American Airlines: The Internet Marketing

Introduction

Marketing entails making products that are desired by a certain section of the target population or consumer. Marketing has been viewed as a continuing dynamic process involving a set of interacting activities that deal with market offerings by producers to consumers on the basis of reliable marketing anticipation. Most organizations are turning on internet based technologies as efficient ways that can improve their corporate objectives towards attaining a wider market share.

Many companies in the world are using internet-based systems that are cheap and which enhance the information management process by removing the marketing management complexity, making the organization more responsive and as a result generating more profit through revenue and saving. In addition, companies are trading together in electronic marketplaces that provide cost effective goods and services which are of benefit to the customers and act as means to fast economic recovery and development. Thus, internet marketing, also associated with e-commerce, is the conducting of business electronically using a communication link. It provides exchange of goods and services by use of electronic means, especially the World Wide Web and other computer networks (Coupey 2004). Acquiring e-commerce system improves the way business is carried out, which leads to a competitive advantage. In this regard, this paper focuses on how the internet has drastically changed the promotion and distribution strategy of products and services. The paper looks at the best internet marketing strategies based on American Airlines, which offers much of its goods and services through the internet.

The Internet and Business Strategy

Companies frequently integrate innovations to attain competitive advantages. One of such innovation is the use of internet. According to Porter (1985), competitive forces model and value chain model are used to describe how the organization can formulate its strategies for competitive advantage. Competitive forces include the negotiation force of players in the market and threats of alternate products and new entrants. Likewise, the competitive strategies include cost control, differentiation, originality, growth and coalition. Therefore in the value chain model, the internet can be used by a company to obtain a competitive advantage in the following ways:

  1. Managers can use e-mail and other internet communication capabilities to oversee larger number of employees, to manage many tasks and subtasks in projects, and to coordinate the work of multiple teams in different parts of the world.
  2. The internet can alter the current distribution channels, creating openings for drawing and serving customers who otherwise would not patronize the company. For instance, web-based discount brokerages have drawn new clients who could not afford paying high fees charged by usual brokerage firms.
  3. For e-commerce, the internet offers businesses an even easier way to link with other businesses and individuals at very low cost hence improving alliances. For example, Cisco Systems sell switches and routers through telecommunications network in the Business to Business (B2B) space. Cisco has been a leader in utilizing the direct sell model over the internet (Haag, Cummings, & McCubbrey 2002).
  4. Internet cuts transaction costs for searching buyers and sellers, gathering information on products, bargaining, writing and enforcing contracts, and transforming merchandise. A company can be able to lower its market cost of products and services, hence gaining a competitive advantage.
  5. Through Automated Just-in-Time warehousing, the internet or rather intranet can be used in coordinating the flow of information between inventory system and controllers, making warehousing information more accessible to different parts of the organization hence increasing precision and lowering costs.

In this light, e-business has enabled organisations to change the way they work and implement new organisational design. The changes occur either incrementally or radically and they affect different parts of organisation, including structure, organisation of work, processes, and interorganizational relation (Feng Li 2006). E-business has enabled organisations to flatten the hierarchal management structure by increasing steadily the number of people reporting directly to the Chief Executive Officer (CEO) and by reducing the number of managerial levels between the CEO and the low-level managers. Consequently, the change in hierarchical structure is as a result of easy availability and accessibility of information to everyone, which enables organisations during acquisition, merger or diversification to have insignificant addition of CEO direct report and thus lower managers to only take additional responsibilities. Organisations are required to adopt new organisational design in order to achieve new alignment between organisation and the ever changing new business environment.

Consequently, e-business technologies affect the organisation’s business model by redefining the processes, structure, strategies and goals that are deemed to create value to consumer and to enable the organisation to compete effectively. In essence, a business model acts as a link between information systems, business organisations, and the strategy by providing an understanding and a clear communication of concepts between strategic information system and process designer. Organisational e-business model enable smoother execution of strategies which makes it easier for managers to effectively adopt to external forces such as customer demand change, social and technological change, competition, and legal value creation from e-business models. An organisation with e-business system uses a different pricing model and marketing channel, by saving cost through optimized infrastructural management and direct sells over the internet.

Moreover, E-business has an important role in the communication not just within an organisation but also in the inter-organisation communication. The inter-organisation information exchange (Business-to-Business E-Business) has been transformed by the introduction of e-business technologies that have brought about various communication processes. This transformation started in the first age of e-business in the mid 1970’s with the automation of order entry systems and since then e-business has greatly facilitated transaction between different organisations. Feng Li (2006) states that, “Inter-organisation exchange of information using internet communication systems attracts distinctive attention due to their potential for growth and their impact on different organisation structures all over the world” (p.43). Inter-organisational relation for the organisations with the same supply chain has fostered the existing relationship between relating organisations. Inter-organisational relation can take the form of strategic alliance, joint ventures, long term buyer-supplier partnership and other ties. This capability enhances the distribution of goods and services.

