Qantas CEO Missed Marketing 101

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Way, way back, Michael Porter identified three potentially successful strategies for marketing: Segmentation, Differentiation or Cost Leadership. That was in 1980. The three strategies are still mentioned -- and generally accepted -- in beginners' courses in business, marketing and strategy.

Why have Porter's strategic alternatives lasted so long? Because they are simple to state, reasonably easy to understand -- and they still seem to work.

I am refreshing my memory from -- of course -- Wikipedia. For those who dismiss Wikipedia as being of doubtful value, here is a summary:

• Segmentation involves a focus on selling to just one small section -- or segment -- of a market. Find out what just a few people want, give them exactly what they want, convince those few people that yours is the exact product or service that suits their exact requirements.
  
• A Differentiation strategy involves a focus on the ways in which your product is different from -- and therefore superior to -- competing products. Your customers are those who are willing -- or able to be convinced -- that your product offers worthwhile features that are not available from competing products.
  
• Cost Leadership is a euphemism for cheap. You sell to people who are willing to compromise their standards in order to save money.
  

For many years Qantas marketed itself using a Differentiation strategy. There were several points of difference:

• Qantas was true-blue Australian. Put another prawn on the barbie, cuddle a dinki-di koala, fly the Aussie airline to you-beaut Aussie destinations... It all went down a treat with non-Australians, especially while Australia itself had a good reputation as a friendly and fascinating tourist destination. Australians also enjoyed the way that Qantas pushed the Ocker image... in a way that those crazy foreigners probably took as being fair dinkum.
  
• Qantas was safe. Best safety record of any airline anywhere in the world. Some customers were willing to pay for that feeling of comparative safety.
  
• Qantas was Australian-owned. Owned by Australia, based in Australia, operated by Australians. An unthinking Australian could fly Qantas and know that they were flying in a small, metallic extension of home.
  

No other airline could claim to be true-blue Australian. No other airline was as safe. No other airline was "our airline" to all Australians. So what has Qantas done with this reasonably successful Differentiation marketing strategy?

They have destroyed it.

First, the government sold Qantas. Partly to Australian investors but a large chunk is now owned overseas. Qantas is no longer "Australian-owned"... One point of differentiation removed.

How safe is a flight with Qantas? Well... just as safe as a flight with any other airline that is serviced in those same overseas service centres. Qantas may well still be safe. But no safer that anyone else. How could Qantas be safer -- when its safety maintenance is done by companies which sell the same services to any other airlines.

Now Qantas plans to destroy the final point of Differentiation... Fly SinoQantasJetStar Airways, for a truly ... Asian ... experience...

What marketing strategies are left? Segmentation, or Cost Leadership.

Which segment of the flying market could SinoQantasJetStar target? Those who appreciate the Asian style of flight service and food? Why would anyone switch to SinoQantasJetStar when they can choose Cathay, or Nippon, or Singapore, or... any of dozens of others.

Which leaves... Cost Leadership.

Qantas plans to cut 1000 Australian jobs. These will be replaced by cheaper staff in Asia. Costs will be reduced so fares can be reduced. SinoQantasJetStar could be cost competitive. Oooohhh great.

A Cost Leadership strategy will get cheaper seats for passengers. When the international version of Tiger Airlines is back in the air -- SinoQantasJetStar will be in direct competition. Prices will be forced even lower -- because price will be the only deciding factor for customers.

Prices forced down will lead to costs being forced down. More expensive staff -- people who know what they're doing -- will be replaced by generic service companies. SinoQantasJetStar will become even more of a rubber-stamp copy of every other airline in the world.

And the big winners will be the senior executives of the current Qantas. They will continue to pocket huge salaries and bonuses as they bring SinoQantasJetStar down to the lowest, common, price denominator.

Independent thinking & independent analysis of your problems by Agamedes Consulting. Support for your thought: email nick leth at gmail dot com