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An Integrated Marketing Approach for a Medium-Sized South African

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An Integrated Marketing Approach for a Medium-Sized South African AN IINTEGRATED MARKETING APPROACH FOR A MEINIUM-SIIZEI) S UTH AFRICAN AMILIN IIN A ER GULATEID MARKET N. LOUW MAY 1996 AN INTEGRATED MARKETING APPROACH FOR A MEDIUM-SIZED SOUTH AFRICAN AIRLINE IN A DEREGULATED MARKET by NICOLAAS SALOMON LOUW A dissertation submitted in fulfilment of the requirements for the degree of MAGISTER COMMERCII in MARKETING MANAGEMENT of the FACULTY ECONOMIC AND MANAGEMENT SCIENCES at the RAND AFRIKAANS UNIVERSITY SUPERVISOR: PROF. J.A. BENNETT MAY 1996 ACKNOWLEDGEMENTS I would like to express my sincere appreciation and gratitude to the following persons and organisations which contributed to this study: Prof. J. A. Bennett, for his assistance and constructive criticism. Comair, for granting me this study opportunity - may the next 50 years be as successful as the previous. Mary Smith, for proof-reading the dissertation. My father, for his valued comments and assistance. (i) TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES GOAL AND OBJECTIVES OF STUDY 1 1.1 INTRODUCTION 1.2 THE RESEARCH PROBLEM 4 1.3 GOAL AND OBJECTIVES 4 1.4 RESEARCH METHODOLOGY 5 1.5 DIVISION OF CHAPTERS 6 THE MACRO AND MARKET FORCES AFFECTING AIRLINES IN SOUTH AFRICA 10 2.1 INTRODUCTION 10 2.2 THE MACRO ENVIRONMENT 12 2.2.1 The economic environment 13 2.2.1.1 The South African economy in a world and regional context 14 2.2.1.2 Economic indicators 17 2.2.1.2.1 Economic growth 17 2.2.1.2.2 Inflation 18 2.2.1.2.3 International capital flows 19 2.2.1.2.4 The exchange rate 19 2.2.1.2.5 Economic policy issues 20 2.2.1.3 Tourism and air travel 21 (ii) 2.2.2 The social environment 23 2.2.2.1 Demographics 24 2.2.2.2 Socio-cultural aspects 28 2.2.2.2.1 The changing role of women 28 2.2.2.2.2 The increasing importance of leisure 29 2.2.2.2.3 The rise of singles 29 2.2.2.2.4 Changing sexual attitudes 30 2.2.2.2.5 A growing interest in health consciousness 3 I 2.2.3 The physical environment 31 2.2.4 The international environment 33 2.2. 5 The institutional environment 34 2.2.6 The technological environment 41 2.3 THE MARKET ENVIRONMENT 47 2.3.1 The South African air travel industry 48 2.3.1.1 The South African air travel industry in a world context 48 2.3.1.2 The South African air travel industry in a regional context 51 2.3.1.3 The domestic South African air travel market 52 2.3.2 Comair - a medium-sized South African airline 55 2.3.3 Domestic and regional competitors of Comair 58 2.3.3.1 Air Botswana (BP) 59 2.3.3.2 Air Namibia (SW) 60 2.3.3.3 Air Zimbabwe (UM) 60 2.3.3.4 Nationwide (CE) 61 2.3.3.5 Royal Swazi National Airways (ZC) 61 (iii) 2.3.3.6 SA Express (SAX) 62 2.3.3.7 South African Airways (SA) 62 2.3.3.8 Sunair (BV) 66 2.3.3.9 Zimbabwe Express (Z9) 67 2.4 SUMMARY 67 3. MARKET SEGMENTATION, MARKET TARGETING, MARKET POSITIONING AND THE DEVELOPMENT OF A MISSION STATEMENT 72 3.1 INTRODUCTION 72 3.2 MARKET SEGMENTATION 74 3.2.1 Advantages and disadvantages of market segmentation 75 3.2.2 Criteria for effective market segmentation 76 3.2.3 Segmentation of the domestic South African air travel market 77 3.2.3.1 Market segmentation sources for the domestic South African air travel market 78 3.2.3.2 Segmentation based on purpose of trip 79 3.2.3.3 Segmentation based on demographic, geographic, and economic characteristics 80 3.2.3.3.1 Demographic segmentation 81 Ethnic group 83 Gender 84 Age 84 Marital status 84 (iv) (v) Home language 84 3.2.3.3.2 Geographic segmentation 85 Provincial distribution of the domestic South African flyer 85 City distribution of the domestic South African flyer 86 3.2.3.3.3 Economic segmentation 88 Income 88 Lifestyle measurement (LSM) of the South African flyer 90 3.2.3.4 Segmentation based on airline user status 92 3.2.3.5 Segmentation based on buyer needs and benefits sought 95 3.2.3.6 Segmentation based on psychographic characteristics and lifestyle 95 3.2.3.6.1 Responsibles 97 Characterising trends 97 Marketing implications 98 3.2.3.6.2 Brandeds 98 Characterising trends 99 Marketing implications 99 3.2.3.6.3 Innovatives 100 Characterising trends 100 Marketing implications 101 3.2.3.6.4 Self-motivateds 101 Characterising trends 101 Marketing implications 102 (v) 3.2.3.6. 