Marketing Analysis of Jetstar and Virgin Blue Airlines

Executive Summary

This research report provides an analysis of two popular airlines in Australia; Jetstar and Virgin Blue, both whom are competing in the airline business. Jetstar and Virgin Blue can both compete and be highly profitable within the business, leisure and family market but however, it will ultimately be the service companies, and their associated marketing strategies and techniques which, will establish the difference between the market �leader’ and the market �loser’. This analysis will detail potential solutions to a number of major strategic issues confronting the companies to maintain its position and protect its profitability in its core domestic market.

There is intense competition between the airline brands and an important factor to consider is how they will target and cater to the traveler segments’, as it is the responsibility of the airline brands. Furthermore this report will discuss the findings of the marketing areas and segments to be targeted and worked on, it will provide literature to prove the success of the information found, as well as there will be recommendations made from the research established.

Introduction

The airline industry at present consists of fierce competitiveness where the market leader is a company who delivers their service in a more meaningful and efficient way than its competitors. Taylor (2006) states that today’s customers will not settle for less as they continue to grow more service savvy raising their expectations ranging from convenience in purchasing airline tickets to the helpfulness of employees. If customers are not satisfied, they will simply refuse to purchase the service provided and look elsewhere.

Major Findings of the report

1.0 Segmentation

Virgin Blue and Jetstar both segment towards the leisure market, as they are both low-cost carriers and therefore the leisure market tend to be more price elastic compared to business travelers (Bamber, 2006). However Virgin Blue have introduced several methods to attract to business travelers as well as leisure. For example, �velocity frequent flyer programme, the relaunch of lounges at major airports, web check-in, new flexible fares for business and Government travelers, completion of new code-share technology and an application programme interface facility for corporate accounts’ (Virgin Blue 2006, p. 5). Segmentation is also used as strategies for certain airline companies. For example, Jetstar entered the airline industry as a segmentation strategy against Virgin Blue. Qantas created Jetstar as direct competition for Virgin Blue, and this strategy of using both Qantas and Jetstar �aimed to close the gap at the lower end of the domestic market, and also to reduce the risk of cannibalization of the mainline carrier’ (Bamber 2006, p. 4)

1.1 Positioning strategy

Virgin Blue and Jetstar position themselves in the airline market as value-based carriers (Qantas, 2006). Virgin Blue perceives’ themselves, as having values such as �safety, quality, innovation, value for money, challenge, flair, mutual respect and exceptional service’ (Virgin Blue 2006, p. 9). In regards to innovation, Virgin Blue state in their annual report �innovation is a hallmark of Virgin Blue…we are dedicated to finding fresh and inventive ways to enhance our product to better meet the needs of individual Guests…’(2006, p. 6). These innovative ideas include web self check-in service, with Virgin Blue being the only airline in

Australia to implement this service. Their live2air in-flight entertainment system is also an example of them putting their positioning of innovation into practice (Virgin Blue, 2006). According to the Virgin Blue annual report, �Virgin Blue will be the first airline to operate the system outside of North America and only the fourth airline in the world to offer this revolutionary product’ (2006, p. 7). Virgin Blue also want customers to perceive them as being different from the normal �no-frills’ low-cost carrier, as well as being different �to traditional legacy carriers at higher prices’. (Virgin Blue 2006, p. 7). Furthermore, this view enables Virgin Blue to be differentiated from the competitors much easier, having a distinctive outlook different from other airline companies.

1.2 Service recovery and customer handling

Service recovery and handling customer complaints is very important in the airline industry and leads to customer satisfaction and loyalty. In the past, Jetstar in particular have had to put their service recovery plans into action. For example, on