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Electronic Assignment Cover Sheet

Student Number and Student Name: 10366882 Amosova Daria

Course Title: Higher Diploma in Business

Lecturer Name: Dr. Chantal Ladias

Module/Subject Title: Marketing B8MK112

Assignment Title: Critical Analysis Essay – Ryanair

No of Words: 2424 (excluding references)

Submission Date: 19/11/2017


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Table of Contents
Introduction ................................................................................................................................ 4

Marketing Mix ........................................................................................................................... 5

Product ................................................................................................................................... 5

Price ....................................................................................................................................... 5

Place ....................................................................................................................................... 6

Promotion............................................................................................................................... 7

Innovations in Ryanair’s marketing strategy ............................................................................. 7

Figure 1 – Brand share of Irish airline market. .................................................................. 9

Conclusion ............................................................................................................................... 10

Figure 2 – Five forces model of Ryanair ......................................................................... 10

Bibliography ............................................................................................................................ 12

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Introduction
The remarkable journey of Ryanair from an aspiring “low-cost” start-up in Ireland in
1985 with the fleet consisting of a single airplane, one daily route from Waterford to London
and the fare fees collected in a paper box before departure (Jacobs, 2015) to today’s Europe’s
largest budget airline with the more than 340 aircraft at its disposal, operating from 87 bases
across the EU and making around 2000 daily flights to more than 200 destinations in 33
countries catches imagination of many in the business and academic community.

The company has successfully adopted “blue ocean” business strategy from the
American firm Southwest Airlines (Hüttinger & Giediratis, 2010). They successfully applied
it in European market and maintained high passenger numbers and revenues while focusing on
cost reduction and extreme operational efficiency. In 2016 financial year Ryanair reached the
mark of 100 million passengers, 6.53 billion Euros in revenue and 1.24 billion Euros in profit.
At the same time Ryanair has been consistently graded low in regards of its branding, marketing
activities and customer services and, at times, appeared to take pride in being – in its CEO
Michael O’Leary’s own words (2012) – “cheap and nasty”.

This essay examines Ryanair’s marketing practices to demonstrate that the company’s
sustained and long-term low-price orientation is undoubtedly primary but not the only
marketing concept that the airline successfully implements in its target market. The analysis of
the company’s business model, its operating environment and marketing-mix shows that
Ryanair management recognizes the vast untapped potential that exists in its traditional and
especially digital marketing strategies and is pushing a set of innovations ranging from
customer experience oriented “Always Getting Better” programme to the introduction of
“Ryanair Labs”. Finally, these innovations combined with the research of the company’s own
commercial data and academic sources are reviewed with the purpose to form
recommendations that future decision makers can use to introduce changes that might further
improve Ryanair’s performance, positively affect its operating environment and, in the end,
might prove beneficial to the society as the whole.

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Marketing Mix
To highlight and identify Ryanair’s distinct marketing position in its market this paper
will discuss its marketing mix according to 4Ps model that consists of Product, Price, Place and
Promotion.

Product
Ryanair’s core product is low-cost, “no frills”, short-haul air travel within Europe. The
airline provides point to point travel in a single-class cabin with all passengers receiving the
same level of service and does not operate connecting flights or collaborate with other airlines.

Additional services that include travel insurance, luggage check-in, preferred seat
reservations, priority boarding, drinks and food, and on-board sales constitute ancillary sources
of revenue that along with the car-hire and hotel deals at destination cities form around 16% of
total revenue, according to estimates (Hobbs, 2015).

In delivering its service the firm aims to provide large choice of destinations and
emphasises safety and punctuality with on average 90% of flights departing and arriving on
time (O'Higgins, 2007) . Ryanair uniform fleet consists of 320 B747s which allows the frim to
minimise maintenance and training costs and facilitates high turnover rate at the airports due
to that particular model design features (e.g. low-hanging engines, quick refuelling procedure).

As an attempt to build “travel platform” beyond its core competency processes the
Ryanair is experimenting by offering its customers event-ticketing reservation service under
their current pilot project for London only and is rolling out the packaged holiday solutions as
well as e-commerce trading on its web-site.

Price
Sustainable low pricing is the most crucial element of the company’s marketing-mix.
Understandably, all airline’s core competencies are aligned around their differentiation strategy
that is based on an extremely low-price position in the market. Consequently, the airline targets
the budget-conscious leisure and business travellers and those taking a journey to meet their
families and friends. The approach proved to be beneficial as, according to the company’s latest
financial data, Ryanair today is among top-three airlines in Europe by market share with the
average fare price of 46 Euro which is 33% less than that of the closest low-cost competitor
Whizz and 229% lower than the average competitor’s fare (Ryanair Plc, 2017).

