Table of Contents
Managerial Summary. 3
Company Background. 4
New Product Description. 4
Current Product Portfolio. 5
Product Innovation Charter (PIC) 5
Marketing Description and Analysis. 6
Marketing Objective. 6
Market Trends. 6
Competitors Analysis. 7
Marketing Mix. 7
Product Positioning. 9
Market Targeting and Segmentation. 9
Product Concept Statement and justification. 9
Economic Summary. 9
Budget Expenditure. 9
Market Share Expectation. 10
Sales Forecasts. 10
Time to Break Even. 11
Investment Over Time. 11
Expected Life Cycle. 11
Project Evaluation Based on A-T-A-R Model 11
Time Plan for New Product Development 12
Reference List 15
British Airways (BA) lead the airline operations market in the United Kingdom (UK) and globally. The scheduled passenger service is the most significant sector for BA, accounting for most of its revenues. Over the last decade, the market shares have eroded because of the immense increment in competition triggered by seat comfort. Seat comfort is one of the key factors put into consideration by airline customers. Seat comfort is determined by various dimensions such as seat pitch, reclining capacity, screen and table. The current BA seats are ranked poorly globally compared to its main competitors. BA aims to offset this challenge with the introduction of a new product portfolio, the AirGo seat. The AirGo seat is a unique new product expected to increase the comfort of BA seats to maintain and attract more passengers. The AirGo seat is improved in terms of seat pitch, recline capacity, entertainment screen and dining/working table, and flexibility. This unique product fits appropriately into BA. The business travellers and executive club are among the primary targets for this new product. This is a worthwhile investment for BA that would stretch its competitive advantage and bring more profits. Once the new product is absorbed fully in the market, good performance of the product in the market is anticipated. This paper focuses on the British Airways marketing plan for the new developed product, the AirGo seat. A clear analysis and evaluation of the new product is done to determine the suitability of the product to BA.
BA is one of the most renowned and biggest airlines in the UK operating in over 550 destinations around the world. Indeed, it is largest in terms of fleet size, international flights, and destinations measured by the number of passengers carried and kilometres flown. Established on August 25, 1919, BA has accomplished 93 years of operation to date in the airline industry. It is located in a central business area in London and thus has an important presence in Heathrow (main hub), London City, and Gatwick. It offers transport services to over 3 million passengers across the world annually hence makes billions in revenue. BA vision is to become more responsible and leading airline worldwide. This vision is embedded in its mission centred on the provision of the best customer service and relations. BA usually targets customers seeking comfort and thus its seats are highly differentiated based on the degree of quality, comfort, and convenience. Seat comfort is determined by various dimensions such as seat pitch, recline ability, entertainment screen and table. However, BA faces stiff competition from its main competitors in seat comfort. Therefore, improving BA seats comfort is a key priority (Katie 2013).
New Product Description
The BA AirGo seat is a new unique product expected to enhance BA services and attract more customers. This new AirGo seat sits in an independent personal space of between 55 to 60 per cent in each row which take up extra space by just 16 per cent. The spacing of the seat is based on a straight line design. In this case, the spacing of the seat ranges from head to toe with maximum shoulders, elbow and feet’s room. The spacious surroundings of the new AirGo seat offer the passengers with significant space to relax. The seat goes a notch higher than the older and other airline seats with its reclining capability from an upright position to a lie-flat bed. The angle of recline of the seat is controlled using a dial rather than the usual buttons. This allows ultimate control to customize the seat in a position of maximum comfort where the passenger posture fits perfectly to avoid pain in the neck or back. The dial touch screen is fixed separate to the seat but in a convenient place where the passenger can move his/her arm easily to configure it. Additionally, the seats back support is made of strong and flexible nylon mesh taking shape of a human body. This helps to avoid body fatigue and also prevents sweating (Gayle 2013).
