Executive Summary

This paper discusses marketing management by British Airways (BA). Firstly we discuss what is market segmentation and British Airways methods to identify its target market, positioning and segmentation approaches. We would then define brand, discuss branding strategies and BA’s brand imagery and positioning in the market. Lastly we discuss “what is”, the use of and drawbacks of Web 2.0 technology. How BA actually uses the applications to further communicate its image through web 2.0.

Introduction

Marketing has been one of the central activities in a business to maintain sustainability and also growth. Customers are essential to a company’s sales and one effective way to gain and retain customers is through marketing activities which has the importance of creating awareness, constantly remind customers of the product and services provided and last and most importantly is to create the sense of value, vanity and wants of the products or services offered.

Marketing as defined by the American Marketing Association; Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and managing customer relationships in ways that benefit the organization and its stakeholders[1]. (Bennett 1995).

Marketing in business requires continuity and concentrated effort from all divisions in a business. The organization should be customer oriented where company’s activities are concentrated towards identifying the needs, wants and demands of customers. Carefully select the right target market through market segmentation and positioning; creating value and achieving customer satisfaction; choosing the right marketing channels and integrated supply chain. Lastly; it is important to understand the market environment and competition to stay ahead of the game.

British Airways, a world renowned brand, recognizes the importance of marketing and its role to maintain the customer base and delivering customer satisfaction. Their marketing activity ranges from catchy phrases to multimedia advertisements to designs on the aeroplane itself to communicate the value and delivering superior customer satisfaction.

British Airways have so far been successful in defending their leading position in the aviation industry until taken over by Lufthansa in terms of passenger numbers in 2001. Through that experience, British Airways have been aggressive in their marketing strategies and improve on the services provided to gain competitive advantage over their rival companies.

Market Segmentation

Market segmentation by definition is that it is actually a group of consumers sharing the same or almost the same demands, wants and needs. Given the similar characteristics of the segments; marketers may identify and recognizes the ideals of the segments. Through identity of market segments, marketers can now focus on how and what is needed to communicate to their segments and deliver to satiate their segments’ appetite of their products or services offered. (Wells, V., S. Chang, J. Oliveira-Castro, and J. Pallister. 2010.)

Consumer purchase pattern needs to be understood; the factors influencing purchase and also the psychological process involved. Understanding the processes of consumer purchase will help companies to target the right marketing mix to influence and create demand. This is especially important to decide level of marketing mix decision making.

Famous psychological theories are Freud’s Theory; iceberg theory assume that most of the motivation are large developed unconscious and that people are not able to fully understand his own motivation. Maslow’s Theory; people are driven by a specific needs at a specific time; based on the model hierarchy or needs. Herzberg’s Theory draws a clear line on satisfiers and dissatisfiers; where in the absence of either, the other must be present to motivate the buyer. By understanding the psychological motivation only then companies may position itself exactly in the right market segments.

Industrial or business market represents a larger portion of sales and also higher number of repurchases. Therefore it is very important to serve this segment, even though the customer base may be smaller but the volume of purchase is far larger. BA should also design selective marketing mix to target directly to business market segments to capture the huge business travel potential.

In the case of British Airways, both the consumer market and also business segments both represents important segments to be tap for continuous growth of the company.

Consumer and Industrial Segmentation Approach

Market segmentation can be done through several ways. Consumer market segmentation may be divided into several ways.

Geographic segmentation focuses on different geographical locations and segments them into regional and locality of their market. Most of the time geographic segmentation would also combine with demographic segmentation to provide a fuller picture of the customers in the area.

Demographic segmentation; examples are; segmenting the customers according to age, gender, annual income, education and many other categories. Demographics are used as it is able to distinguish between customers characteristics so that the company may actually positions themselves towards the right target market.

Psychographic segmentation basically divides their customers according to their lifestyles; example sports directed lifestyle, culture oriented or leisure oriented. Famous model used is the VALS framework where it divides the consumers to two major categories; i.e. innovators and survivors. Innovators are group of people having high resources and also high innovation where the survivors have the opposite. Then these two major groups are divided according to their primary motivation; thinkers, achievers, experiencers, believers, strivers and makers with each having different tendencies in life.

Behavioural segmentation; divides customers according to their personality. E.g. ambitious, aggressive, opinionated. Customers have five different roles when purchasing an item; initiator, influencer, decider, buyer and user. All five roles have different purchasing power and decision making. Targeting the right personality of buyer is therefore very important.

Business market can also be segmented according to geographical segmentation, customer type segmentation; i.e. size of company or industry based, and also behavioural segmentation which look at usage patterns and also volume of purchase.

After understanding how to classify the market segments, it is now more important to indentify which are the market segments that the company should target. Identifying the right target market seems to be the most difficult stage.

British Airways, segments its market according to the demographics and psychographics; because of its premium service and connectivity to all major cities and airports, their customers are divided into segments that appeals to the upper class.

The approach by British Airways if largely focused on a mixture of segmentation. Demographics segmentation is one of them where their customers are focused on the upper and middle upper social class of the society where they have the purchasing power. Using psychographics segmentation, BA focuses on the innovators, thinkers, achievers and experiencers as they have the high resources and high innovation.

