Executive summary
Ryanair Company is a low-cost Irish airline operating approximately 178 destinations and 610 routes within the European Union. Michael O’Leary, the executive officer, reported revenues totaling to £3.657 billion in the fiscal year 2015, thereby bringing profits to £ 387.8 million. The company’s success receives credit for offering bare minimum services for the most affordable price, rewarding contracts, and negotiating a cheap contract with secondary airports. Likewise, the firm utilizes a contemporary and well-organized fleet consisting of 291 aircraft and charges further amenities the customers require (Pfanner 2008, p. 2). The firm’s Issues and Outlook Profile documents a range of issues confronting the firm. These include its controversial employee relations, advertising, susceptibility to worldwide oil prices, and conflicts, which the firm needs to address. Despite achieving enormous success to date, the company has several areas, which require improvement. This report unveils marketing management, focusing on the marketing mix and strategic options that offer a roadmap for achieving the company’s objectives. The report shows that the company is transcending to a stage of maturity factoring an industrial lifecycle. This report recommends that for Ryanair to continue achieving its goals and objectives, it is worthy to adopt a market penetration strategy focusing on satisfying the needs and wants of customers in the existing market. The current instability in the economy makes the needs of customers unique, and the company needs to fulfill for them to sustain a substantial market share and achieve revenue.
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1.0 Section 1: Current competitive positions with growth projections
Competition is a force in the market that currently and will remain in the future to influence the firm’s actions alongside future performance. With the establishment of competition guidelines, airline sector opposition has exploded immensely, particularly in the last ten years. Rajan (2003, p. 4) projects that competition will persistently grow as fresh competitors in the industry seek to take advantage of the elimination of regulatory measures. Nonetheless, there has emerged a high amount of new people entering the airline industry, yet many have failed. This is because the current competitors occupy a suitable position and attack new businesses with better customer services and lower air tickets. According to Rajan (2003, p. 4), the established business increases in value the loyalty of customers and their suitable prices for they enjoy a strong foothold in the market, unlike the new entrants that lack this advantage. Therefore, understanding the competition of this firm it is important to divide the major players into categories: flag carriers, self-governing airlines, charter operators, and major franchises airlines. The flag carriers represent the airline that flies transnational and Western Europe courses. Previously, they have heavily reliant on aid from the identifiable government, such as Aer Lingus and Air France (O’ Connell & Williams 2005, p. 263). The commercial flag carriers, including British Airways and Scandinavian Airlines, have worked with minimal support or none in recent years. Lastly, the independent carriers, such as Ryanair offer low fare flights and receive no support from the government. Therefore, these factors have a significant effect on Ryanair airline because it competes against larger airlines, which obtain aid.
Ryanair’s Customers is one strategic group that indicates its position in the market based on the existing competitive strategy. Ryanair is widely known for its customer hostility, bad and sometimes rude customer service. A firm with a primary emphasis on profits ignoring the high level of customer service that most of the competitors swear by. According to Roe (2009, p. 9), the passenger number of the airline increased by 12 percent to 40.1 million people in a period of six months. Meanwhile, the company indicated that it had not felt the economic downturn effects on the economy. Most of the customers Ryanair serves are financially conscious who are in search of a cheap deal during times of recession. Therefore, the firm attracts money-conscious individuals, including business people, families, and groups who are in search of reliable and affordable airline transport. In the meantime, Ryanair’s emphasis on no-frills and low costs ensures competition. Despite the increasing number of entrants into the market, Ryanair and EasyJet control 55.8 percent of the market share (Malighetti, Paleari, Redondi 2010, p 38). Further, competition among the low-fare airlines remains intense because they operate in similar sizes. Also, the lack of significant differences existing between business models and low-fare airlines can be studied and copied easily leading to increased pressure on price wars that in turn constraints profitability. The current performance in the market provides evidence of the current competitive position in its basic form as indicated in the financial results and considering that the airline enjoys the European low-cost carriers’ major market share of passenger numbers.
