Introduction
Singapore Airlines Limited (SIA) emerged in 1972 and is the national airline of Singapore operating major routes globally. SIA has built up a strong reputation in the aviation industry for its innovation and safety and consistent profitability despite rising and volatile fuel prices, stress in global financial markets, heightened security issues, and increased market competition. SIA has grown from a regional airline into one of the world’s leading carriers and as the first operational customers of the “super jumbo” Airbus A380. It manages its regional flights with its wholly owned subsidiary, SilkAir and has a stake in the low-cost airline market through Tiger Airways. SIA has a dedicated freighter fleet, Singapore Airlines Cargo, and has also diversified into airline related businesses1. SIA have a young and well trained staff focused on service excellence and a top ranked hub in Singapore to serve their extensive global network. The airline has built a sustainable competitive advantage using strategies that differentiated it from other airlines based on superior customer service, both in-flight and on the ground. This paper analyses how marketing activities have been used and may be used in the future by SIA to sustain its success in a changing and turbulent environment.
Overview of Marketing Auditing and Planning
The marketing audit is a fundamental part of the marketing planning process. It is conducted at the beginning of the planning process as well as during the implementation of the plan, to review the plan itself2. Marketing auditing is a process that constantly scans the macro environment and micro environment to develop an accurate and objective view of the factors and issues that affect organisations like SIA and the trends and opportunities that may exist for such organisations3.
The marketing planning process is a series of activities that involves setting objectives and formulating strategies for achieving them. Marketing planning aims to ensure that in carrying out the matching process, that the organisation’s resources are used in the most efficient manner4.
SIA needs to undertake marketing planning for a number of reasons:
- increased competitiveness in the airline industry and the inherent complexity of markets;
- increased speed of technological changes and their relevance to customer wants and needs, and the way in which the organisation provides for them;
- the need to identify sources of competitive advantage and customer value creation; and
- to ensuring the plans are integrated and consistent across other (non-marketing) elements of the organisation4.
The link between these is that in business planning which tries to predict, understand and forecast market demand, customer behaviour and competitor actions, requires the development of a clear strategy. Marketing audits allow an understanding of the organisation’s position of “where it is now?” The corporate strategy considers the current and future position of the organisation and identifying a plausible future for the organisation5. During strategic “thinking”, as much information about the organisation and its environment that affects it is gathered from marketing auditing and it clarifies the question “where do we need or want to be in the future?” Marketing planning are the methods or processes that aims to document the strategic thinking into a road map (plan) for the future. It clarifies the question “how can we get there?”
The marketing activities of auditing and planning are required to develop strategies for the organisation. In strategy development, marketing exercises aim to clearly identify the issues that are critical to the organisation’s position (role, function and purpose), and “define the path to an end” so as to achieve the organisation’s purpose. The corporate strategic plan is the master plan that provides the guidance about the organisation’s future direction and objectives6. The link between auditing, planning and corporate strategy is that by auditing, SIA can identify particular consumer wants and needs. Planning then involves devising strategies that meet or satisfy those needs with the organisation’s strengths and resources. SIA needs significant positive differentiation in the key success factors of the business if it is to sustain its competitive advantage.
The Marketing Planning Process
The steps involved in the marketing planning process are:
- understanding corporate mission and objectives;
“Singapore Airlines is a global company dedicated to providing air transportation services of the highest quality and maximising returns for the benefit of its shareholders and employees”1
- conducting a marketing audit of SIA’s macro-, micro-environments and strategic business units (SBU’s) using marketing business tools;
- developing marketing objectives (statements of what the marketing plan intends to achieve in the future and the offers that they will make to those markets);
- developing marketing strategies (statements of how the SIA will accomplish the marketing objectives) that assist the organisation develop competitive advantage;
- preparing a marketing plan that documents the outcomes of the previous steps in the marketing planning process;
- integrating the plan with other elements of the corporate plans by ensuring that they are consistent across the organisation4.
Marketing Auditing
SIA’s Marketing Environment – Macro environment
SIA’s macro environment is the wider context in which the market/ airline industry exists. Because SIA operates in an international market, their operations involve more complexity and more risk7. PESTEL Analysis (Appendix 1) is employed as a method of environmental scanning and it provides a general awareness of the macro-environmental forces, the understanding of which allows SIA to predict change, better plan, and decide where to invest, reallocate or diversify its resources. Notably, the macro-environment is where SIA has the least influence and control over, but the dynamics arising from the macro environment can have significant influences on both SIA and the micro-environment. Rising fuel costs and the deregulation of the airline industry introducing new entrants in the growing budget airline market are two examples of major trends having a major impact on existing players in the market.
