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Table of Contents Executive Summary 4 Introduction 4 Company Overview 5 Company Description 5 Research Design 5 Purpose of Research and Desired Outcome 5 Research Agenda and Procedures 6 Research Methodology 7 SWOT Analysis 8 Strengths 8 Weaknesses 9 Opportunities 10 Threats 10 Industry Analysis 10 Porter’s Five Forces Analysis 10 Value Chain Analysis 12 Travel Industry Overview in Open English’s Markets 13 Latin America 14 Russia 15 Turkey 16 Advertising in the Airline Industry 16 In-Flight and Media Consumption 16 Passenger Demographics 18 Challenges 19 Recommended options for advertising in the Airline industry 19 Interactive Booth in Airports 19 Thirty for Thirty 19 Additional Recommendations 19 Conclusion 19 References 20 Appendix 24 Competitors 24 Competitive Advertising 25 Open English Advertisements 26 Global Tourism Trends 26 In-Flight Advertising Vendors 27 Copa Airlines Demographics 27 LAN Airline Demographics 28

Open English: Growth Opportunities in Existing Airline Industry Markets

Purpose of project, Problem, Justification and further contribution, findings and conclusion, Key Words

The role and impact of the English language in ongoing processes of globalization have been amply documented in recent literature (Crystal, 1997; Lysandrou & Lysandrou, 2011; Phillipson, 2001). Deemed the global language of business communication, the teaching and learning of English has evolved into an industry in its own right across the globe. The seamless nature of a world dependent on fast Internet connection has motivated many companies to develop and implement language-learning software programs to meet the language needs of individuals and international corporations seeking to communicate in English to carry out their transactions globally. In fact, the language-learning software industry is growing at rate of 4.2% per year and recorded a profit of $44.4 million in 2015. As of 2015, there were 588 companies in the industry. An example of such company is Open English, an online language-learning software headquartered in Miami.

The purpose of this research is to explore how Open English can increase their number of enrolled students through interactive marketing in the transportation industry, primarily in airlines traveling throughout Latin America. It is worth mentioning that the five-year compound annual growth rate (CAGR) for digital English language-learning products in Latin America is 13.8%, and revenues will reach $260.9 million by 2018, up from the $136.2 million reached in 2013. This paper includes a brief company overview followed by the methodology used to conduct this inquiry, including SWOT and Industry analyses that focus on the competitive landscape. The research purpose and desired outcomes are also discussed. Finally, an overview of the travel industry in Open English’s markets includes advertising options and challenges in the airline industry. Research-based strategic recommendations, including alternative options, are also provided.

Open English uses asynchronous and synchronous lessons to teach young professionals how to speak English. Asynchronous classes are described as courses, which use the drag and drop teaching methods. The drag and drop methodology ask users to match answers to pictures. Synchronous lessons are classes, which are taught by live professors every thirty minutes (Hayes, 2016). Open English, which was founded in 2007 by Andres Moreno and Wilmer Sarmiento, differentiates itself from the competition by creating a program that customizes courses for each student (Open English, 2016). Course cost ranges between $500 and $1,500 and averages at $750 USD per year, but a six-month program now exists and is being sold at $600 per subscription (Hayes, 2016). Not only do students have personally tailored classes, but they are also able to have live sessions with a native English-speaker weekly (Open English, 2016). As of 2015, Open English has obtained over $125 million in funding from investors - the second highest investment amount made to a learning technology company (Adkins, 2014). Today, Open English serves over 400,000 students throughout the United States, Latin America, Russia and Turkey (Open English, 2016). Comment by Ariel Gil: Define “drag-and-drop” teaching methods briefly for readers who may not be familiar with this approach.

Open English attracts new customers through traditional advertising methodologies. However, the company wants to invest in innovative promotional ideas. The research team will explore how and if Open English can increase their number of enrolled students through interactive advertising in the transportation industry, primarily in airlines traveling throughout Latin America.

The proposed project requires extensive investigation of the aviation industry. Open English has requested that the research team specifically analyze the current in-flight offerings of Copa and LATAM airlines as well as two airlines in Russia and Turkey. The possibility of partnering with airline alliances will be explored. It is important that the team present any barriers of entry that may hinder the new marketing opportunity such as technology, cost, and competitive challenges. Furthermore, the team needs to identify the necessary requirements for implementing a marketing campaign within the in-flight entertainment platforms as well as the potential client information, which can be derived from such program. Finally, the possibility for future expansion of this campaign to additional markets or other mediums, such as airports, will be considered.

