Image representing Amazon as depicted in Crunc...
Image via CrunchBase

In December last year, as major retailers in the US worried about “Black Friday” not arriving and cash registers not ringing, Amazon.com announced that it had its best year ever. Here’s the story and here are the numbers: Amazon reported that the buying was strongest on December 15 when they received 6.3 million orders, which according to the Dow Jones translates to a “record 72.9 items a second.” And this is not the first time Amazon has bucked the recessionary trend.

Amazon’s brand matters

The reason for Amazon’s success? It’s the Amazon brand that has done the work here. Had Amazon not established strong brand loyalty in good times, the customers wouldn’t have stood by it in bad times.  More importantly, everything about Amazon is based around customer experience, and everything is marketed to the customer well.

So what can airlines learn from the Amazon brand, to beat the recession? Here are three key lessons.

1. Build a distinct airline brand

If Amazon hadn’t established its brand as the first (and often last) stop for online shopping  —i.e., as the place to go for a huge segment of the online shopping population because of its value and consistency of shopping experience, it wouldn’t have reported rising sales when the overall online retail sales declined 2.3%. The key to it’s success? Distinctiveness.

Distinctiveness, or positioning as introduced by Reis & Reis, is what distinguishes a brand from another. For airlines these days, it’s something of supreme importance,  which cannot be ignored as flying becomes more of a commodity. Distinctiveness adds personality to a brand that resonates with its customer. Legacy carriers with a distinct brands? Singapore Airlines, Virgin Atantic and Emirates. Budget carriers with distinct brands? I’d rank JetBlue Airways, Virgin America, Kulula.com in South Africa and Indigo airlines in India among the top.

2. Everything is about customer experience

As a recent article at MarketingDoctor mentioned, everything at Amazon is built around the customer experience. The article states that “They follow up with emails on almost each shopping experience.  They guarantee what they sell and closely monitor vendors who sell through them.  They personalize the experience using consumer feedback, but they don’t hard-sell or over-sell based on this feedback, since they know that the successful online shopping experience is never coercive.  Most of all, they’ve done an excellent job of staking out their brand’s territory from the beginning and then sticking to it.”

I have often emphasized that airlines are in the travel services industry, not the transport and logistics industry. And once airline executives change their mindsets to this, they will start to value customer service much more. Again, airlines that successfully take care of its customers are often the most loved. JetBlue “following” its passengers on Twitter, KLM creating an online community for its frequent fliers and Indigo follwing up each booking with a personalized message has left deep impact on the customers.

3. Marketing is integral to the business

There aren’t any accidents in marketing.  Amazon isn’t the beneficiary of luck in this downturn either.  It’s the beneficiary of its own excellent branding strategy and a business model that has marketing built into its very core.

Airlines have often outsourced marketing, or have payed less importance to it as compared to operations and network. But the best airlines have integrated marketing in their global business operations. The best example? I’d say Emirates. Their advertisements on trains in Sydney, on malls in Toronto and on stadiums in the UK exude a consistency with the in-flight experience rarely associated with airlines.

—–

What do you think? What are some other things Amazon.com has done right, that airlines can learn from? Is there anything you disagree with? Let’s hear it in the comments section.

Reblog this post [with Zemanta]

Shashank Nigam

Shashank Nigam

CEO at SimpliFlying
Shashank Nigam is the CEO of SimpliFlying and a globally sought-after consultant, speaker and thought-leader on airline branding and customer engagement strategy. He is also the youngest winner of the Global Brand Leadership Award and has addressed senior aviation executives globally, from Chile to Canada and from Sydney to San Francisco.

Shashank's perspectives have found their way into major media outlets, including CNN Travel, CNBC, MSNBC, Bloomberg UTV, Mashable and in leading publications like Airline Business, ATW, Aviation Week, and others.

Shashank studied Information Systems Management and Business Management at Singapore Management University and Carnegie Mellon University. Hailing from India, he splits his time between Singapore and Vancouver, among other cities.
Shashank Nigam
Shashank Nigam
  • Marston Gould

