Singapore Airlines:

Introduction

Singapore Airlines Limited (SIA) is the national airline of Singapore. Singapore Airlines has evolved into one of the most respected travel brands around the world. They have one of the world's youngest fleet in the air, a network spanning five continents. SIA operates a hub at Singapore Changi Airport. SIA has diversified into airline-related businesses such as aircraft handling & ground handling, aircraft leasing, aviation engineering, air catering, and tour operations. The Singapore Airlines Group comprised 25

subsidiary companies, 32 associated companies, and two joint ventures. SIA has grown from a regional airline into one of the world’s leading carriers and is the first operational customers of the “super jumbo” Airbus A380.

Its wholly-owned subsidiary, Silk Air, manages regional flights to secondary cities with smaller capacity requirements. Subsidiary Singapore Airlines Cargo operates SIA's dedicated freighter fleet, and manages the cargo-hold capacity in SIA's passenger aircraft.

Singapore Airlines Limited is the world's largest carrier by market capitalization. It ranks amongst the top 15 carriers worldwide in terms of revenue per passenger kilometers and ranked 6th in the world for international passengers carried. SIA was ranked 17th in Fortune's World’s Most Admired Companies rankings in 2007 and has built up a strong brand name as a trendsetter in the aviation industry, particularly in terms of innovation, safety and service excellence, coupled with consistent profitability despite rising and volatile fuel prices, stress in global financial markets, heightened security issues, and

increased market competition. 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. It has won numerous awards.

Airline Marketing, Auditing and Planning

Airlines are part of the transportation business. An airline sells seats to transport people from one place to another. Airlines not only compete with other modes of transport to attract passengers but also with other airlines. To be competitive airlines offer various services to the traveler to ensure the traveler choices their airlines as the mode of transport. Airlines don’t market a product but services. These services are intangible i.e. the experience of travelling with the airline. This is the convenience that the passenger experiences while buying tickets, making bookings or reservations, check-in, the ground handling, luggage handling, and the flying experience which includes the seats, the in-flight entertainment and the dining.

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 itself. 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 organizations like SIA and the trends and opportunities that may exist for such organizations.

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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 organization’s resources are used in the most efficient manner. SIA needs to undertake marketing planning for a number of reasons:

Increased competitiveness in the airline industry and the complexity of markets. Increased speed of technological changes and the need to anticipate changes in customer wants and

needs, and the way in which the organization provides for them. The need to identify sources of competitive advantage and customer value creation and To develop cohesion with non marketing function ensuring the plans are integrated and consistent

across other (non-marketing) elements of the organization.

Marketing places special emphasis on the process of planning, based on researching and understanding

the critical marketing environments and working to achieve organizational objectives. The link between these is that in business planning which tries to predict, understand and forecast market demand, customer behavior and competitor actions, requires the development of a clear strategy. Marketing audits allow an understanding of the organization’s position of “where it is now?” The corporate strategy considers the current and future position of the organization and identifying a plausible future for the organization. During strategic “thinking”, as much information about the organization 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 organization. In strategy development, marketing exercises aim to clearly identify the issues that are critical to the organization’s position (role, function and purpose), and “define the path to an end” so as to achieve the organization’s purpose. The corporate strategic plans are focused on the whole organization and act as a guide for marketing plans, HR plans, technological plans, productions plans, financial budgets etc. The corporate strategic plan is the master plan that provides the guidance about the organization’s future direction and objectives. 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 organization’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

As per McDonald (1999:37 the steps involved in the marketing planning process are:

1. Understanding corporate mission and objectives: SIA’s mission statement is “SIA is a global company dedicated to providing air transportation services of the highest quality and maximizing returns for the benefit of its shareholders and employees”.

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2. Conducting a marketing audit as part of SIA’s overall management audit which includes Marketing Audit, Distribution Audit, Production Audit, Financial Audit and HR Audit. While conducting a marketing audit of SIA, analysis of the following is required to be done i.e. analyze the products, prices, promotion delivery, business and economic environments, completion etc. SIA shall have to conduct a marketing audit of SIA’s macro and micro-environments and strategic business units (SBU’s) using the various marketing business tools.

