Case Study: Ryanair
The physical environment that Ryanair provides are cut right back to reduce the costs on Ryanair. Whilst this does offer customers very competitive prices. Many customers will expect additional service to be provided, however Ryanair either does not provide these at all or uses them as an opportunity to charge an additional fee.
Digital marketing is any marketing that takes place digitally, typically online. This could be anything from social media advertising campaigns to viral videos. It allows for very rapid, certain marketing. Online people can find and share content much more quickly leading to greatly improved marketing performance. And if an advertising campaign is purchased via a technology company they can typically gaurantee so much reach and interactions.
Ryanair achieves penetration pricing partly via their dynamic pricing model, where they will sell the first tickets on a flight at very low prices, and gradually increase the price as more seats fill up. They also provide seasonal offers, where even lower prices are offered (and advertised) allowing for them to appeal to the market as the choice for cheap air travel. The impact of penetration pricing is typically stiffling competition and increasing units sold.
After Ryanair has sold the first 70% of seats on a flight, they switch from their lower pricing strategy to a price skimming strategy. Ryanair knows that if you have not booked in the first 70%, then you are likely to be somewhat desperate to get a flight, meaning that you will be more likely to pay a higher price, because you just need a flight and don’t have the flexibility to choose another flight. Therefore, Ryanair has successfully implemented price skimming across the final 30% of ticket sales for each flight, allowing them to make more money from these customers whilst still typically managing to fill the flight - and give most customers the impression of great prices.
Ryanair became established and successful fairly quickly in Europe, and already had a fairly large market share. There is not enough room for two businesses to exist in the very low end flight market. So if SouthWest Airlines moved into Europe, they would have a very high risk, low chance of success battle to beat Ryanair in the market. This is not something that their low cost model would work well with, as it would likely lead to increasing prices in the main American branch. Therefore, it would not make financial sense for SouthWest to try and enter the European market, however if there are other regions of the world, such as Asia or Oceania where this is a demand for cheap flights, and no business is currently competing in the market then it may be a much better idea for SouthWest to enter that region instead.
Ryanair is looking to increase the quality of the service that they provide to appeal to a greater range of people, specifically the business class. To do this, one of their focuses is on people. By ensuring that their staff provide a high quality, reliable and friendly experience to passengers, Ryanair will be able to improve the customer satisfaction that they have, giving them the ability to compete with other airlines in different areas other than price. If they can do this successfully, without having to increase their costs or pricing by much, then it could lead to Ryanair becoming a choice for people looking for something more premium as well.
Price elasticity of demand on flights is something that changes. If you are booking a flight 6 months in advance, you are not under pressure to book there and then, so in order to secure a sale, a company such as Ryanair can do this best by offering a lower price to you. However, if you are looking to book a ticket the same week or even same day, then you are just looking for a flight that will take you to the correct place. Ryanair knows this, and is aware that in these cases people will be much more likely to pay a higher price for a ticket than the people who book early, meaning that they can easily push prices up and increase their margin for the final 30% of tickets sold. In other words, Ryanair goes from being one option among many for the early birds, to the only option for people booking late - therefore it is much easier for Ryanair to sell a ticket to the late person than it is for them to sell a ticket to the early one.
Digital marketing is a new strategy that allows for guaranteed reach and much quicker more reactive marketing. If used correctly, it can funnel traffic from major social networks onto the Ryanair website, and it can be used to specifically target individuals who are looking for flights to certain areas. Because of this degree of accuracy that digital marketing offers, Ryanair will be able to get much better value for money on marketing campaigns. Moving to a more technologically based market.
# Hwk: Evaluate the potential difficulties faced by Ryanair in trying to change its marketing mix in order to widen its appeal.
Ryanair is trying to shift their focus to more points in the marketing mix because they have now cornered the budget market, using price penetration and skimming to maximise their revenue for each flight whilst ensuring that they get run at a near maximum capacity. So, price is already very well optimised, and they have chosen to only operate between popular destination meaning that their place is fairly wll constructed so far.
However, one area where Ryanair has not yet directed their focus is people. Customers looking for a more premium experience will not choose Ryanair because the service that they offer is not premium. One of the main ways that Ryanair could bolster this would be through increasing both the staffing levels on flights and the training of their staff. If there are more staff, then the load on each individual staff member will be reduced and the quality of service that can be provided to each individual customer will increase. With additional training, this will only improve further.
The physical environment on a Ryanair flight is not something that could particularly be described as luxurious either. As a primarily budget airline, Ryanair has packed their planes with as many seats as possible. This means that leg room, comfort, and other amenities have been significantly restricted. If Ryanair wants to successfully attract a more premium clientelle, then they will have to find a way of offering these services at a slight premium. Likely the best way that they could offer this would be by converting a certain section of the seats on the flight to “Premium seats”, which would enable customers willing to pay a bit more for the upgrade to enjoy an experience that matches more high end airlines.
In addition, the process that Ryanair puts customers through is not intended to be luxurious or premium. It is intended to convert as many people to paying customers as possible, and it applies time pressures with their cheaper prices for the first customers and seasonal deals. This means that Ryanair is less attractive than many competitors where you don’t have to worry about whether or not you’ll get a seat. Because of this, Ryanair may need t ofocus on some form of premium membership, whereby people who pay some form of annual fee will get priority access to their booking system. Allowing them to book seats before they are made avaliable to everyone, and possibly even providing additional services to these customers, such as included meals or discounts on flights. It would be possible to structure this in such a way where Ryanair would continue to make a profit from these customers, whilst also improving the quality to a level where they would be attracting higher tier customers onto their flights.
Therefore, it makes a lot of sense for Ryanair to look at expanding their marketing mix. The process allows Ryanair to significantly bolster their range of offerings, meaning that more people will be attracted to their service. However, it is also important for Ryanair to not loose sight of their core customer base, because these are the people who generate most of the company’s revenue, and if Ryanair makes their customers on lower priced tiers feel discriminated against or like second-class customers, then they will risk loosing both positive public relations and customers. So - Ryanair need to expand their marketing mix to improve the experience people offer, the process through which bookings are made and the physical environment provided on their flights, but they do also need to do this in a way that allows them to increases profit, without scaring away existing customers and opening a gap in the market to allow a competitor to enter.