CONTENT PAGES

1.0 INTRODUCTION2
About the product..2
1.1 Company background......7
1.2 Business process and operation...9
1.3 Low cost carrier (lcc) business model.11
1.3.1 Business model...11
1.4 Competitive Advantages ....12
1.5 Historical Performance...13
2.0 ANALYTICAL SWOT ANALYSIS...18
3.0 PRODUCT ANALYSIS.21
3.1 The product Life Cycle (PLC)....21
4.0 STRATEGIS AND TACTICS...24
5.0 SEGMENTATION, TARGETING AND POSITIONING ANALYSIS
5.1 Market Segmentation...26
5.2 Target Market Profile30
5.3 Positioning..32
6.0 MARKETING STRATEGIES AND EVALUATION OF MARKET PROGRAM
ELEMENTS..33

Refferences
.36

1.0 INTRODUCTION AND HISTORY

a. Introduction of the product

1
Name of the company: Air Asia Berhad

ABOUT THE PRODUCT

Air Asia is a low cost airline based in Kuala Lumpur, Malaysia. It operates

scheduled domestic and international flights and is Asias largest low fare, no frills

2
airlines. Air Asia pioneered low cost travelling in Asia. It is also the first airline in the

region to implement fully ticketless travel and unassigned seats. Its main base is the

Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its

affiliate airlines Thai Air Asia and Indonesia Air Asia fly from Suvarnabhumi Airport,

Thailand and Soekarno-Hatta International Airport, Indonesia, respectively.

The airlines established in 1993 and started operations on 18 November 1996. It

was originally founded by a government-owned conglomerate DRB Hicom. On

December 2, 2001 the heavily indebted airlines was purchased by the former Time

Warner executive Tony Fernandess company Tune Air Sdn Bhd for the token sum of

one ringgit. Fernandes proceeded to engineer a remarkable turnaround, turning a profit

in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at

breakneck speed, undercutting former monopoly operator Malaysia Airlines with

promotional fares as low as RM1 (US $ 0.29).

Air Asia operates with the worlds lowest unit cost of US$0.023/ASK and a

passenger breakeven load factor of 52%. It has hedged 100% of its fuel requirements

for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew

productivity level that is triple that of Malaysia Airlines and achieves an average aircraft

utilization rate of 13 hours a day.

Air Asia currently is the main customer of the Airbus A 320. The company has

placed an order of 175 units of the same plane to service its routes and at least 50 of

these A320 will be operational by 2013. The first unit of the plane arrived on 8

December, 2005.

3
Support

As a pioneered in low cost air transportation in Asia, Air Asia has several

subsidiaries and associate company to support its operation.

Subsidiaries

Thai Air Asia was established as Subsidiaries of Air Asia Berhad on 8 December

2003 as joint venture with Shin Corporation. Flight operation was commenced on 13

January 2004 from its base in Don Mueang International Airport. Since 25 September

2006, the airline is based at the new Suvarnabhumi Airport.

The other subsidiary is Indonesia Air Asia. This airline is based in Soekarno-

Hatta International Airport. Air Asia acquired the then defunct Awair in 2004 with a 49%

stake in the airline. Awair commenced services on behalf of Air Asia in December 2004;

full rebranding to Indonesia Air Asia was completed on 1 December 2005. The airline is

based in Soekarno-Hatta International Airport.

Associated companies

They also have associate companies such as Air Asia X, Fly AsiaXpress, Tune

Hotels and Tune Money. Air Asia X is a service operated by Air Asia X sdn.Bhd.

(previously known as Fly AsianXpress Sdn.Bhd.) as a franchise of AirAsia. It has started

offering long-haul services from Kuala Lumpur to Australia and China using Airbus

A330. The inaugural flight was on 2 November 2007 to Gold Coast, Australia.

4
 The first AirAsia no-frills hotel, Tune Hotels, is ready for occupancy in Kuala

Lumpur and Kota Kinabalu and later in Penang, Johor Bahru, KLIA, Miri, Kuching and

Sandakan.

Tune money is Asias first no-frills online financial service owned by Tune Air

Sdn.Bhd. Modelled aftaer Virgin Money, it comprises life, home and motor vehicle

insurance as well as prepaid cards.

Destination

Air Asia operates over 200 flights a day, to over 75 domestic and international

routes covering Malaysia, Thailand, Indonesia, Singapore, Brunei, Myanmar, the

Peoples Republic of China, Vietnam, Laos, Cambodia, Australia and the Philippines.