    There are significant underlying differences between airlines and Amazon. 1st safety for customers is much lower issue. 2nd Amazon sells almost no products that expire if not used by a particular date. 3rd Amazons costs are not driven as significantly by unions or fuel costs. 4th Amazon has many substitutes for it’s core assets – technology and warehousing – airlines do not. 5th it’s a lot easier to fulfill something most of the time in Amazons business than fulfilling airline departure and arrival times. 6th Amazon is free to offer certain experiences at whim – airlines are not. Government regulations, port authorities, etc dictate much of the experience. 7th with few suppliers to airlines and many airlines it’s harder to differentiate product. Airline pricing is aggregated by agencies. Agent / price shopping models have not penetrated Amazon model significantly. 8th – Amazon doesn’t have to get most of it’s products approved before selling. Airlines are not free to just sell whatever routes they want. 9th Amazon is the only Amazon – there are too many airlines to achieve pricing power. 10th Amazon has not succumbed to the economics of it’s loyalty program. As consumer spending falls, airlines no longer make the money on the mileage sales to banks that they used to. If you compare airline websites – many are achieving strong sales online as a share of wallet. Only 3-4% of retail is online – 40-60% of travel sales are online – comparing apples and oranges.

  • Mel DePaoli

    It is more than just airlines that can learn from these simple concepts. Great article.

  • Sumit Roy

    Insightful article.

    I agree with Mel.

    Every category could learn from this article.

    In my experience the fundamental roadblock to good branding is the belief that the brand must belong to a “rational” product category.

    In truth, brands have emotionales. Products have rationales.

  • Carolyn Hawkins

    I agree with you – branding is everything and Amazon did it right..

  • Chris Cardillo

    I disagree. It isn’t their brand. I have worked with airlines. Several of them. I know that the biggest issue for them is the overhead cost of maintenance for the terminals, planes and staff. It is very expensive. Amazon has very little overhead. They can sell everything from books to Prada shoes. Airlines have one product and one method to sell it (only a few affiliates). Amazon has infinite products and uses thousands of affiliates that market it.

    Amazon is powered by the internet which is new commerce whereas airline is the old way of doing things. Brand helps a little, but it isn’t the brand that made amazon successful. It was novelty and being first major player to the internet shopping stage just like Ebay was the first to the online barter business. Airlines have tough rules and constraints, high overhead, limited growth opportunity, and tough competition. Back when things were regulated in airlines, then Brand did matter. Profits were guaranteed. Now companies can cut prices to the bottom.

    Of course brand really only matters when it comes to SAFETY. ValuJet crashed and so they changed their name AirTran so that their name wouldn’t be associated with Cheap and Dangerous. Eastern Airlines is a great Brand and the name is still for sale after 15 years of going defunct.

  • Matthew Nagy

    I do not think that airlines have the ability to really create a strong brand loyalty any longer with the advent of Kayak, priceline, and all of the other competitors.

    With big budget, high volume carries there is not much that they can in order to distinguish themselves enough to get customers to stick with only their brand, not the low-cost leader when they are looking.

    Sure, I’d rather fly Virgin America or JetBlue for domestic travel, but I don’t have a high willingness to pay a big premium on flight cost just for the experience. I think many feel the same.

  • http://www.clippingimages.com Fuad Ahasan Chowdhury

    Thanks Shashank Nigam for such nice sharing.. Actually I’ve heard a few things from here first and learned ;).

    Everybody have some limitations.. lack of good practice.. poor strategies and some others.. so anyone can learn GOOD thing from anywhere.. doesn’t matter what is the Industry and who is the people. thats it!

    Thanks
    Fuad
    http://www.clippingimages.com
    Clipping Path service provider

  • http://www.clippingimages.com Fuad Ahasan Chowdhury

    Dear Nigam, I don’t think these three lesson is for only Airline Industry.. GOOD thing always bring the GOOD result to any company in any Industry.

    I agree with the point “It’s the beneficiary of its own excellent branding strategy and a business model that has marketing built into its very core.” in Marketing is integral to the business section. Thanks for this nice article Nigam.

    -
    Fuad Ahasan Chowdhury
    Manager – Operations & Marketing
    http://www.clippingimages.com
    Clipping Path service provider

  • http://www.mondial-assistance.com.au Tanya McCaffrey

    Having worked for a low cost carrier in Australia (Virgin Blue) I totally endorse that branding is a leading factor. It sets an expectation in the mind of the passenger of the experience they will have – this for Virgin Blue was “fun and great service at a low cost without compromising safety”. However ongoing success comes from a) having staff/functions that meet and deliver that expectation; and b) the airline or companys’ desire to understand the needs of their customer. Once you start understanding your customer you can effectively cross sell and promote ancillary products which equals additional revenues and brings customer loyalty.

    It is this that Amazon does well.