Storage Pod with Screen and Table
Each of the AirGo seats has a movable storage pod above it which contains the entertainment screen and the tray table which is also controlled using a dial. Additionally, the pod can be moved without interfering with the nearby passengers. This allows the passengers full control of their screen and table without interfering with those seated at the back. This is attributed to the fact that the pod is fixed independently above the seat, but not in front seats. Most airline seats have the fold out screens and tables fixed on the seats backside. Therefore, whenever the passenger in front reclines his/her seat, this interferes with the table or screen of the other passengers seated at the back. Furthermore, the table is convertible to both a dinning and writing desk. In regards to the entertainment screens, they offer various applications such as movies, games, songs, books, and magazines among others. Finally, the footrest forms part of the seat. In this case, the passenger does not have to rely on the footrest attached to the seat inform on him/her as it is the case with most airline seats (Gayle 2013).
This unique product fits appropriately in BA and the larger airline market. Airlines customers particularly those for long flights need comfortable seats. The most amazing thing about this new product is that some of its features can be adopted to other BA classes. As a result, many passengers can get access to the product based on their income levels. To BA, this would automatically be the opening BA needed to conquer the airline industry. Since BA is an already well known and reputable company, attracting customers to the new product will not be a big challenge. Therefore, after the product is absorbed in the market great success is expected in terms of increased customers and more revenue (Crawford, & Benedetto 2011).
Current Product Portfolio
The current BA seats are of a higher standard compared to some airlines, but in terms of comfort, they surpassed by other airlines. The current seats have got the recline capability that allows conversion of the seat to a lie-flat bed which is controlled using a button. However, seat pitch and seat width of the classes are small, limiting the passengers to have the maximum comfort. In regards to the seat pitch, it is approximately 78 inches. This seat pitch is small compared to most airlines particularly its main competitors Lufthansa and Virgin Atlantic. In addition, the width of BA’s first class seat is also small at 21 inches compared to other airlines. Relative to entertainment screen and the dining / working table. These components in BA first class are held in a fixed position behind the seat. The table is convertible to both a writing desk and a dining table. As the passenger in front reclines his/her seat, the screen and table of the passenger behind is affected. Further, the current BA seats are made of material, a quirky blue and creamy leather, which though is of quality but crampy. This material does not fully take the shape of the passenger thus leading to a poor sitting posture. This poor sitting posture leads to some passengers developing back and neck pains.
Product Innovation Charter (PIC)
BA has a reputation for innovative products and quality services which kept the airline in a leading position around the world over the years. BA focus to sustain slogan “The world favourite airline” by continuing to improve customer service both in-flight and on the ground (Doyle, and Bridgewater 2012).
Goals and objective
Investing efficiently by providing comfortable and flexible airline seats even in economic crisis time.
Reducing the manpower on its entire terminal to assist the company in reducing the cost. This can be achieved by introducing a new product like the new AirGo seat in various airline classes particularly those mostly used in long haul flights.
Delivering customer service of high standard at every touch point.
Solidifying and extending its presence in key places globally as well as establishing a strong market position in the United Kingdom and the larger world.
BA will keep being an innovative airline by being the first in market in term of technology.
Porter’s Five Forces Analysis
There is limited possible of new entrants in the airline sectors at international level. Therefore, BA faces strong competition from Lufthansa and United States airlines.
There are limited choices for airline customers particularly long haul travellers leading to an average bargaining power. This is attributed to the limited availability of flights or seats.
The substitutes bargaining power is also low like for buyers. This is due to the limited direct closed substitutes especially for short haul flights with Eurostar or ferry being the main substitutes. However, no substitutes exist for long haul flights.
Airbus and Boeing comprise of BA’s main suppliers translating to a higher bargaining power. Relative to fuel suppliers, BA relies primarily on one supplier which also mean a high bargaining power regardless of oil prices.
There is stiff competition in the airline industry hence regular fluctuations in ticket prices to lure more customers. BA faces competition in passenger transport and cargo services from Lufthansa airlines, Swiss airways, Virgin Atlantic airways, and many others. Nonetheless, BA is offering services of higher quality than most airlines. Additionally, increase in Internet usage is influencing customers’ awareness and interactions.