In 2007, 19 new routes had been introduced over the Air Asia wide network.

These include routes from Kuala Lumpur to Gold Coast (Via Air Asia X), Vientiane and

Banda Aceh and the connection of Southern China (Macau and Shenzhen) with

different Malaysian hubs and Bangkok. In 2008, new routes were introduced which

included destinations in India and China.

Air Asia future plan is seeking to set up a hub in Malacca serving Medan, Pekan

Baru, Palembang, Padang, Penang and Langkawi. Air Asia has gained approval from

India authorities to start flying to destinations in India such as Chennai, Madurai and

Kochi.

5
Value Added Services

On 15 May 2007, a service named Xpress Boarding was launched, enabling

passengers to get priority boarding for a fee. This product is available in all hubs

including Thai Air Asia and Indonesia Air Asia.

On Air Asia X flights, passengers are given a choice of purchasing extra baggage

weight, meals, comfort kit and seat selection all with nominal fees.

On 26 November 2008, Air Asia has launched its Air Asia X London flights to

London Stanstead Airport.

AirAsia is one of the award winning and largest low fare airlines in the Asia

expanding rapidly since 2001. With a fleet of 72 aircrafts, AirAsia flies to over 61

domestic and international destinations with 108 routes, and operates over 400 flights

daily from hubs located in Malaysia, Thailand, and Indonesia. Today, AirAsia has flown

over 55 million guests across the region and continues to create more extensive route

network through its associate companies. AirAsia believes in the no-frills, hassle-free,

low fare business concept and feels that keeping costs low requires high efficiency in

every part of the business. Through the corporate philosophy of Now Everyone Can

Fly, AirAsia has sparked a revolution in air travel with more and more people around

the region choosing AirAsia as their preferred choice of transport. AirAsia creates values

through the following vision and mission:

6
1.1 COMPANY BACKGROUND:

In 1993, Air Asia was established and started to operate on November 18, 1996.

The airline industry was originally founded by DRB-Hicom which is a government-

owned conglomerate. Fernandes proceeded to engineer a notable and significant

turnaround, turning an Air Asia a profit in 2002 and establishing new routes from its hub

in Kuala Lumpur International Airport rapidly.

On December 2, 2001, Air Asia was purchased by Tony Fernandes. The industry

is operating scheduled domestic as well as international flight and known as the largest

low-fare in Asia. Air Asia is a pioneer when it comes to low-cost travelling and the first

industry in the region to implement ticketless travel and unassigned seats. Nonetheless,

as of February 5, 2009, Air Asia has implemented allocated seating for their guests

across all their flights which include Thai Air Asia and Indonesia Air Asia. The main base

of Air Asia is the Low Cost Carrier Terminal located at the Kuala Lumpur International

Airport.

The company aims on enabling more people to travel by air by providing them

hassle-free, no frills and low-cost airline services. Accordingly, the advent of aviation

7
deregulation has been able to provide opportunities to different airline industries and

started low-fares operations in 1990. Because of this, low cost carriers has been

developed in Asia since 2000 and industries like Air Asia has been able to grab this

opportunities. Accordingly, low-cost carrier model is very applicable in the global market,

even though deregulated market are most appropriate for its faster spread. It can be

said that with the deregulation of aviation market in European Union, airlines are also

given the chance to make decisions with regards to market access, fares and capacity.

It is said that before the deregulation, airline industries have always been restricted by

governments which controlled the destinations of the airline industry and also the

product planning and pricing strategy.

AirAsia makes the low fare model possible and create values through the

implementation of the following key strategies:

8
1.2 BUSINESS PROCESS AND OPERATION

AirAsia has fostered a dependency on Internet technology for its operational and

strategic management, and provides an online ticket booking services to traveler online.

The following shows the home page of AirAsia.com as the company key channel of

marketing and sales.

9
Exhibit 1 AirAsia.com Home Page

To book a flight with AirAsia, customers can either choose the following channels or

simply visit the

AirAsia.com home page and follow the below 5 steps.

1. Call centre

2. Sales office and airport sales counter

3. Authorized travel agents

4. Mobile booking via mobile.airasia.com or

5. Online (http://www.airasia.com) in 5 easy steps as shown below.

Step 1 - Search

Step 2 - Select

Step 3 - Guest & Contact

Step 4 - Payment

Step 5 - Itinerary

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1.3 LOW COST CARRIER (LCC) BUSINESS MODEL

The low cost airlines like AirAsia have changed the definition of airlines that air travel is

a luxury and it is only for the upper segment of the population. The key objective of low

cost carriers is to increase their reach and provide the services to a large segment.

