developing the service marketing mix of azerbaijan
TRANSCRIPT
VYTAUTAS MAGNUS UNIVERSITY
FACULTY OF ECONOMICS AND MANAGEMENT
MARKETING DEPARTMENT
FARID VALIZADA
DEVELOPING THE SERVICE MARKETING MIX OF AZERBAIJAN
AIRLINES USING 7P’S
Master Diploma Paper
Programme: Marketing and International Commerce, State code 621N50005
Study Field: Marketing
Advisor: prof. Arvydas Bakanauskas
(degree, academic position, name, surname) (signature) (date)
Defended: doc. dr. Rita Bendaravičienė
Dean of the Faculty of Economics and Management (signature) (date)
Kaunas, 2016
2
CONTENT
SANTRAUKA……………………………………………………………………………………... 3
ABSRTACT………………………………………………………………………………………... 4
GLOSSARY OF TERMS………………………………………………………………………….. 5
INTRODUCTION…………………………………………………………………………………. 7
1. THEORETICAL ANALYSIS OF SERVICE MARKETING………………………………….. 9
1.1. Definition and characteristics of services………………………………………………… 9
1.2. Differences between goods and services……………………………………………….... 13
1.3. Service Marketing Mix – 7Ps of marketing……………………………………………... 15
2. ANALYSIS OF AZERBAIJAN AIRLINES SERVICES……………………………………... 21
2.1. Methodology of researches……………………………………………………………… 21
2.2. The overview of the company…………………………………………………………… 23
2.3. AZAL’s position on the global, regional and local markets…………………………….. 26
2.4. Analysis of AZAL;s marketing in customer’s opinion………………………………….. 28
3. PROPOSALS FOR SERVICE MARKETING MIX FOR AZAL USING MODEL OF 7PS... 39
3.1.Product…………………………………………………………………………………….. 39
3.2.Price……………………………………………………………………………………….. 42
3.3.Place………………………………………………………………………………………. 46
3.4.Promotion…………………………………………………………………………………. 48
3.5.People……………………………………………………………………………………... 50
3.6.Process…………………………………………………………………………………….. 52
3.7.Physical evidence…………………………………………………………………………. 53
CONCLUSIONS AND RECOMMENDATIONS………………………………………………... 54
REFERENCES………..…………………………………………………………………………... 56
ANNEXES………………………………………………………………………………………… 61
Annex 1………………………………………………………………………………………. 62
3
SANTRAUKA
Baigiamojo darbo autorius: Farid Valizada
Pilnas baigiamojo darbo
pavadinimas:
Azerbaidžano linijų paslaugų tobulinimas,
naudojant 7P marketingo modelį
Baigiamojo darbo vadovas: Prof. Arvydas Bakanauskas
Baigiamojo darbo atlikimo vieta ir
metai:
Vytauto Didžiojo universitetas, Ekonomikos ir
vadybos fakultetas, Kaunas, 2016
Puslapių skaičius: 68
Lentelių skaičius: 3
Paveikslų skaičius: 27
Priedų skaičius: 1
Pagrindinis baigiamojo darbo tikslas yra pateikti Azerbaidžano oro linijų paslaugų tobulinimo
pasiūlymų naudojant 7P marketingo modelį.
Teorinėje darbo dalyje yra analizuojama mokslinė literatūra, pateikiami paslaugų marketingo
apibrėžimai, atskleidžiami skirtumai ir specifinės prekių ir paslaugų charakteristikos bei nagrinėjamas
7P modelis, kaip įmonės marketingo efektyvumo didinimo priemonė.
Analitinėje baigiamojo darbo dalyje aprašoma Azerbaidžano oro linijų įmonė bei
išanalizuojama jos vieta vietinėje, regioninėje ir pasaulinėje rinkoje. Naudojant vartotojų apklausos
metodą nustatytos pagrindinės Azerbaidžano oro linijų marketingo problemos.
Projektinėje darbo dalyje, remiantis įmonės vartotojų tyrimu, suformuluoti Azerbaidžano oro
linijų paslaugų kokybės tobulinimo pasiūlymai naudojant 7P marketingo komplekso modelį.
Baigiamasis darbas apibendrinamas pateiktomis išvadomis ir rekomendacijomis.
4
ABSTRACT
Author of diploma paper: Farid Valizada
Full title of diploma paper: Developing the service marketing mix of Azerbaijan
Airlines using 7Ps
Diploma paper advisor: prof. Arvydas Bakanauskas
Presented at: Vytautas Magnus University, Faculty of Economics and
Management, Kaunas, 2016
Number of pages: 68
Number of tables: 3
Number of figures: 27
Number of annexes: 1
The main aim of the diploma paper is to make the proposals for service marketing mix for
Azerbaijan Airlines using model of 7Ps in marketing. The first chapter represent the theoretical
analysis of the scientific issues that include the overview of definitions of service marketing,
underlining the differences between some specific characteristics of goods and services and analyzing
the mechanisms and features of 7Ps model in the service marketing mix as an efficient instrument for
company‘s marketing. Second chapter include the overview of the company and identifying its place
on the domestic, regional and global market, and followed by market researches using survey method
to define the current problem Azerbaijan Airlines has to deal. The third chapter provides proposals for
the service marketing mix for Azerbaijan Airlines in the frame of 7Ps and basing on the researches
made among the passengers of the airline. The diploma paper is summarized by conclusions and
recommendations.
5
GLOSSARY OF TERMS
Service - service is “any act or performance that one party can offer to another that is essentially
intangible and does not result in the ownership of anything. (Kotler, 2013).
Intangibility - is used in marketing to describe the inability to assess the value gained from engaging
in an activity using any tangible evidence. It is often used to describe services where there isn't a
tangible product that the customer can purchase, that can be seen, tasted or touched. (Bowman, 2009)
Perishability - one of the four fundamental characteristics of a service, it refers to the fact that (in
general) services cannot be produced and stockpiled (inventoried) before consumption: they exist only
at the time of their production. (Bowman, 2009)
Variability of services associated with inability of their standardization. Also due to the big share of
the human factor the quality control can becoming very difficult. (Huotari, 2012).
The marketing mix - is a business tool used in marketing and by marketers. The marketing mix is
often crucial when determining a product or brand's offer, and is often associated with the four Ps:
price, product, promotion, and place. Now 3 more elements are added: process, people, and physical
evidence. (Kotler, 2013).
The service marketing mix is also known as an extended marketing mix and is an integral part of a
service blueprint design. The service marketing mix consists of 7 P’s as compared to the 4 P’s of a
product marketing mix. Simply said, the service marketing mix assumes the service as a product itself.
However it adds 3 more P’s which are required for optimum service delivery. (Bryson. 2011)
Survey research is a method of collecting information by asking questions. Sometimes interviews are
done face-to-face with people at home, in school, or at work. (Hague, 2012).
Questionnaire - a set of printed or written questions with a choice of answers, devised for the purposes
of a survey or statistical study. (Hague, 2012)
Airline - an organization providing a regular public service of air transport on one or more routes.
(Hoffamn, 2010).
Aircraft - an airplane, helicopter, or other machine capable of flight. (McCarthy, 2010)
Customer - is the recipient of a good or a service, or a product, or an idea, obtained from a seller,
vendor, or supplier via a financial transaction or exchange for money or some other valuable
consideration. (Bolton, 2010)
6
Product - is anything that can be offered to a market that might satisfy a want or need. In retailing,
products are called merchandise. (Kotler, 2013)
Price - is the quantity of payment or compensation given by one party to another in return for goods or
services. (Christopher, 2012)
Marketing channel - is a set of practices or activities necessary to transfer the ownership of goods
from the point of production to the point of consumption. It is the way products and services get to the
end-user, the consumer; and is also known as a distribution channel. (Bryson. 2011)
Distribution - is the process of making a product or service available for use or consumption by a
consumer or business user, using direct means, or using indirect means with intermediaries. (Bowman,
2009)
Customer support - is a range of customer services to assist customers in making cost effective and
correct use of a product. It includes assistance in planning, installation, training, troubleshooting,
maintenance, upgrading, and disposal of a product. (McCarthy, 2010)
7
INTRODUCTION
Nowadays air transport is rapidly growing branch of service sector. Its development
interdependently determined by general changes and progress trends of the global economy. At the
same time the growth rate of air transportation industry and its market has a strong impact on the
economic development of the world economy. It is based on complex means of locomotion, navigation
and ground handling, and requires the involvement of large capital and highly skilled personnel. Air
transport together with information technology is referred to as basic infrastructure of globalization.
From the other side globalization has big influence on this kind of transport and make all airline
companies act in the conditions of global competition. This fact means that companies providing air
transportation services has to operate on many markets at the same time and deal with constantly
changing business environment that require creating strong and flexible marketing strategies with the
help of different marketing tools.
Relevance of the topic. Air transport is very capital-intensive and complicated in managing
branch of economy. To be efficient and attractive for investments airline companies has to make many
efforts to match the demand with supply, to create and use their competitiveness for increasing their
market share and getting new customers. People began to use air transport more and more often what is
connected with the growth of people’s income and understanding such main advantages of this mode of
transportation as speed, comfort and safety. However, at the time when travelling by plane is not
something new and unusual any more, customers became more demanding to the services they get.
Availability of the information on the Internet and experience helps people to find the most appropriate
means of transport for them with acceptable prices and services. In such situation airline companies
should become more customer-oriented, offer the comprehensive, variable product that will meet the
customer’s requirements. For creating such product, special marketing tools are needed. One of such
tools that considered as effective and corresponds to the characteristics of service sector is marketing
mix used by managers and marketers all over the world.
Despite the leaders in air transport are usually the companies form big developed countries, on
the regional and even continental level there are companies that play significant role in providing
transport services and becoming more than complementary for the regional transport communication
networks. The example of such company is Azerbaijan Airlines that works on its marketing policy to
improve its services and to gain a foothold in the air transportation market.
8
Scientific problem. Azerbaijan Airlines wants to increase its market share and competitive
position by getting new loyal customers with the help of improving features of its services and ways
they are provided. To do this the matching of consumer’s needs and offered product is needed.
Object of the work – Azerbaijan Airline’s marketing mix components (product, price, place,
promotion, people, process, physical evidence.
Aim of the work - using model of 7Ps in marketing make the proposals for service marketing
mix for Azerbaijan Airlines.
Main objectives:
1. To identify the meaning of service and importance of services marketing,
2. To analyze the core of 7Ps marketing mix model and its place in services marketing of
transport companies,
3. To make an overview of Azerbaijan Airlines and identify its key issues that influence on
marketing operations,
4. To make the proposals for Azerbaijan Airlines service marketing using marketing mix.
Logical structure of the work. The work includes three main chapters. The first chapter is
presentation of theoretical background of service marketing that refers to identifying the meaning of
services and the particular qualities of marketing services with an emphasis on the service and
especially transport sector. The second chapter intended to analyze the present state of the company, its
position on the market, main factors this position is affected by and problems that company has to deal
with. The third chapter contain proposal for service marketing mix for Azerbaijan Airlines with the
using of &Ps model.
Methods and techniques – analysis of the scientific literature, journals and Internet sources,
survey, analytical methods of inductive and deductive thinking.
