Product - Singapore Airlines In-flight services.

In October 2002 SIA reported half-yearly operating profit of $510 million (+12.8% compared with the same period last year) and pre-tax profit of $656 million (+127.9% compared with the same period last year).  34% of profit comes from East-Asian operations, 20% from American routes, 20% from European routes, and the rest from the Pacific, West Asia and Africa. On the whole, there was a steady increase in the number of passengers and other indicators (figures 1 to 3).  

SIA Deputy Chairman stated that SIA ‘made full use of opportunities presented by a faster-than-expected recovery post-September 11’.  While the rest of the Asian carriers are engaged in the struggle of survival, SIA stands out.  It managed to hold profits steady after the initial post-Sept11th fall.  Although SIA had to suspend 11 aircrafts and almost halved the rate of expansion, they managed to seize on their rivals misfortunes and made some acquisitions, e.g. SIA recently bought 10% stake in Thai Airlines.  Also despite the global downturn in the airline industry, SIA could afford to recently undertake the biggest product launch in its history: $300 million revamp of its first class, business class and economy services.    

Part 3. Internal analysis

SIA services 93 destinations in 38 countries.  SIA Group has more than 29,000 employees that come from a diverse background and bring a range of skills, attributes and personalities. They are employed both in Singapore and outside in 80 different locations around the world.  

SIA company structure is distinguished by its flat management structure, which means that there are few levels of authority within the hierarchy.  This creates a more dynamic and flexible business that empowers people to make decisions in response to customer needs and changes in the business environment.  To avoid their staff being compartmentalised into their roles, SIA has a policy of moving key staff around in a process of job rotation. It provides managers with cross-functional expertise and a better knowledge of SIA business as a whole.

SIA Group stresses the importance of retraining and motivating their staff.  SIA training expenditure per worker exceeds Singapore’s national average and accounts for 15% of SIA’s total annual cost. In turn it positively affects staff productivity, which is kept rising over the years.

Long-term objectives

Airlines operate in a competitive environment. A key area of competitive for them is the quality of customer service.  There are two main long-term objectives: a) expand their route network, and b) to continue making improvements to their in-flight services.

On the first objective, expansion can be made via already existing 'Star Alliance' and creating new alliances (e.g. with Air India, Quantas, or Virgin Atlantic).  These alliances are beneficial for SIA in case of a sudden fall in passenger numbers on any one route, because diversification of routes via alliances helps to reduce that risk.

On the second objective, SIA have mastered an art of equilibrium in terms of maintaining a healthy financial position while 80% of its revenue comes from economy class passengers who expect a world-class service but pay economy-class prices.  To date, SIA upheld its world-class services for all the passengers regardless.  

In terms of passengers’ satisfaction with safety, SIA is proud of its safety record: it is a company policy to purchase a new aircraft whenever possible and to maintain them thoroughly.  The age of its fleet is well below the mean average for the industry, with the underlying assumption that new machines are less likely to be involved in accidents.  To reduce the health risk of thrombosis, SIA has printed warnings on its tickets and provides advice to passengers on liquid intake and in-flight exercise.

While a non-stop SIA flight may take up to 18 hours, the passengers endure major loss of control.  Therefore the use of technology (especially individual in-flight entertainment and a global satellite email service) can assist passengers’ empowerment and enable them to feel that the time spent on the airplane has not been wasted.  SIA are introducing in-flight internet system for use by economy class passengers, free during the test period and nominally priced thereafter.  

In terms of legroom for economy class passengers, SIA’s standard exceeds UK regulation.  And yet SIA is considering removing few rows of seats in their aircrafts to give even more legroom, which is a sign of their continuous strive to improve standards.  And finally, ‘Thinking globally whilst acting locally’ philosophy helps the in-flight staff to respond positively to local needs of their clients whilst remaining conscious of airline’s global goals.

Part4. Product strategy: objectives, targeting, positioning against competitors, product features, quality and image, pricing, distribution channels, promotion mix, sales force, etc.

Marketing philosophy and objectives

SIA’s marketing philosophy is that ‘the customer is always right’.  SIA’s long-term objective has been to rise from a very good Asian airline to the world’s most exquisite airline, in which they succeeded, and to maintain this position.  Maintaining this position rests on a) maintaining high profits, and b) continuous development, innovation and improvement of its outstanding level of service.  

Targeting

SIA segments its customers using the Activities-Interests-Opinions-Demographics framework.  A customer audit identified that SIA’s most profitable customers, in good and bad times, are business and first class passengers on transcontinental routes.  SIA’s response was to enhance services to these passengers by introducing more capacity on long-haul flights and by up-scaling its services.  Recent $300 million revamp, the biggest in SIA history, was the answer.  Further than that, the revamp involves upgrading economy class as well, since economy passengers comprise the largest chunk of SIA customers.