However, the low cost carriers are now facing some challenges in the market.

1.3.1 BUSINESS MODEL

AirAsia follows the Low-Cost-Carrier (LCC) business model in the airline industry, which

can be characterized as below:

11
 FIGURE 1: LOW COST CARRIER BUSINESS MODEL

1.4 COMPETITIVE ADVANTAGES

With the Low Cost Carrier business model, AirAsia has the following competitive

advantages over the competitors in the airline industry, which can be summarized in the

following diagram.

12
 FIGURE 2: AIR ASIA COMPETITIVE ADVANTAGES

1.5 HISTORICAL PERFORMANCE

Air Asia is using Customer Relationship Management (CRM) as their

performance measurement system. This performance measurement system is putting

customer at the heart of the business. It satisfies the customer needs and wants. It is

strategy and process of acquiring, retaining, and partnering with selective customer to

create superior value for company and the customer. This will then increase the

shareholders wealth and company value in the long term. According to the Chairman of

Air Asia, Dato Abdul Aziz, the core of the company is to provide excellent service and all

the staff in the company is trained to put customers as their priority. This has shown the

company concern of customers relationship. Thus, Air Asia has started to implement

CRM as their performance measurement system on March 2009. is strategy and

13
process of acquiring, retaining, and partnering with selective customer to CRM in Air

Asia helps the company to target market, increase merchandise and launch various

promotions by analyzing knowledge about customers. Air Asia official website includes

the necessary information such as destination, hospitality, transportation, climate

information as well as recommendation. This could convenient the customers in gather

information for their decision making. Other than that, Air Asia has an effective CRM

system to address the route that has proven to be lucrative and delivered sustained

profit which is Malaysia Singapore route. Therefore, Air Asia has increased the flight

from Malaysia to Singapore on 2009. In the effort of customer retention, CRM helps the

company to identify loyal customers and implement loyalty programs to treat them

better. In addition, CRM recognized and analyzed the buying pattern of the customers.

From here, Air Asia can increase flights, number of seats and at the same time provide

packages, hotels and number of staying days in tourist locations. In addition, customers

will receive information such as travel guide and suggested destination by SMS. These

efforts could help the company to acquire more potential customers in align with CRM.

Hence, Air Asia managed to secure the first cycle of the CRM which has tremendous

effects on the entire chain cycle. Lastly, according to Skytrax Airline Ranking, it was

clearly defined.

i) Cost reduction:

With the implementation of CRM, it would help to reduce the operational cost in

the company. CRM is the performance measurement system that implement

under cross functional integration of the processes, workers, marketing data and

operation in the company. With the integration of the components in the

14
company, it could enhance the efficiency and effective in the daily operation in

the company and therefore, cost of operating can be reduced significantly. Other

than that, CRM detects and alerts to the management the poor operational

processes in the company. With this, management can perform corrective action

and step and thus, it could lower the unnecessary cost incurred in the operation.

ii) Increase customer satisfaction:

The main objective of CRM is dealing with long term and sustainable customer

relationship by satisfy every customer. CRM provides company the systematic

data regard to customer value and information which are useful to allow company

to execute the steps and attempts in customer relationship. In addition, CRM

supply the complete and crucial information about every customer which help

company to identify the profitable and potential customers. The information and

data can be obtained from CRM are such as personal details of the customers,

buying patterns and demands of the customers. The management in the

company could then launch the comprehensive efforts to satisfy the customers in

accordance with their needs, demands, preferences, and requirements.

Customers are considered satisfied not only they obtain what they want but also

their perceived value of the particular product and service is exceeds their

expected value. Hence, satisfaction of the customers can be increased when the

company is able to constantly provide products and services that above

customers expectation.

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iii) Growth in number of customers.

CRM upholds two major principles which are customer retention and customer

acquire. Customer retention is dealing with retain the existing customers to avoid

loss of customers while customer acquire is to attract new customers and

therefore increase the portion of the customers. With CRM, company manages to

commence various loyalty programs to reward the identified loyal customers.

