CHAPTER I INTRODUCTION a. Overview High-Competition would be the best words describing current Indonesian Airline Industry situation, unless they could find their own niche market. One of the fire-starter was the Low Cost Carrier (LCC) flight, with some strategy to reduce the ticket price to consumers. Indonesian airlines market has been very interesting in the past few years. The proportion of the Airlines Businesses market itself has also grown by the shifting Land and Sea transport to Air transport. The market growth shown in the following tables: Table 1.1 Indonesia s Airlines Passengers Data Year 2001 Passenger 9.12 Million 2002 11.4 Million 2003 12.5 Million 2004* 15 Million * Estimation Source: Angkasa Pura Passenger Number 2001-2004 1
Right now, what happening in Indonesia is the ticket price war because of the oversupply market by more than 50% new armada operated by 17 operators, and the new expansion to the Fat Routes - route with a high demand - such as Surabaya and Medan and the new routes to the new area. Generally, the variables that affecting the Airlines Industry Market was: Price, On-Time Performance (OTP), or Services (including On-board performance, food & beverages, and after sales service). The Global Economy has also brought several impacts for the transportation industry. Besides national problem, the companies must also prepare themselves to compete with foreign companies that have started to enter Indonesian market. PT. Merpati Nusantara Airlines (PT. MNA or Merpati or Merpati Airlines) as one of the players in the Indonesia Airlines Industry realize about this problem. As the Indonesia s 2 nd Brand of Airlines Industry (Frontier FGD Result, April 2003) they expect to preserve their position in the 2 nd after Garuda Airlines. Some efforts running for this Mission was the Company s Big Business Process Re-engineering is which has been running from year 200X. The top 5 player in Indonesian Airlines Company currently (Frontier FGD Result, April 2003): Garuda Airlines, Merpati Airlines, Lion Air, Bouraq, Mandala. 2
Table 1.2 Brand Awareness Ranking of Airlines in Indonesia Ranking Airlines Names 1 st Garuda Indonesia 2 nd Merpati Airlines 3 4 rd th Lionair Bouraq 5 th Mandala Source: Quantum Focus Group Discussion (2003) Merpati in the past few years has tried very hard to boost up their revenues and profit by making some changes in their corporate level strategy, such as: a. Cost Reduction Program b. Employee Downsizing c. Insurance Premium Reduction d. Debt Restructuring e. Company Culture f. Operation Productivity Table 1.3 Merpati s Revenue Performance 3
Year 2002 Sales 1.50 Billion 2003 1.58 Billion 2004 1.70 Billion* * Estimation Source: Merpati s Corporate Planning 2002-2004 We found some interesting results about Merpati s current Brand in several aspects from the Brand research report that was conducted by Frontier and submitted to the Merpati s Branding Department: 1. About the Logo Awareness That cannot really the Merpati Airlines (MZ) Logo. The customers have the shape and the color perception about the logo: a. Like Perusahaan Jasa Kereta Api (PJKA) and Perusahaan Air Minum (PAM) b. Not Flexible, not dynamic c. The Colors doesn t look goods, Looks cheap d. Formal 2. About the Brand Name The Brand Name was not communicative enough and has an association with the word Peace 3. About the Brand Image and Perception The Customers assumed that Merpati is: 4
a. The Sister Company of Garuda Airlines b. Fokker Airplanes c. They pick Merpati because of no other better d. The tag not captures and understood And the brand was associated with: a. Positive: good in flight community & relations, good pilots difficult routes, friendly pilots, friendly crew, good relation b. Negative: late, unfriendly, small aircraft, old fashion, unsafe, difficult to contact, not flexible, unreliable & bad online system, not responsive. Furthermore, there are several changes in the Merpati s performances including the On Time Performance, Safety performance, and fleet that must be informed to the public. From 1999 until now, they can reach the impressive performance for their services to the public, especially after they had standardized their Airline operation in 1999. Percentage 82 80 78 76 74 72 70 68 66 64 1996 1997 1998 1999 2000 2001 2002 2003 Year Figure 1.1 Merpati on Time Performance 1996 2003 5
Merpati s on time performance were improving since 1999 until now. They can successfully reach the impressive performance for their services to the public, especially after they had standardized their Airline operation in 1999. Percentage 0.035 0.03 0.025 0.02 0.015 0.01 0.005 0 1996 1997 1998 1999 2000 2001 2002 2003 Year Figure 1.2 Merpati Safety Performances (1996 2003) The operation standardization in 1999 enhanced performance of Merpati flight and passenger safety. The level of accident is slopping down to zero percent in year 2002. 6
Percentage 70 68 66 64 62 60 58 56 54 52 50 1996 1997 1998 1999 2000 2001 2002 2003 Year Figure 1.3 Merpati Passenger Load Factor The better operation performance, especially On-time Performance and Safety could boost up the passenger Load Factor, from less then 60% at 1998 to almost 70% at 2003. Customers trust to Merpati will be able to increase with these performances. (Source: Merpati s Company profile, 2003). Merpati already had some facilities that bring easier and better way for the customers to communicate to the company, with some auxiliary services such as: 1. Merpati Online The Merpati s Airlines Officially Website, www.merpati.co.id, which is providing information such as: time schedule, reservation on-line, ticketing on-line, and more about Merpati 2. Call n Fly Merpati Delivery Service, the customers can just dial Merpati toll free number and they can do the reservation and ticket delivery 3. Info Merpati 7