Marketing Description and Analysis
To extend the BA product line with a new product label that enhances comfort of the customers. This is intended in order to differentiate BA products aiming to increase the sales profit and revenue for the company (Luther 2001).
Currently, the trend towards comfortable seats has emerged more in the airline customers in the United Kingdom particularly for the long haul travels. This is attributed to the fact that customers are now more concerned about their health posture based on the neck and back pains. BA is an airline company focused on passengers travels across the globe. In this respect, BA has an opportunity to extend its product line from the existing seats to incorporate more comfortable seats. As a result, BA would increase its sales revenue and profits at large.
BA serves different types of customers with different needs ranging from business travellers, executive club to families and students. BA success is vested on customer satisfaction beyond the shareholders. Business travellers’ vital consideration of the flights is based on the flight schedules and frequency. Additionally, business travellers are linked with certain business cities and centres. Business travellers are willing to pay for high fair prices provided that their demands are met satisfactorily. The executive club is another set of BA customers who require special and quality services in their diplomatic travels. Family, leisure and special travellers like the students and military personnel are category of customers flying with BA. Business travellers and executive club mostly utilize business and first class flights. The majority of other BA’s customers’ category uses the economy class.
The seat comfort is triggering competitive rivalry amongst airlines currently. Most of the airlines have the entertainment screens, dining/working table and footrest connected on the seats back. In this case, the passenger can access them from the seat in front of him/her and thus he/she has no control over them. Moreover, spacing issue has also been a big problem particularly about the seat pitch/leg room and seat width. Sat pitch is the space from a point in a seat to a similar exact point on the seat in front or behind it. The airline market is undergoing tremendous change in trying to improve the seat comfort. This is attributed to the feedback given by their customers from the surveys about airlines products and services. Therefore, improving BA’s seat comfort will be a big boost to maintain its existing customers as well as attract more customers. The AirGo seats offer the best option for seat comfort as it takes care of most shortcomings associated with the current portfolio (Moore, and Pareek 2009).
Currently, BA is in a healthy position in the market above most of its competitors. More specifically, BA has cemented its market position as one of the premium airline service provider. However, BA faces an intense competitive rivalry in the airline industry globally. The top competitors of BA globally are Deutsche Lufthansa AG and Swiss International Airways (Hanlon 2012). According to Schlappig (2013), BA is currently ranked eighth behind Lufthansa and Swiss International airways in the top 10 international airlines with best and comfortable first class seats (Schlappig 2013).
Deutsche Lufthansa AG
Deutsche Lufthansa AG is a German-based airline that operates about 700 passenger aircraft to about 215 destinations. This is in over 78 countries locally and internationally without including the destinations Lufthansa core-share with other airlines. Lufthansa is Europe’s largest airline based on fleet size and passengers carried. In addition, it ranks fourth worldwide. However, together with its subsidiaries Lufthansa is the largest globally in terms of passenger airline fleet. As of 2010, Lufthansa carried more than 90 million passengers. This great achievement is attributed to its products particularly seat comfort. As mentioned earlier, Lufthansa is ranked high in terms of seat comfort compared to BA. More specifically, it is ranked fourth according to TravelSort (2013). The Lufthansa first class is comprised of 8 lie-flat seats which provide for the ample spacing between the seats. The seat pitch (bed length) is 85 inches and width is 21 inches with 180 degree recline (Schlappig 2013; Hanlon 2012).
Swiss International Airways
Swiss Airways is a major competitor to BA in Europe and the world at large in passenger service. Swiss operates in about 70 destinations over the globe from Zurich, Basel and Geneva hubs. Moreover, it operates highly advanced aircrafts in carrying its passengers. As of 2011, Swiss Airways carried over 15 million passengers. This is highly attributed to the comfort and quality of its seats. Swiss airways seats have a pitch of 83 inches and width of 22 inches with 180 degree recline. All these features are high above those of the BA. Swiss Airways rank third amongst the top 10 best international airlines in terms of First class seat quality and comfort (Schlappig 2013; Hanlon 2012).
