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10 Step Marketing Plan for Low Cost Carrier Cebu Pacific
1. 10 STEP Marketing Plan for CEBU PACIFIC AIR Louie Mark Quizon June 2011 1 http://louiemarkquizon.blogspot.com
2. This 10 Step Marketing Plan is part of the mandatory requirements of Prof. Remigio Joseph De Ungria’s AGSB marketing management class. The data included in this report are based on publicly available data such as those on internet websites, news, package declarations, public reports. When appropriate, data are “masked” so as not to create unexpected conflicts. The reports are posted and linked on slideshare, blogs and facebook so that there is easier sharing among students from different marketing classes. Disclaimer http://louiemarkquizon.blogspot.com
3. Cebu Pacific’s PTM are the business and leisure travelers Who want to be fulfilled by a low cost, no frills, and fun airline service Can choose PAL and other local LCCs Gap is a low cost carrier who can offer many routes, has the youngest fleet, and can give a “Fun Flight” experience The market size is Php 40.41 Billion. Cebu Pacific Air’s market share is Php 19.48 Billion Steps 1 to 5Reaching out to every “Juan” http://louiemarkquizon.blogspot.com
4. Cebu Pacific is a low cost carrier that offers fun in the skies Is priced 51% lower than PAL and 11% and 21% higher than AirPhil and Zest Air Uses sales promotion, word of mouth, advertising, public relations, and events and experiences Flights are mainly booked online Uses low cost approach to win Steps 6 to 10A fun flight at a low cost http://louiemarkquizon.blogspot.com
5. 1. Cebu Pacific Air’s Primary Target Market (PTM) are the business and leisure travelers that want an affordable, fun, and no-frills service… Ages 21-55, male and female, social class BCD, single and married Price conscious internet and technology savvy professionals and leisure tourists who want/love to travel (mostly domestic) Business and leisure travelers who travel frequently, or during vacation/holidays, and demand an affordable, fun, and “no frills” airline service http://louiemarkquizon.blogspot.com
6. PTM needs to travel by air at a low cost… I am fulfilled when I can travel by air at a low cost I want to experience luxury so I can achieve status Reference: Maslow’s Hierarcy of Needs Marketing Management, 11th ed, Philip Kotler 6 http://louiemarkquizon.blogspot.com
7. 2. PTM’s needs, wants & demands Professionals and tourists need to experience luxury, to achieve status and recognition, gain self-esteem, and to be fulfilled to attain self-actualization Professionals and tourists choose Cebu Pacific over other airlines because of price, service, safety, extensive distribution coverage, on-time flights, brand promise of a “Fun Flight” experience Professionals and tourists demand low cost with no-frills service, safe travel, easy booking, fun travelling experience, feeling of fulfillment http://louiemarkquizon.blogspot.com
8. 3a. Direct competitors in the domestic and international markets Domestic Philippine Airlines AirPhil Express Zest Air Seair International Cathay Pacific Airways Philippine Airlines Singapore Airlines Asiana Airlines Others1 Note: (1) Others include DragonAir, Hong Kong Express, Air Asia, Eva Air, etc. http://louiemarkquizon.blogspot.com
10. 3a. Variables that affect the choice of airline Variables Price Routes served Safety Record Service and amenities Distribution coverage Brand promise of “Fun Flight” http://louiemarkquizon.blogspot.com
11. Price vs Route Matrix of Key Domestic Carriers in the Top 5 Largest Domestic Routes (based on lowest fares offered) Market share as of 2009 http://louiemarkquizon.blogspot.com
12. Cebu Pacific dominates the domestic market and is priced lower than Philippine Airlines, its main competitor Market share as of 2009 http://louiemarkquizon.blogspot.com
13. Benefit Positioning vs Brand Matrix of key domestic carriers as of 2011 http://louiemarkquizon.blogspot.com
14. Cebu Pacific’s key differentiators are the most routes per day, youngest fleet age and the “Fun Flight” experience as of 2011 http://louiemarkquizon.blogspot.com
15. 4. Cebu Pacific is strongly positioned as the country’s premium “Low Cost Carrier (LCC)” All airlines except PAL are adopting the “low cost carrier” business model Cebu Pacific is the onlylow cost carrier that: Offers the most routes per day Has the youngest fleet age Guarantees a “Fun Flight” experience http://louiemarkquizon.blogspot.com