9
1. THEORETICAL ANALYSIS OF SERVICE MARKETING
1.1.Definition and characteristics of services
During the second half of 20th century, there was a significant increase of service sector (tertiary
sector) in almost all economies. Especially intensively, service sector was progressing in developing
countries where it now takes around 70% of economies. The highest share of tertiary sector according
to the last data is in Hong Kong – 92, 8%, on the second place is United Kingdom and Netherlands –
79, 6%, and on the third place is France – 79% (fig. 1). China has the rate 48, 4% that had been grown
by 109% over the last quarter of the century (McDonald et al, 2011)
Figure 1 Size of service sector (% of GNP for different countries) in 2015
Source: the figure has been created by the author, based on the data from CIA World Factbook (2016)
Increasing of service’s significance in the economy related to gradual changes in the structure of
consumption, income growth and changes in the relative labor productivity (Waters, 2010). Firstly,
growth of population’s income causes the growth of consumption of agricultural and industrial
products. Later further growth of people’s income and amount of free time leads to their interest in
different services such as for example entertainment and leisure, travelling, health care etc. Likewise,
92,8
79,6
79,6
79
77,6
76,3
76,2
74,8
74,2
72,2
71,9
70,5
70,2
69,1
69
66,3
60,4
59,7
59,7
54,4
48,4
Hong kong
United Kingdom
Netherlands
France
United States
Denmark
Singapore
Spain
Italy
Japan
Brazil
Canada
Finland
Germany
New Zealand
Australia
Argentina
Russia
South Korea
India
China
10
with the economy’s development such sectors as banking, insurance, investment, accountancy and
legal services becoming an essential and indispensable part of life. In the whole world people are
becoming more and more engaged in the production of "intangible" goods that should satisfy the
demand for traditional services (medicine, education, public governance) and for new services
(computers, information, communication, business) (Hoffman, 2010). To understand the growing
meaning of the services and their core the author will try to analyze what definitions different scholars
give to that term.
According to American classic of marketing science Philip Kotler (2013) service is “any act or
performance that one party can offer to another that is essentially intangible and does not result in the
ownership of anything. Its production may or may not be tied to a physical product”. A service can be
also defined as “an activity or series of activities of more or less intangible nature that normally, but not
necessarily, take place in interactions between customer and service employees and/or physical
resources or goods and/or systems of service provider, which are provided as solutions to customer
problems” (Gronroos, 2015). A. Payne (McDonald et al, 2011, p. 27) underline that the service is any
activity that contains an element of immateriality, which consists in influencing on customer or object
or property in his possession, but that does not provide to the transfer of ownership rights.
Most of definitions that describe service may be divided on three types: exhaustive, negative and
constructive (Kapoor et al. 2011). Exhaustive definitions are based on the counting business activities
that refers to service sector. Negative definitions say that service activities is everything but the
producing of material goods. Constructive definitions base on potential (the ability of people and
machines to provide services), service delivery (steps), the result (product material). (Hoffman et al.,
2010) In this way, services usually considered as an intangible product, a special kind of value in use,
which is produced by human labor.
List of economic services is quiet big, it includes, for example: banking, consulting, accounting,
dispute resolutions and prevention, construction, education, construction, transport, health care,
information services, communication, insurance, tourism, personal grooming and so on.
Depending on the recipient and the character of the services, they can be divided into 4 basic types
(Harris, 2013): consumer services, business services, public services and other complementary
services. Consumer services provide services to individual consumers in case they want to consume it
and have possibility to buy it (e.g. education, health, retail, leisure). Business services aims to simplify
other businesses and in the main include professional, financial and transportation services. Public
services are provided by government in order to supply a commodity (as electricity or gas) or service
11
(as transportation) to any or all members of a community (Needham, 2011).
There are four characteristics of services offered by Kotler and Keller (2007): intangibility,
inseparability, variability and perishability. Intangibility often means that the consumers have
difficulties to assess and to compare them. Services cannot be stored or easily presented. Usually
consumers assess services with the help of the price or delivery time of that service. There is bigger
risk and bigger importance of personal sources of information during the process of decision making
then when consumers have to deal with the material goods (Berry L. et al., 2011). In many cases the
service provider uses tangible products together with intangible and also they can be complementary.
For example, quickly working and modern computer will be associated with quick qualitative Internet
connection or good-working computer games. Hospital with modern equipment is perceived as the
place with good healthcare services. Beautiful renovated university building with laboratories, gardens,
and sports centers will be associated with proper education. Sometimes there is no possibility to show
the service before buying it, no possibility to see or to check it before using. Buying the ticket to the
plane customer buy a promise that will get the service offered by company. For making a decision
people are guided by the opinion about the company, price, and material conditions of providing that
service. And only after purchase and consumptions customers may share their expectations about
consumed service.
As services are intangible, there is a unity in place, size and time of service’s production and
consumption, which define the service’s inseparability (Bryson, 2011). Additionally services are
inseparable from their means of production and from the customer's experience connected with them
(U.S. International Trade Commission, 2015). This characteristic require that a consumer interact with
its producer to receive its benefits. For example, haircut cannot be made without customer’s
participation or communication service cannot be provided without people who want to communicate.
The process of providing the service also depends on the place it is produced, what increase the
importance of producer’s location and its equipment (as an exception telecommunication, television,
information services (Kamin, 2006). The unity of the place, time of producing and consumption causes
the situations when consumer establishes contact directly with its producer and sometimes make a
decision about buying some services only when he knows that it will be realized by certain company or
person (doctor, lawyer, musician, actor etc.).
Variability of services associated with inability of their standardization. Also due to the big share
of the human factor the quality control can becoming very difficult (Huotari, 2012). If the customer
partly decide about the content of the service then the services with the same name may differ
12
depending on staff qualifications and time of producing (Mohamad, 2010). The bigger participation of
consumer and staff during the time of service’s realization leads to bigger variability and uniqueness of
the service. Despite the difficulty of service’s standardization, there are attempts to do it in hotel
business, transport and commerce.
Perishability related to inability to spare services as the consequence of their immateriality
(Bolton, 2009). Producers cannot store the services, because their production exists only in the service
process. An important feature is the space determination – arrangement of certain service’s demand and
supply due to natural conditions, climate, border limitation and so on (Harris, 2013). Supply and
demand can change relating to the seasons, months, holidays or working days, hours etc. Services has
different demand elasticity (e.g., bank, tourism, entertainment services have high elasticity and
transport services has low elasticity). Services are characterized by a diversity of supply and demand as
well as their substitutability and complementarity. The mobile nature of the supply is associated with
the possibility of adjusting supply to changes in demand. Services are "pure", but there are also those
that occur with a certain degree of material factor, or even lie on the border between services and
industry (e.g. construction services).
As field analyze in the second chapter will be connected with the company that provides transport
services it is important to know some specific characteristics of transport services. Technical and
technological specifics of transport of transport service influence on the features of marketing strategy
on the transport market. There is some characteristics of transport service that are linked with its
intangibility (Zeithmol et al., 2010): impermanence, the integrity of the process of production and
consumption, failure to store this specific product, heterogeneity, inseparability with the producer,
limited possibilities for standardizing. Mentioned characteristics are important for marketing activities
and use of marketing-mix instruments. In marketing activities connected with transport service
specialists should (Zeithmol et al., 2010):
- pay more attention on human resources then tangible ones;
- put a strong emphasis on the proper selection and training of staff in contact with customers;
- realize on both sides of the market (demand and supply) adjustment activities.
For marketing name and brand of transport service is also important. Those factors increase the
customer’s confidence in the company that produces services (Coyle et al., 2009). That confidence
plays a special role in transport sector. Transport service can be defined as product produced and
offered by carriers and forwarding companies, travel agencies and other subjects that cooperate with
them (Christopher et al., 2012).
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Additionally services provided by other agents are also significant. For example, travel agencies
gives to the potential passengers recommendations and information about possibilities and types of
travel, book the places for them, sell tickets, organize transfer form and to airport and so on.
Summarizing services are becoming crucial in a country's development, including for the
achievement of the Millennium Development Goals, such as poverty reduction and access to basic
services, including education, water and health services (UNCTAD, 2015). Understanding the meaning
of services companies began to pay more attention on service marketing.
In the late 1970’s and early 1980’s, a handful of marketing scholars started forming a new school
of thought for marketing concentrating on services because the classical marketing axioms were based
on the exchange of physical goods, which could not provide a sufficient understanding on services
(Grönroos, 2007). Researches in service marketing were provided independently from the main science
and later marketing theory adopted to services began to be used for goods marketing.
For effective and appropriate marketing, it is important to distinguish difference between goods
and services within analyzing and using similarities between them.
1.2. Differences between goods and services
Goods and services has many significance differences that are important in management and
marketing activities. Kotler (2007) identified 4 categories that represent the difference between “pure”
service and “pure” product. First category is “a pure tangible products” when no services are bought
with the service (e.g. milk, eggs or iron). Second category is “a tangible product with accompanying
services such as commissioning, training, maintenance” when the offer has built-in services to enhance
its customer appeal (e.g. computers, cars) (Hendrickson, 2012). Third category is “a service with
accompanying minor goods (or services)” when the offer is basically a service but has a product
element (e.g. airlines offer inflight meals, or entertainment). The fourth category is “a pure service,
where one buys expertise” when the offer is a stand-alone service such as psychoanalysis (Ward,
2008). The basic features that shows the difference between goods and services are represented in the
table 1.
Table 1
List of goods and services features
Services Goods
A set of economical intangible and functional
products
A set of economical tangible products
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Cannot be stored, it is a stream of economical
products
Either stream or resource; can be stored
Exists as an abstract product (result) at the
output of the production system; service
delivery has productive character
Occurs as objectified tangible product (result)
at the output of the production system; a
process of producing products has productive
character
There are no property rights to the services,
services cannot be the subject of contracts of
sale, acts of inheritance, donation
There are property rights: goods may be sold
and purchased
Consumption is usually separated from
production
Consumption often happens at the same
moment as production
Diversified Identical
Cannot be returned Can be returned
Source: the table has been created by the author, based on Mendel, 2012
Despite variant nature sometimes the difference between goods and services becomes less discrete.
The distinction between services and manufactured products has become increasingly blurred as many
manufacturing companies have seen the opportunity to add services to their portfolios (Moeller, 2010).
For example, the company BMW that produce cars also produce for its customers the service of
transportation. Also some products has characteristics that make impossible assign them only to goods
or to services (Waters, 2010): data is intangible but can be stored at the same time and except this its
consumption is usually separated form production.
Marketing of goods and marketing of services are based on different rudiments, but nowadays
marketing of services seems to be appropriate also for the marketing of goods. Such statement is linked
with new service-dominant logic. Authors of service-dominant logic, S. Vargo and R. Lusch (2008), try
to prove that “services are more prevalent than goods and goods need to be considered as a ‘medium’
for a firm’s service”. According to their theory all firms provides services. Even those that produce
typical goods indirectly always produce some service. The possibility of using service marketing
approaches for marketing of the goods is explained by two important concepts – customer as co-
producer and value-in-use (McDonald, 2011). Customer may acts as a co-producer not only in service
sector, but also in other material sectors, as by using goods and giving feedback customers may help to
change, adopt and improve some goods. Value-in-use model Company’s role in the value creation is to
support the customers’ processes by offering resources into them. Resources can refer e.g. to personnel,
15
machinery, service setting, or to available information sources.
Still a lot of economists underline that there is a difference in tools used for good marketing for
the companies that produce services or that ones that produce goods. Such tools that are used by
marketers throughout the world will be described in the next subsector.
1.3. Service Marketing Mix – 7Ps of marketing
Nowadays consumer has the central importance in the economy. Companies knows that if they
want to sell their goods or services they should produce something that will meet the needs of the
consumer. To match the organization’s capabilities with the needs of customers in order to achieve the
objectives of both parties is the purpose of marketing (McDonald et al., 2011). Important thing is to
provide consumer satisfaction by the nature of produced service or by its using. It is impossible to
create goods or services that will be good for all types of consumers, but at least company can find the
group of customers whose needs are most compatible with the organization’s strengths and future
ambitions (Bowman, 2009). As the business environment is changing all time the matching that was
mentioned before and that compose the core of marketing is very complicated and needs continual
researches and actions. The set of instruments that help to match organization’s capabilities with the
needs of customers and “to the right product in the right place, at the right price, at the right time” is
marketing-mix.
