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Marketing Planning ± New flight route Hanoi a Kunmin

Spring/Winter/Summer 2012, Vietnam
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Instructors: Nguyen Thi Thu Trang

Trinh Thi Thu Giang
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TABLE OF CONTENTS

Instructors: Nguyen Thi Thu Trang

Trinh Thi Thu Giang
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INTRODUCTION

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BUSINESS STRATEGY
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1.p For economic growth
Innovation is the creation and transformation of new knowledge into new products, processes, or services
that meet market needs. As such, innovation creates new businesses and is the fundamental source of growth
in business and industry.

ë.p For competitive advantage

Companies that use and act on their insights get a jump on the competition. They are the competition. They
leave behind those that are lulled by the security of strong, enduring economic performance and the
conventional corporate wisdom that stays the course. Often, the leader loses.

£.p ecause cost-cutting is not enough anymore

Profit equals to revenue cost. The profit equation shows that for profits to grow, or even be maintained,
you've got to manage cost, even reduce it. It is the most obvious way to grow profits. And companies have
been doing this: with technology; by downsizing; through re-engineering.

Œ.p `esire for higher business revenues

With costs reaching bottom and few opportunities to reduce them further, companies can turn to increasing
sales. Marketing innovations come to mind here and do well to sell more of what you have to sell. But new
products and services bring in new revenues too.

è.p For business survival

For companies to survive a discontinuity, they must face the rather unpalatable reality that there may have to
be fundamental changes in who they are, what they do, and how they do it, as wrenching and dislocating as it
may be.

X.p ceeds to be innovative in airline industry

It is suggested air traffic growth seems to be resuming after the economic decline of 2008-09. Future growth

Instructors: Nguyen Thi Thu Trang

Trinh Thi Thu Giang
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trends will be driven by the low-cost airlines, as they continue to increase their passenger loads. Low cost
airline have revitalized many regional airports, leading to competition between airports and the need for
airports to be competitive in their fees. This presents a challenge to airports to find new sources of revenue,
with the clear understanding that they cannot continue to operate with a more of the same attitude. Airports
recognize that they must adopt new approaches in order to actively support this growth of air travel and be
competitive. Those airports that successfully rise to the challenge will become airports of the future and will
exhibit three key characteristics that distinguish the successful from all others:
-p Lower-cost operating costs
-p Faster and more efficient passenger flows
-p New revenue streams, driven by increased retail and services opportunities

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1.p Airline market overview
a.p Market definition
A market definition for Jetstar should contain two dimensions: a particular product (new airline from
Hanoi to Kunminh) and geographic area (Hanoi). It is often practical to define the relevant product market
first and only then to define the relevant geographic market.
Following the price rise, customers may switch some of their purchases from the focal airline to other
substitute airlines (demand side substitution). It is not necessary for all customers, or even the majority, to
switch. The important factor is whether the volume of purchases the new product likely to be switched is
large enough to prevent a hypothetical monopolist profitably sustaining prices 5 to 10 per cent below
competitive levels. A significant factor in determining whether substitution takes place is whether
customers would incur costs in substituting products. High switching costs relative to the value of the
product will make substitution less likely.
For consumer products, geographic markets may often be quite narrow, e.g. where sufficient numbers of
consumers are unlikely to switch to products sold in neighbouring towns or regions, let alone countries.

b.p Market size

Instructors: Nguyen Thi Thu Trang
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Pacific accounted for 40% market share for passenger transportation on their main routes between Ho
Chi Minh City and Hanoi and captured 5% of total domestic air market. Airline Jetstar Pacific is Vietnam's
only unused tickets, provides 100% electronic ticketing and payment by credit card online through their
website and reservation services over the phone.

c.p Market structure

Oligopoly: in Vietnam economics, the ³sky´ market consist of only two main companies (VNA & PA)
who are highly sensitive to each other¶s pricing and marketing strategies. There are few competitors
because it is difficult for new firms to enter the this market. Each seller is alert to competitor¶s strategies
and move.