This is one of the efforts in performing customer retention. Other than that, the

company could acquire new customers by execute some promotions to attract

potential customers through communication medium such as telephone, emails,

internet and sales visit. When the company is successful in retain and acquire

customers, the numbers of customers is will certainly grow.

iv) Improved marketing strategies and competitors information:

CRM ensures the company to focus to external components such as customers,

markets and competitors as well. By implementing CRM, the company can

improve their products marketing strategies and plans. With the help of CRM, the

company could measure their marketing efforts such as marketing campaign,

marketing promotion and figure of sales, so that, corrective action can be taken

for improvement. In addition, CRM too facilitates the company in optimizing and

controlling the marketing, sales and processes. Other than that, CRM enables

company to access to competitors information in the sense of using market

intelligence to track competitors information as well as analysis of customers

trend.

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v) Provide long term profitability and sustainability:

CRM is a tactical approach that enables company to generate long term profit

from the sustainable customer relationship. CRM integrates the marketing

strategies and information technology to create long term profitability that derived

from relationship with customers. Cost reduction from CRM could avoid the

company to operate at low cost. Customer satisfaction and high customer

numbers is the core of company earnings. Lastly, effective marketing strategies

and competitors information allow the company to success. These factors

contribute to company long term profitability. When the profit is high and

maintained so as the shareholders wealth.

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2.0 Analytical Tools (SWOT Analysis)

To figure out the internal factors such as strengths and weaknesses, and external

opportunities and threats to business objectives, a SWOT Analysis of AirAsia can be

conducted and shown below.

Strength

AirAsia serves a very basic need of its passenger, getting from point A to point B,

its business models derives from Southwest Airlines, Ryanair and EasyJet. AirAsias

No Frills module simply means cutting out the unnecessary offering such as in-flight

meals, baggage allowance, lesser leg room and reduced seat pitch. The storage space

for food has been used to add more seats. And by no free snacks means lesser time

spent on the ground and AirAsia spend nothing more than 25 minutes on the ground
18
each time it lands. Averagely a full board airline is airborne for 8-9 hours a day while

AirAsia flight is airborne for 12 hours a day. By using the same fleet, AirAsia reduces the

cost of training cabin crews and pilots as it is easier to move them around and the floor

plan and layout remains the same. The official website of AirAsia, allows you to pay

using multiple currency options and with the partnership of Expedia, AirAsia website

serves as the only website a passenger need to book a flight, accommodation and

ground arrangements. AirAsia has won the prestigious award Worlds Best Low Cost

Airlines by Skytrax for the last 3 consecutive years (AirAsia, 2012c), Appendix 7 shows

the award won by AirAsia for the last 3 years and it certainly helps build trust in the

brand.

Weakness

According to a research, 35% of passengers choose airlines based on

punctuality (Emirates247, 2008) by delaying flight AirAsia also loses its air borne time.

Another problem that AirAsia faces is the customer service support and there is only 2

ways for one to get in touch with an AirAsia customer service representative, either by

writing to their customer service e-mail mailbox with a reply response lead time of 4-5

days or a premium customer service line with a charge of RM 1.95 per minute (AirAsia,

2012e). There also have been incidents whereby AirAsia website is down, most of the

time during its promotions and most probably due to heavy traffic and non-redundant

data infrastructure. As cost rises and consumers expects to pay lesser AirAsia routes

its flights to secondary airports as the handling fees and airport charges are lower.

Opportunities

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 As the flight to Europe and India has been called off, AirAsia focuses to open

more routes in North Asia. With new fleets AirAsia should open more routes such as

Palawan, Boracay, Makati, Koh Sa Mui and Madurai. MAS has also confirmed that it will

reduce its flight frequency to Sydney and Fireflys routes to Langkawi, Penang and

Singapore post August 2011 agreement to benefit AirAsia (The Star, 2012b)

Threats

Events such as Bali bombing, 9/11 and Bangkok Airport lockdown are

unpredictable potential treats. Aviation rules and government policies also act as a

threat and in this case, AirAsia faces fuel price hike, airport tax, handling charges and

government protection towards national carrier and predominant route restrictions.

Major challenges

Increasing competition because of increasing number of low cost airline competitors,

and aggressive competition against the large or traditional airline companies

Customer decrease because of poor economy

Rising of the fuel prices

Higher labor cost

Inadequate infrastructure

Route and flight utilization

Safety and security issues of aircraft crash or being attacked

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3.0 PRODUCT ANALYSIS

As with living organisms, products have a life cycle. For some, such as the

Boeing 747, the life cycle is measured in decades whilst for others, for example the

merchandising spin offs from popular movies, the life cycle may be measured in mere

weeks.

