Marketing in the Digital World-2

1.0 Market Analysis Of ComfortAir 1.1 Executive Summary

The air transport industry is one of the most competitive and dynamic industries.

Business models and overall operations in this industry are constantly changing due to external business environment factors such as legal, technological, social and political.

ComfortAir plc, as a start-up company, must pay close attention to these factors and adapt its strategic operations to the relevant factors and issues in order to remain competitive.

This analysis uses PESTLE and Porter's Five Forces analytical tools to help ComfortAir plc understand the environment in which it operates, design an appropriate STP strategy and identify potential challenges and potential success factors.

1.2 Analysis of the business environment using PESTLE

Part 1

Analysis of the business environment using PESTLE

Political Factors

Government policies have a significant impact on airlines.

For example, government regulation and demarcation of airport access roads may restrict airline operations, creating problems between business and government.

Economic factors

An economic recession (e.g. inflation) may prompt airlines to increase airfares to cover high operating costs.

An economic downturn may result in fewer potential customers and savings in consumer spending.

Social Factors

Significant shifts in consumer preferences potentially affect the airline sector.

For instance, increase in leisure travel would definitely lead to enhancement of airline services such as Wi-Fi connectivity and tailored seating, among others (Park et al., 2020). ComfortAir Plc. has to monitor this social trends.

Technological Factors

Technological trends such as Wi-Fi connectivity is becoming a common trend in the airline industry.

It is primarily geared towards enhancing the experience of travelers (Jin & Kim, 2022).

Legal Factors

According to the ICAO (2016), passenger rights, such as the right to data privacy, is a critical legal issue in the airline industry, which airline companies have to consider.

ComfortAir Plc adhere to passenger data protection expectations to avoid legal suits.

Environmental Factors

Environmental protection is a central issue in the airline industry, especially with the ongoing advocacy for sustainable operations in the airline industry.

1.3 Using Porter’s Five Forces to analyse current facts

Part 1

Using Porter’s Five Forces to analyse current facts

Consumers’ Bargaining Power (Strong)

Consumers have high bargaining power, especially because the aviation market is saturated in local and regional markets. In addition, the availability of other alternatives provides consumers with high bargaining power.

Suppliers Bargaining Power (Strong)

Suppliers to the aviation industry have high bargaining power. Because there are only a few suppliers of aircraft and fuel, labour and aviation equipment suppliers also have strong bargaining power (Bureau, 2020).

Intensity of Competitive Rivalry (Strong）

The European aviation industry has many strong competitors and airlines offering similar services.

Threat of Substitutes (Medium)

For short-haul and regional travellers, potential air transport users have a wide range of travel options (Ellis, 2020). For example, there are alternative modes of transport such as high-speed rail and car.

Threat of New Entrants (Small)

New entrants are less of a threat due to substantial capital requirements, regulatory hurdles, and intense competition. For example, to operate in regional markets such as Europe, airlines will have to obtain operating licences from all countries, especially after the UK leaves the EU (Aviation Source News, 2019). This may discourage new entrants.

2.1 STP strategy to be deployed by ComfortAir

Part 2

STP Strategy to be deployed by ComfortAir

Market Segmentation

ComfortAir segments its markets primarily based on geographic and demographic factors.

Key market segments include business travellers and affluent individuals seeking a premium flight experience.

The European market is generally more affluent than the rest of the world, and there are relatively more customers looking for a high quality flight experience. This market segment has a relatively good number of customers, allowing ComfortAir to make more profit in the current situation of low price competition.

Business travelers represent a significant percentage of the market. Affluent individuals looking for a premium experience form a smaller but high-value segment.

Target Customers

ComfortAir's target customers are business travellers who need to make frequent trips to and from major European cities, as well as affluent individuals who value a comfortable and luxurious travel experience.

This group of people is not price-sensitive and is more interested in a superior travelling experience and efficient travel services.

Positioning

ComfortAir has positioned itself as a premium airline offering high quality services.

Its unique selling proposition is dedicated to providing a luxurious travelling experience, equipped with designer products and gourmet food.

ComfortAir differentiates itself through superior service, luxurious amenities, and a focus on customer comfort. The aim is to make every flight a memorable experience for passengers.

Through various means and promotions, it opens up brand awareness and establishes the image of a premium and luxurious premium airline.

2.2 Quantify key segments, targeting and positioning

Part 2

Quantify key segments, targeting and positioning

Quantitative demographic analysis

By using quantitative information such as demographic data for segmentation, we assess the size and business potential of different population groups.

By comparing the demographic data of Europe, we found that the average income of European countries is relatively high in the world, especially some cities where ComfortAir is planning to operate flights, which are economically developed and have a high demand for high-end airlines, which is more suitable for ComfortAir's development strategy.