Financially speaking, their current competitive strategy is working for the company because they have increased both their revenue and succeeded in reducing their costs, hence offering the company an increased profit margin (Hanlon 2009, p. 29). A good example of the reported 28 percent increase in total operating revenues and their expenses in compared to total operating revenues reduced by 7 percent resulting in a higher profit margin. The aspect of competitive rivalry related to low-cost airline segments remains attractive because of the enormous number of rivals and entrants. Nonetheless, nearly 50 entrants went bankrupt showing that getting might be easier while maintaining operation remains a huge problem. Therefore, competitive rivalry in the airline industry is extremely high and survival and profitability are founded on creating a competitive advantage over rivals (Mason 2006, p. 93). The company has numerous opportunities that would facilitate expansion. In detail, the company can make good use of the open skies treaty with the United States and commence intercontinental flights at low costs thereby offering flights all over the world. What’s more, the company can plan to expand beyond the European borders and exploit markets such as Asia and Russia, which could increasingly provide passenger traffic. It is important to mention that the future of the firm, considering the addition of new European Union nations is a prospect to enlarge the airline service area, as customers will take the advantage of reduced air services. Besides, people may secure jobs across the borders, and the tourism industry increase, which in turn offers a massive opportunity for Ryanair’s future expansion.
2.0 Section 2: Strategic marketing applications for growth
Ansoff developed a model instrumental for describing alternative directions for company development in the 1960s. Accordingly, the model offered a combination of current and new product or service markets. Ansoff identified and explained four main strategic development options, including market penetration, product development, diversification, and market development (O’Sullivan 2010, p. 7).
2.1 Marketing penetration
This approach incorporates the sale of present products in the present market where the firm functions. In detail, Ryanair’s market penetration encompasses the conversion of the present customers to generate additional revenue, such as family bonuses and discounts. Primarily, Ryanair focuses on maintaining or increasing the market share of existing products. Therefore, the firm has ensured offering options for competitive pricing, advertising, sales promotion, and increasing properties devoted to individual sales. In the meantime, Ryanair has secured the dominance of growth markets by restructuring mature markets. Essentially, this resulted from driving out competitors, which required an effective campaign on promotion, aided by a pricing plan calculated to ensure the marketplace is unappealing for new players (Adcock 2001, p. 41). Further, Ryanair increased usage by existing customers, such as the introduction of loyalty schemes. Certainly, the airline industry focuses on markets as well as products it is familiar with. Therefore, it is likely that obtaining decent statistics on opponents and the needs of customers. Nonetheless, it remains unlikely that a market penetration strategy will necessitate the need for much investment in new market research. Therefore, Ryanair’s market penetration is very much about conducting regular focuses on services and markets it already controls. Therefore, the company will less likely require additional investment in new market research. Increasing market penetration requires that the company strengthen promotional and marketing programs in the marketing mix promotion plan.
2.2 Market development
The aspects of market penetration strategy incorporate selling off the firm’s existing products to a new market. As such, Ryanair has the opportunity to exploit the market in the new EU member countries recently added to provide the existing service to new customers. Ryanair has made tremendous efforts in approaching this tactic, counting on exploiting new topographical marketplaces and product exporting to a new country. Similarly, the firm focuses on introducing new dimensions of products or packaging and new distribution channels. Further, the firm uses different pricing policies to attract customers from a wide base and create new segments of the market. Product development would require that Ryanair Company develops new competencies as well as providing significant expenditure, especially on research and development (O’Sullivan 2010, p. 7).
2.3 Product development
Marketing development strategy involves developing new products and offering them to current customers. This strategy works for the company because its demand for existing products is declining (Adcock 2001, p. 34). Ryanair focuses on the development of new competencies, has developed, and modified product that appeals to existing markets. The concept of marketing development requires the company to target the marketing of customers who are reluctant to use airline services. It is important to enquire whey they are not using airline services despite the reduced prices, thereby providing avenues for appealing to such customers. Further, it calls for an emphasis on market segmentation by searching for new market segments alongside potential clients to the introduced market segments. In a nutshell, for the company to succeed in a market development strategy it must be dependent upon robust market research, development, and planning.
