Impacts of Web Marketing on the Business of Low cost Airline Carriers in the GCC Countries Essay Sample
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Introduction of TOPIC
Though more recently developed, low cost carriers are giving full service airlines a stiff run for their money. As the competition between the two intensifies, each party is looking for ways of surviving by gaining a higher competitive advantage hence a higher market share particularly through marketing. One of the regions where low cost carriers have gain ground is the Middle East and particularly among the GCC countries. According to experts, demand for low cost aviation is huge in the Middle East. The region is argued to be a natural for the growth of low cost aviation. Low cost carriers are yet to achieve their potential in the region as most people still prefer paying more for extra comfort due to profusion of personal wealth and excessive disposable income.
Low cost carriers have been forced to look for ways of marketing their services cheaply as marketing is one of the aspects of business that often takes the highest amount financial resources. In order to keep the cost of services low, actors in low cost airline carriers have turned to cheaper ways of marketing. Technological developments particularly the Internet has provided an answer to this. Low cost airline carriers in the GCC countries just like many other firms in other industries have embraced technological revolution and employ web marketing in one of their attempts to keep the price of their services low. This paper seeks to investigate the impact of web marketing on the business of low cost airline carriers in these countries. The paper seeks to achieve this by carrying out a qualitative study in which data will be collected by analysing case studies. The findings will be discussed in detail in relation which the research question and any recommendations made for any area that will have been identified as needing to be further researched.
The objective of this paper is to evaluate the impact of web marketing on the business of low cost airline carriers in the Asian economy which is experiencing rapid economic growth and with particular interest on the GCC countries. Surveys have been conducted to ascertain why most business firms have taken to web marketing and how it is affecting their business (O’Connor, Eamonn, & Evans, 2004). Literature argues that the key issue with any strategic tool or plan is the extent to which its usage benefits those using it. Sometimes strategies are implemented without the management understanding their engendered advantages. Information technology is one of the tools that have been widely adopted in organisations in spite of the fact that it is hard to measure its value.
The belief that technologies have several advantages and is always good has made its use prevalent particularly among marketers who use it as a strategic tool. The cost of technology is very high and often accounts for over 2 percent of an organisation’s revenue. Yet in spite of IT being credited with improving productivity, it still is not clear the extent to which productivity from adopting IT is rewarded in an environment that is competitive as various components have to be effectively used for quality usage to be achieved. Based on these beliefs about IT, this paper seeks to examine the use of technology in marketing and its impact on a business’ performance which particular interest on low cost airline carriers. This paper contributes to literature by exploring how the business of low cost airline carriers in the GCC countries has been affected by adoption of online marketing.
This paper will begin by assessing the background of low cost airline carriers and contrasting them with the full service airlines in terms of the cost of operation and traffic carried. The paper will concentrate on surveys carried out in Asia and specifically on the GCC countries. The study will highlight important findings such as the booking methods, passenger characteristics, fares, purpose of journey, types of trips among other data.
1.1 Background of Low Cost Airline Carriers in Asia
Apart from reforming the competitive environment in most liberalised markets, low cost airline carriers have also made major impacts in the domestic passenger markets worldwide which had been largely dominated and controlled by full service carriers (Doganis 2006). Currently, low cost airlines provide 14 percent of the seat miles available in Europe with easyjet and Ryanair accounting for approximately 9 percent. According to O’Connell, & Williams (2005), these carriers seek efficiency, productivity, simplicity as well as high utilisation of the available assets to offer their services at low prices.
Prior to the year 2002, the Asian region had no serious low cost scheduled airlines operating. The slow development in Asia was partly due to the perception that Asia could not replicate the models adopted in Europe and the United States due to lack of scarcity of secondary airports and the existence of regulatory restrictions which prevented easy access to the international markets. The second reason is argued to be true because most traffic and revenues are obtained the Asian international markets.