First using of the term “marketing-mix” was offered by Borden (1965) and consisted of 12
elements: product planning, pricing, branding, channels of distribution, personal selling, advertising,
promotions, packaging, display, servicing, physical handling, fact finding and analysis. In 1960
McCarthy offered the model of marketing-mix consisted from 4 controllable variables the company
puts together to satisfy a target market: product, price, place and promotion (first letters of those
variables made the often used synonym of marketing-mix – 4Ps).
Later economists began to criticize 4Ps model and underline that that there is a high degree of
dissatisfaction with the 4Ps framework (Rafiq and Ahmed, 1995) as according to scientists it was more
production-oriented than customer oriented model. The rethinking of 4Ps showed that service
marketing needs different decisions than product marketing.
Three new elements were added to 4Ps marketing mix: people, physical assets and process
(Kubicki, 2015). In such way new model that is in a better way adopted to service marketing appeared
– 7Ps marketing mix. According to diploma’s objects author will characterize all those seven elements
that will be used lately during researches. Marketing mix 7Ps consists of product, price, place,
promotion, people, process, physical (evidence) (Lin, 2011) (fig. 2)
16
Figure 2. 7Ps marketing-mix model
Source: Lin (2011)
Product involves introducing new products or improving the existing ones (Zimuto, 2012).
Company has to offer the product that will meet the needs of the consumers. In aim to do this marketer
should make an extensive research on the life cycle of the product.
The importing thing is to care about the quality if the products. Marketing people should
research about their service quality level in relation to needs and demands of customers and how much
they can pay (Alipour and Darabi, 2011). Marketers should make the consumers familiar with the
(service) product level by the service marketing informative media or tools. But what is the need and
demand of customers are should be considered as the (service) product with good quality in a suitable
and proper situation and in a reasonable price the contemporary marketing people are trying to discover
the new ways to improve the (service) product, situation, price and its enhancement and also for
gaining the customers satisfaction from their product quality (Gillespie, 2014).
Every transport service is consist from the next components (Lauterbach, 2009):
The area of transport (e.g., urban, suburban, local, interregional, international);
Distance of transportation;
Rapid of transportation (e.g., ordinary, express)
17
Nature of transport (e.g., individual, collective, corporate, specialized)
Other quality parameters requested by the passengers (e.g., the level of comfort and
safety)
Transportation services have their value in use and the value expressed in money. Buyer that
estimate offered transport services, make a deliberate choice of a trip that meets their expectations
(Bowman, 2009). Auxiliary services also have significance meaning.
Price determines firm’s profit and survival, but also be competitive on the market. Setting the
price of the product influences on the efficiency of the whole marketing strategy (Blythe, 2009). The
perceived value that the product offer should be considered, especially if the company is new on the
market.
The price for transport service can be the price that was negotiated freely - determined as a
result of an agreement between the seller and the buyer (Zeithmol, 2010). Additionally the price can be
established as the rate of transport tariffs – the one that is determined and published in the list of
existing prices for services provided by the transport company For example, on the market of airline
services IATA tariff system with wide range of special fares dominates. Tariff rates are differentiated
by the transport distances or the weight and value of shipped goods.
Process of price setting should take into the account the reaction of the consumers on the
relation between service’s characteristics and its price (Goi, 2009).
Prices are a key positioning factor and must be decided in relation to the target market, the
product and service assortment mix, and the competition (Lauterbach, 2009). All retailers would like
high turns x earns (high volumes and high gross margins), but the two don’t usually go together. Most
retailers fall into the high-markup, lower volume group (fine specialty stores) or the low-markup,
higher-volume group (mass merchandisers and discount stores) (Waters, 2010)
Place refers to the certain place where the potential customers can buy the product and how the
product reaches out to that place (Kotler, 2007). At this stage it is very important to find and analyze
appropriate target markets.
Transport services should be enabled for purchase for potential customers with the help of
distribution channels. The following elements impact the forming of distribution channels (Williams
and Fair, 2011):
temporal and spatial distribution of demand in the transport market;
structure, size and dynamics of demand for different modes of transport, represented by
carriers and companies organizing transport processes
18
the preferences of buyers of transport services, tourism, shipping, etc., and the real
possibility of acquiring those services;
system of competitive relations and the strength of the market impacts individual
instruments of price and non-price competition, including advertising and innovations.
Distribution channel in the transport sector is an organization of services sales that covers all
objects offering these services to the buyers (Hughes et al., 2014). These objects, depending on their
role, are grouped in different kinds of combinations. They are connected in a definite manner and occur
in a specific order, creating different links of the distribution channels.
Offering transport services to the buyers requires taking into consideration such factors as the
location of the sale, the size and type of sales; forms of operations, range of additional services
(Christopher, 2012).
The transport service itself does not create market offer, this service must be available to buyers
- there should be possibilities of purchase at the time and place appropriate to customer's needs and
requirements (Coyle, 2009).
For transport service’s producer price is one of the most important economical factor that
impact on their revenue (Williams and Fair, 2011). Producers and sellers of transport services are
strongly limited in increasing of their revenues by usual increasing of the price as price elasticity on the
transportation market is very significant (Ross, 2014). For consumers the price is the factor that forms
the size of expenses according to consumer’s transport needs.
Promotion is connected with different ways of communicating with the customers to inform
their about the product’s characteristics, uniqueness, advantages of purchase that product. Promotion is
comprised with sales organization, public relations, advertising, sales promotion. (Kapoor,
2011).Combination of promotional strategies and how the company act depends on its budget, the
message it wants to communicate, and the target market has.
Promotion of transport services is based on the impact on their customers, giving them the
information about the characteristics, quality and benefits arising from the acquisition of these services,
reminding and encouraging purchase (Dethloff et al., 2013). It is also a way of company's
communication with the environment in order to create for him a competitive advantage in the market.
The purpose of the promotion of transport services is to overcome resistances and prejudices of their
customers, as well as the creation of demand for new services (Moller, 2010).
Diversified promotional purposes on the transport services market requires careful selection of
promotional tools, which include: advertising, acquisition, public relations and publicity, sales
19
promotions, sponsorship (Lauterbach, 2009). The use of that forms and promotion's techniques depends
on the promotional purposes of a transport company and the specifics of the various promotional tools:
the type of market, life cycle of services and promotion budget (Berry, 2011). The specificity of
advertising on the market of transport services is caused by their immateriality and lack of presentation
of the service before consumption. Offering sales idea or concept is a difficult task, so transport
services are advertised in an indirect way often by promoting the benefits associated with the
acquisition of services (Richter, 2011).
People linked with the customers, employees, management and other persons that take part in
service production and consumption. In many cases customers doesn’t separate goods or services form
the stuff that provide them with certain products, so the reputation of company’s brand sometimes very
strongly depends on the personnel (Armstrong, 2013).
In transport services choice of transport workers who have direct contact with consumers
should take place by taking into account certain criteria (Williams and Fair, 2011): psychophysical
qualities of the candidate, vocational preparation guaranteeing high professionalism, competences and
presence. The scope of training includes not only knowledge of the services provided, but also the
ability of professional negotiations. Workers should have positive attitude to customers.
Process refers to the methods and process of providing a service. The process of delivering the
product or service, and the behavior of those who deliver it, are crucial to customer satisfaction
(Kubicki, 2015).
Physical evidence is connected with experience of using a product or service (Shanker, 2008).
The customer doesn’t know how good the product will be. It will be revealed after purchase, with
condition of taking a risk. Uncertainty of the potential customers can be reduced by showing them the
references of other customers, presenting portfolio or creating a special image of the product.
Though, many scientists use marketing-mix as an effective and tested marketing tool there is
some criticism about it. A. Möller, (2010) underline that marketing-mix is internally oriented and
doesn’t take under the consideration the customer behavior. Moreover this model regards consumers as
passive, what reduces interaction between customer and buyer. Marketing-mix is based more on
management experience, attention and sometimes ignore theoretical background. Also it does not offer
help for personification of marketing activities.
Airline industry has its own special components of marketing-mix (Charoensettasilp and Wu,
2013):
1. Product – ground and inflight services, design, quality, range, brand name and features.
20
2. Place - distribution channels, methods of distribution, coverage, location, online 24 hour
reservation system, consolidation, tour operator/travel agent,
3. List price, discounts, commissions, surcharges, extras, premium pricing, value for money
pricing, cheap value pricing, low cost pricing and apex fares,
4. Advertising, airlines advertisements needs to keep in mind the image of the country, the
scenic beauty, tourist attractions, rich cultural heritages or places that would attract a
number of tourists, advertisements, receptionist, travel agents and media.
5. People - competence, reliability, caring attitude, responsiveness, initiative, problem solving
ability, goodwill,
6. Process - reservation, flight information, facilities at the airport, baggage handling, meal
service, flight entertainment and deliver quality service,
7. Physical Evidence on the ground - booking offices or ticket counter, paperwork, brand logos
and tickets. In-flight: aircraft, seating configuration, good inner-exteriors, cleanliness,
uniforms, ambience, baggage and labels or tag.
Summarizing, marketing mix is considered by marketers and managers all over the world as a
basic tool for targeting the market, creating strategic plans and promoting their products. This model is
changing as new important components appear that should be taken under consideration in order to
provide successful and perspective business activities. Airlines companies as representatives of
transport service sector have very complicated market conditions what make them to do significant
efforts to act on that market and to lead. Complexity of airlines service is explained by intricacy of
services they provide as they obtain sometimes very big spatial range can be dangerous for people’s life
and demand high-cost and high technological machines within high qualified personal. Basing on
service marketing rudiments companies should be also very consumer-oriented and understand the
needs of their customers to be successful. Next chapters will show more fully the possibilities of using
7Ps marketing mix in airline industry.
21
2. ANALYSIS OF AZERBAIJAN AIRLINES’ SERVICE
MARKETING
2.1. Methodology of researches
Before creating proposals for the service marketing mix for Azerbaijan Airlines that should be
the tool for increasing market share of the company by getting new customers and improving its
services, it is important to reveal through objective and systematic analysis the current problematical
issues that company has to deal with. For the solving of the scientific problem, that author determined
in the introduction of the master thesis, certain research methods will be used.
Market research is a vital component in many marketing processes and decision-making. For
effective marketing it is not enough for managers and marketers to base in their actions on intuition and
hunch – they should have additionally data that shows actual situation on the market. As author in
creating marketing mix will deal with existing product on existing markets, market research may help
to measure customer satisfaction to find out how to maintain competitive advantage. Usually two types
of methods are used to collect and analyze primary and secondary data – quantitative and qualitative.
Qualitative methods offer a diagnostic understanding of what is wrong while quantitative methods
provide hard data across different respondent groups that can lead to specific recommendations with
measures that may be used as controls to determine the effectiveness of actions (Hague et al., 2012).
Secondary market research is based on analyzing already available information from different
sources (e.g. internet, government data, office data, newspapers, magazines etc.). The internet sources
play here a significance role because only there we can find the actual information about AZAL, its
products, market, and competitors and so on. Primary market research is made by the author himself
and based on gathering new data with the help of such quantitative method as online survey.
Survey is usually determined as method of gathering information from a sample of individuals
(ASA, accessed on 12-03-2016). Isaac and Michael (2008) underline that survey research is used “to
answer questions that have been raised, to solve problems that have been posed or observed, to assess
needs and set goals, to determine whether or not specific objectives have been met, to establish base
lines against which future comparisons can be made, to analyze trends across time, and generally, to
describe what exists, in what amount, and in what context”. According to K. Kraemer (2011) survey is
used to quantitatively describe specific aspects of a given population. Surveys helps to make
generalizations, to evaluate attitudes, but still they provide estimation for the real population, not exact
measurements.
