The Blake Project, the brand consultancy behind Branding Strategy Insider, delivers interactive brand education workshops and keynote speeches designed to align marketers on essential concepts in brand management and empower them to release the full potential of the brands they manage.
Category: Airline Brand Strategy
The response by airlines to customers’ demands for lower and lower fares has been to do exactly that, lower seat costs, but at the same time to strip more and more of what is included in the fare out of the price.
This process – referred to by Time as “the unbundled skies” – points to a business model that I see becoming more prevalent, and not just in the heavens, as price-sensitive brands lower entry points in order to get customers to commit, and then use “upgrades” to restore margin and, according to the article, add another 50% or so to the real price. Pay less, get less. Want more? Pay more. Ryanair have even suggested, somewhat controversially, that “more” could include access to the toilet. In fact, according to one consultant quoted, there are up to 35 add-ons available when you fly, ranging from baggage and food fees to flight-delay insurance and keeping the middle seat empty. You literally get what you pay for.
This seems like an expedient answer to customers’ demands for cheaper goods. Lure them in – then trick them into paying more. It’s not exactly customer-friendly but at least, some would argue, it’s a way to compete.
True, but changing the competitive model this way is not without its consequences. One is that as the product itself becomes less valuable and valued, service now comes not just at, but with, a price. That in turn shifts the emphasis from what customers get to what do they not get, and what shortfalls they are prepared to do without.
For the moment what’s happening in the aviation sector amounts potentially to a complete economic rebalance of the product at that end of the market. As the article points out, “In the unbundled world, airfare is merely the price of admission to get on a jet. If you crave comfort, convenience, less stress, decent food — what was once called good service — expect to pay up.”Read More
And then there were four…major U.S. airlines that is. Last week, it was announced that American Airlines will merge with US Airways. Neither airline can be considered a strong business or a strong brand, but perhaps consolidation will finally lead to an improvement in business results and customer satisfaction. The only question to my mind is which of those two things is the chicken and which is the egg?
The conventional wisdom is that airlines suffer from systemic problems that make it tough to run a successful business. This post from Investopedia suggests four basic reasons why airlines struggle financially.
1. Unprofitable airlines keep flying and so undermine demand for the other carriers
2. Fixed and variable costs are high making it difficult to respond to changing market conditions
3. Exogenous events can have a big impact on demand e.g. volcanic dust clouds
4. Airlines have a reputation for hassle and bad service
Bankruptcy, which would often see normal businesses shuttered for good, seems to be a safe haven from which the airline uses to effect cost efficiency plans and upgrades they could not afford otherwise. They then emerge from bankruptcy with the expectation of improved financial performance, but the same dismal customer service. What is the definition of madness? Doing the same thing repeatedly but expecting different results.
Airlines in general have a low customer satisfaction score by comparison to other industries and it is notable that the two smaller, value airlines – JetBlue and Southwest – achieve satisfaction scores significantly higher than the traditional carriers: Delta, US Airways, American and United Airlines. We saw exactly the same picture last time when we measured U.S. airlines in BrandZ back in 2011. Southwest was far better known than JetBlue, but both brands were meaningfully different from the competition and poised for growth. None of the legacy airlines came even close to matching the equity scores achieved by the value airlines, which were seen to be setting the trends for the category.
Brands that fail lack a meaningful difference compared to their competition. They tend to be equally well-known but they are unable to establish positive and differentiating perceptions of the brand, particularly among the people who use them.Read More
In a recent post on airline brand differentiation I shared insight into the creation of Song Airlines, Delta’s high touch-low cost airline subsidiary, a first of its kind airline brand developed to attract primarily women to its leisure destinations. While President and chief brand advocate, we conceptualized Song in late 2002, it began flying April 15, 2003. Song was merged back into Delta on May 31, 2006, during Delta’s bankruptcy process. Today on Branding Strategy Insider, more on the Song story and how we created a differentiated brand in a cluttered, uninspired marketplace:
Once we had gone “boldly, where no man has gone before . . . ” and designed an airline brand for women, it was important that men not be alienated in the process. Shortly after the new brand was introduced, we did some perception testing and found that while women “got” the brand right away, men were “curious” about it. That, of course, was a good thing, since their curiosity would lead them to at least try it once! Our marketing and product development team quickly got to work. Knowing at the outset that men would focus on the onboard satellite TV, the team insured that our offerings included a few ESPN and business channels like CNBC and Bloomberg. We also decided to create an interactive trivia game using the TV monitors, and enabling customers to compete against each other, no matter where their seats were on the airplane. This turned out to be a big hit. As did the good-sized (yet healthy) organic sandwiches and wraps, and imported beer we offered with our “food for sale” program.Read More
Remarkably, even though Song Airlines (Delta’s high-touch low-cost subsidiary) was folded back into Delta in Mid 2006, I still get several comments each month from former customers and employees about what a great brand it was. As the creator of the airline, and builder of the brand, I am at once gratified by their fondness yet disappointed that the airline became a casualty of bankruptcy and the need to economize – maintaining two independent airline brands and workforces was more expensive than one, and austerity was the rule of the day.
Yet people still talk longingly about Song, even though it hasn’t flown in six years. Why is that? Isn’t the airline industry just one big commodity provider? For the most part, yes, certainly in the case of the legacy airlines it is true. Each of them has created their airline to be the “carrier of choice” for the businessman.
But as niche airlines have developed, we have seen product differentiation start to take shape. Most people still remember People Express, a true low cost carrier that appealed to the common man versus the traditional well-heeled customer, and was dedicated to the proposition that everyone should be able to fly. On the other side of the spectrum was MGM Grand Air, which provided an uber-First Class experience, but was expensive to fly, served very few markets and not enough customers to be successful.