The team scheduled weekly face-to-face meetings as well as bi-weekly client calls in order to discuss project progress. The progress of assigned task is reviewed on the Wednesday of the week in which the task was given. Communication among team members is vital for the success of this project. The team will use academic and non-academic research tools for information gathering. Additionally, the research team will need to identify and contact airline entertainment platform vendors to discuss the capabilities of in-flight marketing. Finally, the team will primarily gather qualitative data and use third-party sources for quantitative information.

The research team will need to function as an advertising agency in order to successfully complete the Open English interactive marketing project. A full-service advertising agency typically has account management, creative, research, and media divisions. The research team will have to take the responsibility of account management, research, and media (Know This, 2016). Open English will be in charge of creative implementation if the decision is made to pursue interactive advertising opportunities. A breakdown of each team member’s role and responsibilities is presented in the appendix.

Account managers are required to implement strategies, be leaders, and build relationships with the client (McDonnell, 2014). The Open English project will require that the Account Manager ensure that each of the sections in the research paper remain focused on interactive advertising in the transportation industry.

Researchers in an advertising agency analyze the client’s market situation (Know This, 2016). In essence, each member of the research team will function as a researcher. The team members that are assigned an investigative task as their primary role are responsible for conducting a SWOT, Porters Five Forces, Value Chain, and transportation industry analysis.

Media planners are responsible identifying and screening perspective media vendors (Kantar Media, 2013). The research team’s media planners will contact vendors based on the research findings and client direction. It is important that the team research and contact in-flight entertainment platform vendors as well as other interactive advertising vendors in the transportation industry.

Excellent senior executive team. Andres Moreno, the founder of Open English, is a multifaceted entrepreneur, who is involved in many global projects. Open English has many other highly skilled executives that can lead the organization to continuous growth. For example, Greg Kress (COO) has a strong technical foundation, with expertise in manufacturing & supply chain operations, and business transformation leadership, and he is a certified Lean Six Sigma Master Black Belt. Sam Peterson (CTO) spent 13 years at Overstock.com, serving as Senior Vice President of Technology (CTO). Alexander Sotelo (CFO) is a licensed CPA with more than 15 years of financial management experience in leading multinational digital media and broadcasting companies.

Good finance performance. To date, Open English has raised $120 million in funding, the third highest in Ed Tech history, and has been named the fifth most valuable Ed Tech company in the world. Open English received financing from a group of prominent international investment firms to drive the company's expansion throughout the globe.

Innovative teaching method and business model. Open English bases its success on a combination of live, online classes 24 hours a day, 7 days a week, with certified teachers from the United States and around the globe who are all native English speakers, so students will get the correct pronunciation and intonation. Open English offers innovative tools and more than 2,000 hours of interactive content.

Brand value. Open English’s value is increasing on a daily basis; they have enrolled nearly 500,000 students in over 40 countries in less than ten years. Open English’s rapid growth has been publicized by the press, being thoroughly featured in The Wall Street Journal, CNN, El Mercurio, Globo, El Tiempo, 0 Estado de Sao Paulo, The Miami Herald, and other top media outlets across the Americas.

Single type of product. Open English only offers classes online and through its mobile application. Users need to have Internet access to take a class. Poor Internet service may limit Open English’s ability to expand into new markets.

Focusing only on English Language. Open English is only focusing on English language. Perhaps they should build a policy to offer more language courses like Spanish, French, etc. to their students.

Marketing strategy. Open English was designed specifically for native Spanish and Portuguese speakers. The company focused on teaching English to the Latin American and U.S. Hispanic markets. Open English is using investments to continue working toward its goal of reinventing the way English is taught. However, currently, it is preparing to enter new markets in Europe and beyond.

Fee policy. Open English provides a one-week test to determine if the program is beneficial for students. Students can then cancel on the 8th day, but they have to pay a two-month cancellation fee or a prearranged exit fee. Open English does not provide students a free trial.