22
Different scientists (Polland 2005, Kraemer 2011, Glasow 2010) describe from four up to eight
stages of survey research process. The model author found appropriate to the needs of the research and
that was used for collecting primary data is model with nine steps (S. Guyette, 2006). Those steps are:
1. Define Purpose of Study,
2. Locating previously conducted surveys in similar topic,
3. Deciding on the type of survey design,
4. Select the sampling method,
5. Deciding on a method of collecting the data,
6. Conducting of the pretest,
7. Collecting the data,
8. Follow-up,
9. The analysis of the data.
First step on way to effective research is defining its purpose. All collected data should relate to
specific purpose and, in this case, the purpose is to find out what problems Azerbaijan Airlines’ product
has and that should be solved by creating proposals for 7P marketing mix. The goal of the survey is to
evaluate different elements of the AZAL’s services (product, place, promotions, price and others) and
the objective is to measure customer’s satisfaction of those services.
Second step is locating previously conducted surveys. This step helps to check similar surveys
and to understand the logic of questions and kind of questions asked to obtain similar purposes as the
current research has. Before designing the questionnaire author analyzed first of all surveys conducted
by different airlines in order to organize feedback and measure customer’s satisfaction.
Next important step to accomplish the goals and objectives of the research is deciding on the
type of survey design. On this stage appropriate survey design should be chosen. As in this research
author plan to explore the current problems of the company a cross-sectional survey was used. The
cross-sectional study is a type of observational study that involves the analysis of data collected from a
population, or a representative subset, at one specific point in time (Schmidt & Kohlmann, 2008). But
usually measuring of customer satisfaction is connected with longitudinal survey that is repeating every
certain period of time and helps to monitor the effectiveness of marketing strategy and its
implementation.
Fourth step is selecting the sampling methods. This step should rely on logic and judgment and
also be related with the type of survey design. The target population in the research is people who ever
purchased Azerbaijan Airlines services so they have experience to evaluate different elements of the
23
company’s product. As the way of the selecting from the population the respondents is not random, it is
a nonprobability method (Yin 2014).
Fifth step is deciding on a method of collecting data. To reach as many respondents as possible
especially when the research is realized far from the main target audience of the company the best way
to collect data is the questionnaire. The questionnaire is a set of questions that are answered directly on
paper or online by the respondent (Polland, 2005). Questions are represented by highly structured
responses in closed form. Most of questions are close-ended with unordered choices (multiply choice
questions) – respondent offered to compare responses and choose one of them. There are also questions
that evaluate different objects and events by using numerical scale (1-5) and questions that measure
responses to analyses or proposals – the respondent compare its own views to the ideas presented in the
question statement (Flower and Floyd, 2009).
To reduce possibility of problems before the actual data collection the next step is needed –
pretest. Questionnaire was read by the author, consulted with the teacher and given to some
respondents to see if questions are clear and complete.
The seventh step includes the process of collecting the data. Author used online Google surveys
to make the questionnaire and to send it to chosen target population. This tool is very convenient in use,
allow to design different types of questions, easy in sending by post or social media by using lists.
Additionally Google surveys help to analyze collected data. It helps to realize the eighth step – follow-
up thanks to the counting of fulfilled questionnaires. It is important to explain to the respondents the
purpose of the research and maintaining its confidentiality. The survey took place in March 2016.
There were sent 364 questionnaire and get 246 responses.
The last step is analysis of the data in order to make certain summaries. The data was collected
mostly in numerical format (percentage of responses) and represented with description and analysis
with the help of diagrams in the last subsector of the second chapter.
2.2. The overview of the company
The history of the company is tightly connected with the history of Baku Airport and the
development of the aviation in Azerbaijan. The first plane flew over the Baku took place over one
hundred years ago in 1910 and 13 years later aviation transport got official status - the Caucasus Joint
Stock Company of Civil Aviation ZAKAVIA was founded by the Mughan Melioration Construction,
the Caspian Shipping Company and AzNeft (Azerbaijan Airlines, 2016). In the beginning the
objectives of the company was aerial photography, delivering of the emergency loads and mail.
24
First passenger flight was committed on the route Baku-Tbilisi-Baku in April 1923, but regular
flights began after building the Kishly Airport in 1926 and had the aim to connect recreation and
tourists places on Caucasus: Mineralniye Vody – Grozniy – Makhachkala – Baku – Yevlakh – Tbilisi.
In 1929 new international route appeared Kharkov – Baku – Pehlevi, later in 1933 first flights to
Moscow and afterwards to Rostov and Astrakhan took place (Azerbaijan Airlines, 2016). Thanks to the
fast grow of air transportation the Baku airport received the status of a separate economic unit. Before
II World War the development of aviation in Azerbaijan was accelerated by the finding new oil fields
in the sea.
New stage in the history of Azerbaijan’s civil aviation fleet began in the 1970-80s form the
building new airports in Ganja, Yevlakh Naftalan, Nakhchivan, Zagatala, Lenkoran, Agdam, Agstafa
and Sheki (Azerbaijan Airlines, 2016). So all big cities and all regions were connected with the capital
by air routes. But the collapse of the Soviet Union caused hard times: cooperation links were lost,
hardware supplies were cut off, aircraft were aging and becoming outworn, good specialists with bug
experience were leaving the sector and there was no possibility to train new ones.
Subsequently the situation changed when President Heydar Aliyev invested 200 million $ in
civil aviation. New aircrafts were bought (e.g.: Boeing-757), the air traffic control equipment was
updated, new system of education and personnel training appeared. But the biggest incentive was the
opening of the international airport terminal in Baku that now accommodates planes from around 60
airline companies from all over the world.
In 2008 according to presidential decree the governmental company “Azərbaycan Hava Yolları”
was changed to Closed Joint Stock Company “Azərbaycan Hava Yolları” (eng. Azerbaijan Airlines or
AZAL) (Azerbaijan Airlines, 2016). Company was actively engaged in fleet renewal and increasing the
quality of its services. In 2010 exchanged two Boeings 757 to one 767-300ER with more extended
range and refused to use all planes of Russian production (1news.az, 2016). In 2011, 2013 and 2014 the
air fleet replenished with new aircrafts - Boeing 767-300ER, Airbus A340, Boeing 787 Dreamliner
(Vesti Kavkaza, 2016). For initial training, retraining and advanced training of members of the crews
and ground personnel in 2010 the aviation training center (AZAL Training) was established (AZAL
Flight Training Center, 2016).
The company owns 6 (Baku Heydar Aliyev international airport, The Nakhchivan airport, The
Ganja international airport, The Lankaran airport, The Zaqatala airport, The Gabala airport, fig. 3) from
11 airports (not including 4 military airports) in Azerbaijan and all of them has the status of
international airports (Azeraijan Airlinrs, 2016). The biggest and the most modern airport is Baku
25
Heydar Aliyev international airport that serves approximately 1 million passengers over a year
(terminal building area is 12 000 m², complete apron area is 163 000m². Baku Airport is the base hub
of the Azerbaijan Airlines national flag carrier and Silk Way Airlines (Baku Airport, 2016).
Figure 3. Airports of Azerbaijan
Sours: Maps of the World, accessed 15.03.2016 http://www.mapsofworld.com/international-
airports/europe/azerbaijan.html
Azerbaijan Airlines carries out flights to 36 cities in Europe (London, Paris, Frankfurt,
Barcelona, Kiev and others), Asia (Bishkek, Being, Tehran, Dubai and others) and North America (New
York) (fig. 4).
Figure 4. Map of AZAL’s flights
26
Source: Azerbaijan Airlines, Map of Flights, accessed 15.03.2016 https://www.azal.az/jumies/map/index.html
Big investments and ongoing development and improving of aircraft, infrastructure and
personnel was noticed and awarded by influential and well-known in the airline industry British
consulting company Skytrax. National carrier AZAL got prestigious "4 Star" rating (scale is from 1 to
5) (Azerbaijan Airlines, 2016). The rating was made by judging more than 800 criteria. There are only
38 airlines in the world that got such rate what underline the progress AZAL had for last years.
The company has a wide range of services. It provides catering services offering different menu
that depend on the class (economy, business, VIP), duration of the flight and destinations. Also there is
possibilities of special orders for vegetarians and children. Aircrafts has passenger entertainment
system – common for economy class and personal for business and VIP class. In common there are 4
classes that varies by the type of seats, priority of check-in, access to special lounges in the airport,
availability of personal assistance services, allowance of additional luggage, and type of meals: VIP-
club, Comfort-club, Business class and Economy class (Azerbaijan Airlines, 2016). Additionally
AZAL publishes a magazine 6 times per year.
. As many other airlines AZAL has its own Frequent Flyer Program – “AZAL Miles”
(Azerbaijan Airlines, 2016). Customer may get additional services or benefits if he is a member of the
program. To do this customer has to collect certain amount of points every of which has its value
depends on the flight, agent the used during purchase and so on.
Summarizing Azerbaijan Airlines is fast growing national company that works on it image and
continuous improvement of services investing in modern aircrafts, airport infrastructure and training
on-board and airport personal and follow its mission “ to make flight unforgettable”. All that factors
helps it to play a significance role on local and regional market of air transportation services.
2.3. AZAL’s position on global, regional and local markets
Azerbaijan Airlines is the main airline company in Azerbaijan and the main “player” on the
local market. For a long period of time it was public company and even after it became closed joint
stock company the influence and support of government is still significant. Two companies Turan Air
(charters) and Imair Airlines has ceased to exist first one in 2009 and second one in 2012 (Airline-
Inform, 2016). So AZAL became a monopolist on the Azerbaijan market, especially in flights inside
the country.
Mass media very often accuse AZAL of seeking to limit the activities of other airlines by
increasing airport taxes (especially it impairs low-cost carriers) (Azerbaijan News Network, 2016). For
example, Wizzair stopped to realize flights from and to Baku explaining it by the unacceptable changes
27
in the contract from the side of AZAL’s representatives (Mediafax, 2016). Despite this fact, many
airline companies choose Baku airport as one of the best and the safest in the region, high airport taxes
limit their number or cause increasing of their services. In such a way AZAL control 60% of air
transportations in Azerbaijan. Being a monopolist has its advantages and disadvantages. AZAL as a
monopolist rises the prices and customers still buy the tickets as they don’t have another choice.
Nevertheless, raising of prices without increasing in demand for the product destabilizes the economy.
In the long term, a company can get the losses because of the incorrect politics of the prices. Customers
also looking for cheaper places pay attention on the airlines of neighbor countries – Georgia and
Armenia.
To analyze the position of AZAL on the regional and global market author will use ratings
made by Skytrax that prepare annual Worlds Airline Awards for airline industry using the airline
passenger satisfaction survey (World Airline Awards, 2016). AZAL refers to the World’s Top Airlines
and was on 69th place in 2012 and 2013, on 72th place in 2014 and on 66th place in 2015. The
neighbors of the company in the rating list are Alaska Airlines (USA). Southwest Airlines (USA),
Transareo (Russia).
Azerbaijan Airlines got 2nd place as World’s Most Improved Airlines after Air France that is on
the 1st place (World Airline Award, 2016). This award represents the change in the rating among the
airlines and refer to companies that achieved the highest upward rating improvement across the
different survey categories.
Additionally AZAL was recognized as one of the best companies in air industry in Central Asia
and India – it got 3rd place after Air Astana (Kazakhstan) and IndigGo (India). The same award
company got in nomination „The Best Airline Staff” (World Airline Award, 2016).
Azerbaijan Airlines and Azerbaijan airports have very big potential and meet all modern
requirements in civil aviation that is why it has strong position on local and regional market and also
noticed by international awards. But being monopolist in Azerbaijan and trying to decrease the number
of the competitors on the market AZAL may have certain problems in the future. It is important to
understand the advantages of competition and market laws. Still AZAL according to the official
information and world ranking is rapidly growing company with many positive characteristics. To
confirm or refute this fact, the analysis of AZAL’s activities and strategies will be made by using
customer’s survey.
