Pay-Per-View in the Aviation Industry: A Marketing Research
In a recent media release of Associated Press, International Air Transport Association’s Director General and Chief Executive Giovanni Bisignani remarked that the global aviation industry is set to reach a combined net profit of $3.8 billion in 2007, with Asia being the industry leader, accounting for one-third of the world’s air traffic (Associated Press, 2007). After the industry suffering from major losses brought about by the lull in travel after the 9/11 terrorist attacks, SARS scares and oil price hikes, this year is promising after the airlines’ adaptive strategies of efficient use of technology, better infrastructure and customer-friendly schemes (Associated Press, 2007).
This is probably good news for Green Jet, now caught in the middle and struggling to survive the Charles Darwin rule of survival in the aviation industry. Green Jet’s CEO is on his toes realizing that it is indeed about time to start thinking radical ways to save the business.
As we go on to discuss the area of Green Jet’s concerns on profitability, it is crucial to place it into perspective and context. Green Jet, a major commercial airline, serving both domestic and international, even long-haul flights, faces the problem of winning back what it has invested for. Considering the difficult market conditions, trying to sustain one’s customers and attracting more to avail themselves of your product can be quite a challenge. CEO proposed the adoption of pay-per-view sporting events to gain market attention and subsequently convert them into actual revenues and additional profits. This was however argued against by the Marketing team as the service pay may be cost prohibitive. How true this statement is can be logically and scientifically tested through marketing research.
Firstly, what is the product all about? What is pay-per-view? Pay-per-view, also known as PPV, is the system where viewers can purchase events and allow them to watch it in their very homes. Purchasing of these events can be done using an on-screen guide, an automated telephone system or through a live customer service representative. Viewers can have the option to watch features on films, sporting events and even pornographic movies (Wikipedia, 2006). Pay-per-view started gaining its popularity in the late 1980s and has expanded to airlines’ use and various programming. Sporting events account for the bulk in pay-per-view purchases and the professional boxing and wrestling make up the majority of PPV amongst other sports (Conjecture Corporation, 2007). The pricing of PPV purchases is usually dependent on the type of event with sporting events’ range of prices at USD$ 14.95 to as high as USD$ 50.00 (Conjecture Corporation, 2007). With all these information on hand, how do we determine the feasibility and profitability of incorporating the PPV system in Green Jet? We now need to put the PPV system deeper into the context of the airline business utilizing a marketing research approach.
Marketing research involves data gathering of the product and its attributes. It is about deducing the facts from common knowledge to serve as managerial tools in providing direction to arrive with more important marketing decisions (QuickMBA, 2007). It is used to identify and define marketing opportunities and problems and eventually be able to discern how to improve the marketing process (American Marketing Association, 2007). Let us now use the steps in marketing research in application of PPV system in to Green Jet’s array of services.
According to QuickMBA (2007), most marketing projects involve the following steps:
Define the problem
Determine research design
Identify data types and sources
Design data collection forms and questionnaires
Determine sample plan and size
Collect the data
Analyze and interpret the data
Prepare the research report
Define the problem
In marketing research, or even in any other situation of assessing a problem, it is most important that the problem is clearly stated. It also matters that you have the intent of pursuing the answers to the problem so as to arrive with more credible and logical results. It has to be a SMART problem – specific, measurable, attainable, realistic and time-based. In the case of Green Jet, we can infer from our above discussion the following SMART problem: Would the implementation of pay-per-view sporting events in-flight Green Jet impact its profitability given a one-year testing ground?
The type of research that will be adapted is categorized according to the objective of the research (QuickMBA, 2007). These are classified as (a) exploratory research where one clarifies concepts and gather insights and explanations through literature search, survey or even focus groups; (b) descriptive research tackles more on the who, what, when, where, why and how aspects of the problem to arrive at more measurable fields and (c) causal research, which seeks for the cause and effect relationships in the stated problem (QuickMBA, 2007). Green Jet would need to describe its situation further – the involved target market, the trends of the aviation industry and most especially, Green Jet’s positioning in the industry, thereby the need for a more specific and measurable research design: the descriptive research.