3.0 Section 3: Market penetration strategy
Market penetration strategy is the suggested approach that would develop the company. This strategy requires focusing on additional advertising, new pricing policies, and bigger promotional campaigns. This strategy applies to the company because Ryanair already has a wide customer base, distributed all over the country, and flights to main airports. Ryanair is also a well-established brand with an excellent reputation for delivering high-quality services. The firm works in a market where they are well-established and have a good knowledge of the existing competition. A market penetration strategy, according to Adcock (2001, p. 38) would require minimal investment because the firm already boasts lots of knowledge on its potential competitors and customers. Therefore, money spent on improving various areas of the company would offer a better start of the strategy. In the case of improving key company areas, Ryanair needs to concentrate on approaches for reducing costs and introduce new streams of revenue. For example, the company focuses on cleaning the planes more quickly, generating more flying time, and using less staff.
Therefore, the adoption of such strategies means reducing cost so that Ryanair can concentrate on delivering increased flying standards at a lower cost. Indeed, this would lead to attraction and assigning additional customers away from its competitors, who would show the willingness to pay more for a higher class of flight. Baines, Fill, and Page (2008, p. 98) reports that generation of extra revenue requires targeting of customers targeted using a large base of flight products on planes and in leaving and entrance lazes. Such products incorporate reductions on extra flights, car hire, and hotel price cuts, and complete package long weekend deals. The use of a market penetration strategy would ensure cost leadership because the company is already the cheapest airline in Europe and can ensure a similar strategy to gain access to new markets beyond the European borders.
3.1: Marketing mix
The company’s marketing mix outlines a set of manageable planned approaches of marketing the company mergers to offer the reaction needed in the objective marketplace. The marketing mix entails seven variables known as 7P’s that are used to attain the marketing goals and objectives of the company.
Product mix: The term product alludes to the totality of products and services offered by the company to the target market necessary for satisfying the needs of customers. Therefore, Ryanair’s main product references their service to fly customers to desired destinations. Choosing the marketing penetration strategy requires the company to develop a new product as well as marketing their existing services to reach a wide base of customers (Adcock 2001, p. 42). Consequently, if the company chooses to penetrate existing markets, they should commence domestic flights using the 15 airports in the country. Ryanair can operate in the new markets domestically and internationally.
Price mix: Price refers to financial resources charged for a service offered or product in that case. For Ryanair, they are currently the cheapest of lower-cost airlines in Europe. Therefore, penetrating new markets may mean that the company continues offering low-cost flights (Adcock 2001, p. 42). Penetrating new markets both domestically and internationally would mean expanding the business in other markets that will attract additional customers since the flights operated inside the country are not relatively cheap.
Place mix: The aspect of place incorporates activities of the company, which makes the product available to targeted buyers. In the case of Ryanair, the only place their service can increasingly sell is through the internet. Nonetheless, if they wish to operate in current markets alone, the firm will necessarily include travel agencies in their current selling strategy of services through the internet because some customers may lack or just reluctant to use the internet.
Promotion mix: Promotions are essential activities to service or product offered by a company. Therefore, if Ryanair opts to penetrate existing markets, they can provide some offers on promotional activities, including the breast cancer. Ann has been a staunch Christian since childhood just like the rest of her family package. In particular, this may incorporate a discount in case of four or three members of the same family buy tickets from the company. Meanwhile, the company can also achieve market penetration by promoting its services through product media platforms such as newspapers and televisions. Further, Ryanair can sponsor various sporting activities, such as cricket, rugby, or football tournaments held in the country to market it and reach a wider base of customers.