Quantitative Customer Segmentation Model

Identify segments through consumer data.

By searching European consumer data, or the consumer characteristics and consumption level of European consumers, we found that some groups are more suitable for ComfortAir's customer groups. For example, company executives, they often have high-end travelling needs, ComfortAir can cooperate with some large groups in business travel business to win orders.

Segmentation business case analysis

We collected case studies in the same industry and analysed the positioning strategies of successful airlines.

By comparing several famous premium airlines, such as Emirates, we found that this airline focuses on premium flights, and obtains the favour of premium customers through luxurious cabin space and high quality in-flight food and beverage, as well as high level of service. This has resulted in significant profits and a good reputation in the industry, with a large number of loyal premium customers, which ComfortAir can use as a model to gain business inspiration.

3.1 Critical Evaluation Compare and contrast ComfortAir's STP vs British Airways' STP

Part 3

Critical Evaluation

Compare and contrast ComfortAir's STP vs British Airways' STP

Segmentation

ComfortAir

Targets business travelers and affluent individuals seeking a premium flying experience.

British Airways

Point-to-point high-yield travellers and point-to-point economy travellers.

Targeting

ComfortAir

Focuses on major European cities, targeting frequent business travelers and luxury-seeking individuals.

British Airways

Long-haul European and North American routes, with an emphasis on point-to-point direct flights and fewer interline routes.

Positioning

ComfortAir

Positions as a premium airline with high-quality services, designer fittings, and gourmet offerings.

British Airways

Offers long-haul point-to-point non-stop flights for business travellers on European and North American routes, with four different cabins on board to meet the needs of different high-yield travellers.

3.2 Critical Evaluation ComfortAir's STP vs British Airways' STP

Part 3

Critical Evaluation ComfortAir's STP

Targets mainly high-end customers with high unit prices and high margins, and is less attractive to the lower end of the customer base.

It operates better in a booming economy because of a larger customer base and at the same time a higher earning capacity.

But should always observe the market environment, such as economic downturn, but also timely adjustment of positioning, to absorb some economic customers to survive the crisis.

British Airways' STP

Mainly for high-end users, but also at the same time to serve the economic customers. Stronger resistance to risk, but the profit margin is low.

The most important customer group is the business travellers with low sensitivity to fares, mainly the business personnel of big companies or large multinational companies, this part of travellers have very high requirements on service quality, fares are not a problem for them, as long as the service is over the top, they are willing to pay higher fares.

At the same time, it also serves business travellers with high sensitivity to fares, mainly business personnel of small and medium-sized enterprises, who are willing to compromise between fares and service quality for the sake of the economic situation of their enterprises, and may choose relatively cheaper fares by appropriately lowering the standard of service demand.

There is a need to keep an eye on changes in the market environment, and when the market economy is favourable, the proportion of mid-to-high-end customers may be increased.

4.1 Challenges and Barriers facing ComfortAir

Part 4

Challenges and barriers facing ComfortAir

High Operating Costs

Rising fuel costs, high staffing expenses, and the cost of maintaining a luxury travel experience can create significant financial challenges for ComfortAir.

Regulatory Compliance

The airline industry is heavily regulated and compliance with safety, labour and environmental regulations is costly and complex.

Economic Uncertainty

Recessions and crises, such as the current state of the economic downturn, can severely impact traveller demand.

Intense Competition

The airline industry is extremely competitive.ComfortAir competes with both premium carriers and full-service airlines.

4.2 Challenges and Barriers facing ComfortAir

Part 4

Excessive customer expectations

Maintaining a high level of customer satisfaction in the premium market is a challenge, as premium customers have high expectations of service quality and high quality.

Concern for sustainability

With growing environmental concerns, airlines are under pressure to reduce carbon emissions, which may require significant investment in related equipment.

Market unpredictability

The airline industry is highly unpredictable as it is affected by external factors (Hao et al., 2016). For example, an increase in fuel prices is likely to lead to a surge in operating costs. This is usually passed on to consumers through increased airfare costs.

Changing consumer preferences

Consumer preferences in the airline industry are highly variable (Jung et al., 2017) and participants need to constantly monitor such changes to improve efficiency. However, without an effective structure to monitor and predict consumer trends, companies will likely not be able to stay ahead of the competition.

5.1 Key drivers for ComfortAir to succeed

Part 5

Key drivers for ComfortAir to succeed

Enhancing product value

Data released by the European Union in October this year showed that average airfares in Europe increased by 20 to 30 per cent in the summer of 2023 compared to 2019 (Gualini, 2023). This kind of data shows that customer acceptance of premium airfares products is increasing.

