Delta Airways (DELTA) is the US’s largest airlines; it operates both internationally and domestically along with chartering air services for the carriage of passengers, cargo and mail. The airline flies to over 900 destinations globally and is considered to be a leader within the industry with almost 770 aircrafts in service. Starting back in 1924 as a crop dusting company down in Louisiana, merging with several airlines and rising through bankruptcy to become one of the strongest airlines in the business today.
With Delta Airlines being one of the most successful airlines in the industry it currently has its own marketing strategies which makes it unique from its other partners. Its most current market strategies are “Building a better airline not just a bigger one. ” Delta is focusing on the 4p’s and they put these ideas to practice every day when they market their product. The major marketing mix tools are classified into four broad groups, called the four Ps of marketing: product, price, place, and promotion (Armstrong 2011).
If market research is carried out effectively, a company can plan a promotion for the right product, at the right price, and to get it to their chosen market in the right place. Product is the most important of the components in an organization. Without it there is no place, no promotion, and no price, therefore there is no business and the company goes under. Product serves as a purpose to satisfy a want or need which makes it the core ingredient of marketing mix and everything favorable and unfavorable, tangible and intangible received in exchange for an idea, service or good.
Delta is a business that offers a service as its product, flying across destinations in the transportation industry. It is obvious that the product strategy is vital for an organization to succeed and it needs to be well developed and manage carefully. Delta’s product strategies include quality of flight, flight services, various destinations across globe, executive class, business class, speed, security, good customer service and many years of experience. On the heels of its 2008 acquisition of Northwest, Delta’s consumer rankings suffered as passenger complaints increased.
Airline mergers and their associated integration activities typically impact negatively on its customer satisfaction. However, Delta’s response to that in the form a USD 2 billion dollar investment program which was put in place to improve the quality of its products and services deserve particular attention in our view. No matter how good the product is, it is unlikely to succeed unless the price is right. This doesn’t just mean being cheaper than competitors. Most people associate a higher price with quality, so you would expect to pay more for a first class seat versus a seat in coach.
Therefore price is the value of what has been exchange during marketing process. The consumer exchanges his or her money in return for the satisfaction of either being taken care of in first class or riding like a standard customer in coach. Delta has set its pricing strategies in a manner that customers can choose how much from the extra the airline is providing. For instance, someone can buy a ticket for $650. 00 to fly from San Diego to Atlanta in the economy class which will include the basic product they offer. While someone else might pay $1000. 0 in the first class section which include extra services including selection of meals in order to satisfy their needs. The simplest method of all is cost-plus pricing, where a firm adds a profit mark-up to the unit cost. Aperfect example of great pricing is what Delta Air Lines did in 2005. The company announced a restructuring of ticket fares across its route system which ended up lowering many unrestricted fares often used by business and capping ticket prices at $499 one-way ($599 in first class). The company believed that this is an important move and was likely to trigger pricing changes by Delta’s competitors.
Ultimately for Delta, the risks of adopting a simpler, lower-fare structure have decreased, while the risks of not taking action might have increased for the company. The main aim of a promotion is to persuade, inform and make people more aware of a company’s brand, as well as improving the overall sales figures. Advertising is the most widely used form of promotion, and can be through the media of TV, radio, journals, cinema or outdoors (billboards, posters). The specific sections of society being targeted will affect the types of media chosen, as will the cost.
If you were a toy manufacturer, you might want an advertising spot during children’s TV. If you ran a local restaurant, you might choose a local paper or radio. A small or local business would not usually advertise on TV, because it is very expensive. Sales promotion is designed to encourage new and repeat sales. Loyalty cards, free gifts, competitions and voucher schemes are the most popular. Companies use sponsorship and public relations to improve their image, notably through financing sports, the arts and public information services.
In an effort to lift revenue, Delta did a discount on its fees to its posh airport lounges that cater to its elite frequent fliers. In 2011, it offered one-day passes on Groupon for 50 percent off and five-visit passes for $89. Regular customers usually pay annual fees of $450 for the club or $50 to get in for one day. Frequent fliers with Diamond Medallion status get free access to Delta Sky Club lounges worldwide. About 5,000 people purchased the Groupon deals this year. The most recent promotion ended earlier this month, but Delta said it will continue to offer discounted passes to its Sky Clubs.