Based on this, the low cost phenomenon is an experience that is relatively new in Asia and particularly in the gulf region where the GCC countries lie. Most of the required management and experience come from outside the region such as Ryanair. In terms of development, the Asian low cost airline carriers are still in their initial growth stage. In order to reach the maturity level of their European or American counterparts, these airlines have had to adopt strategies that will give them to attain a considerable share of the market and some competitive advantage over the already established full service airlines (Mason 2001).
The Internet has turned to be a very important contributor to business organisations who have adopted the use of web sites for general marketing and to enable consumers purchase the service or product online. Low cost airline carriers are amongst the business firms that have followed this trend. This is still a very sensitive industry implying that the players have to be efficient in their operations so as to maximise on profitability due to the low cost nature of the business.
The evolution of electronic business which aims at cutting down the cost of operation while at the same time increasing efficiency in terms of speed and accuracy is very essential to low cost airline carriers (Doganis 2001). Research shows that online/web marketing is one of the strategies used by low cost airline carriers in their business. This paper seeks to evaluate the impact of this marketing strategy to the business of these airlines. In so doing, this paper will establish whether web marketing is beneficial for this kind of business and its general efficiency in marketing. This is based on technological development and its adoption to be applied in almost all areas of business resulting to what is referred to as e-commerce. By assessing the impact of online marketing on low cost airline carriers, the paper will be able to identify how effective this strategy is in launching a new service or product into a market where one is not sure as it is in this case.
- Literature Review
The term market is usually used to refer to firms or individuals that are possible consumers hence potential buyers of a product with clear emphasis on the demand side of exchange opportunity. The marketing strategy adopted by any organisation is based on fact that not everyone out there can be pleased with the same thing hence buy it. It is therefore usual to view a market as a place that is made up of relatively homogenous categories of potential customers whose needs, interests, wants and other attributes are similar (Wedel & Kamakura 2000).
A market can be conceived in several ways. One way is that a market can be regarded as a geographical area. It can also be conceived as a body of buyers and sellers possibly on a specific plane in the distribution system. It can be perceived as a mixture of forces which determine price and the exchange opportunity whereby markets are classified as pure competition, imperfect or as monopoly. The fourth way of perceiving a market is using it to show the potential demand for enumerating products or classifying the actual potential buyers. It is this last perception of a market that make business firms to come up with strategies that will it possible for them to identify the needs of their potential buyers hence meet them through their products (Wedel & Kamakura 2000).
The internet has been developed to offer a market which can be defined using any of the discussed concepts. Online shopping and online marketing are examples of ways through which business firms have taken advantage of the market offered by the Internet. Business firms are depending on the knowledge that nowadays most people have access to computers that are connected to the Internet as the application of computer technology particularly in accessing information continue to grow. Online marketing which is also referred to as web marketing, i-marketing, e-marketing or Internet marketing is the use of the Internet to market services or products. One of the advantages of the development of the Internet is that it has brought media directly to the global audience (Beynon-Davies 2004). One of the unique qualities of web marketing is the interactive aspect it has in that it provides eliciting responses as well as instant response from potential customers. Web marketing has a wider scope as apart from the Internet, wireless media and e-mail, it also includes management of electronic customer relationship and their digital data (Timmers 2000).
According to research, marketing is a very significant aspect of any business firm. This is based on the fact that sales hence profit margins an
d growth entirely depends on how well marketing is executed. Despite its great importance, marketing
Businesses have in the past depended on advertising through the media (radio, television, and newspapers), public relations and carrying out promotions as the only marketing tools. These tools and particularly advertising and promotions have been found to very costly eating into the profits of business organisations. Public relations is not expensive but has been found to be ineffective as the organisations have absolutely no control over what the media decides to air about them. Technological development has come in to the aid of business firms and offers them the option of e-commerce which makes it possible for them to carry all their business transactions including marketing over the Internet (Beynon-Davies 2004).
