Description
This abstract tell scandinavian airlines repositioning strategies.
Institute of Marketing and Statistics Author:
Master thesis
Peter Ujaraq Lumbye Jensen
Advisor:
Elmer Fly Steensen
Scandinavian Airlines repositioning strategies
Århus School of Business
2010
2
Table of content
1.0 INTRODUCTION 4
1.1 PROBLEM STATEMENT 5
1.2 THE STRUCTURE OF THE PAPER 5
1.3 DELIMITATION 6
2.0 METHODOLOGY 7
3.0 THEORY 10
3.1 CRITICISM 15
4.0 INTERNAL ANALYSIS 18
4.2 SAS’ CORPORATE STRATEGY, CORE SAS 19
5.0 EXTERNAL ANALYSIS 26
6.0 CONCLUSION BASED ON THE INTERNAL AND EXTERNAL ANALYSIS 27
7.0 SEGMENTATION ANALYSIS AND QUALITATIVE DATA 29
7.1 THE NEW CONSUMER GROUP SAS SHOULD ATTRACT 29
7.2 METHOD 30
7.3 THE FOCUS GROUP FINDINGS 34
7.4 CRITICISM OF THE FOCUS GROUP INTERVIEWS 42
7.5 CONCLUSION ON THE FOCUS GROUP INTERVIEWS 42
8.0 THE RECOMMENDED REPOSITIONING STRATEGIES FOR SAS 44
8.1 CREATING THE NEW POSITIONING 44
8.2 IMPLEMENTATION 48
3
9.0 DISCUSSION: 57
10.0 FURTHER RESEARCH 59
11.0 CONCLUSION 60
12.0 REFERENCES 65
13.0 APPENDIX 74
4
1.0 Introduction
Since the 1950s it has increasingly been recognized marketing capabilities are necessary in
order for a company to be financially successful. Arguably, effective and efficient marketing
depends on the organization’s knowledge of consumers. Key consumer insights are needed in
order to grow, effectively compete, and remain a relevant player in a given market. A market
orientation makes it possible for corporate survival, even in the face of fierce competition and
a changing market environment. The consequence of this generally applied orientation is
competition has intensified in many industries. New entrants are quicker to enter the market,
and rivals will imitate strong segmentation, targeting, and positioning strategies. This means
companies must be quicker to change these strategies, when needed. The successful
companies of the 21
st
century understand customers enter a mutually dependent relationship
with the company. The degree of customer value, customer satisfaction, and customer
retention
1
will determine, how successful this relationship will be (Schiffman et al 2008).
One sector, which has experienced these effects in recent years, is the aviation industry. The
European market has been deregulated in 1993, and the business model of the low cost
carriers (LCC) has severely pressured the national network carriers (NC). The LCC have
managed to persuade the airline passengers of the imbalance between the price charged and
the product offered by the incumbent airliners (Lynch, 2008; Horn & Willumsen, 2006). The
shifts in consumer preferences also mean passengers are not loyal to any particular airline, as
choice is predominantly determined by price (Datamotor, 2009, a).
One airline company, which has had a difficult time adjusting to these changes in the
marketing environment, is Scandinavian Airlines (SAS). The company has been capable of
staying afloat, even though in the last ten years it has constantly faced bankruptcy (Horn &
Willumsen, 2006; SAS Annual Report, 2009, and 2003). The image of the airline has also
been affected, as there is frequently bad press coverage in the media. One example concerns
the recent financial cutbacks (Olst, 2010; Pinholt, 2010). Another example is Berlingske
Nyhedsmagasin (2010), which recently conducted a company image analysis on 4,057 Danish
business executives. SAS has been ranked with the worst company image out of 140 Danish
corporations for two consecutive years.
1
For definitions of customer value, customer satisfaction, and customer retention see appendix 9.
5
1.1 Problem statement
This report employs a marketing perspective on the current situation of SAS, which entails
exploring, how the SAS brand is performing. Based on the above-mentioned problems SAS
face, the intensified competition and an affected public image, it is argued by this paper the
concept of repositioning, as contended by Kevin Lane Keller (1999), can be employed. In
short this paper seeks to explore the following research question:
How can the SAS brand be repositioned to attract non-business travellers, without alienating
business travellers, and be perceived by both groups as relevant, distinctive and believable?
In order to answer this, the following investigative questions must be answered:
• What are the internal resources of SAS, and do these provide key competitive
advantages?
• What is the current brand positioning of SAS (i.e. the brand identity)?
• What business environment does SAS operate within, and is SAS competitive?
• Which new consumer age group should SAS attract?
• What is the brand knowledge of this new customer age group with regards to SAS?
• Which new positioning strategies should SAS follow, and how can the marketing mix
support this?
1.2 The structure of the paper
As can be seen in figure 1.2, the paper is based on four parts: Part one deals with the
theoretical foundation of this report, which mainly relates to Kevin Lane Keller (1999; and
1993). The second part can best be characterized, as a strategic analysis and is divided into
two sections: Section one performs an internal analysis to determine the brand image, and the
competitive advantages, of SAS. Section two undertakes an external analysis to determine,
how SAS is performing in the marketplace, as well as the nature of competition in the
industry to establish if SAS in fact has sustainable competitive advantages. Part two is of a
more descriptive nature, whereby the operating performance of SAS can be seen in appendix
4., and the entire external analysis is performed in appendix 5.0.
6
Figure 1.2: The structure of the paper
Source: Author’s own creation
Part three deals with the empirical data of this report. This part is based on both secondary
and primary data. The secondary data has been used to determine, which new customer
segment SAS should attract. The primary data has then been collected in the form of two
focus groups. The first three parts are undertaken to justify why SAS should be repositioned.
Part four deals with, how to create, design, and implement the repositioning strategy, based
on the preceding three parts.
1.3 Delimitation
Undertaking a repositioning strategy is a complicated process, and it is impossible for this
paper to cover all of its aspects. Specifically, the purpose of this report is to provide possible
repositioning strategies for SAS. The paper, in order words, does not consider if the
recommendations offered can actually be realized, as they are merely suggestions.
The SAS Group is a very large corporation, which is divided into two main business areas;
Core SAS, which consists of SAS Airlines, Blue1 and Widerøe; and Individual Holdings,
which include Air Greenland, Estonian Air, Skyways, SAS Ground Services and SAS Tech
(SAS Annual Report 2009). The paper will entirely focus on SAS Airlines, and unless
otherwise stated, it will refer to this as SAS.
The market investigated is the Danish passenger aviation industry. The reason is it. It is
suggested further research is to be conducted to guarantee the results are not specific for
Denmark.
This paper will specifically not deal with: (A) Organizational behaviour. This refers to the
organizational structure that is best suited to support the chosen repositioning strategy; the
impact of national culture on organizational behaviour; the organizational power, politics, and
7
leadership, and their respective impacts on the economical outcome of the company. (B) The
legal issues concerning the aviation industry, such as: pricing policies, securities,
anticompetitive behaviour, the power and legal rights of employee unions, and safety
regulations. (C) A detailed analysis of the troublesome economic situation of the SAS Group.
It will however, be necessary to briefly discuss this condition, since it affects which
recommendations should be pursued.
The reason this paper does not carefully examine the heavy costs incurred by SAS Airlines is
the aim is to determine how the company can be renewed from a marketing perspective,
rather than from an economic or financial perspective. Many of the expenses are difficult to
reduce or eliminate, as the history of the four turnarounds show (see section 4.0). The cost
orientation has been the primary corporate concern for many years, which may have created a
negative spiral. By cutting employee costs, lower levels of customer service may have
occurred. Customers have then sought out alternatives, whereby the ticket price may have
been increased, and more customers have fled. More costs have then had to be cut yet again.
By focusing on how to generate revenue streams (and profit potential) signifies a shift in
thinking from money out to money in. This thinking resembles that used by Brenneman
(1998) on how to save Continental.
2.0 Methodology
The purpose of this section is to explain the choice of procedure used in this paper, which
include a paradigm discussion, the research approach followed, and the research techniques.
Paradigm discussion
The purpose of this paper is providing suggestions for, how SAS can be repositioned. This
entails no definitive conclusion is offered, but rather possible strategic directions are
recommended, and discussed. This report follows a so-called triangulation approach, which
refers to combing two or more paradigms. This report does not only deal with understanding
consumers’ brand perceptions of SAS, but also analysing and discuss these, whereby neither
positivism (i.e. assuming there is only one truth) nor symbolic interactionism (i.e. investigate
individual’s perceptions) are fully followed (Flick, 2006). There is not one “true”
repositioning strategy for SAS to follow, but not all directions will be equally valid.
The choice of research method
The choice of employing a qualitative or quantitative research method, and how accurate their
results are, has been an ongoing debate within the area of scientific research. It is common in
8
Economic literature for the majority of research conducted to be quantitative, as this is an
easy and cheap way to obtain a high representation of the estimated population investigated.
The purpose is to establish a causality relationship among the dependent variable (or
variables) and the selected independent variables. On the other hand, qualitative methods such
as words, sentences or narratives, are predominantly used in the field of anthropology. The
reason is such an approach enables specific examination and focuses more on how
interpretations are made in regards to the phenomenon studied. It is however, impossible to
say which type is best or more appropriate, since it depends on what kind of research question
is asked; what sort of information is available for the study; and what the study is to be used
for. It has also been argued a process that examines a new field of research, typically begins
based on a qualitative method. It is then tested for validity by a quantitative approach
(Blumberg et al, 2006). The factors underlying the qualitative manner is also more complex
than its counterpart, as it includes social constructs based on cultural framing (i.e. what one
person believes a word to mean differs from that of another. What differentiates the two is
determined by their distinct cultural backgrounds (Abnor & Bjrerke, 1985)).
In the field of positioning and branding both quantitative and qualitative approaches have
been used. For example, a common quantitative method is executing a correspondence
analysis, which facilitates the perceptual mapping of objects, such as products and companies,
on a set of non-metric attributes (Hair et al, 2006; Gursoy et al, 2005). The qualitative
research method, on the other hand allows examination of attitudes and perceptions, which is
the overall objective of this report (Flick, 2006). It also discovers what customers want, and
what they are willing to pay for, which is difficult to achieve with a quantitive approach.
Based on these arguments, the qualitative method has been chosen.
Research approach
The field of qualitative research covers many more specific approaches, such as comparative,
retrospective, snapshot studies, observations, and expert interviews (Flick, 2006). This paper
employs to approaches:
Case studies:
The traditional approach is to include several studies to support the research findings, but it
has been limited to one single case of Scandinavian Airlines (SAS). It will therefore not be
relevant to include other cases. SAS has, however, not been involved in the development of
9
this paper. They have unfortunately, not been interested in answering any questions related to
this project.
Focus group interviews:
The specificities will be provided in section 7.2.
Sources
In this paper both primary (the two focus group interviews) and secondary (non-self
conducted information) data are employed. There are six categories of secondary information
used in this report: peer reviewed articles; published books; journal articles from respected
publications; Internet pages including information from www.flysas.com;
newspaper/newspaper magazine articles; and a secondary quantitive study performed by TNS
Gallup Denmark. The level of reliability of these sources is uneven, where the newspaper/new
magazines are the least reliable. Therefore, they will be supported by other sources to validate
their claims. One of the primary sources is Horn & Willumsen (2006). Jens Wittrup
Willumsen has been vice-president in SAS Denmark, and Peter Horn is a management
consultant, as of 2006. Thus their insights have a high degree of credibility. It should be
mentioned these authors, as well as SAS’ annual reports, are slightly biased by favouring
SAS. Horn & Willumsen (2006) do nonetheless offer critical comments, which limits this
issue. This book is by its nature retrospective. It has however, not been possible to collect
more recent information about the particularities of SAS. This book has, when possible, been
complemented with more up to date sources., such as the annual reports.
Reliability, validity, and objectivity
According to Flick (2006) there currently is not a recognized way of, how to measure the
value of qualitative research. This has been used to question the legitimacy of such a method.
It does seem it would be unreasonable to judge the two approaches on the same criteria. Yet
he argues that while the terms are the same their meanings are different. He defines the
following three factors as
2
:
“Reliability: Checking the dependability of data and procedures, which can be
grounded in the specificity of the various qualitative methods”.
2
Uwe Flick, qualitative research, 2006, chapter 28, especially pages 371, 373 and 375.
10
“Validity: Validation as the social construct of knowledge by which we
evaluate the “trustworthiness” of reported observations, interpretations, and
generalization
3
”.
“Objectivity: it is interpreted as consistency of meaning, when two or more
independent researchers analyse the same data or material. Arriving at the
same conclusions surmises them as being objective and reliable
4
”.
It is the author’s belief of this paper the data used and collected, as well as the procedures
followed, are reliable, given the above-mentioned arguments. This leads to the question of
validity or, in other words if the method is appropriate given the sources. It is possible for a
study to be invalid, even though the sources are dependable, and vice versa. The paper
employs theoretical literature and primary data. This method is valid, since it follows the
same construct as many other marketing scholars, who have successfully conducted research
in this area. However, since the research is performed on individuals, the results cannot be
easily compared for verification. Based on Uwe Flick’s (2006) definition the objectivity of
this paper is questionable.
To conclude, this paper follows the qualitative research method, and employs both a case
study and focus groups interviews, which other researchers have followed when studying
issues of market positioning. This has been established as reliable and a valid method, but the
criteria of objectivity is questionable.
3.0 Theory
This sections deals with the theoretical foundation of this report. It begins with explaining the
roots of repositioning, and then continues with a brief review of the repositioning concept.
The conceptual paper “Managing brands for the long run” by Kevin Lane Keller (1999) is
then explained, as it is the main theory employed in this paper. The section ends with a
critical reflection of Keller (1999 and 1993).
Before the literature on repositioning is explored, it is important to first appreciate a clear and
shared understanding of the concepts. There are several definitions used in this report, which
are explained in appendix 9. In this section the most important concepts are dealt with. It
3
Uwe Flick has adopted this definition from Mishler (1990)
4
Uwe Flick has adopted this definition from Maddull, Jordan, and Shirley (2000), who argues that the concept
of objectivity is only suitable to a realistic context.
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should be said there are several definitions of what constitutes a brand. These may refer to
organizational, service, product, or retail brands. These different notions share many similar
characteristics and are used interchangeably (Merilees and Miller, 2008). This paper will
define a brand as: “A brand is the sum of the good, bad, the ugly, and the off-strategy. It is
defined by your best product as well as your worst product. It is defined by award winning
advertising as well as by god-awful ads that somehow slipped through the cracks, got
approved, and, not surprisingly, sank into oblivion. It is defined by the accomplishments of
your best employee as well as by the mishaps pf your worst hire you ever made. It is also
defined by your receptionist and the music your customers are subjected to when they are put
on hold. For every grand and finely worded public statement by the CEO, the brand is also
defined by derisory consumer comments overheard in the hallway or in a chat room on the
Internet. Brands are sponges for content, for images, for fleeting feelings. They become
psychological concepts held in the minds of the public, where they may stay forever. As such
you can’t entirely control a brand. At best you can only guide and influence it” (Bedbury,
2002, p.15).
Keeping the above brand meaning in mind, attention is now given to the concept of
repositioning. This concept has evolved from positioning, as developed by Ries & Trout
(1986). According to them a position is “Like the memory bank of a computer, the mind has a
slot or position for each bit of information it has chosen to retain”. A positioning is “...what
you do to the mind of the prospect” and “Positioning is an organized system for finding a
window in the mind. It is based on the concept that communication can only take place at the
right time and under the right circumstances” (Ries & Trout, 1986, p. 29, p. 2, and p.19).
They furthermore elaborate consumers have constructed a number of ladders in their mind,
where each step on the ladder signifies a product or brand, which has been placed on that step
accordingly to their preferences. The ladder signifies a specific product group. There are then
certain positioning strategies a market leader, and a market follower, can pursue. As long a
leading company owns a position in the mind of the prospect it should not be tampered with.
The company should instead build capabilities to reinforce its position, and incorporate new
functions once these have shown their value. A follower company should find a position not
occupied by the leader, for example a low-price position, and then pursue this strategy.
Interestingly, a repositioning strategy should be followed when “…there are so few creneaus
(non-occupied positions), a company must create one by repositioning the competitors that
occupy the positions in the mind (i.e. convincing the prospect to alter the perception of the
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rivals’ brand)) (Ries & Trout, 1986, p.61). It should be pointed out here positioning and
repositioning are dealt with as a advertising campaign strategy, and is something to be
avoided. A company should find a sustainable positioning and maintain it, but being ready to
size new opportunities.
The concept of repositioning has since then been used to include everything from individual
product/brand alterations to shifting corporate brand strategies (Aaker, 1997; Balmer et al,
2009). As the concept is used to cover such a large spectrum, there is as of this writing, not
an established academic consensus, and repositioning continues to be elusive. There are
numerous aspects of the concept including revitalization, rebranding brand renewal,
refreshment, makeover, reinvention, and renaming. There appears to be two main schools of
thought, those devoted to corporate rebranding, which “refers to the disjunction or change
between an initially formulated corporate brand and a new formulation “(Merrilees &
Miller, 2008, p.538), and those devoted to repositioning referring to “any decision by a firm
to alter the perceptual positioning of a brand” (Simms & Trott, 2007, p.300). The definition
employed in this report follows Keller’s (1999) argument of a revitalization strategy, and is in
the same vein as that defined by Simm’s & Trott (2007).
According to Keller (1999) if a brand is performing badly or in fact has failed it either needs
to be reinforced or revitalized. These two directions are based on the Customer Based Brand
Equity (or CBBE) Model as developed by Keller (1993). This model, defines customer-based
brand equity as “the differential effect that consumer knowledge has on the customer’s
response to marketing activity. Positive customer-based brand equity results when consumers
respond more favourable to a product, price, or communication when the brand is identified
than when it is not” (Keller, 1999, p.102). This model describes consumer brand knowledge
in relation to brand awareness (i.e. brand recall and brand recognition) and brand image (i.e.
favourability, strength, and uniqueness of customer perceptions). A strong performing brand
is one where: “Sources of brand equity occur when consumers are aware of the brand and
hold strong, favorable, and unique brand associations. There are a number of ways to create
those knowledge structures in the minds consumers. Broadly, they involve choosing brand
elements, developing supporting marketing programs, and creating secondary associations”
(Keller, 1999, p.102).
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Any change in these elements can alter the sources of brand equity, whereby companies need
to carefully consider its marketing decisions. The way to reinforce, i.e. enhance, brand equity
is dependent on the bearing the brand is given financially and consistently communicating the
brand meaning to consumers. The danger of not reinforcing a brand will lead to a situation
where the brand needs to be revitalized. Consistency entails a dedication to maintaining the
strategic focus of the brand as well as the brand meaning, and not the market tactics, like price
changes, product features, different creative advertising campaigns, and changes in brand
extensions. These tactics are often needed to alter in order to create strategic force. The brand
equity reinforcement strategy is also dependent on whether the brand associations are
connected to product attributes (i.e. functional benefits) or they are non-product connected
(i.e. symbolic or experimental benefits). Product related associations can be reinforced
through innovation, in for example design features, and/or promotions influencing brand
performance. Non-product related associations can be reinforced by emphasizing the brand’s
relevance for the consumer and in the consumption situation. It is however, important not to
change these associations too much, as they may devalue the CBBE (Keller, 1999).
In certain situations brand reinforcement strategies are not enough to alter a troubled brand’s
performance. These situations are catalysed by changes in consumer tastes and preferences,
new competitors or technology advances, or other alterations in the surroundings of the
company. Revitalizing a brand involves either lost sources of customer brand equity are
regained, or new sources are generated. It is therefore important to access the breadth (the
way consumers think of the brand) and the depth (consumers ability to recognize or recall the
brand) of brand awareness and determining the strength, favourability, and uniqueness of the
brand associations of consumers. According to the customer-based brand equity model, two
approaches are possible (Keller, 1999, p.112):
1. “Expand the depth and/or breadth of brand awareness by improving consumer recall
and recognition of the brand during purchase or consumption settings. This is
achieved by increasing the level or quantity of consumption, and/or by increasing the
frequency of consumption”.
2. “Improve the strength, favourability and uniqueness of brand associations making up
the brand image. This approach may involve programs directed at existing or new
brand associations. This is archived by retaining vulnerable or recapturing lost
customers, identifying neglected segments, and/ or attracting new customers”.
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Regardless of the direction taken, changing the brand elements, altering the supporting
marketing program, and creating secondary associations can regain sources of customer brand
equity. If a troubled brand is performing badly due to lack of brand awareness the company
should communicate new ways the brand can be used, and improve brand recall by
communicating closely to the point of purchase. On the other hand, a troubled brand is
usually performing badly due to lack of strength, favourability, and uniqueness of brand
perceptions, i.e. problems with brand image. The company needs to establish if there are
positive associations, or if they have been substituted by negative ones, which will determine
if points-of-difference (POD) or points-of-parity (POP) need developed to either differentiate
the company from rivals, or make consumers include the brand in their consideration set, see
appendix 9 for definition. Several options are available to reposition the brand, which include
changing brand associations, analyse if there are neglected customer groups in the market, or
if the existing consumers should be discarded to attract an entirely new group. In any case the
company needs to carefully nurture its CBBE, and should, if possible, make the brand
relevant for both existing and new customers. This is a difficult task to manage, where several
companies have had to completely cut the ties to its past to be perceived as relevant. Other
organizations employ different communication tools to become relevant in the eyes of the
consumer. Yet others again have instigated brand extensions. In certain cases a brand is
simply not worth revitalizing, because there are no sources of customer brand equity, or
negative associations have superseded the positive perceptions, where the strategies are to
milk the brand, fade it out of the market, or disregarded it entirely (Keller, 1999).
To conduct actual research based on Keller (1999) and (1993) is difficult, although
suggestions for measuring brand awareness and brand image are provided, see appendix 1,
and a supporting marketing mix needs developed. Therefore other theories have been
consulted. In regards to brand perceptions the philosophy Smash your brand (Lindstrom,
2008, a)
is employed, because is breaks the brand into several parts, and recognize a brand is
much more than its logo. The idea is to break the brand at all customer contact points with the
brand, in order to develop or maintain the brand image. The framework is designed as a tool
to offer insights into, how a company can use other brand elements than the brand logo. These
elements refer to: imagery, colour scheme, form, name, language, icon/symbol, sound,
behaviour, service, tradition, ritual, and navigation. These all need to exhibit significance
individually, and support each other to generate synergy to institute a strong brand
(Lindstrom, 2008, a), see appendix 2 for details. Moreover, Lindstrom (2008, a) argues
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companies should move away from a 2D (i.e. appealing to the senses of sight and hearing)
brand orientation to a 5D (i.e. stimulating all five human senses of taste, smell, hearing, and
touch) perspective, as these will create a more authentic brand in becoming more credible,
real, and true. It will also create a strong customer bond.
To be able to develop a supporting marketing mix for the new positioning the 7ps framework
offered by Booms & Bitner (1981, as cited in Rafiq &Ahmed (1995)), has been followed. The
concept of the marketing mix has originally been developed by McCarthy (1964; cited in
Rafiq &Ahmed (1995)) and consists of 4ps, product, price, place and promotion. The
framework has been criticised, especially from service marketing, as the 4ps do not
incorporate the characteristics of services, as the 4ps are based on manufacturing companies.
These issues have caused Boom & Bitner (1981) to specifically design the 7ps for service
marketing, which relate to: product, price, place, promotion, participants, physical evidence,
and process, see appendix 3 for what constitutes each element. The new elements are essential
for how the customer perceives the customer experience, both before and after it has been
encountered. Furthermore, the company can manage these different elements to affect
customer behaviour, which are the reasons for their enclosure in the expanded marketing mix.
It is important to point out these elements need to have value in themselves, and should
support each other to generate synergy (Rafiq &Ahmed (1995).
3.1 Criticism
The customer based brand equity philosophy, which the reinforcement and revitalization
strategies are based on, is not without critics. According to Punj & Hillyer (2004)
some
commentators have wondered if this approach enhances the theoretical value of consumer
behaviour by utilizing existing concepts, like for example brand loyalty and attitudes toward
the brand. Punj & Hillyer (2004) therefore instigate a model of a cognitive model of customer
based brand equity in regards to frequently purchased products, which they test empirically.
Other critics, like Rust et al (2004), contend brand equity has suffered from lack of adequate
measurability, because most methods assume brand value is stable, as well as measuring
brand equity by a condensed metric of brand strength. The model developed by Rust et al
(2004)
captures both customer equity and brand equity by appreciating the drivers of each
construct and their individual effects. The authors moreover claim the model offers financial
accountability for marketing choices. The problem with employing this model to the research
paper, is the three identified drivers value equity, brand equity, and relationship equity are
16
defined too generic to be of practical value. For example the driver value equity is defined as
“the objectively considered quality, price, and convenience of the offerings” (Rust et al, 2004,
p.116). Specifically for Keller’s (1993) model Ponnan & Kishnatray (2008) argue the
framework only considers CBBE in isolation, and does not capture the importance of
evaluating, how the brand is performing with rival’s brands. This is important, because
consumers respond to other elements than those of the marketing mix. It is also contended the
definition of brand associations regarding strength neglects to consider that such associations
can also be formed subconsciously. Moreover, the uniqueness of the brand associations is
difficult to conceptualize.
According to Beverland (2009) the approach undertaken by Keller (1999) falls into a
traditional model of brand equity accentuating brand meaning occurs in consumers’ brains.
Nevertheless, many companies do not include consumers in the creation of brand meaning, as
it is believed this is the responsibility of the marketer. Brand meaning is established by
producing favourable brand associations using one-way top-down communication
instruments. The author elaborates, “Brand marketer’s main job is to measure the gap
between how consumers should view the brand (brand identity) and how they currently see it
(brand image). Strategies like “reinforcement” and “repositioning” are then used to close
this gap. As part of this approach brands must stay on message by repeating their core
message – change, ambiguity and inconsistency should be avoided” (Beverland, 2009, p. 17).
Therefore to include consumers’ role in constructing brand meaning it is said brands should
become authentic (where authenticity is defined as “the manifestation of the search for what
is real”(Beverland, 2009, p.17), which can be archived through seven strategies (or habits as
it is called in the book). It is however, outside the scope of this report to cover all seven
strategies in their entirety. The one followed in this report is that of story telling, because it is
important to have a story, as it adds a layer to the brand meaning. It is also important to
recognize a brand becomes more authentic when consumers are allowed to continuously
create their own stories (and meanings) of a brand. The company should in other words not be
afraid to include consumers in creating brand meaning (Beverland, 2009).
There are of course many ways a company can shift its strategic focus other than employing a
branding repositioning strategy. According to Andersen et al (2010) a number of new theories
have the last couple of years emerged, where each argue their unique approach leads to
financial success, especially the theory of Blue Ocean Strategy by Kim & Mauborgne (2005)
17
and the theory of Discount Strategy by Andersen & Poulfelt (2006; cited in Andersen et al
(2010)).
Box 3.1.1: The four strategic perspectives and their characteristics of modern strategic
thinking
The positioning
perspective
The resource-based
perspective
The Blue Ocean
Strategy perspective
The Discount
perspective
Rivalry Compete on
existing markets
Compete by
developing strong
resources
Create a market that
renders the competition
irrelevant
Compete on markets
described by hyper-
competition
Sustainable
competitive
advantage
achieved by
Beat the
competition with
a strong market
positioning
Resources should be
valuable, rare, costly
to imitate and
exploitable by the
organization: the
VRIO framework
Make competition
irrelevant
The company creates
value for itself while
at the same time
value is destroyed for
rivals
Demand Exploit existing
demand
Exploit strengths to
create a strong
resource profile
Create and maintain new
demand
Both supply push and
demand pull
Strategy Cost leadership
or differentiation
Optimise resources Create value free of
competition
Form strategy with
disruptive effects
Most
significant
Contributors
Michael E. Porter Edith Penrose,
Berger Wernerfell,
Jay Barney
Kim & Mauborgne Christensen,
Moesgaard Andersen
& Poulfelt
Source: Originally developed by Andersen et.al., 2010, but have been translated by the author of this report,
who has also made a few additions.
These theories argue against the traditional strategic thinking consisting of the positioning and
resource based perspectives, as among others advocated by Keller (1999). Together these four
perspectives, positioning, resource-based view, Blue Ocean Strategy, and the Discount
Strategy view, represents the modern strategic thinking, which can be seen in box 3.1.1.
Although Andersen et al (2010) argues these four perspectives should be combined in order to
create a strategic map consisting of four main strategic positionings, this paper will only
include the thinking behind the Blue Ocean Strategy (BOS), see appendix 9 for what is meant
by a Blue Ocean and a Red Ocean. This theory contends a company needs to offer new
factor(s) the industry has not previously provided to customers, in order to create a blue ocean
(uncontested market space). This is achieved by examining non-customers’ preferences,
whereby the BOS perspective mimics one of Keller’s (1999) ideas for a company remaining
relevant it can attract new customers. Andersen et al (2010) further point out creating a BOS
is only temporary, as the competition cannot become irrelevant indefinately, as argued by
Kim & Mauborgne (2005), because rivals are quick to either match or copy new offerings.
To recapitulate, on part 1 of this paper, the concept of repositioning has its roots in the
positioning field, as developed by Ries & Trout (1986). The concept has since then evolved to
18
include individual product/brand alterations to corporate brand changes. The one employed in
this paper follows that of revitalization and reinforcing strategies, as contended by Keller
(1999). Two other theories are necessary to conduct actual research on Keller’s (1999) theory,
those of Smash your brand and 5D branding by Lindstrom (2008, a), and Booms & Bitner’s
(1981) framework as argued by Rafiqu & Ahmed (1995). For creating a more authentic brand
Beverland’s (2009) story telling strategy is also followed, as it allows consumers an active
role in creating brand meaning. The thinking behind the Blue Ocean Strategy, as developed
by Kim & Maugborne (2005) is also considered.
4.0 Internal analysis
This section initiates part 2 of this paper. Specifically this section is an outline of what SAS is
and what it does. It begins with a brief review of the company history. The section ends with
an explanation of the current corporate strategy, as well as the branding and positioning
strategies.
Figure 4.0 The main historical developments of SAS
Source: Author’s own creation based on information from SAS (2010, a) and Horn &Willumsen (2006), and
Dickson (2006)
SAS is formed as
a consortium by
(DDL), (DNL,
and (SILA)). The
first
intercontinental
flight from
Stockholm to NY
is launched. SAS
is the world’s first
airline to fly from
Copenhagen to
LA via the North
pole in scheduled
flights. The
airline extends
the routes to
include Tokyo,
whereby SAS can
offer “around the
world services
over the North
Pole”
1940s/1950s
The first hotel,
SAS Royal Hotel
in Copenhagen is
opened. Arne
Jacobsen designs
the entire
building. Curt
Nicolin initiates
the 1st turnaround
strategy.
In 1971 the first
Boing 747 jumbo
jet is taken into
service.
By the
stewardship of
Jan Carlzon is the
2
nd
turnaround
strategy initiated.
The
Businessman’s
airline concept is
introduced with
the new segment
EuroClass. SAS
is the most
punctual airline in
Europe. SAS
receives the
“Airline of the
Year” award.
SAS celebrates its
50
th
anniversary.
The company is
harmonized, and
establishes the
profit-centres
SAS Denmark
A/S, SAS Norge
ASA, and SAS
Svergie AB.
Focus is on
operationalizing
the firm. SAS
established,
among others,
Star Alliance. Jan
Carlzon, Jan
Reinås and Jan
Stenberg each
are CEOs in this
period.
The toughest
period in SAS
history occurs in
2001 in the wake
of 9/11 in NY.
Jørgen
Lindegaard heads
the 3
rd
turnaround
strategy whereby
the firm cut costs
by 14 billion
SKR. A single
SAS share is
offered. Mats
Jansson becomes
the new CEO,
and introduces
S11 and Core
SAS.
1960s/1970s 1980s 1990s 2000s
19
There have been many events throughout the 65 years SAS has existed. All of these cannot be
covered in their entirety, but the most important ones can be seen in figure 4.0. According to
Horn & Willimsen (2006) SAS has always been a company employing a top-down
management approach, although the CEOs’ strategies have not been followed through after
they have lead the airline. They furthermore, highlight these strategies undertaken by the
various CEOs have been viable and economically sound, yet the company boards have not
been able to demand clear market orientated strategies, causing each CEO to loose focus. The
history clearly shows a number of turnaround strategies have been initiated to make the
company financially strong, but the outcomes of these strategies have not always been
satisfactory. The company is still in a dire financial situation, whereby remaining an
independent airline for the future may seem bleak.