Delta is the largest carrier at the Minneapolis-St. Paul International Airport, and this deal helped to attract younger, female fliers, a demographic the airline feels is missing from the mostly male customer base. With putting this discount in the field it has caused a stir among Delta’s most loyal fliers, who say the move will cheapen the experience at the lounges and diminish their hard-earned, frequent-flier status. Distribution channels are the key to ensuring that the promotions are put in the right place.
A firm has to find the most cost-effective way to get the product to the consumer. Direct marketing through catalogues, via a TV shopping channel and through the Internet have become popular, because the consumer can shop from home. For the airlines this can cut out the middleman in the process and they can therefore make more profit putting the offers in the right place. Going through wholesalers and discount marketers, however, is the most popular form of distribution for most airlines today because that is still where most people shop for tickets.
Competitive rivalry plays a really big role in the air travel today. This not only refers to the degree of competition, but also the type of competition occurring. Delta airlines operates in two different markets and those are long and short flights. With this offering forces competition in both of these areas for other airlines that have the same offerings. In the long flight market, competition comes from other large airlines for example American Airlines or US Airways who both compete on routes, service, and comfort.
In short flight area the competition is driven by low-prices from airlines including Jet Blue, Virgin Airlines and Southwest. Delta has done some standard and also some innovative moves over the years to keep competitive in the air line market and build customer loyalty to their brand. One major move that Delta has made in the past was the merger with Northwest airlines in 2007. With this merger comes some great opportunities for their customers and build even more customer loyalty.
Combining Delta and Northwest airlines created a global US carrier that can compete with foreign airlines. Customers and new communities benefited from access to a global route system which increased Delta’s customer base and revenues. With the merger also brought more destinations and scheduling options, and more opportunities to earn and redeem frequent flyer miles. With both companies common membership in the SkyTeam alliance will make the integration risk to its frequent flyers which is a common complications that some airline mergers have.
In April of 2012 Delta did a new innovative purchase of a refinery in order to lower the companies jet fuel costs. According to the New York Times, “Delta said that it would spend $150 million to acquire the Trainer refinery, which has been shut down for six months, after receiving $30 million from the state of Pennsylvania as part of a deal to support job creation. ” The airline would spend $100 million dollars in addition to the purchase cost to refurbish the plant to increase its output of jet fuel in order to feed the northeast operating area.
Delta’s chief executive said the investment was a modest one and is really equivalent to the list price of a new wide-body plane like a Boeing 777. The company estimated that it would reduce its annual fuel expense by $300 million, once the refinery was refurbished and operating again after the refit and refurbishment. This purchase is a great example of thinking outside the box for a company since rising fuel costs have forced painful restructurings for airlines in the past several years.
The rising fuel cost has helped to push many of them like American Airlines into bankruptcy and spurring consolidations across the airline industry. The airlines have set up elaborate strategies to try to help counter the rising fuel costs and keep the airlines afloat. Most of the plans backfired when crude oil prices rose or fell in unexpected ways. Buying a refinery will not erase Delta’s fuel bill but will reduce its cost when buying the remaining 20% of it. According to the company when the plant is in full operation the refinery will produce 80% of the airline’s needs.
The airline will still need to buy crude oil at world market prices. With Delta’s use of the “four P’s of marketing: product, price, place, and promotion” (Armstrong 2011) they are a great example of a company working toward building a strong company and also increasing customer loyalty. The company’s marketing team always seems to roll out an out of the box idea in order to make the company stronger as a whole. With the world economy in shambles as it is, Delta was still able to place 4th place in every airline out there and is continuing to work to improve that rating. With the great use of marketing strategies, they will continue to work and solidify themselves as a leader in the airline business.
Armstrong, Philip Kotler and Gary. Principles of Marketing for Ashford University, 14th Edition. Pearson Learning Solutions. ;vbk:9780558783433#outline(7. 7);. http://airtravel. about. com/od/airlines/a/dlnwmerge. htm http://www. businessweek. com/investor/content/jan2005/pi2005016_2351_pi036. htm http://www. fundinguniverse. com/company-histories/delta-air-lines-inc-history http://www. nytimes. com/2012/05/01/business/delta-air-lines-to-buy-refinery. html