3. 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).

4. Developing marketing strategies (statements of how the SIA will accomplish the marketing objectives) that assist the organization develop competitive advantage;

5. Preparing a marketing plan that documents the outcomes of the previous steps in the marketing planning process.

6. Integrating the plan with other elements of the corporate plans by ensuring that they are consistent across the organization.

7. Measure, review and amend operating plans. This is conducted continuously throughout the planning cycle.

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 risk. PESTEL Analysis is done 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, better decision making and to decide where to invest, reallocate or diversify its resources. 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. Current global financial meltdown, 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.

PESTEL ANALYSIS OF MACRO ENVIRONMENT:

Environment Reasons for their importance

Political more volatile when operations penetrates international markets determines competitiveness depending on regulations put in place . E.g. deregulation of airline industry has enabled other airlines to enter the market with lower barriers to entry as in the case of Low-Cost Airlines – opportunity or threat?. The politics has become more stable among countries around the world. This gives

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Airline industry a chance to enter into a new market and secures Airline business. However, this will increase considerably the competition that the monopoly will lose the benefit, for example, Singapore Airlines (SIA) can no longer be a sole airline in Singapore. Bilateral agreement is one of the obstacles in the way of truly pan-Asia budget carriers. Landing charges at so-called "gateway airports" and navigation charges are often prohibitively expensive, and in key destinations like Bangkok, Beijing, Hong Kong and Singapore there are no cheaper, secondary airports. The budget airline industry in south-east Asia has been underdeveloped because the aviation market is tightly regulated by bilateral air rights agreements.Threat of terrorism, people is afraid to fly after the September 11 terrorist attacks incident. The most significant political event however has been September 11. The events occurring on September had special significance for the airline industry since airplanes were involved. The immediate results were a huge drop in air traffic due to safety & security concerns of the people.o International airlines are greatly affected by trade relations that their country has with others. Unless governments of the two countries trade with each other, there could be restrictions of flying into particular area leading to a loss of

Economic In the recent years, there has been an economic fluctuation and increased oil price around the world. The airlines have faced the difficulty to predict the demand and cost. This pressures Airlines industry to become more intense. Economic “health” of countries determines viability of business operations importance of exchange rates, tariffs, tax legislation E.g. rising fuel costs are impacting airline operations profitability but strong demand from consumers for lower cost alternatives to transportation combined with a favorable movement in the US dollar has partially mitigated this increase in fuel costs21.

Socio-Cultural considers people’s beliefs, values, attitudes, opinions and lifestyleshigher propensity to spend based on higher wage rates and increased consumer power .SIA’s global presence requires sensitivity to customer socio-cultural norms and values. The customers have become more sophisticated and demanded high value from airlines as they have many airline choices. This forces airlines to be aware of providing the best service at reasonable price. Additionally, there is an increasing trend of traveling and doing business abroad. This is a good sign for airline industry.

Technological Technology, in recent years, has significantly improved and been continuously launched to the market. Airlines have to carefully choose the technology in order to create competitive advantage. Rapid adoption of relevant technology enables improved services to customers – opportunity? E.g. SIA was quick to trial and adopt the latest in-flight entertainment systems for its consumers. IT & telecomm technology have improved efficiency and business operations – opportunity? Growth in e-business strategies – opportunity? Information Systems have led to more efficient targeting of segments within market and customized marketing offers – opportunity?

Environment - Nature

Environmental issues have become more significant as people concern more about pollution and global warming. The airlines that can put environmental friendly

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campaign tend to gain competitive advantage in the future. Airline industry often under pressure to seek ways of decreasing contribution to global warming and noise pollution E.g. the new A380 is a cleaner and greener aircraft compared to the Boeing 747 on a per-seat basis13.

Legal As governments around the world rely more on the free trade, they often reduce the trade barriers. This gives airlines a good opportunity to enter into a new market. Moreover, new airlines are easily allowable. This makes existing airlines in particular markets face intense competition. Fair trading/ consumer law/ natural environmental outlook etc. SIA needs to keep abreast of changes in the law to ensure their marketing strategies complygrowing emphasis on passenger safety and carrier reliability

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 summarized below), is used as a guide for auditing an organization 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 analyze formalized 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.

