ASSIGNMENT -1 OF E-Marketing

SUBMITTED TO Mr.Abhisek Dutta

SUBMITTED BY Kuldeep Tiwari Reg no-10809869

Introduction

India is one of the fastest growing aviation industries in the world. Because of the introduction of liberalization policy in the Indian aviation sector, the industry has witnessed a vast difference with the entry of the privately owned full service airlines and low cost carriers.In 2006, the private carriers accounted for around 75% share of the domestic aviation market. The growth in the aviation industry looked promising and hence attracted many low cost carriers like SpiceJet, GoAir and IndiGo after the success of Air Deccan in 2003. On one hand, the booming opportunities incited players to expand capacity but on the other hand, rising fuel costs and taxation rates, increased the operational costs The IndiGo team uses all of these resources to design processes and rules that are safe and simple, that make sense, and that cut waste and hassles, which in turn ensures a uniquely smooth, seamless, precise, gimmick-free customer experience at fares that are always affordable. It was awarded the title of Best Domestic Low Cost Carrier in India for 2008. The airline currently operates 120 daily flights with a fleet of nineteen brand new Airbus A320 aircraft and flies to 17 destinations. IndiGo plans to serve approximately 30 Indian cities by 2010 The key factors of the business model of IndiGo airlines: A single passenger class. Single type of airplane to reduce training and service cost. No frills such as free food/drinks, lounges.

Emphasis on direct sale of ticket through Internet to avoid fee and commissions paid to travel agents. Employees working in multiple roles. Unbundling of ancillary charges to make the headline fare lower.

Developing Greenfield airports with private sector

Porters Five Forces strategy for Airline Industry Threat of New Entrants:
Product differentiation: In low cost carriers, there is not much differentiation in the basic service that is being provided to the customers. Differentiation can only be achieved by Value Added Services. IndiGo provides check-in kiosks, stair-free ramps, and Q-Busters. Hence this argument works in favor of IndiGo. Switching cost: 1. The switching cost is not high. Customers can easily choose other low cost carriers. 2. The switching cost of an airline company to other business/industry is high as the exit cost is high. In aviation industry the major entry barriers can be: Government regulations: 1. The government's open sky policy has encouraged many overseas players to enter the aviation market. 2. Aviation was primarily a government owned industry. Due to liberalization Indian aviation industry is now dominated by privately owned full-service airlines and low-cost carriers. Private airlines account for around 75 per cent share of the domestic aviation market. 3. Private sector is allowed to operate scheduled and non-scheduled services. 4. Operator should be a citizen of India or a company or a body corporate which is registered in India and whose principal base of business is in India. Fuel prices: Domestic ATF prices have increased by over 160 per cent from the beginning of 2005 till last year and by over 80 per cent from a year-ago levels. In India, oil companies do not import ATF directly; instead they refine it from imported crude oil. With rising crude oil prices, imports are becoming expensive day by day and at the same time, the government is unable to pass on the full impact of this rise to the consumer. As a result, the state owned oil marketing companies (almost 95 per cent of the market is with state owned firms) are forced to sell diesel, petrol, kerosene and LPG at way below cost, a cost they are trying to somewhat make up by raising the price of ATF, which is under their control. As a result prices of ATF in India are much higher than some of the other Asian countries.

Bargaining Power of Suppliers

Any airlines in general face a duopoly of two major suppliers of aircrafts i.e. Airbus and Boeing. There are other suppliers like Dauphin,Dronier,Bell,ATR-42 but do not meet the requirements to serve the low cost commercial aircraft carriers, particularly IndiGo airlines. Fleet Forecast for the India-Region 2006-2011 shows that there will be approx. 85% growth in the order rate of air carriers. Thus, suppliers are few and thus in better position to bargain as they always finds customers for their aircrafts. IndiGo fleet comprises of Airbus-A320 and the switching cost is high due to the limited number of suppliers. Due to shortage of commercial aircraft pilots in India the supply of pilots is concentrated, hence increasing their power. There are only four suppliers for ATF (Aviation Turbine Fuel); IOC, Hindustan Petroleum Corporation, Bharat Petroleum and ONGC and since their number is limited, they possess more power. The proof of evidence for high power enjoyed by ATF suppliers lies in the fact that the ATF prices constitute 35-40% of the costs in India compared to 20-25% globally. The brand value of suppliers is high due to their less number and results in higher bargaining power for them. The airlines also face a threat of forward integration since the suppliers are in close contact and are familiar with the knowhow of the aviation industry. The suppliers are few and thus in better position to bargain as they always finds customers for their aircrafts.

Bargaining Power of Buyers

Buyers in airlines industry are large in number and highly fragmented thus lowering their power .With the growing Indian economy and increasing low cost carriers, the buyers have increased and so have the growth opportunities.