Figure 4.0 shows the history of SAS and illustrates the company has instigated many
initiatives to become more competitive. For a more detailed description of the company’s
history see Horn & Willumsen (2006), SAS (2010, b), and SAS (2010, c). The company has
since its establishment been owned by the Swedish, Danish and Norwegian governments,
which respectively own 21.4, 14.3, and 14.3 per cent (SAS (2010, d), Largest shareholder
information). Furthermore, the pioneering spirit of the 1940s, 1950s and to some extent the
1980s, have provide the company with a rich heritage with many great achievements and
strong ties to the business world. The pioneering spirit has however been replaced with
streamlining the business, and make it more cost efficient, since the 1990s. Cost efficiency
has despite these initiatives remained the Achilles’ heel for competitiveness. Other national
airliners (or flag carriers as they are often referred to), like British Airways, have had to be
privatized in order to become competitive in a deregulated market (Balmer et al, 2009).
Perhaps SAS needs to do the same.
4.2 SAS’ corporate strategy, Core SAS
The main business areas and the operating performance of the company can be seen in
appendix 4.. The business area with the lowest percentage EBIT has been experienced on
international travel, although SAS has not managed to reach the profitability target the last six
years. The most prominent costs are payroll expenses and jet fuel costs, which respectively
account for 38.9 and 16.6 per cent (SAS Annual Report 2009). The corporate strategy Core
SAS has been designed to deal with the financial problems of the company and is explained in
detail below.
20
Core SAS has been launched in 2009 to complement the previously designed corporate
strategy S11, since this has not been sufficient to bring the company to profitability. It is
based on five pillars aiming at strengthening the long-term situation of the company by
making it competitive and profitable (SAS Annual Report, 2009). Each of these five pillars
are now explained:
(1) Focus on the Nordic market
The strategy Core SAS has been created to streamline the company by concentrating on the
core business, aviation, of the company in its home market. As previously mentioned, the
international flights EBIT performance has been the worst. This has caused SAS to capitalize
on its home market, as it has a strong market presence in Scandinavia. It has 54, 43, 33, and
15 per cent of the Norwegian, Danish, Swedish, and Finnish markets. The economic
operations in 2009 have been negative in Europe, and in the Scandinavian market, when
compared to 2008 (SAS’ Annual Report, 2009).
(2) Focus on business travellers and strengthened commercial offering
As can be seen from figure 4.2,1 part a, the number of passengers on scheduled flights has
increased from 2000 to 2006, which in large part can be attributed to the strategy S11,
implemented in 2003. The passenger volume has since 2006 been declining, most
significantly from 2006 to 2007. The number of passengers has been fairly stable in 2008, but
declined with 14.1 per cent from 2008 to 2009, leading the SAS Group to transport a total of
24.9 million passengers in 2009. A large part of this decline is attributed to the global
Financial Crisis, which has hit the entire airline industry hard, especially in 2009.
This has particularly been the case for the business travel segment. The SAS Group’s
passenger volume is in 2009 back to its level in year 2000. To match the declining passenger
numbers the capacity has been cut back with 57 routes, mainly on leisure destinations, which
the passenger load factor is an expression for, see appendix 9 for a definition. This can be
seen in figure 4.2.1 part b. The aircraft fleet has been cut with 18 units. It can be seen in part b
the passenger yield has also been declining from 2002 to 2004, and has since then increased.
It has however not reached its 2000 level (SAS Annual Report, 2009).
Though the business traveller segment has declined in 2009, it remains the largest part of the
SAS Group’s customers. To accommodate the different customer needs, and these customers’
different price sensitivity, each customer segment has tailored offerings, which can be seen in
21
figure 4.2.2. These segments are based on a turnaround strategy launched in 2003 to provide a
future for the troubled company. The purpose of this strategy has been to reposition SAS,
which should be established by an altered product offer to the market. To achieve this a
substantial amount of research has been undertaken through key constituents, and through a
quantitive analysis in eight countries. The research revealed the market for consumers, who
used the price of the ticket as the only criterion for a destination accounted to 40 per cent of
all consumers. This is especially the case for Denmark. Another segment, called productivity,
focused on punctuality regarding take off and landing, which accounted for roughly 40 per
cent. The remaining 20 per cent concentrated on being comfortable onboard. The results
clearly indicated SAS could regain market shares within the business travelling segment.
These product and service offerings are provided on international, European, and
Scandinavian destinations. Domestic travel, for example within Denmark, is only offering
economy class. These strategies are still employed by the company (Horn & Willumsen,
2006; SAS Annual Report (2004); SAS’ website, 2010).
Figure 4.2.1: The passenger development on scheduled flights, and the passenger load factor
and yield performance.
Part a Part b
Source: Part a is the authors’ own creation, based on figures from SAS Annual Report, 2009, and part b is a
copy from SAS Annual Report, 2009, page 48.
It can be observed, the Business class offers numerous other services to increase the level of
comfort, when travelling. The Economy Flex class offers important services for a business
traveller, but at a lower airfare than the Business Class ticket. The Economy class offers a
basic product for those travellers only interested in cheap airfares and they avoid paying for
unnecessary extras (i.e. no frills service). In comparison, Norwegian offers two classes,
22
namely full flex and low fare (www.norwegian.com), and Cimber Sterling only offers one
class, although the ticket price depends on when the booking is made (www.cimber.dk). It
therefore seems the customer offerings of SAS indeed are more suited for business travellers,
than the offerings of the airliner’s main competitors. This is reflected in the customer
categories, where business travellers have been roughly 60 per cent of all customers from
2007 to 2009. Charter passengers have increased with 5 percentage points, and leisure
travellers have decreased with between 5 to 10 percentage points in the same time period
(SAS Annual Report 2007 and 2009).
Box 4.2.2: The three main customer segments of SAS, their respective product offerings, and
their percentage of all SAS Group’s customers.
Business Economy Flex Economy
Offer SAS Fast Track
Lounge
Empty middle seat
More legroom
Internet/telephone check-in
Priority boarding
Food and beverages incl.
Ticket can be
changed/refunded
Basic service commitment
EuroBonus points
SAS Fast Track
Internet/telephone check-in
At the gate 20 min before
departure
Priority boarding
Food and beverage incl.
Ticket can be
changed/refunded
Basic service commitment
EuroBonus
Competitive fares
No advance reservation
requirement
Food and beverages may
be purchased on board
No changes once booked
Basis service commitment
EuroBonus points
Snowflake fares (i.e. extra
cheap fares)
Price Premium Medium Low
Source: Author’s own creation based on information from SAS Annual Report, 2004, and SAS Annual Report
2008 and 2009.
To support these segments, and their respective customer offerings, the positioning It’s
Scandinavian has been created along with the corporate strategy S11. To make the positioning
relevant the company implemented the marketing strategy through its corporate identity, the
customer service, the product offerings, and through its marketing communications (Horn &
Willumsen, 2006). But, as mentioned, the S11 strategy has not been enough to make SAS
profitable, whereby the new corporate strategy Core SAS has been implemented. With Core
SAS a new positioning strategy has been launched, which is called Service And Simplicity.
The idea is to “minimize travel time and maximizing perceived customer value” (SAS Annual
Report, 2008, page12), and can be seen in figure 4.2.3.
The new positioning is furthermore, the brand promise, and it is to be fully implemented in
the organizational culture. The customer experience is designed to make it easier to fly, by
flying on time, flying to destinations the customers want to fly to, minimize the travel time
23
spent, and increase the customer perceived value during flights. The brand vision, which is
also the corporate vision, is to be perceived as the obvious choice. The three individual
brands, SAS, Widerøe and Blue1 together stand for reliability, flexibility and punctuality
(SAS Annual Report, 2008).
Figure 4.2.3: The SAS positioning.
Source: Copy from SAS Annual Report, 2008, page 12.
To achieve this positioning the company have designed a supportive marketing mix, which in
the framework developed by Booms & Bitner (1981;cited in Rafiq and Ahmed, 1995) is
explained below.
In regards to the product, the tailored customer offerings will be supplemented with, among
others, an extended EuroBonus program, with the Membership Rewards Loyalty Program in
cooperation with American Express, mobile phone boarding passes, a kiosk where customers
can self label their luggage carried, and free wireless internet services in the airport lounges.
These elements will not be available to all customers, as they are dependent on which type of
ticket is bought. The frequent flyer program, is separated into two parts: Companies using the
airliner obtains SAS Credit points each time an employee fly with SAS, and the travelling
employees obtain EuroBonus points. These can then be exchanged for new air travel. For the
Economy Extra and Business classes discounts are offered via the SAS Travel Pass
Corporate, and the Fast Track lane offers a quick security check to meet these customers’
expectations. In regards to price, SAS concentrates on offering competitive total airfare,
which means seats, luggage, and credit/debit card charges, are all included in the price. The
total flight ticket should thereof be lower than what competitors can offer. According to SAS’
own claim it is no longer perceived as being expensive (SAS Annual Report 2009). In regards
24
to place, the main locations used are the national airports located in, Copenhagen, Billund,
Aarhus, and Aalborg. The main distribution channels are SAS’ own website, and through
airfare comparison websites, such as ww.Momondo.com. In regards to promotion for most of
the business travellers this occurs through a negotiation with individual companies on special
travel deals (Horn & Willumsen, 2006). For non-business people promotion mainly occurs
through mass marketing, such as TV and on the Internet via: banner ads, SAS own website
(www.flysas.com), a Facebook group on www.facebook.com, and ads in the business paper
Børsen. SAS also promotes through its own in-flight margazin called Scanorama (seehttp://www.scanorama.com). The company is also known for using sponsoring, especially in
Denmark, where the Superlega in football is referred to as SAS Ligaen
5
. In regards to
participants, the people who are important for delivering the service offerings will generally
be the personal at the check-in counters and the cabin crew, which can be seen wearing
clothing in the brand colour deep-blue
6
. These people are very important, as they significantly
shape the customers’ perceptions, especially with regard to service quality. Other passengers
also have a significant influence on the service quality perceptions, which will be formed,
based on the number, type and behaviour of these other customers (Rafiq & Ahmed, 1995).
In Denmark SAS has employed celebrity endorsement in TV ads promoting the brand with
people, such as Nickolaj Costa Waldau, Tina Dicow
7
, as well as former and present Danish
Ministers, like Uffe Ellemand Jensen
8
and Ulla Tørnæs
9
. The slogan of the TV ads is SAS as
good as home. This slogan, along with the brand promise, is to be delivered through the
physical evidence of the 7ps. In regards to the physical evidence the environment in which the
service is offered relates to: the check in counter, the lounges at the airports, and the on-board
experience. There is not much to say about the check in counters, but the lounges are designed
to mimic a regular home with a minimal noise level, bright colours, and comfortable
furniture. The on-board experience is designed to continue this level of comfort, where
business passengers are most comfortable, and the economy passengers are the least
comfortable. The airplanes external and internal features are kept in the corporate brand
colours of deep blue, white and orange (SAS annual Report 2009; SAS, 2010, e). With
respect to process most business travellers do not spend much time on acquiring the ticket as
5
http://www.superliga.dk/superligaen/om-superligaen.html
6
See any number of Scanorama.
7
Nickolaj Coster Waldau TV ad:
and Tina Dicow TV ad:
8
Uffe Elleman TV Ad:
=related
9
Scanorama (2010) no. 1 Febuarary accessible via www.Scanorama.com
25
these are included in the specific negotiations with each firm. As for non-business they
mostly find their tickets through price comparison sites like momondo.com (Datamotor, 2009,
a, and b).
These initiates seems to be well suited for SAS’ customers, as the customer satisfaction index
has increased from its level in 2007, which can be seen in figure 4.2.4. part a. According to
SAS, the increase in the CSI is attributed to the quality of the service offerings (i.e. the high
punctuality and regularity of flights), and a higher customer perception of value for money
(SAS Annual Report, 2009). It can moreover, be observed the CSI level in 2009 corresponds
to the level in 1996, which is not impressive over a fourteen year period. Despite the positive
development in CSI from 2007 to 2009, the total number of members in the EuroBonus
loyalty program has declined by 6% from 2008 to 2009, which can be seen in figure 4.2.4,
part b.
Figure 4.2.4: The development of the customer satisfaction index, CSI, from 2005 to 2009,
and the development of EuroBonus members, from 2008 to 2009.
Part a Part b
Source: Part a is the author’s own creation, based on information form Horn& Willumsen, 2006, page 126 and
SAS Annual Report, 2009, and part b is a copy from SAS Annual Report, 2009, page 13.
According to SAS, this change is mainly a consequence of 111,000 members had to be
deregistered, since these were not active, but included in the membership numbers, from the
takeover of Braathens Norway (SAS Annual Report, 2009).
26
(3) Improved cost base
To increase profitability, and lower the cost structure, substantial cost cutting measures have
been implemented. These initiatives have occurred in all areas of the business, including
administration, personal, and SAS Tech. The personnel costs have been achieved through
negotiating with the trade unions. The cost cutting program is performing as anticipated, and
is expected to result in a total cost savings of 7.8 billion SEK (SAS Annual Report, 2009).
(4) Streamline organization and cost orientated culture
The organization has also changed with Core SAS, which is covered in greater detail in
appendix 4..
(5) Strengthened capital structure.
To implement Core SAS in 2009, it has been necessary to offer a rights issue of roughly 6
billion SEK. This rights issue has however been exceeded by 24.2 per cent, and in 2010 it has
been planned to offer a new rights issue of roughly 5 billion SEK (SAS Annual Report,
2009).
To recapitulate, in terms of percentage EBIT the worst performing part of the operations have
been international travel. The corporate strategy Core SAS has been designed to turn the
company back to profitability by concentrating on business travellers in the Scandinavian
market. These passengers account for approximately 60 per cent of all SAS’ customers, but
the passenger numbers have been declining mainly due to the global Financial Crisis. This
partly explains the company’s current financial predicament. The Company’s brand
positioning is Simple and Simplicity, which is supported by the marketing mix. The marketing
program is consistently communicated and each element generates synergy.
5.0 External analysis
This section deals with the external environment (i.e. everything and everyone outside the
organization, as defined by Lynch (2006)) of SAS. It can be seen in appendix 5.0, but the
conclusion is summarized here.
To conclude, on this analysis, the Danish market, along with Swedish and Norwegian
markets, is small compared to the other European countries. The Danish market has
experienced a lower CAGR from 2004 to 2008 than the overall European market. The fact
27
85.9 per cent of all Danish passengers fly to international destinations, along with the small
market value, suggest Danes do not fly with national carriers to these destinations. There are
thus only 14.1 per cent of Danish passengers flying domestically. The level of market
turbulence is contended to be moderate, whereby it is possible to employ a Porter’s Five
Forces Analysis. The competitive forces are all considerable, with only the bargaining power
of buyers to be assessed moderate. These forces pressures SAS’ ability to be profitable, and
based on industry economic metrics the company is not competitive. SAS’ strongest
competitor is Norwegian, which has been able to generate a profit, has performed strongly on
most of the economic figures, and has some clear competitive advantages. In terms of
Lynch’s Four Links Analysis SAS have strong formal, complementary, and governmental
relationships, which fosters sustainable competitive advantages. All cooperation relationships
can be improved, but there is strong threat from the other airlines to enhance formal and
complementary links and networks.
6.0 Conclusion based on the internal and external analysis
This section provides the main results from the internal and external analysis, which are
presented in the SWOT analysis, as among others developed by Porter (2004):
Strengths
• SAS has a strong heritage
• The airline has a strong market presence in Scandinavia
• It has, according to internal estimates, strong brand equity with core customers
• It has strong links and networks through: the Star Alliance; bilateral relationships with
other airlines, like Lufthansa; strong complementary and governmental linkup with
airports, like CPH.
• SAS is Europe’s must punctual airline and provides reliable and flexible air travel
• Has accommodated the fall in passenger demand by creasing capacity and
intercontinental travel.
Weaknesses
• EBIT has over the past six years not managed to reach the profitability target
• The passenger yield has declined since its peak in 2001
• The passenger volume has been declining since 2006; Moreover, the number of
passengers has decreased with 15.7 per cent from 2008 to 2009, which is substantially
more than most of SAS’ competitors
• The market shares for the Nordic countries have declined since 2006
28
• The Premium passenger segment (i.e. first and business travellers) for AEA’s
members, which include SAS, has declined more than the economy segment from
2008 to 2009 on scheduled flights, due to the global Financial Crisis
• Danish passengers predominately fly internationally (i.e. 85.9 per cent), which is
direct contradiction to the corporate strategy Core SAS with a focus on domestic
travel. This furthermore worsened by the cut in capacity with 15 per cent mostly on
leisure destinations, which is a dangerous move, because the market is continuing to
develop towards these destinations.
• There are weak informal links and network, i.e. via Facebook.com, but they can be
improved.
Opportunities
• Find ways to utilize the SAS football sponsorship in the SAS Legaen. Currently SAS
is only present by naming the league.
• There are many ways to foster links and networks with other constituents within, and
outside, the airline industry, whereby SAS sustainable competitive advantage can be
improved
• To lower the operating costs it might be necessary to follow Norwegian’s example of
just employing one type of aircraft
• Fully outsource SAS Ground Services and SAS Tech might also be necessary to lower
operating costs, and not just parts of them as currently undertaken by Core SAS
• To lower the dependency on business travellers it might be strategically important to
attract other customer segments.
Threats
• The biggest threat is the continuation of the global Financial Crisis; it is important to
note that perhaps SAS’ current financial problems are simply caused by the decline in
business travellers, who might return once the crisis is over. According to AEA
estimates, this not likely to happen as corporate culture has changed in regards to
business travel. AEA further estimates the crisis will last until 2013
• There is continued competition and price pressure from industry rivals and substitutes,
which limits SAS’ profitability
• The Danish market is small and has experienced a slow market growth from 2004 to
2008. According to Datamotor it is expected the market will follow the European
market value and passenger deceleration, but the value will decelerate a slightly higher
rate, whereas the deceleration of passengers will occur at a slightly lower rate, until
2013.
• The other airlines continues to pressure the cooperation and network SAS has
established
• The frequent bad press exposure threatens to negatively affect the consumer
perceptions of the company and the image of the company.
• According to Berlingske Nyhedsmagasin’s Image Analysis SAS has the worst
corporate image of 140 companies. This might also indicate SAS’ customer based
brand equity may in fact be lower than estimated by the company itself
The conclusion on part 2 of this paper is SAS is uncompetitive, and by focusing on business
travellers in the Scandinavian market makes the airline out of line with the actual market
29
developments; the business travel segment is declining, whereas leisure travel is increasing.
Danish passengers almost entirely fly internationally, whereby lucrative revenue generation is
foregone by focusing on the Nordic home market. This fact cannot be changed even though
SAS has reported it has lost most of its passengers on international flights. The product
offered and related services may simply have to be more adoptive to the market. This paper
will analyse further, how SAS can attract new customer segments without abandoning its
business travellers.
7.0 Segmentation analysis and qualitative data
Part 3 of this paper section begins by explaining, how the new customer group SAS should
attract has been ascertained, and who these consumers are. This analysis is based on
secondary data obtained from Gallup Marketing Denmark. The methodology of the two focus
groups is then explained, followed by the research findings. The section ends by concluding,
which strategic direction SAS should pursue.
7.1 The new consumer group SAS should attract
Figure 7.1 identifies the customer demographics of Danish residents, who have flown, or not
flown, with SAS within the past two years. This figure is based on a survey conducted by
TNS Gallup, in which 1994 interviews have been conducted. The entire data set can be seen
in appendix 6.
It can be observed those who mainly have flown with SAS are in the age groups 32-41, and
42-51. Both age groups 62-71, and 12-21, are also strongly represented. There undoubtedly
are many reasons for this large distribution coverage, but it may suggest the SAS offerings
have a large customer appeal. Together all persons who have flown with SAS represent 37.9
per cent of all interviewed. The remaining 62.1 per cent have thus not flown with SAS.
The figure also illustrate there are additional passenger volume to be generated from
practically all age groups, even the age groups 32-41 and 42-51. The largest age group, which
are not SAS customers, are people aged 22-31 and 32-41. This paper will concentrate on the
22 to 31 year olds, because they exhibit the biggest growth potential. Furthermore, it provides
the option to attract a generation of young consumers, which is essential for long-term
sustainability (Keller, 1999). The reasons why this age group does not fly with SAS will be
further investigated in the two focus groups.
30
Figure 7.1: The age distribution of Danish residents flying with SAS, and those who have not
flown with SAS, within the past 2 years
Source: Authors own creation based on data from Gallup Marketing Denmark: Index DK/Gallup
(R)2.half2009/base:4,717 persons/3790 interviewed, The entire dataset can be seen in appendix 6.
It might however, be difficult for SAS to attract this age group, as it represents a different
generation than then one most of its existing customers belong to. According to a secondary
study performed by Axiom Consulting Australia (2008), some of the characteristics of the
Generation Y consumers, i.e. roughly those people have been born in 1974 and as late as 1994
which make them somewhere between 15 and 30 years of age (Businesweek, 1999) are; they
are socially, environmental, and technological savvy; desire more personal time, are creative,
and attracted to authentic brands; and expect companies to be environmental conscious. The
study also argues for companies to communicate more effectively with this age group they
need to offer new brand services, make brand extensions into unrelated categories and
understand customers are in control of the brand, not marketers (Axiom, 2008).
Although the Axiom study (2008) is conducted in Australia, it is believed these findings are
applicable to a generation and therefore also applicable in Denmark. However, the
considerations offered by the study have not directly been included in the interview guide,
because the purpose of this paper is not to test these consumer characteristics, but rather to
determine what the customer brand perceptions are.
7.2 Method
The focus group construct has been chosen, based on its ability to uncover consumers’ brand
perceptions. This is achieved by allowing the interviewees to articulate their thoughts and
feelings in their own words, which can be covered in great detail. Personal interviews have
31
not been selected, as it is believed it might be difficult for a person, not currently flying with
SAS, to single-handedly offer specific brand perceptions. A focus group discussion will
compensate for this issue, and at the same time foster more comprehensive consumer insights.
The participants are also encouraged to mention topics the interviewer may not have thought
about a priori. The interviewer’s role is to act as a facilitator, where all group members’
opinions are heard. It also allows the interviewer to interact with the interviewees in a context
closer to everyday life, whereby any misunderstandings and interpretations can be clarified
directly. The method is however, not without problems. One limitation is during the interview
the interviewees may be influenced by each other’s opinions, which may make them
agree/disagree on matters they otherwise would not. Another limitation is the ability to
generalize the findings, because the insights will be personal and more specific (Flick, 2006;
Kvale, 1997).
According to Flick (2006) the literature offers several guidelines for, how a focus group
interview should be performed. These rules of thumb include; interview strangers rather than
friends; start with heterogeneous groups, and end with homogenous groupings; more than one
focus group should be conducted in order to compare, and contrast, statements; the
methodological procedure should be to record the interviews, transcribe them, and then
code/categorize them. All of these recommendations have all been meet. But it should be said
it is questionable whether the interviewees are statistical representatives, as they are friends of
the author to this report. It is common for focus groups not to be statistically representative,
whereby other researchers have employed the concept of theoretical sampling. This sampling
method is not concerned with random sampling and stratification do not results in a
representative sample of the population investigated. The quintessence is achieved by the
ability of the participants to provide new knowledge, given the existing data and the
conclusions already made. Given these considerations this author believes the interviewees
fulfil the theoretical sampling criterion. Their insights can still be used to offer
recommendations for how SAS can reposition itself. The procedure for conducting the two
interviews have also followed the traditional way of recording the discussions via a tape
recoder, transcribing the interviews, and then use a coding process, which in this case is open
coding, see appendix 9 for a definition. The transcript from each of the two focus groups can
be seen in CD appendix 7.3 The codes have been applied to both a sentence-by-sentence, and
paragraph-by-paragraph method (Flick, 2006), based on the primary categories offered by the
7ps, see CD appendix 7.4.
32
Question construction
The actual questions, including initial, follow up and interpreting questions, asked in the
interview have been designed based on the guidelines offered by Kvale (1997), who contend a
good question is one covering both thematic issues (i.e. regarding the area of the interview)
and dynamic areas (i.e. encouraging the participants to answer). Furthermore, Kvale (1997)
argues to improve the quality of the interview it is recommended to; interpret the insights
from the participants during the interview; that these interpretations are also validated during
the interview; clear and simple questions should be asked; and the quality of the interview is
also depended on the interviewer’s ability to follow up on important views. It is the author’s
belief of this report the two focus group interviews fulfil these quality criteria, since there are;
interpretive questions (see transcripts from focus group 1: questions I54, I63, and focus group
2: I40, I54), validate questions (like focus group 1: I17, focus group 2: I19), and follow up
questions (like focus group 1: I19, focus group 2: I73). To structure the questions, and keep
both the thematic and dynamic aspects in mind, an interview guide has been created, which
grouped the questions accordingly to the 7ps and the philosophy Smash your brand
(Lindstrom, 2008, a), see appendix 9.
Moreover, as the interviewees are not currently flying with SAS, general questions have been
asked, such as what generally constitutes good service, and exposing the participants to two
types of stimuli during the interview. The first stimulus is a short Keynote Presentation with
SAS’ logo and its strongest immediate competitors’ logos, in terms of market shares as
identified by SAS – see appendix 5.3. This is included in order to ascertain if SAS can pass
the test Smash your brand (Lindstrom, 2008, a). The second stimulus is an edited version of
DR1’s TV program Rabatten, a consumer program from the 27
th
of May 2010. This program
tests if you get value for money by flying domestically between Jutland and Zealand. The
departure flight is from Copenhagen to Aalborg with Norwegian, and the return flight is with
SAS. The TV program evaluates the two flights based on five factors, which can be seen in
appendix 8. It is important to keep in mind the definition of service used in Rabatten refers to,
what the passenger can get onboard (i.e. free coffee, a blanket to keep warm and so on). This
explanation is essential, because it is also used in the interview discussion after the program.
Objectives to be reached through the focus group interviews
Based on Keller (1999; and 1993), Booms and Bithner (1981), and Lindstrom (2008, a) the
specific objectives to be reach through the focus groups are; (1) Which degree of brand
33
awareness does SAS have among these consumers? (2) What is the brand image of SAS
among these consumers? (3) Does SAS pass or fail the test of Smash your brand? (4)Which
criteria do these consumers use when they buy an airline ticket? (5) Do these consumers
mostly travel internationally or domestically? (6) Is SAS’ current promotional strategy
effective in attracting these consumers? (7) Is there a difference between these two groups in
terms of perceptions of SAS, the topics mentioned, or in the type of attitudes? The last
objective is not only intended to compare the two groups, but also to test the hypothesis if the
business students’ perceptions and attitudes are more compatible with the existing customers
of SAS.
Participants
It should be pointed out there is an overrepresentation of females in the study, as they
represent 75 per cent of the respondents. This overrepresentations can be argued is simply
because there are more women studying at universities (dts and the Ministry of Equality,
2009). The participants for the first focus group include four students. Three of them are
currently enrolled in a non-business education, and one participant is currently a business
student. The business student has been included to evaluate if he holds more favourable
associations than those borne by the three others. The interview has taken place in a common
room at Vilhelm Kiers Kolligie in Aarhus for nearly two hours. The participants for the
second focus group include four students currently enrolled in the same business education
(cand.merc marketing) in order to keep the group as homogeneous as possible. The focus
group took place in a classroom at ASB for nearly one and a half hours. The atmosphere at
both interviews has been relaxed and light, whereby the respondents frequently laughed. The
last two sections, physical evidence, and promotion, are thus only answered by three persons
and not by four.
Typology
It should be said the typology used referring to the focus groups, such as I64 or M48 in focus
group 1, this corresponds to the transcript from focus group 1 with the specific statements
from I’s (i.e. interviewer) 64
th
statement and participant M’s (i.e. Maryam) 48
th
comment. The
paper will also use the notion F.G. to refer to focus group. To separate the two interviewees,
whose first name starts with K, K
2
is used for the second focus groups.
34
7.3 The focus group findings
Table 7.3: The results from open coding
Concept Primary codes. These can be seen in CD appendix 7.4. Examples of answers relating to
sentence coding. These can be found
in CD appendix 7.3.
Product Brand awareness, destination, frequency of flying,
Smash your name, Smash your (logo) colours,
Anchored Danish logo, Smash your (logo) form,
Competitor comparison, , Plane instead of train/bus
A2, M3, D3, R6, K2, R8, C9, R16,
A14, D26, A47, B15, K36, B21,
M23, K37
2
Price To high a price in comparison, SAS’ really cheap
tickets, Intention to buy when price is lower, Lower
price sensitivity after education,
A70, D63, M66, K94
2
, C127, R155,
K13
2
, R154
Place Airport Ålborg/CPH, Facilities, Transport to/from
airport, Time in advance
C106, B114, A75, R115, C115,
K133
2
, M85, R126
Promotion TV ads, Smash your picture, Celebrity endorsers, SAS’
Facebook Group, Target market
A87, K164
2
, A92, D98, K117, R165,
A89, R154
Participants General good service, Smash your service, Smash your
behaviour, Other personnel’s behaviour, Fly with
friends
C8, K9
2
, R101, C83, K84, D84,
C99, B104
Physical
evidence
Customer experience onboard, Evaluation of the
experience, Smash your sound
M82, B130, A83, K139
2
, C124,
K147
2
, C53, K48
2
Process Low brand loyalty, Smash your navigation, Search
engines, The navigation of search engines, Purchase
criteria, Improving the booking process,
M51/52, B32, K56,K59, B43, C6,
B53, K68, B44
Note:
2
refers to K. in focus group 2
Source: Authors own creation. The concepts and codes have been created based on the Booms & Bitner (1981),
Lindstrom (2008), and Keller (1993).
The results of the open coding have lead to seven overall categories, i.e. the 7ps, and several
codes. Table 7.3 shows these findings, as well as some examples of sentence codes, which
relate to specific statements from the participants. As mentioned, choosing these two groups
to interview is based on an initial hypothesis that business students will be more compatible
with the existing customers of SAS (i.e. focus group objective 7, see section 7.3). This
hypothesis is however rejected, as there is no significant perceptional difference between the
two groups. This can of course be attributed to a tight structural design, but several codes,
which have been found to exist for both groups, for example Anchored Danish logo, where
not included in the initial research design. Another likely explanation to this outcome is the
business students are currently students and not actual business travellers. Their perceptions
and criteria for choice of airline carrier are the same as the non-business students. Yet, the
business students are capable of providing a greater level of detail with regards to the negative
associations of the brand. This is probably related to the interviewed business students all
35
study marketing, whereby they, ceteris paribus, have a higher knowledge about those
elements influencing the brand perception.
7.3.1 Which degree of brand awareness does SAS have among these
consumers?
In terms of brand awareness, as defined by Keller (1993), these consumers are able to
recognize the brand, but are not able to recall it. Their tops of mind brands are mainly Ryanair
and Norwegian, as the following excerpt from focus group 1 shows:
“I5. Generelt set, hvilket flyselskab tænker I først på når, I skal ud at flyve?
A2. Jeg tror det er Ryanair, Norwegian. Det er mere lavprisselskaberne.
C2. Det kommer an på, hvordan (der menes hvorhen) jeg rejser…
…
I7. Men almindeligvis ville I ikke inkludere SAS i overvejselserne?
M3: Nej. Det er måske forkert at vælge for en studerende. Jeg ville overveje nogle bus
muligheder. Og om man tage med toget”.
The quotes indicate the airlines included in the consideration set, see appendix 9 for a
definition, is also dependent on, where the journey is to. C does however, not specify which
airlines he considers. During the interview he nevertheless point out that Air France (today
Air France/KLM) is his favourite, because it functions smoothly (C56). He also believes the
airline he is most confident flying with is Lufthansa, even more so than flying with SAS
(C57). The low brand recall, as expressed by C, is more pronounced in the second focus
group, the business students. Only one participant specifically mentions an airline (i.e.“D3.
Ryanair”). The low brand recall in combination with that these consumers use the online
search engine sites to compare airline prices, like momondo.com, show there is low brand
loyalty, see appendix 9, among these consumers. As one respondent notes from focus group
1:
A4: Jeg plejer at finde dem (dvs. flyselskaber) ved hjælp af søge maskiner, så jeg kan finde
frem til den billigeste billet. Og hvornår jeg skal afsted. Så det passer. Så da var det egenligt
lidt tilfældigt, hvem jeg rejser med”
This has also been determined to be the case for the majority of consumers flying on
Economy Class. The strategies the industry has employed to compensate for this fact has been
to either attract large passenger volumes, or introduce loyalty programs (Datamotor, 2009, a).
36
7.3.2 What is the brand image of SAS among these consumers?
Table 7.3.2: Primary brand associations of the SAS brand:
Positive brand name
associations
Negative brand name
associations
Positive logo
associations
Negative logo
associations
Forretningsrejsende For dyrt til mig Gode farver: blå for
himlen, hvid for flyene
eller skyer
D20:”Det er sådan lidt
gammeldags”
Kvalitetsniveau Ofte negative presse
omtale, fx personale
strejker
K27
2
:”Altså blå det er
troværdigt”
D21:”Det er sådan lidt
Mallorca stil agtig”
Højt serviceniveau R21:”...der er bare så
mange ting, som måske
ikke burde være der”.