Marketing Planning
The business tools used below are used to assist SIA undertake formal marketing auditing and planning by analysing the markets and their performance and assisting in setting strategic directions for the future.
SWOT Analysis
This tool, (results summarised below), is used as a guide for auditing an organisation and its environment. It is the first stage of planning that assists marketers focus on key issues and for developing strategic summaries.
This analysis highlighted that there are opportunities in growth areas such as low-cost airlines, technological, natural environmental and revenue opportunities to be gained from new aircraft fleets. SIA may want to address a particular issue further by conducting marketing research to collect and analyse formalised data for their formal marketing auditing.
| |
Positive |
Negative |
| Internal |
STRENGTHS
Aircraft Fleet – SIA has adopted aircraft with larger passenger capacity & more fuel efficient technology
In-flight Services – SIA continues to be a leading innovator in in-flight services by adopting technological improvements
Ground Services – SIA’s subsidiaries enable it to have more direct access to relevant ground services and potentially achieve greater operational efficiencies.
Communication – SIA maintains effective communication across all levels
|
WEAKNESSES
SIA is a large organisation concurrently operating independent Business Units such as Engineering, Cargo and Airport Terminal Services. This could leave it weak in these areas if not managed and controlled effectively. |
| External |
OPPORTUNITIES
Destinations – SIA continues to seek opportunities in expanding services to more cities (new markets).
There are always opportunities to adopt new technology and implement them to improve customer experience.
Develop marketing strategies in growth areas to attract new customers. Increased market share in the Middle East, China and India offer untapped opportunities for SIA.
Invest and trial the growing Low-Cost Airline market. |
THREATS
Rising and volatile fuel costs impact on operational costs.
New Entrants – Growth of the discount market (Low-Cost Airlines)
Economic stability in other countries impact on SIA’s profitability. Review routes that offer little to no growth and withdraw services where justified.
International Politics are complex in global markets. |
Table 1 - Shows analysis the organisation’s Strengths, Weaknesses, Opportunities, and Threats (SWOT).
BCG (Boston Consulting Group) Matrix
This tool, (results summarised below), is used to determine what priorities should be given in the product portfolio of a business unit8. It plots the organisation’s business unit against 1) the rate of market growth in its market and 2) its relative market share (with competitors). In SIA’s case, this tool can be used to help prioritise strategic decisions about allocating resources to a portfolio of business units such as its portfolio of airlines, and its Cargo and Terminal Services strategic business units (SBU). To date, the biggest contributor to the organisation’s profit is the airlines, followed by its Terminal Services, Cargo and then Engineering9. However, this tool should be used with caution because its isolated utility oversimplifies the scenario it illustrates.
Table 2 - The BCG Matrix helps illustrate which business units are worth allocating resources towards (Stars), and which to divest from (Dogs).
GE (General Electric) Matrix This tool, (results summarised below), is another business tool designed to assist SIA prioritise strategic decisions about allocating resources to business portfolios, brands or experiences, and discover opportunities from which to create strategies. The two criteria they are assessed against are 1) the level of attractiveness of an industry or market, and 2) the organisation’s strength or competitive advantage in the particular industry or market10.
The GE matrix illustrates which businesses require ongoing protection (core strengths) and/or future investment. The matrix offers a slightly better approach than the BCG Matrix due to this tool’s extra dimensions, but its scoring and weighting is still subjective. It should be used for analysing broad strategies but it does not indicate how best to implement them11.
Business Strength |
Industry Attractiveness
|
|
Strong |
Average |
Weak |
High |
Protect Position
In-flight services
Cuisine
In-flight entertainment system and communication
Ground services
Kris Lounges
Branding Image (SIA Girl) |
Invest to build
Expand destinations outside its Singapore base
Aircraft Fleet (A380 & others) |
Build selectively
Budget Airline services (Tiger Airways) |
Medium |
Build selectively
Frequent Flyer Program
E.g. Kris Flyer &
PPS Club
Profitable Destinations
Codeshare Agreements |
Selectively manage for earnings
Virgin Atlantic Airways
Star Alliance |
Limited expansion or harvest
Singapore Engineering Company
Singapore Airport Terminal Services
Singapore Aero Engine Services |
Low |
Protect and refocus |
Manage for earnings
Singapore Flying College |
Divest |
Table 3 - The General Electric (GE) Matrix illustrates which portfolio of businesses, brands, or experiences in SIA could be considered for further investment (Green matrix) or vice versa (Orange matrix) due to its market attractiveness and competitive position.
