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PART 1: MARKETPLACE SITUATION ANALYSIS

By Alex Ross,2014-05-07 12:34
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AIR CANADA IS A BRAND WITH UNIVERSAL RECOGNITION LIKE VIRTUALLY NO OTHER IN CANADA. THE COMPANY HAS A LONG, STORIED HISTORY, AND A HUGELY DOMINANT POSITION IN THE ...

    Air Canada: Here To Get You There ADMN488-Lincoln Dunn

    Air Canada:

     Here To Get You There

    Lincoln Dunn

    Student #100033003

    July 4, 2007

    ADMN488 Final Project

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Air Canada: Here To Get You There ADMN488-Lincoln Dunn

    Introduction

    Air Canada is a brand with universal recognition like virtually no other in Canada. The company has a long, storied history, and a hugely dominant position in the domestic airline industry.

    And it has a one of the most tarnished brands in the country.

    i Air Canada‘s primary product is Founded in 1937, Air Canada has a fleet of 332 aircraft,

     both goods and passengers. It offers domestic throughout Canada and air transportation

    to many international destinations. Air Canada also has a range of associated secondary and tertiary revenue streams that include holiday packages, as well as in-flight services like executive upgrades, meal and beverage services. Air Canada is, literally, almost

     it has a commanding presence in all major airports as well as everywhere in Canada

    most secondary airports.

    Air Canada has only one significant competitor in the domestic air travel market: Westjet Airlines, based out of Calgary. Westjet was originally intended to be a low-cost carrier modeled after American airlines Southwest Airlines and Morris Air. The company stormed into the market with dramatic growth between 1999 and 2003, primarily because it was effectively positioned as the ―other‖ airline to fill the vacuum left by the acquisition of Canadian Airlines by Air Canada. Because of its smaller size, Westjet has been able to be more agile in its corporate strategy. Its differentiation has been through the use of non-union employees who participated in a profit-sharing agreement, cementing buy-in to the corporate strategy of controlling cost, and a casual, upbeat work

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Air Canada: Here To Get You There ADMN488-Lincoln Dunn

    environment, to foster good customer service. This strategy also allowed Westjet to offer substantially lower fares, and claw out a foothold in the marketplace.

    Ostensibly, according to its customer service plan, Air Canada‘s core proposition is to ―provide you with an air travel experience that meets your needs…we aim to deliver a

    ii This is an uninspiring goal for the added value Air Canada‘s consistent level of service.‖

    brand should bring to customers, both functionally and emotionally, bereft of passion or a strong commitment to customer satisfaction.

    The strongest reason that this brand is in need of rehabilitation is its current public perception in the domestic air travel market. As Alan Middleton, professor of marketing @ York University, says, ―"It takes years of neglect or mismanagement to destroy a

    iiistrong brand, and even longer to rejuvenate a brand that has fallen into disrepair." Since

    its acquisition of Canadian Airlines in 2000, Air Canada has struggled in its position as the market share dominator, coming under fire for its customer service issues, increasing competition on both its domestic and overseas routes, and the sharp increase in costs across the airline industry. In a time when cost cutting is required to maintain profitability, while the market continues to demand lower fares, Air Canada has allowed its brand to be degraded by ineffectively delivering its message and failing to satisfy its customers.

    Indeed, if one was to reflect on the core proposition, the largest group of internal stakeholders, its employees, have wholeheartedly embraced its implied goal of lackluster, half-hearted customer service.

    And what do its external stakeholders think about the Air Canada brand? According to a Canadian Business Magazine survey of professionals in 2006, it was considered the worst

    ivmanaged brand in Canada for the last two years running. Obviously, one group of its

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    most important stakeholders, business travel customers, believes there are significant issues. There are many, many instances of negative experiences published online, in

    vweblogs, forums and other online media.

    The segment most important to reach in rehabilitating its brand is the domestic air traveler segment. They are not Air Canada's most profitable segment, but they represent Air Canada‘s largest customer segment. The generally negative attitude towards Air Canada has come predominantly as a result of this segment‘s experiences of the brand.