Positioning against competitors

SIA had positioned itself to execute a strategy of differentiation, offering its passages a level of service that was seldom.  SIA is the first airline to have attained a ‘top quality service’ position in the market and a ‘top quality service’ image in customers minds.  SIA’s focus is on continuous enhancement of quality of service, not on reducing costs.  And as such, SIA consistently delivers its service promise.  For example, SIA operates its catering subsidiary that comprise the world’s largest flight kitchen and prepares 45, 000 meals a day, following the passengers menu pre-orders.  SIA’s luggage delivery subsidiary promises to deliver passengers’ luggage within 10 minutes of arrival.  As above, outsourcing of non-inflight services to SIA’s subsidiaries helps to maintain the highest level of service across the board.

Increasing competition in in-flight service from international carriers such as Thai Airline, Cathay Pacific, Malaysian, etc gave increasing pressure to distinguish SIA from the others. Additionally, the tragedy of 9/11 has put greater pressure in the air travel market. Alliance is the only reasonable way of solving problems. SIA joined the ‘Star Alliance’ as a means of growth in overseas market, Europe and the United States. However, there are some concerns about the ability of the other partners to offer the same service quality as SIA do.

Another way to defy competition is to participate in so-called ‘equity investment’ scheme, the basic idea of which is that an airline invests in other airline’s equity in order to cement a long partnership with them or have a controlling stake in them.  SIA took few steps in this direction: it acquired 25% stake of Air New Zealand (who already owns 50% of Ansett shares), 49% if Virgin Atlantic shares in 2000, and recently acquired 10% stake in Thai Airlines.  

Another advantage of SIA over its competitors is that it has the lowest labour costs among leading airlines, thanks to its recruitment strategy.  Most SIA staff is Singaporean although they were drawn from many ethnicities within the South/Southeast Asia region.  This is critical ingredients in the success of the airline.  Also, SIA takes advantage of low cost of fuel, typically the biggest expense for Asia airlines, especially in recent years.  Lower global demand for fuel after Sept. 11 has left prices 10% lower than they were last year, and rising Asian currencies have made it cheaper still for the region's airlines.  It is estimated that SIA will save US$200 million on fuel this year as the result.

To maximize profitability, SIA has focused on long-haul flights. Evidence shows that long-haul flights are the most profitable and have the highest number of business class passengers (see table below).  In addition, the flights are supported by the Alliance to US and Europe, as mentioned above.

Product features, quality and image

SIA’s in-flight services are a premium sector product.  The product features are listed in part 1 of this essay.  SIA’s in-flight services have been established in the minds of customers as epitome of an outstanding service, for which SIA were rewarded with more than 200 rewards; SIA’s service has been described as ‘warm smiles, warm towels and attention to details’.  The service quality comprises high reliability, assurance (courtesy of employees and their ability to convey trust and confidence), tangibles (facilities, equipment, appearance), empathy (caring, individualised attention), and responsiveness (willingness to help, prompt service).  All these elements are met by the high standard of SIA service.

The image of the product is very simple, consistent and distinctive: the image of Singapore girl, gracious, charming and extremely helpful hostess.  What sets SIA’s image apart from its competitors is its distinctive quality of service, innovation, flexibility, commitment to customers, and prestige.  The image of Singapore girl is so powerful that it became 1st commercial figure to be displayed at the Madame Tussaud’s Museum.

Creative customer service means that almost all customers’ wants can be accommodated: from instant noodles to pre-ordering local fares.  Complaints are encouraged to help preventing customer service problems from arising.   Most important SIA’s marketing channel is the word of praise by its customers.  ‘Singapore girls’ maintain the image of authority and confidence in passengers’ minds, while being gracious, warm and friendly at the same time.  All of them are trained in beauty tips, gourmet food, fine wines, and the art of conversation.

SIA adverts always use high quality photography and have a ‘Singapore girl’, the idealised version of SIA cabin attendant, as a central feature.  Ads use the image of Singapore girl is a variety of themes to good effect and reach extremely high advertisement recall rate (50% in 1979, according to INRA survey).  The ads have a very high appeal to young Singaporean women: SIA receives over 20 applications per airhostess position.  

Pricing

As for the pricing policy, SIA largely disregard price-cutting strategy as short-sided.  Instead, they set their prices at a premium, to maintain their strong market position of ‘top quality and service enhancement’ and to maintain their reputation as the world most exquisite airline.   Although the bottom line is ‘No’ to low-cost fares, economy class fares are kept reasonable affordable by implementing various promotions, discounts, allowances, favourable payment periods and credit terms.

