7 Ps of a SERVICE Its charismatic boss Michael O'Leary has a business model with a central focus on cost reduction (and

making money of course!). In around 20 years he has taken Ryanair from a single plane company to become the largest airline in Europe. He had a vision and achieved it through masterful leadership. So how did he do it? How does Michael O'Leary retain his narrow cost focus niche strategy in the face of intense competition? The business simply has lower costs and those costs are passed on to their passengers in the form of low fares. The branded airlines argue that passengers are willing to pay more for a better level of service. You can pre-assign seats. You get food and drink onboard, and can choose a higher level of service e.g. business class. However the large flag carriers have taken notice of the low-cost model and have employed it as part of their own more differentiated business model. In 2009 the company settled for 30% of its local Irish rival Aer Lingus after a prolonged takeover bid. Tough trading conditions meant that Ryanair made its first annual loss in 2008/9. O'Leary put this down firmly to rising fuel costs (as did British Airways in the same year). The company also needed to take into account the burden of purchasing its stake in Air Lingus. So in reality things are looking good for Ryanair and its budget operation - since the business aimed to fly double the amount of passengers 2009/10. Let's take a closer look at Ryanair's marketing mix:

Product or Service.

Low cost, no frills air travel to European destinations. There is no free food or drink onboard. Food and drink are income streams. You buy them onboard, or you don't - take your own food and drink if you like. There are other income streams - or ancillary revenue. The company has deals with Hertz car rental, and a number of hotel businesses. So

Ryanair takes a commission on 'up selling' i.e. ancillary revenue. Other examples include phone cards and bus tickets. About 16% of profit is made this way. This keeps costs lower.

Price

Ryanair has low fares. 70% of seats are sold at the lowest two fares.30% of seats are charged at higher fares. The last 6% are sold at the highest fare Ryanair occasionally get in trouble with bodies such as the Advertising Standards Authority (ASA) in the UK over differences between advertised and actual price - in fairness to Ryanair these are rare mistakes.

Place

Ryanair does not use travel agents so it does not pay agency commissions. It uses direct marketing techniques to recruit and retain customers, and to extend products and services to them (i.e. Customer Relationship Management). This reduces costs. You book online over the Internet. This saves them 15% on agency fees. They are based in Stanstead in Essex - which is known as a secondary airport. It is new and accessible. It is cheaper to fly from Stanstead than either Heathrow or Gatwick, and since it is less busy Ryanair can turn aircraft around more quickly. Many of Ryanair's destination airports are secondary. For example if you fly to Copenhagen (Denmark) you arrive in Malmo (Sweden) although it is only a short coach trip over the border. Secondary airports, which tend to be smaller regional airports, depend upon this single carrier - some (it is rumored) paying up to 100, 000 for each additional new route. Costs are lower and aircraft can be turned around faster.

Keeping aircraft in the air as much as possible is another important part of the low cost jigsaw. However, the company has been challenged by the European Union in relation to anti-competition laws.

Promotion

They spend as little as possible on advertising. They do not employ an advertising agency. Instead all of the advertising is done in-house. In fact O'Leary himself overseas much of the promotion of Ryanair. They use simple adverts that tell passengers that Ryanair has low fares. Ryanair employs controversy to promote its business. For example in 2009, the company reasoned that passengers would be charged 1 to use the toilets on board. O'Leary reasoned that passengers could use the terminals at either the destination or arrival airport. This would speed things up. It was reasoned that this is what passengers wanted - since they did not want other passengers leaving their seats and walking the aisles to go to the toilet. O'Leary also argued that larger passengers should be charged more since they took up more room again it was reasoned that this is what the majority of passengers wanted. Some of their aircraft are decorated in the livery of advertisers e.g. News of the World, Jaguar and Kilkenny (beer).

People

Pilots are recruited when they are young as pilot cadets. They work hard and take early promotions and then move on after 10-years or so to further their careers. Cabin crew pay for their uniforms to be cleaned. They invest in their own training. They are mainly responsible for passenger safety as well as ancillary revenues onboard.

Physical Evidence

They pay as little as possible for their aircraft. Planes are the most expensive asset that an airline can make. They get big discounts on

aircraft because they buy them when other airlines don't want them, for example after September 11th, or on the invasion of Iraq and Afghanistan. Aircraft manufacturers cannot simply stop a supply chain in minutes. If orders are being cancelled or delayed, this is when to buy. It was rumored within the industry that Ryanair was buying Boeing 737s - list price around 40,000,000 (forty million pounds) with up to a 50% discount.

Process

There is no check in. You simply show your passport and supply your reference number. You cannot select a preferred seat. It is first come, first served. This aids speed. There are no air bridges (the tunnel that connects to the side of the aircraft when to board it). You walk or are bused to the aircraft. Baggage is deposited directly onto the terminal - it's quick. However if your bag is broken don't expect high levels of customer service.

Beyond any doubt, Ryanair is one of the strategic marketing successes of the last decade. Undoubtedly synergized by Michael O'Leary - the low cost strategy that it employs is remarkable and industry changing. In many ways the business has looked closely at all aspects of it markets and operations to remold the industry and customer expectations in a unique way. This is how Ryanair has applied the marketing mix.

Product/Service

What does the customer want from the product/service? What needs does it satisfy?

What features does it have to meet these needs?

Are there any features you've missed out? Are you including costly features that the customer won't actually use?

How and where will the customer use it? What does it look like? How will customers experience it? What size(s), color(s), and so on, should it be? What is it to be called? How is it branded? How is it differentiated versus your competitors? What is the most it can cost to provide, and still be sold sufficiently profitably? (See also Price, below).

Place

Where do buyers look for your product or service? If they look in a store, what kind? A specialist boutique or in a supermarket, or both? Or online? Or direct, via a catalogue?

How can you access the right distribution channels? Do you need to use a sales force? Or attend trade fairs? Or make online submissions? Or send samples to catalogue companies?

What do you competitors do, and how can you learn from that and/or differentiate?

Price

What is the value of the product or service to the buyer?

Are there established price points for products or services in this area?

Is the customer price sensitive? Will a small decrease in price gain you extra market share? Or will a small increase be indiscernible, and so gain you extra profit margin?

What discounts should be offered to trade customers, or to other specific segments of your market?

How will your price compare with your competitors?

Promotion

Where and when can you get across your marketing messages to your target market?

Will you reach your audience by advertising in the press, or on TV, or radio, or on billboards? By using direct marketing mailshot? Through PR? On the Internet?

When is the best time to promote? Is there seasonality in the market? Are there any wider environmental issues that suggest or dictate the timing of your market launch, or the timing of subsequent promotions?

How do your competitors do their promotions? And how does that influence your choice of promotional activity?