Data: Types, Collection & Sampling
Gathered information can be in the form of either primary or secondary data. Primary data can be gathered by observation and/ or by communication. Same goes for Secondary data although the latter may have been retrieved for another purpose distinct from your own research (QuickMBA, 2007). It is necessary to validate the credibility of the information through its sources and the how current the material is. For the questionnaire design process, it should be able to address the following: (a) the information needed, (b) specific question structure, scale and appropriate wording, (c) sequencing of the questions and (c) proof and pretest survey (Polaris Marketing Research, 2007). Given this framework, let us put into application the scenario of Green Jet, with the 4Ps of marketing mix being our guideline in data collection. We can set an assumption that this is for survey generation to all passengers of Green Jet serviced for a month. What is the information we need to extract from the market to address the stated problem? To capture primary data utilizing a questionnaire to be given out to the market, the survey should consist of the marketing mix of Pay-Per-View system: Product, Pricing, Placement and Promotion.
Product – Our product in question is the pay-per-view system for sporting events in-flight Green Jet. According to Armstrong and Kotler in the basics of Marketing, what is the core benefit of having pay-per-view system inside an aircraft? For added entertainment? For value-add in the customers’ in-flight experiences? What is then expected of the product? And to whom is the product aimed at? The factors that will be put into consideration to address these matters about the product or about PPV can be about the corresponding costs, the PPV features, the comfort and convenience when purchasing in-flight and even about the timing of the offer. Is the market ready for such system? In a broader scale of analyzing the posed problem, the product should be able to differentiate Green Jet from the other major airlines in operation. The product should be able to stage itself as Green Jet’s potential unique selling point to its target market. The product and service differentiation is crucial when determining if the product can sustain the needs or wants of the market (Armstrong/Kotler, 2007).
Pricing – the data collection should be able to gauge the price range passengers of Green Jet are willing to expend to avail of the PPV sporting events. Given that pricing strategy is the only part of the marketing mix that produces revenue, and is directly related to the problem, this should be carefully planned out (Armstrong/Kotler, 2007). Internal management questions should assess whether the purchasing option can be made available in the booking process or only in-flight payment schemes. Managerial decisions should also tackle setting prices vis-à-vis the demand. Should there be competitors offering exactly the same product, how will the company act upon it? Should Green Jet leverage upon this healthy competition and be a risk-taker or a risk-avenger, keeping in mind the situation of the company. For Green Jet, CEO wanted to implement the PPV scheme to attract more customers. Therefore the pricing objective of Green Jet is towards revenue maximization or increasing revenue by obtaining a large market share (Cram, 2007). Apart from setting the prices and price objectives, adapting prices should not be neglected by Green Jet. Forms of adapting prices vary: (a) geographical pricing where prices account for the geographical location of customers; (b) price discounts and allowances where ex-deals with manufacturers or suppliers are agreed upon; (c) promotional pricing where prices are below the listed price to short-run sales and (d) differentiated pricing where customization is made depending on the product offering (Armstrong/Kotler, 2007). Green Jet can therefore study this further to create a scheme where they can probably benefit more in long-haul flights, especially if the sporting events are attractive to the passengers.
Placement – the data collection should also be able to ascertain how Green Jet can extend to the market the product without jeopardizing the quality of the product and the pricing strategy (Cram, 2007). Given the profit crisis of Green Jet, they should work strategically with PPV providers to reduce costs in-between distribution channels. Green Jet may choose among exclusive, selective or an intensive approach of PPV distribution. Should all the routes or planes acquire this new system? One strategy can also be a dual drive for both PPV and destination – pushing travel to a particular stop while enjoying the perks of PPV.
Promotion – After all, this is all about timing. Marketing communication may include: the push & pull promotional strategy with trade partners, advertising, public relations, etc. (Armstrong/Kotler, 2007). With data gathered, data analysis would come next to pull out the necessary for marketing decisions.
Various types of data analysis can be performed, depending upon the nature of the acquired information. Certain types are Simple Frequency Distribution, Crosstab Analysis, Multiple Regression, Cluster Analysis, Factor Analysis, Perceptual Mapping, SWOT Analysis, Structural Equation Modeling and Data Mining (Polaris Marketing Research, 2007).