Distribution channels

Most of SIA seats sold through Ticket Agents; maybe also use promotional programs  

channels, coverage, assortment, locations, inventory and transport

Promotion Mix

advertising, promoting, personal selling, and publicity

SIA has membership club even included for kids. The passengers can collect miles and it will count towards also with partner airlines

SIA’s message to passengers is: ‘YOU are a great way to fly’

Ad campaigns vary according to the specific cultures of the countries

SIA avoided communicating any discreet benefits available on its planes in ads (possible area of exploration, especially in Asian cultures);

But need for a new ads targeted on Asian Market; present technological benefits

Sales force

Most of SIA seats sold through Ticket Agents; maybe also use promotional programs  

Part5. Proposed marketing strategy for the future (proposed alterations to the product’s objectives, targeting, positioning, etc.)

More than ever before, SIA is pushing the boundaries to provide customers with the world’s best air travel experience. Its single biggest challenge is that of maintaining its place as the world’s best airline as well as the most profitable one.

Proposed alterations to the product’s objectives

As SIA chairman stated in 1997, ‘the increasingly demanding passenger is the norm.  Passenger will refuse to be compartmentalised into one average unit. Each person will have his own particular needs and he will want service that is tailored to meet those particular needs.’ SOURCE???  That is why SIA is aiming to set even higher standards of style and comfort in air travel, in order to attract an even larger flow of travellers.

One major proposed area for improvement in the future is to increase the confidence of the economy  class passengers who takes up to 80% of the seats. The idea is not to reduce costs but continue to enhance customer service. This would be done by offering more and better meals, more comfortable seats, an upgraded entertainment system, and training staff to be even more friendly and helpful, plus to provide even better security measures. That way SIA could win customer confidence, delight and trust, and benefit from the spread of their reputation of the best service in air travel.

Improvements are to be made in the first and business classes as well: SIA will be offering first class passengers even better standards of style and comfort, privacy and personalised service.  The Raffles Class promises to deliver its passengers the latest innovations in cabin and seat designs.  All above, and more improvements are going to be financed by the proposed $100 billion investment (SOURCE?????).  By continually constant development and improvement of in-flight services SIA would succeed in getting its message across as ‘the company that cares’.

Targeting

Despite the immense success of the marketing icon – the Singapore Girl, SIA is planning on a new approach, using geographic segmentations.  ‘Singapore Girls’ are extremely successful in Europe, Australia and America, where customers have been fascinated by the icon.  However the strategy to target the Asian market is different, because there have been some suggestions that ‘Singapore girl’ is becoming outdated for the Asian market, where a new approach would be made in order to promote the company’s competitive services.

SIA has carefully aimed its products at those travellers that value excellence (and are always prepared to pay its price). The quality and service-enhancement strategy appeals to all customers, leaving them with the feeling of getting their money’s worth.  SIA’s customer segmentation strategy reflects different types of their target customers.  Not all customers share similar lifestyle or have the same income, which is why SIA embarked on a journey of segment marketing, aiming its services at specific income-, lifestyle-, and preference-led customers.  

For example in order to cater for its business clients, SIA introduced a ‘SpaceBed’ – a seat that transforms into a lie-flat bed, which will become a standard on every aircraft of the new Business Class.  SIA is also planning to launch ‘CyberCabins’, which offers a wide range of high-tech features such as internet and network gaming for those who always want to stay in touch.  SIA is planning to gradually install ‘CyberCabins’ in all classes.  Another future targeting strategy is to have a much wider choice of meals, spirits, and wines, especially for the connoisseurs.

Positioning

Singapore airline’s market positioning for the future is also changing. Its aim is to develop a marketing mix and product that would fit the customers’ needs and be established in the market. Despite the immense success of its marketing icon (‘Singapore Girl’), SIA is planning to alter its campaign and gradually develop a different positioning technique in each type of market.

SIA has continued and will continue to raise their standards with regular product innovations, new features and their world-renowned impeccable service.  The results show that operating profit has increased by 12,8% (post-tax by 4,7%) in the first half of 2002 compared to the same period last year.  This means that more and more people are choosing to fly Singapore airlines. The fact that SIA has won an outstanding number of world awards (inc. ‘Best Airline In The World’, ‘Best First Class’, ‘Best Business Class’, ‘Best Economy Class’, and ‘Best Scheduled Airline’) means that the Singapore Girl has succeeded again in gaining customers’ trust.  As for the future, things are looking favourable as more new products are introduced to cater for customer needs, so that SIA will be able to attract more new flyers.

Appendix.

Table1. Market Value to Sales ratio among major Asian airlines  

Table 2. 

References

1. Chan, D. ‘The Story of Singapore Airlines and the Singapore girl’.  Journal of Management Development, 19(6), 2000, pp. 456-472

2. Kotler, P. et al (2001).  ‘Principles of Marketing’ (3rd European edition).  Pearson Education.

3. Lovelock, C. et al (1999). ‘Services Marketing: a European Prospective’.  Prentice Hall

4. Singapore Airlines Annual Report, 2001/2002

5. Singapore Airlines Backgrounder, August 2002

6. Storey, C.  Marketing lectures (2002)

7. ‘NY Times News Service’.  Aug 25 (2002)

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