Targeting and Positioning Market Segment

After deciding on customer segmentation, the company must now decide which market segment presents the biggest opportunity. It is not surprising that a company may use more than one framework to decide on its market segmentation. (Geoffrey Yeo. 2005)

As suggested by Roger Best on the needs-based marketing segmentation approach, there are seven steps in the segmentation process (Best 2000);

1. Needs-Based Segmentation – groups customers based on similar needs and benefit sought into similar segment. British Airways groups its customers based on the needs of customers to fly comfortably while receiving value added services during the flight itself. Another segments derived from this process is the business segment where BA targets the business travellers where connectivity with major cities with frequent flight are important to be on time for their business meetings.
2. Segment Identification – for each needs-based segments determine the demographic lifestyle and usage behaviours. For both the segments identified earlier, lifestyle and social class have been identified as the target segment.
3. Segment Attractiveness – determine the overall segment attractiveness using available tools. Common criteria used to determine market attractiveness are market growth rate, competitive intensity and market access.
4. Segment profitability – test segment profitability. Profitability can be tested through forecast of expected volume of passengers and cash flows from the increased passenger volume from the market segments.
5. Segment Positioning – create a value proposition for each segments based on the customers needs. Value proposition created by BA propagates luxury and comfortable long haul flights with connectivity to major cities to target its upper class and business segments of customers.
6. Segment “Acid Test” – test segment attractiveness and positioning strategy. Data should be collected to run correlation between the positioning and target market to conclude if the targeting and positioning is done right. BA could conduct market surveys for data collection.
7. Marketing Mix Strategy – Expand segment positioning strategy to include all aspects of marketing mix. Given the right target market and positioning BA should expands its strategy through all of its marketing mix- product, place, price and promotion to capture the market segments.

Branding

Definition

The American Marketing Association defines branding as “a name, term, sign, symbol, or design, or a combination of all, intended to identify the goods or services provided as of a seller or a group of sellers; and to differentiate them from those of competitors.” (Bennett 1995)

Branding in simple words mean to create a recognizable difference to associate the level of services and quality of product of a company; it is also important to communicate the brands to the end user as to create awareness, retention of the image of quality or the brand and finally whenever there is a need or want of a certain product or services, the brand name will be the first thing that comes to the customers mind. Branding also creates trusts, perception of the level of services and quality of the products that are being pushed to the end customers.

Brand equity on the other hand; is the intangible value that is added through by which is reflected on how the customers feel, react and think of highly about the brand. Brand equity will be reflected on the share price, stakeholders and finally the overall profitability of the company. A brand would also create an image as the company wanted to portray against its customer. (K. L. Keller 2001)

Branding Strategies

In the case of British Airways, BA uses its strengths the national air carrier, to focus on premium conformability, luxury, on time flight schedule, and connectivity with most of the worlds’ main airport and cities.

Through this ideals British Airways have successfully communicated to its customers’ its superior services and it is worth every penny that they are paying for. Therefore branding of BA has in fact created the perception that BA is capable of delivering high value services and also a well regarded and respected brands.

Marketing communications to aggressively create the awareness of luxury, dependable and connectivity has always been the main propaganda in BA’s branding strategy. This is regarded as brand element choice criteria where BA is using memorable element where when their target market intend to fly the first thing that come to mind is British Airways.

Brand Resonance Pyramid Model; provides an ascending ladder or pyramid where branding strategies to work according to building a strong base first. The four stages model where at the base is the identity; to communicate “who are you” to the customers. Second and third stage gives the marketer the question “what are you?” and “what about you?” This meant to link brand meaning (second stage) to the customers and response (third stage) appealing to customers’ feelings to the brand. Lastly the final stage focuses on relationship building and loyalty where marketer focuses on the question “what about you and me?” between the brand and the customer. (K. L. Keller 2001)

Referring to the advertisements and catchy phrases used by BA, it is clear that British Airways is focused on building a brand imagery based on the brand resonance pyramid. Their main focus is to create the ideal imagery for British Airways and followed by positively appeal to the good feelings created by the second stage to bring through to the final stage where communicating and building customer relationship and brand loyalty.

Imagery and Positioning in the Market

All marketing efforts are focused on segmentation, targeting and positioning. A company and segments its market and then positions the company so that the market is aware and will be using the services and products offered. (K. Keller 1998)

British Airways have had identity conflicts when the low cost airlines were launched in United Kingdom. During that period, BA was actually confused between their own brand identity and competitors even though both are offering totally different range of services. BA during this time decided to reduce the airfare and also limited in flight services such as meals on board and entertainment were cut off to offer more competitive price and compete against the low cost airline.

Eventually BA recognizes its sub performance and reverts back to its original positioning and work hard to restore its brand image of premium airline.

Methods of Valuing Brands

Valuing brands falls back to four generic concepts; cost approach, market approach, income approach and brand strength assessment approach. (Aaker 1996)

The first approach, cost based; simply means that the brand name goes though depreciation like any other asset and complies with accounting methods. The short coming of this method is that it overlooked the intangible part of brand value.