Another strategic implication is that e-business enables sharing of information which is required in inter-organisational relation for fostering closer partnership and cooperation between involved firms. Organisation can concentrate on core-competencies and depend on network partner or outsourcings for other non-competent activities. This lowers the cost of operation and stock levels, shortens lead time, and increases cash flow. Inter-organisational relations improve the responsiveness of the supply chain to the market transformation through improvement in productivity, rise in sales, and secure lengthy period contract. Consequently, inter-organisational relation fosters the existing relations between the seller and buyer and raises the future competitors’ entry barrier. Inter-organisational relation has enabled the production of just-in-time products. For example, the manufacture granted suppliers rights to the production planning and the forecasting information. This sharing of information reduces the lead time and better planning to the supplier. Inter-relating organisations can develop new products by using a strategy of joint development. In joint development strategy, suppliers are provided with the detailed Computer Aided Design (CAD), data on space occupied, and technical specification of the component, thus suppliers design the component and passes feedback and modification to the manufacturer (Barnes, 2007).

American Airlines

Looking at American Airlines (AA) with its set of customer specific goals, best internet strategies can be emulated. American Airlines (AA) offers products and services that are mostly flight specific to its passengers. Even though AA is a global largest airline in passenger fleet size and transportation, it is constantly looking for ways to serve its passengers and reviewing many new ideas to cater for its customers, particularly through the internet. Therefore, the AA products and services are mainly depicted in its airline destinations, on board services, service line (AA Cargo), products and gifts, and new ideas for quality improvement.

The AA operates in four continents. Dallas and Miami hubs act as entries to the Americas, while for Europe, Chicago hub acts as the gateway. On the other hand, the main entry for Americas and Europe is the NY Kennedy, while St. Lous and La Guardia are local hubs. Thus, AA is deemed to be the largest airlines with highest number of destinations, preceded by the Continental Airlines. Among the planned flights which the airline operates in international locations include Bolivia, Saint Vincent, Anguilla and Uruguay. According to the American Airlines website, non-stop airline service include the operation from Chicago to Shangai, Chicago to Beijing, Miami to Salvador and Horizonte, Dallas to San Salvador and Fort Worth to Madrid. All these flight destinations are accompanied by well trained flight attendants who ensure that customers’ requirements are met; the company views the flight attendants as important part of its quality product. Therefore concerning customer behavior and satisfaction, the company seeks to treat each customer with much respect and dignity. Customers are able to book flights through the company’s website and also they can buy products online (American Airline 2010).

In addition, American Airlines fleet is about 620 aircrafts, with phone handsets and full in-flight internet service using the Wi-Fi technology on its United States flights. This is a marketing strategy that enhances the services offered to its customers, especially the first-class passengers on very long flights. Many customers are business people whose high-priced tickets pay most of the freight. Since the aim of marketing is to meet and satisfy target customers’ needs and wants, there is a need to understand consumer behavior in relation to their buying process (Kotler 2003). Thus, the AA invented the AAdvantage flyer service so as to reward constant clients and improve brand loyalty. One such invention occurred in the early 1980s, when AA decided to offer free mileage credit to its customers by pioneering frequency program.

Moreover, the AAdvantage program is a traveler’s awards program in which the registered members earn miles every time they buy a genuine published fare ticket and fly on AA or any other subsidiary of the company; such as the American Connection and the American Eagle. However, because not every individual is a constant traveler, miles can also be received from non-travel related partners including retail partners. For instance, AA has moved towards partnership marketing by working closely with Boeing in designing airplanes that fully satisfy American’s requirements. Other business partners include Air Pacific, Jet Airways, Alaska Airlines and Gulf Air. This strategy has dramatically improved the image of the airline.

Also, AA is concerned with offering products and gifts to its customers in order to enhance the business objectives in a competitive marketing environment. Firstly, the Admiral Club Membership enables customers to have privileges like reservation assistance, computer and internet access, and exclusive special offers from other companies like the Hertz and the Sky Mall. Secondly, the credit card offered by the company presents customers with easiness of purchasing goods and services from AA. Thirdly, AA gift cards are essential for customers who would prefer sending gifts to their beloved ones. The gift card are purchased and redeemed through the company’s website, AA.com. And, fourthly, the airlines museum gift shop is a good place for selecting various gift products like jewelry, books, toys, prints and many more.

In the processes of enhancing customer loyalty to its products and brands, AA has been able to implement new ideas in the recent years. Among these ideas are: (1) to supply a power plug in first class so that the business person can work on the computer longer than two hours normally provided by a battery. (2) to offer an Internet connectivity with partial access to web sites and e-mail messaging. (3) to offer 24 channels to satellite cable TV. And (4) to offer several CD audio systems that let each passenger create a customized play list of music and movies to enjoy during the flight.