Against the backdrop of customers' upgrading consumption, ComfortAir needs to adjust its product design thinking to extend its sights from air transport to a wider range of areas, offering a variety of products to solve more problems and create more value for consumers. Providing valuable goods and services can enhance customers' confidence and trust in the company's products (Kumar, Townsend and Vorhies, 2015).

In addition to providing a more convenient and comfortable in-flight experience, ComfortAir can optimise its products and strengthen its product design and management capabilities. From the dimensions of check-in, boarding, cabin, and arrival, ComfortAir can deeply explore the needs of high-end customers, and construct a whole chain of "food, accommodation, transportation, shopping, and entertainment" luxury airline experience.

5.2 Key drivers for ComfortAir to succeed

Part 5

Increase brand awareness and establish high-end brand positioning

Scandinavian Airlines has increased its customers' willingness to pay by 26 per cent in recent years through the creation of a premium brand image and a new visual identity, which equates to a brand premium of EUR 167 million(Yu and Chen, 2023). This situation shows that a great brand image can bring more profit to the airline.

A strong brand creates an emotional connection with customers (Magids, Zorfas and Leemon, 2015).ComfortAir should strengthen its branding efforts so that the brand identity is known and understood by consumers before they develop a need to travel and develop a strong brand trust and propensity to consume.

ComfortAir could create a new customer identity by naming its new target customer the 'luxury grand traveller' and also create a premium brand community to engage customers. Creating a successful premium brand requires upgrading at every point. A new visual identity could also be created so that ComfortAir is seen as a premium airline brand that is good and credible and that the target group wants to engage with.

ComfortAir can also increase its brand exposure by releasing some products co-branded with luxury brands, and at the same time improve its brand image by leveraging the popularity of luxury brands, such as releasing cervical pillows co-branded with luxury brands for airlines.

6.0 References

Part 5

Aviation Source News. (2019) How has Brexit affected UK airlines and air travel? First Class Aviation News. Retrieved from https://aviationsourcenews.com/analysis/how-has-brexit-affected-uk-airlines-and-air-travel/#:~:text=UK%20airlines%20are%20now%20subject,and%20additional%20costs%20for%20airlines

Bureau, A. (2020) What Is the Bargaining Power of Suppliers and how does it affect Your Business? Alcor Fund. Retrieved from https://alcorfund.com/insight/what-is-bargaining-power-of-suppliers-and-how-does-it-affect-your-business/

EESI (2019) The Growth in Greenhouse Gas Emissions from Commercial Aviation Part 1 of a Series on Airlines and Climate Change October 2019. Retrieved from https://www.eesi.org/files/FactSheet_Climate_Impacts_Aviation_1019.pdf

Ellis, D. (2020) Developing a strategic framework of analysis for air transport management. Transportation Research Procedia, 51, pp. 217-224.

EUROCONTROL. (2023) European Aviation Overview- 2023. Retrieved from https://www.eurocontrol.int/sites/default/files/2023-08/eurocontrol-european-aviation-overview-20230831.pdf

Gualini, A., 2023. Competition and Cooperation in the Airline Industry. pp. 23-34.

Hao, L., Hansen, M. and Ryerson, M. S. (2016) Fueling for contingencies: the hidden cost of unpredictability in the air transportation system. Transportation Research Part D: Transport and Environment, 44, pp. 199-210.

6.0 References

Part 5

ICAO Secretariat. (2016) Overview of Regulatory and Industry Developments in International Air Transport. Retrieved from https://www.icao.int/Meetings/a39/Documents/Overview_of_Regulatory_and_Industry_Developments_in_International_Air_Transport.pdf

Jin, M. J., and Kim, J. K. (2022) Customer adoption factors for in-flight entertainment and connectivity. Research in Transportation Business & Management, 43, pp. 100759-100789.

Jung, J., Han, H. and Oh, M. (2017) Travelers' switching behavior in the airline industry from the perspective of the push-pull-mooring framework. Tourism Management, 59, pp. 139-153.

Kumar, M., Townsend, J.D. and Vorhies, D.W. (2015) Enhancing consumers' affection for a brand using product design. Journal of Product Innovation Management, 32(5), pp.716-730.

Magids, S., Zorfas, A. and Leemon, D. (2015) The new science of customer emotions. Harvard Business Review, 76(11), pp. 66-74.

Park, S., Lee, J. S. and Nicolau, J. L. (2020) Understanding the dynamics of the quality of airline service attributes: Satisfiers and dissatisfiers. Tourism Management, 81, pp. 104163-104187.

Yu, M.M. and Chen, L.H. (2023) Productivity change of airlines: A global total factor productivity index with network structure. Journal of Air Transport Management, 109, pp.102403-102423.