Air New Zealand: Marketing Case Study

Introduction

Air New Zealand is an Auckland based company operating scheduled passenger flights to 20 domestic and 53 international destinations in more than 20 countries. The New Zealand government currently owns 52% of the shares and the rest is owned by CEO Jeff McDowell (Air New Zealand Ltd, 2020). With tourism as the airlines stock-in trade it has become one of the most reliable and profitable airlines competing with some of the biggest international carriers. Being a step ahead in terms of innovation and providing quality customer service the company also offers aircraft leasing, airline training services & events marketing. The airlines have signed marketing agreements with several airlines to promote tourism across New Zealand as well as offering convenient flight choices across the US and New Zealand. Keeping a customer-centric approach, they are committed in using environmentally sustainable fuels keeping climate change in mind (Energy & Ecology business, 2008).

This case study aims to discuss the different marketing aspects of Air New Zealand, the marketing strategies used by them, determining the target market using SWOT analysis, analysing the strategies and exploring the buying behaviour of the consumer and making recommendations.

The role of marketing in the business

Marketing plays an important role in establishing relationships with their customers and other organisations. It’s responsible for making sure that the business is focused on delivering high-class value to its customers in a competitive marketplace. As said by Webster Jr, F. E (1992), all businesses are defined by its customers not by their products, factories or offices. Air New Zealand follows a “customer-centric” B2C (Business to customer) approach and brings innovation in various aspects of marketing, such as baggage tracking service & dedicated self-check-in kiosks. Since the introduction of air points in 2004 they have signed up with other airlines to earn and redeem frequent flyer miles offering customers lounge access, extra baggage allowances and other priority services. They partnered with various banks such as Kiwi Bank offering customers credit cards to earn air points with. They sell their services and products with various features which allow the customers to choose the best suited for them (Air New Zealand limited, 2013) at affordable prices. Following a customer-focused approach they have been awarded airline excellence awards 5 times (Airline Ratings, 2019). The brand creates greater awareness through electronic word-of mouth and focuses on promoting its services through the tourism industry. Since the easy availability of data on its competitors they follow a competitive based pricing strategy while offering more features on their products & services. (Air New Zealand limited, 2013). Each of these products & services are customised for customers of all ages and of genuine value, thus creating brand loyalty among them (Duffy, D. L. 2003).

SWOT Analysis

The internal & external factors of a company affect how they meet their objectives and their long-term goals keeping profitability in mind. Literature suggests that identifying these factors in  marketing helps formulate a competitive marketing strategy (Lings, I. N., & Greenley, G. E. 2009) achieving overall advantage.

(i)             Strengths

• Distribution Network: Air New Zealand has a strong distribution network and have a hub in almost every state and makes sure that their products are delivered to their customers in time.
• Cost: They have a low-cost structure, which helps them to produce at a lower cost in turn making it affordable for their customers.
• New Markets: Their innovation team helps to come up with new ideas and products and enter new markets. They have also signed agreements with various other airlines to make flight transfers easier for their customers.
• Digital Presence: Air New Zealand has an interactive website which attracts a large number of traffic and has a high level of customer engagement on social media platforms.
• Products & Services: They offer a large variety of products and services which are not provided by its competitors such as cruise deals, 24-hour medical assistance, money back guarantee services (Air New Zealand Ltd, 2018).

(ii)          Weaknesses

• Expenditure on R&D: Even though the average expenditure is more than the average R&D expenditure within the industry. They spend comparatively less on the research of new products in comparison to its competitors.
• Rent: A significant number of properties owned by Air New Zealand are rented rather than owned and in turn they have to pay large amounts of renting costs.
• Current Ratio: According to (Air New Zealand Ltd, 2020) financial reports the company’s short-term average is lower than the industry average. This might result in liquidity issues for the company in the future. The company also has a lower level of current assets in comparison to the current liabilities.
• Research: They haven’t conducted a market research in the market since 2 years and are making decisions based on the old data, the customers have evolved a lot ever since.
• Staffing: A number of qualified and experienced employees are leaving the organisation which means there could be staffing issues in the future for the company (Air New Zealand Ltd, 2018).