Market growth. The five-year compound annual growth rate (CAGR) for digital English language-learning products in Latin America is 13.8% and revenues will reach $260.9 million by 2018, up from the $136.2 million reached in 2013. Comment by Ariel Gil: Consider including this essential data in the Introduction to frame the importance of this research study.

Offer more languages. Open English can expand its product offering by teaching more languages like German, Spanish, French, and Chinese. Comment by Ariel Gil: This is also a recommendation. Also, the company name (and hence its new brand) will have to be changed if other languages are offered.

Physical existence. Open English can open physical outlets or collaborate with schools. Students that want to improve their English in a classroom setting would benefit from this feature.

Growing competitors and saturated market. There are many competitors in the market. Many of the competitors offer more cost-effective alternatives. Comment by Ariel Gil: Mention leading competitors. Berlitz, Inlingua, Rosetta Stone, ESL programs in community colleges catering to international students in short sojourn in the U.S., etc.

Website hacking: Open English’s rapid growth leaves it vulnerable to cyber-attacks. The company needs continue investing in safe guarding its technology.

This industry is very competitive, so companies are investing heavily in marketing in order to grow their market share. For example, in 2014, Rosetta Stone spent more than 50% of its revenue on advertising (Soshkin, 2015). Therefore, it is important to analyze the industry through Porter’s five forces, which will help paint better picture of the competitive forces that shape the language-learning software industry. This analysis looks at the competitive landscape, barriers of entry, power of suppliers, power of customers, and threat of substitute products (Investopedia, 2016).

Competition in the Industry. Web-based technology has noticeably transformed the learning and teaching environment and has taken the experience of acquiring a new language to a different level. The online teaching method has allowed Open English to undercut face-to-face competitor pricing in Latin America. Thus, Open English was able to position itself as an affordable and convenient option for potential students (Heim, 2011).

Unfortunately, Open English competes in a crowded marketplace. The company was able to garner market share because of their innovative teaching methodology. Yet, it is estimated that no company, aside from Rosetta Stone, has more than 5% of the language-learning software market share in the United States. Therefore, Open English’s market share is estimated to range between 1% and 5% in the U.S. (Soshkin, 2015). Despite market saturation, new competitors, such as the Tutor Group, continue to enter the online language arena (Hayes, 2016). Competition in the industry becomes even more of an issue as free providers, such as Duolingo, enter the market (S.A.P., 2013). The $662.6-million-dollar industry is expected to remain fragmented as barriers to entry are reduced (Soshkin, 2015). The research team has identified several competitors which are listed in the appendix of this report.

Potential of new entrants into the industry. The language-learning software industry is not growing as rapidly as it once was, but the industry is still considered to be in the growth stage of its product life cycle. The need for language-learning software has increased as firms continue to globalize. This industry is not capital intensive, but requires an intensive investment in technology (Soshkin, 2015). Therefore, new competition that offers innovative teaching methods continues to enter the market.

Power of suppliers. The power of suppliers in this industry is low. Companies tend to be vertically integrated, meaning that they produce all of their services in house. This is highlighted by the fact that wages account for 47% of the industry’s revenue. The majority of those wages is taken by vastly skilled software developers, who are necessary for the production of a high-quality product (Soshkin, 2015).

Power of customers. The vast quantity of competitors increases the power of customers. It is important to note that the language-learning software companies not only compete against each other, but also compete against face-to-face schools. Learning a language online tends to be more affordable, but many immigrants prefer to learn in-person (Soshkin, 2015). Overall, customers have several options to choose from when trying to learn a language.

Threat of substitutes. The threat of substitutes is high. As mentioned before, there are many companies that specialize in teaching languages online, via app, or in-person (Soshkin, 2015). From a digital perspective, software developers need to continue to price, quality, and product offering. The emergence of free mobile applications has threatened high-cost competitors.

The primary reason for analyzing a business’s value chain is to understand the company’s value preposition and how it differentiates the organization from the competition. Open English’s unique value proposition is its interactive education platform. Open English has taken a product differentiation approach. Therefore, the company needs to optimize its value chain activities in order to maintain its differentiation strategy.

From a global marketing perspective, Open English should promote the value that its students can derive from its interactive platform. In the following section, the research team will analyze Open English’s current advertising and compare it to various competitor’s advertisements.