3.1 The Product Life Cycle (PLC)

A product enters the market in one of three ways. The first may be as an

improvement on an existing product, in which case there will already be a customer

base. The second is as a competitor to an existing product, in which case a customer

base exists, but its loyalties may lie elsewhere. The third way is as a totally new

product, in which case a customer base needs to be built up.

Research has shown that many new products never move out of the launch

stage. In the 1960s it was stated that 96 per cent of all new product launches failed. By

the 1980s this had improved to the extent that only 80 per cent of product launches

failed.

Reasons for failure were given as:

Incorrect segmentation trying to reach the wrong market.

Incorrect pricing either too expensive to provide consumer value ortoo cheap to

sustain the costs of production and market activities.

Incorrect communication mix failure to create the required levels of awareness,

interest and action.

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 Incorrect distribution not in the right channels or if in the right channels, not in

enough of them.

The product itself by far the most common reason. The product does not provide any

new benefits or it provides benefits that are not sought or valued by the customer. It has

no beneficial differentiation to existing products already established in the market.

Air Asia, Airlines Company with 58 flight destination is in the growth phase

position of Product Life Cycle (PLC) stage. The growth phase is when loyalty begins to

be built up. Some products or services can be taken up by the customer base very

quickly and achieve rapid growth. Sales of Air Asia Airlines grew tremendously in every

country in which they were available.

It is during the growth phase that the product will begin to recover its

development and launch costs and slowly move through the break even mark to begin

to make a profit for the organization. During the growth stage of a new market or a new

product, competitor will also enter the market with similar products or services and

competition will become increasingly evident.

The characteristics of products or services in the growth phase are Gain market

share instead of create awareness and promote trial as the objective, increasing the

sales, moving from the non-profits into profit, the competition is growing.

As Air Asia gain high market share begins to make a contribution to overall

profitability. Revenue pays off the development costs. It will begin to make rival product

or service into problem. As the market still growing, revenues can be expected to

22
increase. This period correspond to the star phase of the Boston Consulting Group

(BCG).

The market mix elements during in the Growth phase are as follows.

Product: Product extension and minor modification.

Price: Penetration Pricing for Market Share.

Advertising: Heavy media even not as heavy as introduction phase, to build

awareness and create brand.

Sales promotion: Reduce as demand increases instead of intensive sales promotions

to encourage trial likes introduction phase.

Distribution: Move from selective distribution to intensive distribution.

4.0 STRATEGIES AND TACTICS

Strategy is used to refer to an overall plan of action. The strategic plan of a

company will indicate where the organization is going and how different functions fit into

the plan. Tactics are the smaller scale actions that are taken to realize the objectives of

the strategy. Gaining 40 percent market share for a product in order to boost profits is a

strategy. Lowering the price of that product for a time in order to stimulate sales is a

tactic.

The Internet plays a vital part in the Air Asia business and has proved to be

critical to the success of the business. As a low cost operation, controlling the cost of

doing business is clearly highly important to the airlines ability to be competitive by

23
offering low fares. The Internet provides the most cost effective distribution channel

available.

AirAsias promotions are very well received by the consumer for example its

Free Seat Promotion and Mega Sale Promotion. In order for AirAsia to maintain its

profitability and ensure its stays in line with cost leadership business model, AirAsia has

to offer more routes and products in its portfolio. Association of Asia Pacific Airlines

stated that demand for air travel is projected to grow 5% annually, with the Asia Pacific

region expanding at an even faster pace of 6% per annum over the next twenty years

(AAPA, 2011). More routes and fleets mean more customers and potential ancillary

income, in 2010 ancillary income per guest is RM 44 (AirAsia 2010). Air Asia should

also strongly focus on its offering via web booking as 77% of its revenue derives via

internet. To further proof this, during AirAsias Mind Blowing Fare, 538,000 tickets were

sold in 24 hours and a record setting 36,871ticket per hour. (AirAsia 2010)

Online Marketing

Social media is a very powerful tool, in a recent survey by TNS, Malaysians have

the most number of friends in social networking websites and spends 9 hours a weekly.

(The Star, 2010).

But in total, on average a Malaysian spends 19 hours and 48 minutes online

whereby 54% of them are spent purchasing online, and a 46% trust the source obtained

online. 94% of Malaysian uses social networking sites as shopping guidelines and 45%

of them share their experience on their product, brand or experience. (Nielsen, 2010)

AirAsia should continue to carry its promotions and focus even more on online

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marketing and selling. Social medias are mostly free and AirAsia should leverage on

these platforms to market its product and also use it a medium to collect feedback.