    To finally add, it is revenue from ancillary products and repeat purchases from loyal customers of core products – that enable airlines and companies to support investment into their core business i.e. the running of an airline

  • Marston

    Sorry folks – having also worked at an airline that is heavily focused on brand in US (Alaska) – I can tell you most US carriers simply don’t have the cash to spend on branding. If you added up all the money that all the carriers in US spend on their marketing activities, you would be extremely surprised at how small it is. Only Southwest (who is sitting on a ton of cash) is able to do much in the way of advertising anymore. And all that branding exercise can be totally wiped out on one cold afternoon stuck on a tarmac for hours and hours. Look at JetBlue – once a darling, now just another fading star. Virgin America has by far one of the most differentiated experiences / brand images in US and its not helping them – their almost out of cash. Brand only takes you so far. If you can’t create a differentiated product – you’ll never survive. And being different simply isn’t enough – you need to be different in a way that matters to customers. All that wonderful messaging is just lipstick on a pig..

  • Dan Romanow

    The problem with the Airline industry is the lack of consistency. Every carrier changes their image, mission, positioning and strategy so often that consumers cannot establish trust in a certain carrier.

    From day one, Amazon has been about ease of use, and providing consumers with what they demand in the most efficient manor. May this be a lesson to the Airline industry – and all industries for that matter!

  • Saskia Bijkerk

    This was the first time I visited simpliflying.com . Very interesting site.

  • http://www.univbrands.com Sumit Roy

    Shashank’s article seems to have brought up a lot of misconceptions about ‘brand’.

    1. That building a brand needs a large advertising budget. (“Most carriers don’t have the cash to spend on branding” – Marston).

    The truth is brands can be built without using any “above the line” spends. I know examples like Google and Microsoft will be called new gen brands. But even old world brands like Harley Davidson and Disney have proved that they are not dependent on “advertising”.

    2. Branding is “lipstick on a pig”. (More Marston). Unfortunate misconception.

    Good brand strategy affects every aspect of the marketing mix. And in the 21st century, this includes 7Ps and not just 4: Product, Packaging, Pricing, Placement (distribution/channels), Promotion, Purchase Experience and Prosumer.

    Unfortunately 20th Century Marketers did use to look on the branding experts to come in only when they needed Packaging or Promotion. Today’s marketing experts look at the brand strategy before they design the product.

    3. Which leads to the point about “product differentiation”. This Marston has got right. Branding is about differentiation. An emotional truth that is relevant to the target consumer and not necessarily the product category.

    Virgin, the brand, works across product categories. So does Kingfisher in India. If Singapore Airlines ever opened other hospitality services, they would do very well indeed. If Lufthansa started a train service, people would believe that it would be on time and would be safe.

    A good brand strategy helps the products under that brand have a clear differentiation.

    A good brand also exists in the consumer’s heart. And that equity can be transferred to all the product categories that the consumer associates with the emotional values the brand represents for them.

  • Marston

    Its obvious to me that that probably none of you have ever really spent any time in a leadership position at any carrier. Yes, I realize that advertising is only one small piece of branding. The issue that none of you seem to understand is that you’re talking about an industry that loses money on over 90% of its customers during a GOOD economy, let alone a bad economy. Branding exercises – in any form – are not free. Creating a differentiated product – particularly with any efficacy, is not free. Creating services that are differentiated from competitors – is not free. Nor are airlines freely able to make the changes that they desire. And worse yet, study after study has shown that the payback for all these exercises are generally zero. Customers appreciate better product/service in the airline business, but as far as US domestic customers are concerned – no one will pay for it. Increase value by 10-30% and try to charge more and customers will abandon you. I’ve seen the data folks. There’s a reason that the only carrier that has consistently made money in the United States (or elsewhere for that matter) has been Southwest. Product – actually not that great. Differentiation – none – its service is basically the same as Airtran and a whole host of LCC. So how SW win? They don’t deal with agencies, they have a single product fleet – which requires lots of connections to make it across country, they take all the thrills out of flying and they get you there as quickly as possible. Even it that does mean treating people like cattle. Oh – yes – they spend enormous amounts of money on everything from lobbying Congress, to PR, to sponsorships, to advertising – at least relative to their peers. You people need to wake up and realize that airlines simply are not allowed to completely control their destiny, their product, or their differentiation.

    Yes you can add plugs to the seats and create a really cool looking interior for your planes. But services are often dictated by the unions or regulatory agencies or by the limitations of the manufacturers, let alone the negative ROI on the industry. Oh but don’t worry – we’ll make it up on volume.