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Ryanair’s CMO Kenny Jacobs claims that up to 70% of the tickets are routinely sold at
the lowest fare, and the rest according to two-tiered system of higher fares (Jacobs, 2015). On
the other hand, the frim uses the principle of dynamic pricing called “U-shaped temporal
pricing profile”. It is based on the advanced data analytics and allows the company to identify
consumer demand and spending patterns. This way the airline can sell enough tickets at lower
price to reach the projected levels of load-capacity and then charge up to 40 times the
promotional fare-price on the “last minute” deals (Ritson, 2014). Same technique gives the
company an opportunity to charge more during the peak demand periods and virtually nothing
during the months of inactivity (e.g. winter months when leisure travel is at its lowest).

Place
Ryanair operates from 87 bases in the UK, Ireland and Continental Europe making
flights between 200 airports in 33 different countries. Placement part of the Ryanair marketing
strategy is heavily affected by the company’s focus on cost containment and cost reduction and
maintaining “high-growth, high-volume” (Simon, 2017) model. This is reflected in the choice
of secondary or regional airports for the airline’s operations throughout Europe. These airports
usually have lower airport access fees and are anxious to increase passenger throughput which
is why Ryanair often enjoys a monopoly status and high bargaining power due to its ability to
generate high volumes on its routes. Furthermore, secondary airports are less congested and
have considerably shorter aircraft turnaround times. It allows Ryanair to keep their planes in
the sky longer and achieve extreme levels of operational efficiency.

The firm, however, faces a serious trade off in this regard as secondary airports are less
accessible from the cities they serve and very often are not designed for the high numbers of
passengers Ryanair attracts. This results in the increased queues at check-in and passport
controls and significant overcrowding of the facilities which in turn negatively affect customer
experience and the brand.

Another important aspect of placement is the company’s drive to reduce intermediary


costs by virtually excluding travel agents from the ticket-sales. In this regard, Ryanair’s cost
containment policy turned out to be aligned beneficially with the development of technology.
Today 96% of the bookings are completed electronically through the company’s modern online
booking system and handled by the centralised depository in Ireland. Meanwhile, the company
encouraged and sometimes aggressively pushed the use of the self-services for ticketing, check-

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in and luggage handling while keeping the front desk staff levels at the airports at the required
minimum or outsourcing these functions to the third-parties.

Promotion
Ryanair’s promotion strategy has been always very well aligned with the company’s
mission and was centred on the concept that is recognised in the literature as EDLP – “Every
Day Low Price” (Simon, 2017). The company used its web-site as the main advertising channel
and from time to time supplemented it by advertisement campaigns in national newspapers,
airports and on billboards to establish its brand.

Faced with the necessity to control costs and having a very limited marketing budget
Ryanair very often relied on controversial advertisement campaigns in the press (e.g. “The
fares are so low even the British Army flew home” newspaper ad in Belfast) (BBC News,
2007) that provided inexpensive viral marketing and produced word of mouth effect. At the
same time extremely low prices like 1€ by itself created a lot of social and traditional media
hype that added to cost-effective PR.

In addition, the firm employed to full extent PR abilities of its outspoken CEO Michael
O’Leary who has established a strong and personal association with the brand and got
additional coverage for the airline by calling the European Commission “The Evil Empire”,
suggesting the regulators to “Foxtrot Oscar” and publicly floating the idea of in-flight-toilet
tax (O'Leary, 2016).

All these measures, together with the extended use of social media that grew from a
twitter-based customer review forum to full presence on YouTube, Instagram and Facebook
created the awareness of the brand at the lowest possible cost.

Innovations in Ryanair’s marketing strategy


Since 2014, the Republic of Ireland has seen economic recovery, referred to as the
"Celtic Phoenix". This reflects in an increase of incomes of the population and consumer
confidence starts growing again. Irish people characterized by Hofstede (Hofstede, 2017) as
belonging to the culture of indulgence feel tempted to spend more on leisure and entertainment
– a category that air travel falls under – after long years of austerity. As a result, Ryanair faces
strengthening competition from legacy carriers with better customer service and attractive fare
deals.

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Even though low price remains the airline’s competitive advantage, the management
appears to recognize that the company has suffered the brand damage that is hindering the
perspectives of the business. With appointment of first ever CMO in 2014, the company
embarked on the brand revitalization campaign creating the designated marketing department
- that did not exist prior to this year - and launched a series of initiatives to improve the customer
relations and move from “cheap and nasty to cheap and cheerful” (O'Leary, 2016).