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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 unit. It plots the organisation’s business unit against ) the rate of market growth in its market and) 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 Engineering. However, this tool should be used with caution because its isolated utility oversimplifies the scenario it illustrates.

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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 market.

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 them.

Business Strength

Industry Attractiveness

 

Strong Average Weak

High Protect Position

In-flight servicesCuisineIn-flight entertainment system and communication

Invest to build

Expand destinations outside its Singapore base

Aircraft Fleet (A380 & others)

Build selectively

Budget Airline services (Tiger Airways)

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Ground servicesKris Lounges

Branding Image (SIA Girl)

Medium

Build selectively

Frequent Flyer ProgramE.g. Kris Flyer &PPS Club

Profitable Destinations

Code-share 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 summarized 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

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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 condition.

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:

1. Only a small portion of this can come from product advantages (First/Business Class, Lounge Access, Frequent Flyer Programs, etc.).

2. As low-cost airlines expand their point-to-point services, that demand is removed from the traffic pool and weakens it for Network carrier.

3. The existing Hub carriers are competing for a static or shrinking traffic pool.

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 fleet.

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,

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restaurants, retail outlets, and other service industries, seeing what can be adopted or adapted in the airline industry. Marketing research itself has a central role in understanding buyer behavior (covered later in this paper).

Market Segmentation

Market segmentation is the grouping of customers and characterizing 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 behaviors. 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 segments.

Examples where SIA uses these types of segmentation are provided for each of the general bases for segmentation summarized 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 organization 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 behaviors and the organization 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 Silk Air, 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 Vancouver.

•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

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reach their destination without the “extras”. SIA have positioned to be part of this target market with their stake in the carrier, Tiger Airways.

•Behavioral – 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 behavior 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:

1. Complex buyer behaviour – requires marketer to provide more information and reassurance to a customer. This is probably more prevalent in B2B transactions with SIA.

2. 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.

3. 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.

4. 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.

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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:

1. Pursue the segment with an offer based on a current product, or

2. 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

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continue to seek ways of improvement in order to maintain their track record whilst retaining the loyalty of their customers and attracting new ones.

REFERENCES

1. Singapore Airlines Website (2008), The SIA Story. http://www.singaporeair.com/saa/en_UK/content/company_info/siastory/index.jsp (accessed 28 Aug 08)

2. Quester,P.G, McGuiggan, R.L, McCarthy, E.J. and Perrealt, W.D. (2001) Basic Marketing, p.637, 3rd edn, McGraw-Hill, Australia.

3. StudyGuide (2008), Conducting an Environmental Analysis or Marketing Audit, Marketing Strategy and Planning from Topic 2.17 of Unit 401 Marketing.

4. StudyGuide (2008). The Marketing Planning Process, Marketing Strategy and Planning from Topic 2.3 of Unit 401 Marketing.

5. StudyGuide (2008), Developing Corporate Strategies, Marketing Strategy and Planning from Topic 2.7 of Unit 401 Marketing.

6. StudyGuide (2008). The Corporate Strategy Development Process, Marketing Strategy and Planning from Topic 2.8 of Unit 401 Marketing.

7. StudyGuide (2008), International Markets, The Marketing Environment from Topic 3.27 of Unit 401 Marketing.

8. Value Based Management.net. The BCG Matrix Product Portfolio Method, http://www.valuebasedmanagement.net/methods_bcgmatrix.html (accessed 18 Sep 08).

9. Singapore Airlines Website (2008). Analyst Briefing for Year ended 31 March 2008 – Transcript. http://www.singaporeair.com/saa/en_UK/content/company_info/investor/analysts.jsp?v=-709984253& (accessed 18 Sep 08)

10. StudyGuide (2008), GE (General Electric) Matrix, Marketing and Strategy Planning from Topic 2.13 of Unit 401 Marketing.

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