The Ansoff Matrix
This tool developed by Ansoff allows SIA to scope out its strategic business options. The results are summarised below.
Low-cost airlines, aircraft fleet investment, and destination expansion are areas that SIA could further investigate and develop strategies for to expand market share.
Product
Market |
Market |
|
Present |
New |
Present |
Market Penetration
Promoting its Low Cost Airline (Tiger Airways) - increase sales and penetrating the new budget market further
Continue promoting in growth markets China, India and Middle East |
Product Development
Promoting the superjumbo A380 as a better alternative/experience in the hope to gain more market share |
New |
Market Development
Promoting SIA's destinations (routes) to new markets. E.g Kangaroo Route & Transatlantic Routes |
Diversification Consider extending their reputation for service by affiliating their brand with hotels/accommodation |
Table 4 - Ansoff’s matrix offers strategic choices to achieve the objectives. Marketing Research and Intelligence
Marketing intelligence is generated from systematic processes in marketing research. It includes the primary and secondary data gathered from industry analysis, customer analysis, and general market conditions.
By using this knowledge about its environment and customers SIA is able to forecast movements in market share and customer preferences and thus be in a better position of understanding consumption patterns and market trends; adapt to the changing needs and wants of its target markets; establish an opportunity to innovate and develop competitive advantages; improve segmentation, targeting, positioning and strategy planning.
An example is SIA’s response to low-cost airlines (which account for an increasing portion of domestic and regional markets). SIA bought a stake in the budget airline market through Tiger Airways. Based on movements in market share, this enabled SIA to follow a particular positioning strategy as a means to developing a revenue premium over the low-cost airlines because of recognition that:
- Only a small portion of this can come from product advantages (First/Business Class, Lounge Access, Frequent Flyer Programs, etc.) 12
- As low-cost airlines expand their point-to-point services, that demand is removed from the traffic pool and weakens it for Network carriers12
- The existing Hub carriers are competing for a static or shrinking traffic pool12.
Marketing intelligence can also assist SIA on the issue of rising and volatile fuel costs. Strategies that airlines like SIA employ are to respond with fuel surcharges, improve their managed outlooks with hedging, seek opportunities of reduced operational costs (to improve profit), withdraw services in some sectors, such as SIA’s phasing out 747’s by 2011 as A380’s increasingly become part of the fleet13.
There is also a growing market in China, India, and the Middle East. The transatlantic market is also an opportunity that SIA still has to establish a firm market in and its strategy here has not proven to be as successful according to a report from Reuters14. With added marketing research and marketing intelligence on its competitors and environment, SIA could review its strategy in this market and seek ways to either improve its performance or consider divesting from this market.
SIA also introduces innovations and tracks competitor progress closely. Even outside the aviation industry, they seek to make improvements from innovations in hotels, banks, restaurants, retail outlets, and other service industries, seeing what can be adopted or adapted in the airline industry22. Marketing research itself has a central role in understanding buyer behaviour (covered later in this paper).
Market Segmentation
Market segmentation is the grouping of customers and characterising them in a relevant manner to ensure that the product or service is aimed at the right consumer (or customer). The objective is to help determine marketing strategies and realistic marketing objectives by understanding customer trends and buyer behaviours. Once the market has been segmented, SIA can pursue all or a number of segments with a different offer for each through differentiated/niche marketing that creates and maintains value for the targeted segments15
Examples where SIA uses these types of segmentation are provided for each of the general bases for segmentation summarised below.
Segmentation combined with the GE Matrix can also provide some useful insights for targeting segments and finding gaps or attractive segments that could be matched against SIA’s business strengths. After the organisation has identified and selected its target market, the next stage for SIA is to decide how it wants to position itself within that chosen segment.
Bases for segmentation with Singapore Airlines:
- Geographic – SIA’s customers are located globally with varying wants and needs or behaviours and the organisation attempts to exploit this by providing airline services to major cities/ routes evidenced by SIA flying to 65 destinations in 35 countries on five continents16. SIA’s strong presence in the Southeast Asian region, with its subsidiary SilkAir, connects Singapore to many international destinations in the region. The airline has also established and captured major markets in its Kangaroo Route, flying international traffic into and out of Australia13 and since 2005, frequent flights between Bangkok and Tokyo16. SIA can segment geographically in an attempt to gain extended market share on transpacific routes from Australia to the United States, as evidenced by its proposed hub in North America through Vancouver16.
- Demographics – segmenting on the basis of customer factual characteristics such as age, gender, income etc. SIA could build on from this by looking at them in terms of the other major segmentation variables using multiple approaches to achieve a more complete consumer profile.