5 Segmenting the South African air travel market according to the 1992 White Sociomonitor 103 3.2.3.7 Segmentation based on price variables 104 3.3 MARKET TARGETING 105 3.3.1 Evaluating market segments 106 3.3.1.1 Segment size and growth 106 3.3.1.2 Segment structural attractiveness l07 3.3.1.3 Airline objectives and resources 107 3.3.2 Selecting market segments 108 3.4 MARKET POSITIONING 110 3.4.1 The importance of market positioning 111 3.4.2 Development of a positioning strategy 112 3.4.3 Anticipating competitive response 114 3.5 DEVELOPING A MISSION STATEMENT 115 3.6 SUMMARY 116 4. THE ROLE OF THE MARKETING MIX (PRODUCT AND DISTRIBUTION) AS A COMPONENT OF AN INTEGRATED MARKETING APPROACH 120 4.1 INTRODUCTION 120 4.2 THE AIRLINE PRODUCT AS A COMPONENT OF THE MARKETING MIX 123 4.2.1 Characteristics of the airline product 125 4.2.2 Developing a competitive airline product 128 4.2.2.1 The airline product and customer value 129 (vi) 4.2.2.2 The airline product and customer satisfaction 130 4.2.2.3 The airline product and quality 132 4.2.3 The airline product and branding 135 4.2.3.1 Brands as part of the booking process 136 4.2.3.2 The usage of differentiators in brand-building 138 4.2 . 4 Loyalty programmes as a component of the airline product 139 4.2.5 Future airline product trends 140 4.3 DISTRIBUTION AS A COMPONENT OF THE MARKETING MIX 142 4.3.1 Distribution channels in the air travel industry 143 4.3.2 The role of travel agencies in the airline distribution channel 145 4.3.3 The role of central reservations systems (CRSs) in the airline distribution channel 148 4.3.4 New trends in the airline distribution channel 153 4.3.4. l Electronic ticketing and self-service ticketing machines 153 4.3.4.2 The changing role of travel agencies 157 4.3.4.3 The changing role of CRSs 157 4.3.4.4 The changing role of passengers 158 4.3.5 Direct marketing and the airline distribution channel 160 4.3.5.1 Major tools of direct marketing 160 4.3.5.2 Advantages of direct marketing 161 4.3.5.3 The development of integrated direct marketing 162 4.3.5.4 Developing a database marketing system 162 4.3.5.5 Major decisions in direct marketing 164 4.4 SUMMARY 165 (vii) 5. THE ROLE OF THE MARKETING MIX (PRICE AND PROMOTION) AS A COMPONENT OF AN INTEGRATED MARKETING APPROACH 169 5.1 INTRODUCTION 169 5.2 PRICE AS A COMPONENT OF THE MARKETING MIX 169 5.2.1 Airline fare structures 171 5.2.2 Air travel pricing and demand 172 5.2.3 Airline costs and pricing 174 5.2.4 Airline productivity and pricing 175 5.2.5 The pricing process 176 5.2.5.1 Influences on the pricing of airline products 176 5.2.5.2 Pricing objectives 178 5.2.5.3 Pricing strategies 178 5.2.6 Air travel pricing and yield management 180 5.3 PROMOTION AS A COMPONENT OF THE MARKETING MIX 181 5.3.1 Advertising 182 5.3.1.1 Setting advertising objectives 183 5.3.1.2 Deciding on the advertising budget 184 5.3.1.3 Deciding on the advertising message 186 5.3.1.3.1 Message generation 186 5.3.1.3.2 Message evaluation and selection 189 5.3.1.3.3 Message execution 189 5.3.1.4 Deciding on media 190 5.3.1.4.1 Deciding on reach, frequency, and impact 190 5.3.1.4.2 Choosing amongst media types 191 (viii) 5.3.1.4.3 Selecting specific media vehicles 193 5.3.1.4.4 Deciding on media timing 194 5.3.1.4.5 Deciding on geographical media allocation 194 5.3.1.5 Evaluating advertising effectiveness 195 5.3.2 Public relations (PR) 196 5.3.2.1 Advantages and disadvantages of PR 196 5.3.2.2 Developing a PR plan 197 5.3.2.3 Implementing a PR programme 199 5.3.2.4 Measuring the effectiveness of PR 199 5.3.3 Sales promotion 200 5.3.3.1 The purpose of sales promotion 200 5.3.3.2 Sales promotion techniques used in air travel 201 5.3.3.3 Developing a sales promotion programme 202 5.3.3.3.1 Establishing sales promotion objectives 202 5.3.3.3.2 Selecting sales promotion tools 203 5.3.3.3.3 Planning a sales promotion programme 205 5.3.3.3.4 Implementing and controlling the sales promotion programme 206 5.3.3.4 Evaluating sales promotion 207 5.3.4 Personal selling 207 5.3.4.1 Advantages and disadvantages of personal selling 208 5.3.4.2 Sales force objectives 209 5.3.4.3 Sales force size 209 5.3.4.4 Managing the sales force 210 (ix) 5.3.4.4.1 Recruiting and selecting sales representatives 210 5.3.4.4.2 Training sales representatives 211 5.3.4.4.3 Directing sales representatives 212 5.3.4.4.4 Motivating sales representatives 213 5.3.4.5 Evaluating sales representatives 214 5.4 SUMMARY 215 6.
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