Hi please see the attached
Hi please see the attached
Marketing class. United AirlinesCorrectly setting prices in any industry is challenging, but air travel can be an especially complex proposition. On the same plane, you’ll have customers that are primarily schedule focused and willing to pay a higher rate to get to a business meeting on time. Sitting next to that traveler (probably in the middle seat) is a leisure traveler who planned a trip months in advance and just wants to get the lowest fare possible. And then there is the perishability issue—when the wheels go up, any empty seats can no longer produce revenue at any price. This is the environment that United Airlines and other carriers face every day. United Airlines is one of the leaders in an industry that has seen many companies come and go since the beginning of commercial air travel in 1914. Along with American Airlines and Delta, United is considered one of the “big 3” in air travel. Formerly a part of airplane manufacturer Boeing, the company was formed in 1931 and today claims to have the world’s “most comprehensive global route network.” Recent counts show 4,600 daily departures taking 148 million passengers per year to 354 destinations in 48 countries. While clearly a survivor, United has in recent years found themselves in competition with a new class of airline known as ULCCs: ultra-low-cost carriers. You may have flown on one of these economical (or “cut rate”) carriers, such as Spirit, Fron-tier, and Allegiant. Southwest Airlines also offers low fares, but (along with Jet Blue and Virgin America) is considered in the low-cost carrier category, as they offer some standard services not available with the ULCCs. In this class of airline, what dis-tinguishes them is what they do not include as part of the fare: reserved seats, snacks, drinks, ability to carry on a bag, in-flight entertainment, seats that recline, leg room, and often, on-time arrivals. These flights are not about service—they are all about getting you from point A to B at the lowest price possible. To compete with low-cost carriers, United first took a run at creating an LCC of their own. Called Ted, the airline had its own separate planes. Skeptics joked that the name stood for “the end of United.” While United survived, Ted was discontinued after five years. United’s latest initiative focused on competing with the (now ultra) low-cost carriers is through the creation of an additional fare class: Basic Economy. The prices are low like those of the ULCCs, and so are the services: no seat selection, no seat assigned until day of departure (a.k.a. a middle seat!), no tick-et changes, no refunds, and one of the biggest: no full-sized carry-ons. The fare savings are not huge—typically between $25 and $40—but enough to attract customers who are very price sensitive, including many in the millennial generation. “Big three” compatriots American and Delta have followed suit with their own versions of the fare class. So far, Basic Economy seems to be a huge success for Unit-ed and other airlines. In addition to keeping some customers away from the ULCCs, United is able to sell a small portion of their unused inventory as a kind of “loss leader,” attracting travelers to their airline and then “upselling” some customers to a better (and more profitable) class of service. The company has been able to upsell up to 70 percent of bookings on its own website and about 50 percent on third-party sites. They also make significant revenues on fees when travelers decide they need that overhead bin after all, often paying more in total than they would have by purchasing a standard economy ticket. Between fees and upgrades, it’s projected that by 2020, United will earn an additional $1 billion through the program. While United tries to be very transparent about the differences between standard and economy fares, an unintended consequence of the pricing has been the creation of a sort of class system in the coach compartment of their planes. Standard economy passengers, including some with “elite” status based on miles flown, resent basic economy “lowlifes” taking precious overhead bin space. On another airline, one passenger spent the night in jail after a battle for the bin with a fellow traveler, and in another case, the conflict turned into a fist fight. So much for “Traveling the Friendly Skies!” The airline industry will continue to evolve with new technology, additional competitors, and changes in consumer preferences. To continue to survive, United Airlines will have to carefully manage their pricing process to meet the needs of all the classes of passengers that they serve. Advertisement Class . Be sure to include a link to your source material. 1. What is the decision facing United Airlines? 2. What factors are important in understanding this decision situation? 3. What decision(s) do you recommend? 4. As seen above, competition is a big factor in United’s pricing decisions. What other factors in the external environment should marketers consider? 5. Is the use of a “loss leader” pricing strategy ethical? What steps could United take to make sure that their Basic Economy pricing program is executed in an ethical manner? Does Spillover Need Mopping Up? While numerous laws and self-regulatory efforts have banished products such as tobacco and hard liquor from the airwaves, it is virtually impossible to keep minors from being exposed to such advertising due to the spillover nature of some media. The ethical issues involved with spillover media are complex, including the kind of advertising appeals used to target audiences. Take outdoor advertising, for example. It is the most public mass medium. It cannot be turned off like television, radio, or the Internet, and it’s displayed 24 hours a day for all to see—even children. The trend in outdoor advertising today is toward eye-catching, sexually explicit ads, seen especially in densely populated urban areas. Most outdoor advertising regulations have focused on the location of billboards, not the content. The Outdoor Advertising Association of America’s (OAAA) Code of Principles says that they “support the right to reject advertising that is misleading, offensive, or otherwise incompatible with community standards.” But it is unknown how often this clause is invoked. Communities, therefore, have taken it upon themselves to regulate the placement and content of outdoor advertising, rather than relying on self-regulation by the advertising industry. In 1998, for example, the Los Angeles City Council passed an ordinance that prohibited alcoholic beverage advertising on virtually all publicly visible sites, even store windows. The OAAA and other local Los Angeles trade association members filed a federal civil rights action, claiming that the ordinance violates the right to free speech. As technology advances, so do the venues for advertising. Advertisers have found ways to work around billboard restrictions. Taxicabs and buses have carried ads for years; however, now appearing on Boston cabs are electronic billboards that have the ability to change their message minute by minute—depending on a few desired variables. The full-color ads change depending on the time of day and location of the cab. Different neighborhoods will see different ads and, if appropriate, in different languages. The taxi’s location is monitored by a GPS tracking system. This new technology is inexpensive for advertisers and may become a common feature on taxicabs across America. However, this raises legal and ethical questions. Should mobile billboards be subjected to the same restrictions as stationary billboards? Neighborhoods and schools may be protected from unwanted billboard advertising, but can concerned parents protect their children from advertising that travels on taxis? Spillover also reaches children in other media vehicles besides OOH. The movies, for example, consistently show people smoking. And if the smoker is a celebrity, an impressionable child might interpret that as an endorsement. In a study conducted by Dartmouth Medical School, researchers concluded that actor endorsements of tobacco brands jumped 10-fold in the 1990s. The study also found that 87 percent of popular movies contain tobacco use and about one-third display identifiable brand-name logos. Minors make up a large percentage of moviegoers, and through movies they may be getting more exposure to smoking endorsements than in real life. Young people who look up to sport stars and movie celebrities may be vulnerable to intentional and unintentional endorsements. Benedict Carey of the Los Angeles Times calls today’s movies “almost as smoke-laden as the stock car racing circuit.” Many people feel that ads are not to blame for the rise of teen sexual activity and tobacco and alcohol use. Others feel that advertisers have a greater responsibility to separate youth from the adult world of unhealthy and explicit activity. Regardless of who is right, advertisers, agencies, and media companies must be sensitive to public opinion and seek creative solutions to protect impressionable children. Otherwise, the industry will risk severe restriction and regulation for having failed to responsibly and conscientiously assert firm ethical standards itself. Questions 1.Do you believe the goal of protecting children justifies banning the advertising of legal products or their glorification in movies? Which products specifically? 2.Should ads in spillover media be censored for sexually explicit content? If so, who should the censors be and what specifically should they prohibit? 3.What alternatives might be available to fight teenage smoking, drinking, and sexual promiscuity besides banning advertising for legal adult products? Question #3 will need at least two links to research as it is not opinion driven.
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