The quintessence of business is to minimize on operation cost so as to maximise on profitability. Based on this fact, most businesses particularly those that use low price as their marketing strategy are in pursuit of ways that would make it possible for them to reduce on the hefty marketing costs without compromising on the quality of their products or on the number of potential consumers reached. Most of them understand the potential of electronic business in achieving this aim. Web-marketing seems to be the tool to employ as it has been found to be effective in terms of time, accuracy, cost and the number of people reached (Timmers 2000). Web-marketing is argued to be one of the various forms of e-business that has enabled business companies that have employed it to experience tremendous growth in sales hence profit margins at a lower cost.
According to Faville (1961), most business firms today function to establish and maintain a market for their services and products. He argues that they conduct elaborate campaigns to rouse demand for their products while at the same time diverting this demand from their rivals. Most businesses are therefore engaged in demand creation, one of the most crucial functions of marketing. Online marketing as one of the methods of marketing functions the same way, seeking to meet consumers’ demands and to satisfy their needs. It involves identifying consumer needs by studying their behaviours and coming up with strategies that correspond to the established behaviours so that the business remains relevant in the market and to the consumers (Solomon 1994).
Methodology, Data Collection and Method Used to Analyse the Data
Based on the geographical location of the countries the researcher intends to study, it is not viable to carry out a primary research. This is because of the distance between the researcher and these countries. In order to save on time and financial resources which are very crucial in research studies, the researcher intends to carry out a secondary study in which data will be collected from case studies.
Apart from the fact that this method is cheap and less time consuming, case studies require the researcher to apply analytic skills in solving the research question. It also allows them to examine the complexity of the issue hence explore various available solutions. Using case analysis also enables the researcher to apply new skills therefore improving the quality of the study (Tellis 1997). In this study, the researcher gathered several cases that were relevant to the study. Data was collected from reputable journals and other sources on web marketing and its application by low cost airline carriers. The collected data was then analysed in relation to the research question and a conclusion made.
In order to analyse the data collected from the various cases, cross-case search for patterns was used. This method was used as it requires the researcher to analytically examine the data, looking at it in different ways before drawing a conclusion (Yin 1994). In this study, the collected data from the studied cases was divided and grouped by type. Each group of data was then thoroughly examined. The aim was to identify matching patterns which increased the strength of the findings. In the event of conflicting evidence, deeper probing was done to determine the source or cause of the differences. All evidence was treated in a fair way so that an analytic conclusion can be drawn.
Discussion and the Results
According to Sorensen & Buatsi (2002), use of technology in marketing can have very little or no impact at all on an organisation’s profitability depending on how it is used and the management’s knowledge of how such technology can of assistance to the organisation. These authors argue that success depends on how well the management assesses such strategic decisions as well as the value of information technology. Successful firms that enjoy positive impact of technology are those that effectively integrate and manage its application in the organisation. Stone, Good & Baker-Eveleth (2007), argue that using web marketing implies that an organisation has adopted information technology in its operation. According to these authors, thorough marshalling of human, environmental and technological resources by the management can enhance the impact of using online marketing on an organisation’s performance.
Most of the studied reports imply that the key goals of web marketing are to create an impact, make targeted people take action and to ultimately make a profit. In order to achieve these critical results, online marketing must be unique and on the target. It is not however a simple activity as leading people to ones’ site is quite difficult. In an attempt to inform people and attract them to their site, most businesses send personal messages to potential buyers’ email boxes. By adopting this method of marketing, low cost airline carriers have been able to identify honestly interested customers and communicate one–to one with them which is not attainable with other kinds of marketing such as advertising through the media (Doganis 2006).
This method has helped them to pass inform more people about their services increasing the number of customers hence sales as people have a clear idea of what the service is all about. Online marketing also allows geo marketing to be used to attract people to one’s site. Geo marketing enables the firm to identify geography; gender and group hence determine the specific group to target for their products. Low cost airline carriers have been able to use this method to attract young people and business men who the services apply most to (Mason 2001. These groups are usually identified through study of market and consumer behaviour by the marketing professionals. This method has enabled these carriers to save on costs as well as time. This kind of marketing is not based on “for those who might be interested” but rather on those who are interested as the professionals through the studies are right on target.