The switching cost is minimal since there are multiple alternatives available. It is not difficult to move from one airline to another or to switch to a substitute. Furthermore the players in the particular strategic group do have minimalistic differentiating points. Backward integration from the buyers end is very difficult and next to impossible.

Competitive Rivalry
The aviation industry is a highly competitive industry because of which it is difficult to earn high returns in this sector. Below are the major reasons for the high competition in the low-cost carrier airlines: Very little scope for differentiation between competitors products and services Aviation is a mature industry with very little growth. The only way to grow is by stealing away customers from competitors. Suppliers of aircrafts are the same, i.e., Boeing and Airbus. Hence suppliers bargaining power is high. Switching cost of customers is high for low cost carriers, i.e., there is no brand loyalty.

Closest competitor of IndiGo is SpiceJet followed by GoAir. Below is brief description about each of them:

Availability of Substitutes:
The substitute for low cost airline company is the railways. But this substitute is not very powerful due to the following reasons: Customers use airline transport as it is convenient and saves travelling time. So trains cannot work as a substitute to save time. Secondly, many customers use airlines as a status symbol. So again, trains cannot substitute for prestige. So if we consider IndiGo airlines, the direct substitutes are the other low cost carriers like SpiceJet and GoAir. So in this case, threat of substitutes is high as the switching cost between low cost carriers is low.

Swot Analysis of Indigo Airlines

Strengths IndiGo has high brand awareness and brand equity. Cost leadership: Successful implementation of low cost strategy. Highly efficient management that ensures high rate of on- time arrivals. Continuous innovation to improve on non price factors. Tie-up with hotels. Ease of ticket bogoking for customers.

Weaknesses Scope of product differentiation is less. Benefits of the innovations implemented by IndiGo to provide better services to the customers are short-lived, as these can be easily imitated by the competitors. IndiGo is not exploring the untapped domestic air cargo market.

Opportunities IndiGo airlines have not ventured into the huge air freight market which can contribute a sizeable portion of the revenue. A study by Centre for Asia Pacific Aviation or CAPA6, an aviation consulting firm estimates the cargo services of 3.4 million tonnes per annum. According to a research conducted by PhoCus, Indian domestic traffic will touch 86.1 million by 2010,up from 32.2 million in 2007.The flight density of IndiGo airlines is limited in domestic market; hence there is a big scope to increase the flight frequency.

The huge untapped international sectors should be explored once IndiGo has a considerable presence in the domestic market. IndiGo currently does not have too many long haul aircrafts and as per CAPA study by 2020, Indian Airports are expected to handle more than 100 million passengers. IndiGo airlines should focus on long haul aircrafts both for domestic and international sectors.

The chartered flight services still remain an area not exploited by Indian aviation industry and IndiGo airlines can play a major role in tapping the potential in that particular market.

Threats ATF (Air Turbine Fuel) prices have increased radically since 2005 Foreign and private players often poach work-force of competitors. Extensive Government Interference can affect the accountability of the organization. In aviation industry, government has control over fuel prices, foreign investments (e.g. FDI policies), tourism laws, taxes etc. This can greatly affect the day to day business in the airline industry. Like every other industry, recession has hit aviation industry as well. People have cut down on tourism and corporate travels have also been slashed down.

The shortage of trained pilots, co-pilots and ground staff is severely limiting the growth prospects of all the airline companies. Barriers to exit in aviation industry are high because of high capital investment, no government restrictions and loss of brand image.

Types of e- marketing used by Indigo airlines IndiGo: Viral Marketing

In one of the best examples of an Indian company engaging in Viral Marketing, IndiGo Airlines has demonstrated a strong commitment towards using word-of-mouth (WOM) marketing by sending out emails. These emails are simple, easy and contain plain text only to avoid making it look like SPAM. You just need to click on a link to get to the page of the actual content. The content also has been carefully crafted. So far I have received 2 of the emails in this series:

Email 1:

(Click to go to the Actual Link) If you click on the Image above you are taken to a flash video (again, neatly designed using the trademark indigo colours purple and white). The video contains a series of texts where IndiGo quotes from surveys and makes BOLD statements in comparison with other airlines Kingfisher, Spice Jet, et al. The strategy clearly has been to attack claims made by competition claims which say that others have better on-time performance, for instance. Low-cost airlines (popularly and colloquially known as LCCs), are often accused of poor levels of customer service and lack of attention to detail with res.pect to hygeine. Both of these have been adequetely dealt with. In fact, in another of the BOLD statements, IndiGo has this to say about Customer Service: At IndiGo we respect our customers. We dont belittle you, talk you down or insult you. 2 -marketing strategy lessons here: 1. Attack false claims (backed by validated research data) 2. USE your loyal customers by spreading word about false competitor claims

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Email #2: The visual says it all. This did not have a series of statements. Just this image.