d.p Market segmentation

Previously, the airline market in domestic only exploited by 3 airline companies in the country is
Vietnam Airlines (VNA), PA and Vasco. However VNA remains giants, almost snatching market with
around 86% market share, competitiveness appear only on the routes Hanoi - Ho Chi Minh City and Da
Nang - Ho Chi Minh City. But when the PA restructuring of capital and Qantas Airlines (Australia) to buy
30% to $ 50 million, the opportunity to develop the PA is also synonymous with competitive on the
domestic market will be fiercer and VNA directly affected.

e.p Market potential

Traditional and cheap: For a country more than 80 million people, the number three airline domestic
(including Vasco is a firm of VNA) with 1% of users means of airline is too low, because of that inevitable
market will have more new faces. Vietnam law has allowed the private to open airline and foreigners who
can contribute to 49% on airline Vietnam, so the presence of foreign firms is just sooner or later. VNA and
PA with two business model aimed at each market segment, competitive enough to confront and annihilate
each other is unlikely. However, competition will appear on some competing routes and boundary between
traditional and cheap are no longer exist. Thus, consumers are absolutely have right to expect to use these
products not only high quality but the price í comfortable. The first signal is 30,000 VND tickets were sold,
super cheap promotion of PA. Accordingly, flight Hanoi - Ho Chi Minh City will be only 500,000 VND
per visitor.
Instructors: Nguyen Thi Thu Trang
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f.p Market trend

Believe in the article comments: people tend to put a holiday if they are reading the article its good
points of the other tourists. Research shows that consumers' opinions posted online are more believe than
on the press. The holiday will still be affected by the economic downturn but the customer will request a
personal style when booking. People have decided to travel but will choose how to spend money and where
a lot more carefully.

ë.p Jetstar Pacific analysis

£.p Oustomers analysis

Œ.p Oompetitors analysis

è.p Airline industry analysis

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STRATEGIC MARKETING FOCUS

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There are various environmental factors which influence the business of Jetstar such as Political and
Legal factors, Economics, Socio-cultures, and Technologies.
1.p Political and legal factors
The political system in Vietnam is quite stable because of its single, undisputed ruling political party,
the Communist Party of Vietnam. In spite of conservatively communist, Vietnam has undertaken some
reforms in recent years. In addition, Vietnamese legal system is set up rationally to attract the investment
of foreign organizations. For example, as from 1 January 2009, the standard corporate income tax is
reduced from 28% to 25% and will be reduces to just 20% from 2011. Moreover, Jetstar Pacific Airlines
is the first low-cost Vietnam, been transformed from Pacific Airlines in May 2008. Jetstar Pacific
Airlines now has 27% shares of the Qantas Group, the rest belongs to other major Vietnamese
shareholders such as Vietnam Venture Corporation and the State Capital Investment Corporation
(SCIC), Saigon Tourist Corporation and Mr. Luong Hoai Nam - General Director of the Pacific. This
thing may affect to the process of opening new air-line of Jetstar. Besides, Vietnam and China are very
near, especially Hanoi and Kunmin. Therefore, the price of the ticket from Hanoi to Kunmin cannot be
Instructors: Nguyen Thi Thu Trang
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too high. It will affect the buying behavior of customers and the price which is set by Jetstar a lot. Those
factors of the political and legal terms make the stabilities for Jetstar to open new air-line from Hanoi to
Kunmin in China and somehow encourage the current business and the developments of the company in
the future.

ë.p Economic factors

The Vietnamese economy has been developing rapidly and ³Vietnam is one of the best performing
economies in the world over the last decade´1. According to the World Bank report in 2008, real GDP
has on average grown by 7.3 percent per year during 1995-2005. Furthermore, the economic growth in
2007 performs impressively with 8.5 percent, making 2007 the third consecutive year above the 8-
percent benchmark. Although, almost countries all over the world suffered from the financial crisis in
2008, the economic growth of Vietnam still maintain at high level with 6.2%. Besides, income per capita
rose from US$ 260 in 1995 to a 2008 level of US$ 1047 when Vietnam has already been a member of
World Trade Organization. Besides, according to a report established by HSBC in 2007, the GDP of
Vietnam was 8.5% and it may decrease gradually to 6.6% in 2010. Accordingly, this is also advantages
for Jetstar when opening new air-line from Hanoi to Kunmin in China because it will attract many
Vietnamese customers in the middle-income group and have the demand of travelling abroad because
the price of Jetstar is for all levels of customers.