Internet Marketing Strategies

Through the analysis of the American Airlines and the way it uses the internet to support many of its promotion and distribution strategies, the following internet marketing strategies are essential to improve an organization’s performance:

Finding new target market

To successfully find new target market, a company will need to make sense of a lot of complex information which will need to be structured into an organized pattern that gives a good overview of the market place. The marketer will require detailed pictures of the environment in which the organization operates. Thus, there are several strategies for finding new target market: First, improving search engine ranking/optimization enables an organization to enhance the way customers navigate through their website and hence having most return customers. Since most people rely in search engines for their information needs, a search engine should be optimized so that the most relevant information about the company is readily available through search engines. In this case, a company must be able to choose the right search terms, allocate them to suitable web pages, and organize links from other web sites to fit the target search words and their pages. For the case of American Airlines, the company uses search terms like “AA” or “American Airlines” to improve its ranking. Second, a company may establish a pay per click (PPC) campaign to monitor visits to the website. This is a form of advertising in which a company pays for every click that leads to its website. PPC campaign requires selection of proper keywords so as to improve on traffic that achieves the organizational goal of having many customers or visitors.

Another target market strategy is setting up a high quality site with specific traffic and high frequency, these enable visitors to navigate through the website easily and make proper buying decisions. Furthermore, high quality content is a key to customer confidence of the company’s products and services.

Automated Home Based Business

Due to the internet automation technologies, an automated business is a strategy that enables firms to do more research on how their products and services are fairing. This strategy requires a careful consideration of the traffic and the website content. E-business technologies enable automation of front-office and back room tasks like counter operation, billing, security and order taking which enable an organization to do without clerical or accounting and facilitates a self service routine for organization’s customers (Feng Li 2006). The strategy orientation to customer experience uses supportive component of the experience environment that are customer communities and set of connected companies which enable unique value for each customer. Customers can request for information from the company and receive automated response through an automated responder system. Since American Airlines enable users to make reservations remotely, home-based resources are expanded hence creating business flexibility.

Selling products when people are online

This involves selling products through the company’s website. Customers can purchase items or make inquiry online. Selling in this concept requires a user friendly website with great sales letter, having high conversation rates. More so, a mailing list is incorporated so as to provide sales online and use the customer information to perform such transactions in future. Looking at the way American Airlines sells its products online, the company focuses on flight specific customers by enabling them to book reservations for their flight tickets.

Self-improved business

To succeed in enhancing an organization’s performance in the market environment, marketers should consider rethinking and redesigning their market structures. They should master the way of dealing with threats and opportunities in the market, join forums on marketing, learn new ideas through books and research. This is a gateway to improvement on the way marketing is carried out over the internet, hence internet marketing strategy.

Benefits of Internet Marketing Strategies

Taking advantage of the internet opportunities has become a major objective of companies involved in promotion and distribution of products and services. Thus, organizations can realize the following benefits by applying the strategies described in the previous section:

Decreased transaction costs: Through implementing an online selling system, the costs incurred in trading goods or services can be reduced. It is easy for a company to decrease the following costs: search and information costs, negotiating and assessment costs, policing and enforcement costs. For instance, advertising the company’s products and services through the internet enables it to reach many customers therefore enhancing product awareness.

Disintermediation: Through internet marketing, a business institution can be able to reach its consumers directly because the internet spans the world. In this case, intermediaries such as suppliers, distributors and retailers are reduced hence an easy management of supply chain.

Decreased use of cash: Handling cash poses a threat to many business organizations. But through online marketing, a firm can be able to implement electronic methods of money transfer. For instance, most supermarkets have implemented the use of credit cards for customers purchasing products online.

Speed: Electronic communications facilitates quick delivery of data from the source to destination. Since electronic messages are instantaneous, a customer may not wait for long in order to get the order details by post.

24*7 Operations: E-commerce systems have the capability of operating daily at any time. A company’s physical stores or markets do not need to be open daily for the consumers and suppliers to engage in electronic business.

Enhances telecommuting: Employees and other staff can be able to work away from their workplaces. This is enhanced through the advent of intranets and the Virtual Private Networks (VPN).

Conclusion

Companies invest in internet technologies since such strategies are presumed to be more profitable in the long run. Internet marketing has resulted to a number of effects that have changed the way marketing is done. This can be thought of as creating opportunities and challenges for organizations, industries, and their market. The impact of internet to business in the view of promotion and distribution of products and services, include: reduction of importance of economy of scale; lowing of market communication cost; great price standardization; reduction of the time required for information flow; temporary synchronicity; increased contact between seller and buyer; and change in intermediary relationship. Basing on American Airlines Company, this paper has discussed the various ways in which internet marketing has efficiently improved the way business is conducted. The best internet marketing strategies discussed are: finding a new target market through proper search terms, using automated home based business, selling products online, and implementing self-improved business.

References

American Airlines, 2010, American Airlines Advantage; Products and Gifts.

Barnes, S., 2007, E-commerce and v-business: digital enterprise in the twenty-first century, Butterworth-Heinemann, Oxford.

Coupey, E. 2004, Digital Business: Concepts and Strategies. 2nd Ed., Prentice Hall, New Jersey.

Feng Li, 2006, What is e-business?: how the internet transforms organisations, Wiley-Blackwell, New Jersey.

Haag, S, Cummings, M & McCubbrey, D 2002, Management Information Systems, 3rd Ed., McGraw-Hill, New York.

Kotler, P. 2003, Marketing Management. 11th Ed., Prentice Hall, New York.

Porter, M 1985, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York.

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