Many bloggers, such as Ben Sandilands in his post (http://www.crikey.com.au/2011/11/01/post-grounding-now-its-the-qantas-virgin-bidding-war/), have been commenting on the decision taken by Qantas Airways’ management to ground its fleet in response to industrial action.

The industrial action began with Qantas’ desire to cut costs to remain competitive. It needed to compete with low-cost airlines such as Virgin Australia, which has also just rebranded, changing its name from “Virgin Blue”. Virgin Australia recently moved in on Qantas’ very lucrative monopoly on business-class travel. Qantas is also suffering on international routes because the high Australian dollar has made Australian employees much more expensive and, therefore, less competitive. Additionally, the decline of North Atlantic economies has led to a reduction in tourists travelling from Europe and North America to Australia.

Qantas’ response to this situation has been to offshore jobs and to refuse the unions’ requests of a 5% wage increase (only around 0.4% above the Australian average increase). This led to various forms of industrial action, which began to damage Qantas’ brand. I recently experienced this first-hand as a passenger on a Qantas flight when a pilot expressed his opinions over the PA to all passengers. Qantas’ offshoring of jobs has caused significant damage to the airline’s reputation. Despite being known as “The Spirit of Australia”, Qantas is now regarded as cheap and somewhat foreign.

The situation for Qantas’ brand went from bad to worse when management decided to ground the entire fleet for two days. It was a shrewd move to force a stop to industrial action. However, the damage to the brand through interrupting the travel of 140,000 passengers seems immeasurably more significant than the benefit of stopping work. Politicians, media and the general public across Australia have attacked the actions of management, labelling it “un-Australian”. Qantas is now trying to recover through the use of promotions and discounts as a form of apology to the public for the disruption. However, even if it works, management’s attempts to remedy the damage will be very costly.

Sibin Fan (https://blogs.ubc.ca/sibin/) discussed the unusual move taken by Singapore Airlines (SIA) to only business class on their five A340-500 aircraft, which are used to provide a direct flight service from Singapore to both Los Angeles, and New York.

It is interesting to consider why SIA did this. They seem to have chosen a profitable market, segmenting based on centres with a high volume of frequent, wealthy, and business travellers. They are likely to be less concerned with prices, allowing SIA to charge more if they can provide greater customer value. Also, by attracting more wealthy, business people to Singapore, they may also be satisfying SIA’s majority share-holder, the Singaporean Government.

SIA’s high-end reputation helps position them for this, but there are two other attributes that add value for the target customer. SIA has increased the prestige of the flight by limiting the passengers to a wealthier clientele, which may be considered more desirable, and may make for a better networking environment. In fact, on their website (http://www.singaporeair.com/en_UK/flying-with-us/business-listing/all-business-class/) one of the three advantages they mention is the snack corner, where customers can go to socialise during the flight. Secondly, it has cut the travel time to New York by around 4 hours by flying direct compared to the alternative SIA route. By having fewer passengers on board, they have also reduced boarding and baggage unloading times. Both time saving measures are valuable for wealthy individuals and business people whose time has a high opportunity cost.

Financially, based upon information and my calculations, if SIA has created enough value for their market through this service to get a similar percentage of seats sold as their 3-class flight, it is likely that this will be a significantly more profitable venture, and also benefit them by building their relationship with wealthy, business clientele.

Last week I mentioned some of my favourite ads from Australia, but this week I would like to mention something I’ve noticed during my past year in Canada, loyalty rewards cards. Unlike Australia, it seems in Canada you need a card for every chain. It seems to me that this is really smart policy for several reasons, and it makes me wonder why Australian companies haven’t used it as much.

The points system is great for changing consumer decisions. Usually in Australia, when a store wants to attract customers to the store, or get rid of excess stock, the obvious choice would be discounting a product. Point based rewards systems make this considerably cheaper for the business. I would like to illustrate this through a real life example. I recently saw at Shoppers Drug Mart they offer 200 points if you buy two pieces of particular product (which cost around $5 each). At the Shoppers rate of 8000 points = $10 of Shoppers credit, this 200/8000 points = $0.25, which would be a fairly small discount on $10 of spending, though 200 looks like a big number. It gets even better for Shoppers! Unlike a discount, to ever use that $10,  I would need another 7800 points, which at the normal Shoppers rate for earning points of 10points/$1 spent means spending a further $780 if I want to ever see my $0.25, which means I have to be loyal to get that investment, and builds value for Shoppers in me as a customer. If I get 7800 points, a $10 store credit is also far cheaper for Shoppers than a $10 discount because presumably the goods cost Shoppers less than the $10 they retail for. Store credit also means one more trip to Shoppers. I’m likely to spend more than $10, and start racking up my points again. What a fantastic marketing idea, but a raw deal for customers!

My name is Adam Spottiswood, and this is my marketing blog.

I’m originally from Australia, but left soon after finishing high school to continue my study of Mandarin Chinese at Zhejiang University in Hangzhou, China for one semester prior to starting at UBC as an Arts student in September last year. I had a great time studying in Arts, but I love business even more, which led me to switching faculties.

To be honest, I’m taking this course because it was on a standard timetable that lets me sleep in until 12:30pm on Mondays and Wednesdays. Although I didn’t get a choice in whether or not to take Comm 296, I’m glad to be taking it. I’m still not sure what I want to major in, so it might have a chance to change my mind, and regardless of which area of business I focus on, I believe having a good understanding of marketing is very important.

Obviously I’ve experienced marketing as a consumer, but I’ve also got a little bit of experience of marketing as a student of the subject. In high school I studied marketing as part of Business and Management HL, and I also did my IA (the major assignment for the course) focused on a marketing decision of a local real estate agency. It was a great assignment, as it allowed me to get some real experience of surveying, and interviewing people, and looking at which means of advertising were the most effective. I also chose to focus my extended essay on a local business, which lead to similarly interesting experience.

When it comes to my favourite ad, theres a lot that come to mind, but for this I’d pick the “Not Happy Jan” ad for the Yellow Pages in Australia.  Its simple, funny, the phrase became very popular throughout the country, and is still used today. It seems to have worked very well at staying in people’s memory. However, I’m not so sure how well the Yellow Pages brand stayed linked to the phrase.

Some of my other favourite Aussie ads:

Sam Kekovich – Lamb: https://www.youtube.com/watch?v=PGZEBjzkZMg&feature=related
Telstra: https://www.youtube.com/watch?v=KHx_VXW-Xd8
Flashbeer – Carlton Draught: https://www.youtube.com/watch?v=esrNyIg_SMI
Big Ad – Carlton Draught: https://www.youtube.com/watch?v=eH3GH7Pn_eA
I Still Call Australia Home – QANTAS: https://www.youtube.com/watch?v=hbGuqmaDgLA

Something about me: I like to speak Chinese, so if you can speak it please come say “ni hao” sometime.