A complete analysis of Segmentation, Targeting and Positioning

With special reference example of Kingfisher Airlines

PUNEET SINGH
MBA-1 TRIMESTER 2 SECTION D
CHRIST UNIVERSITY INSTITUTE OF
MANAGEMENT
 AIR TRAFFIC
The Airport Authority of India (AAI) manages total 122
Airports in the country, which include 23 International
Airports, 71 domestic airports and 28 civil enclaves. 
Top 5 airports in the country handle 70% of the
passenger traffic of which Delhi and Mumbai together
alone account for 50%. 
Passenger and cargo traffic has growth at an average of
about 9% over the last 10 years.
 
 GROWTH
Estimated domestic passenger segment growth is at
12% per annum.  Anticipated growth for International
passenger segment is 7% while the growth for
International Cargo is likely to grow at a healthy rate
of 12%.
 Market segmentation is the division of markets into
homogenous groups of customers, each of them reacting
differently to promotion, communication, pricing and other
variables of the marketing mix. It is considered to be the best
strategy for targeting the markets.
 The consumers are becoming increasingly particular about their
needs and preferences and hence there arises a need for going
in for segmentation in the market which will suit the needs of
all the different types of customers. 
 Segmentation helps marketers understand the needs of
different consumers and serve them with better value
propositions. Marketers can design their marketing mix to suit
the customer in the segment they are targeting. To remain
competitive companies refine and develop products and
services to meet the need and preferences of different segments.
 The following income levels have been drafted keeping in
mind prospective flyers.
 High level income group: People who fall under this
category have an income level of more than Rs 7-8 lakh
per annum. Generally business men, top level managers of
big companies etc fall under this category.
 Middle level income group: People who fall under this
category generally earn anywhere between Rs 3 lakh to 6
lakh. Young working professionals, middle level managers,
small proprietors etc fall under this group.
 Lower level income group: People who earn less than Rs
3 lakh fall under this group. Fresh graduates who have
started working, people at supervisory levels in
organizations etc generally fall under this category.
 Business Travel:  People who travel mainly for the
purpose of work and business prefer crisp service, safety
and security and plush ambience with all facilities like
food, Wi-Fi etc. These are the people who want to reach
destinations fast and hence prefer Hybrid or Full service
airlines depending on the availability of tickets and
income level.
 Leisure Travel: Leisure Travellers are people going for
vacations. Among them, those who are on a low budget
might prefer low fare airlines. These are fresh graduates,
young working class, etc. Another section of travellers are
those who have enough money to splurge and so they
might prefer hybrid or full service luxury aircraft.
Tier I cities: This category includes all metro and big
cities like Delhi, Mumbai, Chennai etc.
Tier II cities: Under this, semi urban cities like
Ahmedabad, Pune, Jaipur, Chandigarh etc are
category.
Tier III cities: Rural areas are categorized under this
level.
Frequent flyers:  are those who frequently travel by a
certain airline and prefer it over the other airlines.
First timer:  is a person who travels for the 1st time by
a particular airline. It’s generally observed that full
service and premium airlines cater to frequent flyers
and a small percentage of first timers as well. Whereas
no frill airlines generally carry the first timers who
over a period of time can become frequent flyers
depending on other variables like lifestyle, income
group etc.
 It is a variable under behavioral segmentation which
defines the commitment of the customers towards the
brands. We can categorize the consumers into three
groups- hard core loyal, split loyal and switchers.
 Hard core loyal: are those consumers who are extremely
loyal to those brands with which they have formed a deep
emotional bond.
 Split loyal: are those customers who use more than one
brand. Their loyalty is divided among two or three brands.
 Switchers: are those customers who are not loyal to any
brand, they continuously switch from one brand to the
other. For example people traveling by low cost airlines
may not be loyal to a single carrier as they prefer to travel
by those airlines that offer the least fare.
Seeing the above characteristics, we can infer that
airlines like Kingfisher target the Elite Fliers. There
are certain specific characteristics observed in this
segment:
Airlines like Kingfisher targets young married
professionals (age group 20-35) with small kids and
with income levels more than Rs 7 lakh per annum;
who generally commute between Tier 1 and Tier 2
