Marketing Strategies After Deregulation

Table of Contents

Before deregulation
After deregulation
Marketing methods
Flight Bonus Programs
Code Sharing
Hub-and-spoke system
References

The deregulation influenced the air transportation market in a variety of ways. In this essay, we are giving a brief overview of how deregulation determined the emergence of new marketing strategies. Before we pass directly on the post-deregulation marketing, it is necessary to describe the situation that preceded it.

Before deregulation

For our convenience, we divide the evolution of air transportation marketing into three phases, according to Wensveen (2011): the product-oriented phase, the sales-oriented phase, and the consumer-oriented phase (p. 275).

During the first phase, the emphasis was put on increasing the quality of customer service. After the Second World War, there was virtually no competition, hence no need for such thing as a marketing strategy. Nor was there need for any research, because there were scarce options available. The success of airlines was stipulated by the decline in railroad services later in the 60s. The main problem of air transportation back then was excessive aircraft capacity which led to undersold flights and a lack of competition. These factors, alongside ineffective marketing, were the stimuli for 1979 deregulation (Truxal, 2013).

After deregulation

The deregulation in the field of air transport led to increased competition, which forced airlines to invent new marketing strategies and remodel the existing ones.

This has led to the third marketing phase: the consumer-oriented period. It was a transition to the target market approach, meaning meeting the consumer needs, rather than shaping them. The carriers identified target groups of customers and decided what actions or services were required to appeal to them. Many companies have realized the importance of selling additional services and goods on board. This resulted in the emergence of such consumer-oriented services as Duty-Free, Low-cost/no-frills flights, charter flights, in-flight services, such as drinks and food onboard, extra leg space, additional baggage, etc., with some of them known as business class service.

Marketing methods

The most important technological development that determined the future of airline marketing was the computerized reservation system (CRS). It allowed developing effective schedules to suit customers needs. New companies got an opportunity to advertise their services worldwide. Companies that own such systems receive additional revenue from sale fees. CRS usage gave way to a number of other marketing strategies that further increased the quality of service and competition.

Flight Bonus Programs

The most popular marketing tools since the deregulation were Flight Bonus Programs or FBOs. American Airlines were the first to implement the FBP called AAdvantage. Although the public firstly dismissed the system, it has proven to be very popular among customers later on. Even though FBP was replicated shortly after by other airlines, such as United, Delta, and TWA, the FBP by American Airlines still remains the largest and the most successful one. As of now, more than 70 FBPs were implemented around the world. Most airlines, however, run FBPs only to keep their market share intact. (Hougaard and Bjerre, 2013).

Codesharing allowed two airlines to have the same identification code for two flights. Usually, the code is shared between a major and a regional flight. It allows airlines to increase the market share and for airlines to keep up with their image by providing a service of consistent quality throughout the route. This usually requires buying better aircraft, therefore it is beneficial for the customers. Similar to code sharing is interactive marketing agreements. The only difference is that code sharing implies contractual liability between parties, whereas interactive marketing does not.

Hub-and-spoke system

Another example of airline interaction is a hub-and-spoke system. It is aimed to eliminate inefficient routes by gathering passengers from a certain number of flights in one airport and then delivering them to their final destination.

As a conclusion, we may note that since deregulation, a gradual shift from sales-oriented marketing to customer-oriented marketing is observed. Recent technological advancements allowed creating a vast network of airlines, routes, and schedules, and optimizing their interaction.