    It‘s important to realize that there is substantial movement from one segment to the other. For instance, when travelers who usually fly for vacation are required to travel for business, their past experiences as part of the domestic leisure segment will have an impact on their purchase decision making process. If Air Canada continues to position itself as an elitist airline catering to the most profitable customer segments, those travelers will look elsewhere, because of their lack of brand loyalty, fostered by the all-to-common indifferent attitude towards customer service by Air Canada employees. Air Canada has two strategic goals that are crucial to increasing the brand value, recapturing customer loyalty and repositioning itself as the customer service champion in the domestic airline industry:

    1. Refocus. Now. Air Canada needs to explicitly state, at the strategic level, that it is customer focused and relationship driven. The fragmented IMC strategy that Air Canada currently employs needs to be brought sharply into focus on anticipating customer needs, in a profitable fashion. No more excuses about rising fuel costs or labour issues from the CEO. The chairman has a responsibility to provide direction, not excuses, to both create a strategic vision, and, in Air Canada‘s case, to raise their sensitivity to being responsive to

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    the needs of their customers. Essentially, the CEO needs to act as the ―brand steward.‖ He or she has the role of empowering employees to understand the brand message, and enabling each one of them to embody it. It isn‘t enough for Air Canada to start a new advertising campaign that says, ―We‘re customer focused.‖ As Marie Germain of Brand Revival states, ―The consumer is not stupid, won't buy it; it won't change their attitude. It will take some time….To go out with brand information in their advertising would be a

    vi waste of time right now because it would be like putting lipstick on a pig.‖2. Surprise and delight your customers. In empowering employees, management needs

    to give each and every employee the authority to resolve a customer‘s issue in the most appropriate fashion. This shows employees that they are an important part of the team, and that they are respected, and trusted, by the company‘s management, that they will do the right thing to maintain and strengthen that customer relationship. Allow them to

    surprise customer with unexpected advantages. Inspire employees to thrill customers with unexpected bonuses. If there are seats available in business class, upgrade a customer who looks harried or tired. If a flight is delayed, credit everyone‘s frequent flyer plan for a moderate amount. Not only will the experience be unbelievably positive for the customer, it also is satisfying for the employees having the chance to make someone‘s

    day in that fashion is incredibly uplifting. By providing top-down support for a switch to a more customer-focused, customer-driven experience, Air Canada will be able to differentiate itself from its competition not by its price points, but by its own merit as a company. Westjet differentiates by being quirky, funny, and the folksy upstart. Air Canada should pursue its own differentiation that ignores Westjet‘s marketing. Instead of

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    trying to be like the competition, both in attitude and price, be something more: the one who doesn‘t make their customers laugh, but makes them relax.

    This message also needs to be delivered through a comprehensive brand positioning strategy, and supporting creative message strategy, to validate the positioning statement: Air Canada offers competitive, simplified air travel fares and a superior travel experience that our customers love, and our competitors hate.

    Air Canada‘s new campaign is focused on reigniting brand loyalty, and awareness of its renewed focus on total customer satisfaction, following up on the adjusted brand promise in the integrated marketing communications campaign of committed customer relationship management, and a positive customer experience. The essence of the campaign is Air Canada regaining the trust of both former and current customers; the trust that they view their customers as something more than a seat number. As Garo Keresteci of Fuse Marketing Group said, Air Canada the ideal position to place their brand is as a ―combination of a good price and a good customer experience.‖ This message strategy is poised to do just that, emphasizing transparency, empathy, stellar customer relationship management and showing that Air Canada is changing how it does business.

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    Market Segmentation and Targeting

    The target prospect segment for the new creative message strategy is the domestic family traveller. The demographic characteristics for this target include:

     -35-54 years old -moderately higher than average income

    -generally Caucasian/high Asian -town/suburban homeowners

     -some college/university education -professional/white-collar employment

     -married with 1-2 children

    Using the PRIZM classification system, the segment is comprised primarily of the ―Kids

    & Cul-de-Sacs‖ and ―Beltway Boomers‖ classifications. Using the VALS system of classification, these are believers and/or thinkers, who value order, knowledge, responsibility, practicality and fairly brand loyal. They‘re motivated by ideals, which the

    creative message is intended to target, with its emotionally compelling imagery and tone. When examining the level of brand relationship that these customers have with Air Canada, inertia loyalty is the likely involvement level. Limited choice and a lack of a competing, comprehensive flight connection infrastructure are the most likely reasons tying customers to the brand. It is interesting to note that Westjet uses an egalitarian flavour to many of its ads, making it clear that everyone on the flight enjoys the same treatment directly targeting this demographic profile in many ways. The higher involvement decision-making process that is typically associated with this type of purchase encourages the explicit use of recourse in customer interaction, that easy access to a customer service representative who can solve a problem. In order for the brand integrity to be renewed with this market segment, Air Canada needs to embrace the three

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    aspects of the consistency triangle, but most notably the ―do‖ messages that relate

    specifically to product performance, the place where the company has lacked consistency in the past.