- Psychographic – attempts to capture what is driving the customer’s behaviour, such as values, personalities, attitudes and lifestyle aspirations of each segment. For example, SIA provides variations of cabin classes (First, Business and Executive Economy) to meet the product needs and wants of people. SIA employs tiered membership to provide status preferences to consumers. In addition, the Low-Cost Airlines have attracted a market that have a simple need to reach their destination without the “extras”. SIA have positioned to be part of this target market with their stake in the carrier, Tiger Airways.
- Behavioural – is segmenting the market based on observable issues on consumer behaviour when consuming the products. Characteristics include frequency of consumption, buyer readiness and commitment. The corporate market tends to be a frequent flyer that could gain benefits from SIA’s Frequent Flyer program (KrisFlyer and PPS Club), in return for consumer loyalty to the airline.
Buyer Behaviour
With the level of competitiveness in the airline industry, an understanding of buyer behaviour makes marketing strategy development and value creation easier.
Consumer behaviour is however complex and dynamic because different products are bought differently and as a result of different thinking. Factors that influence it include a mix of social, cultural, personal, lifestyle, psychological, environmental, education, occupation, motivation and beliefs and attitudes to name a few17. SIA’s understanding of this could enable them to develop more successful marketing mix strategies.
Henry Asael in Kotler18 (2003:201) summarised the four different buyer behaviours that require different responses from marketers:
- Complex buyer behaviour – requires marketer to provide more information and reassurance to a customer. This is probably more prevalent in B2B transactions with SIA.
- Dissonance-reducing buyer behaviour – requires marketer not to provide any reason not to buy the product and maintain consumer satisfaction. SIA maintains this through their consistent delivery of quality service in all cabin classes leaving consumers with high satisfaction levels. The frequent flyer program and lounge services further add value to their level of satisfaction.
- Variety-seeking buyer behaviour – requires marketers to provide a lot of options within their range so it reduces the likelihood of the customer switching to another provider. For example, SIA provides a variety of options in cabin classes, catering, in-flight entertainment, flight destinations and even for budget-conscious customers, an option with their Low-Cost Airline, Tiger Airways. These days, access to service providers via the internet enables buying decisions that involve low risk to be compared more directly with competitors.
- Habitual buying behaviour – requires the marketer to encourage as many people as possible to trial their products so as to be included in their habitual choice sets. SIA along with SilkAir has established a strong presence in the Asian market, managing regional flights to secondary cities with smaller capacity requirements. The corporate sector, as part of their business needs, is perhaps the most consistent and habitual with flight bookings9.
Upon a customer experiencing services from SIA, it is equally important to understand how the customer is satisfied by the service and/or product offered. This provides invaluable insight on how the service and/or product provided value for the customer as well as how they chose it. Market research can be of assistance here.
Market Positioning
After segmenting a market and then targeting a consumer (based on an understanding of their buying behaviour), SIA can now position a product/service within that market. Market positioning is about how SIA wants consumers to perceive their products and services in relation to their competitors19.
An understanding of market positioning enables SIA to create positioning strategies that result in an offer being seen by consumers as attractive, filling a gap in the market, and providing the organisation with some competitive advantage20.
SIA’s options are to:
- Pursue the segment with an offer based on a current product, or
- Develop a new product offer that meets the needs of the segment.
SIA’s positioning strategy uses Singapore Girl as a central ingredient in marketing its image. Singapore Girl broke that branding image of traditional marketing communications focusing on cabin design, food, comfort and pricing. Personified through the girls, customers got a sensory/emotional experience of air travel with SIA’s commitment to service and quality excellence23. The more senses the brand appeals to, the stronger the message will be perceived.
At the other spectrum of the market, Tiger Airways’ positioning is also very clear – it is a pure low-cost carrier. It pursued a segment with a low-cost offer and positioned itself close to existing competitors like JetStar, and Virgin Blue, so consumers can make a direct comparison when they purchase. It is operating successfully within Australia9, doing well in market penetration and turnover against its competitors.
Conclusion – A Great Way to Fly
SIA is a proven company that delivers great service reflecting their frequent international awards for innovation, flight experience and quality service. Many companies aspire to the status that SIA has earned itself, but SIA earned this through their commitment towards their mission statement of delivering quality world class service to their customers as their prime objective. Like the glory days of aviation when flying was an exclusive experience, SIA have continued to deliver to their customers the sense that flying is glamorous and is matched with quality customer service. Although their company slogan “A great way to fly” instils this, SIA must continue to seek ways of improvement in order to maintain their track record whilst retaining the loyalty of their customers and attracting new ones. |