The Appendix includes some digital Open English advertisements and competitive ads. Open English’s digital ads encourage students to triumph and learn English. A number of their ads also offers a percentage discount, but none of the studied ads allows students to interact with the learning software. Rosetta Stone also offers major product discounts, but unlike Open English, they are running ads that invite users to try a free demo. Babbel promotes interactive lessons, and the vast quantity of languages it teaches. Many of the competitors have a social media presence. Rosetta Stone has the most likes, but Duolingo tends to generate more likes per post than any of the competitors.

The travel and tourism industry is one of the world's biggest commercial enterprises with a worldwide monetary commitment of nearly $7.6 trillion in 2014. The direct economic impact of the industry, including convenience, transportation, stimulation and attractions, was around $2.36 trillion in 2014 (World Travel and Tourisim Council, 2016).

Plunging just during times of worldwide monetary hardship, the quantity of international traveler’s entries has expanded relentlessly on a yearly basis. The number of international tourist arrivals tends to increase on a yearly basis from 950 million in 2010 to almost 1.2 billion in 2014 (Statista, 2015). By 2030, international traveler entries are forecasted to surpass 1.8 billion, please see the appendix (OECD, 2016). Europe is the most frequented region by travelers. As of recently, Asia Pacific has become the second most visited region. Nations with the biggest tourism expenditures included China, the United States and Germany (Statista, 2015). In 2015, London, with over 18 million visitors, and New York were the most visited cities in 2015 (Statista, 2015). However, London received fewer than 3% of its visitors from Latin America (Guibourg, 2015). Out of all of Open English’s markets, Brazilians, Mexicans, Argentines, and Russians visited New York the most (NYC & Company, 2015).

Many locals are reluctant to fly because of its high cost. Therefore, bus travel is the most common form of long-distance transportation in South America. The quality of the buses varies significantly. The top-end companies have fleets of modern, air-conditioned buses with fully reclining bed-seats. The train network in South America is almost non-existent (Poelzl, 2014).

Of the people traveling within and out of Latin America, 82% travel for leisure versus business. Latina Americans tend to travel more within their region than to foreign markets. In 2014, Latin America ranked 7th out of 12 in visitors exported. Exported visitors are defined as people that are traveling abroad to visit another country. Asia, Europe, North America, and the Middle East all ranked higher than Latin America. The number of people traveling from Latin America experienced the 3rd worst growth percentage in 2015. However, the percentage of people traveling abroad from this region is expected to generate the third highest growth rate from 2015 to 2015 (World Travel & Tourism Council, 2015). Comment by Ariel Gil: ?

Mexico. Mexico used to have a decent train service that connects most urban areas, utilizing restaurant cars, resting-cars and scenery-view cars. Unfortunately, the Mexican government pulled the fitting on all long-distance passenger train service a few years back, and buses and planes are currently the best way to get around Mexico (Brooks, 2016).

As was the case in Latin America, most of Mexico’s travelers travel domestically and 90% of them are traveling for leisure. On a positive note, the country ranks 27th in the world for the number of visitors that are traveling abroad. Brazil, which is 42nd in visitor exports, ranks the highest for Latin America. However, it is important to note that Peru, Brazil, and Venezuela rank 2nd, 6th, and 7th respectively for visitor export growth percentage. Mexico ranks 42nd (World Travel & Tourism Council, 2015)

Most Russians typically travel within their country via train. The primary travel routes in Russia are between St. Petersburg and Moscow. Currently, there are three major types of train services in Russia: elektrichiki, skorry poyezdy and firmeny (Russian Rail, 2015)

Firmeny trains are operated by privately-owned organizations and travel long distances. They are cleaner, more comfortable and faster than other types of train services, and along these lines, they are also costlier. Skorry poyezdy are fast trains which likewise run long distances, and they are not exceptionally comfortable; they stop at numerous spots along the way. Elektrichiki are rural trains spread throughout a much larger section of Russian urban communities. They do not have bunks or cabins and are utilized for short distance travel (Russian Rail, 2015).