A study carried out by Yang & Oliver (2004), found that many people are now relying on the web for exchange of information making the Internet a very important source of information. In assessing the impact of web marketing, these authors looked at the benefits of marketing using this method. These studies argue that web marketing is one of business imperatives. They base this argument on the fact that the Internet has become an irrevocable trend that is unstoppable (Minter 2009). It does not matter the kind of business one is operating in, they will lose valuable customers in the event they lack an online presence. Research indicates people regularly search for goods and services using their computers, a routine that is enabled by the yellow pages (Muhammad 1996). In the event a business is not on the web, consumers will choose another firm with whom to deal with.
Online marketing is also cheaper (Docksai 2009). It is way cheaper than placing advertisement in the media or conducting promotions. What it is more, it enables the business to reach more people, actually globally as it is not restricted to a certain location all within a very short time. Online marketing is a strategic tool for a business that is still new in the market and is seeking to establish itself. It enables small and new businesses without enough capital to advertise through the media which is very expensive to compete relatively well with large companies that are already established in the market. This fact is applicable to our case as low cost airline carriers are still new in the aviation industry in the GCC countries. Using web marketing has enabled this business to gain popularity and increase its sales as they have been able to successfully establish themselves in a market that was initially dominated by the full time carriers all at a relatively low price.
Online marketing has also made it possible for low cost airline carriers to differentiate themselves from their competitors (build a name and reputation for themselves), a task that is often the most difficult for new players in an industry. It has enabled these airlines to provide their customers with all the information they may require. It has also made it easier and faster for these carriers to serve their customers. It is worth to note that most bookings are done through the internet. This is faster and cheaper as it avoids need for travelling agents. Customers do not have to travel all the way to the booking offices or place phone calls to make inquiries. Since a large population of people in the GCC countries have personal computers and access to the Internet, most bookings are done online greatly reducing costs for the low cost airline carriers while at the same increasing efficiency (Kernchen 2007). This has ultimately increased the number of customers, particularly young people and business people who are attracted by the efficiency increasing sales for these airlines (Proussaloglou & Koppleman 1995).
Web marketing has also had some negative impact on low cost airline carriers. Marketing online is not free and as cheap as it is believed to be. It requires an organisation to have a well established information and technology system which is costly to implement and maintain. These airlines have therefore had to part with substantial amounts of money in order to effectively run the websites for marketing. They have also had to deal with huge amounts of information that is characteristic of information technology.
Web marketing, one of the many forms of electronic business which is an aspect of organisational adoption of technology has several benefits and positive impact on businesses as long it is well managed. The two most important aspects of technology that attract business organisations are cost effectiveness and high speed. The primary goal of low cost airline carriers is to provide services at a low cost by charging low fares while at the same time making profits. Low cost airline carriers are also new in Asia implying that those operating in this business have to establish a market and maintain it by struggling against their full time carriers competitors. In order to achieve this goal, low cost airline carriers in the GCC countries particularly the UAE and Saudi Arabia have been forced to employ strategies that will make this possible but at a low cost for them to continue operating.
As a result, most of them have turned to use the Internet as a marketing tool. Web marketing has generally increased the competitiveness of these airlines in the region. It has made it possible for the low cost airline carriers to inform and attract customers to their services increasing their sales while attaining them a share in the market. Due to web marketing, these carriers have been able to save on their marketing cost hence continue charging low fares as they aim to. Low marketing costs, fast access to many people and the ability to do bookings online through web marketing have enabled low cost airline carriers in GCC countries to establish themselves within the aviation industry market in the region and are giving the full time carriers a run for their money due to the competitive advantage they have been able to achieve as a result of saving on the cost of operation and charging low fares due to reduced cost of marketing that usually accounts for the larger portion of an organisation’s revenue. Web marketing has basically increased growth of low cost airline carriers in GCC countries due to increased sales due to the created high demand for these services by consumers.
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