2.4. Analysis of AZAL’s marketing in customer’s opinion
28
Before making proposal for the service marketing mix using 7Ps model it is important to define
the problems company has to deal collecting and analyzing primary data. Customer’s opinion about
AZAL’s product, prices, distribution, promotion, personnel, physical evidence and process will show if
current marketing strategy meet the needs of customers and reveal the issues that should be changed in
order to increase effectiveness of company’s activities and customer’s satisfaction.
During research it was collected 246 responses form the persons that ever flew with Azerbaijan
Airlines. 75% of respondent were male and 25% were female predominantly in the age younger than
25 years (68,8%) and 25-35 years old (31,3%). Most of respondents are employed (42,5%) or students
(46,3%) originate from Azerbaijan (83%), Russian Federation (5%), Ukraine (4,5%), Lithuania (3,5%),
Georgia (2%) and Poland (2%), and currently living in Azerbaijan (65%), Lithuania (10%), Estonia
(6,5%), Great Britain (4%), Turkey (3%) , Russian Federation (3,5%), Poland (3%, Germany (2%),
Italy (2%), USA (1%).
Respondent that were offered to fill in the questionnaire mostly traveled in the economy class
and only small percentage in the business and first class (fig. 5), so it should be taken into consideration
that evaluation given by them will concern first of all the services in the economy class. 50% of the
audience use AZAL as a carrier at least once per year, 30% less than once per year and only small
percentage of respondents once per half a year (12%) or even more frequently once per 3 month (4%)
and more than once per 3 month (4%)(fig. 6). Men in the age 25-35 years has the highest frequently of
flying with AZAL (85% of the respondents that fly once per 3 month).
91%
5%4%
Economy class Business class First Class
29
Figure 5. Types of classes’ respondents flew in with AZAL
Figure 6. Frequency of respondent’s flights with AZAL
Substantially customers remain neutral to the AZAL’s services (41, 8% of respondents) or
somewhat satisfied (32, 9%). The most satisfied category of respondent are employed women in the
age of 35-45 years – 74% of them are somewhat satisfied. Just 11, 4% of respondents are extremely
satisfied and 6, 3% are extremely unsatisfied (fig. 7). Such situation indicates that while the majority
has positive attitude to the company and its services there are factors that impede the full satisfaction of
the purchase. Nevertheless, 37, 5% of people are sure that they will fly with this company again and
40% will most probably will fly with Azerbaijan Airlines again.
According to research 21, 3% of respondents will definitely recommend AZAL to their friend
and relatives, 43, 8% will most probably do it and only 5% will not definitely do it.
Figure 7.The level of respondents’ satisfaction from flying with AZAL
30%
50%
12%
4%4%
less than once per year
once per year
once per half a year
once per 3 month
more than once per 3 month
11%
33%
42%
8%6%
extremly satisfied
somewhat satisfied
neutral
somewhat dissatisfied
extremly dissatisfied
30
Below results of the research will be analyzed according to model of 7P.
Product. Respondents chose four most significant for them factors that influence on their
choice of airlines (fig. 8): schedule (time and dates of flights play significant role, because they are
chosen by customers according to their needs and possibilities), ticket price (most of persons are aware
of low-cost companies, hot offers, so they become very demanding and always look for better offer),
punctuality (if the customer pay big sum for flight to get somewhere in-time and in comfortable
conditions he appreciate the lack of delays) and in-flight catering (concerns first of all long flights).
Figure 8. The factors that have the biggest influence on choosing airline
AZAL’s customers in common evaluate its in-flight and on-ground services more or less
satisfied (4 or 5 according to 5 scale). Respondents are very satisfied by the safety, ambience and
comfort of the flight and less satisfied by in-flight connectivity, catering and on-board entertainment
(fig. 9). In case of on-ground services most liked by respondents are checking and transportation of the
luggage and transportation of the luggage - these services totally satisfied the customers (fig. 10). Less
positive assessments got waiting lounges, check-in time and transportation to the aircraft. Billing and
payment and duty free shopping got the biggest amount of negative ratings (fig. 10).
0 10 20 30 40 50 60
Schedule
Punctuality
In-flight catering
In-flight internet
In-flight entertainment
Frequent flyer programme
Ticket price
Airline image
%
31
Figure 9. Evaluating of in-flight services of AZAL
Figure 10. Evaluating of on-ground services of AZAL
According to respondent opinions the most important factors that effect on their perception of
the AZAL are first of all aircraft quality and interior (45,5% of respondents confess it as one that made
the biggest positive impression), on-time performance (29,9%) and customer interaction (24,7%).
Aircraft quality and interior is more important for young people 15-25 years old – 91% of them choose
that factor. Employed men 35-45 years old mainly appreciate on-time performance (76% of them chose
that factor).
As it turned out half of respondent are aware of AZAL’s Frequent Flyer Program, but 36% does
not have a need to use it as they fly with that company not so often to have possibility to get benefits
0
5
10
15
20
25
30
35
Catering On-boardentertainment
In-flightconnectivity
Safety Ambience andcomfort
%
1- totally unsatisfied. 5 - very satisfied
1
2
3
4
5
0
5
10
15
20
25
30
Check-in time Checking andtransportation of
the luggage
Transportation tothe aircraft
Billing andpayment
Waiting lounges Duty freeshopping
%
1-totally unsatisfied, 5 - very satisfied
1 2 3 4 5
32
from the membership (fig. 11). Another half of the respondents have never heard about this program,
but still 25% of them claim that membership in it will not effect on their choice of Azerbaijan Airlines.
Figure 11. Awareness of AZAL’s Frequent Flyer program among respondents
Similar situation concerns another product of the company - AZAL Miles Mobile App is used
only by 6, 4% of respondents, 39, 7% don’t have a need to use it and 53, 8% have never heard about
this application. The low awareness of company’s products points on insufficient efforts in their
promotion.
Price. As it was represented before price is one of the most important factors that affect the
choice of airlines and that was confirmed by 55% of respondents (fig. 12). 35% of them think that it is
important when price correspond to quality and can be higher if the quality of services is appropriate
(fig. 12). Only for 2% the price doesn’t have matter – the most important is to get to desired
destination. For 57, 7% of peoples’ price is very high and for 29, 5% is high. Evaluating the prices
respondents shared their opinion about the competitiveness of the AZAL’s prices – for 47, 4% of them
they are not competitive and for 34, 6% they are more than competitive. This opinion is very subjective
as it depends on the process of airlines respondent usually use.
14%
36%
50%
Programme is known byrespondent
The respondent doesn't needto use it
Programme is unknown byrespondent
33
Figure 12. The importance of the price for respondents
As most of respondents assess prices as too high 65% underline that process should be lower for
the provided services and 24% are ready to deal with those prices in case if they will obtain more
additional services (fig. 13). Only 7% think that prices correspond to the provided services and do not
have to be significantly changed (fig. 13).
Figure 13. Respondent’s opinion about price changing
Place. Planning a purchase respondent prefer to do it on AZAL’s website (42% of them usually
buy tickets on official website) (fig. 14). Nevertheless significant part of the persons (17%) buy tickets
through usual and online travel agents trying to simplify the process of purchase and looking for
additional benefits as, for example, discount for hotel’s stay or parking facilities. 11% buy tickets or get
55%35%
8%
2%
the most influencing factor
price should correspond toquality
the main factor is the qualityof services and availabledestinations
price doesn't have matter,the main thing is to get todesired destination
24%
65%
4%7%
prices should obtaine moreservices for the same price
prices should be lower thanfor the provided services
prices can be higher but withmore additional services
prices correspond to theprovided services
34
them in the travel department of the companies they employed, 9% use airline sale office and only 4%
do it at the airline desk in the airport (fig. 14).
Figure 14. Places of purchasing AZAL’s services by the respondents
Airport is important element in all process of transportation service and has big impact on
customer’s satisfaction. Respondents evaluating the airports they departure and arrive are
predominantly satisfied by their infrastructure. Most appreciated elements that brought the biggest
satisfaction are flight information screens, availability of baggage carts and trolleys, short waiting time
in checking queue and Internet access (fig. 15). Less satisfying for respondents are ease of finding the
way in the airport, courtesy and helpfulness of airport staff. Parking and eating facilities, internet access
was unsatisfied for the biggest amount of respondents (fig. 15).
Figure 15. Places of purchasing AZAL’s services by the respondents
9%
11%
4%
17%
42%
17%
airline sale office
company travel department
airline desk at the airport
travel agent
airline website
online travel agents
0
5
10
15
20
25
30
35
Park
ing
faci
litie
s
Ava
ilabi
lity
of
bag
gage
caer
t/tr
olle
ys
Wai
tin
g ti
me
inch
ecki
ng q
ueu
e
Ease
of
fin
din
g th
e w
ayth
rou
gh a
irp
ort
Flig
ht
info
rmti
onsc
reen
s
Co
urte
sy a
nd
hel
pfu
lnes
s of
th
eai
rpo
rt s
taff
Res
tau
ran
ts a
nd
oth
erea
tin
g fa
cilit
ies
Ava
ilabi
lity
of
ban
k/A
TM/m
on
eych
ange
rs
Inte
rnet
acc
ess/
Wi-
FI
%
1 - totally unsatisfied, 5 - very satisfied
1
2
3
4
5
35
Promotion. The main source of information about the company, its services and promotions is
Internet (37% of respondents, fig. 16) and foremost webpage of the company, where customers can
find complete information about the carrier, its fleet, safety, panel of reservations. 27% of respondents
knew about the company from friends and listen to their opinion (fig. 16). Alternative sources are travel
agencies (12%), poster and banners (15%) and television (9%) (Fig. 16).
Figure 16. Sources of the information about AZAL
Research showed that respondent are interested in such forms of promotion as price reduction
(36%), competitions and price draws (29,3%), bonus pack deal (25,3%), free products or gifts (8%) and
cause-related and fair-trade products/services (1,3%). More detailed the possibility of implementing
them in the AZAL’s strategy will be described in the third chapter.
People. Evaluation of the personnel on different stages of service’s purchasing shows that
respondents highly assess all type of staff, but especially crew staff (25% assesse it as very
professional) and airport staff (24% assessed it as highly professional) (Fig.17) . High evaluated were
personnel of sales offices (31% assessed it as professional), online and telephone support (26 and 24%
of respondent assesse it as professional) (Fig 17). Still the biggest amount of the negative assesses
refers to telephone support and airport staff. Characteristics that were attributed to personnel
friendliness (56, 2% of responses), hospitality (53, 4% of responses) and enthusiasm (20, 5%) (Fig. 18).
37%
27%
12%
15%
9%
Internet
Friends
Travel agencies andtravel portals
Posters and banners onthe streets and in theairports
Television
36
Figure 17. Evaluation of the staff during purchasing process
Figure 18. Staff’s characteristics according to respondents’ opinion
Process. Assessing the whole process of realizing services produced by AZAL respondents
underline first of all the process of buying is easy, but slow (46, 7%) or satisfied them totally (32%).
The customer support is every evaluated as average by 40% of respondents, as very satisfactory – by
36% and as excellent by 12% (Fig. 19). Similar assess concerns the promptness and accuracy of
baggage: 37, 3% - very satisfactory, 36% - about average, excellent (18,7%).
0
5
10
15
20
25
30
35
sales office crew staff airport staff on-line support telephonesupport
%
(1-incompetent, 5 - very professional)
1 2 3 4 5
53,4
20,5
56,2
3,5
16,4
12,3
2,7
0 10 20 30 40 50 60
hospitality
enthusiasm
friendliness
well-educated
ignorants
unfriendly
caddish
37
Figure 19. Evaluation of customer support
Physical evidence. Important role for creating the feeling of the comfort and safety plays the
aircraft. All offered to the respondents characteristics of the AZAL’s airplanes were highly assessed,
especially seats (29% of responses “very satisfied”), illumination and temperature (30% of very
satisfied respondents) and ease of movement (30%) (Fig. 20). From another side the less satisfying
elements of aircraft according to a significant part of aircraft were seats and multimedia (Fig. 20).