16. 4. Cebu Pacific is strongly positioned as the country’s premium “Low Cost Carrier” Traditional business model is the “network carrier”, wherein airlines: Typically pursue a service differentiation strategy Fares are more expensive http://louiemarkquizon.blogspot.com
17. 4. “Positioning”: brand identity from the maker “It’s time everyone flies” Or occasionally modified with humorous intent as: “It’s time ever Juan flies” Source: Cebu Pacific Air Website http://louiemarkquizon.blogspot.com
18. 5a. Based on PAL’s quarterly revenues, market size is Php 45.54 Billion 2010 Passenger revenue is Php 59.32 Billion1 Civil Aeronautics Board reveals PAL average market share of 32.3% for 2010 Revenue contribution for the domestic market is 24.8%2 Market size is (0.248 x 59.32)/0.323 = Php 45.54 Billion http://louiemarkquizon.blogspot.com
19. 5a. Based on PAL’s quarterly revenues, market size is Php 45.54 Billion References Philippine Airlines Annual and Quarterly Reports 2010 http://www.pse.com.ph/ Philippine Airlines Annual Report 2010 http://www.pse.com.ph/ http://louiemarkquizon.blogspot.com
20. 5b. Based on Cebu Pacific’s claimed market share, market size is Php 40.41 Billion Cebu Pacific’s claimed passenger domestic market share is 48.2% for 2010 Passenger revenue for 2010 is Php 24.656 Billion Domestic capacity share is 79% Market size is 0.79(24.656 Billion/0.482) = Php 40.41 Billion http://louiemarkquizon.blogspot.com
21. 5c. Customer data reveals a market size of Php 41.9 Billion Total domestic passengers for 2010: 16,539,0001 Average fare of Cebu Pacific 1999 = Php 23542 2010 = Php 2468.8 (Jan-June 2010) CAGR = 0.48% Growth Average domestic airline fares in 1999 = Php 25213 Applying CAGR: 2521x1.048 = Php 2533.34 Total domestic passengers x Average airline fare 16,539,000 x 2533.34 = Php 41.9 Billion http://louiemarkquizon.blogspot.com
22. 5c. Customer data reveals a market size of Php 41.9 Billion References Cebu Air, Inc 1Q2011 Results of Operations sourcing Civil Aeronautics Board, Company Filings Competition in the Domestic Air Transport Industry: Can it be sustained without competition policy?, Myrna S. Austria, August 2001, Table 4. Average fare by airline per sector, 1997-1999 (PhP), Average of Cebu Pacific Air Competition in the Domestic Air Transport Industry: Can it be sustained without competition policy?, Myrna S. Austria, August 2001, Table 4. Average fare by airline per sector, 1997-1999 (PhP), Average of PAL, Cebu Pacific Air, Air Philippines http://louiemarkquizon.blogspot.com
23. 5. Annual market size for the domestic passenger market is Php 40.41 Billion Competitor data= Php 45.54 Billion Company data = Php 40.41 Billion Customer Usage data = Php 41.9 Billion http://louiemarkquizon.blogspot.com
31. 6b. Cebu Pacific has the youngest fleet in the Philippines and continues to differentiate itself from other LCCs CEB operates a fleet of 25 Airbus (10 A319 and 15 A320) and 8 ATR 72-500 aircraft, the youngest fleet in the Philippines CEB offers the lowest year round Lite Fares for its destinations CEB remains to be the pioneer in creative pricing strategies as it manages to offer the lowest fare in every route it operates From Cebu Pacific Air website http://louiemarkquizon.blogspot.com
32. 6b. Cebu Pacific’s innovation is key to its domestic market dominance CEB is the first local airline to introduce e-ticketing, prepaid excess baggage and seat selection in the Philippines The only domestic carrier that offers fun in the skies with its games on board popularly known as Fun Flights, together with its entertaining inflight magazine – Smile From Cebu Pacific Air website http://louiemarkquizon.blogspot.com
33. 6b. All Fares are now “Lite Fares” Customers don’t have to pay for: Newspapers, lounges, free meals Paper tickets, frequent flyer programs Lite Fares have two variants: Year-round fares Promo fares From Cebu Pacific Air website http://louiemarkquizon.blogspot.com
34. 7. Cebu Pacific is priced lower than PAL but is generally higher than the other LCCs http://louiemarkquizon.blogspot.com
35. 7. Cebu Pacific is 51% lower than PAL but 11% and 21% higher than AirPhil and Zest Air respectively http://louiemarkquizon.blogspot.com
36. 8a. Cebu Pacific Air uses Sales Promotion, Word of Mouth, Advertising, Public Relations, and Events and Experiences 1 3 4 2 5 http://louiemarkquizon.blogspot.com
37. 8a. Cebu Pacific’s website is the most visited e-commerce travel website from 2008- June 2010 according to Alexa Top Sites http://louiemarkquizon.blogspot.com