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GDP of Vietnam from 2005 to 2010 (ource: HSBC)

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All data above show that Vietnam is in a developing economy and being a potential market where
consumers are always ready to travel abroad and book flight ticket with inexpensive price and good
quality of flight. These things will provide them values which can bring prosperities to Jetstar¶s business
in a long period.

£.p ocio - cultural factors
Vietnam is a densely populated country with over 86 million people - the 15th country in
population level, which is a potential market for Jetstar to invest new air-line in Vietnam, especially
the capital - Hanoi. Besides, Vietnam population has been increasing gradually with the population
growth rate was estimated by 0.977 in 2009 (CIA, 2009). Additionally, the population distribution is
continually moving from countryside to cities. In 2005 and 2006, the volume of urban citizens was
22.13 million (occupying 26.8% the total Vietnam population), and 22.82 millions (occupying 27.1%
the total Vietnam population) respectively. In 2008, the urban population occupied 28% of total
population. It means that it is more and more people leaving the countryside to cities to live and cities
are going to be more crowded.
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In fact, as the research result recorded, the travel tour or business tour from Hanoi to Kunmin in
China is very attractive to customers in the North of Vietnam. They often travel by train or bus in
order to save money although the duration of the journey is not short and the way of transporting is so
complicated. For example, customers can go to Lao Cai Province by train or bus, then they will
continue the journey to Kunmin by train and bus or take a flight of Chinese Airline. Besides, the
Hanoi ± Kunmin air-line of Vietnam Airline is also a choice for them to save time. However, the
price is not cheap. Accordingly, this is an advantage for Jetstar if the company competes with other
competitors and commits to supply customers a cheap flight with good quality.p
Furthermore, the lifestyle of Vietnamese is changing towards to foreign style, especially the young
generation. They are now preferring to travel abroad, especially cheap flight. This also affects the
buying behavior of the consumers. That is the reason why Jetstar should use the cheap-price
advantage of the company to attract them.
Therefore, it seems to be said that Vietnam is a potential market for Jetstar to expand the business.

Œ.p Technological factors

Technological factors can affect Jetstar¶ orientation in both positive and negative sides.
Indeed, with the fast development of modern technologies, the company can easily promote its
flights. Otherwise, citizens can access to the flights¶ information and book ticket by touching it via
internet or mobile-phone instead of going to the ticket agenciess, which is called e-ticketing, e-
services and e-customer care to save consumers¶ time. By the way, Jetstar and customers can easily
approach each other, and the company can know how customers satisfy their flights and services,
then the company can maintain and promote them.
Moreover, upping-to-date the technological development of air industry in a country is an
important factor for the company to innovate its services to adapt with the customers¶ needs and
wants as well as estimate new trends of the market. Nevertheless, this may cost lots of money. For
examples, Jetstar now is planning to change all its planes into Air Bus A320 instead of Boeing 737 as
a result of values.
In fact, Vietnam has been developing rapidly since renovation. Accordingly, there are many
changes such as technology, quality of products and services. Besides, promoting and innovating

Instructors: Nguyen Thi Thu Trang

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technologies to catch up with the developments of Vietnamese and Vietnamese new demands will
require the company much spending.

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MARKETING PLAN

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1.p Product
We plan to launch new Jetstar air-line from Hanoi to Kunmin in China in 2012. This airline is sold
mainly for two types of customers in the North of Vietnam:
p Customers who book ticket online in http://www.jetstar.com/vn/en/index.aspx or in Jetstar ticket
agency.
p Customers who book a group of ticket such as tour agents and so on.
In order to set the suitable time for the flight, we made references to Vietnam Airline and the difference
between time zone of Hanoi and Kunmin. In fact, the time zone in Hanoi does not differ much from the
time zone in Kunmin with just only one hour. Besides, after analyzing the customers¶ behavior in the North
of Vietnam, we recognize that most of customers go to Kunmin for travel and a small number of them go
for business and they often travel by train or bus in order to save money although the duration of the
journey is not short and the way of transporting is so complicated. Accordingly, it will be beneficial for
customers if Jetstar can save them more time.
Compared to the most favorite time of customers travelling a long-distance journey by train is between
00:00am and 9:00am (Figure 1); we decided to set the time for flight is from 7:00am to 8:20am. It means
that customers will arrive to Kunmin in 9:20am followed the time zone there.

