Analysis Of Budget Airline Company Indigo Airlines Tourism Essay

Indigo airlines are planning to introduce new promotional offers for the potential customers. The aim of the organisation is to increase the current market share by at least 30%.The goal of this marketing plan is to outline a new marketing strategy to attract the potential customers from other airlines, to attract the first time travellers as well.

The demographic for the organisation consists people of all age groups with average income and middle class life style. In a recent survey it has been found that in India more than 20% people prefer air travel more than any other transport facility. Due to the sudden increase in the market for airline travel it can be said that it is easy to capitalise on the current image of the firm, however it could be a little difficult to gain competitive advantage in front of the competitors.

Quality for the firm is the most important thing so quality can never be compromised with and that is the motto of the firm.

1. Introduction

Organization and product

Indigo airline is a low cost airlines company operating from India since 2006. It has been very successful in the low cost airlines business from the time they have begun operations. They are one of the market leaders in the low cost airlines service providers and have a very good reputation in the Indian market. The reason for their good reputation is because of their punctuality and the service that they provide. Indigo airlines are currently catering to the needs of the domestic travellers in India and have been flying the sky since 2006. It has gained advantage in the market due to the punctuality and the prices that they offer to the customers.

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The need for new product offers arise from the increasing market which is growing at a rapid rate. The new offers for the airlines can not only attract potential customers but can also attract the loyal customers of other airlines as it would be very cost effective making it affordable.

“The award-winning low-fare airline that is redefining the airline business in India bagged the NDTV Profit Business Leadership Award 2009 in the category of Aviation”. (ndtv.com)

Strategic Plan and Focus

To achieve the firm’s strategic direction, the firm’s objectives, mission, aims, goals and competitive advantage have been created to offer an image and vanguard for the firm’s success. In accumulation, to determine the extent of the services and products that are offered by the organisation, and the primary environmental commitment towards nation and the aviation industry, are also important aspects of the company’s strategic direction and focus.

Mission Statement

Indigo airlines aims to become the number one leader in the low cost airline industry of India, offering the best service and ensuring highest standards of quality at low cost to the customer.

Goals and Objectives

Non- Financial

Indigo airlines aim to attain the utmost rank of customer satisfaction in terms of the service and products offered by the firm. The management ensures that the highest standards of quality are in place at every level to ensure 100% customer satisfaction.

Financial

The financial goal for the firm is to ensure highest rate of return for the investors and the stakeholders and increasing the profit by following steps.

Effective costing of products

Cost cutting

Increasing the market share by 25%

Core Competencies / Competitive Advantage

The strengths for indigo airline in the current market situation are the price tag of the tickets and the fact that it has been awarded many times in 2009 as one of the best low cost airlines. The recession was extreme and most of the people who were using services from jet airways and kingfisher came down to low cost airlines (financial express).The market almost doubled for the low cost airlines as in the times of recession companies wanted to cut costs so most of -the official travel (Domestic) was done through low cost airlines.

Indigo airlines are a low cost airline and because of that when they earned in recession they did not cut down on employees in fact they hired more employees. This gave a better picture and reputation for the airlines. This scenario helped indigo airlines to invest more in their staff skills and there airline operations team which gave them competitive edge over the competition in the market.

2.4. Situational Analysis

2.4.1 SWOT Analysis

According to the SWOT analysis there are more opportunities and strengths for indigo rather than weaknesses and threats but in order to increase the market share and stabilize the growth it is important to work on the weaknesses first and keep a strong focus on the opportunities.

Strengths

Good reputation in the market

Skilled staff

High profit margin in 2009 as compared to competitors

Lower cost of the product as compared to the competitors

Weakness

Relatively new in the market

Lacks in number of flights as compared to the competitors

Opportunities

High Profit Growth

Rapid increase in the market growth

Product development

Technological advancements

Threats

Threat of a new entrant

Higher growth rate of the market but increase in the competition

Market fluctuation

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2.5. Industry Analysis

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The market in India for the aviation industry is a growing market. For years Indian aviation industry was being dominated by air India(Indian Aviation Journal2002)..About 15 years back companies like jet airways, air Sahara, spice jet, kingfisher and a few others came into picture. In 2006 august indigo airlines entered the aviation industry. Mentioned below are the current market statistics.