Second method, market approach; provides the value according to the market capitalization of the company. Any excess of market capitalization are usually related to the branding of the company.

Income approach; provides future value of the brand and later discount it to present value. This method takes into consideration of all future income that may be derived from the brand and discount it back to present value for valuation purposes.

Brand strength assessment approach; this method developed by Interbrand was meant to value a brand based as the net present value of future earnings it is expected to generate in the future through assessing its financial analyses and marketing efforts. Following is the overview of the steps involved in determining the brand value: i) market segmentation, ii) Financial analysis, iii) Role of branding, iv) Brand strength, v) Brand valuation calculation. This method is a dynamic and strategic tool to determine investment value of a brand across a wide spectrum. (Interbrand Group 1992)

Estimated Value of British Airways

Based on the proposed model by the Interbrand Group, estimated value for British Airways brand would stand at £40 million. This projection was also published in the British Airways annual general report as goodwill under the balance sheet as at March 31 2010.

Web 2.0 Technologies

Web 2.0 have created a whole new experience for people who uses the web as it is now more interactive and allows people to collaborate through use of social media sites. This technology has improved communication and actually makes the world smaller. Through collaborative framework and interactive application has allowed the internet to be a marketing tool for companies.

Types of applications of web 2.0 are Facebook, Twitter, Myspace, GoogleDocs, Youtube and many more. These are social networking website which the main idea is to create and simplify means for people to interact and collaborate though the internet. Many social applications have evolved into business opportunities for users to market and sell their products online.

The advantages of web 2.0, it has created a new source of information and whenever users are looking for information on certain products or issues, many sites actually have reviews on the item users are looking for. Multiple channels of information make it easier for users to compare and make informed decisions.

The disadvantages of web 2.0 are that information given may be true to some extent. Given the interactive feature of web 2.0, good and not so good comments and complaints can actually hurt a company when dissatisfied users write not so good things about the company as experienced by Whirlpool an Australian company.

British Airways and Web 2.0

In British Airways, web 2.0 has become an integral part of the company to reach out to its market segments. It is not only interactive but also as a promotional tool to have its users to directly communicate their wants and expectations to BA directly.

British Airways have been using Facebook and Twitter, and other social media application, to reach to its customers. Not only that it is used for marketing purposes but also as a channel for its users to voice any dissatisfaction and also to participate interactively by replying to them through the web application as well. New promotions, customer care and flights delay are now all announced through the internet to reach the targeted audience directly.

BA’s business model will be deeply integrated with Web 2.0 technology to create an efficient way to communicate and propagate its ideas to the right target market and also to create brand awareness. Almost all processes from booking of flights to check in and boarding are now all available through online booking and check in, mobile flight booking and check in from BA’s website; instead of having to do it manually and also through phone call. To complete every customers’ needs, BA have included packaged offers which includes hotel offerings, transportations, tour packages, shopping, travel insurances and many others, all to suite every travellers needs through its website.

British Airways may also track the volume of its online users to assists in its marketing program; data collected through data warehousing will reveal new patterns and specific customers’ needs. This would help BA to create new offerings and services to its existing customers while attracting new customers. Through the web applications, BA would be able to continue to track the demands and needs of its customers through interactive communications and collaboration with its customers. One third of BA’s bookings are through web 2.0 which amounts to 20% of its revenue.

Conclusions

Internet technologies especially the web 2.0 have helped many including British Airways to create and positions itself among the top in the aviation industry. Thorough and detailed market segmentation has assisted BA to position itself in the right target market. Being in the right place at the right time gives BA the opportunity to build on its brand as the worlds most preferred airlines and also to communicate its value proposition to its customers.

References

Aaker, D.A. “Measuring Brand Equity Across products and markets.” California Management Review Vol 38, 1996: 102-120.

Bennett, Peter D. Dictionary of Marketing Terms. Chicago: American Marketing Association, 1995.

Best, Robert J. Market Based Management. Upper Saddle River NJ: Prentice Hall, 2000.

Interbrand Group. Worlds’ Greatest Brand: An International Review. New Yokr: John Wiley, 1992.

Keller, K.L. Strategic Brand Management: Building, Measuring and manageing Brand Equity. New Jersey: Prentice hall, 1998.

Keller, Kevin Lane. “Building Customer Based Brand Equity: A Blueprint for Creating Strong Brands.” Marketing Management, July/August, 2001: 15-19.

Craig Smith. 1999. The mighty crash when they forget marketing basics. Marketing, August 26, 15.

Geoffrey Yeo. 2005. Understanding Users and Use: A Market Segmentation Approach. Society of Archivists (Great Britain). Journal of the Society of Archivists 26, no. 1, (April 1): 25-53.

Jacques Bughin, and Michael Chui. 2010. The use of Web 2.0 in businesses. FT.com, December 13,22-23.

Klaassen, A.. 2008. Can social networks predict what you’ll buy? Advertising Age, November 17, 3,46.

Wells, V., S. Chang, J. Oliveira-Castro, and J. Pallister. 2010. Market Segmentation From a Behavioural Perspective. Journal of Organizational Behaviour Management: Special Issue: Consumer Behaviour Analysis 30, no. 2, (January 1): 176.