Term Paper on "Aviation Marketing"

Term Paper 9 pages (2476 words) Sources: 6 Style: APA

[EXCERPT] . . . .

Aviation Marketing

Airline Sky Miles

Emergence, Marketing Mix and Effects upon the Airline Industry

The contemporaneous business industry is significantly different from how it used to be only a few decades ago. The primary change that occurred regarded the nature of the business. As such, in the past, business activities had a more practical and technological nature and they were generally product oriented; but today, they have become more human oriented. For instance, during the twentieth century, the focus was on the products manufactured and the technologies used, without much emphasis on the human resource or on customer satisfaction. So low was the interest towards customer satisfaction, that Henry Ford even said once that his customers could have their cars made in any color they desired, as long as this color was black.

Today however, the industrial sector places increased emphasis on both employees as well as customers. Employees have transformed from the people operating the machines into the company's most vital resources and the customers are the forces that drive businesses.

An industry sector which is extremely relevant of this change in the nature of the businesses conducted is the airline sector. There are numerous airline companies that compete against each other on the market and strive to present customers with the best products and services. Furthermore, these companies invest millions of dollars each year in order to improve the quality of their products and increase customer satisfaction. A more and more common means of achieving this is that of offering customers the possibility to fly for free or, at least, to benefit of deductions and special offers.

2. Emergence of airline sky miles

Airline sky miles programs were first initiated in order to attract more customers. Delta Airlines was one of the first companies to ever implement these programs which were soon adopted by most national and international airline companies.

The basic principle of acquiring additional sky miles is that of purchasing airline products and services, gathering value points proportionally to the fees paid and then using these value points to pay for future services. The practice has spread around the globe generally due to its benefits and its easiness. There are numerous possibilities of acquiring sky miles, but the most common one is through credit cards. By paying the airline fees with credit cards, the customer can earn air miles.

The amount of miles earned per fee depends on the airline companies. For instance, Delta Airlines and Blue Airlines grant customers one mile for a dollar paid. (Dial Abroad, 2007) as such, if one pays $350 for a ticket, he will be granted the right to fly 350 miles for free. Capital One on the other hand grants customers 1.25 miles for each dollar spent. This means that for a $350 ticket, the buyer can earn 437.5 air miles, 87.5 extra miles that those offered by Delta or Blue Airlines.

Among the most common credit cards that earn customers free sky miles are: Delta Sky Miles Gold Credit Card, Starwood Preferred Guest Credit Card from American Express, Hilton Honors Platinum Card from American Express, British Airways Visa Signature Card, Continental Airlines World MaterCard from Chase, United Mileage Plus Platinum Business Card or Alaska Airlines Visa Signature Credit Card. (Credit Federal, 2007)

When they first emerged onto the market, the air miles were aimed to attract more customers and could only be used for flying services. However, in time they have evolved at such a level that they are now able to significantly influence the airline industry and the customer satisfaction at unforeseen levels.

3. Marketing Mix

The marketing mix of the sky miles is composed of four features: product, place, price and promotion. The product related issues have to answer to questions in regard to brand name, functionality, quality, safety, support, services, accessories and warranties. Place (distribution) related issues regard distribution channels, market coverage, specific channel members, warehousing or distribution centers. Price related issues answer to questions in regard to the retail price, payment possibilities and discounts. Promotion decisions regard advertising campaigns, a marketing budget and public relations. (Net MBA, 2007)

Product

Sky miles are transportation benefits earned from previous purchases of airline products and services

They can be used for several purposes, such as, but not limited to, plane flights, car rentals, shopping from airport stores, hotel reservations, or any other services provided by airline companies and their partners

Sky miles' brand name is that of the airline company that issues them (for example Delta Sky Miles or American Express Sky Miles). The brand name represents the issuer's promise of high quality and commitment.

Sky miles can be issued as nominal titles or they can be bearer miles.

The bearer sky miles can easily be sold, donated or transferred to a tertiary party. For instance, in 2004, the United States Department of Defense initiated the "Operation Hero Miles" which allowed American citizens to donate their unused sky miles to the soldiers wounded in battles and to their families. (Luckach, 2005)

Earning points through credit card payment grants numerous benefits for the customers. For instance, the Gold Delta Sky Miles Credit Card offers buyers "15,000 bonus miles with the first purchase; 2,500 bonus miles for adding an additional card member; no annual fee for the first year- a savings of $85; one mile for every other eligible dollar spent" (American Express, 2007)

Sky miles have a minimum period of accumulation, for instance a customers can only use his miles after a period of three months from enrolment in the program

Sky miles have a maximum period of validity, meaning for instance that they would have to be spent in a time period of six months since the last purchase. However there exists a possibility of avoiding this disadvantage as the clients are not obliged to fly within that period but only to acquire their tickets. As such, at the expiration of the six months, customers can purchase a ticket and only use it after another three additional months, or whatever future date they choose.

Place

The place of distribution refers to the means of delivering the sky miles to the final customers

Customers can directly earn their air miles by purchasing services at the airport counter, directly from the airline company, from the airline company's partners (such as hotels or car rental agencies), through the airline company's online purchase services

Clients can also indirectly get sky miles by buying them from other customers. For example, several customers earn sky miles and then sell them on the internet. There are numerous advertisement websites that contain adds regarding sky miles sales. EBay hosts on their travel category numerous such advertisements. One of them includes 2,000 Delta sky miles; the add expires on October 31, 2007 and has a starting bid of $10.50 (eBay, 2007)

The market coverage of the sky miles depends on each company's market share and other features that strengthen or weaken the company and consequently their issued air miles

The special channels of distribution refer to the issuers' business partners and online purchases

Since sky miles are service related rather than products, a special storage or warehousing is unnecessary.

Price

Sky miles are services that are earned, rather than paid for However, they are not free and they are established proportionally with the amount of products and services previously acquired from the issuer. For instance, most companies offer one mile for one dollar spent, but this varies based on each issuer's internal policies

There are price variations based on the buyer's relationship with the airline company that issues the sky miles. As such, Delta Airlines offers one mile per one dollar on general purchases and two miles for one dollar at participating retailers (Knox, 2006)

When indirectly purchasing the sky miles from a customer who desires to sell them the price is negotiated between the two parties and it considers the number of miles, their transferability and their particular usage possibilities

Also included in the air miles prices is the process through which the customer earns the miles. As such, in the case of the credit cards, clients have to pay for the account maintenance costs

The annual fees of the credit card vary form an airline company to the other. Generally, most companies offer a six to twelve months period which is free of charges. After this period has expired, some companies demand fees while others do not. For instance, the Gold Delta Sky Miles Credit Card has an annual fee of $85 starting with the second year, while the Blue Sky Mile Credit Card from American Airlines charges no fee for the entire validity of the credit card. Other companies have annual fees of $19 (Miles Edge), $55 (Northwest Airlines) or $75 (British Airways). (Credit Cards, 2007)

Promotion

The sky miles are in their essence promotional services used to attract more customers and increase their level of satisfaction. Even so, issuers need to implement several promotional strategies that familiarize customers with the services

The… READ MORE

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