Marketing in any organisation is based on four elements: Product, Price, Place, and Promotion, commonly known to as the marketing mix (Armstrong, & Armstrong 2009). The product is the organization’s biggest asset which a company fully depends on. BA offers a wide range of products to its customer. Moreover, the company continues to invent new products to better its services to the customers. In regards to airline seats, BA is facing stiff competition from its competitors based on the seat comfort. As aforementioned, it is ranked 8th in terms of seat comfort worldwide. Therefore, the proposed new AirGo is expected to enhance BA seat comfort to reduce the competition (Gayle 2013; Kotler 2007).
The BA AirGo seat is a strong and flexible seat made of nylon. Nylon is a popular fibre known for its potential in absorbing sweat. Relative to its flexibility, nylon is easily stretchable and thus takes the shape of the person. The AirGo seat is more spacious in terms of the seat pitch and width hence will help BAS overcome its competitors. The AirGo seats features can be adopted in other classes of BA apart from the first class such as the economy class and the business class.
Price is a key determinant in the airline industry likewise in every company. However, in the airline industry, the heavily reliant on the price is based on the comfort of the airline especially for long flights. Additionally, organizations use pricing strategy to garner more customers and market share across the world. BA utilizes the pricing strategy as to tool to offer various deals to its customers with the aim of generating revenues. The AirGo seat prices are consumer friendly. In addition, their price is influenced by the significant cost of production. During 2011 after BA introduced a new first product, the cost ranged from 49,684.12 GBP to 99,367.19 GBP for the long haul flights whereas 16,560.45 GBP to 23,184.63 GBP on short haul flights (Walton 2011). BA expects to maintain the same prices for the better improved AirGo seats in order to retain and attract more customers. To recover the lost revenue, BA aims to sell the inflight extra like the internet applications.
Promotion involves marketing and advertising the company’s brand in the market which go hand in hand. BA develops different marketing strategies because of the immense competition from its main competitors. BA primarily depends more on advertising through internet-websites, social media-Facebook, and Twitter, and other communication ways like broadcasting in the radio and televisions (Smith, Pulford & Berry 1999). In addition, BA utilizes promotional strategies based on mobile services such as text messaging to reach out to more customers. It also uses brochures and posters. In all advertising mediums, a description of the new product as well as the picture is to be provided. As for brochures and posters, they are to be delivered in BA branches and subsidiaries where they can be given to their customers. Others are to be placed inside the aircrafts where they can be viewed by customers flying with BA. Furthermore, the BA should incorporate customer feedback about the product offered in order to improve and renovate the new product to meet customers’ standards (Yeshin 2006).
Place in the airline industry is one of the key priorities. In this case, every airline company requires a proper place/location in order to operate. BA has its operational base located in the United Kingdom from where it operates and carries out its day to day activities. BA operates through various airports carrying out different business activity such as carrier purpose mainly for passengers. Therefore, BA will use this place as the basis of operation of its new product, AirGo seats. Moreover, BA will strive to develop an infrastructure and updates about the places where the new product will occupy and operate.
BA’s AirGo seat is manufactured using high technology, hence its price is considered to be relatively high compared to the current seats. However, the price is estimated to compete with its competitors to retain and attract more customers. Below is the product positioning map with its main competitors:
Green- Lufthansa Airways
Market Targeting and Segmentation
BA targets customers who highly value their comfort and are willing to pay an extra amount for the same. More specifically, BA targets business persons and high profile people. Business people look for comfortable seats that provide a good environment where they can transact their businesses awaiting arrival to their destinations (Solomon, 2009).
BA is facing increased competition based on the prices that vary from one route to another because of the open sky policy. In this respect, BA focuses to segment its current market using two main aspects; the short haul market and the long haul market.
