NOTE: Numerical values in Chart is shown in thousands (000's)
Airlines in America found a way out in getting the required no of consumers for their product. They need to locate a target market to actively sell the product. Salaried people definitely will be the target market for the Puddle Jumpers. A salaried person needs the assistance in traveling to long distance. They always prefer train or bus to go to other states. However it is a very good idea to target the salaried American citizen with low fares. How they will their product to the respective buyers? It is simple. We need to implement the pricing strategy that will intuit them to buy low fare air tickets from Puddle Jumpers.
They also want to target the group of people of who are flying from one town to another town more frequently. In simple words they want to target the Anytown market. More business contacts though marketers will yield good results. However tourists and holiday travelers also has some contributions to the Anytown market.
Services or Products
Puddle Jumpers as always provides low cost air fares to every one, they provide airline service to all destinations in the U.S.A. It gives you the pleasure to go anywhere from any town to any town in the U.S.A hub. All the pleasure in traveling is given by them in discounted fares. Puddle Jumpers provides the safety of the people and the handling of the goods on at most care. Despite they provide low fares, there is no compromise on these things.
Many surveys also show that citizens of U.S would not want to compromise on security and safety by providing low fares. In fact many would compromise for low level of service rather than compromising for safety and security. Puddle Jumpers provides high security to their customers in low fares and it is their high priority for them.
The main competitor of Puddle Jumpers in Anytown and low fare airline market is the US Air. Eastern and Piedmont were the super powers in the market in the past years. Eastern Faded out in times and Piedmont acquired by the US Air. US Air market occupies about 86% of the Anytown travel market. And second comes the Delta having 2% of the market. For these reason the U.S Air not able to cut the Air fares and not providing any discounts to the consumers.
The major problems of U.S Air is that they profits are confines only to the acquisitions and not by consumer direct trading. It buys many regional carriers keeps in mind that it would bring more profit to the company. However they had profits but the operational costs increased higher than the expected level. The second problem would be the labor costs of U.S Air. U.S Air’s strongest out hold in the region of North East. North east contains the strongest labor unions that have strong influence of labor salaries in the U.S Air. The top management of U.S Air is not having full authority over the Labors and not effective from getting any concessions from them.
Although it as high cost, U.S Air stands sixth in nation’s largest carriers. U.S Air needs to look its strategies of spending in the Airlines. Stephen Wolf, Chairman of U.S Air says that the Airline needs to be buying by someone or to buy some airline or they have to get partnered with another airline. None is there to approve this statement because of high costs and conflicts of routes with either with buyers or partners.
Puddle Jumpers may have many opportunities in the Anytown market is probable be liberated from impressive rivalry except it arrives from any more airlines. Puddle Jumpers can be able to attract this market with large capitalization. However creating the large capitalization will be difficult task to them, but it can be achieved by establishing themselves for years. They have to target the direct customers to get more revenue. They can surely generate 90% of its sales thorough direct sales and they may reduce the agent’s commission.
Summary And implementation Plan:
Puddle Jumpers completely following the approach of cost-per-impression basis. It is a cost effective and targeted method. Marketing is generated through media which will produce a direct sale to corporate accounts. Centralizing the reservations and air operations are cost effective methods. The target is to establish the market locally so that media range can be narrowed and hence Puddle Jumpers are not in need to launch program in national media. Outdoor billboards are considered as an effective media and that is the reason why the private jet completely relied on billboards to make $100 million and more business. Local radio, sports and news are other ways used for marketing but not the printable mode like news papers. And above all, the powerful media to reach the targeted viewers is World Wide Web. Puddle Jumpers have their website with payment capability, reservation and purchase. Puddle Jumpers established the low cost operating structure through which it is possible to offer 50% less airfares while comparing to their competitors.
Here the Pricing Strategy:
The third column is of average fare for all travelers for current day journey. The second column is fares for the purchase within 14 days. The fares listed in first column cannot be refunded or cancelled. For the purpose of financial and consumer purposes public relation firm is essential. Hence all together firms, reservations and advertising it will cover 15% of sales. In that aspect $16.5 million is expenditure for the first year. To improve the sales and to attract the Anytown business traveler company has to directly contact the travel departments and town based corporations. The economy of Anytown area is growing rapidly therefore high chance for business travel which would be 50% of over all revenue of Puddle Jumpers.
The company forecasting a positive annual sale for the first year of flight operations and second year I assumed to be double the value like 55% in year one, 62% in year two. In the second year more flights and more airplanes would be added to the routes already served. This will enable to maximize profits within the market we have created without incurring the additional expense of opening new markets. It also allows for more controlled growth and eliminates the risks, early on, of the loss of control of operational procedures that can occur either with de-centralization or growth that is too rapid.
The great people in the management of puddle jumpers are not performed for any other airlines. The five major operational areas of Puddle Jumpers are flight operations, maintenance, financial, marketing and customer service. The strategy of puddle Jumpers in seed, bridge and progression is winning model for start-up airlines. The financial assumptions are very important for any organizations to reach the tremendous growth. The following are the three major assumptions to be made:
In the business of airlines cost measurements are based on the Available Seat Mile and utilization factor. If seat costs are kept below 7 cents and utilization is at 50% or better, the airline will operate profitably. If all operational costs of flying air crafts have been vanished and aircraft leases the company can break even on the first six airplanes by maintaining sales just over $2 million per month or approximately $24 million in first year. However it is less than the expected sales forecast for about 25%.
Though it is indicating that company can carry on without adding routes and planes for an indeterminate period with load factors of less than 15% and from that the profits increases from lowest sales in first year to modest sales in second year. Improvement in sales percentage is expected in further years. That leads to healthy profit in foreclosing operational years. Borrowing is necessary only in the situation of seasonal fluctuation or plans acceleration.