K19:”Men også meget
trygt”
R26:”Der kunne ligeså
godt have stået ISS”
Fungerer godt R161:”...Det er sjældent
man hører en
successhistorie”
K46
2
:”...Det er kort og
fint”
God komfort M99:”Men ikke noget
vi ville bruge. Jeg tror
ikke det lige appelere til
os”
K31:”..Der er SAS
blevet inkorporeret i
min hjerne...”
Giver en følelse af
tryghed
M36:”...nu forbinder jeg
jo SAS med dansk...”
D108:”…den der
Minerva halløj. Vi har
den blå og det er oftest
dem som så rejser med
SAS. Og den er blå.
Hvis vi nu deler
mennesker ind i en
kategori så er det
nok…vi er jo også på
vej derhen af, at komme
i den blå kategori, men
vi er der jo ikke helt. Så
hvis de skal til at sates
på nogle yngre nogle,
jamen…det…det synes
jeg ikke loget henviser
til”
Note: R, K
2
, D refers to interviewees from focus group 2. M and K refer to focus group 2. The numbers refer to
the transcripts of the respective focus groups.
Source: Author’s own creation
In terms of the positive and negative primary associations of the SAS name and logo, the
participants hold the same perceptions. The business students have nonetheless, slightly
stronger negative associations, than the non-business students, see box 7.3.2. The result is
rather surprising, as the participants perceive SAS very close to, how the company wants to
be perceived. As mentioned in section 4.2 the brand positioning, i.e. brand identity, is Service
and Simplicity, which is targeted at business travellers. The participants do not associate SAS
with simplicity, but definitely with service. This indicates the brand identity and brand image
are properly calibrated. The issue is of course, despite these associations are strong, unique
and somewhat favourable, these consumers do not perceive the brand as appealing, and is
strongly considered to be for business travellers. The participants, in other words, are well
aware of the brand, but do not include it in their consideration set.
37
7.3.3 Does SAS pass or fail the test of Smash your brand?
As mentioned the idea to include the philosophy Smash your brand (Lindstrom, 2008, a) is to
determine if SAS’ brand is more than its logo. This will be achieved by testing if the
elements that constitute a brand are in fact communicated properly in all aspects of where the
consumer is in contact with the brand. According to Lindstrom (2008, a) too few companies
are able to pass this test, and it has been believed by the author of this paper SAS would share
this fate. Unlike expectations SAS passed the test, where Smash your, name, colour, and
language have already been dealt with, see the two objectives above. With regards to Smash
your form the respondents do not believe it to be important for their ability to remember the
brand. It is rather the colours and the typology used (see F.G. M83,A24, K27, C23, A26, and
F.G. 2 K27
2
, B20, D26, R33). The typology used to write the SAS name can be interpreted as
a form of icon, or symbol, in itself, which one of the referents also point out (F.G. 1, M36).
SAS therefore also pass this element. In terms of Smash your sound the first focus group do
not associate SAS with specific sounds, expect for C. He perceives the sounds of the airport
directly with SAS (C53) and with a personal tradition with travelling with his father on
business trips (C53, and C10). The other focus group on the other hand strongly associate
SAS with specific sounds from the music the airline employs in its TV ads (K48
2
, D30, K49
2
,
R48, K51
2
). For this group there is furthermore strong secondary associations in terms of
county of origin effects, in Keller’s (1993) wording, via the music and the celebrity endorsers
fosters a strong connection to Denmark (D31, K51
2
, D32, D33, R49, R50). These perceptions
of the name, language, colours, form, icons, and the secondary associations from the country
of origin effects make the SAS logo strongly anchored in these consumers minds, as one
participant point out from the second focus group:
B15.” Nej. Jeg synes også det...men det er også fordi jeg synes det er lidt ligesom Lego, at
noget af det vi også får det, er det der med at man kender dem. Og man er tryg ved dem, og
ved, hvad de står for. Så må de endeligt heller ikke ændre det der (logoet). Tænker jeg”.
In order for the participants to be able to comment specifically on SAS’ behaviour and service
they have been exposed to the TV program, Rabatten. It should be mentioned, the referents all
argue it is difficult to evaluate such elements in a relatively short the program (F.G. 1, M73,
F.G. 2, R96). These consumers overall think the two stewards, from Norwegian and SAS,
shown in the TV program both deliver a good service (i.e. what the passenger can tangibly get
onboard in terms of something to drink or a blanket) given the resources available to them
(F.G.1, M73, C98, and F.G.2 B92, K102
2
). One referent furthermore believed both stewards
38
could have been less formal, and exhibiting more humour, like Ryanair’s onboard personnel
shows (F.G. 1, K84). Only one participant explicitly believes SAS delivers a better service
than Norwegian (F.G. 1, C83). In terms of the other personnel’s (i.e. the service personnel at
the check-in) service and behaviour the first focus group thought the lady from SAS provided
a bad customer service, since she:
C99: “…Jeg synes sjovt nok hende der fra SAS blev sådan lidt...ja da han spurgte, skal man
betale for det, skal man betale for det, så var normalen “nej”. Det lyd som om han lige havde
fornærmede SAS på en eller anden måde...Nej det synes jeg ikke de burde gøre. Det er jo bare
positivt at hun kan sige “nej det gør man ikke her hos SAS”, eller hvad. Hun skulle jo bare
bøje det på en munter måde. Men hun gør som om, “hvem tror du lige du flyver med her”?
altså”
For the second focus group they do not believe the TV program allows them to judge these
people, and though both SAS and Norwegian provide a decent level of service (B101, R96,
B102, K106
2
, R97). The referents on the other hand believe the lady at the Luggage Handling
office provide a low level of service, and appeared unprofessionally (K109
2
, B105, R100), but
they agree that the lost luggage would have happen had the TV host flown with SAS as well.
The issue is of course passengers feel they have a bad flight experience if their luggage is
mishandled, even though it is not the actual airlines fault (K77
2
, K78
2
). The fact that SAS
Ground Service has reported an unprecedented high rate of mishandled luggage from 2008 to
2009 needs to be carefully monitored, see appendix 5.3. The second focus group moreover
perceived SAS’ Marketing Director as credible, and Norwegian’s as incredible (D48, R68,
K79
2
, K81
2
), which three of the participants believe to be less important (R69, K80
2
, B60).
According to Lindstrom (2008, a) this is nonetheless significant for the brand perception that
the company representatives in fact stand for what the brand symbolizes, like Sir Richard
Brason of the Virgin Goup. Therefore SAS only partly passes the test Smash your behaviour
and Smash your service. Concerning Smash your tradition SAS fails this test, as only one
participant actually commented on this brand element (C53, C10). SAS also fails to Smash
your ritual, as none of the respondents remarked on this brand element. With regards to
Smash your navigation SAS only partly passes, because the two participants, who mentions
they have visits SAS’ website, to not remember it with much confidence (F.G. 1, M51/52/53,
and F.G. 2, B32/B33). In terms of Smash your picture SAS passes this test, and will be further
analysed in the focus group objective 7.3.6, see below.
39
7.3.4 Do the identified consumer age group mostly travel internationally or
domestically?
The purpose of this question is to discover if the interviewed consumers’ behavioural pattern
will fit into the corporate strategy Core SAS with the focus on domestic travel in Scandinavia,
see section4.2. To reach a conclusion with regards to this objective, the participants have been
asked the following question, “I hvilke sammenhænge kunne I finde på at vælge indenrigsfly,
fremfor at tage bussen, eller toget?” (I68 in F.G. 1, and I91 in F.G. 2). The overall conclusion
is it will probably be difficult to convince these consumers of flying domestically. For the
referents in focus group 1 they would only consider to do so if they were pressed for time
(C88, K82, M68). The trouble is, as one respondent notes, you have to book well in advance
to get a ticket and the flight departures are not always appropriate (A67), whereby it might
actually not be possible to fly anyway. It is furthermore more convenient to take a train from
Aarhus, where the interviewed lives, to Copenhagen (M70). This referent also state:
M71:” Ja, altså, hvis jeg skal rejse...tage med fly, så skal det være et eller andet langt væk,
hvis det nu er, ikke. Hvis det er kortere vil jeg tage med bussen eller toget. Med mindre jeg
skal til Sverige, eller Tyskland, der kunne jeg godt finde på at tage med toget. Men lidt mere
varme lande, kunne jeg ikke hvis jeg skal til København”.
For the participants in focus group 2 the reason they provide for flying domestically is if the
travel distance is far, whereby the train is more expensive, and takes longer time (D55, B73,
D56, B74). For two of the referents they will not consider flying domestically as a viable
option, because it is more of a hassle, at least from Aarhus Airport where the interviewed
lives, and more expensive, if they do not have a car so they can drive to the airport themselves
(R79, D54, R80, D62, R86). Two of the participants, who do have a car, argue taking a plane
is cheaper than taking a train, and have presumably done this (K86
2
, B71, K88
2
, B72, B70,
K85
2
). The author of this paper, however, questions the validity of these answers, as these
same respondents point out they have only considered it (B81, K97
2
). One of the two
contributors, who has a car, moreover perceive using public transportation to/from the airport
as infuriating, which is why she prefers the comfort of the car (B76).
7.3.5 Which criteria do these consumers use when they buy an airline
ticket?
The purpose of this objective is to discover if the interviewed consumers only focus on
obtaining the cheapest flight possible, or if there are potential for SAS to attract these
consumers through its existing positioning. To uncover this the participants have been asked
the following question, “Men hvis vi skal snake lidt om de kriterier I bruger, når I skal u dog
40
rejse, hvad er det så oftest?” (I57 in F.G.2, and slightly reformulated in I77 in F.G.1).
Generally, all of the participants use price as the main criteria, but also the airlines reputation,
and comfort on long journeys (F.G. 1, A56, M55, M56, C72, and F.G. 1 B53, B57, K69
2
,).
For a short domestic journey, the TV program concludes price is the most important criteria,
which the interviewees agree with (F.G. 1, C86, A65, M7, and F.G. 2, B63). Specifically for
focus group 1 one of the participants have furthermore two other criteria, which are
punctuality, in terms of takeoff/landing, and if there is only a marginal price difference what
other offers do they provide (A57, A58). In focus group 2 one participant has as a criteria the
stopover does not take too much time (K64
2
, K68
2
).
7.3.6 Is the current promotional strategy of SAS effective in attracting these
consumers?
The purpose of this objective is to determine if SAS needs to readjust its advertising program
in order to better target these consumers. The main advertising media, see appendix 9 for a
definition, these consumers remember being exposed to a SAS ad is via the TV commercials,
like the one with Tina Dickow, see also section 4.2. Unlike, what might be expected these
consumers have strong, unique and favourable secondary associations from these campaigns.
These secondary associations stem effects that Keller (1993, p.11) calls the “Country of
origin” and “Celebrity spokesperson or endorser of the product or service”. The first source
links the brand to where it comes from, whereas the latter is to provide credibility to the
brand.
For both of the two focus groups the participants can all remember more than one SAS
commercial, where the first group can recall the two ads with Uffe Ellemand and Tom
Kristensen (A87, K115, C138). The second group can recall the past five commercials with
Tina Dicow, Nikolai Coster Waldau, Uffe Ellemand, and Tom Kristensen (D98, D99, K171
2
,
D100, K172
2
, R173, K174
2
). The referents moreover have a positive attitude towards these
ads, because these offer a well-known feeling of being at home (F.G. 1, C134), a sense of
being safe on the plane, the plane is one time, and it is dependable (F.G. 1, A89), they make
you happy (F.G. 2, D101), they are like a small movie, which is enjoyable to watch (F.G. 2,
R176), the good music and the endorsers used in the ads fosters the country of origin effect
for the second focus group (D31, K51
2
, D32, D33, R49). All of the participants furthermore
believe these commercials are very unique to SAS, because of the way it is filmed with
sunshine, a blurred lens, and the colour scheme (F.G. 1, K113), has a slight atmosphere of
41
conservatism (F.G. 1, C136), follow the same theme with Almost home (F.G. 2, K179
2
. This
participant even remark:
K182
2
. “Eller reklamerne. Man ikke sådan i tvivl når man ser den. Lige bort set fra man kan
forveksle den med Ota Solgryn”.
It can therefore, be concluded that SAS passes the test of Smash your picture. The problem
with SAS current promotional strategy is these consumers still do not feel the SAS brand is
appealing to them, as they are well aware they are not the target audience for these
commercials (F.G. 1, A89, A91, R152, and F.G. 2, K157
2
, R153). The TV commercials only
increases brand awareness, which specifically for these consumers is only for brand
recognition.
SAS has also recently opened a Facebook group, called SAS Scandinavian Airlines, as
mentioned in section 4.2. To determine if this customer group of the 22 to 31 year olds will
find communicating with SAS via this informal network attractive the following question has
been asked: “Så jeg ved ikke om I ved det, men SAS har faktisk også en Facebook gruppe.
Hvad ville så egenligt gøre, at I ville melde jer ind i gruppe”? (I117 in F.G. 2,, and I131 in
F.G. 2). Generally, the attitude is not positive, as it is believed to be strange a big company,
like SAS, would communicate through such a media (F.G. 1, M97), a bit unnecessary (F.G. 1,
K118), and two participants do by definition not join such groups (F.G. 2, K167
2,
, D90). If
they joined the group it would be to obtain information (F.G. 1, A95), they have had a good
customer experience (F.G. 1, K117), or that they would achieve some sort of advantage by
doing so (F.G. 2, R166). The last argument, from focus group 2, is elaborated by the use of an
example of another Facebook group:
R171. “Jeg synes artgear.com har en rigtig god Facebook gruppe, hvor han..jamen det er to
forskellige dage, eller første åbning her i dag 20% på alt der jeg nu tillader. Så tænkte jeg
“nå for satan, der går jeg lige ind og kigger igen”. Og så fandt jeg det og så købte jeg det.
Øh altså. Det behøver ikke...det er selvfølgelig 20% det er også meget, bare at smide af. Men
han er ude hele tiden. Så er der et eller andet, vær med i en konkurrence her, tag dig i mit
billede, eller et eller andet. Et eller andet som...det tror jeg også bare man husker. Der er
vildt meget at komme efter, fordi han er på vej op ad og sådan noget. De er der jo...alle ved
hvem de er, selvom de ikke reklamerede”.
Interestingly, SAS has in fact launched a special promotional campaign, in the form a
competition, on Facebook in October 2009. Briefly explained the competition has been based
42
on the Facebook user, it was not a requirement to a member of the group to participate,
choosing a Scandinavian airport to fly from, and then turn a virtual world-orb to find a
random travel destination, to which Facebook chooses a random person among the user’s
Facebook friends to fly with the user. To be able to win a ticket the user, and the randomly
chosen friend, had to cooperate in writing a letter of motivation with why they should win
(Adverblog.com, 2009; Venderby, 2009). There is thus evidence that SAS has attempted to
attract other consumers, especially younger ones, via more targeted promotion strategies via
Facebook.
7.4 Criticism of the focus group interviews
One of the problems with the interviews can be argued relates to the tight structural design, as
this does not allow the participants to offer more spontaneous, or innovative, opinions (Kvale,
1997). It is the belief of the author of this paper this has been compensated by asking direct
questions concerning, how the interviewees would like specific elements to be improved (see
for example I63 in F.G.1, and I82 in F.G.2). The generated ideas may not be classified as
being radical innovative, but some have more potential than others, which will be dealt with
in greater detail in section 8.0. Another problem is in terms of the stimuli used during the
interview to make it possible to talk about SAS specifically. The TV program Rabatten does
not offer many insights into the service, or customer experience, on board, nor how the
customer experience is at the two airports, Aalborg and CPH. The participants in each focus
group have also addressed these points, (see F.G. 1, M73, C106, A74, C107, M81, and F.G. 2,
R96, B102, R97). One participant from the second focus group also remarked she though it is
problematic to directly compare the price between SAS and Norwegian, because other factors
determine the paid price too, like seat preferences (B63). To compensate for the TV program
lacking information of the customer experience, some general questions concerning, what the
participants do onboard, and which facilitates are important to be in an airport have been
asked (I109 and 107 in F.G.1, and I90 and I89 in F.G.2).
7.5 Conclusion on the focus group interviews
The results from the two focus group interviews clearly indicate that despite the strong,
unique, and favourable brand associations, the participants do not fly with SAS. This leads to
two options:
43
Option 1: A new customer segment needs to be investigated, which in fact does include SAS
in their consideration set. The interviewed consumers have strongly stated their primary
criteria for choice of air carrier is the price of the air fare, which is not in alignment with the
presumed needs of comfort and service of the business travellers. In its current state the SAS
brand cannot stretch to include the interviewed consumer group. Based on section 7.1 a
consumer candidate is the 32-41 year olds, but the growth potential is smaller than the 22-31
year olds.
Option 2: As argued by Keller (1999) a simple way to attract a younger customer group is
through a brand extension, which in this case would be to establish a low cost airline. SAS
has attempted this strategy before with Snowflake in 2003 (SAS, 2010, b), but it failed. The
reasons are that it used the same personnel and flew to the same destinations as the regular
SAS flights. This caused internal competition, rather than allowing SAS to capitalize on the
new market demands. As mentioned it is, as of this writing, not an independent company, but
a price label for SAS’ cheapest prices (Horn & Willumsen, 2006). The fact that the consumers
interviewed still fly with LCCs, combined with the increased market shares they have
obtained on the Danish market, see appendix 5.3, it is clear this product is both demanded and
economically attractive. As mentioned, the business travellers have been hit the hardest by the
global Financial Crisis, whereby profits have been severely affected. SAS simply cannot
afford not to compete in the LCC segment. This presents two additional approaches: (A) To
launch a new LCC airline, either from scratch or by acquisition. Given the financial state of
the company, see appendix 4, this is ill advised, as such a strategy will have initial high fixed
costs. It will also take time before the brand will be accepted, as it should not directly be
associated with SAS, in order not to transfer the perceptions of the SAS brand to the new
company. (B) Capitalize on the existing Snowflake price label by establishing it is an
independent brand in a House of Brands architectural strategy. In this respect Snowflake
should have no connection to the overall SAS brand to prevent the brand perceptions being
transferred. This way the two brands are able to benefit from each of the two different
markets (Aaker & Joachimsthaler, 2000). To make this possible SAS will have to lower its
price substantially for the Snowflake product. This will be achieved by removing all
unnecessary services, i.e. those services the interviewed participants are not willing to pay for.
Taken the focus group interviews and the strategic analysis into consideration, i.e. part 2 and
3 of this paper, the option best suited for SAS’ current situation is option 2 (B). This will be
44
further pursued mainly based on the insights provided by the two focus groups, but also on
ideas from the author of this paper.
8.0 The recommended repositioning strategies for SAS
The purpose of this section is offer recommendations as to what SAS can do to reposition
itself to attract the 22 to 31 year olds, without alienating its core customers. The different
recommendations offered are based on interpretive ideas from the interviewed participants, as
well as ideas generated from the author of this paper. This section begins with the design of
the new brand positionings. Then follows the suggested marketing mix to support the new
positionings. The section ends with a critical comment on the recommendations.
8.1 Creating the new positioning
As mentioned in section 3.0, Keller (1999) argues there are two options a firm can employ
when a business wishes to be more effective in managing its customer brand equity for the
long run; either the company needs to reinforce its brand or create revitalization strategies.
Table 8.1 the brand strategies for the SAS brand
Eliminate
The existing positioning with service and simplicity
Bad press by directly commenting on these events
Raise
Leverage the sense of place and tradition (i.e. founding
story, as Beverland, 2009, calls it)
Leverage the secondary associations fostered from the
TV ads by improving the consumer senses by
establishing 5D marketing (this will be dealt with in
section 8.2)
Reduce
The complex aircraft fleet
Create
The new positioning of when time matters
Establish a House of Brand brand architecture, with
Snowflake.com
Source: author’s own creation based on framework offered by Kim & Mauborgne (2005, p. 35)
The existing SAS brand can be reinforced, because there are many sources of brand equity,
which are appealing for the business travellers. On the other hand, the Snowflake brand
should be revitalized, because new sources of brand equity are needed for Generation Y to
find SAS appealing.
The specific brand strategies recommended for the SAS brand to follow can be seen in table
8.1. As can be observed it is suggested SAS in fact does not continue with its current
45
positioning of Service and Simplicity, despite the fact it has been argued in section 7 the brand
identity and brand image is somehow probably calibrated. The reason is not only has SAS
been known for being the most punctual airline in 1982, (Horn & Willumsen, 2006), they
have also been awarded this great achievement in 2009 (SAS Annual Report, 2009). This is in
fact a very important value propositioning for business travellers, as it is believed the less
time wasted the better. it has been discovered in the focus group interviews to be important
too after these participants have finish their education (F.G. 1, K13, K14, A89, K7, K8, in,
and F.G. 2, B5, K144
2
). The new positioning SAS should own is When time matters, which is
actually the title of Horn & Willumsen’s (2006) book. To own this positioning will
furthermore nurture the feeling of being safe onboard, because the flight is in fact smooth
(F.G. 1, M8, K116, M13, and F.G. 2, K179
2
). Not only will this cultivate the primary and
secondary associations to SAS, but the fact the company has the capabilities to be Europe’s
must punctual airline makes it a sustainable competitive advantage, which should more
strongly be capitalized upon. Another important element in this new positioning is SAS do
not need to really change anything, as the airline is already communicating this perception.
The new positioning is therefore able to pass Kotler & Keller’s (2006) criteria for a point of
parity to be established, as it is relevant for consumers, is distinctive, in terms of other airlines
are not able to do so, and its is both a believable and credible claim. The old positioning of
Service and Simplicity is both relevant and believable, but as these are generic they fail to be
distinctive. The brand architecture, as mentioned in section 7.0 should be a House of Brands
(Aaker & Joachimsthaler, 2000) in order not to have a meaning transfer taking place. This has
been the case when Snowflake was first launched in 2003, and its logo featured the SAS logo
right next to it. Keller (1993) also offers such a strategy a company can follow, when
secondary associations stem from country of origin effects, which is the case here. One way
to leverage these associations will be telling the founding story of the airline, which should
probably be provided at the company website. These stories are important for SAS, because it
has strongly shaped, how Scandinavia, and especially Denmark, has economically evolved
since its establishment. To tell such a story will allow the SAS brand to be attached to time
and place, whereby SAS will become a more authentic brand (Beverland, 2009).
It is also recommended to raise the networks with governmental institutions, and the informal
links to consumers to improve SAS’ sustainable competitive advantage, which have been
covered in appendix 5.5. It is furthermore, advised SAS to lower is complex aircraft fleet in
order to reduce the costs associated with such as constellation, which Norwegian Airlines
46
Shuttle has showed is important to be profitable, see appendix 5.4. The second focus group
has also revealed consumer perceptions is affected by bad media coverage, as contended in
appendix 5.3. This should be dealt with by directly communicating on such events, and
provide some success stories too, see section 7.3.2.
Table 8.1.2 specific brand strategies for Snowflake.com
Eliminate
All branding ties to the SAS brand
Raise
Leverage the secondary associations fostered from the
TV ads by improving the consumer senses by
establishing 5D marketing (this will be dealt with in
section 8.2)
Reduce
These will be deal with in section 8.2
The level of service offered
The branding initiatives concerning the senses of taste
and touch
Create
A new brand positioning of The social airline
A new brand identity and logo
Offer a new industry factor; social interaction
Source: author’s own creation based on framework offered by Kim & Mauborgne (2005, p. 35)
The brand strategies recommend to attract the new customer segment, people age 22 to 31,
can be seen in table 8.1.2. This is based on the focus group interviews, where one participant
even remarked the current logo does not appeal to this younger customer audience due to its
brand personality, see appendix 9 for a definition. This is probably, because SAS is perceived
to exhibit conservative brand personality, which the interviewed consumers do not believe to
be negative, but simply does not appeal to them, see section 7.0. The fact that the
snowflake.com brand has been created to appeal to a more price sensitive audience, means
SAS already has a brand with the necessary impact (Horn & Willumsen, 2006).
The actual name should be changed to Snowflake.com, as the interviewed consumers strongly
perceive a .com, or dot something, in the name of an airline logo as cheap. This is explained
by two of the participants in focus group 1:
K35. “Mmhmm. Jeg vil gerne tilføje, at jeg synes så snart der står dot et eller andet, .com,
.no, så begynder det bare at virke enormt billigt et eller andet sted. Synes jeg.
C35. Det vil jeg give dig ret i. Ja .com...netbaseret...det får det også til at virke lidt mindre
etableret end de andre”.
K36. Ja, og så alle de der små ikoner, som flyet på Norwegian .no, så snart der er et lille
ikon, eller sådan en lille sjov ting, så begynder jeg også blive lidt mere...hvad hedder
sådan noget... opmærksom på, om der skulle være nogle faldgruber når jeg bestiller
47
hos dem. Man begynder at tænke: “Åhh er det nogen der prøver at tage mig ved
næsen”?
C36. Det vil jeg faktisk også (sige)...det er som om de vil prøve at bevis for meget...det er
som om de prøver at forklare for meget gennem deres brand..øh deres logo...det er
som om de virkelig har et behov for, at fortælle, hvad de er.
A38. Ja”
The purpose of a logo is to create instant recognition, while at the same time separate the
business from that of its rivals (Kotler & Keller 2006). If another name were to be chosen the
company has to start all over with building brand awareness of the brand. Since it is believed
there is a moderate brand awareness of this name, for example one of the participants
mentioned Snowflake unaided (F.G. 2, R152), which would be lost with a new name. This
will also compensate for any negative associations, which may have been created, since it
failed as an independent airline. The brand personality should also remain the same, s the
colours yellow and brown are according to a multicultural colour study, perceived in the US
as happy and inexpensive, respectively (Jacobs et al, 1991). The colours will likely also foster
a modern and young brand personality. This is partially supported by the interviewed
respondents from focus group 1, who remark orange in fact holds these traits (C47, A43,
M41, C47, M42, C48). The participants in focus group 2 on the other hand comment that if
SAS’ logo is yellow it will be less credible (D25, D26, K37). The referents from the second
focus group perceive blue as credible, which is supported by Jacob et al (1991). The brand
personality is helpful, as it can instantly generate points of difference in the industry. The
brand personality should be a precise account of the company, since the customers buy the
company and what is stands for, rather than a product or service. The brand personality
should also be consistently communicated in every situation, because that is how strong
customer relationships, and customer trust, are established (Moser, 2003).
As can be seen from table 8.2 it is recommended the brand positioning of Snowflake.com
should be The social airline. This positioning is based insights gained from focus group 1,
where the respondents have been asked: I109. “Hvad gør I så for at beskæftige jer i løbet af en
tur?”, too which it has been remarked:
M82. “Jeg tror jeg læser lidt og så har jeg nogle blade og læser lidt i dem, og så kan man
snakke lidt med nogle andre. Og så plejer jeg at læse en god bog.
K96. Jeg plejer altid at sidde og snakke, eller også prøver jeg på at sove.
M83. Jeg synes faktisk det er hyggeligt at have nogen til at sidde og snakke med”.
48
Although social interaction is not strongly supported in the focus groups it allows SAS to
position itself on a proposition not purely price related, which has been an important
component for the airlines business model combining elements from both LCCs and NCs
(Horn & Willumsen, 2006). More importantly, the brand positioning may make it possible for
SAS to party create a blue ocean, because social interaction is not a factor currently offered in
the airline industry. The foundation of a Blue Ocean Strategy is the notion of value
innovation, which refers to lowering operational costs and at the same time increasing value
for consumers. This is achieved by offering a new factor in an industry and not by competing
with rivals by tender “a little more for a little less”. The theory furthermore, argues the
insights into which new factor (or factors) to be offered is not based on detailed consumer
research, as consumers will not be able to provide any real innovate insights, because they
cannot see beyond the existing market offerings. The sources to create a blue ocean are
instead by examining alternatives and studying non-consumers (Kim & Maugborgne, 2005,
pp.27-28). According to Andersen et al (2010) this theory is not able to render competition
irrelevant, but rather enables the company undertaken such a strategy with a temporary
monopoly status. It is possibly overoptimistic to assume that offering social interaction will
lead to a monopoly situation for SAS, but it permits the airline to create a POD with this new
positioning, as it also meets Kotler & Keller’s (2006) POD criteria of being relevant,
distinctive, and believable. The Snowflake.com brand should still only cover the Economy
Class, whereas the SAS brand should cover the Business and the Economy Flex Classes.
To recapitulate, it is recommended SAS should create two new brand positionings; The SAS
brand is should be repositioned to When Time Matters to reinforce the sources of customer
based brand equity. This will allow POD to be established, which the existing positioning of
Service and simplicity cannot fully fulfil. The Snowflake.com brand is recommended
revitalized in order to appeal, and be relevant for, the new consumer group. The positioning
is suggested to be The Social Airline, because of its importance to these consumers, allows
SAS to develop a POD, and partly allows a blue ocean to be formed.
8.2 Implementation
With the two new brand positionings in place the next task is to make it visible through, the
seven marketing mix elements. Is should be said most attention will be directed at how SAS
should implement Snowflake.com, as the marketing mix is properly calibrated for the SAS
49
brand, as indicated by the insights gained from the two focus groups. The most important
element in the marketing mix is the physical evidence, as the consumers must experience the
new positioning, when they enter the airplane, otherwise Snowflake.com will not be able to
deliver on its positioning as The social airline, and will loose the ability to build strong
customer relationships.
The product strategy
The recommendations offered are divided into three specific tactics. The First tactic involves
changing the current product offerings. The focus group interviews revealed there needs to be
a bigger distinction among the ticket classes. The Snowflake.com brand should offer a basic
product. In its current form it can be observed a basic service level is offered to all ticket
classes, which make it difficult to determine, why passengers should trade up to Business
Class or to Economy Flex. Surely there are many additional features for these two classes not
offered for Economy, or Snowflake.com, but the actual consumer experience onboard needs
to be prioritized. The service level onboard for Snowflake.com tickets, on domestic air travel,
should include no complimentary the/coffee, as seen in the TV program Rabatten, because
consumers do not demand such a high level of service for such a short flight duration (F.G. 1,
M63, M64, K80, and F.G. 2, R72, B84, K100
2
, B92). It is recommended the second tactic the
Snowflake.com product should allow passengers to check-in online as well, or by SMS.
These initiatives will significantly improve consumer perceptions to be favourable and
significantly improve the consumer experience (F.G. 2, R129, R126, R128, B134, B135). To
guarantee there is a clear ticket class differentiation here as well, these passengers should be
allowed to be at the gate 1 hr before departure, whereas for passengers on either Economy
Flex or Business should maintain the time needed to be at the gate, as described in section
4.2. It should be pointed out SAS has since 2002 offered a basic product with a higher degree
of service to compete with the LCC (Horn & Willumsen, 2006). This business model is
however deemed to have failed, and should be adjusted to meet the realities of the market.
These adjustments will also lead to costs can be cut.
The third product tactic involves the destinations offered. The consumers interviewed mainly
fly to European or international destinations, whereby SAS needs to shift its strategic focus to
offer more Snowflake.com tickets for international travel. The interviewed consumers are also
more willing to pay for comfort on these flights, for example extra leg room, whereby
revenue can be increased, see section 8.1 focus group objective 4 for further details.
50
The pricing strategy
It is recommended that SAS should follow three pricing tactics. Firstly, the price on
Snowflake.com tickets needs to be lower, since this is the basic product offered. The current
price is a total price, which include seat reservation and luggage checked-in (SAS Annual
Report, 2009, and the TV program Rabatten). According to the TV program, Rabatten, SAS
has a 137 DKr higher price than Norwegian on the route Aalborg to Copenhagen, which both
the program and the interviewed consumers perceive to be too high for such a short journey
(F.G 1, C86 and A65, and F.G 2, K91
2
, D61, K92
2
, B77, R157). The price needs to be in
harmony with both other airlines’ prices, like Norwegians, while at the same time being
competitive with substitutes (F.G 1, C87, and F.G 2, D63, B83, R87). Secondly, the new price
should also exclude seat reservation, as it seems passengers are willing to sacrifice this
element too. This will also provide passengers to social interact more, as they might sit next
to someone they do not already know, whereby the airline can deliver on its Snowflake.com
brand positioning. The fact social interaction is offered might prevent passengers from
focusing entirely on price, as a criterion for choosing an airline. Thirdly, it is recommended
the new price should remain constant, since potential consumers will be lost if they cannot
obtain the current 27 per cent of SAS’ airfares, which are the so called really cheap tickets or
Snowflake tickets (an expression SAS’ Marketing Director uses in the TV program Rabatten)
(F.G 1, C87, and F.G 2, K94
2
, D62).