The most significant element of this transformation is Ryanair’s “Always Getting


Better” (AGB) campaign which aims to shift the focus to personalisation of customer
experience and digital. Its objective is to reshape the company’s value proposition by
associating the brand with the concepts of "being smart with your money" and "smart living",
e.g. “don’t spend your money getting to your destination, it’s more fun to spend it at the
destination” (Jacobs, 2015). This constitutes a move from Ryanair’s original message about
“cheap tickets and savings” that was perceived more as “for poor or budget conscious” by their
potential customers. AGB has introduced company’s brand promise of constant innovation and
enjoyable experience in addition to low fares, safety, great choice of destinations and
punctuality.

The programme focuses heavily on digital marketing. As a part of it, Ryanair has
refurbished the web-site, launched the new mobile app and taken steps to create strong brand
community on social media (Facebook, Instagram, YouTube and LinkedIn). The company has
created a dedicated Ryanair Labs that is responsible for developing new technology to enhance
the digital delivery of airline’s tickets and ancillary products and to improve customer
experience (Wilson, 2015). At the same time Ryanair has recognised that their customer data
is an important marketing asset and introduced “MyRyanair” loyalty programme. Further on,
the firm has made the membership in the scheme automatic for all passengers aiming to reach
their customers with personalised offers and incentives based on their data profiles. All these
improvements are meant to change the company’s model from acquisition to retention of
customers, mostly by monitoring their post purchase behaviour and engaging with them
through digital channels.

The understanding of customer needs and analysis of their data has helped the
management to identify their new opportunities and formulate long term strategy to turn the
airline into the “travel retailer” or in company’s CMO words “Amazon of travel” (Rogers,
2017). Ryanair has realized that travel planning starts with booking of the flights and rolled out
travel package solutions such as car hire and accommodation deals on their web-site extending
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their brand portfolio. In addition to this, the airline has stretched its product line with 'Business
Plus' and 'Family Extra' offers.

Finally, in what seems to be a departure from the long-standing marketing policy,


Ryanair has announced several initiatives, among which are partnerships with Amadeus on
travel GDS (Global Distribution System), Google flights search engine (Jacobs, 2015),
connecting flights and transatlantic routes from a number of secondary airports.

This transformation of the marketing approach has already led to an improvement in


the company’s performance. Ryanair’s traffic statistics for April 2017 – 4th year of the
programme - show that passenger numbers grew from 9.5 million to 10.6 million, representing
an 11% increase from June 2015. The programme has also led to 20 million sign-ups and 18
million app installations (Gee, 2017). More importantly, it has enabled the experience of flying
with Ryanair to create and enrich airline’s brand equity.

Figure 1 – Brand share of Irish airline market.

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Conclusion
Marketing mix analysis shows that Ryanair has executed its low-price oriented strategy
extremely well. The company has also acknowledged the untapped potential in the area of
improving the stature of its brand and is currently undergoing major marketing policy
transformation needed for it to achieve and secure a status of the strong industry leader. The
brief analysis of the airline’s target market from the point of view Michael Porter’s 5 Forces
Model (Team FME, 2013) that is presented below in addition to the study of firm’s marketing-
mix indicates that Ryanair is well positioned to reach this objective.

Figure 2 – Five forces model of Ryanair


Based on the conducted research this essay suggests following recommendations for
Ryanair’s marketing strategy:

- Due to high-bargaining power of consumers and intense competition the airline should
still regard its “low-price – high efficiency” orientation as its distinct marketing position
and continue competing on pricing.
- It is vital to further strengthen relations with customers and develop the brand’s equity
by improving the customer experience both on- and off-board.
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- Cultivation of digital marketing tools such as new loyalty scheme, e-mail send outs, e-
commerce and social media should be encouraged to keep up “high growth – high
volume model”;
- Investment in data analytics and development of “Ryanair Labs” might allow the
company to identify long-term and short-term travel trends and offer its various
customers better personal experience suited to their needs.
- It might be beneficial for the airline to introduce some new routes penetrating markets
in Eastern Europe and increase the frequency on the existing flights to grow its market
share in Germany and France.
- “Amazon of travel” model supported by development of digital marketing channels
and e-commerce can further stimulate the growth in ancillary revenues.
- Management should closely monitor the progress of Brexit negotiations as the result
might present a problem for the company in its biggest “cash cow” market, the UK
(Popova, 2016). The company may consider the contingency plan for redistributing
their capacity from the UK to other markets.

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Ritson, M., 2014. "Reading this on Thursday morning? That'll be 8p more please. Why
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