(iii)      Opportunities

• Online Presence: There has been a significant increase in the number of internet users online. This means that the company has an opportunity to expand its presence online
• Click Marketing: Due to this online traffic, the company has an option of setting up more stores online for their products and earning more revenue.
• Development in Technology: There has been major advancements in technology and the company can benefit from it by using more automated systems and cutting down labour costs. This technology could also help marketing collect customer data efficiently.
• Population Growth: The company can benefit with the increasing number of potential customers and attract more customers towards the business.
• Green Government: New Zealand can focus more on the environmentally friendly products since the government has announced subsidy on the sale of these goods (Air New Zealand Ltd, 2018).

(iv)       Threats

• Increasing Competition: There is an increase in competition in the market with the number of players rising constantly which could lead to a reduction in revenue for the company.
• Exchange Rates: Since there is a constant fluctuation in the exchange rates it affects the company’s international sales.
• Change in consumer tastes & preferences: The rapid changes in consumers tastes & preferences puts a lot of pressure on the business since they have to constantly tweak their products according to the consumers.
• Political & Trade Uncertainties: Regulations on trade and political hinderances makes the business incur unnecessary costs and hinder their performance.
• Rising cost of fuel: The rise in cost of fuel will not only affect the company but will also affect the other industries that provide inputs for Air New Zealand (Air New Zealand Ltd, 2018).

Recommendations

• The increasing number of outlets in Air New Zealand could be a strength in a growing economy but a weakness in a recession economy. Competitive factors in an environment should be taken into account.
• With a large number of outlets and distribution networks, more rent & charges would need to be paid. 
• Since the company is dependent on their old data, they should conduct new market surveys to get updated with consumer tastes & preferences and update obsolete technology. It should get updated with the latest trends and introduce new products in the market while spending more on research & development before launching them. They should introduce online shopping for their customers which will help the company generate more sales.

• They should put more focus on advertising on various platforms such as TV or include famous faces as brand ambassadors to market their business more.

The Role of Markets in the business

The competitive market in today’s world has encouraged a lot of businesses to follow a targeted market approach which segments its customers based on demographics, geographic & behaviour (Malhotra, S., Sivakumar, K., & Zhu, P. 2009) while mass marketing takes into account the whole market in general. Air New Zealand mass markets its products but since the mass market approach doesn’t identify the potential & current customers, they should follow a target market approach segmenting the customers on the basis of their age, gender, income, lifestyle, etc, targeting the middle, upper-middle class and positioning their semi-premium category so as to generate maximum profitability. By using this they can narrow down the large growing population and target their audience specifically.

Competitor Analysis

Whenever Air New Zealand is mentioned, Cathay Pacific & Qantas Airways come close as competitors both offering cheaper fares as compared to Air New Zealand and offering a wide range of products and services, but due to the large innovative tactics of Air New Zealand such as the Skycouch, self-check kiosks, customers don’t mind paying a higher price for a premium quality. Since the airlines competes in one of the most competitive industry in the world it keeps its focus on providing with a seamless experience to its customers.

• Cathay Pacific is an airline operating from Hong-Kong and operates flights to multiple destinations across the globe and has a vast distribution network.

Strengths: The airlines continuously monitor customer preferences & research which helps them to decipher and stay updated with consumer tastes. They also train their employees regularly and offer their customers services such as senior citizen discounts, passes for shopping and a lot of non-stop flights.

Weaknesses: The airlines had signed long-term fuel contracts which led them to incur major losses and had a drastic affect on the business. 

Marketing Strategy & Communication: Their marketing strategy is focused on their data analytics and using digital media to stay constantly updated with the changing consumer preferences and communicating with market groups (Cathay Ltd, 2019).

• Qantas Airways is the official airline of Australia and among the oldest and the most experienced ones.

Strengths: They have had successful cost cutting methods over the years which help then cut down unnecessary wages & expenses and introduced a transformational program which was able to deliver $374 million in benefits. Moreover, with their frequent flyer points customers can buy products from the some of the famous brands such as Apple, Sony and offer various merchandises and travel accessories.