The promotion strategy
This is the most noticeable tool in the marketing mix for consumers, as it involves any way
possible for the company to communicate with its target customers and other stakeholders of
the organization. The purpose of the communication is to endorse the product or service
offerings or the actual company (Pelsmecher et al 2007.). For SAS to communicate
effectively with the younger consumers a promotional strategy is needed to transform these
non-customers into passengers. Many types of media, see appendix 9, are needed to reach
Generation Y, but the main ones recommended SAS to follow can be seen below.
Viral ad
Despite the interviewed consumers all have strong, unique, and somewhat favourable
associations regarding the TV commercials, these represent different brand associations not in
line with what is intended Snowflake.com should stand for, and is aimed at another audience.
The new ads might employ some of the clearly identifiable elements from the current
commercials, like the music used or that they represent short movies. It is therefore
51
recommended to create a new promotional ad campaign, which communicates the new
Snowflake.com positioning. As mentioned in section 7.0 in the Axiom study Generation Y
consumers are very much on-line, which means the new promotion campaign should probably
be a viral ad, to improve informal links and networks with consumers, and make
communicate the younger brand personality. According to Go-Viral (an online marketing
company purely devoted to aid other companies to develop viral ads) viral ads have the ability
to significantly improve brand awareness, brand favourability, and enhance the consumers’
intention to buy the brand. The fact that it happens online add another level of interactivity
(http://www.goviral.com/opportunity.php). According to Mads Holm, from Go-Viral, in order
for a viral ad to work efficiently it requires the audience can and will talk about the ad, the ad
needs to be spectacular, i.e. there has to be something causing the ad not broadcasted via other
media, and the idea behind the ad should be strong enough to foster a longer narrative
(Lindstrom, 2010). A common criticism of such ad campaigns is the company undertaking
such a strategy loose control over the brand, as unintentional word-of-mouth may be created
(Pelsmecher et al 2007). The fact is, as both Beverland (2009) and Lindstrom (2009, b)
argue, loosing control of the brand is the reality of modern marketing, which should not be
feared, but embraced, as the combined efforts of the company and the consumer will create a
stronger and more authentic brand.
Website
SAS also needs to deliver on the new Snowflake.com positioning by presenting the new brand
identity, of being young and more modern, through the company website. In order not to
alienate business travellers the current SAS website, i.e.http://www.flysas.com, should be
maintained, but provide a link to the new website for Snowflake.com. It should use the same
colour scheme, as the Snowflake.com logo of yellow and brown, to create consistency
between the different branding and marketing elements. The site should concentrate on being
engaging and interactive for the visitors. This can be achieved by offering visitors to
communicate their own stories about the brand, experienced or otherwise, which will
furthermore add authenticity to the brand. This can either be in terms of blogs or a discussion
board to let visitors share or debate their travel experiences with each other. The site could
also offer related content to flight queries, sort of like Amazon’s More items to consider
feature (www.amazon.com). According to one of the participants in focus group 2 there
should also be a feature of Find a random desination given the type of holiday the visitor is
considering, such as a city holiday (B44, B45). The visitor’s preferences should not be saved,
52
as all respondents argue it always require registration and spam emails (F.G. 1, K68, C77,
K69, C78, M58, and F.G. 2, B47, R62, R63, K63
2
). If the visitor’s preferences are to be saved
the procedure should be like Amazon.com, where the visitors’ preferences are saved without
such negative perceived features. The overall navigation needs to be simple and user friendly,
which is also the case for the terms of the airfare (F.G. 1, K70, C79, K72, M59). If this
achieved then arguably consumer loyalty will be created, if the webpage convey in a
consistent manner (Lindstrom, 2008, a). The website could also offer links to other travel
related websites, like insurance companies and guides to travel destinations, like
Loneyplanet.com or tgt.dk (i.e. Turen Går Til).
Facebook
It is also recommended SAS should improve its Facebook Group engagement by engaging the
younger consumers via events like contests or special offers, as argued in section 7.0 focus
group objective 6. Facebook may very well be used as a more specific media vehicle to
launch an ad campaign. To gain a global reach, and buzz, however it might be more effective
to launch the ad both on SAS’ own website and on youtube.com.
The place strategy
The fact that Snowflake.com is a brand for Economy Class means SAS can offer flights to the
main airports, whereby passengers achieves both a more convenient form of travel and save
time travelling to/from the airport. This element has been determined in the focus groups to
be an important feature to offer, because the LCC tend to offer only secondary airports (F.G.
1, K76, and F.G. 2, R76).
The interviewed consumers are not very demanding as for the actual facilities at the airport, as
long as it is possible to sit at a café, comfortable seats in the waiting area, an ATM, and clean
toilets are offered these consumers will have a favourable perception of the airport (F.G. 1,
C108, A75, C109, and F.G. 2, B119, K1192, B121, D72, R115). It might be possible to
increase social interaction by offering a gym in the airport, which will also lead to passengers
being more relaxed and comfortable on the plane. This has been offered in several American
airports with arguable success, which indicate such a facility is both economical and
sustainable (seehttp://www.airportgyms.com/, for details). The question is of course whether
it will be worthwhile a Danish airports to offer, which will require additional analysis. This is
however, outside the scope of this report to do.
53
The participant strategy
As mentioned, it is recommended to lower the service level for Snowflake.com, as the
interviewed consumers do not demand SAS’ current level. Although some of the participants
perceive there is a service difference between SAS and Norwegian (F.G. 1, C83 in focus, and
F.G. 2, K102
2
), the respondents agree with the TV program, Rabatten, that there is not a big
difference between the two flights (F.G. 1, M73, C98, K84, and F.G. 2 B84, B93, K101
2
). It
also seems a higher service onboard does not compensate for charging a higher price. What
does matter is for the interviewees is the cabin crew needs to exhibit more humour, be less
formal, and be able to take things with a smile (F.G. 1, K84, M88). A more humorous cabin
crew combined with doing something special for the different holidays, as is the case for
Ryanair and Norwegian (K85, A83, in focus group 1), will also make it possible to deliver on
the Snowflake.com positioning, as the passenger – company interaction will be less formal.
To improve the consumer perception of the service onboard, it will be necessary to prioritize
baggage handling, as mentioned in section 7.0 focus group objective 3.
The physical evidence strategy
Although all of the 7ps are important elements in a supporting marketing mix, physical
evidence needs to be carefully considered, because the physical setting is fundamental to how
consumers form their brand perceptions. SAS needs to deliver on the positioning to be
perceived as The social airline.
The onboard experience
The current cabin layout of SAS airplanes follows the standard design, with business class in
front of the airplane, Economy Flex in the middle, and Economy at the back of the airplane
(Horn & Willumsen, 2006;http://www.seatguru.com). The reason this design has been
chosen, is SAS has previously learned to customize the airplanes make them more difficult to
sell (Horn & Willumsen, 2006). It is therefore difficult to recommend radical cabin changes,
such as Air New Zealand has initiated (Quest, 2010).
Instead, it is recommended SAS move from 2D to 5D branding, which can be achieved by
creating a Sensorgra, as Lindstrom (2008, a) calls it. This is a graphical tool to illustrate, how
the brand operates with regards to the five senses, and provides the opportunity to sketch, how
the brand can be improved vis-à-vis these five senses. Although it is has not been possible to
create an actual Sensogram for SAS, it is possible to estimate, how SAS performs regarding
these senses. Lindstrom (2008, a) contend the most important sense is sight, then followed by
54
smell and sound, taste, and lastly touch. According to the insights gained from the two focus
groups it is clear SAS performs well on both sight and sound, see Objective 3 in section 7.0.
Both the sight and sound brand strategies should be maintained, but there is in fact an
opportunity for SAS to improve its sound branding initiatives, in much the same vein as
Ryanair has created their sound strategy, as one respondent directly has strong brand
associations with the sound employed for when an airplane is on time with the airliner (F.G.
1, K52, K53, K54, K55). SAS should however not use Ryanair’s strategy, because it is not
special when a flight is on time that is simply the value proposition offered by SAS. Rather
the airline should concentrate on creating a more SAS-friendly environment, which the music
from the TV ads can also be used for. For example this music could be played when the
passengers enter or exist the airplane, and could be played in the toilet facilitates. This will
necessitate the music played follows the new ads showed on TV, which might make it
difficult to establish a particular sound for the SAS brand. A better alterative will be to create
a particular SAS sound that can be employed for a longer timer period. In terms of taste and
smell, which is speculated, to mainly stem from the food and drinks offered onboard, is
difficult to analyse. According to a few articles online (http://www.erhvervsrejser-
bornholm.dk/site/172/ andhttp://www.startour.dk/Nederst-paa-siden/Star-Tours-ABC/ABC-
Sol-og-Strand/Flyrejsen/Mad-paa-flyet/) it seems SAS’ served meals and drinks on long haul
destinations are not unique. Since the ability to smell and taste are very important they need
to be prioritised. The importance of smell can in fact also be supported by the second focus
group, because one respondent remarked she would like the smell in the flight cabins to be
changed (F.G. 2, B168), when asked what the participants wanted to be changed in order to
improve the flight experience (F.G. 2, I105). This comment is not directly attributed to SAS,
but it is still important for the airline to carefully consider, as it arguably has a direct link to
the evaluation of the flight experience. This sense could be stimulated by for example using
the smell of freshly cooked dinner meals for long flights, or freshly baked bread or brewed
coffee for shorter flights. It must be said these initiates may be difficult to implement, since
SAS previously has chosen not to prepare the food onboard out of economical considerations
(Horn & Willumsen, 2006). Offering freshly brewed coffee should nonetheless still be
possible, and can be offered on both short and long flights.
The food and drinks served onboard also allows the sense of taste to be triggered. This cannot
be unique if standardized meals and drinks are offered. SAS should prioritize to offer a great
meal consisting of the best Danish ingredients for the higher priced classes, because these will
55
leverage, and improve, the secondary country of origin associations. These meals will likely
only be demanded on longer journeys, as a previous consumer study showed conducted by
SAS on business travellers (Horn & Willumsen, 2006). For shorter journeys the food trolley
may be able to offer more than just the traditional selection of sweets, drinks, and sandwiches,
which for example could be high quality Danish brewed beer from smaller breweries and
seasonally Danish fruit. The actual trolley could be designed to be transparent, rather than the
traditional grey and black design, to offer more visually stimulating cues. It could also
emanate different smells, like freshly brewed coffee, to stimulate this particular sense. It is
moreover, cost effective for SAS as both business travellers and non-business travellers will
be engaged to buy the food from the trolley on short domestic flights.
Regarding the last sense of touch it is believed SAS performs at a decent level for long haul
travel, since there is a difference between the seats offered on the different flight classes
onboard. For domestic travels, SAS needs to differentiate more between the different flight
classes, as no video type, laptop power plug, or WiFi Internet if offered for business
travellers. Furthermore, there is no seat-size difference, as only Economy Class is offered.
(http://www.seatguru.com/airlines/SAS_Airlines/information.php). It is though possible to
buy Economy, Economy Extra, and Economy Unrestricted tickets, where the difference lies
in the terms of the tickets and not the actual physical seat in the airplane (SAS’ website,
2010). It is however important to offer a physical element to business travellers, otherwise
these passengers will not perceive they actually get more for their higher paid airfares. This
could be as simple as offering laptop power plugs or WiFi.
As can be seen in box 8.2. Snowflake.com is advised also to use a 5D branding orientation,
but because these passengers are less willing to pay for service and comfort on short
destinations the initiatives regarding meals, drinks, and better seat comfort (i.e. those ideas for
taste and touch) should not be delivered to the same extend as for the business travellers.
It is furthermore, recommend SAS create more social interactive events in the airplane, and
according to Pine & Gilmore (1999, pp.29 to 38) to efficiently enriching the consumer
experience there needs to be four experiences present, which relate to entertainment (i.e. “this
occurs when they (consumers) passively absorb the experiences through their senses, as
generally occurs when viewing a performance, listening to music, or reading for pleasure”),
education (i.e. “…education involves the active participation of the individual. To truly
56
inform a person and increase his knowledge and/or skills, educational events must actively
engage the mind”), escapist (i.e. “The quest of the escapist experience is completely
immersed in it, and actively involved participant. Examples of environments tha are
essentially escapist include them parks, casinos, virtual reality headsets…”), and esthetic
(“In such experiences, individuals immerse themselves in an event or environment but
themselves have little or no effect on it, leaving the environment (but not themselves)
essentially untouched. Esthetic experiences include standing on the rim of the Grand Canyon,
visiting an art gallery…”). To enhance the consumer experience on longer flights the
Personal Entertainment System can offer educational content as well, whereby SAS can offer
edutainment to passengers. This content could for example be learning, how to write in a
foreign language provide interactive guides to the destinations. The system can also have a
direct link to several video cameras on the outside of the airplane, which could form the esthic
experience. Creating different in-flight events, like Karaoke, talent competitions, or by having
a number on the air tickets, where the passenger will have to find his/her match, can provide
passengers with the escapist experience. The purpose of these new customer experiences is to
make passengers more active, instead of being passively entertained by the in-flight
entertainment system. This will be more difficult to achieve on domestic travel, as the flight
time is very short. The in-flight events can though easily be offered too.
The process strategy
Since the interviewed participants first visit the search engine sites, like momondo.com, to
determine, which airlines have the cheapest fares, it is important the price charged by SAS on
the basic product will be at the competitor’s price level, especially for domestic travel. After
the cheapest airfares have been found via these search engines, the participants then continue
to the actual airline companies’ own websites to do the actual purchasing. The reason is the
search engine sites are perceived to charge extra for their services, and are less trustworthy
than the airlines themselves. To make this process more effective SAS should engage in
formal networks with these websites, because they are strategically very important in
generating website traffic. The currently much higher ticket prices charged by SAS means it
will not be featured nearly as frequently, as the other airline carriers, particularly the LCCs. A
strong cooperation with these sites is likely to compensate for this, if the actual ticket price is
not to be lowered.
57
To recapitulate, the new positioning of the Snowflake.com brand is to be delivered through a
new marketing mix, which is implemented via a new product offering with a lower level of
customer service to lower the ticket price, communicating this through the price comparison
sites, a new viral ad and a new website, enhancing the customer experience onboard via 5D
marketing, and a less formal cabin crew. The SAS brand positioning should be delivered by a
stronger product differentiation, and provide a customer experience for all five human senses
onboard.
9.0 Discussion:
In this paper several theories have been employed to determine, how SAS can be repositioned
to attract a new consumer group, while at the same time appeal to its existing core customers.
These theories are all solidly founded in their respective fields of operation, i.e. marketing and
strategy, but their practical applications are more problematic.
The theories offered by Keller (1999, and 1993) are based on the idea that consumers can
adequately put words to why they use a given brand. Though it is possible to obtain such
consumer insights, a frequent criticism is there is not a clear link between intention to buy (in
this case the referents believe they will fly with SAS when they have finished their
educations, because their price sensitivity will be lower) and the actual behaviour (i.e. that the
participants will actually fly with SAS) (Schiffman et al 2007). Furthermore, the traditional
marketing methods involving either surveys or focus groups have the last couple of years
been criticized, among others, by Martin Lindstrom. In Lindstrom’s Buyology (2008, b) he
argues the only way to know with certainty consumers’ brand perceptions is to use brain-
measuring techniques like an fMRI (i.e. functional Magnetic Resonance Imaging) machine.
The reason, according to Lindstrom (2008, b) is consumers form their brand perceptions
subconsciously and are therefore not able to knowingly give reasons for them, nor why they
chose a given brand over another. Seen in this light the findings in this report may not truly
reflect, why the participants choose one airline over another, nor if their stated brand
perceptions match what they truly believe. This philosophy is much in the same vein as the
Blue Ocean Strategy (Kim & Maubourgne, 2005), as mentioned previously. The problem
with this theory is that there is little empirical evidence to support it, though a recent study in
the Dutch retail sector revealed BOS to be sustainable. This study also argues competitive
strategy should not be forgotten, as rivals will ultimately catch up with the innovative
company, although it first occur after roughly 15 years (Burke et al 2010). The point
58
competition eventually catches up to with a company employing a BOS is also supported by
Andersen et al (2010), who contend the uncontested marketspace will only be a temporary
monopoly. Having said that the author of this report believes to effectively employ a BOS
requires the company is concerned with creating radical innovation (i.e. “new to the world”)
rather than incremental innovation (i.e. “doing what we do better”) (Tidd et al 2005, p.12), as
new ideas are generated outside traditional thinking. If a company is not conducting radical
innovation, as is the case of SAS, the organization will fall into, what Bower & Christensen
(1995) call “The dilemma of innovation”. This occurs when too much focus is given to
existing customers causing the company to fail. It is therefore very important to deal with
future customer’s demand too.
Despite it has been recommended SAS should create the Snowflake.com brand to attract
consumers aged 22 to 31, it is important to underline the interviewed participants have argued
their price sensitivity to fly with LCC will change once they graduate (F.G.1, K13, K14, M11,
M12, A10, and F.G. 2, R152, R153, D84, K162
2
). The question is whether this in fact will be
the case. Other data suggest differently. According to SAS’ own estimates non-business
travellers and business travellers have a price sensitivity of -1.3 and -0.9 respectively (SAS,
2004). Furthermore according to AEA (2009) the global Financial Crisis has created a shift in
corporate culture, where business travel expenses are cut, which is not a short-term fix.
Combined with SAS has previously experienced a drop in passenger numbers, due to an
economic recession in the wake of the terror attack in New York City in 2001 to 2002, there
is clear evidence suggesting SAS cannot afford not to offer a low cost product. Otherwise
SAS will fall into The dilemma of innovation. To guarantee this will not happen it is
necessary constantly rethinking, how the company is performing, the way it operates, and
how additional revenue streams can be created (Hamel, 2000). The innovation process must
occur constantly, yet it requires the brand positioning to be maintained for a number of years,
where only the marketing tactics (i.e. elements of the marketing mix) can be redefined to
remain relevant for consumers, as argued by Keller (1999) and by Ries & Trout (1986).
Although focus group interviews have been used in this report to uncover consumer brand
perceptions, it seems this method is difficult to generate radical innovation, as argued above.
To do so less consumer orientated strategies can be employed, such as observation or
ethnography. These methods consider the practices investigated can only be revealed through
monitoring. Interviews and narratives, on the other hand, can only report these practices. In
59
SAS’ case the most appropriate method is likely a non-participant observation technique,
where the researcher simply monitor the passengers onboard the airplane (Flick, 2006).
Testament to the applicability of this method is Air New Zealand, which has undertaken such
an exercise in developing radical cabin changes (Quest, 2010), as mentioned in section 8.2.
Given the problem statement of this report, and the current financial situation of SAS,
observation and ethnography methods have not been considered appropriate methods in
understanding consumer brand perceptions. Despite the criticism outlined above, and that
given to the CBBE concept, as mentioned in section 3.1, it is the opinion of this author this
method has proved its worth in this paper. It is as Keller (1999) has argued a brand may have
strong, unique, and favourable associations to be powerful, but it is critical it is relevant too.
This is believed to be achievable for the SAS brand provided the company follows the
recommendations offered in this report. This will also guarantee SAS will not fall into the
dilemma of innovation. Though the Snowwflake.com strategy may only be a temporary
monopoly it will be an important element in generating profitability of the company.
10.0 Further research
The qualitative research conducted in this report provides many insights regarding consumer
perceptions of the SAS brand. The main limitation is its inability to quantify how strong these
perceptions are for a lager number of consumers. It will therefore be required to conduct
further quantitative analysis to statistically determine, if the recommended brand positioning
for the SAS brand, and for the Snowflak.com brand, can be supported. This can be achieved
through a correspondence analysis, which facilitates the perceptual mapping of objects on a
set of non-metric attributes. Another method is to use a conjoint analysis, because it estimates
consumers’ preferences relating to product/service attributes, and allows specific prototype
designs to be constructed. These prototypes then need to be carefully evaluated by consumers
once again (Hair et al 2006; Gursoy et al, 2005). The quantitive study also needs to expand
the nationality of the respondents to include Norwegians, Swedes, and Fins to rule out any
country specificities, and necessitates inclusion of consumers and other company
stakeholders. These respondents also need to be randomly chosen in order to guarantee the
sample is statistically representative.
The 5D branding orientation, which is recommended SAS follows, is in fact designed to be a
quantitive survey, which allows the Sensogram to be developed to evaluate, how the brand is
60
performing concerning the five human senses. If this method is to be followed in its entirety it
might be necessary to contact Martin Lindstrom in order to accurately establish, how the SAS
brand performs.
11.0 Conclusion
The purpose of this paper is to investigate How can the SAS brand be repositioned to attract
non-business travellers, without alienating business travellers, and be perceived by both
groups as relevant, distinctiv,e and believable? To provide an answer to this question both
secondary and primary data has been used.
Part 2 of this paper deals with the international and external analysis. The internal analysis
has revealed SAS’ original corporate strategy S11 has not been enough to generate a profit,
whereby it has been required to instigated Core SAS. The strategy is designed to make the
company competitive and profitable by concentrating on Scandinavian business travellers.
Passenger numbers have however been declining since 2006, and has returned to its level in
2000, mainly due to the global Financial Crisis. This is particularly the case for business
travellers, which remains approximately 60 per cent of all SAS’ customers, and also explains
the company’s current predicament. The largest passenger drop has occurred on international
flights, whereby SAS has cut capacity, mainly on leisure destinations It is premature to
determine if the corporate strategy is effective to bring SAS back to profitability, but the
company has reported a net loss of -2,947 MSEK (or roughly -2,33 MDKK) for the financial
year 2009. The airline is even so not without assets, as it holds several sustainable
competitive advantages: The airliner has a rich brand heritage; SAS has a strong market
presence in Scandinavia with a strong brand name; High customer brand equity with core
customers through a strong customer bond with the Scandinavian business world; There is a
strong partner relationship with other international airliners through the strategic alliance, Star
Alliance; And the company has been rewarded the most punctual European airline company
in 2009.
The current brand positioning of SAS, i.e. its brand identity, is Simple and Simplicity, which
has been created in the wake of the corporate strategy Core SAS. Service and Simplicity also
acts as the brand promise, and is designed to be part of the organizational culture. It is also to
be captured by the consumer experience, as idea is to “minimize travel time and maximizing
perceived customer value” (SAS Annual Report, 2008, page 12). The brand vision, and the
61
corporate vision, is for SAS to be perceived as the Obvious Choice. SAS, Widerøe, and Blue1
all stand for reliability, flexibility and punctuality (SAS Annual Report, 2008). The current
marketing mix, which is consistently communicated, supports the brand positioning and each
element generates synergy.
The external analysis has showed the Danish market value, and market share, is small relative
to the European market. Danish passengers have been transported in 2008, which is an
increase of 2.4 per cent from 2007, although it has lost its momentum since 2005. Of these
13.2 million passengers 85.9 per cent travel internationally, compared to the remaining 14.1
per cent flying domestically. The small market value and the passenger increase may suggest
Danes do not fly with national carriers to international destination. The size and growth of the
market suggest it has reached the maturity stage in the Porter’s (2004) Industry Life cycle.
This should according to the theory hinder new entrants, but both Norwegian Air Shuttle and
Transavia.com have both entered the market in 2008. The degree of market turbulence has
been estimated to be moderate, which means Porter’s Five Forces Analysis can be employed
with some certainty. This analysis has revealed the Danish market is characterized by strong
forces from all sides. It is only the bargaining power of buyers, which is estimated to be
moderate. According to AEA (2009) the global Financial Crisis has caused both business and
economy passengers to save on their transport expenses. Companies has also arguably
experienced a shift in corporate culture, whereby it is expected business passengers will
continue this trend, whereas economy passengers are expected to recover to numbers prior to
the Crisis. All Five Forces severely pressures SAS’ profitability, and based on industry
metrics, i.e. passenger growth, ASK, RPK, and load factor, SAS is not economically
competitive. SAS has moreover, lost market shares. In 2006 it had approximately 33 per cent
of the Scandinavian market, which in 2009 has dropped to 28 per cent. This has mainly
benefited Norwegian and Ryanair. SAS’ main competitor is Norwegian, which has solid
economic figures, a good brand, good distribution coverage, and has a strong hold on leisure
and business travellers both domestically and internationally. Concerning, Lynch’s Four
Links model SAS has some strong formal, complementary, and governmental relationships,
which fosters sustainable competitive advantage. As for informal relationships they are
currently weak, but they can easily be improved. There are furthermore, many opportunities
available for SAS to expand these links and networks, and increase competitive advantage.
The other airlines in the industry are also competing for formal and complementary
relationships. In other words, the conclusion on part 2 of this report is SAS is uncompetitive,
62
despite it has sustainable competitive advantages. By focusing on the business travellers in
Scandinavia the company foregoes lucrative long-haul revenue generation.
Part 3 of this paper has revealed the new consumer group SAS should attract is people aged
22-31. These consumers have the strongest growth potential, and allow SAS to draw in a new
generation of consumers, which is essential to long-term sustainability, as argued by Keller
(1999). This is a difficult task to manage, as their demands and behaviours are different than
the current passengers of SAS. For example they are more social, environmental, and
technology orientated than their parents (Axiom, 2009).
To shed light on the brand perceptions of these new identified consumers two focus group
interviews have been performed. The first interview included mainly students not enrolled in
a business education, whereas the second group consisted entirely of business students. It has
been expected there are brand perceptional differences between these two focus groups, but
that has not been the case. Yet, the business students have been able to provide both positive
and negative perceptions, whereas the non-business students hold positive associations. In
terms of brand awareness, these consumers are able to recognize the brand, but are not able to
recall it. Their tops of mind brands are primarily Ryanair and Norwegian, although several of
the participants have not been able to specifically recall a brand name. This lack of recall is
probably attributed to the low brand loyalty exhibited by these consumers, as they use price
comparison sites to determine which airline operator to fly with.
In regards to the brand image, the interviewed consumers do in fact perceive the brand closely
to its brand identity of Service and Simplicity, which is targeted at business travellers. The
participants do associate SAS with service, but not with simplicity. This indicates the brand
identity and brand image are somewhat properly calibrated. The problem is nonetheless,
despite these associations are strong, unique, and somewhat favourable they do not lead these
consumers to perceive the SAS brand as appealing or relevant, as it is strongly considered to
be for business travellers. In other words, the participants are aware of the brand, but do not
include it in their consideration set.
Based on the focus group interviews it has also been established SAS is aware a brand is
much ore than just a logo, as it passes many of the different elements in the philosophy Smash
your brand (Lindstrom, 2008, a), which not many companies can claim.
63
Part 4 of this paper recommends, based on the qualitative data, creating a new brand
positioning of when time matters to reinforce the SAS brand. This allows the company to
capitalize on being the most punctual airline in Europe, which is a strong value proportioning
for business travellers, and it meets Kotler & Keller’s (2006) criteria for creating POD. This is
not possible with the current positioning of Service and Simplicity, which fails the POD
criteria of being distinctive. The current capabilities of SAS make it possible for SAS not to
change much of its existing product offerings. SAS should moreover leverage the secondary
associations regarding country of origin effects via providing the founding story of SAS as
this will connect the brand to time and place, as argued by Beverland (2009). In addition it is
recommended to follow a 5D branding orientation, as this will lead to authenticity, a stronger
bond with passengers, and leverage secondary associations. SAS should also build a House of
Brands with Snowflake.com in order to maximize the capitalization of the two different
markets of business travellers and people age 22 to 31. The Snowflake.com brand is created,
because it captures a brand personality of being cheap, young, and more modern than the
current SAS brand. The positioning is The social airline, since it is important for these
consumers, it meets Kotler & Keller’s (2006) POD criteria, and partly allows SAS to create a
blue ocean. Though Snowflak.com should also use a 5D branding strategy, the initiatives
regarding taste and touch, will not be prioritized as much as for the SAS brand. The reasons
are these initiatives are not demanded by the younger consumer group, and will allow a
stronger product differentiation to be established.
For SAS to be able to deliver on its Snowflake.com positioning of The social airline a new
marketing mix needs to developed in order to support it. It is recommended there should be a
bigger distinction between the different ticket classes. The Snowflake.com product needs to
be basic, which can be achieved by lowering the onboard service. It is also suggested
Snowflake.com should offer passengers check-in online or via a SMS, whereby check-in time
can be set to 1 hr prior to takeoff. To guarantee product differentiation business travellers
should still be allowed to board 40 min prior to take off. This will significantly improve
customer perception. Furthermore, it is recommended there should be offered more
international Snowflake.com tickets, as this is what is demanded by the consumers. This will
allow SAS to capture more revenue, since the new consumer group are willing to pay for
extra services on these destinations. The new price charged for the Snowflake.com product
should be in harmony with both direct competitors, like Norwegian, as well as substitute
modes of transport to be competitive. The price should also exclude seat reservation, as this
64
will lower the price, and allow passengers to socially interact with each other. The price
should also be constant, as the interviewees have argued; if they cannot find cheap tickets at
SAS they will choose another airline. Since consumers first visit price comparison sites to
find the cheapest airfare, it is strategically important to develop a formal relationship with
these operators. The consumers, however, do not buy the tickets on these sites, whereby a
new more engaging website should be designed, and will also add authenticity to the brand. A
new viral promotional campaign is also suggested to create a buzz about the new positioning.
To increase social interaction at the airport it is suggested a gym should be offered. Although
a lower service is recommended the flight crew should exhibit humours behaviour, and do
something special for season holidays, to make the relationship with customers less formal,
which will enhance social interaction. To clearly communicate the new Snowflake.com
positioning particular attention is devoted to, how SAS can improve the onboard customer
experience. This is recommended to be achieved through 5D marketing initiatives. To trigger
the sense of hearing it is suggested music is played when passengers enter and exit the
airplane and in the toilet facilities. To stimulate taste, smell, and sight the business travellers
should be offer the best Danish food and drinks on long-haul destinations. On domestic
journeys the food trolley should be more stimulating by emanate different smells, like freshly
brewed coffee, offer more than just the traditional selection of sweets, drinks, and sandwishes.
The food trolley should be designed to be transparent to stimulate the sense of sight. To
increase the onboard social interaction it is suggested the customer experience should include
entertainment, educational, escapist, and esthetic experiences. These might however be more
effective on long-haul destinations, due to the longer flight duration. The marketing mix
suggested here is furthermore intended to fulfil the principles of being consistent and
generating synergy, as advocated by Pelsmacker et al (2007). For Snowflake.com to become
an authentic brand it is important SAS is not afraid to allow consumers to create, and
communicate, their own stories about it, which the new website and the group on Facebook
will provide.
To end, although the SAS brand can be argued is a strong brand in its current state, it does not
foster an appeal among younger consumers. Given the recommendations in this paper, it is
argued both a new consumer group, and the existing customers, will find the brand relevant,
distinctive, and believable.
65
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13.0 Appendix
doc_673837659.pdf
This abstract tell scandinavian airlines repositioning strategies.
Institute of Marketing and Statistics Author:
Master thesis
Peter Ujaraq Lumbye Jensen
Advisor:
Elmer Fly Steensen
Scandinavian Airlines repositioning strategies
Århus School of Business
2010
2
Table of content
1.0 INTRODUCTION 4
1.1 PROBLEM STATEMENT 5
1.2 THE STRUCTURE OF THE PAPER 5
1.3 DELIMITATION 6
2.0 METHODOLOGY 7
3.0 THEORY 10
3.1 CRITICISM 15
4.0 INTERNAL ANALYSIS 18
4.2 SAS’ CORPORATE STRATEGY, CORE SAS 19
5.0 EXTERNAL ANALYSIS 26
6.0 CONCLUSION BASED ON THE INTERNAL AND EXTERNAL ANALYSIS 27
7.0 SEGMENTATION ANALYSIS AND QUALITATIVE DATA 29
7.1 THE NEW CONSUMER GROUP SAS SHOULD ATTRACT 29
7.2 METHOD 30
7.3 THE FOCUS GROUP FINDINGS 34
7.4 CRITICISM OF THE FOCUS GROUP INTERVIEWS 42
7.5 CONCLUSION ON THE FOCUS GROUP INTERVIEWS 42
8.0 THE RECOMMENDED REPOSITIONING STRATEGIES FOR SAS 44
8.1 CREATING THE NEW POSITIONING 44
8.2 IMPLEMENTATION 48
3
9.0 DISCUSSION: 57
10.0 FURTHER RESEARCH 59
11.0 CONCLUSION 60
12.0 REFERENCES 65
13.0 APPENDIX 74
4
1.0 Introduction
Since the 1950s it has increasingly been recognized marketing capabilities are necessary in
order for a company to be financially successful. Arguably, effective and efficient marketing
depends on the organization’s knowledge of consumers. Key consumer insights are needed in
order to grow, effectively compete, and remain a relevant player in a given market. A market
orientation makes it possible for corporate survival, even in the face of fierce competition and
a changing market environment. The consequence of this generally applied orientation is
competition has intensified in many industries. New entrants are quicker to enter the market,
and rivals will imitate strong segmentation, targeting, and positioning strategies. This means
companies must be quicker to change these strategies, when needed. The successful
companies of the 21
st
century understand customers enter a mutually dependent relationship
with the company. The degree of customer value, customer satisfaction, and customer
retention
1
will determine, how successful this relationship will be (Schiffman et al 2008).