However, AirAsia should also be mindful as negative comments and bad customer

experience will also be posted on the same platform and it is visible to everybody.

AirAsia has to be tactful in handling these situations.

Increase Product Offering

By partnering with Expedia, AirAsia adds value to its services by easing travellers to

book accommodation and ground arrangements. AirAsia should work with more

partners to obtain a better price so that its customer will be able to get better deals.

Agoda, Booking.com, Wotif and Orbitz are a few other options for AirAsia to work with

on accommodation. As for tour packages and ground arrangements, AirAsia should

form collaboration with local partners, for example Reliance and Berjaya Holidays.

These arrangements with local travel agents will also benefit AirAsia as they may set a

quota or have an agreement with the local tour agents to use AirAsias services. AirAsia

should also focus on new routes, for example, domestic flights within Thailand, Australia

and India, respectively 34 %, 49% and 59% of all flight are domestic flights (Forbes,

2010).

5.0 SEGMENTATION, TARGETING AND POSITIONING ANALYSIS

5.1 Market Segmentation

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AirAsia may use segment bases such as demographics, socio-cultural, user-related,

user-situation and benefits-sought segmentation to segment their market, as indicated

in Table 1.

TABLE 1: MARKET SEGMENTATION FOR AIR ASIA

Segment

Segm Segment 1 Segment 2 Segment 3 Segment 4

ent

Base

Demograph
ics MYR0 MYR40,00 MYR60,00 MYR40,00
MYR40,000 1 1 and over 1
Income
(yearly) -MYR60,0 (yearly) MYR60,00
00 0 (yearly)
(yearly)

Socio-
cultural Lower Middle Upper Middle
class class class class
Social class

User-
related Low Moderate High High
Usage rate

User-
situation Leisure Leisure Leisure Business
Time

Benefits
Sought High High Low High
Value-for-
money

26
Income

Under demographics, income is one of the variables which AirAsia may use to segment

their market (Schiffman, Bednall, OCass, Paladino & Kanuk, 2008). Income indicates

the capability of the consumer to travel with AirAsia as consumers from different income

groups are attracted to different airlines. For example, low-income [MYR0 MYR40,000

yearly] and middle-income [MYR40,001 - MYR60,000 yearly] earners are more price

sensitive than high-income [MYR60,001 and over] earners, thus they would be more

attracted towards LCCs such as AirAsia. This is because low-income and middle-

income earners generally have lesser disposable income than high-income earners,

hence are unlikely to be capable of purchasing airline tickets from FSCs such as MAS

as their tickets are more expensive. For low-income and middle-income earners, their

main need of an airline ticket is simply to travel from one destination to another.

Therefore, the pricing of airline tickets is a vital factor that influences purchasing

behaviours. Statistics have indicated that consumers have increased their expenditure

in air travel due to the availability of more affordable domestic and regional flights from

LCCs (Consumer Lifestyles Malaysia, 2009).

Social Class

AirAsia may have segmented their market into lower, middle and upper social classes

on the basis of this variable because different social classes tend to have different

purchasing behaviours, brand preferences and expectations (Schiffman et al., 2008). A

consumers social class is associated with the income level that the consumer is

earning. For example, if a consumer is categorized as a low-income earner, the

27
consumer will fall within the lower social class. Moreover, upper social class consumers

would tend to have a negative perception about the image of LCCs as a provider of less

comfortable services.

Usage Rate

Usage rate is one of the variables under the user-related segmentation which AirAsia

can use to segment their market and is divided into low, moderate and high usage rates

(Schiffman et al., 2008). Depending on the consumers amount of disposable income

and preferences, consumers will have different levels of usage rates. For example,

consumers [Segment 4] who travel frequently for business meetings would have a high

usage rate of air travel as they are required to travel to different destinations frequently.

Consumers with low usage rates are mostly from the low-income category who can only

afford to travel at most twice a year depending on the destination. This is because they

have less disposable income compared to high-income earners. However, if price levels

are affordable, then low-income earners [Segment 1] would be able to travel more often

with LCCs.

Time

As for the user-situation base, AirAsia is able to use time as one of their variables to

divide the market (Schiffman et al., 2008). The time variable is categorized into leisure

and business. Consumers with different purposes of travelling have different priorities.