Weaknesses: The are unable to reach higher profits in their international flights or even reach break-even. They face a number of challenges operating international flights.

Marketing Strategy & Communication: They focus on maintaining communication with the Australian tourism industry and promote philanthropy while transforming digitally to increase their profits, specifically in international flights (Qantas Ltd, 2019).

Recommendations

• For Air New Zealand to sustain its position in the market, it must reach as must customers as possible, considering offering a more range of products to new sales channels and focusing on USP’s (Unique Selling Propositions) that could provide an edge against their rivals. For instance, Qantas Airways, provide a huge portfolio of products to its customers and have tie ups with famous brands. If Air New Zealand expands its range of products it will get benefits not only to them but to their customers as well.
• Another instance similar to that of Cathay pacific is updating the application to make it more user friendly so as to reach as much audience online as possible. Currently, the Air New Zealand application only shows some of the information about the flights and points in the app itself and redirects the customer to the website which some people might find tedious.
• It will help Air New Zealand reach their customers quick and in real time. As nowadays, online shopping has gained more popularity and over time people could develop a dependence on their range of products.
• They can get the opportunity to operate longer hours since online business is 24/7.
• This will help in communicating with the current market easier.

They should keep evaluating their product line by assessing their growth & potential in the market.

Buyer Behaviour & Marketing Communications

The buying behaviour of a consumer investigates the pre-process and the post-process of buying and is influenced by various cultural, social & psychological factors (Kotler & Keller, 2015). All customers have different characteristics segmenting them on the basis of demographics, psychographics, behavioural, etc. The challenges faced by any business is to create a well-planned marketing communication program to capture these customers. Tools of marketing communications such as advertising, sales promotion, public relations & personal selling achieves to capture them. Their job is to show the consumers why, how & by whom a product is used and help them link their brand to the product.

• The company adapts its marketing communications through various communication channels such as sales promotions, online advertising, public relations & direct marketing to carry out its marketing strategies. It publishes various types of in-flight safety videos which are usually ignored by the public on social media channels and advertises in unique ways using humour to create a buzz around people. Moreover, they make videos with well-known sports celebrities & personalities to keep the buzz going. Other ways used by them include painting their airplanes with artistic designs from the famous Lord of the Rings and the Hobbit movie which were filmed in New Zealand (Air New Zealand, 2014).
• For further digital media communication, they use an email deployment system called Responsys to send out email campaigns every month to over 8 00 000 people. These emails are a mix of sales, flight promotions, air points & loyalty based statements and gives the customer a good viewing and experience no matter which device the customer is viewing it on. Moreover, they are quite active on the social media channels and frequently reply their prospect & current customers about any queries or packages (Air New Zealand, 2014).
• They also have various employee training programmes which are open to people to apply for after their tertiary education. They offer a range of packages with benefits starting from pilot training programmes to the F&B (Food & Beverage) Programmes and have a dedicated website for their programmes called the Air New Zealand Academy of Learning (Air New Zealand Learning Academy, 2019).

Assessment & Recommendations

• Air New Zealand doesn’t define their USP’s and don’t focus on making the customer understand why they need the product and how different it is from alternatives. They should put together a well-crafted message so as to help the customer create a clear image of the product.
• The Company focuses the most on advertising on TV which is getting obsolete and is quite expensive. The popularity of social media has increased significantly. Thus, the company should invest and focus more on their social media presence as well as invest in SEO (Search Engine Optimisation) to attract more traffic to their websites and applications.
• The business should use segmentation, targeting & positioning (STP) in simplifying the process of market segmentation. Segmenting would make them understand the specific buying behaviour of the customers and their needs & expectations, classifying them into factors like age, gender, lifestyle, income etc. By combining these factors, the company can more specifically target them by assessing the growth potential and evaluating them. After the segmentation and targeting the right market, Air New Zealand should set a clear system to create a positive image in the customers mind
• Air New Zealand should understand the unique buying behaviour of the customers through surveys and divide the market into smaller groups. This will help the company understand the customers according to their lifestyles, attitudes, traits, etc and create brand loyalty among them. Another way of increasing brand loyalty is by rewarding customers repeat purchase behaviour.

References:

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