Figure 20. Evaluation of airplane facilities
Most of respondents positively evaluate the design and informativeness of tickets and printed
material: 40% - about average, 42% - very satisfactory, excellent (12%) and services are less satisfying
for 6% of respondents (Fig. 21)
12%
36%40%
7%5%
excellent
very satisfactory
about average
somewhatunsatisfactory
very poor
0
5
10
15
20
25
30
35
seats multimedia WC Illumination &temperature
Ease ofmovement
Place of handluggage
%
1 - totally unsatsfied, 5 - very satisfied
1 2 3 4 5
38
Figure 21. Evaluation of design and informativeness of AZAL’s ticket and printed materials
Performed research helped to analyze weaknesses and strengths of the Azerbaijan Airlines
defined from the consumer side. The basic issues that should be taken into consideration during the
building of marketing mix for AZAL are:
- as ticket price is an important factor that strongly effect on the choice of airline company, very
high prices of AZAL are not attractive for customers and they evaluate them as non-competitive
comparing to other companies; from another side AZAL is a monopolist on Azerbaijan market and
very often consumers don’t have a choice. Besides the common satisfaction by AZAL’s services
customers offer to provide more services for the exciting prices or provide sales promotions and reduce
them,
- some products of AZAL such as Frequent Flyer Program and Miles Mobile App are very
badly known by the customers and assessed as useless for those who heard about them; that fact signals
about the need to modify those products and promote them in a way to persuade customers in their
benefits,
- on-board entertainment was evaluated by customers as less satisfied than another services
(refers first of all economy class) and the improving should be considered,
- despite the positive rating of AZAL’s staff (on-board and on-ground) low satisfaction by crew
personnel and customer support shows the gaps in customer service.
AZAL is a strong rapidly developing company with a strong position on local and regional
markets that takes into account new technologies and high international standards of air transportation.
But still modifying of marketing strategies according to market researches is important step for
expansion and progress.
12%
42%
40%
3% 3%
excellent
very satisfactory
about average
somewhat unsatisfactory
very poor
39
3. PROPOSALS FOR THE SERVICE MARKETING MIX FOR AZAL
USING MODEL OF 7P
3.1. Product
As it was stated before the aim of the work is to make the proposals for service marketing mix
for Azerbaijan Airlines using model of 7Ps. Previous researches of customer’s opinion about AZAL on
the base of survey method helped to identify main problems that the company has to deal with now. So
the results of the researches of AZAL‘s customers opinion will be used by the author to make such
proposals for service marketing that will help to make the work of the company more efficient and
increase its competitive position on domestic and abroad markets. 7P marketing mix is used as
appropriate model for allocating the resources among the various competitive devices in the company.
Customers are mostly satisfied by the services of Azerbaijan Airlines or has neutral attitude.
That fact shows that the product that the company created meets the requirements of the customers, but
in order to make the level of satisfaction higher and to enhance the repurchase some changes should be
made.
According to results made by the author during the analysis of customer’s opinion of
Azerbaijan Airlines, one of the most important factors that influence on the choosing airline is schedule
that represent the time and directions of the flight. Looking for the flight people try to find the most
optimal option to save time, money and to get good services. AZAL works mainly on the market of
Europe and Central Asia. Citizens of Azerbaijan has a limited choice of airlines to and from Baku,
because, as it was mentioned before, AZAL is monopolist on its domestic market. From one side it
leads to significant market share, but from another side leads to unsatisfying the customers, because
they don’t have another choice and forced to adjust to company offer. Still various directions allow to
get to most popular destination in Europe, Asia and even North America (New York). AZAL should
work on opening new destinations. Airport Council International (2016) published the ranking of the
busiest airports in 2015 that also represent the most popular directions in the world (fig. 22). AZAL
has flights to 5 of those directions: Frankfurt, Istanbul, Paris, Dubai, Beijing (fig. 4, 22). As fig. 4
shows very perspective for the company can be such directions as Amsterdam, Singapore, Shanghai,
Hong Kong and Tokyo especially the last four as centers of world economics and considering the
increasing cooperation between the Near East, Central Asia and Western Asia. The entering on
40
American market is irrational as AZAL is too small company for it and the market is overfilled by big
local and European companies.
Figure 22. The world airport traffic ranking
Source: the figure has been created by the author on the base of Airport Council International (2016)
Passengers appreciate the comfort, ambience and safety of the flight, but are not completely
satisfied by in-flight connectivity and on-board entertainment. Of course, the level of satisfaction is
often depends on the class people choose and researches made by the author in the second chapter
shows in a greater extent opinion of passengers that used economy class. Business class is equipped in
personal, portable media players, but economy class has only some common screens and magazines.
To meet the needs of passengers in entertainment AZAL can implement the on-board Wi-Fi and
popular now among leaders of airline industry - wireless inflight entertainment portals. Such portals are
about expanding the “standard” product with services such as online shopping and reservations,
destination information, real-time travel information and seat-to-seat chat (Airline Trends, 2016). The
standard of economy class doesn’t include the necessity of personal devices, but company should meet
the needs, satisfy their customers and provide them with digital content such as movies, books,
magazines, that will be available 24h before and during the flight. AZAL should equip seats in
charging devices, which are in high demand. In the era of dependence on electronic devices offered
0 20 40 60 80 100 120
Hartsfield-Jackson Atlanta International Airport…
Beijing Capital International Airport (PEK)
Dubai International Airport (DXB)
Chicago O'Hare International Airport (ORD)
Tokyo International Airport (HND)
Heathrow International Airport (LHR)
Los Angeles International Airport (LAX)
Hong Kong International Airport (HKG)
Paris Charles de Gaulle Airport (CDG)
Dallas/Fort Worth International Airport (DFW)
Istanbul Ataturk Airport (IST)
Frankfurt Airport (FRA)
Shanghai Pudong International Airport (PVG)
Amsterdam Airport Schiphol (AMS)
John F. Kennedy International Airport (JFK)
Singapore Changi Airport (SIN)
101,5
89,9
78,5
76,5
75,5
74,5
74,9
68,2
65,7
64,5
61,5
61,5
60
58,5
56,5
55,5
Number of passengers, million
Air
po
rts
41
changes will increase the passengers’ satisfaction and consequently enhance to buy AZAL’s product
again.
Important element of AZAL’s product is Frequent Flyer Program called AZAL Miles Program.
Frequent Flyer Programs has their advantages and disadvantages that AZAL should take into
consideration (fig. 23).
Figure 23. Advantages and disadvantages of Frequent Flyer Programs
To increase the awareness of the program and make it more useful for the passengers AZAL
should work on improving its Frequent Flyer Program. Next changes are proposed by the author for
this purpose:
1. Replace the way of awarding travel points – now points are given for every 1€, but
experience of many companies shows that more liked by the customers and more useful is
giving points for certain amount of miles. Especially this system is appropriate for AZAL,
because it provides flight for long distances,
2. Gathered points can be used only for free tickets and upgraded in membership. AZAL can
offer exchanging points for additional services and products – discount for hotels, car
renting, entrance tickets to museums or theaters, discounts for food services. This will
interest the customers and bring to the company additional income form cooperating with
certain companies and promoting them among their passengers,
42
3. Allow to share the points with another people (perhaps with extra fees), what will enhance
for joining the program even people that do not fly very often and influence on
recommending AZAL to friends and relatives,
4. Allow exchanging points to electronic money and purchasing not only airline’s services.
Even small purchases can satisfy the customer and make possible to use the points for
another needs if the expire date is close,
5. Giving extra points for special events or dates as birthday or marriage, what will show that
company is taking care of its passengers.
If mentioned changes will be implemented the popularity of another AZAL’s product – AZAL
Miles Mobile App - will increase. This application also has to be connected with wireless inflight
entertainment portals.
Managing the development of the product of AZAL such special features of the services as
intangibility, inseparability and variability should be take into consideration. As services are intangible
and inseparable, the customer can evaluate the quality of services by using them and there is no
possibility of producing these services without customer. Air transportation services are very complex
and their evaluation begin from the moment of buying tickets and entering the airport till the flight and
leaving the airport, so product of airlines consists of tangible and intangible elements and their
marketing has to be in accordance with their features. Marketing professionals in the company should
constantly look for tangible signals to indicate service quality. One of such signals is opinion of the
passengers that helped the author to make proposals of improving the product of AZAL basing on the
results of the survey. Additionally services are variable, so product should be changed to more
appropriate to customer needs even with low costs of changes. Choosing from the variable options
AZAL should offer more services to existing prices and programs.
3.2. Price
Price is one of the most important factor that affect the choice of airline and also significant for
the company to get it profits and be cost-effective. AZAL’s prices are perceived by its customers as
high. Despite the services of good quality, too high prices are unsatisfying for the customers.
Pricing strategies of airlines are very complicated and current globalization led to appearing of
many factors that influence on the price of flight ticket: length of the flight, serves airports, fuel
surcharge, using of additional services, day of the week, how far in advance the trip is planned, length
of the trip (fig. 24). These factors, from one side, allow to make a matching variable offer for customers
by using elaborate algorithms, and from another side, can be risky for airlines and not fare.
43
Figure 24. Factors affecting price strategy
Defined factors are used by AZAL to implement the pricing strategy offered by International
Air Transport Association. This strategy is aimed to create process on the base of personal data of the
customer. AZAL has to use data from the members of AZAL Miles Program or other sources to offer
more personalized deals with certain discounts (different prices for the same flights for people with
different history of searches and using the AZAL’s services). Using of such strategy make almost
impossible to analyze or monitor the prices, because they can become different during the day or e.g.
be different at the same time for people Before offering own changes of the price last reductions made
by the Azerbaijan Airlines in 2015 were represented in table 2. Those changes together with further
calculations shows how big modifications of the price are permissible.
Table 2
Average prices and discounts of AZAL in 2015
Des
tinat
ion
Pre
vio
us
pri
ce,€
Red
uce
d
pri
ce,€
Dis
count,
€
Dis
count,
%
Des
tinat
ion
Pre
vio
us
pri
ce,€
Red
uce
d
pri
ce,€
Dis
count,
€
Dis
count,
%
Antalya 436 350 86 20 Prague 503 389 114 23
Price strategy
length of the flight
serves airports
how far in advance the booking is
made
length of the trip
day of week (weekend,
holiday, etc.)
using of additional services
Fuel surcharge
44
Bodrum 436 350 86 20 New York 755 597 158 21
Izmir 436 350 86 20 Bejing 505 389 116 23
Dalaman 436 350 86 20 Tel-Aviv 445 434 102 23
Ankara 366 278 88 24 Paris 525 413 112 21
Istanbul 277 219 58 21 Tehran 236 182 54 23
Moscow 406 321 85 21 Rostov-on-
Don
319 247 72 23
Dubai 272 216 56 21 Barcelona 494 382 112 23
Kiev 352 256 96 27 Bishkek 390 296 94 24
Rome 509 397 112 22 Novosibirsk 377 285 92 24
Tbilisi 183 147 36 20 Krasnoyarsk 361 275 86 24
Aktau 222 172 50 23 Perm 401 305 96 25
Lvov 478 337 141 30 Nizhniy
Novgorod
381 287 84 25
Mineralniye
Vody
239 185 54 23 Kazan 316 236 80 25
Saint
Petersburg
403 307 96 24 Yekaterinburg 311 249 62 20
London 464 366 98 21 Minsk 372 280 92 25
Milan 500 388 112 22 Berlin 475 371 104 22
Source: Azernews, 2016
AZAL should continue to use different booking classes to maximize profits. Such strategy will
help to decrease the prices in the table for certain customers up to 40% (table 3). Airlines make lower
prices for traveler that plan their trip in advance, and closer to the date of flight increase prices. In such
way, they AZAL will earn even more revenue. Additionally the type of traveler should be taken to
consideration. Leisure traveler is more or less flexible and can look for different dates and routes
searching for better price, so the risk that he will prefer another airline is bigger. Business traveler very
often has to travel at certain day and time, so he is ready to pay more and usually his company is pay
45
for it – the main thing is to get at certain place in time. The example of discounts and price’s reduction
for AZAL for some directions based on the data from the table 2 are represented in the table 3.