People mix: These refer to the employees that offer a human resource to the company. For Ryanair, penetrating the market requires hiring highly motivated employees to offer continual training and development programs (Adcock 2001, p. 42). As such, motivated and knowledgeable employees would offer the best services to the customer and maintain the best brand image for the company provided they want to extend their services to current markets.
Process mix: The aspect of the process mix entails the procedure of conducting activities in the company. As the company does not function through travel agencies, therefore, Ryanair needs to plan thoroughly, maintain queuing, and schedule delivery provided they choose to penetrate the existing market to sign higher potential customers.
Physical affected by mental or physical health disability. However, research evidence mix: The concept of physical evidence means that Ryanair makes the customers feel and see their presence thereby influencing their perceptions of provided services. Therefore, the company can print a brochure detailing their services and corresponding charges and channel them into the new markets penetrated. Furthermore, the physical evidence aspect of the company can entail the introduction of a special outfit for Ryanair’s staff as new markets have different cultures from Europe, as they need to reflect on the culture of the country through the outfit (Adcock 2001, p. 42-43). The company can also use the magazine, appropriate foods, and in-flight movies that would satisfy the cultural market demands.
3.2. Digital marketing
A social media platform provides important marketing approaches for various reasons. According to Ryan and Jones (2012, p. 19), people are likely to listen to their families and friends before using a brand. For that reason, social networking sites, including Facebook and Twitter essentially used to connect with friends and families from the offline world. Technology is the last step a company should take when developing a marketing strategy. Since Ryanair already has technologies, the company needs to participate in social media to represent itself involuntarily. The internet offers a central role in selling plane tickets. Customers in the previous days would use travel agencies and engage a travel agent personally and once an agent has sold a ticket; he would receive a commission from the sale of the ticket. The objective of digital marketing should be to convert online visitors to buy, and the company would focus on achieving online sales to existing and new customers. The use of digital marketing platforms will enable Ryanair to encourage visitors to its site and facilitate the online buying of tickets through promotions and merchandising. As part of a digital marketing strategy, the company will have various options for converting visitors into action, that is, promotions for first time buyers, improvements in the design of sites, and landing page optimization. Furthermore, the company uses event-triggered and automated emails to convert potential sales to a real sale.
Digital marketing through various channels, such as iPhone applications, and using a value calculator would make the company win the heart of many customers in the market (Mariegaard & Host 2012, p. 13). Ryanair is attempting to prove that it can guarantee price competitions and has launched a value calculator on its websites that compares its prices with that of British Airways and EasyJet. Further, the company considers the launching of business-class services only using onboard internet services for the specified class of passengers. The platform allows customers to send emails, texts, and access the Internet in-flight. Ryanair claimed this year was the best time to offer such technology, especially on existing flights. Also, Ryanair focuses on providing online services to retain existing customers and assign new ones. The established online portal of the company would help drive down costs thereby increasing revenues. Approximately half of the bookings done in the company are made on its website, with nearly all the business fares sold using the UK site, as evidence of popularity with the customers. In the previous year, Ryanair introduced a new feature that permits customers to upgrade their bookings at any time and location between ticket buying and checking its status online. Ryanair had launched new online services that allow the customers to check-in or access real-time departure and arrival information using mobile applications.
3.3 CRM
The use of CRM strategy would enable Ryanair to put additional emphasis on the various aspects of customers’ lifecycle for online terms (Ryanair n.d., p. 2). In detail, the company would ensure acquisition founded on designing of various strategies to penetrate the market and assign new customers to the airline as well as migrate current customers across to online platforms. Also, Ryanair would ensure retention of customers by using online channels such as web-based ads popups, websites, and linkages from their web page that would increase retention and add value to customers subscribing to the company services. Accordingly, Ryanair would ensure reactivation by encouraging the sustained application of their airline website, for example, through the registration of members. The approach would motivate customers to revisit constantly the company’s website to keep up to date with relevant information, including promotions prompting subsequent changes in prices and new information or changes in flights. Lastly, elements of customer knowledge or customer intimacy through learning additional information about the customer based on monitoring and profiling of behavior. Again, this can be achieved through keeping customer records online that would allow easy storage and offer efficient linkage with online membership, but the issues on data protection may emerge and the company must abide by this situation.