One sector, which has experienced these effects in recent years, is the aviation industry. The
European market has been deregulated in 1993, and the business model of the low cost
carriers (LCC) has severely pressured the national network carriers (NC). The LCC have
managed to persuade the airline passengers of the imbalance between the price charged and
the product offered by the incumbent airliners (Lynch, 2008; Horn & Willumsen, 2006). The
shifts in consumer preferences also mean passengers are not loyal to any particular airline, as
choice is predominantly determined by price (Datamotor, 2009, a).
One airline company, which has had a difficult time adjusting to these changes in the
marketing environment, is Scandinavian Airlines (SAS). The company has been capable of
staying afloat, even though in the last ten years it has constantly faced bankruptcy (Horn &
Willumsen, 2006; SAS Annual Report, 2009, and 2003). The image of the airline has also
been affected, as there is frequently bad press coverage in the media. One example concerns
the recent financial cutbacks (Olst, 2010; Pinholt, 2010). Another example is Berlingske
Nyhedsmagasin (2010), which recently conducted a company image analysis on 4,057 Danish
business executives. SAS has been ranked with the worst company image out of 140 Danish
corporations for two consecutive years.
1
For definitions of customer value, customer satisfaction, and customer retention see appendix 9.
5
1.1 Problem statement
This report employs a marketing perspective on the current situation of SAS, which entails
exploring, how the SAS brand is performing. Based on the above-mentioned problems SAS
face, the intensified competition and an affected public image, it is argued by this paper the
concept of repositioning, as contended by Kevin Lane Keller (1999), can be employed. In
short this paper seeks to explore the following research question:
How can the SAS brand be repositioned to attract non-business travellers, without alienating
business travellers, and be perceived by both groups as relevant, distinctive and believable?
In order to answer this, the following investigative questions must be answered:
• What are the internal resources of SAS, and do these provide key competitive
advantages?
• What is the current brand positioning of SAS (i.e. the brand identity)?
• What business environment does SAS operate within, and is SAS competitive?
• Which new consumer age group should SAS attract?
• What is the brand knowledge of this new customer age group with regards to SAS?
• Which new positioning strategies should SAS follow, and how can the marketing mix
support this?
1.2 The structure of the paper
As can be seen in figure 1.2, the paper is based on four parts: Part one deals with the
theoretical foundation of this report, which mainly relates to Kevin Lane Keller (1999; and
1993). The second part can best be characterized, as a strategic analysis and is divided into
two sections: Section one performs an internal analysis to determine the brand image, and the
competitive advantages, of SAS. Section two undertakes an external analysis to determine,
how SAS is performing in the marketplace, as well as the nature of competition in the
industry to establish if SAS in fact has sustainable competitive advantages. Part two is of a
more descriptive nature, whereby the operating performance of SAS can be seen in appendix
4., and the entire external analysis is performed in appendix 5.0.
6
Figure 1.2: The structure of the paper
Source: Author’s own creation
Part three deals with the empirical data of this report. This part is based on both secondary
and primary data. The secondary data has been used to determine, which new customer
segment SAS should attract. The primary data has then been collected in the form of two
focus groups. The first three parts are undertaken to justify why SAS should be repositioned.
Part four deals with, how to create, design, and implement the repositioning strategy, based
on the preceding three parts.
1.3 Delimitation
Undertaking a repositioning strategy is a complicated process, and it is impossible for this
paper to cover all of its aspects. Specifically, the purpose of this report is to provide possible
repositioning strategies for SAS. The paper, in order words, does not consider if the
recommendations offered can actually be realized, as they are merely suggestions.
The SAS Group is a very large corporation, which is divided into two main business areas;
Core SAS, which consists of SAS Airlines, Blue1 and Widerøe; and Individual Holdings,
which include Air Greenland, Estonian Air, Skyways, SAS Ground Services and SAS Tech
(SAS Annual Report 2009). The paper will entirely focus on SAS Airlines, and unless
otherwise stated, it will refer to this as SAS.
The market investigated is the Danish passenger aviation industry. The reason is it. It is
suggested further research is to be conducted to guarantee the results are not specific for
Denmark.
This paper will specifically not deal with: (A) Organizational behaviour. This refers to the
organizational structure that is best suited to support the chosen repositioning strategy; the
impact of national culture on organizational behaviour; the organizational power, politics, and
7
leadership, and their respective impacts on the economical outcome of the company. (B) The
legal issues concerning the aviation industry, such as: pricing policies, securities,
anticompetitive behaviour, the power and legal rights of employee unions, and safety
regulations. (C) A detailed analysis of the troublesome economic situation of the SAS Group.
It will however, be necessary to briefly discuss this condition, since it affects which
recommendations should be pursued.
The reason this paper does not carefully examine the heavy costs incurred by SAS Airlines is
the aim is to determine how the company can be renewed from a marketing perspective,
rather than from an economic or financial perspective. Many of the expenses are difficult to
reduce or eliminate, as the history of the four turnarounds show (see section 4.0). The cost
orientation has been the primary corporate concern for many years, which may have created a
negative spiral. By cutting employee costs, lower levels of customer service may have
occurred. Customers have then sought out alternatives, whereby the ticket price may have
been increased, and more customers have fled. More costs have then had to be cut yet again.
By focusing on how to generate revenue streams (and profit potential) signifies a shift in
thinking from money out to money in. This thinking resembles that used by Brenneman
(1998) on how to save Continental.
2.0 Methodology
The purpose of this section is to explain the choice of procedure used in this paper, which
include a paradigm discussion, the research approach followed, and the research techniques.
Paradigm discussion
The purpose of this paper is providing suggestions for, how SAS can be repositioned. This
entails no definitive conclusion is offered, but rather possible strategic directions are
recommended, and discussed. This report follows a so-called triangulation approach, which
refers to combing two or more paradigms. This report does not only deal with understanding
consumers’ brand perceptions of SAS, but also analysing and discuss these, whereby neither
positivism (i.e. assuming there is only one truth) nor symbolic interactionism (i.e. investigate
individual’s perceptions) are fully followed (Flick, 2006). There is not one “true”
repositioning strategy for SAS to follow, but not all directions will be equally valid.
The choice of research method
The choice of employing a qualitative or quantitative research method, and how accurate their
results are, has been an ongoing debate within the area of scientific research. It is common in
8
Economic literature for the majority of research conducted to be quantitative, as this is an
easy and cheap way to obtain a high representation of the estimated population investigated.
The purpose is to establish a causality relationship among the dependent variable (or
variables) and the selected independent variables. On the other hand, qualitative methods such
as words, sentences or narratives, are predominantly used in the field of anthropology. The
reason is such an approach enables specific examination and focuses more on how
interpretations are made in regards to the phenomenon studied. It is however, impossible to
say which type is best or more appropriate, since it depends on what kind of research question
is asked; what sort of information is available for the study; and what the study is to be used
for. It has also been argued a process that examines a new field of research, typically begins
based on a qualitative method. It is then tested for validity by a quantitative approach
(Blumberg et al, 2006). The factors underlying the qualitative manner is also more complex
than its counterpart, as it includes social constructs based on cultural framing (i.e. what one
person believes a word to mean differs from that of another. What differentiates the two is
determined by their distinct cultural backgrounds (Abnor & Bjrerke, 1985)).
In the field of positioning and branding both quantitative and qualitative approaches have
been used. For example, a common quantitative method is executing a correspondence
analysis, which facilitates the perceptual mapping of objects, such as products and companies,
on a set of non-metric attributes (Hair et al, 2006; Gursoy et al, 2005). The qualitative
research method, on the other hand allows examination of attitudes and perceptions, which is
the overall objective of this report (Flick, 2006). It also discovers what customers want, and
what they are willing to pay for, which is difficult to achieve with a quantitive approach.
Based on these arguments, the qualitative method has been chosen.
Research approach
The field of qualitative research covers many more specific approaches, such as comparative,
retrospective, snapshot studies, observations, and expert interviews (Flick, 2006). This paper
employs to approaches:
Case studies:
The traditional approach is to include several studies to support the research findings, but it
has been limited to one single case of Scandinavian Airlines (SAS). It will therefore not be
relevant to include other cases. SAS has, however, not been involved in the development of
9
this paper. They have unfortunately, not been interested in answering any questions related to
this project.
Focus group interviews:
The specificities will be provided in section 7.2.
Sources
In this paper both primary (the two focus group interviews) and secondary (non-self
conducted information) data are employed. There are six categories of secondary information
used in this report: peer reviewed articles; published books; journal articles from respected
publications; Internet pages including information from www.flysas.com;
newspaper/newspaper magazine articles; and a secondary quantitive study performed by TNS
Gallup Denmark. The level of reliability of these sources is uneven, where the newspaper/new
magazines are the least reliable. Therefore, they will be supported by other sources to validate
their claims. One of the primary sources is Horn & Willumsen (2006). Jens Wittrup
Willumsen has been vice-president in SAS Denmark, and Peter Horn is a management
consultant, as of 2006. Thus their insights have a high degree of credibility. It should be
mentioned these authors, as well as SAS’ annual reports, are slightly biased by favouring
SAS. Horn & Willumsen (2006) do nonetheless offer critical comments, which limits this
issue. This book is by its nature retrospective. It has however, not been possible to collect
more recent information about the particularities of SAS. This book has, when possible, been
complemented with more up to date sources., such as the annual reports.
Reliability, validity, and objectivity
According to Flick (2006) there currently is not a recognized way of, how to measure the
value of qualitative research. This has been used to question the legitimacy of such a method.
It does seem it would be unreasonable to judge the two approaches on the same criteria. Yet
he argues that while the terms are the same their meanings are different. He defines the
following three factors as
2
:
“Reliability: Checking the dependability of data and procedures, which can be
grounded in the specificity of the various qualitative methods”.
2
Uwe Flick, qualitative research, 2006, chapter 28, especially pages 371, 373 and 375.
10
“Validity: Validation as the social construct of knowledge by which we
evaluate the “trustworthiness” of reported observations, interpretations, and
generalization
3
”.
“Objectivity: it is interpreted as consistency of meaning, when two or more
independent researchers analyse the same data or material. Arriving at the
same conclusions surmises them as being objective and reliable
4
”.
It is the author’s belief of this paper the data used and collected, as well as the procedures
followed, are reliable, given the above-mentioned arguments. This leads to the question of
validity or, in other words if the method is appropriate given the sources. It is possible for a
study to be invalid, even though the sources are dependable, and vice versa. The paper
employs theoretical literature and primary data. This method is valid, since it follows the
same construct as many other marketing scholars, who have successfully conducted research
in this area. However, since the research is performed on individuals, the results cannot be
easily compared for verification. Based on Uwe Flick’s (2006) definition the objectivity of
this paper is questionable.
To conclude, this paper follows the qualitative research method, and employs both a case
study and focus groups interviews, which other researchers have followed when studying
issues of market positioning. This has been established as reliable and a valid method, but the
criteria of objectivity is questionable.
3.0 Theory
This sections deals with the theoretical foundation of this report. It begins with explaining the
roots of repositioning, and then continues with a brief review of the repositioning concept.
The conceptual paper “Managing brands for the long run” by Kevin Lane Keller (1999) is
then explained, as it is the main theory employed in this paper. The section ends with a
critical reflection of Keller (1999 and 1993).
Before the literature on repositioning is explored, it is important to first appreciate a clear and
shared understanding of the concepts. There are several definitions used in this report, which
are explained in appendix 9. In this section the most important concepts are dealt with. It
3
Uwe Flick has adopted this definition from Mishler (1990)
4
Uwe Flick has adopted this definition from Maddull, Jordan, and Shirley (2000), who argues that the concept
of objectivity is only suitable to a realistic context.
11
should be said there are several definitions of what constitutes a brand. These may refer to
organizational, service, product, or retail brands. These different notions share many similar
characteristics and are used interchangeably (Merilees and Miller, 2008). This paper will
define a brand as: “A brand is the sum of the good, bad, the ugly, and the off-strategy. It is
defined by your best product as well as your worst product. It is defined by award winning
advertising as well as by god-awful ads that somehow slipped through the cracks, got
approved, and, not surprisingly, sank into oblivion. It is defined by the accomplishments of
your best employee as well as by the mishaps pf your worst hire you ever made. It is also
defined by your receptionist and the music your customers are subjected to when they are put
on hold. For every grand and finely worded public statement by the CEO, the brand is also
defined by derisory consumer comments overheard in the hallway or in a chat room on the
Internet. Brands are sponges for content, for images, for fleeting feelings. They become
psychological concepts held in the minds of the public, where they may stay forever. As such
you can’t entirely control a brand. At best you can only guide and influence it” (Bedbury,
2002, p.15).
Keeping the above brand meaning in mind, attention is now given to the concept of
repositioning. This concept has evolved from positioning, as developed by Ries & Trout
(1986). According to them a position is “Like the memory bank of a computer, the mind has a
slot or position for each bit of information it has chosen to retain”. A positioning is “...what
you do to the mind of the prospect” and “Positioning is an organized system for finding a
window in the mind. It is based on the concept that communication can only take place at the
right time and under the right circumstances” (Ries & Trout, 1986, p. 29, p. 2, and p.19).
They furthermore elaborate consumers have constructed a number of ladders in their mind,
where each step on the ladder signifies a product or brand, which has been placed on that step
accordingly to their preferences. The ladder signifies a specific product group. There are then
certain positioning strategies a market leader, and a market follower, can pursue. As long a
leading company owns a position in the mind of the prospect it should not be tampered with.
The company should instead build capabilities to reinforce its position, and incorporate new
functions once these have shown their value. A follower company should find a position not
occupied by the leader, for example a low-price position, and then pursue this strategy.
Interestingly, a repositioning strategy should be followed when “…there are so few creneaus
(non-occupied positions), a company must create one by repositioning the competitors that
occupy the positions in the mind (i.e. convincing the prospect to alter the perception of the
12
rivals’ brand)) (Ries & Trout, 1986, p.61). It should be pointed out here positioning and
repositioning are dealt with as a advertising campaign strategy, and is something to be
avoided. A company should find a sustainable positioning and maintain it, but being ready to
size new opportunities.
The concept of repositioning has since then been used to include everything from individual
product/brand alterations to shifting corporate brand strategies (Aaker, 1997; Balmer et al,
2009). As the concept is used to cover such a large spectrum, there is as of this writing, not
an established academic consensus, and repositioning continues to be elusive. There are
numerous aspects of the concept including revitalization, rebranding brand renewal,
refreshment, makeover, reinvention, and renaming. There appears to be two main schools of
thought, those devoted to corporate rebranding, which “refers to the disjunction or change
between an initially formulated corporate brand and a new formulation “(Merrilees &
Miller, 2008, p.538), and those devoted to repositioning referring to “any decision by a firm
to alter the perceptual positioning of a brand” (Simms & Trott, 2007, p.300). The definition
employed in this report follows Keller’s (1999) argument of a revitalization strategy, and is in
the same vein as that defined by Simm’s & Trott (2007).
According to Keller (1999) if a brand is performing badly or in fact has failed it either needs
to be reinforced or revitalized. These two directions are based on the Customer Based Brand
Equity (or CBBE) Model as developed by Keller (1993). This model, defines customer-based
brand equity as “the differential effect that consumer knowledge has on the customer’s
response to marketing activity. Positive customer-based brand equity results when consumers
respond more favourable to a product, price, or communication when the brand is identified
than when it is not” (Keller, 1999, p.102). This model describes consumer brand knowledge
in relation to brand awareness (i.e. brand recall and brand recognition) and brand image (i.e.
favourability, strength, and uniqueness of customer perceptions). A strong performing brand
is one where: “Sources of brand equity occur when consumers are aware of the brand and
hold strong, favorable, and unique brand associations. There are a number of ways to create
those knowledge structures in the minds consumers. Broadly, they involve choosing brand
elements, developing supporting marketing programs, and creating secondary associations”
(Keller, 1999, p.102).
13
Any change in these elements can alter the sources of brand equity, whereby companies need
to carefully consider its marketing decisions. The way to reinforce, i.e. enhance, brand equity
is dependent on the bearing the brand is given financially and consistently communicating the
brand meaning to consumers. The danger of not reinforcing a brand will lead to a situation
where the brand needs to be revitalized. Consistency entails a dedication to maintaining the
strategic focus of the brand as well as the brand meaning, and not the market tactics, like price
changes, product features, different creative advertising campaigns, and changes in brand
extensions. These tactics are often needed to alter in order to create strategic force. The brand
equity reinforcement strategy is also dependent on whether the brand associations are
connected to product attributes (i.e. functional benefits) or they are non-product connected
(i.e. symbolic or experimental benefits). Product related associations can be reinforced
through innovation, in for example design features, and/or promotions influencing brand
performance. Non-product related associations can be reinforced by emphasizing the brand’s
relevance for the consumer and in the consumption situation. It is however, important not to
change these associations too much, as they may devalue the CBBE (Keller, 1999).
In certain situations brand reinforcement strategies are not enough to alter a troubled brand’s
performance. These situations are catalysed by changes in consumer tastes and preferences,
new competitors or technology advances, or other alterations in the surroundings of the
company. Revitalizing a brand involves either lost sources of customer brand equity are
regained, or new sources are generated. It is therefore important to access the breadth (the
way consumers think of the brand) and the depth (consumers ability to recognize or recall the
brand) of brand awareness and determining the strength, favourability, and uniqueness of the
brand associations of consumers. According to the customer-based brand equity model, two
approaches are possible (Keller, 1999, p.112):
1. “Expand the depth and/or breadth of brand awareness by improving consumer recall
and recognition of the brand during purchase or consumption settings. This is
achieved by increasing the level or quantity of consumption, and/or by increasing the
frequency of consumption”.
2. “Improve the strength, favourability and uniqueness of brand associations making up
the brand image. This approach may involve programs directed at existing or new
brand associations. This is archived by retaining vulnerable or recapturing lost
customers, identifying neglected segments, and/ or attracting new customers”.
14
Regardless of the direction taken, changing the brand elements, altering the supporting
marketing program, and creating secondary associations can regain sources of customer brand
equity. If a troubled brand is performing badly due to lack of brand awareness the company
should communicate new ways the brand can be used, and improve brand recall by
communicating closely to the point of purchase. On the other hand, a troubled brand is
usually performing badly due to lack of strength, favourability, and uniqueness of brand
perceptions, i.e. problems with brand image. The company needs to establish if there are
positive associations, or if they have been substituted by negative ones, which will determine
if points-of-difference (POD) or points-of-parity (POP) need developed to either differentiate
the company from rivals, or make consumers include the brand in their consideration set, see
appendix 9 for definition. Several options are available to reposition the brand, which include
changing brand associations, analyse if there are neglected customer groups in the market, or
if the existing consumers should be discarded to attract an entirely new group. In any case the
company needs to carefully nurture its CBBE, and should, if possible, make the brand
relevant for both existing and new customers. This is a difficult task to manage, where several
companies have had to completely cut the ties to its past to be perceived as relevant. Other
organizations employ different communication tools to become relevant in the eyes of the
consumer. Yet others again have instigated brand extensions. In certain cases a brand is
simply not worth revitalizing, because there are no sources of customer brand equity, or
negative associations have superseded the positive perceptions, where the strategies are to
milk the brand, fade it out of the market, or disregarded it entirely (Keller, 1999).
To conduct actual research based on Keller (1999) and (1993) is difficult, although
suggestions for measuring brand awareness and brand image are provided, see appendix 1,
and a supporting marketing mix needs developed. Therefore other theories have been
consulted. In regards to brand perceptions the philosophy Smash your brand (Lindstrom,
2008, a)
is employed, because is breaks the brand into several parts, and recognize a brand is
much more than its logo. The idea is to break the brand at all customer contact points with the
brand, in order to develop or maintain the brand image. The framework is designed as a tool
to offer insights into, how a company can use other brand elements than the brand logo. These
elements refer to: imagery, colour scheme, form, name, language, icon/symbol, sound,
behaviour, service, tradition, ritual, and navigation. These all need to exhibit significance
individually, and support each other to generate synergy to institute a strong brand
(Lindstrom, 2008, a), see appendix 2 for details. Moreover, Lindstrom (2008, a) argues
15
companies should move away from a 2D (i.e. appealing to the senses of sight and hearing)
brand orientation to a 5D (i.e. stimulating all five human senses of taste, smell, hearing, and
touch) perspective, as these will create a more authentic brand in becoming more credible,
real, and true. It will also create a strong customer bond.
To be able to develop a supporting marketing mix for the new positioning the 7ps framework
offered by Booms & Bitner (1981, as cited in Rafiq &Ahmed (1995)), has been followed. The
concept of the marketing mix has originally been developed by McCarthy (1964; cited in
Rafiq &Ahmed (1995)) and consists of 4ps, product, price, place and promotion. The
framework has been criticised, especially from service marketing, as the 4ps do not
incorporate the characteristics of services, as the 4ps are based on manufacturing companies.
These issues have caused Boom & Bitner (1981) to specifically design the 7ps for service
marketing, which relate to: product, price, place, promotion, participants, physical evidence,
and process, see appendix 3 for what constitutes each element. The new elements are essential
for how the customer perceives the customer experience, both before and after it has been
encountered. Furthermore, the company can manage these different elements to affect
customer behaviour, which are the reasons for their enclosure in the expanded marketing mix.
It is important to point out these elements need to have value in themselves, and should
support each other to generate synergy (Rafiq &Ahmed (1995).
3.1 Criticism
The customer based brand equity philosophy, which the reinforcement and revitalization
strategies are based on, is not without critics. According to Punj & Hillyer (2004)
some
commentators have wondered if this approach enhances the theoretical value of consumer
behaviour by utilizing existing concepts, like for example brand loyalty and attitudes toward
the brand. Punj & Hillyer (2004) therefore instigate a model of a cognitive model of customer
based brand equity in regards to frequently purchased products, which they test empirically.
Other critics, like Rust et al (2004), contend brand equity has suffered from lack of adequate
measurability, because most methods assume brand value is stable, as well as measuring
brand equity by a condensed metric of brand strength. The model developed by Rust et al
(2004)
captures both customer equity and brand equity by appreciating the drivers of each
construct and their individual effects. The authors moreover claim the model offers financial
accountability for marketing choices. The problem with employing this model to the research
paper, is the three identified drivers value equity, brand equity, and relationship equity are
16
defined too generic to be of practical value. For example the driver value equity is defined as
“the objectively considered quality, price, and convenience of the offerings” (Rust et al, 2004,
p.116). Specifically for Keller’s (1993) model Ponnan & Kishnatray (2008) argue the
framework only considers CBBE in isolation, and does not capture the importance of
evaluating, how the brand is performing with rival’s brands. This is important, because
consumers respond to other elements than those of the marketing mix. It is also contended the
definition of brand associations regarding strength neglects to consider that such associations
can also be formed subconsciously. Moreover, the uniqueness of the brand associations is
difficult to conceptualize.
According to Beverland (2009) the approach undertaken by Keller (1999) falls into a
traditional model of brand equity accentuating brand meaning occurs in consumers’ brains.
Nevertheless, many companies do not include consumers in the creation of brand meaning, as
it is believed this is the responsibility of the marketer. Brand meaning is established by
producing favourable brand associations using one-way top-down communication
instruments. The author elaborates, “Brand marketer’s main job is to measure the gap
between how consumers should view the brand (brand identity) and how they currently see it
(brand image). Strategies like “reinforcement” and “repositioning” are then used to close
this gap. As part of this approach brands must stay on message by repeating their core
message – change, ambiguity and inconsistency should be avoided” (Beverland, 2009, p. 17).
Therefore to include consumers’ role in constructing brand meaning it is said brands should
become authentic (where authenticity is defined as “the manifestation of the search for what
is real”(Beverland, 2009, p.17), which can be archived through seven strategies (or habits as
it is called in the book). It is however, outside the scope of this report to cover all seven
strategies in their entirety. The one followed in this report is that of story telling, because it is
important to have a story, as it adds a layer to the brand meaning. It is also important to
recognize a brand becomes more authentic when consumers are allowed to continuously
create their own stories (and meanings) of a brand. The company should in other words not be
afraid to include consumers in creating brand meaning (Beverland, 2009).
There are of course many ways a company can shift its strategic focus other than employing a
branding repositioning strategy. According to Andersen et al (2010) a number of new theories
have the last couple of years emerged, where each argue their unique approach leads to
financial success, especially the theory of Blue Ocean Strategy by Kim & Mauborgne (2005)
17
and the theory of Discount Strategy by Andersen & Poulfelt (2006; cited in Andersen et al
(2010)).
Box 3.1.1: The four strategic perspectives and their characteristics of modern strategic
thinking
The positioning
perspective
The resource-based
perspective
The Blue Ocean
Strategy perspective
The Discount
perspective
Rivalry Compete on
existing markets
Compete by
developing strong
resources
Create a market that
renders the competition
irrelevant
Compete on markets
described by hyper-
competition
Sustainable
competitive
advantage
achieved by
Beat the
competition with
a strong market
positioning
Resources should be
valuable, rare, costly
to imitate and
exploitable by the
organization: the
VRIO framework
Make competition
irrelevant
The company creates
value for itself while
at the same time
value is destroyed for
rivals
Demand Exploit existing
demand
Exploit strengths to
create a strong
resource profile
Create and maintain new
demand
Both supply push and
demand pull
Strategy Cost leadership
or differentiation
Optimise resources Create value free of
competition
Form strategy with
disruptive effects
Most
significant
Contributors
Michael E. Porter Edith Penrose,
Berger Wernerfell,
Jay Barney
Kim & Mauborgne Christensen,
Moesgaard Andersen
& Poulfelt
Source: Originally developed by Andersen et.al., 2010, but have been translated by the author of this report,
who has also made a few additions.
These theories argue against the traditional strategic thinking consisting of the positioning and
resource based perspectives, as among others advocated by Keller (1999). Together these four
perspectives, positioning, resource-based view, Blue Ocean Strategy, and the Discount
Strategy view, represents the modern strategic thinking, which can be seen in box 3.1.1.
Although Andersen et al (2010) argues these four perspectives should be combined in order to
create a strategic map consisting of four main strategic positionings, this paper will only
include the thinking behind the Blue Ocean Strategy (BOS), see appendix 9 for what is meant
by a Blue Ocean and a Red Ocean. This theory contends a company needs to offer new
factor(s) the industry has not previously provided to customers, in order to create a blue ocean
(uncontested market space). This is achieved by examining non-customers’ preferences,
whereby the BOS perspective mimics one of Keller’s (1999) ideas for a company remaining
relevant it can attract new customers. Andersen et al (2010) further point out creating a BOS
is only temporary, as the competition cannot become irrelevant indefinately, as argued by
Kim & Mauborgne (2005), because rivals are quick to either match or copy new offerings.
To recapitulate, on part 1 of this paper, the concept of repositioning has its roots in the
positioning field, as developed by Ries & Trout (1986). The concept has since then evolved to
18
include individual product/brand alterations to corporate brand changes. The one employed in
this paper follows that of revitalization and reinforcing strategies, as contended by Keller
(1999). Two other theories are necessary to conduct actual research on Keller’s (1999) theory,
those of Smash your brand and 5D branding by Lindstrom (2008, a), and Booms & Bitner’s
(1981) framework as argued by Rafiqu & Ahmed (1995). For creating a more authentic brand
Beverland’s (2009) story telling strategy is also followed, as it allows consumers an active
role in creating brand meaning. The thinking behind the Blue Ocean Strategy, as developed
by Kim & Maugborne (2005) is also considered.
4.0 Internal analysis
This section initiates part 2 of this paper. Specifically this section is an outline of what SAS is
and what it does. It begins with a brief review of the company history. The section ends with
an explanation of the current corporate strategy, as well as the branding and positioning
strategies.
Figure 4.0 The main historical developments of SAS
Source: Author’s own creation based on information from SAS (2010, a) and Horn &Willumsen (2006), and
Dickson (2006)
SAS is formed as
a consortium by
(DDL), (DNL,
and (SILA)). The
first
intercontinental
flight from
Stockholm to NY
is launched. SAS
is the world’s first
airline to fly from
Copenhagen to
LA via the North
pole in scheduled
flights. The
airline extends
the routes to
include Tokyo,
whereby SAS can
offer “around the
world services
over the North
Pole”
1940s/1950s
The first hotel,
SAS Royal Hotel
in Copenhagen is
opened. Arne
Jacobsen designs
the entire
building. Curt
Nicolin initiates
the 1st turnaround
strategy.
In 1971 the first
Boing 747 jumbo
jet is taken into
service.
By the
stewardship of
Jan Carlzon is the
2
nd
turnaround
strategy initiated.
The
Businessman’s
airline concept is
introduced with
the new segment
EuroClass. SAS
is the most
punctual airline in
Europe. SAS
receives the
“Airline of the
Year” award.
SAS celebrates its
50
th
anniversary.
The company is
harmonized, and
establishes the
profit-centres
SAS Denmark
A/S, SAS Norge
ASA, and SAS
Svergie AB.
Focus is on
operationalizing
the firm. SAS
established,
among others,
Star Alliance. Jan
Carlzon, Jan
Reinås and Jan
Stenberg each
are CEOs in this
period.
The toughest
period in SAS
history occurs in
2001 in the wake
of 9/11 in NY.
Jørgen
Lindegaard heads
the 3
rd
turnaround
strategy whereby
the firm cut costs
by 14 billion
SKR. A single
SAS share is
offered. Mats
Jansson becomes
the new CEO,
and introduces
S11 and Core
SAS.
1960s/1970s 1980s 1990s 2000s
19
There have been many events throughout the 65 years SAS has existed. All of these cannot be
covered in their entirety, but the most important ones can be seen in figure 4.0. According to
Horn & Willimsen (2006) SAS has always been a company employing a top-down
management approach, although the CEOs’ strategies have not been followed through after
they have lead the airline. They furthermore, highlight these strategies undertaken by the
various CEOs have been viable and economically sound, yet the company boards have not
been able to demand clear market orientated strategies, causing each CEO to loose focus. The
history clearly shows a number of turnaround strategies have been initiated to make the
company financially strong, but the outcomes of these strategies have not always been
satisfactory. The company is still in a dire financial situation, whereby remaining an
independent airline for the future may seem bleak.
Figure 4.0 shows the history of SAS and illustrates the company has instigated many
initiatives to become more competitive. For a more detailed description of the company’s
history see Horn & Willumsen (2006), SAS (2010, b), and SAS (2010, c). The company has
since its establishment been owned by the Swedish, Danish and Norwegian governments,
which respectively own 21.4, 14.3, and 14.3 per cent (SAS (2010, d), Largest shareholder
information). Furthermore, the pioneering spirit of the 1940s, 1950s and to some extent the
1980s, have provide the company with a rich heritage with many great achievements and
strong ties to the business world. The pioneering spirit has however been replaced with
streamlining the business, and make it more cost efficient, since the 1990s. Cost efficiency
has despite these initiatives remained the Achilles’ heel for competitiveness. Other national
airliners (or flag carriers as they are often referred to), like British Airways, have had to be
privatized in order to become competitive in a deregulated market (Balmer et al, 2009).
Perhaps SAS needs to do the same.
4.2 SAS’ corporate strategy, Core SAS
The main business areas and the operating performance of the company can be seen in
appendix 4.. The business area with the lowest percentage EBIT has been experienced on
international travel, although SAS has not managed to reach the profitability target the last six
years. The most prominent costs are payroll expenses and jet fuel costs, which respectively
account for 38.9 and 16.6 per cent (SAS Annual Report 2009). The corporate strategy Core
SAS has been designed to deal with the financial problems of the company and is explained in
detail below.
20
Core SAS has been launched in 2009 to complement the previously designed corporate
strategy S11, since this has not been sufficient to bring the company to profitability. It is
based on five pillars aiming at strengthening the long-term situation of the company by
making it competitive and profitable (SAS Annual Report, 2009). Each of these five pillars
are now explained:
(1) Focus on the Nordic market
The strategy Core SAS has been created to streamline the company by concentrating on the
core business, aviation, of the company in its home market. As previously mentioned, the
international flights EBIT performance has been the worst. This has caused SAS to capitalize
on its home market, as it has a strong market presence in Scandinavia. It has 54, 43, 33, and
15 per cent of the Norwegian, Danish, Swedish, and Finnish markets. The economic
operations in 2009 have been negative in Europe, and in the Scandinavian market, when
compared to 2008 (SAS’ Annual Report, 2009).