Table 3
Example of reducing the prices for AZAL (in case of 85% of occupancy of the plane)
Direction Average price,€ Differentiated
prices ,€
Differentiated
prices,€
Discounts,%
Antalya 350
350*85seats = 29750
250
250*50 = 12500
500*35 = 17500
Σ30000
250
250*50 = 12500
500*20 = 10000
600*15 =9000
Σ31500
42
Istanbul 219
219*85seats = 18615
150
150*50=7500
350*35 =12250
Σ19750
150
150 *50 = 7500
350*20 = 7000
370 *15 = 5550
Σ20050
31,5
London 366
366*85=31110
250
250*50 = 12500
530 *35=18550
Σ31050
250
250*50 = 12500
530*20 = 10600
550*15=8250
Σ31350
31,7
Moscow 321
321*85seats = 27285
240
240*50 = 12000
440*35 = 15400
Σ27400
240
240*50 = 12000
440*20 = 8800
450 *15 = 6750
Σ27550
25,2
Calculations in table 3 shows that the reduction of the price may have positive results and
maximize the profit. The company will not lose in its revenues, but will for sure get more clients and
satisfied passengers that will become regular customers.
AZAL has three classes in each aircraft and should reduce process for economy class by
increasing them in some extent for business and first class. According to the experience of such
companies as Emirates, Air France and Lufthansa (fig. 25) 1-3% of seats in the first class give 13-14%
of the revenue, 12-25% of seats in the business class give 29-50% of the revenue and 69-85% of the
seats in economy class gives 30-35% of the revenue.
46
Figure 25. Example of allocation of classes and revenues in the leading airlines companies
Source: Airline Industry Overview, 2016
AZAL does not refer to any alliance and does not have to adjust to member’s prices, but it has
to make them competitive. Regular modification of the prices and their matching to the needs of
different types of travelers together with appropriate to that price quality of services will give AZAL
more competitive position on the regional and global market.
3.3. Place
Developed channels of distribution are one of the most important basics of regulating sales.
Azerbaijan Airlines uses different marketing channels. Researches of AZAL’s customers’ opinion
show that customers prefer its webpage for making purchase, so “zero level” channel is well
developed. Direct sales from the internet and in the ticket counters helps to decrease the costs of
distribution as company doesn’t have to pay commissions to the agents.
In order to improve the mechanism of buying tickets through the web-page of AZAL next
changes should be made:
1. Adding of the additional services panel. Implementation of additional services that were
described in 3.1. Should be followed by the appropriate changes on the web-page of the
company (hotels booking, car renting, touristic discounts). As Internet is the most popular
source of information for most of people it is also the best place for presentation of the new
services,
2. Adding panel with promoting discounts and low-cost flights.
47
Azerbaijan Airlines actively uses “one level” marketing channels cooperating with different
intermediaries such as travel agencies and various metasearches for cheap flights (like Kayak,
Skyscanner and Momondo). Provisions offered by IATA are 9% for international sector and 5% for
domestic sector. AZAL should set up a separate shopping engine to handle its whole metasearch
network.
AZAL should positioning its direct channels and make them more attractive by giving customer
additional benefits for using them. Monitoring of the prices by the author showed that prices on the
portals with option of searching cheap flights are much lower than the web page of AZAL.
Heydar Aliyev International Airport in Baku is the base hub of the Azerbaijan Airlines and both
of them are identified very often as one whole and influence on the image of each other. Airport
provide services and its marketing should fits the characteristics of the services. Next proposals, based
on the characteristics of services that distinguish them from typical goods, are made for the
improvement of the airport’s services:
Airport’s services are inseparable - they are produced and consumed simultaneously and
through the interaction with many departments and other companies (transfers, hotels, food
services etc.). The organization of the work of the airport should ensure coordinated and
integrated functioning of all the constituent elements,
Airport should reinforce brand identity and encourage loyalty what is possible only by
providing services of the high quality,
The same as for product of the airline the airport management has to use tangible signals to
evaluate and improve the intangible services – passenger’s feedback should be provided and
analyzed constantly to identify the problems and to solve them.
Constant control of the quality should take place. For example, food services and access to high
speed Internet were determined one of the most unsatisfying and need to be examined and
improved,
Airport products and services generally cannot be stored for later sale or use, so it is important
to predict the demand for certain services and the changing of passengers’ needs to save its
advantages.
Just rebuilt Baku airport meets all current requirements and became popular among airlines thank to
its safety ad strategical position. However, investment of its building were very high and to recoup all
implemented innovations company offer fees which sometimes are very high. Rich airlines may allow
themselves to pay high landing fees but be sure of the quality of the served services. Oppositely low-
48
cost companies left Azerbaijan because of increasing of those fees, because they made their flights to
Baku unprofitable. Contracts and fees should be reviewed to guarantee the occupancy of the airport and
revenues in the future.
3.4. Promotion
Offered changes of the product, price and place for Azerbaijan Airlines took to consideration
preferred by the passengers forms of promotion such as price reduction, bonuses, free products or gifts,
- and they should be followed by appropriate changes in promotional strategies.
AZAL uses standard ways of promotions – published materials (magazine, information brochures,
and posters in the airport, in the big cities in Azerbaijan and abroad), Internet (first of all its webpage
and positioned ads), catalogues of the domestic and some foreign travel agencies and so on.
Advertising become more and more importunate and usually customer ignore messages the
company try to deliver. That is why to break through the advertising clutter airlines are looking for the
new ways of promotion. AZAL should try to implement the onboard events that will be safe,
interesting, and interactive and will make better the image of the company and at the same time
promoting its products.
Good way to form the loyalty is small branded gifts that will not be costly, but will make a
pleasure to the passengers, especially for families or tourists – it will increase the emotional connection
between the customer and the company.
Another form of promotion AZAL should develop in order to improve public relations and brand
perception is sponsorship. AZAL successfully sponsors perspective Spanish football team Atlético
Madrid using the slogan “Land of Fire”. This sponsorship include shirt sponsorship and also socially
oriented events – company planned the Atlético took part in the program of training young footballers
in Madrid and Baku. Azerbaijan Airlines was also a partner of The European Games in Baku in 2015
that helped them to promote its brand to wide and international audience. AZAL also sponsor the
football team – AZAL PFK (prev. Olimpik-Shuvalan Baku) that is the member of European Club
Association.
AZAL may manage significant changes for its brand perception and position on the market by
sponsoring the fields represented on the fig. 26.
49
Figure 26. Perspective fields for sponsorship for AZAL
Defined spheres for sponsorship are first of all perspective, because of their popularity (wrestling,
gymnastics, and football) and access to big amount of people (Baku Expo Center, Opera and Theatre).
The sponsored events or objects should underline some features of the company – high quality, speed
and comfort of flights, diversity of the services and so on.
Important to use social media for promotion. Variety of social media allows to get to many
potential customers all around the world and to represent the information about the company and its
product in an unobtrusive way and underline the fact that company is in touch with people on a more
personal level. Also it’s a perfect tool for feedback and collecting opinions and suggestions from the
passengers to increase the quality of the services. The most popular social media are Facebook, Twitter,
YouTube, and LinkedIn (fig. 27). Using them company will rapidly and in easier way inform its
customers about important changes, new sales promotions, new flight’s direction etc.
Perspective
fields for
sponsorship for AZAL
freestyle wrestling
gymastics
Baku Expo
Centerfootball
Azerbaijan State
Academic Opera and
Ballet Theater
50
Figure 27. Example of AZAL’s message in the social media
Source: Facebook, 2016
AZAL as a national carrier should focus on dual strategy of promoting its services and touristic
potential of Azerbaijan. Reasonable prices and using of the effective promotion tools can make
Azerbaijan attractive destination for tourists that are always looking for unique, authentic and exotic
places to visit with good, comfortable and fast transportation channels.
3.5. People
The award for Best Airline Staff in Central Asia and India (3rd place) given by Skytrax to AZAL
says about good training of the personnel and good customer services. Aircraft staff and personnel of
the sales office completely satisfy the passengers and only for some extent airport staff and telephone
support is not enough satisfying.
Constant training and improving the skills of the on-board and on-ground staff is a key to good
customer service. Customer should be happy and satisfied by all services, which are included in the
price he paid for the flight ticket. To provide such customer service employers should be patient (be
ready to listen to the customer and its complains), attentive (notice the obvious needs and suspicious
behavior), has clear communication skills (be able to represent the information about the company and
its services in a clear and understandable way), have good knowledge of the product (be ready to
answer various questions and to make passengers fill that they are in the safe hands especially in
extraordinary situations) , use “positive” language, have time managing skills (be able to do everything
in time), empathy and understanding (guess the mood and wishes of clients), work in stressful
situations (safety of the airports and aircrafts is not always can take place, so personnel should be
51
informed about behavior in different dangerous situations) and others. For bigger effect trainings of the
personnel should be provided by the external company as for example company “Provide Support”.
Also AZAL should make steps to improving the system of payments and rewards for its employees
to motivate them for high qualified customer support and providing appropriate services in common.
Company has to ensure remuneration dependent on length of work, age of the worker, which
corresponds to the promotion of the career ladder, contribute to employees’ stable employment and
development of their skills. AZAL should implement the system of rewards in the form of additional
payments to the main salary that will depends on the researches of customer’s satisfaction of the
separate departments and services in common.
All efforts of the personnel should be focused also on the saving of the time of the passengers. Any
unnecessary delays, formalities and procedures that consume the time of the customer arouse the best
impatience - sometimes it ends in annoyance and frustration, which does not build good associations
with the company. The goal of all personnel is to provide conditions for stress-free and enjoyable trip.
Important to develop psychological skills that helps to identify the needs of the customer and offer
appropriate decision. Modern technologies and access to the Internet make possible to the passenger do
many by themselves and get needed information. Still there are always questions on which only
competent workers can give answer. At the airport of Baku should be workers that freely move across
the airport and provide services that are more flexible. Using tablets with certain database will be
appropriate for such workers in order to give actual and full information. Mobile service staff, who will
change the paradigm of traditional customer support to a more specific approach to customer service.
Permanent examination of quality customer service should take place among on-board and on-
ground staff. AZAL and manager Heydar Aliyev International Airport should use such simple but
effective method as mystery shopping. According to this method specially trained auditor (mystery
shopper) will play the role of an ordinary customer who during the process of the purchase carry out
observation and saves the observations in a special questionnaire. Mystery shopper does not have to
disclose the employees of his role, so in that way he will give an insight into the actual process of
service (actual process operation). Observations should be made on the base of certain scenario.
Flexible and constantly improved customer support process and trainings will help AZAL to hold
its leading place in the region in the category of “best aircraft staff” and form competent on-ground
staff that will satisfy the passengers.
52
3.6. Process
The process of the flight is very complex and multilayered. It consists of many visible and not
visible for the passenger elements that all together influence on the success and good quality of the
flight.