There are many comfortable bus companies, such as Varan Turizm, that service the local and European markets, but landtravel is time consuming, and with airfares so cheap, flying remains the best alternative for travelers to and from Turkey. Most ships calling at Turkish ports are for cruises, not simple passage. Starting in 2011, there are no more immediate ships traveling between Turkey and Italy, yet voyagers may still navigate this route via Greece and the ships between the Greek Aegean islands and Turkey. Reasonable flights, advanced and modern buses and the Balkam wars of the 1990s ended train travel between Istanbul and Europe (Brosnahan, 2016).

Companies can advertise in the transportation industry through media agencies or via direct contact with vendors. A list of several in-flight advertising vendors is located in the appendix. Vendors act as third parties, which sell advertising opportunities for multiple airlines and airports. For example, EAM sells advertising space for 50 domestic airports, 62 international airports, and 65 airlines. Although some airlines, such as Virgin America and LAN offer advertising opportunities through their sales team.

What is average time spent in airport by passengers traveling abroad versus domestic flights? What is the average time spent by passengers in international flights within LatAm? The time spent in an airport or in a flight is referred to as dwell time. The consumption of media by passenger is dependent on the length of the customer’s dwell time. A consumer is more likely to recall a brand after a high dwell time versus a low dwell time (93% vs 7%). Similarly, recalling the details of the ad is six times stronger after a high dwell time (86% vs 14%) (CBS Outdoor, 2006).

Properly targeted in-flight advertising tends to be more effective in reaching the correct audience than traditional media campaigns. Up to 86% of passengers can recall an in-flight ad without aid (EasyAir Media, 2016). Recall is defined as an individual’s ability to remember an advertisement. A passenger’s ability to recall an in-flight advertisement is astonishing. In comparison, traditional television eight second advertisements achieve a 20% recall percentage and thirty-second ads are remembered 8% of the time (Fratti, 2015).

Words or phrases, such as click here or call now, that result in immediate action by a member of the target audience are referred to as call-to-action (Business Dictionary, 2016). In-flight advertising has proven result in a 75% call to action by the target market. The typical click through rate, which is a result of an individual’s reaction to a call to action, for a digital banner campaign is .01%. The high call to action in in-flight advertising may be attributed to high percentage, 86%, of passengers being in the positive frame of mind when traveling. Business and high-frequency flyers tend to have a more positive reaction to advertisements than economy and non-frequent flyers (EasyAir Media, 2016).

Mobile users check their phones 150 times a day (EasyAir Media, 2016) . A person will look at their phone more often as they spend more time in the airport. Likewise, they may be more likely to use their tablets and laptops while they await their scheduled flight. Many of the aforementioned devices require Wi-Fi for Internet access. Demand for Wi-Fi in airports has increased, but customers are reluctant to pay Wi-Fi access fees, which cost an average of $2 for thirty minutes of smartphone Internet use (Stellin, 2013).

The top three full-service Latin American airlines are Avianca, Copa Airlines, and LATAM Airlines. On average each of these airlines has 10,402 flights per month. They have 1,134,429 passengers per month. LATAM has twenty-seven domestic flights, which comprise most flights from the three major airlines. Copa Airlines specializes in flying to international destinations. They fly to seventy-two international locations versus one domestic location. On average, the top Latin America airlines fly to forty-nine international locations. The research showed a positive correlation between business class and international flights. For example, Copa Airlines flies to most international locations and has the highest percentage of business travelers at 77%. Finally, the majority of airline passengers are men (58% versus 42%). Comment by Ariel Gil: Which research? Comment by Ariel Gil: Citation is needed here to support this claim.

Frequent travelers are more likely to recognize company advertisements; thus it is important to understand key features of this group of people. Frequent flyers are six times more likely to travel business or first class. They are three times more likely to have a household income of over $150K. This group is three times more likely to travel internationally for business or vacation. Finally, they are more likely to stay at hotels multiple times every month (Nielsen@plan, 2014).

Discuss challenges that the advertiser may face such as need to secure media space as early as possible or inability to conduct interactive advertising. Discuss regulations of advertising inside an airport – long lead times.

Discuss the possibility of an interactive booth in select airports, what user data can we get from this?

Discuss thirty seconds of mobile advertisement for thirty seconds of wifi. What user data can we get from this?

Are there any recommendations that are in the transportation industry, but not necessarily in airlines? Can we look into interactive digital ads such as “Content Capsule”? Discuss, Russian train opportunities.

Conclude the paper