In regards to the short haul Market, the company shifts its focus on customers who prefer taking shorter routes in the country. This is referred to as domestic flights, which many of the United Kingdom airlines mostly operate. BA has been operating in the premium class travels and has grown to provide excellent services to the customers. This is attributed to their marketing strategies and technology. BA focus on the short haul flights is attributed to the immense competition it faces from larger airline players operating on the same routes. The new product will help BA to overcome much competition in the short haul flights.
Relative to long-haul market, BA is amongst the well known and reputed airlines across the globe. In this respect, BA commands a larger portion of market share based on long distance flights. Therefore, the BA primary focus of market segmentation is to explore new routes and destination over the world. In so doing, BA is targeting to get more customers across the globe as well as solidify its position at the top by sustaining the market in every aspect and conditions. In addition, BA also focuses on plans to engage in reducing the cost of air ticketing through cutting down the price to overcome its competitors in order to retain its customers and get more market share. The new product, AirGo seat will be of much benefit to achieve this goal (Czinkota, 2007; Brassington & Pettitt 2007).
Product Concept Statement and justification
Concept Statement: The best comfortable airline seat at a reasonable price
BA’s new product, “The AirGo seat” will provide the airline market with the best comfortable seat in the first class travels.
The AirGo seat will offer first class seats which are very spacious in terms of seat pitch and width as well as recline capacity. In addition, the seat is accompanied by a movable storage pod which contains the screen and the table. Here, the screen/table is adjustable to every position based on customers’ wishes. With the AirGo seats, customers will get maximum comfort devoid of any posture problems like the back and neck pains.
This section shifts focus on how the new product is going to be financed. The analysis will include estimation of budget expenditure, market share expectation, sales forecasts, break even point, investment over time, expected life cycle and the project evaluation (A-T-A-R model).
It is important for the company to calculate approximately the budget expenditures for producing a new product as well as launching it. In order to estimate this, it could be seen that the capital budget of a new product will be broken down into certain sections. The estimates below identify the two areas, namely the fixed costs. The fixed costs are divided into three categories, which are the manufacturing process and advertising channels. At the beginning stage of producing AirGo seats, BA primarily needs to invest in the company manufacturing the AirGo seats. It costs around £150 million to manufacture the AirGo seats. This is followed by the advertising costs; the company will promote AirGo seats by using brochures and posters, as well as the internet-website and social media.
AirGo Seat * (14 seats)
Marketing -Brochure (10.5×14.8cm) (25,000 = 20)
-Poster (29.7x 42 cm) (500 = 10)***
-Website, Facebook, Twitter (£0)
Total fixed cost
Market Share Expectation
The BA AirGo seats are proposed to increase the market share which was at 10.15 % in 2011 by meeting the need of customers and enhancing their loyalty.
Calculation of the sales forecast is based on the volume of seats sold to the customers in the United Kingdom and other destinations (Jobber & Lancaster, 2009). AirGo seats are assumed to increase passenger revenues of BA which had increased by 17 per cent in 2011 from the improvement in seats comfort. This saw passengers increasing year by year at 5.7 per cent rate translating to 0.475 per cent growth rate per month.
Sale Forecast (£ million)
Sales growth rate
0.54 % per month
135 (0.27 per unit)
Unit of sale
*COGS = Cost of Goods Sold
Time to Break Even
Break even analysis assists a company in knowing the intersection of the fixed costs and expenses. In this case, it is possible to calculate the break even point of the AirGo seats using the budget expenditure estimations that have been indicated. The variable cost changes when the production volume changes whereas the fixed cost is not affected by any changes in production. Using the estimate of the new product quantity sold, the break even point can be calculated.
Total fixed cost
Selling price/unit – Variable cost/unit
Total fixed cost / Contribution margin
= 165 / 3.21
= 51 units
Total revenue (£ million)
(Total Fix cost + (Variable cost x Q))
= 51+ (0.04x 500)
Using the breakeven analysis above, BA’s AirGo seat requires to sell 51 units every month to break even. In this case, BA will require to make sales of at least 71 to cover the expenditure fully.