Total number of domestic flights in India

8600

Total number of seat increase

1.7 million a year

% increase in travellers

12% yearly basis

% increase in flights

25% yearly

(Source Indian aviation journal2010)

2.6. Competitor Analysis

As the airline industry is becoming a big market due to the 12.8% growth of the Indian aviation industry in the last 5 years (Indian Aviation Journal, 2002,).. There are new airlines being introduced as low cost airlines. The biggest competition for indigo airlines is spice jet airlines which have been with indigo for quite some time as the strongest competitor. Spice jet sells more tickets than indigo (Clash of the Titans http://www.articlesnatch.com/topic/Spicejet+Airlines, Date accessed 3rd December 2010). This due to the time span of the two airlines being different, indigo is a 4 year old company where as spice jet has been there for more than 7 years(Spice Jet Industry, http://www.makemytrip.com/flights/spicejet-history.html, Date accessed 3rd December 2010) and is treated as a major in the industry when it comes to low cost airlines. This competition has been going on for quite a lot of time but now as indigo has started making name for itself spice jet is feeling the heat too.

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2.7. Customer analysis

The current customer is more aware about the services and the rights, the price and the difference between paying for food. The increasing percentage of people travelling via airplanes every year domestically is increasing this gives a slight idea of the customer requirement. As the demand is increasing at a rapid rate the competition is increasing as well and the customer’s expectations are rising.

2.8. Key Issues

The key issues that can be derived out from the above mentioned are as follows

Competition is growing day by day not only the competitor

The market is changing like never before

Introduction of a new service is a mandate

Indigo needs to market itself in the new generation

Ansoff Matrix

Ansoff matrix is a tool which determines the growth of an organisation and its strategy for the related growth.

http://www.mrdashboard.com/images/Ansoff_Matrix_Excel.png

(Source Google images)

Market penetration.

According to the ansoff matrix indigo airlines will target the potential customer which is travelling through trains and at the same time the current customer database to penetrate the market .The scope of marketing current product in the new market is considered to be high risk however by adding value in the current product reduces the risk. This will be by offering 10% discount for the next visit. It will enhance the chances of increasing the customer base.

Porter’s five forces

4.1. Rivalry

Indigo airlines entered the market in 2006 and there were very strong competitors in the market then. The direct rivalry between indigo airlines and spice jet airlines has been very popular in the Indian media as both the airlines started somewhat at the same time. Indigo airlines have reached competitive advantage over spice jet due to its price tag of the air tickets. By adding the promotional scheme indigo airlines will not only gain advantage over spice jet but can also attract the customer data base that spice jet posses.

4.2. Threats of Substitute

The threat of substitute in porter’s model is considered to be a substitute product from another industry. For indigo airlines it is not really something that they have to worry about. This is because as the airlines were a threat to train system in India and no other substitute could be provided to the customers besides airlines. It is the fastest way of travelling as the country does not possess any water transportation being covered from sea on the three sides.

4.3. Buyer Power

The buyer power is strong in the Indian market as the competition is very strong the buyer has more options then what it used to be about ten years back. To weaken the buyer power indigo airlines from the very beginning kept the prices of its tickets comparatively lower then what the other competitors were offering.

4.4. Supplier power

The supplier power in the Indian aviation industry is weak especially for indigo airlines. Indigo airlines have maintained a very strong relationship with the travel agents and travel websites due to which the airlines have not really felt the heat from the supplier’s side. Due to the direct relationship between the travel agents and airlines the customer is a bit weak and that shortens the authority of the supplier.

4.5. Threat of A New Entrant

The airline industry in India is growing and this is one of the reasons there can be new entrants in the market that can cause trouble for indigo airlines. The advantage that indigo has in the market is its lowest ticket prices. A new entrant while entering the market has to ensure that the ticket prices are either same or less then what indigo offers. The possibilities of cheaper ticket is a bit difficult to imagine however even if the competitor comes up with cheaper tickets they will have to setup the distribution channel for its products and enhance the services which is difficult and indigo has an advantage on that.