Instructors: Nguyen Thi Thu Trang

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Rail journey time (Source: http://www.icea.co.uk/)

Indeed, it just takes customers around one hour to fly to Kunmin from Hanoi. Customers will come to
the airport at about 5:00am and make a check-in routine there from 5:00am to 7:00am. We suggest Jetstar
to set about three flights per week in Monday, Wednesday and Friday. With this time of flights, we ensure
that customers can minimize wasted time for transporting while they absolutely can fly with Jetstar to
Kunmin in 9:20am then spend about one more hour to go to the hotel and take a rest. In the rest of the day
and days after, it is time for travelling or doing business.
Although air-line from Hanoi to is not a new product in Vietnam, it is still not popular because only
Vietnam Airline exploits it. Jetstar should commit to supple customers cheapest price as the company¶s
strategy and improve the quality of flights, to compete with its major competitors mainly based on price
differentiation.
In term of plane, Jetstar can use Airbus A320 for this air-line because of the lower-fares than Boeing 737
and the economics (Airbus A320 can transport 180 customers while Boeing 737¶s transportation is lower
with 167 people).
2.p Price
3.p Place
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4.p Promotion
5.p People
For any service, the provision of people is a very important ingredient. Especially for Jetstar, who
provides aviation service, recruiting the right staff and training them appropriately in the delivery of their
service is essential if Jetstar wants to satisfy the customers. People do not mean solely the fight attendants;
there are pilots, officers, guards and a lot of positions to be concerned. Consumers make judgments and
deliver perceptions of the service based on the employees they interact with. That is the reason why
Jetstar¶s staff should have the adequate interpersonal skills, attitude, and service knowledge to provide the
service that consumers are paying for. Firstly, it is very important for Jetstar to have good pilots. Even
though pilots do not interact much with people, they are responsible for passenger¶s lives, moreover, the
way they control the airplane affects customers directly on how they feel about the safety level of the flight.
That is one of the factors which customers consider the most when choosing airlines. Secondly, the ones
need to be trained very well are flight attendants. They are who interact directly with customers and leave a
lot of impression in customers¶ mind. The way they dress, communicate, serve customers as well as deal
with problems on board must be perfect in order to satisfy the customers. For Jetstar, besides recruiting the
flight attendants from flight academy, they have to provide them with an extra training course to improve
their knowledge about the company, their job, emergency handling as well as their interpersonal skills. Last
but not least, it is the ground staff, they do not flying with passengers, but also play a very important roles
in creating the image of the airline. Overall, for an airline like Jetstar, they need to have a standardized
system and regulation about how the staff behave in order to retain a good image of the whole company.
6.p Processes
7.p Physical evidence
Physical evidence refers to the Jetstar Company¶s environment in which the service is assembled and in
which the airline company and customer interact, combined with tangible commodities that facilitate
performance or communication of the service. The physical evidence of service includes all the tangible
representations of service such as brochures, letterhead, reports, e-tickets, internet presence (Jetstar
Pacific¶s website) and equipment in the airplanes. For example, in the Jetstar Pacific, the interior
decorations, furnishing, lighting, viewing-door, and safety life-jackets as well as the appearance and
attitudes of its employees will influence customer perceptions of the service quality and experiences.
Because of the simultaneous production and consumption of most services, the physical facility i.e. its
Instructors: Nguyen Thi Thu Trang
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servicescape can play an important role in the service experience.

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Instructors: Nguyen Thi Thu Trang

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CONCLUSION

Instructors: Nguyen Thi Thu Trang

Trinh Thi Thu Giang
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APPENDICES (Tables and charts)

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REFERENCES

Instructors: Nguyen Thi Thu Trang

Trinh Thi Thu Giang
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