Investment Over Time
BA is supposed to invest more in distributing AirGo seats on its airlines as time goes on based on the performance of the seat in terms of revenue and market share. More investment is to be done on advertisement/promotion to sensitize its customers of the new product. Furthermore, investment is also to be done in redeveloping the new products to meet customer needs.
Expected Life Cycle
BA Airgo seats are new products, which are in their introduction phase. The majority of the airline customers are not yet familiarized with the new product. On top of this, the introduction phase of this product involves high costs, which are attributed to the high investment in the product. In turn, this translates to a lower sales volume. The lower sales are due to the fact that customers are not yet familiar with the product. Therefore, promotion of the product is very vital to create awareness in the customers about the new product. At the point, BA needs to venture into marketing. In this case, it should advertise the product using the media popularly used by customers. This includes advertising through its website, social media-Facebook and Twitter, posters and brochures.
Project Evaluation Based on A-T-A-R Model
This model is mostly utilized as a marketing tool in new product forecast to contact customers testing in various forms as well as evaluate the proposed market plan. The model initials A-T-A-R stand for Aware, Trial, Availability and Repeat which are further explained below: Aware refers to the estimation of customers’ awareness of the new product; Trial, the estimated number of the customers willing to try the new product; Availability, estimation of the accessibility of the new product; and Repeat, estimation of the new product repurchase (Crawford and Benedetto 2011).
Profit per unit
Aware of product after one year launch
Percent of people who will try the product
Availability of the product
Measure of repeat buying
= Unit sold x profit per unit
The estimated percentage of awareness is 59 percent because BA will promote the new product by using various advertising tools such as BA website, Facebook, Twitter, posters and brochures to give the information of BA’s AirGo seats during the period of pre-launch, launch and post-launch. The result of this will make customers aware of new product.
The estimation of customers who are willing to buy the new product is 54 percent. In this case, customers who love eating healthy snacks tend to buy this product. Availability of the new product is 72 per cent because there are many distribution channels to sell the products such as British Airline branches.
Repeat purchases are estimated at 40 per cent because the average bookings are quite high. Therefore, it could be assumed that consumers are willing to repurchase if they are satisfied with the comfort of this product.
The unit sold will be £75,960 units per year by analysing the A-T-A-R model, and the profit contribution will be approximately £143811 per year.
Time Plan for New Product Development
During the pre-launch of this new product, AirGo seat, BA will contact its supplier, Contour Aerospace to deliberate on the raw material prices, as well as delivery in the long run. Consequently, BA has to bargain for reasonable prices. BA has to take into consideration the whole estimate of the expenditure to be used in manufacturing the comfort seats. This helpful to BA in managing and monitoring its production costs. On the other hand, BA management and human resources has to be involved in training, as well as recruiting skillful staff to cater for the passengers using the new product. Furthermore, the BA is to contact a printing firm to produce the brochures and posters that will be used during the launching and post-launching period. Additionally, the company is to incorporate the new products in its website and other internet advertising sites (Lancaster, and Massingham 2010).
In launching the new product, BA is required to start distributing the brochures and posters to attract attention of their customers. The brochures and posters are to be placed in BA strategic branches and subsidiaries within their passengers reach. In addition, BA has to launch its product live which will involve the presence of its passengers and the media at large (Lancaster, and Massingham 2010).
Several months after launching its new product, BA is supposed to track the performance of its new product. This is instrumental in determining the success or failures of the new product in order to improve it. Most significantly, BA will use the feedback from its customers based on a survey to be carried on every customer using the new product. Moreover, the social media networks may also be used to get the direct feedback from their customers using the new product. Besides evaluating the performance of the product, BA will be involved in the extensive advertisement of its new product to make sure it reaches many customers as possible (Lancaster, and Massingham 2010).
Product Implementation Plan
Negotiate with seats suppliers
Social media (Facebook/Twitter)
British Airways website
Social media (Facebook/Twitter)
British Airways website
Track sale performance
Study customer’s feedback
Social media (Facebook/Twitter)
British Airways website
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