Friday, 17 October 2014

Keeping Your Enemies Closer

Apparently, the airlines in Australia are avoiding confrontation; with both small regional and international markets, they sort of have to if they want to survive. What’s even more surprising than the major Qantas cuts from earlier this year, is that Qantas has finally admitted that it can’t exactly continue to keep claiming its prestige over Virgin Australia or blow their sales away, according to news.com.au. This realisation may save them in the end, however, many customers simply look for good service and convenience and don’t want to see furious marketing and advertising hostility and devious price wars - although no one minds snapping up a hot deal here and there!

The image below displays Australia’s major airport hub cities. Note: There aren't many! The second image displays America’s major airport cities. Note: There are significantly more. The pure fact that there are more cities to service in the USA is a key indicator of competitive pricing, whereas in Australia, it costs a lot more to service the fewer cities, let alone, the fact that there are fewer competitors in Australia, fewer flights per day, fewer people to potentially accommodate, flying time constraints over some cities/airspaces, and other regulations which inhibit the market from growing more significantly.

Not only do airlines in the Australian market already run into domestic problems, they also face the hardest feat of getting people to Australia in the first place, as it poses international carriers some of the longest flying legs in the world. Some people even say Australia is on the way to nowhere else.

(Image 1: http://3.bp.blogspot.com/_9tS_k-d7cac/TMkX08G9L3I/AAAAAAAAA40/-2T4RazF0oQ/s1600/Australia_Map.jpg)

(Image 2: http://www.allairports.net/images/airport-map.jpg)

All of this being said, it just goes to show these big and indestructible businesses exactly how important their internal and external marketing is. Completing an environmental scan in order to find out where their business competes is crucial in understanding the types of obstacles they will face in such a demanding market. Additionally, they must then understand what they can truly offer to combe any obstacles, such as by assessing assets and competencies. In this case, Qantas has chosen to update some of their fleet; their main asset in the industry. This may be costing them quantities of seats to purchase smaller planes or those configured with less seats, as opposed to Virgin, Tiger, and Jetstar, who are all said to be gaining quantities of seats through newer aircraft. And lastly, these airlines need to begin to revise their market strategies and be strategic in their partnerships; or at least who they are going to mess with or not.

These three steps make up the foundations for a long-term and innovative marketing strategy, something we’ve recently experienced in our Innovative Marketing Strategy course in our Master of Marketing program. So, the next time you check momondo.com or skyscanner.com.au and wonder why Virgin and Qantas are no longer fighting over fares and seat classes because their prices seem to be the same, just think of the long term benefit they are trying to create instead. Maybe one day the regional services within Australia will pick up and then they can focus on those new markets and new outreach programs.

Christine Drpich
Current student in the Master of Marketing program at the University of Sydney Business School

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