    So let me give you some examples of basic economics of the industry:

    First off big airlines are able to negotiate better deals on the purchase of their raw assets – be it aircraft, ports, etc. If they centralize their aircraft purchases or build huge hubs they gain additional strength – but their are usually competitive limitations on both of these. Neither Boeing or Airbus produce a broad range of livery that can handle all situations. And concentrating your strength can also kill you if the city you’re in dies (ala Northwest in Detroit). For international carriers – old Michael Porter rules come into play – strength of nations. Why did we see such a rebound on a few european carriers? Well let’s see – maybe because they received direct and indirect funding from their governments. Lufthansa falls into this category. One of its huge stockholders is DP pension fund – which also happens to control DHL and several large shippers. It also has a lot to do with the relative strength of currencies and with the decrease of competition. (how many euro carriers went belly up – notice we don’t let that happen in the US).

    So after fixed costs – like gates and aircraft, carriers next have to pay off fuel bills. This is a penalty to all – although the further behind you get economically, the harder this becomes because – until recently – healthier carriers could offset fuel costs with hedges. Maintenance also becomes an issue – old carriers tend to keep their assets around trying to soak up every $ of revenue out of those aircraft that they can – but this means increased maintenance fees. So why don’t they just ditch the old airplanes. Well first, they don’t want to be flying against their own aircraft, second manufacturers can’t build more than 900-1000 new jets a year for everyone in the world, and third if they just reduce fleet size, their costs would rise. Rise by reducing? how does that happen?

    Like this – most carriers either have union employees or they pay their employees like union employees. Every year that a union worker works for a carrier – their pay goes up – both cost of living adjustments as well as grade adjustments – until they reach some cap 15 or 20 years hence. This tends to increase the average labor costs by 6-8% a year. So that means in order to keep unit costs level, carriers have to increase capacity by 6-8% a year (and thus hire in a bunch of newbies at the bottom). If they grow slower than this (or shrink) they are left primarily with older employees who sometimes are less productive and are always more expensive. Thus airlines add capacity all the time. Then you end up with too much capacity in the market, and prices fall. Doesn’t matter how differentiated your product is. If someone offers a fare of $49 one way – most people will abandon any brand. So must consumers in the the travel industry have no brand ties. None. The only thing that keeps them around are the complicated rules for achieving loyalty program status.

    After interest or lease payments, fuel, maintenance, gate and landing fees, labor costs – you are pretty much already flying people below cost. Now add in food, music, plugs, and any other service quality and you are in deep do do. Example Alaska Airlines spent a ton of money building a brand new check in experience at its hub in Seattle. Its actually a very nice experience. In fact, it is completely differentiated from just about everyone in the US. You can get from the in front of security to through security with a lot less stress and a lot greater speed than probably any airport in the country. What are customers will to pay for this improved experience. Nothing. Zip. Oh yeah, sure, Alaska makes more revenue per pax than most carriers – but this has nothing to do with their ‘brand’ as much as it does the fact that they are a near state supported monopoly in the state of Alaska. They only make money on a few routes south of Alaska and they lose money on far more. Same is true of most carriers.

    Then you throw in carriers like Jet Blue, Airtran, or Virgin. They are the darlings to start. Why? Well their planes are usually new – so low maintenance costs – on holiday so to speak. New planes are generally more fuel efficient – so lower fuel bills, and their labor is all brand new – so they are on labor cost holiday as well. But get into it 10 or so years as Jetblue and Airtran have and what you find is their costs rise, the money they can put towards a solid branded experience falls and all of a sudden that darling is a fallen star.

    I actually give Virgin credit for creating the most differentiated product experience in the US. Their loyalty program is the easiest to understand. Their flight experience is wonderful. And they certainly know their target audience – those whom a recession doesn’t bother – 30s to 60s, no little kiddos. Lots of techies. The uniforms, the PR, the advertising – its all very unique. And hey, they created a program for their front line staff that doesn’t require them to learn Sabre! Although to be fair, they did take some cues from the defunct brand experiments at Delta (Song) and United (Ted) as well as JetBlue. But no matter – give them 10 years of flight – particularly in the bad economy – and you’ll see Virgin ‘Red’ turn to blood.

    Don’t get me wrong – the central tenants of branding are correct. But its a little disengenous comparing Apple, Nike, Starbucks, or Amazon to other industries like Airlines. just as it is silly to even compare carriers like Singapore to American.

  • http://alwafeerair.com Mr. Manny Chia

    It is very interesting to know more about airline bussiness management. could you please email me on more detailed information. Thank you very much., I will base my personnal comment later on regarding the subject……….

  • Pingback: Amazon- Part 2 « Building your Brand for Tomorrow's Consumer

© 2013 SimpliFlying – Singapore | New York | Vancouver. All Rights Reserved.

󰁓
󰀰