5. Market-product Focus

5.1. Marketing and product objectives

Indigo airlines has identified its target market as official travellers and rest are all the potential first time travellers. The product objective is to increase the market share..

5.2. Target Market

The target market for indigo airlines is as follows:-

The travelers who travel through trains and have a pre conceived notion of the airplanes being costly then the trains.

Potential customers from the various other airlines which are not happy with the price and the service they get from the respective airlines.

The target market demographics for indigo airlines are approximately 60% official travellers and rest 40% includes all types of travellers the metropolitans of India, Delhi, Mumbai, Bangalore and Chennai. Not ignoring the fact that the b grade cities also have the potential to yield profit. The consumers are sub divided depending on their age, profession, family size, and language as indigo airlines is a service providing organization and in order to keep the relationship marketing sustainable it is important to understand the demographics of the target market.

This segmentation mainly deals with the lifestyles of people there attitudes and there personality. Indigo airlines being an airlines company has to keep in mind the needs of the customers keeping the above mentioned three perspectives as a base to provide good customer service which relates directly to relationship building. The psychographic for indigo airlines are the people who travel through trains in first class and have a annual income of more than 300,000 Indian rupees.

5.3. Market Positioning

The position of indigo airlines in the market is very important as at the moment it is one of the best low cost airline carrier in the Indian aviation industry however due to a lot of new entrants and the existence of some old competitors it is still not certain that it can be one of the best in the next coming years as well.

Indigo airlines will be positioned as an airline which offers a product that is not compromised upon in terms of quality service and commitment. It will be positioned as a stable airline that will provide the services at a low cost.

Market positioning according to me is a how a potential customer perceives a product or a service before actually buying the product or rendering the service indigo airlines has to make the potential customer feel that the service they are about to render from indigo airlines is one of the best and is one of the most economical in its class as affordability is always a matter of discussion when someone plans to travel via a low cost airlines.

Marketing MIX

Product Line

Indigo airlines have considered a service offer which will generate optimistic impression in the fluctuating industry at present. Any product that a firm offers to the customer should be available to the customer when they want it. The product should be different from what the competitor offers, such an offering to the customer will generate curiosity in the industry and the people will be ready to buy it as it is available as per the demand. The best way to achieve such a market height is by offering the best product that the company has with an added value. The firm is selling low cost airline tickets at the moment and has been generating good profit over the years. To increase the market share it is important to retain the current customer by providing added values and offering the same to new customers as well. Mentioned below is the new product line to attract the potential customers in form of a discount voucher which can be used by the customer travelling the next time.

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Pricing

Indigo airlines products are sold online, on the ticketing counters and through various travel agents. Pricing is one of the most important aspects for any business as it determines the return on investment for the stakeholders. Indigo airlines is a low cost airlines which makes the pricing to be even more complex as compared to its other competitors as there is not much of a margin.

As per the new plan that a discount voucher will be given to every new customer lets create a hypothetical equation to understand the pricing of the new product.

Total number of flights by indigo airlines-118 in a day

Minimum ticket price booked one month advance- INR 3200

Total sitting capacity of A320-148 seats

Total number of travelers in a day in full booking-17464

Total income for a single business day-INR 55, 884,800

Let’s take number of first time travelers in a day- 5000

Total cost of discount vouchers- INR 16, 00,000

Percentage increase from last time in travelers 21% every month

Promotion

Indigo airlines have two key objectives in its promotional plan. They are as follows

Achieving new product recognition

Escalating sales for the business.

Promotion of indigo airlines offers will be done through various mediums such as

Internet

Television

Journals

Magazines

Events

In schools and colleges

Word of mouth

Place

For a product to be successful it is very important to identify the right place and the right people. According to the demographic analysis mentioned above (target market) it is very important to attract the target market. Internet is the best tool to do so by increasing marketing opportunities through travel websites from which people usually buy tickets. Posting important updates and dates on such websites can bring in a lot of brand awareness amongst the people who are willing to travel on special offers and prices. The supply chain has to be brilliant indigo airlines is a service provider so supply chain concept does not comes in it, however if implied then the supply chain can be related with the optimum communication between the travel agents and the airlines providing them with the best dates and functionality of the airlines.