    The brand adoption potential for the target prospect segment is high with a caveat. The

    profile of the target segment suggests that two things are likely to encourage brand adoption: comfort, and attractive pricing. However, if the creative message strategy can access the emotional aspect of the decision-making process and then be supported by the customer relationship management throughout the brand experience, the comfort aspect will hopefully outweigh price comparison as an adoption driver.

    In order to successfully reach the target market, the creative message has both an explicit and an implicit aspect. The explicit aspect of the brand message is, simply, ―We will get you and your family where you‘re going with a minimum of hassle, and we‘ll make sure you enjoy it enough to want to use us again.‖ The implicit and brutally honest aspect of the brand message, however, is ―We‘ve changed – and we want you to see how. Try us,

    and learn to trust us again.‖ The message appeal most appropriate in delivering this brand message is using strong emotional response.

    The message is suitable for the target market for a number of reasons. The first is that, by using strongly emotive creative approaches, the message will resonate with the target market segment. Given the focus on families in the 35-54 years old age category, emotionally-charged situations that focus on children and family will be more likely to generate an emotional response. The creative focus is not using fear, but reinforcement of

    vii The goal the safety needs in Maslow‘s hierarchy of needs, where security of family lies.

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    is to re-prioritize that need, and illustrate how Air Canada‘s brand message can satisfy

    that need as is related to their air travel experience.

    Secondly, the message is suitable for the target market because of their life stage. The target age group includes both Generation X and late stage baby boomers, which James

    viii Julie Danis, senior VP of mind and mood for Tenser refers to as the ―Boom-X.‖

    Interpublic Group of Cos. Foote Cone & Belding opines that the segment is very focused on child rearing, and that a major part of their attitude is ―Focus on my family first.‖

    This market segment also wants to get a deal but not sacrifice quality. If Air Canada‘s product works well for the customer, price will not likely be a major issue. Tenser identifies the market segment as significant spenders They are, however, demanding as a result of their focus on a quality product. The segment is also cynical, however, and distrustful of institutions, a challenge to the overall IMC strategy. It further reinforces, however, how important the follow-through on the brand promise is, when the creative message strategy is successful in driving a response. These beliefs and desired benefits are important segmentation variables, and are a significant driver of the creative message strategy.

Situational Analysis

Internal Factors

    Air Canada, under the direction of the Vice President of Marketing, Charles McKee, uses an outside advertising agency for their marketing production and promotional plan execution, in addition to a comprehensive. Marketel, a leading agency based in Montreal,

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    Quebec, has been their agency of choice for the last several years. Although Air Canada employs a sizeable internal marketing and communications department, Marketel, an award-winning agency, is heavily involved in almost aspect of their IMC strategies, including sourcing and maintaining strategic marketing partnerships with media

    ixcompanies and providers.

    Air Canada has had several notable promotional objectives since its return to solvency. The most recent integrated national campaign was launched in 2006, and featured a comprehensive, collateral-wide strategy under the moniker, ―Revolution.‖ The concept

    behind the campaign was to sell a new product: pre-paid multi-trip flight passes. Using slogans like ―More freedom,‖ and ―Give pass a chance,‖ Air Canada created a series of

    TV spots as well as print advertising that fed off the theme of a ―revolution‖ taking place in the travel industry. Its promotional objective was creating demand, in both the business and pleasure travel market segments, for the new multi-pass product, a distinctive way of purchasing air travel tickets that had not been widely used in the Canadian market previously. Conversational lines from TV ads ―‘Looks like a better business idea.‘ ‗No,

    it‘s for everybody!‘‖ – made the multi-segment approach easier for the target audience to

    xdecode. As part of the mix of the campaign elements, which included TV, radio, print, online and out-of-home marketing (OOH), all of the pieces drove response to a web site designed around the ―Revolution‖ branding, allowing customers to immediately respond to the product, and for the marketing team to evaluate the response rate to the variety of

    xivehicles. The site continued the ―Revolution‖ theme with testimonials from travellers, as well as fake news reports of people demanding, ―to travel this great country in total liberty.‖ This illustrates a secondary objective of the campaign: to promote Air Canada as

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