cities ; travel for business and leisure ; frequent fliers ;
enjoy the luxuries of life and have a bent towards
flamboyancy. These fliers are generally observed to be
hard core loyal
 Positioning is the aggregate perception the customer has
of a particular company, product or service in relation to
their perceptions of the competitors in the same category.
Mr. Vijay Mallya is one of the most flamboyant CEOs in
Asia. A great part of the personality of the Kingfisher brand
is based on Mallya's personality. The one word which
people associate with Kingfisher Airlines is “Experience.” 
 They encourage people to “Fly the Good Times”.
Consumers know that they just have to pay a bit more for
high level of comfort during the journey. This shows how
efficiently they have positioned themselves in the market
as a premium brand that provides high quality service at a
bit extra cost.
 Positioning in the truest sense indicates what people
perceive of a product or a company. It’s the brand image
that people have about the company. From the above
table, we can see that Kingfisher has a very distinct style
of positioning itself in the minds of the consumers.
 Rather than promoting their brand as fast service provider
or reliable etc, they have taken a different tangent by
saying that flying with Kingfisher is an experience in itself.
Taglines like “FLY THE GOOD TIMES” makes a passenger
feel that Kingfisher is not just about flying from a place to
another but it’s much more.
 The company is not just selling tickets per say but also
selling “Experience”.
 Airlines assign prices to their services in an attempt to
maximize profitability.
 Most airlines use differentiated pricing, a form of price
discrimination, in order to sell air services at varying
prices simultaneously to different segments.
 Factors influencing the price include the days remaining
until departure, the booked load factor, the forecast of
total demand by price point, competitive pricing in force,
and variations by day of week of departure and by time of
day.
 Carriers often accomplish this by dividing each cabin of
the aircraft (first, business and economy) into a number
of travel classes for pricing purposes.
 Full-service airlines have a high level of fixed and operating
costs in order to establish and maintain air services: labor, fuel,
airplanes, engines, spares and parts, IT services and networks,
airport equipment, airport handling services, sales distribution,
catering, training, aviation insurance and other costs. Thus all
but a small percentage of the income from ticket sales is paid
out to a wide variety of external providers or internal cost
centers.
 Moreover, the industry is structured so that airlines often act as
tax collectors. Airline fuel is untaxed because of a series of
treaties existing between countries. Ticket prices include a
number of fees, taxes and surcharges beyond the control of
airlines. Airlines are also responsible for enforcing government
regulations. If airlines carry passengers without proper
documentation on an international flight, they are responsible
for returning them back to the original country.
Airline financing is quite complex, since airlines are
highly leveraged operations. Not only must they
purchase (or lease) new airliner bodies and engines
regularly, they must make major long-term fleet
decisions with the goal of meeting the demands of
their markets while producing a fleet that is relatively
economical to operate and maintain.
A second financial issue is that
of hedging oil and fuel purchases, which are usually
second only to labor in its relative cost to the
company. However, with the current high fuel prices
it has become the largest cost to an airline.
 In view of the congestion apparent at many
international airports, the ownership of slots at certain
airports (the right to take-off or land an aircraft at a
particular time of day or night) has become a significant
tradable asset for many airlines.
 Clearly take-off slots at popular times of the day can be
critical in attracting the more profitable business traveler
to a given airline's flight and in establishing a competitive
advantage against a competing airline.
 If a particular city has two or more airports, market forces
will tend to attract the less profitable routes, or those on
which competition is weakest, to the less congested
airport, where slots are likely to be more available and
therefore cheaper.
Code sharing is the most common type of airline
partnership; it involves one airline selling tickets for
another airline's flights under its own airline code.
Often the companies combine IT operations, buy fuel,
or purchase airplanes as a bloc in order to achieve
higher bargaining power. However, the alliances have
been most successful at purchasing invisible supplies
and services, such as fuel.
Airlines usually prefer to purchase items visible to
their passengers to differentiate themselves from local
competitors