For example, low-income earners who are planning to go on a leisure holiday would

have the ability to continuously monitor ticket prices to ensure that they can attain the

28
cheapest price. Travellers on business trips meanwhile would probably have to pay

higher prices because they may need to purchase airline tickets in advance.

Value-for-money

Value-for-money is one of the benefits sought variables which AirAsia can likely use to

segment their market (Schiffman et al., 2008). The level of importance of value-for-

money can be divided into low, moderate and high whereby consumers with lower

income levels tend to place high emphasis on value-for-money products and services.

For example, consumers from Segment 4 place high emphasis on value-for-money

because these consumers are working for corporations that are currently affected by the

economic recession happening, thus they are required to reduce their expenses as

much as possible (AirAsia, 2009d).

5.2 Target Market Profile

Once the market has been segmented, the organisation can analyse, evaluate and

prioritise which segment to pursue (Duncan, 2005). There are three different target

markets which AirAsia are targeted. These segments are categorised as Segment 1,

Segment 2 and Segment 4 as indicated in Table 2.

Table 2: Target Market Profile of AirAsia

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 Segment 1

Income : Low-income level (MYR0

MYR40,000 yearly)

Social class : Lower social class

Usage rate : Low

Time : Leisure

Value-for-money : High

Segment 2

Income : Middle-income level (MYR40,001 -

MYR60,000 yearly)

Usage rate : Moderate

Time : Leisure

Social class : Middle social class

Value-for-money : High

Segment 4

Income : Middle-income level (MYR40,001 -

MYR60,000 yearly)

Usage rate : High

Time : Business

Social class : Middle social class

Value-for-money : High
Segment 1 is referred to as the lower social class consumers who travel at most twice a

year for leisure and have high importance on value-for-money. Segment 2 is defined as

30
middle social class consumers who travel moderately for leisure and place high

emphasis on value-for-money. Segment 4 meanwhile is classified as middle social class

consumers who travel frequently for business purposes but also place high importance

on value-for-money. This is because the current economic climate has caused

consumers to be more price-sensitive and often search for the best value (AirAsia,

2009e). However, this has not dampened but instead increased the frequency of

consumers to travel domestically or internationally on LCCs (Airline Passenger Traffic

Malaysia, 2008; Airline Passenger Traffic Asia Pacific, 2008). Consumers these days

who travel for leisure or business want to pay as little as possible to secure a seat on a

flight (Driver, 2001).

5.3 Positioning

FIGURE 1: AIR ASIAS PERCEPTUAL MAP

31
AirAsia has positioned itself as the leading and largest LCC in Asia with the philosophy

of Now Everyone Can Fly (AirAsia, 2009b). They believe in the no-frills, hassle-free,

low fare business concept and believe that keeping costs low requires high efficiency in

every part of the business (AirAsia, 2009b). Efficiency creates savings which are then

passed on to consumers in order to make affordable air travel a reality. AirAsia has

sparked a revolution in air travel with more and more people around the region choosing

AirAsia as their preferred airline (AirAsia, 2009b). Figure 1 indicates the position in

which AirAsia currently stands against its competitors. The vertical axis illustrates the

price range while the horizontal axis represents the service quality. Despite being Asias

largest and leading LCC, service quality of AirAsia lacks behind other LCC such as

Jetstar. Thus, while AirAsia hopes to maintain its current position as the leading LCC, it

also hopes to moves towards providing better services in the future as seen in Figure 1.

6.0 MARKETING STRATEGIES AND EVALUATION OF MARKET

PROGRAM ELEMENTS

Table 3: Comparison of Malaysias Top Players in Low Cost Carriers Marketing

Program
Company AirAsia FireFly Tiger Airways Malaysia Airlines (MAS)

Price Price ranges Price ranges Price ranges Price ranges from
from RM30 to from RM 50 from RM30 to RM60 to 5000.
RM 700. to RM500. RM400.