The indigo airlines used viral marketing through mail to the customer

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Mini case of Indigo airlines( Success Factors of Airline Industry) The airline industry is a rapid evolution towards a new market form. There have been entries in the airline industry in the form of low cost carriers after the deregulation in 2003. After privatization, majority of the incumbents have performed well to get a higher market share than the state owned Air India. There have been various developments in the areas of strategic alliance, mergers and acquisitions and capacity increase by various airlines in the race to compete against each other critical success factors to be looked in for while devising strategies for an Airline industry player. The Air transport industry has been like an economic laboratory where new trends and evolutions have taken place. The industry had witnessed periods of boom and strong economic growth along with the entry of new carriers and expanding businesses. Trends and success rate at the recent years have shown that the success of the airport and airlines depends on a lot of critical factors. The approach with more increasing focus towards low cost transport and air freight has become USPs of many airlines across the globe especially the so called low cost carriers (LCCs). In Airline industry, there are certain critical factors which can give an incumbent high success rate and competitive advantage over others. One such success factor is the carriers ability to handle the transaction costs. In general, companies in order to minimize their transaction costs would want to organize their activities. When transaction costs are high especially due to uncertainties from the supply side, they would like to combine their operations under one corporate name. For example, Jet-Airways in order to reduce its expenses or acquiring other players. It has acquired Jet Lite (India) Limited (earlier known as Sahara Airlines Limited) in 2007. The two airlines have joined forces in a number of service and infrastructure programs in order to reduce their expenses. Although this might have resulted in some job losses, the alliance proved to be financially beneficial for the companies. Sales and marketing costs, customer service facilities, and flight cancellation costs would reduce in this case. IndiGo Airlines offering a diverse array of packages for its passengers: Holiday packages, business packages, religious packages, God's Own Country, hill station trips

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and Goa's sun & sand. There are several promotional strategies such as including fare promotion, spokespersons and customer loyalty programmes. The most popular way of increasing the customer loyalty is to set up a frequent flyer programme (FFP). Many studies have shown that the FFP is an effective marketing tool in this industry. Marketing is also done through partnering with credit card companies to provide discounts. Social Media marketing helps to capture the audience through the rapidly growing accounts on Facebook and Twitter. This initiative started by Jet Airways and other players has helped the firm to connect with its guests, increase the awareness of the company on a global level, understand and address the issues faced by them and appeal to a broader section of people. Also, the firms have launched a Wireless Application Protocol (WAP) site for mobile users. Investment in Technology is another critical factor in todays scenario. When an incumbent faces a problem of a new entrant or an existing player increasing its capacity by opening new routes, the incumbent can overnight redeploy aircraft and secure gates and ground personnel immediately to react to the entrant. This is made possible due to the advancement of communication and information systems.

Challenges
ATF (Air Turbine Fuel) prices have increased radically since 2005 Foreign and private players often poach work-force of competitors. Extensive Government Interference can affect the accountability of the organization. In aviation industry, government has control over fuel prices, foreign investments (e.g. FDI policies), tourism laws, taxes etc. This can greatly affect the day to day business in the airline industry. Like every other industry, recession has hit aviation industry as well. People have cut down on tourism and corporate travels have also been slashed down. The shortage of trained pilots, co-pilots and ground staff is severely limiting the growth prospects of all the airline companies. Barriers to exit in aviation industry are high because of high capital investment, no government restrictions and loss of brand image.

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Strategies
Use viral marketing for promote the products . Use facebook ,twitter,and internet to promote the brand and create awareness among the customer.

Recommendation

As inferred from the above two solution analysis, we recommend that IndiGo must increase its domestic operations by starting flights connecting to new destinations and long haul flights. As the opportunities are vast for this purpose, the other low cost carriers may also venture in this area. So using the cost leadership strategy, IndiGo can gain competitive advantage over its competitors as the first mover. Once the above strategy is successful and results in promising revenue growth, IndiGo can use extension to freight and chartered services as the next objective for further expansion.

Conclusion
Low cost airlines have huge potential in Indian market and they are many players entering the market targeting at the price sensitive segment. Open sky policy and deregulation have further opened space for many players to enter the market. Despite of the fact that product differentiation in low cost carriers is very less with many established players in the market, Indigo has successfully implemented the low cost strategy with its value added services but still it has huge potential to capture more market if it can establish itself internationally, expand its services to cargo, Upgrade to long haul aircrafts as per demand and Continuous innovation of value added services.

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