Case Study: easyjet & Ryanair

Transcription

1 Case Study: easyjet & Ryanair Flying high with Caglar Cintuglu Deniz Yarar Uli Breunig EasyJet & Ryanair: flying high with 1

2 Introduction Source: Jobber, p EasyJet & Ryanair: flying high with 2

3 First Question How do EasyJet and Ryanair achieve success using low price strategies? Source: Jobber, p EasyJet & Ryanair: flying high with 3

4 EasyJet & Ryanair The orange-liveried airline is one of the pioneers of low-cost travel in the UK Established in 1991 Europe s largest budget airline EasyJet & Ryanair: flying high with 4

5 Short History: 1978 Deregulation of American Skies Southwest Airlines first no-frills, low-fare business model No free meals or coffee, only peanuts SecondaryAirports: Faster turnaround times Cabin crew does the cleaning No waiting for incoming flights EasyJet & Ryanair: flying high with 5

6 Only one type of aircraft i.e. Boeing 737 Keep costs down by Reducing pilot training costs Reducing maintenance costs EasyJet & Ryanair: flying high with 6

7 Internet booking Cut paperwork and administrative costs Source: EasyJet & Ryanair: flying high with 7

8 Product Strategy EasyJet & Ryanair have successfully attacked British Airways with their rapid penetration strategy (Price: low, Promotion: high) EasyJet & Ryanair: flying high with 8

9 Target segment Independent customers (no need for bundled services) with high grade of self organized market overview/comparison Rather young and flexible EasyJet & Ryanair: flying high with 9

10 Customer Characteristics Independent, self organised Desire of object: pure, cheap transportation service Familiar with new media and interactive devices (internet) Flexible Easily maintained (low expectations, shrunk space for complaints) EasyJet & Ryanair: flying high with 10

11 Second Question What are the advantages and risks associated with low-price strategies? Source: Jobber, p EasyJet & Ryanair: flying high with 11

12 Advantages of low-price/rapid penetration Fast diffusion and adoption leading to High market penetration rates quickly Competition by surprise, no time to react Source: EasyJet & Ryanair: flying high with 12

13 Advantages of low-price/rapid penetration Goodwill among early adopter segment word of mouth Cost control pressure greater efficiency Barrier to entry for new competitors (Porter s 5 forces) EasyJet & Ryanair: flying high with 13

14 Disadvantages for customers Fast turnaround times: No waiting for connecting flights No entry for customers checking in too late Paying compensation: Compensation for cancelled flights is only the ticket price EasyJet & Ryanair: flying high with 14

15 of low-price/rapid penetration Low price conveys an image of low quality; Image! Competingsuppliersalso reduce prices, nullifying the advantage Long term price expectations EasyJet & Ryanair: flying high with 15

16 Third Question To what extent do the conditions for charging low prices discussed in this chapter hold for EasyJet and Ryanair? Source: Jobber, p EasyJet & Ryanair: flying high with 16

17 charging low prices -Onlyfeasible - Market Presence or domination -Experiencecurveeffect/low costs -Make -Make - Barrier to entry - Predation Money later Alternative Money elsewhere Source: Jobber, p EasyJet & Ryanair: flying high with 17

18 Only feasible Alternative Charging Successlow through prices Source: Jobber, p385 Rather homogenic service Cut down to core value (transportation) Low price as incentive for consumers to switch from usual brand EasyJet & Ryanair: flying high with 18

19 Market presence or domination Charging Successlow through prices Source: Jobber, p386 Aggressivelypricing Segment of pricesensitive consumers (Price elasticity) Only way to overtake national airlines on the low-cost lane EasyJet & Ryanair: flying high with 19

20 Experience curve effect/low costs Charging Successlow through prices Cost decline of 20% if production doubles Becomingthelowestcost supplier Source: Jobber, p EasyJet & Ryanair: flying high with 20

21 Make money later Charging Successlow through prices Price-sensitive consumers in the lowcost segment No way for airlines to make money later Source: Jobber, p EasyJet & Ryanair: flying high with 21

22 Make money elsewhere Charging Successlow through prices Low-cost airlines concentrate on the core competence: Transportation Selling food on planes EasyJet & Ryanair: flying high with 22

23 Barrier to entry Charging Successlow through prices Satisfied market in all price segments High costsof entry High fixedcosts Only small margins National airlines partially subventioned by state EasyJet & Ryanair: flying high with 23

24 Predation Charging Successlow through prices National airlines backed up by subsidies Alliances Special contracts with airports BA & TWA accused predatory pricing EasyJet & Ryanair: flying high with 24

25 Fourth Question How successful do you believe EasyCinema is likely to be? Source: Jobber, p EasyJet & Ryanair: flying high with 25

26 What is EasyCinema? Source: EasyJet & Ryanair: flying high with 26

27 EasyCinema Film bookings 2 weeks in advance Starting from 20pence (<30 cent) The earlier the cheaper (like with aircraft seats) EasyJet & Ryanair: flying high with 27

28 Cutting EasyCinema costs and staff No popcorn etc. If ya want popcorn, go to a popcorn vendor. For movies come to Internet: Print out membership card, access via turnstile EasyJet & Ryanair: flying high with 28

29 EasyCinema s success Direct changes of price according to demand Cheap for cineasts, who plan watching films in advance EasyJet & Ryanair: flying high with 29

30 Thank you for your attention! EasyJet & Ryanair: flying high with 30