Marketing research by itself does not guarantee that answers to the posed problem will be addressed immediately, but it aids in the decision-making process so as not to leave certain aspects that may impact the final decision of the Board (QuickMBA, 2007).
For Green Jet, SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis can be performed to test the hypothesis that the CEO remarked, PPV system can attract more customers into using Green Jet when traveling. From the gathered data, the product (PPV), can be attributed as the strength of Green Jet. It is all about leveraging on it as the unique selling point of Green Jet. Competition-wise, if Green Jet is the first within its niche to offer PPV, and the market is new to this product, then Green Jet should sustain the draw to the market that it will generate. Its weakness on the other hand is the additional costs involved in terms of logistics and operations in staging the system within the aircraft. Promotional deals however, for the launch of the product, may serve as a way to break-even with the liabilities. Opportunities abound for the product. Since the 1960s, airlines rely highly on in-flight entertainment, and therefore to add to the conventional offerings of in-flight shows, PPV’s demand expands dramatically (Brancatelli, 2004). Green Jet can also tap into the hotspots based on the type of traveler. Assume that Green Jet services international routes, the following global trend report about the world travel market may come in handy. UK travelers continue to be the single people with high disposable income. American travelers on the other hand search for value-added experiences in their trips, that is why products offered to them are mostly customized according to different life stages. Asians are now becoming more liberal in travel and is creating a high demand driven by the expansion of many low-cost carriers. They are more into gaming and entertainment and the PPV may perhaps win this segment. Middle Easterns are slowly becoming engaged more into travel as the success of low-cost carriers entry was tremendous in bringing travel to the masses. Finally, Africans are willing to pay a premium for extreme tourism or the reality tourism (World Travel Market, 2006). These are niche markets Green Jet can tap in its introduction of the PPV for sporting events. The environment is favorable to travel and particularly to the airline business. Key economic drivers for the airlines are looking better and better given that flight capacity has been constrained; travel demand is rising; operating costs are being reduced in addition to fuel efficiency improvement by 18%; and finally, fares are recovering as more business travelers are back on track (Randall Travel Marketing, 2006). At the moment, a threat noteworthy is the competition it calls for. PPV is no longer new in the market and a number of carriers may start adapting this system.
Reporting and Presentation
Gathered data plus strategic analysis will bring you about the basic ingredients of a well-thought out report. Ensure that the methodology, the results and the limitations are elaborated (QuickMBA, 2007).
Market conditions, economic drivers, demand for travel and internal management responses – these all play a role as to whether a new product will make or break in the environment. Green Jet’s adaptation of the pay-per-view system may be cost prohibitive, according to the VP for Marketing but based on research, conditions are all favorable. The first few years may not easily translate to a large profit share but Green Jet’s positioning as a competitive commercial carrier with a unique experience offered in-flight, will enable passengers to pay the premium valuable after all.
American Marketing Association. 2007. Introduction to Marketing Research. Retrieved
Associated Press. 2007. Airline Business to be Profitable in ’07 – Growth in Asia
Expected to Spur the Aviation Industry. Retrieved from www.msnbc.msn.com
Conjecture Corporation. 2007. What is Pay-Per-View?. Retrieved from
Gary Armstrong, Philip Kotler. 2007. Marketing: An Introduction. Pearson/Prentice Hall
Joe Brancatelli. 2004. Business Traveler. Retrieved from www.USAToday.com
Polaris Marketing Research. 2007. Marketing Research. Retrieved from
QuickMBA, Knowledge to Power Your Business. 2007. Marketing Research. Retrieved
Randall Travel Marketing. 2006. Top Ten Travel and Tourism Trends for 2006. Randall
Travel Marketing, Inc., North Carolina.
Tony Cram. 2006. Smarter Pricing: How to Capture More Value in your Market.
Prentice Hall/Financial Times
Wikipedia, the Free Encyclopedia. 2006. Pay-Per-View. Retrieved from
World Travel Market. 2006. Global Trends Report 2006. Euromonitor International.
Retrieved from www.euromonitor.com