How have some of the other non-legacy airlines differentiated themselves? Well, for Southwest, it was the peanuts and the flight attendant humor. For Spirit, it’s ultra-low cost fares, but you must be willing to pay for everything else, yes even charging for toilet use was announced then scrapped. JetBlue introduced live in-flight TV and an upscale low cost product, while Hooters Air chose to appeal to the …well, you know who you are.Read More
Fighter brands are one of the oldest strategies in branding. In a classic response to low priced rivals an organization launches a cheaper brand to attack the threat head on and protect their premium priced offerings. Unlike flanker brands or traditional brands that are designed with a set of target consumers in mind, fighter brands are specifically created to combat a competitor that is threatening to steal market share away from a company’s main brand. Fighter brands are usually a classic recession strategy. As value competitors gain share and private labels grow stronger – an increasing number of marketers turn to a fighter brand to rescue disappearing sales while maintaining their premium brand’s equity.
When a fighter brand strategy works it not only defeats a low priced competitor but also opens up a new market. Intel Celeron is a notable case study of successful fighter brand application. Despite the success of its Pentium chips, Intel faced a major threat during the late Nineties from competitors like AMD’s K6 chips that were cheaper and better placed to serve the emerging low-cost PC market. Intel wanted to protect the brand equity and price premium of its Pentium chips but also wanted to avoid AMD gaining a foothold into the lower end of the market. So it created Celeron as a cheaper, less powerful version of its Pentium chips to serve this market and keep AMD out. Intel’s subsequent 80% share of the global PC market is testament to the potential of a successful fighter brand to help restrict competitors and open up additional segments of the market.
Unfortunately, for every success like Intel Celeron there are many more cases of abject failure. Saturn from GM was meant to attack Japanese imports but ended up losing billions and helping destroy GM. Song from Delta was designed to hit back at low priced carriers like Southwest and JetBlue but lasted three years and cost the airline hundreds of millions of dollars. Funtime film from Kodak was meant to win back share from Fuji but did little to stem the tide. The history of fighter brands is a discouraging roll-call of failed campaigns that inflicted very little damage on targeted competitors and resulted, instead, in significant collateral losses for the company that launched them. My research into fighter brands published in the October edition of Harvard Business Review examines the classic strategic hazards that marketers must negotiate in order to ensure their fighter brand will emerge victorious from its low price battles.
The first tip is to consider whether an additional brand is really what your organization needs? An additional brand means less investment and management attention for your existing portfolio of brands at the very time when you probably should avoid any distractions. Do you really want to spend precious resources on a new low priced fighter brand at a time when perhaps the focus should be on adjusting your existing brands and strategic thinking? Too often companies embark on significant cost cutting and re-pricing strategies for their premium brands after acknowledging that their respective fighter brand strategies had failed. In each instance, however, these crucial strategic transformations are usually delayed by years while the organizations conceived, executed and then retracted their fighter brands. Start your fighter brand campaign by questioning whether you even need one in the first place. Less brands is always more.
If you decide to launch, the next key consideration should be cannibalization. Most fighter brands are created explicitly to win back customers that have switched to a low-priced rival. Unfortunately, once deployed, many have an annoying tendency to also acquire customers from a company’s own premium offering. Too often the break even analysis used to justify the launch of a fighter brand unrealistically favors competitor steal over premium brand cannibalization. The best fighter brand strategies, like P&G’s use of Luvs in the diaper category, not only factor in the degree to which the brand will steal from its sister brand, they also include strategies to minimize the amount of cannibalization incurred. P&G specifically removed innovative features from Luvs and invested heavily in their premium brand Pampers to successfully ensure that the two brands attacked their respective competitors more than they fought with each other.
Another key focus should be consumers. The provenance of a fighter brand is very different from the usual brand launch. It originates with a competitor and the strategic success it has achieved, or threatens to achieve, against your organization. The DNA of a fighter brand is therefore potentially flawed from the very outset because it is derived from company deficiencies and competitor strengths, rather than a specific focus on a particular target segment of consumers. One of the reasons that Qantas succeeded, where so many other airlines failed, when it launched its successful fighter brand JetStar was that it began the planning process with secret focus groups all over Australia. Rather than orient its development around matching the strengths of the competitor it was designed to attack, JetStar was created around the needs of the consumers it would one day serve.
A final crucial question is one of sustainable profits. While a fighter brand is designed to target a rival, it also has to do so profitably. How else can it mount a long term campaign? This was one of the key lessons from GM’s failed experiment with Saturn which successfully stole share back share from Toyota and Honda but did so while losing $3,000 per car. Eventually GM had to make savings and when it did – Saturn lost its edge and the Japanese imports resumed their domination of the US market. A better case study for CMO’s is 3M’s fighter brand version of its Post-It Notes. Highland comes in less formats, with lower grade adhesive and is altogether a more basic product. But lower quality means lower costs and this ensures that despite Highland’s low price it is also a very profitable product for 3M. This, in turn, has ensured its long term fighting effectiveness in the category.
When you first consider a fighter brand strategy its likely your thoughts will immediately dwell on the tempting combination of restricting threats from lower priced competitors while opening up fast growing segments at the lower end of the market. But if you want to get it right you should first consider the concerns I’ve highlighted in this post. Most fighter brands fail… despite their apparently unbeatable potential.
Mark Ritson is a visiting Associate Professor of Marketing at MIT Sloan where he teaches Brand Management and Marketing on the MBA program. His paper, “Should You Launch A Fighter Brand?” is published in the October edition of Harvard Business Review. A variation of the piece is featured today on Branding Strategy Insider in partnership with the Harvard Business Review.
Sponsored by: The Brand Positioning WorkshopRead More