(2) Focus on business travellers and strengthened commercial offering
As can be seen from figure 4.2,1 part a, the number of passengers on scheduled flights has
increased from 2000 to 2006, which in large part can be attributed to the strategy S11,
implemented in 2003. The passenger volume has since 2006 been declining, most
significantly from 2006 to 2007. The number of passengers has been fairly stable in 2008, but
declined with 14.1 per cent from 2008 to 2009, leading the SAS Group to transport a total of
24.9 million passengers in 2009. A large part of this decline is attributed to the global
Financial Crisis, which has hit the entire airline industry hard, especially in 2009.
This has particularly been the case for the business travel segment. The SAS Group’s
passenger volume is in 2009 back to its level in year 2000. To match the declining passenger
numbers the capacity has been cut back with 57 routes, mainly on leisure destinations, which
the passenger load factor is an expression for, see appendix 9 for a definition. This can be
seen in figure 4.2.1 part b. The aircraft fleet has been cut with 18 units. It can be seen in part b
the passenger yield has also been declining from 2002 to 2004, and has since then increased.
It has however not reached its 2000 level (SAS Annual Report, 2009).
Though the business traveller segment has declined in 2009, it remains the largest part of the
SAS Group’s customers. To accommodate the different customer needs, and these customers’
different price sensitivity, each customer segment has tailored offerings, which can be seen in
21
figure 4.2.2. These segments are based on a turnaround strategy launched in 2003 to provide a
future for the troubled company. The purpose of this strategy has been to reposition SAS,
which should be established by an altered product offer to the market. To achieve this a
substantial amount of research has been undertaken through key constituents, and through a
quantitive analysis in eight countries. The research revealed the market for consumers, who
used the price of the ticket as the only criterion for a destination accounted to 40 per cent of
all consumers. This is especially the case for Denmark. Another segment, called productivity,
focused on punctuality regarding take off and landing, which accounted for roughly 40 per
cent. The remaining 20 per cent concentrated on being comfortable onboard. The results
clearly indicated SAS could regain market shares within the business travelling segment.
These product and service offerings are provided on international, European, and
Scandinavian destinations. Domestic travel, for example within Denmark, is only offering
economy class. These strategies are still employed by the company (Horn & Willumsen,
2006; SAS Annual Report (2004); SAS’ website, 2010).
Figure 4.2.1: The passenger development on scheduled flights, and the passenger load factor
and yield performance.
Part a Part b
Source: Part a is the authors’ own creation, based on figures from SAS Annual Report, 2009, and part b is a
copy from SAS Annual Report, 2009, page 48.
It can be observed, the Business class offers numerous other services to increase the level of
comfort, when travelling. The Economy Flex class offers important services for a business
traveller, but at a lower airfare than the Business Class ticket. The Economy class offers a
basic product for those travellers only interested in cheap airfares and they avoid paying for
unnecessary extras (i.e. no frills service). In comparison, Norwegian offers two classes,
22
namely full flex and low fare (www.norwegian.com), and Cimber Sterling only offers one
class, although the ticket price depends on when the booking is made (www.cimber.dk). It
therefore seems the customer offerings of SAS indeed are more suited for business travellers,
than the offerings of the airliner’s main competitors. This is reflected in the customer
categories, where business travellers have been roughly 60 per cent of all customers from
2007 to 2009. Charter passengers have increased with 5 percentage points, and leisure
travellers have decreased with between 5 to 10 percentage points in the same time period
(SAS Annual Report 2007 and 2009).
Box 4.2.2: The three main customer segments of SAS, their respective product offerings, and
their percentage of all SAS Group’s customers.
Business Economy Flex Economy
Offer SAS Fast Track
Lounge
Empty middle seat
More legroom
Internet/telephone check-in
Priority boarding
Food and beverages incl.
Ticket can be
changed/refunded
Basic service commitment
EuroBonus points
SAS Fast Track
Internet/telephone check-in
At the gate 20 min before
departure
Priority boarding
Food and beverage incl.
Ticket can be
changed/refunded
Basic service commitment
EuroBonus
Competitive fares
No advance reservation
requirement
Food and beverages may
be purchased on board
No changes once booked
Basis service commitment
EuroBonus points
Snowflake fares (i.e. extra
cheap fares)
Price Premium Medium Low
Source: Author’s own creation based on information from SAS Annual Report, 2004, and SAS Annual Report
2008 and 2009.
To support these segments, and their respective customer offerings, the positioning It’s
Scandinavian has been created along with the corporate strategy S11. To make the positioning
relevant the company implemented the marketing strategy through its corporate identity, the
customer service, the product offerings, and through its marketing communications (Horn &
Willumsen, 2006). But, as mentioned, the S11 strategy has not been enough to make SAS
profitable, whereby the new corporate strategy Core SAS has been implemented. With Core
SAS a new positioning strategy has been launched, which is called Service And Simplicity.
The idea is to “minimize travel time and maximizing perceived customer value” (SAS Annual
Report, 2008, page12), and can be seen in figure 4.2.3.
The new positioning is furthermore, the brand promise, and it is to be fully implemented in
the organizational culture. The customer experience is designed to make it easier to fly, by
flying on time, flying to destinations the customers want to fly to, minimize the travel time
23
spent, and increase the customer perceived value during flights. The brand vision, which is
also the corporate vision, is to be perceived as the obvious choice. The three individual
brands, SAS, Widerøe and Blue1 together stand for reliability, flexibility and punctuality
(SAS Annual Report, 2008).
Figure 4.2.3: The SAS positioning.
Source: Copy from SAS Annual Report, 2008, page 12.
To achieve this positioning the company have designed a supportive marketing mix, which in
the framework developed by Booms & Bitner (1981;cited in Rafiq and Ahmed, 1995) is
explained below.
In regards to the product, the tailored customer offerings will be supplemented with, among
others, an extended EuroBonus program, with the Membership Rewards Loyalty Program in
cooperation with American Express, mobile phone boarding passes, a kiosk where customers
can self label their luggage carried, and free wireless internet services in the airport lounges.
These elements will not be available to all customers, as they are dependent on which type of
ticket is bought. The frequent flyer program, is separated into two parts: Companies using the
airliner obtains SAS Credit points each time an employee fly with SAS, and the travelling
employees obtain EuroBonus points. These can then be exchanged for new air travel. For the
Economy Extra and Business classes discounts are offered via the SAS Travel Pass
Corporate, and the Fast Track lane offers a quick security check to meet these customers’
expectations. In regards to price, SAS concentrates on offering competitive total airfare,
which means seats, luggage, and credit/debit card charges, are all included in the price. The
total flight ticket should thereof be lower than what competitors can offer. According to SAS’
own claim it is no longer perceived as being expensive (SAS Annual Report 2009). In regards
24
to place, the main locations used are the national airports located in, Copenhagen, Billund,
Aarhus, and Aalborg. The main distribution channels are SAS’ own website, and through
airfare comparison websites, such as ww.Momondo.com. In regards to promotion for most of
the business travellers this occurs through a negotiation with individual companies on special
travel deals (Horn & Willumsen, 2006). For non-business people promotion mainly occurs
through mass marketing, such as TV and on the Internet via: banner ads, SAS own website
(www.flysas.com), a Facebook group on www.facebook.com, and ads in the business paper
Børsen. SAS also promotes through its own in-flight margazin called Scanorama (seehttp://www.scanorama.com). The company is also known for using sponsoring, especially in
Denmark, where the Superlega in football is referred to as SAS Ligaen
5
. In regards to
participants, the people who are important for delivering the service offerings will generally
be the personal at the check-in counters and the cabin crew, which can be seen wearing
clothing in the brand colour deep-blue
6
. These people are very important, as they significantly
shape the customers’ perceptions, especially with regard to service quality. Other passengers
also have a significant influence on the service quality perceptions, which will be formed,
based on the number, type and behaviour of these other customers (Rafiq & Ahmed, 1995).
In Denmark SAS has employed celebrity endorsement in TV ads promoting the brand with
people, such as Nickolaj Costa Waldau, Tina Dicow
7
, as well as former and present Danish
Ministers, like Uffe Ellemand Jensen
8
and Ulla Tørnæs
9
. The slogan of the TV ads is SAS as
good as home. This slogan, along with the brand promise, is to be delivered through the
physical evidence of the 7ps. In regards to the physical evidence the environment in which the
service is offered relates to: the check in counter, the lounges at the airports, and the on-board
experience. There is not much to say about the check in counters, but the lounges are designed
to mimic a regular home with a minimal noise level, bright colours, and comfortable
furniture. The on-board experience is designed to continue this level of comfort, where
business passengers are most comfortable, and the economy passengers are the least
comfortable. The airplanes external and internal features are kept in the corporate brand
colours of deep blue, white and orange (SAS annual Report 2009; SAS, 2010, e). With
respect to process most business travellers do not spend much time on acquiring the ticket as
5
http://www.superliga.dk/superligaen/om-superligaen.html
6
See any number of Scanorama.
7
Nickolaj Coster Waldau TV ad:
Uffe Elleman TV Ad:
9
Scanorama (2010) no. 1 Febuarary accessible via www.Scanorama.com
25
these are included in the specific negotiations with each firm. As for non-business they
mostly find their tickets through price comparison sites like momondo.com (Datamotor, 2009,
a, and b).
These initiates seems to be well suited for SAS’ customers, as the customer satisfaction index
has increased from its level in 2007, which can be seen in figure 4.2.4. part a. According to
SAS, the increase in the CSI is attributed to the quality of the service offerings (i.e. the high
punctuality and regularity of flights), and a higher customer perception of value for money
(SAS Annual Report, 2009). It can moreover, be observed the CSI level in 2009 corresponds
to the level in 1996, which is not impressive over a fourteen year period. Despite the positive
development in CSI from 2007 to 2009, the total number of members in the EuroBonus
loyalty program has declined by 6% from 2008 to 2009, which can be seen in figure 4.2.4,
part b.
Figure 4.2.4: The development of the customer satisfaction index, CSI, from 2005 to 2009,
and the development of EuroBonus members, from 2008 to 2009.
Part a Part b
Source: Part a is the author’s own creation, based on information form Horn& Willumsen, 2006, page 126 and
SAS Annual Report, 2009, and part b is a copy from SAS Annual Report, 2009, page 13.
According to SAS, this change is mainly a consequence of 111,000 members had to be
deregistered, since these were not active, but included in the membership numbers, from the
takeover of Braathens Norway (SAS Annual Report, 2009).
26
(3) Improved cost base
To increase profitability, and lower the cost structure, substantial cost cutting measures have
been implemented. These initiatives have occurred in all areas of the business, including
administration, personal, and SAS Tech. The personnel costs have been achieved through
negotiating with the trade unions. The cost cutting program is performing as anticipated, and
is expected to result in a total cost savings of 7.8 billion SEK (SAS Annual Report, 2009).
(4) Streamline organization and cost orientated culture
The organization has also changed with Core SAS, which is covered in greater detail in
appendix 4..
(5) Strengthened capital structure.
To implement Core SAS in 2009, it has been necessary to offer a rights issue of roughly 6
billion SEK. This rights issue has however been exceeded by 24.2 per cent, and in 2010 it has
been planned to offer a new rights issue of roughly 5 billion SEK (SAS Annual Report,
2009).
To recapitulate, in terms of percentage EBIT the worst performing part of the operations have
been international travel. The corporate strategy Core SAS has been designed to turn the
company back to profitability by concentrating on business travellers in the Scandinavian
market. These passengers account for approximately 60 per cent of all SAS’ customers, but
the passenger numbers have been declining mainly due to the global Financial Crisis. This
partly explains the company’s current financial predicament. The Company’s brand
positioning is Simple and Simplicity, which is supported by the marketing mix. The marketing
program is consistently communicated and each element generates synergy.
5.0 External analysis
This section deals with the external environment (i.e. everything and everyone outside the
organization, as defined by Lynch (2006)) of SAS. It can be seen in appendix 5.0, but the
conclusion is summarized here.
To conclude, on this analysis, the Danish market, along with Swedish and Norwegian
markets, is small compared to the other European countries. The Danish market has
experienced a lower CAGR from 2004 to 2008 than the overall European market. The fact
27
85.9 per cent of all Danish passengers fly to international destinations, along with the small
market value, suggest Danes do not fly with national carriers to these destinations. There are
thus only 14.1 per cent of Danish passengers flying domestically. The level of market
turbulence is contended to be moderate, whereby it is possible to employ a Porter’s Five
Forces Analysis. The competitive forces are all considerable, with only the bargaining power
of buyers to be assessed moderate. These forces pressures SAS’ ability to be profitable, and
based on industry economic metrics the company is not competitive. SAS’ strongest
competitor is Norwegian, which has been able to generate a profit, has performed strongly on
most of the economic figures, and has some clear competitive advantages. In terms of
Lynch’s Four Links Analysis SAS have strong formal, complementary, and governmental
relationships, which fosters sustainable competitive advantages. All cooperation relationships
can be improved, but there is strong threat from the other airlines to enhance formal and
complementary links and networks.
6.0 Conclusion based on the internal and external analysis
This section provides the main results from the internal and external analysis, which are
presented in the SWOT analysis, as among others developed by Porter (2004):
Strengths
• SAS has a strong heritage
• The airline has a strong market presence in Scandinavia
• It has, according to internal estimates, strong brand equity with core customers
• It has strong links and networks through: the Star Alliance; bilateral relationships with
other airlines, like Lufthansa; strong complementary and governmental linkup with
airports, like CPH.
• SAS is Europe’s must punctual airline and provides reliable and flexible air travel
• Has accommodated the fall in passenger demand by creasing capacity and
intercontinental travel.
Weaknesses
• EBIT has over the past six years not managed to reach the profitability target
• The passenger yield has declined since its peak in 2001
• The passenger volume has been declining since 2006; Moreover, the number of
passengers has decreased with 15.7 per cent from 2008 to 2009, which is substantially
more than most of SAS’ competitors
• The market shares for the Nordic countries have declined since 2006
28
• The Premium passenger segment (i.e. first and business travellers) for AEA’s
members, which include SAS, has declined more than the economy segment from
2008 to 2009 on scheduled flights, due to the global Financial Crisis
• Danish passengers predominately fly internationally (i.e. 85.9 per cent), which is
direct contradiction to the corporate strategy Core SAS with a focus on domestic
travel. This furthermore worsened by the cut in capacity with 15 per cent mostly on
leisure destinations, which is a dangerous move, because the market is continuing to
develop towards these destinations.
• There are weak informal links and network, i.e. via Facebook.com, but they can be
improved.
Opportunities
• Find ways to utilize the SAS football sponsorship in the SAS Legaen. Currently SAS
is only present by naming the league.
• There are many ways to foster links and networks with other constituents within, and
outside, the airline industry, whereby SAS sustainable competitive advantage can be
improved
• To lower the operating costs it might be necessary to follow Norwegian’s example of
just employing one type of aircraft
• Fully outsource SAS Ground Services and SAS Tech might also be necessary to lower
operating costs, and not just parts of them as currently undertaken by Core SAS
• To lower the dependency on business travellers it might be strategically important to
attract other customer segments.
Threats
• The biggest threat is the continuation of the global Financial Crisis; it is important to
note that perhaps SAS’ current financial problems are simply caused by the decline in
business travellers, who might return once the crisis is over. According to AEA
estimates, this not likely to happen as corporate culture has changed in regards to
business travel. AEA further estimates the crisis will last until 2013
• There is continued competition and price pressure from industry rivals and substitutes,
which limits SAS’ profitability
• The Danish market is small and has experienced a slow market growth from 2004 to
2008. According to Datamotor it is expected the market will follow the European
market value and passenger deceleration, but the value will decelerate a slightly higher
rate, whereas the deceleration of passengers will occur at a slightly lower rate, until
2013.
• The other airlines continues to pressure the cooperation and network SAS has
established
• The frequent bad press exposure threatens to negatively affect the consumer
perceptions of the company and the image of the company.
• According to Berlingske Nyhedsmagasin’s Image Analysis SAS has the worst
corporate image of 140 companies. This might also indicate SAS’ customer based
brand equity may in fact be lower than estimated by the company itself
The conclusion on part 2 of this paper is SAS is uncompetitive, and by focusing on business
travellers in the Scandinavian market makes the airline out of line with the actual market
29
developments; the business travel segment is declining, whereas leisure travel is increasing.
Danish passengers almost entirely fly internationally, whereby lucrative revenue generation is
foregone by focusing on the Nordic home market. This fact cannot be changed even though
SAS has reported it has lost most of its passengers on international flights. The product
offered and related services may simply have to be more adoptive to the market. This paper
will analyse further, how SAS can attract new customer segments without abandoning its
business travellers.
7.0 Segmentation analysis and qualitative data
Part 3 of this paper section begins by explaining, how the new customer group SAS should
attract has been ascertained, and who these consumers are. This analysis is based on
secondary data obtained from Gallup Marketing Denmark. The methodology of the two focus
groups is then explained, followed by the research findings. The section ends by concluding,
which strategic direction SAS should pursue.
7.1 The new consumer group SAS should attract
Figure 7.1 identifies the customer demographics of Danish residents, who have flown, or not
flown, with SAS within the past two years. This figure is based on a survey conducted by
TNS Gallup, in which 1994 interviews have been conducted. The entire data set can be seen
in appendix 6.
It can be observed those who mainly have flown with SAS are in the age groups 32-41, and
42-51. Both age groups 62-71, and 12-21, are also strongly represented. There undoubtedly
are many reasons for this large distribution coverage, but it may suggest the SAS offerings
have a large customer appeal. Together all persons who have flown with SAS represent 37.9
per cent of all interviewed. The remaining 62.1 per cent have thus not flown with SAS.
The figure also illustrate there are additional passenger volume to be generated from
practically all age groups, even the age groups 32-41 and 42-51. The largest age group, which
are not SAS customers, are people aged 22-31 and 32-41. This paper will concentrate on the
22 to 31 year olds, because they exhibit the biggest growth potential. Furthermore, it provides
the option to attract a generation of young consumers, which is essential for long-term
sustainability (Keller, 1999). The reasons why this age group does not fly with SAS will be
further investigated in the two focus groups.
30
Figure 7.1: The age distribution of Danish residents flying with SAS, and those who have not
flown with SAS, within the past 2 years
Source: Authors own creation based on data from Gallup Marketing Denmark: Index DK/Gallup
(R)2.half2009/base:4,717 persons/3790 interviewed, The entire dataset can be seen in appendix 6.
It might however, be difficult for SAS to attract this age group, as it represents a different
generation than then one most of its existing customers belong to. According to a secondary
study performed by Axiom Consulting Australia (2008), some of the characteristics of the
Generation Y consumers, i.e. roughly those people have been born in 1974 and as late as 1994
which make them somewhere between 15 and 30 years of age (Businesweek, 1999) are; they
are socially, environmental, and technological savvy; desire more personal time, are creative,
and attracted to authentic brands; and expect companies to be environmental conscious. The
study also argues for companies to communicate more effectively with this age group they
need to offer new brand services, make brand extensions into unrelated categories and
understand customers are in control of the brand, not marketers (Axiom, 2008).
Although the Axiom study (2008) is conducted in Australia, it is believed these findings are
applicable to a generation and therefore also applicable in Denmark. However, the
considerations offered by the study have not directly been included in the interview guide,
because the purpose of this paper is not to test these consumer characteristics, but rather to
determine what the customer brand perceptions are.
7.2 Method
The focus group construct has been chosen, based on its ability to uncover consumers’ brand
perceptions. This is achieved by allowing the interviewees to articulate their thoughts and
feelings in their own words, which can be covered in great detail. Personal interviews have
31
not been selected, as it is believed it might be difficult for a person, not currently flying with
SAS, to single-handedly offer specific brand perceptions. A focus group discussion will
compensate for this issue, and at the same time foster more comprehensive consumer insights.
The participants are also encouraged to mention topics the interviewer may not have thought
about a priori. The interviewer’s role is to act as a facilitator, where all group members’
opinions are heard. It also allows the interviewer to interact with the interviewees in a context
closer to everyday life, whereby any misunderstandings and interpretations can be clarified
directly. The method is however, not without problems. One limitation is during the interview
the interviewees may be influenced by each other’s opinions, which may make them
agree/disagree on matters they otherwise would not. Another limitation is the ability to
generalize the findings, because the insights will be personal and more specific (Flick, 2006;
Kvale, 1997).
According to Flick (2006) the literature offers several guidelines for, how a focus group
interview should be performed. These rules of thumb include; interview strangers rather than
friends; start with heterogeneous groups, and end with homogenous groupings; more than one
focus group should be conducted in order to compare, and contrast, statements; the
methodological procedure should be to record the interviews, transcribe them, and then
code/categorize them. All of these recommendations have all been meet. But it should be said
it is questionable whether the interviewees are statistical representatives, as they are friends of
the author to this report. It is common for focus groups not to be statistically representative,
whereby other researchers have employed the concept of theoretical sampling. This sampling
method is not concerned with random sampling and stratification do not results in a
representative sample of the population investigated. The quintessence is achieved by the
ability of the participants to provide new knowledge, given the existing data and the
conclusions already made. Given these considerations this author believes the interviewees
fulfil the theoretical sampling criterion. Their insights can still be used to offer
recommendations for how SAS can reposition itself. The procedure for conducting the two
interviews have also followed the traditional way of recording the discussions via a tape
recoder, transcribing the interviews, and then use a coding process, which in this case is open
coding, see appendix 9 for a definition. The transcript from each of the two focus groups can
be seen in CD appendix 7.3 The codes have been applied to both a sentence-by-sentence, and
paragraph-by-paragraph method (Flick, 2006), based on the primary categories offered by the
7ps, see CD appendix 7.4.
32
Question construction
The actual questions, including initial, follow up and interpreting questions, asked in the
interview have been designed based on the guidelines offered by Kvale (1997), who contend a
good question is one covering both thematic issues (i.e. regarding the area of the interview)
and dynamic areas (i.e. encouraging the participants to answer). Furthermore, Kvale (1997)
argues to improve the quality of the interview it is recommended to; interpret the insights
from the participants during the interview; that these interpretations are also validated during
the interview; clear and simple questions should be asked; and the quality of the interview is
also depended on the interviewer’s ability to follow up on important views. It is the author’s
belief of this report the two focus group interviews fulfil these quality criteria, since there are;
interpretive questions (see transcripts from focus group 1: questions I54, I63, and focus group
2: I40, I54), validate questions (like focus group 1: I17, focus group 2: I19), and follow up
questions (like focus group 1: I19, focus group 2: I73). To structure the questions, and keep
both the thematic and dynamic aspects in mind, an interview guide has been created, which
grouped the questions accordingly to the 7ps and the philosophy Smash your brand
(Lindstrom, 2008, a), see appendix 9.
Moreover, as the interviewees are not currently flying with SAS, general questions have been
asked, such as what generally constitutes good service, and exposing the participants to two
types of stimuli during the interview. The first stimulus is a short Keynote Presentation with
SAS’ logo and its strongest immediate competitors’ logos, in terms of market shares as
identified by SAS – see appendix 5.3. This is included in order to ascertain if SAS can pass
the test Smash your brand (Lindstrom, 2008, a). The second stimulus is an edited version of
DR1’s TV program Rabatten, a consumer program from the 27
th
of May 2010. This program
tests if you get value for money by flying domestically between Jutland and Zealand. The
departure flight is from Copenhagen to Aalborg with Norwegian, and the return flight is with
SAS. The TV program evaluates the two flights based on five factors, which can be seen in
appendix 8. It is important to keep in mind the definition of service used in Rabatten refers to,
what the passenger can get onboard (i.e. free coffee, a blanket to keep warm and so on). This
explanation is essential, because it is also used in the interview discussion after the program.
Objectives to be reached through the focus group interviews
Based on Keller (1999; and 1993), Booms and Bithner (1981), and Lindstrom (2008, a) the
specific objectives to be reach through the focus groups are; (1) Which degree of brand
33
awareness does SAS have among these consumers? (2) What is the brand image of SAS
among these consumers? (3) Does SAS pass or fail the test of Smash your brand? (4)Which
criteria do these consumers use when they buy an airline ticket? (5) Do these consumers
mostly travel internationally or domestically? (6) Is SAS’ current promotional strategy
effective in attracting these consumers? (7) Is there a difference between these two groups in
terms of perceptions of SAS, the topics mentioned, or in the type of attitudes? The last
objective is not only intended to compare the two groups, but also to test the hypothesis if the
business students’ perceptions and attitudes are more compatible with the existing customers
of SAS.
Participants
It should be pointed out there is an overrepresentation of females in the study, as they
represent 75 per cent of the respondents. This overrepresentations can be argued is simply
because there are more women studying at universities (dts and the Ministry of Equality,
2009). The participants for the first focus group include four students. Three of them are
currently enrolled in a non-business education, and one participant is currently a business
student. The business student has been included to evaluate if he holds more favourable
associations than those borne by the three others. The interview has taken place in a common
room at Vilhelm Kiers Kolligie in Aarhus for nearly two hours. The participants for the
second focus group include four students currently enrolled in the same business education
(cand.merc marketing) in order to keep the group as homogeneous as possible. The focus
group took place in a classroom at ASB for nearly one and a half hours. The atmosphere at
both interviews has been relaxed and light, whereby the respondents frequently laughed. The
last two sections, physical evidence, and promotion, are thus only answered by three persons
and not by four.
Typology
It should be said the typology used referring to the focus groups, such as I64 or M48 in focus
group 1, this corresponds to the transcript from focus group 1 with the specific statements
from I’s (i.e. interviewer) 64
th
statement and participant M’s (i.e. Maryam) 48
th
comment. The
paper will also use the notion F.G. to refer to focus group. To separate the two interviewees,
whose first name starts with K, K
2
is used for the second focus groups.
34
7.3 The focus group findings
Table 7.3: The results from open coding
Concept Primary codes. These can be seen in CD appendix 7.4. Examples of answers relating to
sentence coding. These can be found
in CD appendix 7.3.
Product Brand awareness, destination, frequency of flying,
Smash your name, Smash your (logo) colours,
Anchored Danish logo, Smash your (logo) form,
Competitor comparison, , Plane instead of train/bus
A2, M3, D3, R6, K2, R8, C9, R16,
A14, D26, A47, B15, K36, B21,
M23, K37
2
Price To high a price in comparison, SAS’ really cheap
tickets, Intention to buy when price is lower, Lower
price sensitivity after education,
A70, D63, M66, K94
2
, C127, R155,
K13
2
, R154
Place Airport Ålborg/CPH, Facilities, Transport to/from
airport, Time in advance
C106, B114, A75, R115, C115,
K133
2
, M85, R126
Promotion TV ads, Smash your picture, Celebrity endorsers, SAS’
Facebook Group, Target market
A87, K164
2
, A92, D98, K117, R165,
A89, R154
Participants General good service, Smash your service, Smash your
behaviour, Other personnel’s behaviour, Fly with
friends
C8, K9
2
, R101, C83, K84, D84,
C99, B104
Physical
evidence
Customer experience onboard, Evaluation of the
experience, Smash your sound
M82, B130, A83, K139
2
, C124,
K147
2
, C53, K48
2
Process Low brand loyalty, Smash your navigation, Search
engines, The navigation of search engines, Purchase
criteria, Improving the booking process,
M51/52, B32, K56,K59, B43, C6,
B53, K68, B44
Note:
2
refers to K. in focus group 2
Source: Authors own creation. The concepts and codes have been created based on the Booms & Bitner (1981),
Lindstrom (2008), and Keller (1993).
The results of the open coding have lead to seven overall categories, i.e. the 7ps, and several
codes. Table 7.3 shows these findings, as well as some examples of sentence codes, which
relate to specific statements from the participants. As mentioned, choosing these two groups
to interview is based on an initial hypothesis that business students will be more compatible
with the existing customers of SAS (i.e. focus group objective 7, see section 7.3). This
hypothesis is however rejected, as there is no significant perceptional difference between the
two groups. This can of course be attributed to a tight structural design, but several codes,
which have been found to exist for both groups, for example Anchored Danish logo, where
not included in the initial research design. Another likely explanation to this outcome is the
business students are currently students and not actual business travellers. Their perceptions
and criteria for choice of airline carrier are the same as the non-business students. Yet, the
business students are capable of providing a greater level of detail with regards to the negative
associations of the brand. This is probably related to the interviewed business students all
35
study marketing, whereby they, ceteris paribus, have a higher knowledge about those
elements influencing the brand perception.
7.3.1 Which degree of brand awareness does SAS have among these
consumers?
In terms of brand awareness, as defined by Keller (1993), these consumers are able to
recognize the brand, but are not able to recall it. Their tops of mind brands are mainly Ryanair
and Norwegian, as the following excerpt from focus group 1 shows:
“I5. Generelt set, hvilket flyselskab tænker I først på når, I skal ud at flyve?
A2. Jeg tror det er Ryanair, Norwegian. Det er mere lavprisselskaberne.
C2. Det kommer an på, hvordan (der menes hvorhen) jeg rejser…
…
I7. Men almindeligvis ville I ikke inkludere SAS i overvejselserne?
M3: Nej. Det er måske forkert at vælge for en studerende. Jeg ville overveje nogle bus
muligheder. Og om man tage med toget”.
The quotes indicate the airlines included in the consideration set, see appendix 9 for a
definition, is also dependent on, where the journey is to. C does however, not specify which
airlines he considers. During the interview he nevertheless point out that Air France (today
Air France/KLM) is his favourite, because it functions smoothly (C56). He also believes the
airline he is most confident flying with is Lufthansa, even more so than flying with SAS
(C57). The low brand recall, as expressed by C, is more pronounced in the second focus
group, the business students. Only one participant specifically mentions an airline (i.e.“D3.
Ryanair”). The low brand recall in combination with that these consumers use the online
search engine sites to compare airline prices, like momondo.com, show there is low brand
loyalty, see appendix 9, among these consumers. As one respondent notes from focus group
1:
A4: Jeg plejer at finde dem (dvs. flyselskaber) ved hjælp af søge maskiner, så jeg kan finde
frem til den billigeste billet. Og hvornår jeg skal afsted. Så det passer. Så da var det egenligt
lidt tilfældigt, hvem jeg rejser med”
This has also been determined to be the case for the majority of consumers flying on
Economy Class. The strategies the industry has employed to compensate for this fact has been
to either attract large passenger volumes, or introduce loyalty programs (Datamotor, 2009, a).
36
7.3.2 What is the brand image of SAS among these consumers?
Table 7.3.2: Primary brand associations of the SAS brand:
Positive brand name
associations
Negative brand name
associations
Positive logo
associations
Negative logo
associations
Forretningsrejsende For dyrt til mig Gode farver: blå for
himlen, hvid for flyene
eller skyer
D20:”Det er sådan lidt
gammeldags”
Kvalitetsniveau Ofte negative presse
omtale, fx personale
strejker
K27
2
:”Altså blå det er
troværdigt”
D21:”Det er sådan lidt
Mallorca stil agtig”
Højt serviceniveau R21:”...der er bare så
mange ting, som måske
ikke burde være der”.
K19:”Men også meget
trygt”
R26:”Der kunne ligeså
godt have stået ISS”
Fungerer godt R161:”...Det er sjældent
man hører en
successhistorie”
K46
2
:”...Det er kort og
fint”
God komfort M99:”Men ikke noget
vi ville bruge. Jeg tror
ikke det lige appelere til
os”
K31:”..Der er SAS
blevet inkorporeret i
min hjerne...”
Giver en følelse af
tryghed
M36:”...nu forbinder jeg
jo SAS med dansk...”
D108:”…den der
Minerva halløj. Vi har
den blå og det er oftest
dem som så rejser med
SAS. Og den er blå.
Hvis vi nu deler
mennesker ind i en
kategori så er det
nok…vi er jo også på
vej derhen af, at komme
i den blå kategori, men
vi er der jo ikke helt. Så
hvis de skal til at sates
på nogle yngre nogle,
jamen…det…det synes
jeg ikke loget henviser
til”
Note: R, K
2
, D refers to interviewees from focus group 2. M and K refer to focus group 2. The numbers refer to
the transcripts of the respective focus groups.
Source: Author’s own creation
In terms of the positive and negative primary associations of the SAS name and logo, the
participants hold the same perceptions. The business students have nonetheless, slightly
stronger negative associations, than the non-business students, see box 7.3.2. The result is
rather surprising, as the participants perceive SAS very close to, how the company wants to
be perceived. As mentioned in section 4.2 the brand positioning, i.e. brand identity, is Service
and Simplicity, which is targeted at business travellers. The participants do not associate SAS
with simplicity, but definitely with service. This indicates the brand identity and brand image
are properly calibrated. The issue is of course, despite these associations are strong, unique
and somewhat favourable, these consumers do not perceive the brand as appealing, and is
strongly considered to be for business travellers. The participants, in other words, are well
aware of the brand, but do not include it in their consideration set.