38. 8a. Cebu Pacific leverages on their strong internet presence to advertise sales promotions http://louiemarkquizon.blogspot.com
39. 8a. They also use social network sites to promote sales… http://louiemarkquizon.blogspot.com
40. 8a. The use of social networking sites is also a form of Word of Mouth Marketing http://louiemarkquizon.blogspot.com
41. 8a. Cebu Pacific’s safety demo dance even went viral… http://louiemarkquizon.blogspot.com
42. 8a. Cebu Pacific also uses print and TV advertising, supported by radio and outdoor advertising http://louiemarkquizon.blogspot.com
43. 8a. The company uses various PR campaigns such as press releases, annual reports, and their company magazine - Smile http://louiemarkquizon.blogspot.com
55. 8b. Seair, like Cebu Pacific, also has a PR campaign through its company magazine http://louiemarkquizon.blogspot.com
56. 8b. To grow online brand recognition, Cebu Pacific leverages on its strong e-commerce website Airlines now rely heavily on e-commerce and e-marketing Cebu Pacific’s main strength is their e-commerce website Most visited e-commerce travel website (2008-June 2010) Reinforces this by joining social networking sites Facebook Twitter http://louiemarkquizon.blogspot.com
57. 8b. Cebu Pacific’s focus is on e-commerce and e-marketing E-commerce and e-marketing are cost effective Some promotions are exclusive online Lower distribution costs Successful internet bookings Accounted for the highest portion of total direct sales for 2010 http://louiemarkquizon.blogspot.com
58. 9. Cebu Pacific’s main distribution channel is the internet Three principal distribution channels: Internet Booking sales office, call centres, client accounts Third-party sales outlet Distributors General Sales Agents Wholesalers and Preferred sales agents http://louiemarkquizon.blogspot.com
59. 10. Cebu Pacific’s generic winning strategy is Low Cost Producer Low Cost Producer Supply and Distribution Leverage Differentiation Niche http://louiemarkquizon.blogspot.com
60. 10. The premium “Low Cost Carrier” Priced lower than its main competitor which is a “Network Carrier” Differentiates brand with other LCCs End result – No. 1 domestic carrier http://louiemarkquizon.blogspot.com
61. References Marketing plan outline for Southwest Airlines: http://www.grabers.com/library/imc/archives/2005/03/a_marketing_pla.php http://wiki.answers.com/Q/What_is_the_present_social_status_of_the_Philippines Cebu Pacific Air Prospectus October 8, 2010 Cebu Pacific Air Annual Report for year ended Dec 31, 2010 Cebu Air, Inc. 1Q2011 Results of Operations Investors’ and Analysts’ Briefing http://louiemarkquizon.blogspot.com
62. References Philippine Airlines Annual Report for the year ended Mar 31, 2010 Philippine Airlines Quarterly Reports for the periods ended Sept 30, June 30, Dec 31, 2010 Competition in the Domestic Air Transport Industry: Can it be sustained without competition policy?, Myrna S. Austria, Aug 2001 The State of Competition and Market Structure of the Philippine Air Transport Industry, Myrna S. Austria, Nov 2000 http://louiemarkquizon.blogspot.com
63. References The Evolution of the Philippine Airline Industry, Wilfred Manuela, The Airline Customer Loyalty Model, Master Thesis by Judith Benner, Copenhagen Business School, April 17, 2009 Philippine Aircraft, Passenger, and Cargo Statistics 2001-2010, Civil Aviation Authority of the Philippines http://www.caap.gov.ph/web/downloads.htm V53 10 Step Marketing Plan for Cebu Pacific, Lenilynne Go, Feb 2011 http://louiemarkquizon.blogspot.com
65. Cebu Pacific’s PTM are the business and leisure travelers Who want to be fulfilled by a low cost, no frills, and fun airline service Can choose PAL and other local LCCs Gap is a low cost carrier who offers many routes, has a young fleet, and can give a “Fun Flight” experience The market size is Php 40.41 Billion. Cebu Pacific Air’s market share is Php 19.48 Billion Steps 1 to 5Reaching out to every “Juan” http://louiemarkquizon.blogspot.com
66. Cebu Pacific is a low cost carrier that offers fun in the skies Is priced 51% lower than PAL and 11% and 21% higher than AirPhil and Zest Air Uses sales promotion, word of mouth, advertising, public relations, and events and experiences Flights are mainly booked online Uses low cost approach to win Steps 6 to 10A fun flight at a low cost http://louiemarkquizon.blogspot.com
67. 10 STEP Marketing Plan for CEBU PACIFIC AIR Louie Mark Quizon June 2011 67 http://louiemarkquizon.blogspot.com