People

The people involved in the business directly and indirectly are very important for indigo airlines as they will be providing a lot of information. Travel agents will be providing direct business to the airlines so a proper channel should be made to identify the strength of travel agents in a particular area. Employees of a firm are its best resource as the human capital increases production and optimum utilization people with high customer services skills should be hired to impress the clientele as indigo is providing customer service. The customer should be given first hand information as to what is the schedule for their flights in case of any delays or complexities.

Process

The process is related to the service delivery for the customers the best policy about it is to be honest if a flight is delayed give the exact time for the delay and the reason even if indigo airlines has to compromise on price as customer management process should be as transparent as possible to establish loyalty of the customers.

6.7Physical evidence

The physical evidence is related to the impression that the customer gets the first time they get in the plane as all the planes bought by indigo airlines are new and the maintenance department works whole heartedly it give an impression of a very clean environment henceforth providing a good physical evidence.

7. Promotion Schedule

The completion of Indigo airlines promotional schedule is a significant feature for the success of the product promotion. The implementation of the product promotion package will happen in 4 stages. They are mentioned below

Implementation Stages

Stage 1- The first time when a traveller buys the ticket from indigo airlines a proper note will be made using the information provided by the customer while booking. A voucher worth 10% discount of the next travelling price will be given to the customer while checking in for the flight by the customer service assistant which will be valid for the next 35 weeks.

Stage2- After the traveller has got the voucher he/she can use it only at the indigo airlines website or at the indigo airlines office to availa discount of 10% in there next visit. The staff at the ticket counter will monitor the expiry date and validity of the voucher.

8. Critique of the Marketing Models

There are numerous marketing models that have been developed over the years and every model has been criticized for one reason or the other as it has been said nothing is perfect it is true. One marketing model can never satisfied the wants of customers, suppliers, manufacturers and organisations.

Let us look at the marketing models that have been taken in the marketing plan to take the marketing decisions.

8.1 Porter’s Five Forces

Porter’s five forces” is a structure for the trade analysis and trade tactic

Growth developed by Michael E. Porter of Harvard Business School in 1979. (Kotler 2008)

The main weakness of this model is that it was developed in the 80’s when the business environment was very simple and predictable and the business competition in many fields was not what it is today. Porter’s strategies do not ensure superior profit (O’ Shaughnessy.1988,Speed, 1989, MacDonald, 1992)

As this model is a classical model it completely ignores the aspect of technology. Technology in today’s time is playing a vital role and if porter’s five forces are applied it does take into account the power of internet. For an airlines it is very important to reach the customer in their homes which can only be done by the internet. The five forces model does not take into account the e marketing that has evolved after the 1980’s and thus has been criticized as a classical model . porter’s five forces model has a variable called threat of new entrant in this module porter talks about the barriers to be created by the current organisation to prevent any new competition. if close consideration is given to this part then it clearly states that creating a barrier for competition is good but it can also led to some firms joining hand in the market and fixing there prices or there deals so that no one enter the market and therefore creating the monopoly unethically and that is illegal. It has happened in the pas lysiene price fixing conspiracy is in the mid 90’s was a big news when firms from America, Korea and Japan got together to increase the price of lysiene a sort of animal feed additive (Wikipedia). Which resulted in fines and imprisonment. This clearly states that making plans solely on porter’s model will not be a good idea. Till the time someone develops a better plan then porter five forces will still be the first choice for the businesses (goett,1999)

8.2. Ansoff Matrix

Igor ansoff published an article “Strategies for Diversification” in the Harvard Business Review and the ansoff matrix was published in it since then it has been really famous as a tool for the managers to develop a strategic growth strategie which can determine the positioning of the firm. It is very good tool but it has to be incorporated with other tools of marketing to achieve substantial resultsas it only can give one part of the strategy(Jeffery. F. rayport,2001)