The main problems that were revealed during the researches are: slow process of buying the tickets
(first of all for customers that used AZAL’s web-page), average customer support, average services of
promptness and accuracy of the luggage delivering. Those problems are not significant, but require the
company to pay attention on them and make some modifications:
1. Optimization and simplification of the buying process using AZAL’s system of on-line
bookings. Frequent Flyer Program plays here significant role as saved data decrease the time of
purchase, the possibility of making mistakes and offering the best offer corresponded to
previous purchases and passenger’s preferences,
2. Providing quick and effective customer support beginning form the searching for the flight and
ending the boarding and feedback. Passenger should fill the care of the personnel and see their
competence to have feeling of safety and satisfaction of the value he got,
3. Providing entertainment for the passengers that will meet their requirements described in
previous chapters. Important to make the process of the flight comfort, fast-lasting and
interesting,
4. Guarantee the safety of the passenger in the airport and on the board of the aircraft using
security screening and providing all needed equipment and help in case of technical problems
on the board of the aircraft or other life-threatening situations,
5. Improving of the existing operational system or implementation of the new information system.
AZAL try to follow all world trends in airline industry and use modern technologies. One of the
systems that is used by many leading airlines is ALDIS – Airport Landing Dues Information
System. It consists of three main elements:
Airport Data Management System,
Credit or Cash Billing and Invoicing Engine,
Financial and Statistical Information System.
New technologies and optimized processes of the flight, security and airport’s facilities helps to
minimize the time of all processes enhancing the passengers to do many things by themselves (online
check-in, printing boarding passes), and maximize the value of the services.
53
3.7. Physical evidence
It is hard for consumer to assess the services, they buy because of its one main characteristic –
intangibility. To simplify the process of positioning new offers AZAL as many other companies try to
“tangibilize” their offers. Physical evidence in case of airline companies includes such aspects as
airport facilities, staff appearance, aircraft, uniform, printed brochures, magazines, branded souvenirs
and others. As physical evidence is mainly the environment, where services are delivered, two main
tangible components can be defined – aircraft and airport (ambience).
Airport facilities were more detailed described in the chapter 3.3, but aircraft as the most
important tangible element will be described. AZAL has very modern aircraft fleet and continue to
increase and renew it. That’s why passengers are very satisfied by the comfort of the seats, the ease of
movement, the quality of multimedia devices and conditioning.
In order to save and increase the high satisfaction of the ambience AZAL should control the
aircrafts to be customer-friendly, maintain the condition and aesthetic appearance of all equipment.
This will determine the extent of overall customer satisfaction and loyalty to the AZAL’s services.
Smooth take-off and landing, and ambient music tunes in the aircraft, departure and arrival halls, the
condition of facilities for use in emergency situations, the provision high standard conveniences, good
refreshments, and how they are served the seats and sitting arrangements facilities to allow air
passengers have front, side, and rear views of the outside environment in the course of the journey, and
neatness of the aircraft are all important contributors to an aircraft ambience.
Summarizing, the marketing mix is useful and almost indispensable business tool. Using the
theoretical analysis and conducted market research author make an attempt to propose the marketing
strategy on the base of 7Ps that will help AZAL to increase their competitive advantages on the
domestic and international markets and provide constant passenger’s flows. Having modern aircraft
fleet and airport in Baku that meets all modern requirements AZAL should first of all pay attention on
pricing strategies and improving customer service to increase the satisfaction of the customers.
54
CONCLUSIONS AND RECOMMENDATIONS
After provided theoretical and field analyses following conclusions were made:
Theoretical analysis helped to summarize certain theoretical definitions and concepts. Most of
scientists determine service as any act or performance that one party can offer to another that is
essentially intangible, inseparable, variable, and perishable and does not result in the ownership
of anything. Listed characteristics of services vary them from the goods and influence on
forming special features of marketing,
Consumer has the central importance in the economy and product of the company has to meet
the needs of the consumer in order to make this company profitable,
Marketing mix is considered by marketers and managers all over the world as a basic tool for
targeting the market, creating strategic plans and promoting their products. Marketing mix help
to allocate available resources between defined 4 or 7 components in order to optimize the
production of services and maximize profit,
Complexity of airlines service is explained by complexity of services they provide as they
obtain sometimes very big spatial range, can be dangerous for people’s life and demand high-
cost and high technological machines within high qualified personal,
Azerbaijan Airlines thanks to investments of Azerbaijan’s President became a rapidly growing
company with modern aircraft and high quality services. Nevertheless the developing of the
company is limited by its monopolistic policy.
Azerbaijan Airlines and Azerbaijan airports have very big potential and meet all modern
requirements in civil aviation that is why it has strong position on local and regional market and
also noticed by international awards.
Researches of AZAL’s customers’ opinion were the base for identification of the main problem.
Issues Company has to deal with: low level of awareness of AZAL’s products, unsatisfied
quality of some services (e.g. on-board entertainment), average low of satisfaction of customer
support and personnel, too high prices comparing to its competitive.
Proposals for AZAL on the base of provided researches and analyses:
Product. Expend the net of directions offering new flights mainly to world business centers in
Western Asia - Singapore, Shanghai, Hong Kong and Tokyo. Taking into consideration
55
Azerbaijan’s international relations and touristic attractiveness of those destination new routes
can be in demand among citizens of Azerbaijan and foreigners. Company has to change The
Frequent Flyer Program adding new services available for passengers and new system of
gathering points on the base of miles, not price,
Price. Use pricing strategies based on booing classes and offer good and appropriate prices for
different types of traveler. Discounts form the average price may be up to 40% without losing
the revenue. AZAL should increase the price for first and business class that has significance
share in the revenue and very small share in the amount of seats in the aircraft,
Place. Improve the internet on-line booking in the AZAL’s web-page with possibility of
booking additional services as hotel rooms, car rental, and entrance tickets and so on. Company
proposed to work on sponsorship in sport as the perspective form of promotions and less
obtrusive as traditional advertising,
People. Develop the Customer Support by training personnel that will understand the needs of
the customers and solve any problem in a flexible way. Permanent examination using method of
mystery shopping should be used. There should be mobile and competent workers on the airport
that will help to solve not standard problems,
Process. Implement Airport Landing Dues Information System (ALDIS) to optimize the
process of delivering services,
Physical evidence. As aircrafts are the main physical evidence of Azerbaijan Airlines – its
technological control should be a foreground task. Company should continue to renew aircraft
fleet and maintain the good conditions in the current one.
56
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61
ANNEXES
Annex 1
Questionnaire used during market research
Part I Personal Information
1) What’s your gender?
a) Male
b) Female
2) What’s your age?
a)15-25
b)25-35
c) 35-45
d) 45-55
e) 55+
3) What's your employment current status?
a) Student
b)Employed
c)Unemployed
d)Retired
4) What class you choose flying by planes?
a) Economy
b) Business
c) First class
4) Place of Birth _____________________
5) Current residence___________________
Part II General attitude of customers to the company
1. How often do you fly with AZAL?
a) Less than once per year
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b) Once per year
c) Once per half a year
d) Once per 3 month
e) More than once per 3 month
2. Rate your level of satisfaction with the service
a) extremely satisfied
b) somewhat satisfied neutral
c) somewhat dissatisfied
d) extremely dissatisfied
3. Would you recommend this product to a friend or relative?
a) yes, definitely
b) maybe yes
c) not sure
d) not really
e) no, definitely not
4. Will you fly with AZAL again?
a) Yes, of course
b) Maybe
c) Don’t know
d) Rather no
e) Definitely no
5. What are the most influential factors that affect your choice of airlines?
a) Schedule
b) Punctuality
c) In-flight catering
d) In-flight internet
e) In-flight telephony
f) In-flight mobile telephony
g) In-flight entertainment
h) Frequent flyer program
i) Ticket price
j) Airline image
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Part III Product
6. Please evaluate the in-flight services of AZAL (1 – totally unsatisfied, 5 – very satisfied)
1 2 3 4 5
Catering
On-board entertainment
In-flight connectivity
Safety
Ambience and comfort
7. Please evaluate the on-ground services of AZAL (1 – totally unsatisfied, 5 – very satisfied)
1 2 3 4 5
Check-in time
Checking and transportation
of the luggage
Transportation to the
aircraft
Billing and payment
Waiting lounges
Duty free shopping
8. What factors impact the most on your perception of Azerbaijan Airlines brand?
a) on-time performance
b) aircraft quality and interior
c) customer interaction
9. Are you satisfied by luggage services?
a) Completely satisfied
b) somewhat satisfied
c) neutral
d) somewhat unsatisfied
e) totally unsatisfied
10. Do you use AZAL’s Frequent Flyer Program?
a)yes
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b) no, I don’t have such need
c) I don’t know about it
11. Does your membership affect your choice of airlines?
a) Strongly agree
b) Agree
c) Disagree
d) Strongly disagree
e) Not applicable
12. Do you use AZAL Miles Mobile App?
a)yes
b) no, I don’t have such need
c) I don’t know about it
Part IV Price
13. What meaning the price have for you during the choice of the airlines?
a) It is the most influencing factor
b) Price should correspond to quality
c) The main factor is quality of services and available destinations
d) Price doesn’t have matter, the main thing is to get to desired destination
14. Please evaluate AZAL’s prices:
a) Two high
b) High
c) Average
d) Low
15. From your point of you AZAL’s prices comparing to other airlines are:
a) Very competitive
b) More than competitive
c) Not competitive
16. Do you think the AZAL’s prices:
a) Should obtain more services for the same prices
b) Should be lower for the provided services
c) Can be higher but with more additional services
d) Correspond to provided services
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Part V Place
17. Where did you purchase your ticket?
a) Airline sales office
b) Company travel department
c) Airline desk at the airport
d) Travel agent
e) Airline website
f) Online travel agents
g) Others_____
18. Please rate the airport of your departure and arrival using AZAL on each service item (1 –
totally unsatisfied, 5 – very satisfied)
1 2 3 4 5
Parking facilities
Availability of baggage
carts/trolleys
Waiting time in check-in
queue/line
Ease of finding your way
through airport
Flight information screens
Courtesy and helpfulness of
airport staff
Restaurant/Eating facilities
Availability of bank/ATM
facilities/money changers
Internet access/Wi-Fi
Part VI Promotion
19. Where did you first find the Information about AZAL?
a) Internet
b) Friends
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c) Travel agencies or travel portals
d) Posters and banners on the streets and in the airport
e) Television
20. What it is your opinion about AZAL’s Frequent Flyer Program?
a) I didn’t use it
b) It is beneficial program I use
c) It is beneficial program I would like use
d) I don’t know anything about this program
21. What kind of sale promotions would you like AZAL to use:
a) Price reduction
b) Free products/gifts
c) Bonus packs deal
d) Competitions and prize draws
e) Cause-related and fair-trade products/services
Part VII People
22. Please evaluate the professionalism of staff (1 – incompetent, 5 – very professional)
1 2 3 4 5
Sales offices
Crew staff
Airport staff
On-line support
Telephone support
23. Choose the characteristics you can give to crew staff of AZAL
a) Hospitality
b) Enthusiasm
c) attitude and friendliness
d) well-educated
e) ignorant
f) unfriendly
g) caddish
Part VIII Process
24. Evaluate the easiness and quickness of purchasing the tickets for AZAL flights:
67
a) Very easy and quick
b) Easy, but slow
c) Complicated and slow
d) Cannot evaluate
25. Evaluate the customer support:
a) Excellent
b) Very satisfactory
c) About average
d) Somewhat unsatisfactory
e) Very poor
26. Please evaluate the promptness and accuracy of baggage delivery:
a) excellent
b) very satisfactory
c) about average
d) somewhat unsatisfactory
e) very poor
27. Please evaluate the process of the flight with AZAL in total:
a) Excellent
b) Very satisfactory
c) About average
d) Somewhat unsatisfactory
e) Very poor
Part IX Physical evidence
28. Please evaluate the airplane facilities (1 – totally unsatisfied, 5 – very satisfied)
1 2 3 4 5
Seats
Multimedia
WC
Illumination & temperature
control systems
Ease of movement
Place for hand luggage
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29. Please evaluate the design and informativeness of AZAL’s tickets and other printed materials:
a) Excellent
b) Very satisfactory
c) About average
d) Somewhat unsatisfactory
e) Very poor