37
7.3.3 Does SAS pass or fail the test of Smash your brand?
As mentioned the idea to include the philosophy Smash your brand (Lindstrom, 2008, a) is to
determine if SAS’ brand is more than its logo. This will be achieved by testing if the
elements that constitute a brand are in fact communicated properly in all aspects of where the
consumer is in contact with the brand. According to Lindstrom (2008, a) too few companies
are able to pass this test, and it has been believed by the author of this paper SAS would share
this fate. Unlike expectations SAS passed the test, where Smash your, name, colour, and
language have already been dealt with, see the two objectives above. With regards to Smash
your form the respondents do not believe it to be important for their ability to remember the
brand. It is rather the colours and the typology used (see F.G. M83,A24, K27, C23, A26, and
F.G. 2 K27
2
, B20, D26, R33). The typology used to write the SAS name can be interpreted as
a form of icon, or symbol, in itself, which one of the referents also point out (F.G. 1, M36).
SAS therefore also pass this element. In terms of Smash your sound the first focus group do
not associate SAS with specific sounds, expect for C. He perceives the sounds of the airport
directly with SAS (C53) and with a personal tradition with travelling with his father on
business trips (C53, and C10). The other focus group on the other hand strongly associate
SAS with specific sounds from the music the airline employs in its TV ads (K48
2
, D30, K49
2
,
R48, K51
2
). For this group there is furthermore strong secondary associations in terms of
county of origin effects, in Keller’s (1993) wording, via the music and the celebrity endorsers
fosters a strong connection to Denmark (D31, K51
2
, D32, D33, R49, R50). These perceptions
of the name, language, colours, form, icons, and the secondary associations from the country
of origin effects make the SAS logo strongly anchored in these consumers minds, as one
participant point out from the second focus group:
B15.” Nej. Jeg synes også det...men det er også fordi jeg synes det er lidt ligesom Lego, at
noget af det vi også får det, er det der med at man kender dem. Og man er tryg ved dem, og
ved, hvad de står for. Så må de endeligt heller ikke ændre det der (logoet). Tænker jeg”.
In order for the participants to be able to comment specifically on SAS’ behaviour and service
they have been exposed to the TV program, Rabatten. It should be mentioned, the referents all
argue it is difficult to evaluate such elements in a relatively short the program (F.G. 1, M73,
F.G. 2, R96). These consumers overall think the two stewards, from Norwegian and SAS,
shown in the TV program both deliver a good service (i.e. what the passenger can tangibly get
onboard in terms of something to drink or a blanket) given the resources available to them
(F.G.1, M73, C98, and F.G.2 B92, K102
2
). One referent furthermore believed both stewards
38
could have been less formal, and exhibiting more humour, like Ryanair’s onboard personnel
shows (F.G. 1, K84). Only one participant explicitly believes SAS delivers a better service
than Norwegian (F.G. 1, C83). In terms of the other personnel’s (i.e. the service personnel at
the check-in) service and behaviour the first focus group thought the lady from SAS provided
a bad customer service, since she:
C99: “…Jeg synes sjovt nok hende der fra SAS blev sådan lidt...ja da han spurgte, skal man
betale for det, skal man betale for det, så var normalen “nej”. Det lyd som om han lige havde
fornærmede SAS på en eller anden måde...Nej det synes jeg ikke de burde gøre. Det er jo bare
positivt at hun kan sige “nej det gør man ikke her hos SAS”, eller hvad. Hun skulle jo bare
bøje det på en munter måde. Men hun gør som om, “hvem tror du lige du flyver med her”?
altså”
For the second focus group they do not believe the TV program allows them to judge these
people, and though both SAS and Norwegian provide a decent level of service (B101, R96,
B102, K106
2
, R97). The referents on the other hand believe the lady at the Luggage Handling
office provide a low level of service, and appeared unprofessionally (K109
2
, B105, R100), but
they agree that the lost luggage would have happen had the TV host flown with SAS as well.
The issue is of course passengers feel they have a bad flight experience if their luggage is
mishandled, even though it is not the actual airlines fault (K77
2
, K78
2
). The fact that SAS
Ground Service has reported an unprecedented high rate of mishandled luggage from 2008 to
2009 needs to be carefully monitored, see appendix 5.3. The second focus group moreover
perceived SAS’ Marketing Director as credible, and Norwegian’s as incredible (D48, R68,
K79
2
, K81
2
), which three of the participants believe to be less important (R69, K80
2
, B60).
According to Lindstrom (2008, a) this is nonetheless significant for the brand perception that
the company representatives in fact stand for what the brand symbolizes, like Sir Richard
Brason of the Virgin Goup. Therefore SAS only partly passes the test Smash your behaviour
and Smash your service. Concerning Smash your tradition SAS fails this test, as only one
participant actually commented on this brand element (C53, C10). SAS also fails to Smash
your ritual, as none of the respondents remarked on this brand element. With regards to
Smash your navigation SAS only partly passes, because the two participants, who mentions
they have visits SAS’ website, to not remember it with much confidence (F.G. 1, M51/52/53,
and F.G. 2, B32/B33). In terms of Smash your picture SAS passes this test, and will be further
analysed in the focus group objective 7.3.6, see below.
39
7.3.4 Do the identified consumer age group mostly travel internationally or
domestically?
The purpose of this question is to discover if the interviewed consumers’ behavioural pattern
will fit into the corporate strategy Core SAS with the focus on domestic travel in Scandinavia,
see section4.2. To reach a conclusion with regards to this objective, the participants have been
asked the following question, “I hvilke sammenhænge kunne I finde på at vælge indenrigsfly,
fremfor at tage bussen, eller toget?” (I68 in F.G. 1, and I91 in F.G. 2). The overall conclusion
is it will probably be difficult to convince these consumers of flying domestically. For the
referents in focus group 1 they would only consider to do so if they were pressed for time
(C88, K82, M68). The trouble is, as one respondent notes, you have to book well in advance
to get a ticket and the flight departures are not always appropriate (A67), whereby it might
actually not be possible to fly anyway. It is furthermore more convenient to take a train from
Aarhus, where the interviewed lives, to Copenhagen (M70). This referent also state:
M71:” Ja, altså, hvis jeg skal rejse...tage med fly, så skal det være et eller andet langt væk,
hvis det nu er, ikke. Hvis det er kortere vil jeg tage med bussen eller toget. Med mindre jeg
skal til Sverige, eller Tyskland, der kunne jeg godt finde på at tage med toget. Men lidt mere
varme lande, kunne jeg ikke hvis jeg skal til København”.
For the participants in focus group 2 the reason they provide for flying domestically is if the
travel distance is far, whereby the train is more expensive, and takes longer time (D55, B73,
D56, B74). For two of the referents they will not consider flying domestically as a viable
option, because it is more of a hassle, at least from Aarhus Airport where the interviewed
lives, and more expensive, if they do not have a car so they can drive to the airport themselves
(R79, D54, R80, D62, R86). Two of the participants, who do have a car, argue taking a plane
is cheaper than taking a train, and have presumably done this (K86
2
, B71, K88
2
, B72, B70,
K85
2
). The author of this paper, however, questions the validity of these answers, as these
same respondents point out they have only considered it (B81, K97
2
). One of the two
contributors, who has a car, moreover perceive using public transportation to/from the airport
as infuriating, which is why she prefers the comfort of the car (B76).
7.3.5 Which criteria do these consumers use when they buy an airline
ticket?
The purpose of this objective is to discover if the interviewed consumers only focus on
obtaining the cheapest flight possible, or if there are potential for SAS to attract these
consumers through its existing positioning. To uncover this the participants have been asked
the following question, “Men hvis vi skal snake lidt om de kriterier I bruger, når I skal u dog
40
rejse, hvad er det så oftest?” (I57 in F.G.2, and slightly reformulated in I77 in F.G.1).
Generally, all of the participants use price as the main criteria, but also the airlines reputation,
and comfort on long journeys (F.G. 1, A56, M55, M56, C72, and F.G. 1 B53, B57, K69
2
,).
For a short domestic journey, the TV program concludes price is the most important criteria,
which the interviewees agree with (F.G. 1, C86, A65, M7, and F.G. 2, B63). Specifically for
focus group 1 one of the participants have furthermore two other criteria, which are
punctuality, in terms of takeoff/landing, and if there is only a marginal price difference what
other offers do they provide (A57, A58). In focus group 2 one participant has as a criteria the
stopover does not take too much time (K64
2
, K68
2
).
7.3.6 Is the current promotional strategy of SAS effective in attracting these
consumers?
The purpose of this objective is to determine if SAS needs to readjust its advertising program
in order to better target these consumers. The main advertising media, see appendix 9 for a
definition, these consumers remember being exposed to a SAS ad is via the TV commercials,
like the one with Tina Dickow, see also section 4.2. Unlike, what might be expected these
consumers have strong, unique and favourable secondary associations from these campaigns.
These secondary associations stem effects that Keller (1993, p.11) calls the “Country of
origin” and “Celebrity spokesperson or endorser of the product or service”. The first source
links the brand to where it comes from, whereas the latter is to provide credibility to the
brand.
For both of the two focus groups the participants can all remember more than one SAS
commercial, where the first group can recall the two ads with Uffe Ellemand and Tom
Kristensen (A87, K115, C138). The second group can recall the past five commercials with
Tina Dicow, Nikolai Coster Waldau, Uffe Ellemand, and Tom Kristensen (D98, D99, K171
2
,
D100, K172
2
, R173, K174
2
). The referents moreover have a positive attitude towards these
ads, because these offer a well-known feeling of being at home (F.G. 1, C134), a sense of
being safe on the plane, the plane is one time, and it is dependable (F.G. 1, A89), they make
you happy (F.G. 2, D101), they are like a small movie, which is enjoyable to watch (F.G. 2,
R176), the good music and the endorsers used in the ads fosters the country of origin effect
for the second focus group (D31, K51
2
, D32, D33, R49). All of the participants furthermore
believe these commercials are very unique to SAS, because of the way it is filmed with
sunshine, a blurred lens, and the colour scheme (F.G. 1, K113), has a slight atmosphere of
41
conservatism (F.G. 1, C136), follow the same theme with Almost home (F.G. 2, K179
2
. This
participant even remark:
K182
2
. “Eller reklamerne. Man ikke sådan i tvivl når man ser den. Lige bort set fra man kan
forveksle den med Ota Solgryn”.
It can therefore, be concluded that SAS passes the test of Smash your picture. The problem
with SAS current promotional strategy is these consumers still do not feel the SAS brand is
appealing to them, as they are well aware they are not the target audience for these
commercials (F.G. 1, A89, A91, R152, and F.G. 2, K157
2
, R153). The TV commercials only
increases brand awareness, which specifically for these consumers is only for brand
recognition.
SAS has also recently opened a Facebook group, called SAS Scandinavian Airlines, as
mentioned in section 4.2. To determine if this customer group of the 22 to 31 year olds will
find communicating with SAS via this informal network attractive the following question has
been asked: “Så jeg ved ikke om I ved det, men SAS har faktisk også en Facebook gruppe.
Hvad ville så egenligt gøre, at I ville melde jer ind i gruppe”? (I117 in F.G. 2,, and I131 in
F.G. 2). Generally, the attitude is not positive, as it is believed to be strange a big company,
like SAS, would communicate through such a media (F.G. 1, M97), a bit unnecessary (F.G. 1,
K118), and two participants do by definition not join such groups (F.G. 2, K167
2,
, D90). If
they joined the group it would be to obtain information (F.G. 1, A95), they have had a good
customer experience (F.G. 1, K117), or that they would achieve some sort of advantage by
doing so (F.G. 2, R166). The last argument, from focus group 2, is elaborated by the use of an
example of another Facebook group:
R171. “Jeg synes artgear.com har en rigtig god Facebook gruppe, hvor han..jamen det er to
forskellige dage, eller første åbning her i dag 20% på alt der jeg nu tillader. Så tænkte jeg
“nå for satan, der går jeg lige ind og kigger igen”. Og så fandt jeg det og så købte jeg det.
Øh altså. Det behøver ikke...det er selvfølgelig 20% det er også meget, bare at smide af. Men
han er ude hele tiden. Så er der et eller andet, vær med i en konkurrence her, tag dig i mit
billede, eller et eller andet. Et eller andet som...det tror jeg også bare man husker. Der er
vildt meget at komme efter, fordi han er på vej op ad og sådan noget. De er der jo...alle ved
hvem de er, selvom de ikke reklamerede”.
Interestingly, SAS has in fact launched a special promotional campaign, in the form a
competition, on Facebook in October 2009. Briefly explained the competition has been based
42
on the Facebook user, it was not a requirement to a member of the group to participate,
choosing a Scandinavian airport to fly from, and then turn a virtual world-orb to find a
random travel destination, to which Facebook chooses a random person among the user’s
Facebook friends to fly with the user. To be able to win a ticket the user, and the randomly
chosen friend, had to cooperate in writing a letter of motivation with why they should win
(Adverblog.com, 2009; Venderby, 2009). There is thus evidence that SAS has attempted to
attract other consumers, especially younger ones, via more targeted promotion strategies via
Facebook.
7.4 Criticism of the focus group interviews
One of the problems with the interviews can be argued relates to the tight structural design, as
this does not allow the participants to offer more spontaneous, or innovative, opinions (Kvale,
1997). It is the belief of the author of this paper this has been compensated by asking direct
questions concerning, how the interviewees would like specific elements to be improved (see
for example I63 in F.G.1, and I82 in F.G.2). The generated ideas may not be classified as
being radical innovative, but some have more potential than others, which will be dealt with
in greater detail in section 8.0. Another problem is in terms of the stimuli used during the
interview to make it possible to talk about SAS specifically. The TV program Rabatten does
not offer many insights into the service, or customer experience, on board, nor how the
customer experience is at the two airports, Aalborg and CPH. The participants in each focus
group have also addressed these points, (see F.G. 1, M73, C106, A74, C107, M81, and F.G. 2,
R96, B102, R97). One participant from the second focus group also remarked she though it is
problematic to directly compare the price between SAS and Norwegian, because other factors
determine the paid price too, like seat preferences (B63). To compensate for the TV program
lacking information of the customer experience, some general questions concerning, what the
participants do onboard, and which facilitates are important to be in an airport have been
asked (I109 and 107 in F.G.1, and I90 and I89 in F.G.2).
7.5 Conclusion on the focus group interviews
The results from the two focus group interviews clearly indicate that despite the strong,
unique, and favourable brand associations, the participants do not fly with SAS. This leads to
two options:
43
Option 1: A new customer segment needs to be investigated, which in fact does include SAS
in their consideration set. The interviewed consumers have strongly stated their primary
criteria for choice of air carrier is the price of the air fare, which is not in alignment with the
presumed needs of comfort and service of the business travellers. In its current state the SAS
brand cannot stretch to include the interviewed consumer group. Based on section 7.1 a
consumer candidate is the 32-41 year olds, but the growth potential is smaller than the 22-31
year olds.
Option 2: As argued by Keller (1999) a simple way to attract a younger customer group is
through a brand extension, which in this case would be to establish a low cost airline. SAS
has attempted this strategy before with Snowflake in 2003 (SAS, 2010, b), but it failed. The
reasons are that it used the same personnel and flew to the same destinations as the regular
SAS flights. This caused internal competition, rather than allowing SAS to capitalize on the
new market demands. As mentioned it is, as of this writing, not an independent company, but
a price label for SAS’ cheapest prices (Horn & Willumsen, 2006). The fact that the consumers
interviewed still fly with LCCs, combined with the increased market shares they have
obtained on the Danish market, see appendix 5.3, it is clear this product is both demanded and
economically attractive. As mentioned, the business travellers have been hit the hardest by the
global Financial Crisis, whereby profits have been severely affected. SAS simply cannot
afford not to compete in the LCC segment. This presents two additional approaches: (A) To
launch a new LCC airline, either from scratch or by acquisition. Given the financial state of
the company, see appendix 4, this is ill advised, as such a strategy will have initial high fixed
costs. It will also take time before the brand will be accepted, as it should not directly be
associated with SAS, in order not to transfer the perceptions of the SAS brand to the new
company. (B) Capitalize on the existing Snowflake price label by establishing it is an
independent brand in a House of Brands architectural strategy. In this respect Snowflake
should have no connection to the overall SAS brand to prevent the brand perceptions being
transferred. This way the two brands are able to benefit from each of the two different
markets (Aaker & Joachimsthaler, 2000). To make this possible SAS will have to lower its
price substantially for the Snowflake product. This will be achieved by removing all
unnecessary services, i.e. those services the interviewed participants are not willing to pay for.
Taken the focus group interviews and the strategic analysis into consideration, i.e. part 2 and
3 of this paper, the option best suited for SAS’ current situation is option 2 (B). This will be
44
further pursued mainly based on the insights provided by the two focus groups, but also on
ideas from the author of this paper.
8.0 The recommended repositioning strategies for SAS
The purpose of this section is offer recommendations as to what SAS can do to reposition
itself to attract the 22 to 31 year olds, without alienating its core customers. The different
recommendations offered are based on interpretive ideas from the interviewed participants, as
well as ideas generated from the author of this paper. This section begins with the design of
the new brand positionings. Then follows the suggested marketing mix to support the new
positionings. The section ends with a critical comment on the recommendations.
8.1 Creating the new positioning
As mentioned in section 3.0, Keller (1999) argues there are two options a firm can employ
when a business wishes to be more effective in managing its customer brand equity for the
long run; either the company needs to reinforce its brand or create revitalization strategies.
Table 8.1 the brand strategies for the SAS brand
Eliminate
The existing positioning with service and simplicity
Bad press by directly commenting on these events
Raise
Leverage the sense of place and tradition (i.e. founding
story, as Beverland, 2009, calls it)
Leverage the secondary associations fostered from the
TV ads by improving the consumer senses by
establishing 5D marketing (this will be dealt with in
section 8.2)
Reduce
The complex aircraft fleet
Create
The new positioning of when time matters
Establish a House of Brand brand architecture, with
Snowflake.com
Source: author’s own creation based on framework offered by Kim & Mauborgne (2005, p. 35)
The existing SAS brand can be reinforced, because there are many sources of brand equity,
which are appealing for the business travellers. On the other hand, the Snowflake brand
should be revitalized, because new sources of brand equity are needed for Generation Y to
find SAS appealing.
The specific brand strategies recommended for the SAS brand to follow can be seen in table
8.1. As can be observed it is suggested SAS in fact does not continue with its current
45
positioning of Service and Simplicity, despite the fact it has been argued in section 7 the brand
identity and brand image is somehow probably calibrated. The reason is not only has SAS
been known for being the most punctual airline in 1982, (Horn & Willumsen, 2006), they
have also been awarded this great achievement in 2009 (SAS Annual Report, 2009). This is in
fact a very important value propositioning for business travellers, as it is believed the less
time wasted the better. it has been discovered in the focus group interviews to be important
too after these participants have finish their education (F.G. 1, K13, K14, A89, K7, K8, in,
and F.G. 2, B5, K144
2
). The new positioning SAS should own is When time matters, which is
actually the title of Horn & Willumsen’s (2006) book. To own this positioning will
furthermore nurture the feeling of being safe onboard, because the flight is in fact smooth
(F.G. 1, M8, K116, M13, and F.G. 2, K179
2
). Not only will this cultivate the primary and
secondary associations to SAS, but the fact the company has the capabilities to be Europe’s
must punctual airline makes it a sustainable competitive advantage, which should more
strongly be capitalized upon. Another important element in this new positioning is SAS do
not need to really change anything, as the airline is already communicating this perception.
The new positioning is therefore able to pass Kotler & Keller’s (2006) criteria for a point of
parity to be established, as it is relevant for consumers, is distinctive, in terms of other airlines
are not able to do so, and its is both a believable and credible claim. The old positioning of
Service and Simplicity is both relevant and believable, but as these are generic they fail to be
distinctive. The brand architecture, as mentioned in section 7.0 should be a House of Brands
(Aaker & Joachimsthaler, 2000) in order not to have a meaning transfer taking place. This has
been the case when Snowflake was first launched in 2003, and its logo featured the SAS logo
right next to it. Keller (1993) also offers such a strategy a company can follow, when
secondary associations stem from country of origin effects, which is the case here. One way
to leverage these associations will be telling the founding story of the airline, which should
probably be provided at the company website. These stories are important for SAS, because it
has strongly shaped, how Scandinavia, and especially Denmark, has economically evolved
since its establishment. To tell such a story will allow the SAS brand to be attached to time
and place, whereby SAS will become a more authentic brand (Beverland, 2009).
It is also recommended to raise the networks with governmental institutions, and the informal
links to consumers to improve SAS’ sustainable competitive advantage, which have been
covered in appendix 5.5. It is furthermore, advised SAS to lower is complex aircraft fleet in
order to reduce the costs associated with such as constellation, which Norwegian Airlines
46
Shuttle has showed is important to be profitable, see appendix 5.4. The second focus group
has also revealed consumer perceptions is affected by bad media coverage, as contended in
appendix 5.3. This should be dealt with by directly communicating on such events, and
provide some success stories too, see section 7.3.2.
Table 8.1.2 specific brand strategies for Snowflake.com
Eliminate
All branding ties to the SAS brand
Raise
Leverage the secondary associations fostered from the
TV ads by improving the consumer senses by
establishing 5D marketing (this will be dealt with in
section 8.2)
Reduce
These will be deal with in section 8.2
The level of service offered
The branding initiatives concerning the senses of taste
and touch
Create
A new brand positioning of The social airline
A new brand identity and logo
Offer a new industry factor; social interaction
Source: author’s own creation based on framework offered by Kim & Mauborgne (2005, p. 35)
The brand strategies recommend to attract the new customer segment, people age 22 to 31,
can be seen in table 8.1.2. This is based on the focus group interviews, where one participant
even remarked the current logo does not appeal to this younger customer audience due to its
brand personality, see appendix 9 for a definition. This is probably, because SAS is perceived
to exhibit conservative brand personality, which the interviewed consumers do not believe to
be negative, but simply does not appeal to them, see section 7.0. The fact that the
snowflake.com brand has been created to appeal to a more price sensitive audience, means
SAS already has a brand with the necessary impact (Horn & Willumsen, 2006).
The actual name should be changed to Snowflake.com, as the interviewed consumers strongly
perceive a .com, or dot something, in the name of an airline logo as cheap. This is explained
by two of the participants in focus group 1:
K35. “Mmhmm. Jeg vil gerne tilføje, at jeg synes så snart der står dot et eller andet, .com,
.no, så begynder det bare at virke enormt billigt et eller andet sted. Synes jeg.
C35. Det vil jeg give dig ret i. Ja .com...netbaseret...det får det også til at virke lidt mindre
etableret end de andre”.
K36. Ja, og så alle de der små ikoner, som flyet på Norwegian .no, så snart der er et lille
ikon, eller sådan en lille sjov ting, så begynder jeg også blive lidt mere...hvad hedder
sådan noget... opmærksom på, om der skulle være nogle faldgruber når jeg bestiller
47
hos dem. Man begynder at tænke: “Åhh er det nogen der prøver at tage mig ved
næsen”?
C36. Det vil jeg faktisk også (sige)...det er som om de vil prøve at bevis for meget...det er
som om de prøver at forklare for meget gennem deres brand..øh deres logo...det er
som om de virkelig har et behov for, at fortælle, hvad de er.
A38. Ja”
The purpose of a logo is to create instant recognition, while at the same time separate the
business from that of its rivals (Kotler & Keller 2006). If another name were to be chosen the
company has to start all over with building brand awareness of the brand. Since it is believed
there is a moderate brand awareness of this name, for example one of the participants
mentioned Snowflake unaided (F.G. 2, R152), which would be lost with a new name. This
will also compensate for any negative associations, which may have been created, since it
failed as an independent airline. The brand personality should also remain the same, s the
colours yellow and brown are according to a multicultural colour study, perceived in the US
as happy and inexpensive, respectively (Jacobs et al, 1991). The colours will likely also foster
a modern and young brand personality. This is partially supported by the interviewed
respondents from focus group 1, who remark orange in fact holds these traits (C47, A43,
M41, C47, M42, C48). The participants in focus group 2 on the other hand comment that if
SAS’ logo is yellow it will be less credible (D25, D26, K37). The referents from the second
focus group perceive blue as credible, which is supported by Jacob et al (1991). The brand
personality is helpful, as it can instantly generate points of difference in the industry. The
brand personality should be a precise account of the company, since the customers buy the
company and what is stands for, rather than a product or service. The brand personality
should also be consistently communicated in every situation, because that is how strong
customer relationships, and customer trust, are established (Moser, 2003).
As can be seen from table 8.2 it is recommended the brand positioning of Snowflake.com
should be The social airline. This positioning is based insights gained from focus group 1,
where the respondents have been asked: I109. “Hvad gør I så for at beskæftige jer i løbet af en
tur?”, too which it has been remarked:
M82. “Jeg tror jeg læser lidt og så har jeg nogle blade og læser lidt i dem, og så kan man
snakke lidt med nogle andre. Og så plejer jeg at læse en god bog.
K96. Jeg plejer altid at sidde og snakke, eller også prøver jeg på at sove.
M83. Jeg synes faktisk det er hyggeligt at have nogen til at sidde og snakke med”.
48
Although social interaction is not strongly supported in the focus groups it allows SAS to
position itself on a proposition not purely price related, which has been an important
component for the airlines business model combining elements from both LCCs and NCs
(Horn & Willumsen, 2006). More importantly, the brand positioning may make it possible for
SAS to party create a blue ocean, because social interaction is not a factor currently offered in
the airline industry. The foundation of a Blue Ocean Strategy is the notion of value
innovation, which refers to lowering operational costs and at the same time increasing value
for consumers. This is achieved by offering a new factor in an industry and not by competing
with rivals by tender “a little more for a little less”. The theory furthermore, argues the
insights into which new factor (or factors) to be offered is not based on detailed consumer
research, as consumers will not be able to provide any real innovate insights, because they
cannot see beyond the existing market offerings. The sources to create a blue ocean are
instead by examining alternatives and studying non-consumers (Kim & Maugborgne, 2005,
pp.27-28). According to Andersen et al (2010) this theory is not able to render competition
irrelevant, but rather enables the company undertaken such a strategy with a temporary
monopoly status. It is possibly overoptimistic to assume that offering social interaction will
lead to a monopoly situation for SAS, but it permits the airline to create a POD with this new
positioning, as it also meets Kotler & Keller’s (2006) POD criteria of being relevant,
distinctive, and believable. The Snowflake.com brand should still only cover the Economy
Class, whereas the SAS brand should cover the Business and the Economy Flex Classes.
To recapitulate, it is recommended SAS should create two new brand positionings; The SAS
brand is should be repositioned to When Time Matters to reinforce the sources of customer
based brand equity. This will allow POD to be established, which the existing positioning of
Service and simplicity cannot fully fulfil. The Snowflake.com brand is recommended
revitalized in order to appeal, and be relevant for, the new consumer group. The positioning
is suggested to be The Social Airline, because of its importance to these consumers, allows
SAS to develop a POD, and partly allows a blue ocean to be formed.
8.2 Implementation
With the two new brand positionings in place the next task is to make it visible through, the
seven marketing mix elements. Is should be said most attention will be directed at how SAS
should implement Snowflake.com, as the marketing mix is properly calibrated for the SAS
49
brand, as indicated by the insights gained from the two focus groups. The most important
element in the marketing mix is the physical evidence, as the consumers must experience the
new positioning, when they enter the airplane, otherwise Snowflake.com will not be able to
deliver on its positioning as The social airline, and will loose the ability to build strong
customer relationships.
The product strategy
The recommendations offered are divided into three specific tactics. The First tactic involves
changing the current product offerings. The focus group interviews revealed there needs to be
a bigger distinction among the ticket classes. The Snowflake.com brand should offer a basic
product. In its current form it can be observed a basic service level is offered to all ticket
classes, which make it difficult to determine, why passengers should trade up to Business
Class or to Economy Flex. Surely there are many additional features for these two classes not
offered for Economy, or Snowflake.com, but the actual consumer experience onboard needs
to be prioritized. The service level onboard for Snowflake.com tickets, on domestic air travel,
should include no complimentary the/coffee, as seen in the TV program Rabatten, because
consumers do not demand such a high level of service for such a short flight duration (F.G. 1,
M63, M64, K80, and F.G. 2, R72, B84, K100
2
, B92). It is recommended the second tactic the
Snowflake.com product should allow passengers to check-in online as well, or by SMS.
These initiatives will significantly improve consumer perceptions to be favourable and
significantly improve the consumer experience (F.G. 2, R129, R126, R128, B134, B135). To
guarantee there is a clear ticket class differentiation here as well, these passengers should be
allowed to be at the gate 1 hr before departure, whereas for passengers on either Economy
Flex or Business should maintain the time needed to be at the gate, as described in section
4.2. It should be pointed out SAS has since 2002 offered a basic product with a higher degree
of service to compete with the LCC (Horn & Willumsen, 2006). This business model is
however deemed to have failed, and should be adjusted to meet the realities of the market.
These adjustments will also lead to costs can be cut.
The third product tactic involves the destinations offered. The consumers interviewed mainly
fly to European or international destinations, whereby SAS needs to shift its strategic focus to
offer more Snowflake.com tickets for international travel. The interviewed consumers are also
more willing to pay for comfort on these flights, for example extra leg room, whereby
revenue can be increased, see section 8.1 focus group objective 4 for further details.
50
The pricing strategy
It is recommended that SAS should follow three pricing tactics. Firstly, the price on
Snowflake.com tickets needs to be lower, since this is the basic product offered. The current
price is a total price, which include seat reservation and luggage checked-in (SAS Annual
Report, 2009, and the TV program Rabatten). According to the TV program, Rabatten, SAS
has a 137 DKr higher price than Norwegian on the route Aalborg to Copenhagen, which both
the program and the interviewed consumers perceive to be too high for such a short journey
(F.G 1, C86 and A65, and F.G 2, K91
2
, D61, K92
2
, B77, R157). The price needs to be in
harmony with both other airlines’ prices, like Norwegians, while at the same time being
competitive with substitutes (F.G 1, C87, and F.G 2, D63, B83, R87). Secondly, the new price
should also exclude seat reservation, as it seems passengers are willing to sacrifice this
element too. This will also provide passengers to social interact more, as they might sit next
to someone they do not already know, whereby the airline can deliver on its Snowflake.com
brand positioning. The fact social interaction is offered might prevent passengers from
focusing entirely on price, as a criterion for choosing an airline. Thirdly, it is recommended
the new price should remain constant, since potential consumers will be lost if they cannot
obtain the current 27 per cent of SAS’ airfares, which are the so called really cheap tickets or
Snowflake tickets (an expression SAS’ Marketing Director uses in the TV program Rabatten)
(F.G 1, C87, and F.G 2, K94
2
, D62).
The promotion strategy
This is the most noticeable tool in the marketing mix for consumers, as it involves any way
possible for the company to communicate with its target customers and other stakeholders of
the organization. The purpose of the communication is to endorse the product or service
offerings or the actual company (Pelsmecher et al 2007.). For SAS to communicate
effectively with the younger consumers a promotional strategy is needed to transform these
non-customers into passengers. Many types of media, see appendix 9, are needed to reach
Generation Y, but the main ones recommended SAS to follow can be seen below.
Viral ad
Despite the interviewed consumers all have strong, unique, and somewhat favourable
associations regarding the TV commercials, these represent different brand associations not in
line with what is intended Snowflake.com should stand for, and is aimed at another audience.
The new ads might employ some of the clearly identifiable elements from the current
commercials, like the music used or that they represent short movies. It is therefore
51
recommended to create a new promotional ad campaign, which communicates the new
Snowflake.com positioning. As mentioned in section 7.0 in the Axiom study Generation Y
consumers are very much on-line, which means the new promotion campaign should probably
be a viral ad, to improve informal links and networks with consumers, and make
communicate the younger brand personality. According to Go-Viral (an online marketing
company purely devoted to aid other companies to develop viral ads) viral ads have the ability
to significantly improve brand awareness, brand favourability, and enhance the consumers’
intention to buy the brand. The fact that it happens online add another level of interactivity
(http://www.goviral.com/opportunity.php). According to Mads Holm, from Go-Viral, in order
for a viral ad to work efficiently it requires the audience can and will talk about the ad, the ad
needs to be spectacular, i.e. there has to be something causing the ad not broadcasted via other
media, and the idea behind the ad should be strong enough to foster a longer narrative
(Lindstrom, 2010). A common criticism of such ad campaigns is the company undertaking
such a strategy loose control over the brand, as unintentional word-of-mouth may be created
(Pelsmecher et al 2007). The fact is, as both Beverland (2009) and Lindstrom (2009, b)
argue, loosing control of the brand is the reality of modern marketing, which should not be
feared, but embraced, as the combined efforts of the company and the consumer will create a
stronger and more authentic brand.