4.0 Section 4: Resourcing for the proposed changes
The resources required for adopting a market penetration strategy would include re-designing planes internally. This focuses on the concentration of space, ease, and comfort of access and cleaning of the planes. Similarly, it would require designation and integration of a wider range of jobs for staff and revamping the image of the company, thereby targeting the competition customers. For this reason, the company would require viable promotional activities focusing on strengthening the brand and reputation of the company. Ryanair could also assign more affordable fees for landing with existing and new airports and decrease the number of seat classes to two for business and flying class. Furthermore, using analyst insight would offer important views on implementing marketing penetration. The largest revenue proportion results from regular and business travelers. Therefore, it is significant to ensure customer and business confidence. Business travelers are significant to the airline for the reason that they are more inclined to travel numerous times thought the year. Also, keeping a close eye on cost is a sensitive resource area for the implementation of a market penetration strategy. For instance, constant awareness of the cost of labor, fuel, and borrowing costs would allow the company to factor such changes into the analysis (Ryanair n.d.). In particular, energy resource (fuel costs) continually fluctuates, thus paying close attention to such resources is beneficial.
5.0 Recommendations and next step
The main objective of Ryanair is to keep the cost of flight low and continue penetrating the market. Such practices would ensure the company constantly attracts more customer base. Partly, the company has been successful because they are a lean company, especially in service delivery and operations. Therefore, recommending changes in the company would follow the marketing strategies to enable the company to penetrate deeper into the current markets. As one of the most popular airline industries, the company will further have a boom with an increased number of passengers currently enjoying low price flights. The staff should focus on designing a viable marketing mix promotion plan, implementing small business sales using telemarketing, cold calling, postcard marketing, direct marketing campaigns, and direct mailing. Lastly, Ryanair should employ competitive strategies to gain additional market share from the competitors. The company should implement a systematic data collection method concerning customer demands and promotional strategies required to win the hearts of more customers. Likewise, Ryanair should align ancillary fees with costs because they can charge low-ticket prices more than any other European airline (Malighetti, Paleari & Redondi 2009, p 197). These include handling of luggage fees, in-flight refreshments, and carry-on luggage through a partnership or mutual benefits. Furthermore, Ryanair should focus on expanding the available routes and offer premium services to entice more customers to join their airline brand. The company must increase the sale of air tickets within the market segment by incorporating digital booking and sales platforms. Likewise, Ryanair should consider focusing on private and leisure travel markets that would allow for business penetration and expansion. Overall, the company requires capital investment to put the strategies that would allow for viable market penetration.
It is important for the leadership of the company through Michael O’Leary (CEO) to consider turning strategic marketing options for management into success. The future of the airline industry is less promising, yet excelling in seizing the establishment of the low-cost airline market within the UK proves instrumental for future development (O’Higgins 2009, p. 621). Conclusively, the analysis of Ryanair assesses strategic marketing options alongside its strength in overcoming the obstacles and retaining forces of competition to become the largest low-cost carrier in the United Kingdom. The focus of Ryanair on low cost is a fundamental competition strategy that would allow for further market penetration. As a cost leader, the company has the potential of emerging a true budget airline offering high quality, quick, and basic services with zero delays and fuel surcharges. This information available provides significant data relating to Ryanair’s marketing strategy. Therefore, the company should implement a marketing penetration strategy within the United Kingdom as provided in the recommendation section. Also, every development of this report relates to the internal and external analysis as well as strategic comprehension of the company. Overall, Ryanair is on the line of succession if the marketing penetration strategy pairs up with the goals and objectives. Thus, it is worthy for the company to remain as a low-cost leader and sign more customers in its segment to thrive in the UK airline market.
6.0 References
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