Hotline Services to get all information about Merpati s Product and services by dialing Merpati s Hotline number 4. Easy Flyer A frequent flyer program that based on mileage point and discounts for the members with privileges in more than 36 merchants across the country To change the people s misperception about Merpati, these facts about the changes must be informed and well communicated to the public, especially to the airlines passengers. They might not notice neither understand that current their perception about Merpati Airlines is not 100% right. There have been more changes that they aren t notice yet, that might change their perception about Merpati and their Services. Regarding the market situation, we could draw one important point, which is likely to occur as a general but important marketing problem: Brand Equity. Whereas the Brand shall be the First and the Last battle itself on the Consumer buying decision (Source: Jack Trout & All Ries, 1980). The first battle at the stage of requirement analysis or recognition, the consumer will pick the best brand they have been told, because lessen the risk of wrong decision in purchasing. On the other side, whenever all things being equal, the product s quality and all of the service they offered has been almost equal, consumer will only consider about the brand image of the product or service. Therefore, how to enhance the brand equity of a company and its product or service, especially in Indonesian Airlines Industry would be an interesting topic to be researched. 8
Some sponsorship events had been celebrated to increase the company s brand equity. The program such as Fashion on the Sky (December 31, 2003), Inviting th Miss Universe to fly with Merpati (July 24, 2003), and Dewa s Concert in East Timor Brand Equity Requires Company s Vision and Mission and also its marketing strategy. The company will try to communicate what position they expect to be in their customer mind by the Marketing Communication tools, one of the Marketing Mix elements, the Promotion. Looking back to the current problem statements, of course there s a brighter view to the Airlines industry. The proportion of the Airlines Businesses market itself has also grown by the shifting Land and Sea transport to Air, offering higher speed in a relatively cheaper price. This phenomenon is also reflected in many new airlines companies have started their operation, especially in Indonesia. Moreover, they are even offering a cheaper price than the existing player, causing fares to decline rapidly. Consumers are about to begin shifting their prime consideration to price, rather than service or prestige. Marketing Communication Campaign shall be given more attention and careful planning to win the new proportion. When planning for the Marketing Communication Campaign, the Integration of the Marketing Communication elements seems to be a must-have factor. So that the company will strengthen its position with a Consistent Positioning to market, enabling Interactive Marketing Communication, and moving with Marketing programs that Consistent with the Marketing Missions. This Tool was so called the Integrated Marketing Communication (IMC). st 9
b. Problem Statement As an experienced player in airline industry, Merpati has an advantage, especially in remote routes. Based on GFP Team analysis and discussions with Merpati s personnel, we have summarized some problems for our topic: In this Merpati s Marketing Turnaround Event, showing some facts that Marketing Communication effort seems not reaching its target as expected (Current Brand Perception VS Expected Brand Perception). This will lead to declining perception about Merpati Airlines. Meanwhile, Tight Marketing Budget Relative to the Indonesian Airlines Industry has also set some constraints. These issues are supported with relevant data from Interview with Company and previous survey result from Quantum and MARS / CIC consulting, Frontier Marketing Research. c. Research Significance Researches could bring down the fact to a real question and support the conclusion or thesis. Sometimes, people do could make thousands of logically reasonable assumptions based on their intuitive, but when we are planning for the big move of a big company, research data will be a vital Requirement (Source: Ethan M. Rasiel 2002) Research will supports decision making process, it enable the decision makers to make a better quality decision, and with a good explanation. Specifically speaking about Marketing Research, it would reduce the Marketing Strategy efficacy without the data of Product, Price, Promotion, and Place / Distribution (Marketing Mix or 4P). 10
d. Objectives of Group Field Project (GFP) The Main Goal of this GFP is to bring best solution possible to Merpati Airlines as the GFP Clients, to their current problem that will bring the most impact on their business, but also considering the Time Frame available & limitation of the GFP Team. The goal then will be drilled-down as: 1. Research for Current Brand Position 2. Integrated Marketing Communication (IMC) Planning 3. Provide Marketing Strategy for year 2005 Expected Outcome upon those goals are to increase effectiveness of Marketing Communication in the current Indonesia s Airlines Industry competition, which indirectly would bring Consumer loyalty and brand equity rehabilitation of Merpati, so that this research could helps in decisions making that will improve overall profitability. At the end, a better return to shareholders of Merpati should take place. To achieve the goals, we will gather information from survey conducted by GFP Team independently. Based on data gathering and analysis, we will identify specific problem, look for correlated Theory to apply best as the solution, present Alternatives, and finally, recommend effective solution. e. Scope of Study The scope basically bounded by the objective of GFP (Chapter 1.4), the Marketing & Branding Division. Furthermore, time & place limitation of the sample of this GFP, GFP Team will only focusing on Several West Indonesian Cities or Routes, where Merpati is having a lower brand equity compared to the East Indonesian. 11
For scoping based on the Topic - Integrated Marketing Communication This Field Project will only cover for External IMC and some of the Internal: Some of the Internal IMC Task: Defining the IMC Elements, and integrate the elements, and align it upon the Company s Vision and Mission, and Marketing Strategy The External IMC Tasks are: Positioning of Company Brand & Products, approach to customer and updating their consumer behavior, and focusing more on synergizing the promotion mix rather than giving a big bang independently f. Schedule The Project kicked-off on 20 th April 2004, planned to be finished on 27 th November 2004. The Non-Disclosure Agreement, Term of References, signed on 9 th June 2004. 12