Website
SAS also needs to deliver on the new Snowflake.com positioning by presenting the new brand
identity, of being young and more modern, through the company website. In order not to
alienate business travellers the current SAS website, i.e.http://www.flysas.com, should be
maintained, but provide a link to the new website for Snowflake.com. It should use the same
colour scheme, as the Snowflake.com logo of yellow and brown, to create consistency
between the different branding and marketing elements. The site should concentrate on being
engaging and interactive for the visitors. This can be achieved by offering visitors to
communicate their own stories about the brand, experienced or otherwise, which will
furthermore add authenticity to the brand. This can either be in terms of blogs or a discussion
board to let visitors share or debate their travel experiences with each other. The site could
also offer related content to flight queries, sort of like Amazon’s More items to consider
feature (www.amazon.com). According to one of the participants in focus group 2 there
should also be a feature of Find a random desination given the type of holiday the visitor is
considering, such as a city holiday (B44, B45). The visitor’s preferences should not be saved,
52
as all respondents argue it always require registration and spam emails (F.G. 1, K68, C77,
K69, C78, M58, and F.G. 2, B47, R62, R63, K63
2
). If the visitor’s preferences are to be saved
the procedure should be like Amazon.com, where the visitors’ preferences are saved without
such negative perceived features. The overall navigation needs to be simple and user friendly,
which is also the case for the terms of the airfare (F.G. 1, K70, C79, K72, M59). If this
achieved then arguably consumer loyalty will be created, if the webpage convey in a
consistent manner (Lindstrom, 2008, a). The website could also offer links to other travel
related websites, like insurance companies and guides to travel destinations, like
Loneyplanet.com or tgt.dk (i.e. Turen Går Til).
It is also recommended SAS should improve its Facebook Group engagement by engaging the
younger consumers via events like contests or special offers, as argued in section 7.0 focus
group objective 6. Facebook may very well be used as a more specific media vehicle to
launch an ad campaign. To gain a global reach, and buzz, however it might be more effective
to launch the ad both on SAS’ own website and on youtube.com.
The place strategy
The fact that Snowflake.com is a brand for Economy Class means SAS can offer flights to the
main airports, whereby passengers achieves both a more convenient form of travel and save
time travelling to/from the airport. This element has been determined in the focus groups to
be an important feature to offer, because the LCC tend to offer only secondary airports (F.G.
1, K76, and F.G. 2, R76).
The interviewed consumers are not very demanding as for the actual facilities at the airport, as
long as it is possible to sit at a café, comfortable seats in the waiting area, an ATM, and clean
toilets are offered these consumers will have a favourable perception of the airport (F.G. 1,
C108, A75, C109, and F.G. 2, B119, K1192, B121, D72, R115). It might be possible to
increase social interaction by offering a gym in the airport, which will also lead to passengers
being more relaxed and comfortable on the plane. This has been offered in several American
airports with arguable success, which indicate such a facility is both economical and
sustainable (seehttp://www.airportgyms.com/, for details). The question is of course whether
it will be worthwhile a Danish airports to offer, which will require additional analysis. This is
however, outside the scope of this report to do.
53
The participant strategy
As mentioned, it is recommended to lower the service level for Snowflake.com, as the
interviewed consumers do not demand SAS’ current level. Although some of the participants
perceive there is a service difference between SAS and Norwegian (F.G. 1, C83 in focus, and
F.G. 2, K102
2
), the respondents agree with the TV program, Rabatten, that there is not a big
difference between the two flights (F.G. 1, M73, C98, K84, and F.G. 2 B84, B93, K101
2
). It
also seems a higher service onboard does not compensate for charging a higher price. What
does matter is for the interviewees is the cabin crew needs to exhibit more humour, be less
formal, and be able to take things with a smile (F.G. 1, K84, M88). A more humorous cabin
crew combined with doing something special for the different holidays, as is the case for
Ryanair and Norwegian (K85, A83, in focus group 1), will also make it possible to deliver on
the Snowflake.com positioning, as the passenger – company interaction will be less formal.
To improve the consumer perception of the service onboard, it will be necessary to prioritize
baggage handling, as mentioned in section 7.0 focus group objective 3.
The physical evidence strategy
Although all of the 7ps are important elements in a supporting marketing mix, physical
evidence needs to be carefully considered, because the physical setting is fundamental to how
consumers form their brand perceptions. SAS needs to deliver on the positioning to be
perceived as The social airline.
The onboard experience
The current cabin layout of SAS airplanes follows the standard design, with business class in
front of the airplane, Economy Flex in the middle, and Economy at the back of the airplane
(Horn & Willumsen, 2006;http://www.seatguru.com). The reason this design has been
chosen, is SAS has previously learned to customize the airplanes make them more difficult to
sell (Horn & Willumsen, 2006). It is therefore difficult to recommend radical cabin changes,
such as Air New Zealand has initiated (Quest, 2010).
Instead, it is recommended SAS move from 2D to 5D branding, which can be achieved by
creating a Sensorgra, as Lindstrom (2008, a) calls it. This is a graphical tool to illustrate, how
the brand operates with regards to the five senses, and provides the opportunity to sketch, how
the brand can be improved vis-à-vis these five senses. Although it is has not been possible to
create an actual Sensogram for SAS, it is possible to estimate, how SAS performs regarding
these senses. Lindstrom (2008, a) contend the most important sense is sight, then followed by
54
smell and sound, taste, and lastly touch. According to the insights gained from the two focus
groups it is clear SAS performs well on both sight and sound, see Objective 3 in section 7.0.
Both the sight and sound brand strategies should be maintained, but there is in fact an
opportunity for SAS to improve its sound branding initiatives, in much the same vein as
Ryanair has created their sound strategy, as one respondent directly has strong brand
associations with the sound employed for when an airplane is on time with the airliner (F.G.
1, K52, K53, K54, K55). SAS should however not use Ryanair’s strategy, because it is not
special when a flight is on time that is simply the value proposition offered by SAS. Rather
the airline should concentrate on creating a more SAS-friendly environment, which the music
from the TV ads can also be used for. For example this music could be played when the
passengers enter or exist the airplane, and could be played in the toilet facilitates. This will
necessitate the music played follows the new ads showed on TV, which might make it
difficult to establish a particular sound for the SAS brand. A better alterative will be to create
a particular SAS sound that can be employed for a longer timer period. In terms of taste and
smell, which is speculated, to mainly stem from the food and drinks offered onboard, is
difficult to analyse. According to a few articles online (http://www.erhvervsrejser-
bornholm.dk/site/172/ andhttp://www.startour.dk/Nederst-paa-siden/Star-Tours-ABC/ABC-
Sol-og-Strand/Flyrejsen/Mad-paa-flyet/) it seems SAS’ served meals and drinks on long haul
destinations are not unique. Since the ability to smell and taste are very important they need
to be prioritised. The importance of smell can in fact also be supported by the second focus
group, because one respondent remarked she would like the smell in the flight cabins to be
changed (F.G. 2, B168), when asked what the participants wanted to be changed in order to
improve the flight experience (F.G. 2, I105). This comment is not directly attributed to SAS,
but it is still important for the airline to carefully consider, as it arguably has a direct link to
the evaluation of the flight experience. This sense could be stimulated by for example using
the smell of freshly cooked dinner meals for long flights, or freshly baked bread or brewed
coffee for shorter flights. It must be said these initiates may be difficult to implement, since
SAS previously has chosen not to prepare the food onboard out of economical considerations
(Horn & Willumsen, 2006). Offering freshly brewed coffee should nonetheless still be
possible, and can be offered on both short and long flights.
The food and drinks served onboard also allows the sense of taste to be triggered. This cannot
be unique if standardized meals and drinks are offered. SAS should prioritize to offer a great
meal consisting of the best Danish ingredients for the higher priced classes, because these will
55
leverage, and improve, the secondary country of origin associations. These meals will likely
only be demanded on longer journeys, as a previous consumer study showed conducted by
SAS on business travellers (Horn & Willumsen, 2006). For shorter journeys the food trolley
may be able to offer more than just the traditional selection of sweets, drinks, and sandwiches,
which for example could be high quality Danish brewed beer from smaller breweries and
seasonally Danish fruit. The actual trolley could be designed to be transparent, rather than the
traditional grey and black design, to offer more visually stimulating cues. It could also
emanate different smells, like freshly brewed coffee, to stimulate this particular sense. It is
moreover, cost effective for SAS as both business travellers and non-business travellers will
be engaged to buy the food from the trolley on short domestic flights.
Regarding the last sense of touch it is believed SAS performs at a decent level for long haul
travel, since there is a difference between the seats offered on the different flight classes
onboard. For domestic travels, SAS needs to differentiate more between the different flight
classes, as no video type, laptop power plug, or WiFi Internet if offered for business
travellers. Furthermore, there is no seat-size difference, as only Economy Class is offered.
(http://www.seatguru.com/airlines/SAS_Airlines/information.php). It is though possible to
buy Economy, Economy Extra, and Economy Unrestricted tickets, where the difference lies
in the terms of the tickets and not the actual physical seat in the airplane (SAS’ website,
2010). It is however important to offer a physical element to business travellers, otherwise
these passengers will not perceive they actually get more for their higher paid airfares. This
could be as simple as offering laptop power plugs or WiFi.
As can be seen in box 8.2. Snowflake.com is advised also to use a 5D branding orientation,
but because these passengers are less willing to pay for service and comfort on short
destinations the initiatives regarding meals, drinks, and better seat comfort (i.e. those ideas for
taste and touch) should not be delivered to the same extend as for the business travellers.
It is furthermore, recommend SAS create more social interactive events in the airplane, and
according to Pine & Gilmore (1999, pp.29 to 38) to efficiently enriching the consumer
experience there needs to be four experiences present, which relate to entertainment (i.e. “this
occurs when they (consumers) passively absorb the experiences through their senses, as
generally occurs when viewing a performance, listening to music, or reading for pleasure”),
education (i.e. “…education involves the active participation of the individual. To truly
56
inform a person and increase his knowledge and/or skills, educational events must actively
engage the mind”), escapist (i.e. “The quest of the escapist experience is completely
immersed in it, and actively involved participant. Examples of environments tha are
essentially escapist include them parks, casinos, virtual reality headsets…”), and esthetic
(“In such experiences, individuals immerse themselves in an event or environment but
themselves have little or no effect on it, leaving the environment (but not themselves)
essentially untouched. Esthetic experiences include standing on the rim of the Grand Canyon,
visiting an art gallery…”). To enhance the consumer experience on longer flights the
Personal Entertainment System can offer educational content as well, whereby SAS can offer
edutainment to passengers. This content could for example be learning, how to write in a
foreign language provide interactive guides to the destinations. The system can also have a
direct link to several video cameras on the outside of the airplane, which could form the esthic
experience. Creating different in-flight events, like Karaoke, talent competitions, or by having
a number on the air tickets, where the passenger will have to find his/her match, can provide
passengers with the escapist experience. The purpose of these new customer experiences is to
make passengers more active, instead of being passively entertained by the in-flight
entertainment system. This will be more difficult to achieve on domestic travel, as the flight
time is very short. The in-flight events can though easily be offered too.
The process strategy
Since the interviewed participants first visit the search engine sites, like momondo.com, to
determine, which airlines have the cheapest fares, it is important the price charged by SAS on
the basic product will be at the competitor’s price level, especially for domestic travel. After
the cheapest airfares have been found via these search engines, the participants then continue
to the actual airline companies’ own websites to do the actual purchasing. The reason is the
search engine sites are perceived to charge extra for their services, and are less trustworthy
than the airlines themselves. To make this process more effective SAS should engage in
formal networks with these websites, because they are strategically very important in
generating website traffic. The currently much higher ticket prices charged by SAS means it
will not be featured nearly as frequently, as the other airline carriers, particularly the LCCs. A
strong cooperation with these sites is likely to compensate for this, if the actual ticket price is
not to be lowered.
57
To recapitulate, the new positioning of the Snowflake.com brand is to be delivered through a
new marketing mix, which is implemented via a new product offering with a lower level of
customer service to lower the ticket price, communicating this through the price comparison
sites, a new viral ad and a new website, enhancing the customer experience onboard via 5D
marketing, and a less formal cabin crew. The SAS brand positioning should be delivered by a
stronger product differentiation, and provide a customer experience for all five human senses
onboard.
9.0 Discussion:
In this paper several theories have been employed to determine, how SAS can be repositioned
to attract a new consumer group, while at the same time appeal to its existing core customers.
These theories are all solidly founded in their respective fields of operation, i.e. marketing and
strategy, but their practical applications are more problematic.
The theories offered by Keller (1999, and 1993) are based on the idea that consumers can
adequately put words to why they use a given brand. Though it is possible to obtain such
consumer insights, a frequent criticism is there is not a clear link between intention to buy (in
this case the referents believe they will fly with SAS when they have finished their
educations, because their price sensitivity will be lower) and the actual behaviour (i.e. that the
participants will actually fly with SAS) (Schiffman et al 2007). Furthermore, the traditional
marketing methods involving either surveys or focus groups have the last couple of years
been criticized, among others, by Martin Lindstrom. In Lindstrom’s Buyology (2008, b) he
argues the only way to know with certainty consumers’ brand perceptions is to use brain-
measuring techniques like an fMRI (i.e. functional Magnetic Resonance Imaging) machine.
The reason, according to Lindstrom (2008, b) is consumers form their brand perceptions
subconsciously and are therefore not able to knowingly give reasons for them, nor why they
chose a given brand over another. Seen in this light the findings in this report may not truly
reflect, why the participants choose one airline over another, nor if their stated brand
perceptions match what they truly believe. This philosophy is much in the same vein as the
Blue Ocean Strategy (Kim & Maubourgne, 2005), as mentioned previously. The problem
with this theory is that there is little empirical evidence to support it, though a recent study in
the Dutch retail sector revealed BOS to be sustainable. This study also argues competitive
strategy should not be forgotten, as rivals will ultimately catch up with the innovative
company, although it first occur after roughly 15 years (Burke et al 2010). The point
58
competition eventually catches up to with a company employing a BOS is also supported by
Andersen et al (2010), who contend the uncontested marketspace will only be a temporary
monopoly. Having said that the author of this report believes to effectively employ a BOS
requires the company is concerned with creating radical innovation (i.e. “new to the world”)
rather than incremental innovation (i.e. “doing what we do better”) (Tidd et al 2005, p.12), as
new ideas are generated outside traditional thinking. If a company is not conducting radical
innovation, as is the case of SAS, the organization will fall into, what Bower & Christensen
(1995) call “The dilemma of innovation”. This occurs when too much focus is given to
existing customers causing the company to fail. It is therefore very important to deal with
future customer’s demand too.
Despite it has been recommended SAS should create the Snowflake.com brand to attract
consumers aged 22 to 31, it is important to underline the interviewed participants have argued
their price sensitivity to fly with LCC will change once they graduate (F.G.1, K13, K14, M11,
M12, A10, and F.G. 2, R152, R153, D84, K162
2
). The question is whether this in fact will be
the case. Other data suggest differently. According to SAS’ own estimates non-business
travellers and business travellers have a price sensitivity of -1.3 and -0.9 respectively (SAS,
2004). Furthermore according to AEA (2009) the global Financial Crisis has created a shift in
corporate culture, where business travel expenses are cut, which is not a short-term fix.
Combined with SAS has previously experienced a drop in passenger numbers, due to an
economic recession in the wake of the terror attack in New York City in 2001 to 2002, there
is clear evidence suggesting SAS cannot afford not to offer a low cost product. Otherwise
SAS will fall into The dilemma of innovation. To guarantee this will not happen it is
necessary constantly rethinking, how the company is performing, the way it operates, and
how additional revenue streams can be created (Hamel, 2000). The innovation process must
occur constantly, yet it requires the brand positioning to be maintained for a number of years,
where only the marketing tactics (i.e. elements of the marketing mix) can be redefined to
remain relevant for consumers, as argued by Keller (1999) and by Ries & Trout (1986).
Although focus group interviews have been used in this report to uncover consumer brand
perceptions, it seems this method is difficult to generate radical innovation, as argued above.
To do so less consumer orientated strategies can be employed, such as observation or
ethnography. These methods consider the practices investigated can only be revealed through
monitoring. Interviews and narratives, on the other hand, can only report these practices. In
59
SAS’ case the most appropriate method is likely a non-participant observation technique,
where the researcher simply monitor the passengers onboard the airplane (Flick, 2006).
Testament to the applicability of this method is Air New Zealand, which has undertaken such
an exercise in developing radical cabin changes (Quest, 2010), as mentioned in section 8.2.
Given the problem statement of this report, and the current financial situation of SAS,
observation and ethnography methods have not been considered appropriate methods in
understanding consumer brand perceptions. Despite the criticism outlined above, and that
given to the CBBE concept, as mentioned in section 3.1, it is the opinion of this author this
method has proved its worth in this paper. It is as Keller (1999) has argued a brand may have
strong, unique, and favourable associations to be powerful, but it is critical it is relevant too.
This is believed to be achievable for the SAS brand provided the company follows the
recommendations offered in this report. This will also guarantee SAS will not fall into the
dilemma of innovation. Though the Snowwflake.com strategy may only be a temporary
monopoly it will be an important element in generating profitability of the company.
10.0 Further research
The qualitative research conducted in this report provides many insights regarding consumer
perceptions of the SAS brand. The main limitation is its inability to quantify how strong these
perceptions are for a lager number of consumers. It will therefore be required to conduct
further quantitative analysis to statistically determine, if the recommended brand positioning
for the SAS brand, and for the Snowflak.com brand, can be supported. This can be achieved
through a correspondence analysis, which facilitates the perceptual mapping of objects on a
set of non-metric attributes. Another method is to use a conjoint analysis, because it estimates
consumers’ preferences relating to product/service attributes, and allows specific prototype
designs to be constructed. These prototypes then need to be carefully evaluated by consumers
once again (Hair et al 2006; Gursoy et al, 2005). The quantitive study also needs to expand
the nationality of the respondents to include Norwegians, Swedes, and Fins to rule out any
country specificities, and necessitates inclusion of consumers and other company
stakeholders. These respondents also need to be randomly chosen in order to guarantee the
sample is statistically representative.
The 5D branding orientation, which is recommended SAS follows, is in fact designed to be a
quantitive survey, which allows the Sensogram to be developed to evaluate, how the brand is
60
performing concerning the five human senses. If this method is to be followed in its entirety it
might be necessary to contact Martin Lindstrom in order to accurately establish, how the SAS
brand performs.
11.0 Conclusion
The purpose of this paper is to investigate How can the SAS brand be repositioned to attract
non-business travellers, without alienating business travellers, and be perceived by both
groups as relevant, distinctiv,e and believable? To provide an answer to this question both
secondary and primary data has been used.
Part 2 of this paper deals with the international and external analysis. The internal analysis
has revealed SAS’ original corporate strategy S11 has not been enough to generate a profit,
whereby it has been required to instigated Core SAS. The strategy is designed to make the
company competitive and profitable by concentrating on Scandinavian business travellers.
Passenger numbers have however been declining since 2006, and has returned to its level in
2000, mainly due to the global Financial Crisis. This is particularly the case for business
travellers, which remains approximately 60 per cent of all SAS’ customers, and also explains
the company’s current predicament. The largest passenger drop has occurred on international
flights, whereby SAS has cut capacity, mainly on leisure destinations It is premature to
determine if the corporate strategy is effective to bring SAS back to profitability, but the
company has reported a net loss of -2,947 MSEK (or roughly -2,33 MDKK) for the financial
year 2009. The airline is even so not without assets, as it holds several sustainable
competitive advantages: The airliner has a rich brand heritage; SAS has a strong market
presence in Scandinavia with a strong brand name; High customer brand equity with core
customers through a strong customer bond with the Scandinavian business world; There is a
strong partner relationship with other international airliners through the strategic alliance, Star
Alliance; And the company has been rewarded the most punctual European airline company
in 2009.
The current brand positioning of SAS, i.e. its brand identity, is Simple and Simplicity, which
has been created in the wake of the corporate strategy Core SAS. Service and Simplicity also
acts as the brand promise, and is designed to be part of the organizational culture. It is also to
be captured by the consumer experience, as idea is to “minimize travel time and maximizing
perceived customer value” (SAS Annual Report, 2008, page 12). The brand vision, and the
61
corporate vision, is for SAS to be perceived as the Obvious Choice. SAS, Widerøe, and Blue1
all stand for reliability, flexibility and punctuality (SAS Annual Report, 2008). The current
marketing mix, which is consistently communicated, supports the brand positioning and each
element generates synergy.
The external analysis has showed the Danish market value, and market share, is small relative
to the European market. Danish passengers have been transported in 2008, which is an
increase of 2.4 per cent from 2007, although it has lost its momentum since 2005. Of these
13.2 million passengers 85.9 per cent travel internationally, compared to the remaining 14.1
per cent flying domestically. The small market value and the passenger increase may suggest
Danes do not fly with national carriers to international destination. The size and growth of the
market suggest it has reached the maturity stage in the Porter’s (2004) Industry Life cycle.
This should according to the theory hinder new entrants, but both Norwegian Air Shuttle and
Transavia.com have both entered the market in 2008. The degree of market turbulence has
been estimated to be moderate, which means Porter’s Five Forces Analysis can be employed
with some certainty. This analysis has revealed the Danish market is characterized by strong
forces from all sides. It is only the bargaining power of buyers, which is estimated to be
moderate. According to AEA (2009) the global Financial Crisis has caused both business and
economy passengers to save on their transport expenses. Companies has also arguably
experienced a shift in corporate culture, whereby it is expected business passengers will
continue this trend, whereas economy passengers are expected to recover to numbers prior to
the Crisis. All Five Forces severely pressures SAS’ profitability, and based on industry
metrics, i.e. passenger growth, ASK, RPK, and load factor, SAS is not economically
competitive. SAS has moreover, lost market shares. In 2006 it had approximately 33 per cent
of the Scandinavian market, which in 2009 has dropped to 28 per cent. This has mainly
benefited Norwegian and Ryanair. SAS’ main competitor is Norwegian, which has solid
economic figures, a good brand, good distribution coverage, and has a strong hold on leisure
and business travellers both domestically and internationally. Concerning, Lynch’s Four
Links model SAS has some strong formal, complementary, and governmental relationships,
which fosters sustainable competitive advantage. As for informal relationships they are
currently weak, but they can easily be improved. There are furthermore, many opportunities
available for SAS to expand these links and networks, and increase competitive advantage.
The other airlines in the industry are also competing for formal and complementary
relationships. In other words, the conclusion on part 2 of this report is SAS is uncompetitive,
62
despite it has sustainable competitive advantages. By focusing on the business travellers in
Scandinavia the company foregoes lucrative long-haul revenue generation.
Part 3 of this paper has revealed the new consumer group SAS should attract is people aged
22-31. These consumers have the strongest growth potential, and allow SAS to draw in a new
generation of consumers, which is essential to long-term sustainability, as argued by Keller
(1999). This is a difficult task to manage, as their demands and behaviours are different than
the current passengers of SAS. For example they are more social, environmental, and
technology orientated than their parents (Axiom, 2009).
To shed light on the brand perceptions of these new identified consumers two focus group
interviews have been performed. The first interview included mainly students not enrolled in
a business education, whereas the second group consisted entirely of business students. It has
been expected there are brand perceptional differences between these two focus groups, but
that has not been the case. Yet, the business students have been able to provide both positive
and negative perceptions, whereas the non-business students hold positive associations. In
terms of brand awareness, these consumers are able to recognize the brand, but are not able to
recall it. Their tops of mind brands are primarily Ryanair and Norwegian, although several of
the participants have not been able to specifically recall a brand name. This lack of recall is
probably attributed to the low brand loyalty exhibited by these consumers, as they use price
comparison sites to determine which airline operator to fly with.
In regards to the brand image, the interviewed consumers do in fact perceive the brand closely
to its brand identity of Service and Simplicity, which is targeted at business travellers. The
participants do associate SAS with service, but not with simplicity. This indicates the brand
identity and brand image are somewhat properly calibrated. The problem is nonetheless,
despite these associations are strong, unique, and somewhat favourable they do not lead these
consumers to perceive the SAS brand as appealing or relevant, as it is strongly considered to
be for business travellers. In other words, the participants are aware of the brand, but do not
include it in their consideration set.
Based on the focus group interviews it has also been established SAS is aware a brand is
much ore than just a logo, as it passes many of the different elements in the philosophy Smash
your brand (Lindstrom, 2008, a), which not many companies can claim.
63
Part 4 of this paper recommends, based on the qualitative data, creating a new brand
positioning of when time matters to reinforce the SAS brand. This allows the company to
capitalize on being the most punctual airline in Europe, which is a strong value proportioning
for business travellers, and it meets Kotler & Keller’s (2006) criteria for creating POD. This is
not possible with the current positioning of Service and Simplicity, which fails the POD
criteria of being distinctive. The current capabilities of SAS make it possible for SAS not to
change much of its existing product offerings. SAS should moreover leverage the secondary
associations regarding country of origin effects via providing the founding story of SAS as
this will connect the brand to time and place, as argued by Beverland (2009). In addition it is
recommended to follow a 5D branding orientation, as this will lead to authenticity, a stronger
bond with passengers, and leverage secondary associations. SAS should also build a House of
Brands with Snowflake.com in order to maximize the capitalization of the two different
markets of business travellers and people age 22 to 31. The Snowflake.com brand is created,
because it captures a brand personality of being cheap, young, and more modern than the
current SAS brand. The positioning is The social airline, since it is important for these
consumers, it meets Kotler & Keller’s (2006) POD criteria, and partly allows SAS to create a
blue ocean. Though Snowflak.com should also use a 5D branding strategy, the initiatives
regarding taste and touch, will not be prioritized as much as for the SAS brand. The reasons
are these initiatives are not demanded by the younger consumer group, and will allow a
stronger product differentiation to be established.
For SAS to be able to deliver on its Snowflake.com positioning of The social airline a new
marketing mix needs to developed in order to support it. It is recommended there should be a
bigger distinction between the different ticket classes. The Snowflake.com product needs to
be basic, which can be achieved by lowering the onboard service. It is also suggested
Snowflake.com should offer passengers check-in online or via a SMS, whereby check-in time
can be set to 1 hr prior to takeoff. To guarantee product differentiation business travellers
should still be allowed to board 40 min prior to take off. This will significantly improve
customer perception. Furthermore, it is recommended there should be offered more
international Snowflake.com tickets, as this is what is demanded by the consumers. This will
allow SAS to capture more revenue, since the new consumer group are willing to pay for
extra services on these destinations. The new price charged for the Snowflake.com product
should be in harmony with both direct competitors, like Norwegian, as well as substitute
modes of transport to be competitive. The price should also exclude seat reservation, as this
64
will lower the price, and allow passengers to socially interact with each other. The price
should also be constant, as the interviewees have argued; if they cannot find cheap tickets at
SAS they will choose another airline. Since consumers first visit price comparison sites to
find the cheapest airfare, it is strategically important to develop a formal relationship with
these operators. The consumers, however, do not buy the tickets on these sites, whereby a
new more engaging website should be designed, and will also add authenticity to the brand. A
new viral promotional campaign is also suggested to create a buzz about the new positioning.
To increase social interaction at the airport it is suggested a gym should be offered. Although
a lower service is recommended the flight crew should exhibit humours behaviour, and do
something special for season holidays, to make the relationship with customers less formal,
which will enhance social interaction. To clearly communicate the new Snowflake.com
positioning particular attention is devoted to, how SAS can improve the onboard customer
experience. This is recommended to be achieved through 5D marketing initiatives. To trigger
the sense of hearing it is suggested music is played when passengers enter and exit the
airplane and in the toilet facilities. To stimulate taste, smell, and sight the business travellers
should be offer the best Danish food and drinks on long-haul destinations. On domestic
journeys the food trolley should be more stimulating by emanate different smells, like freshly
brewed coffee, offer more than just the traditional selection of sweets, drinks, and sandwishes.
The food trolley should be designed to be transparent to stimulate the sense of sight. To
increase the onboard social interaction it is suggested the customer experience should include
entertainment, educational, escapist, and esthetic experiences. These might however be more
effective on long-haul destinations, due to the longer flight duration. The marketing mix
suggested here is furthermore intended to fulfil the principles of being consistent and
generating synergy, as advocated by Pelsmacker et al (2007). For Snowflake.com to become
an authentic brand it is important SAS is not afraid to allow consumers to create, and
communicate, their own stories about it, which the new website and the group on Facebook
will provide.
To end, although the SAS brand can be argued is a strong brand in its current state, it does not
foster an appeal among younger consumers. Given the recommendations in this paper, it is
argued both a new consumer group, and the existing customers, will find the brand relevant,
distinctive, and believable.
65
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http://www.airportgyms.com/
www.amazon.com
Axiom Consulting Australia (2008): The really blue customers of tomorrow, available via:http://www.scribd.com/doc/25558677/2008-Really-Blue-Consumers-trends-for-2009
http://www.boersen.dk
http://www.business.dk,
http://www.cimber.dk
Konkurrencestyrelsen, (2007): Konkurrenceloven, 2007, available via:http://www.konkurrencestyrelsen.dk/konkurrenceomraadet/regler/love/konkurrenceloven-nr-
1027-af-21-august-2007/
Dansk Statitisk (DTS) and the Ministry of Equality (2009): Elever efter køn, uddannelse og
tid, available via:http://www.dst.dk:80/Sites/KVM/Uddannelse/igangvaer.aspx
Dong Engergy (2010): Corporate website, available via:http://www.dongenergy.com/en/Pages/index.aspx
DR1’s TV program Rabatten; Rabatten (18:20) 27. maj 2010 19:30 available via:http://www.dr.dk/DR1/Rabatten/Udsendelser/seprogrammerne.htm
DSB
DSB Annual Report 2009, available via:http://www.dsb.dk/Om-
DSB/Virksomheden/Rapporter-og-regnskab/Aarsrapporter/
http://www.dsb.dk/Kampagne-urler/Kampagne-urler-til-epi/dsb1/
http://www.dsb.dk/Om-DSB/Presse/Nyheder/Gratis-Sondage-trakker-nye-kunder-til-S-toget/
DSB (2010): Fordeling af opgaver og ansvar mellem DSB og Banedanmarrk, available via:http://www.dsb.dk/Om-DSB/Presse/Pressebaggrund/Fakta-om-fordelingen-af-opgaver-og-
ansvar-mellem-DSB-og-Banedanmark/
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Eurostat (2010): Total population, at 1 January, available via:http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&language=en&pcode=tps00001&tabl
eSelection=1&footnotes=yes&labeling=labels&plugin=1
http://www.erhvervsrejser-bornholm.dk/site/172/
Føtex (2010): Om Føtex Food, available via:http://www.foetexfood.dk/information/Pages/Historien.aspxhttp://www.foetexfood.dk/inform
ation/Pages/Historien.aspx
http://www.goviral.com/opportunity.php
http://jyskebank.tv/
http://www.krak.dk
http://www.Loneyplanet.com
http://www.linje888.dk
Lindstrom (2010): Viral Marketing Put to the Test, interview with Mads Holm, Available via:http://marketmagazine.dk/default.asp?Action=Details&Item=624
Molslinjen:http://www.mols-linien.dk/index.dsp?area=32http://www.monodo.com
Nickolaj Coster Waldau TV ad:
Norwegian Annual Report 2009, available via:http://www.norwegian.dk/om-
norwegian/investor-relations/reports--presentations/annual-reports/
Norwegian, 2010: History, available via:http://www.norwegian.com/about-norwegian/our-
company/history/
http://www.qantas.com.au/fflyer/dyn/program/welcome
Quest, Richard (2010): Stretch Out in Economy Class, from CNN Business Traveller,
available via: www.cnn.com/businesstraveller under the Business Traveller Archive
http://www.ryanair.com
SAS’ website, 2010 :http://www.flysas.com/en/?vst=true
SAS’ Facebook Group, available viahttp://www.facebook.com
http://www.seatguru.com
http://www.startour.dk/Nederst-paa-siden/Star-Tours-ABC/ABC-Sol-og-
Strand/Flyrejsen/Mad-paa-flyet/
http://www.storebaelt.dk/priserprodukter/priser/biler
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http://www.superliga.dk/superligaen/om-superligaen.html
http://www.taenk.dk
Tina Dicow TV ad:
Transavia.com’s Annual Report 2009. Available via:http://www.transavia.com/hv/dom/images/annualreport_transavia.com_0809.PDF
Uffe Elleman TV ad:
http://www.virgin.com/about-us/
www.youtube.com
13.0 Appendix
doc_673837659.pdf