Variety of - 9 countries - 5 - 6 countries - 9 countries across

Destinatio across countrie across South East Asia
ns South East s across South East (32 destinations)
Asia South Asia (18
(40destina East destination - 5 countries across
tions) Asia (18 s) South Asia
destinati
- 3 countries ons) - 1 country - (9 destinations)
across in East
South Asia Asia - 1 country in Africa

32
 - (4 (5destinati (1 destination)
destination ons)
s) - 4 countries across
- 1 country East Asia
- 1 country in South
in East Asia (3 (11 destinations)
Asia destination
(6 s) - 4 countries across
destination the Middle East
s) - 1 country (4 destinations)
in Oceania
(12 - 7 countries across
destination Europe
s)
(7 destinations)

- 1 country in North
America

(2 destinations)

- 2 countries across
Oceania

(6 destinations)

- 1 country in South
America

(1 destination)

Promotion - Certain - Zero - Low fare - Low fare

amounts fare promotion promotion
of free promoti offerings to offerings to
airline ons different different locations
tickets during locations during different
are shoulder during travelling periods.
offered to travellin different
consumer g period. travelling
s. periods.

Place/ - Various - 1 call - Various call - 129 sales offices

Location call centre in centres located in 52
centres Malaysia across 7 countries across
across 7 . countries the world.
countries. in
- 8 city Southeast
- 41 airport ticket Asia and
sales offices in Oceania.
stations 4
across countrie
Southeast s.
Asia, South
Asia, East - 13
Asia. airport

33
 - 27 sales ticket
centres offices in
across 5 2
countries countrie
in s.
Southeast
Asia. - 2
operatio
n
centres
in
Malaysia
.

Branding The leading The Asia- Malaysia Airlines

and largest community Pacifics whereby MH stands
low fare airline. true low for Malaysia
airline in Asia. fare airline. Hospitality.

Added - Provide - Light - Offers - Provides online

facilities online snacks light check-in service
check-in and snacks within 24 hours
within 24 drinks and of departure
hours of are drinks for time.
departure included sale on
time. on board board (In- - Business and
for flight First class
- Offers passeng service) passengers are
Snack ers. entitled to use
Attack, a - Seat the facilities in
buy-on - 20kg selecting the Gold
board baggage service Lounges in
programm check-in for certain airports.
e offering allowanc purchase
food and e is during - Offers customer
drinks for given to online loyalty program
purchase. passeng purchase (Enrich)
ers. of flight
- Pre- ticket.
booked
light meals
during
flights.

- Free
seating
with
Xpress
Boarding

34
 option.

- Self check-
in counters
at all
airports.

- Self check-
in through
mobile
phones.

- E-Gift
vouchers
are
available.

Sources: (AirAsia, 2009b; AirAsia, 2009f; AirAsia, 2009g; AirAsia, 2009h; AirAsia,
2009i; AirAsia, 2009j; Tiger Airways, 2009b; Tiger Airways, 2009c; Tiger Airways,
2009d; FireFly2009a; FireFly, 2009b; FireFly, 2009c; Malaysia Airlines, 2009b;
Malaysia Airlines, 2009c; Malaysia Airlines, 2009d; Malaysia Airlines, 2009e;
Malaysia Airlines, 2009f)

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August16,2009,from

http://www.portal.euromonitor.com.ezproxy.lib.monash.edu.au/passport/ResultsList.aspx

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16,2009,from

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ee.aspx

AirAsia. (2003). Vision & Strategy. Retrieved August 14, 2009, from

http://www.airasia.com/investor/vision1.shtm

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AirAsia. (2008a July 14). Press Releases: AirAsia wins Airline Strategy Award: Finance

Category Real 5 Star carrier gets Real 5 Star honour!. Retrieved August 16, 2009, from

http://www.airasia.com/site/my/en/pressRelease.jsp?id=2104df98-7f000010-19360e70-

88061f55

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d734ffa9

AirAsia. (2009a). Awards & Recognition. Retrieved August 18, 2009, from

http://www.airasia.com/amazing/en/pageWithHeader.php?

menu=one&content=one_awards

AirAsia. (2009b). Company Profile. Retrieved August 18, 2009, from

http://www.airasia.com/site/au/en/page.jsp?name=Company+Profile&id=261a884e-

ac1e00ae-edd9de00-4fe3279d&nav=5-0

Malaysia Airlines. (2009d). Annual Report 2008. Retrieved August 15, 2009, from

http://malaysiaairlines.listedcompany.com/misc/ar2008.pdf

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http://www.malaysiaairlines.com/my/en/loyal/loyalty.aspx

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http://www.malaysiaairlines.com/my/en/flymh/lounge/lounge.aspx

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Saha, G. C. & Theingi (2009). Service quality, satisfaction, and behavioural intentions: A

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Schiffman, L., Bednall, D., OCass, A., Paladino, A., Ward, S. & Kanuk, L. (2008).

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37