Tag Archives: Market segmentation

Economics of Airline Class Seating

Plane fares are frustrating. From the time someone searches for a flight in the morning, until they book it later in the week (or day), the price changes. And don’t even get started about how little leg-room and seat space there is in the economy class section! But then again, the economy class is not how airlines make money. How does an airline make money on fares?

First class and premium cabin seats!

Here is an example of a flight’s pricing: British Airways 777, round-trip, non-stop between London and Wash. D.C.

  • 224 seats total
  • 122 economy seats @ $876/seat = $106,872
  • 40 premium economy seats @ $2,633/seat = $105,320
  • 48 business class seats @ $6,723/seat = $322,704
  • 14 first class seats @ $8,715/seat = $122,010

The front sections of the plane account for 45% of the seats, but generate 84% of the revenue! While this model does not always hold true, in general airlines get 66% of revenue from the premium, business, and first-class seats.

In essence, airlines are able to sell the same service (transportation) to different people, at vastly different prices (enhanced amenities and the onboard experience). Airlines realized that passengers could be segmented into two categories: tourists, and business people.

What else will future air travel hold?

Group Activities and Discussion Questions:

  1. Pricing is usually a complex topic. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
  2. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  1. Show this video that explains the basic economics of airfare:
  2. https://youtu.be/BzB5xtGGsTc
  3. Draw the price structure on the board.
  4. Divide students into teams. Have each team work on a possible re-design of planes to address more market segments.

Source: Wendover Productions, YouTube

Leave a comment

Filed under Classroom Activities

A Ken Doll for Today’s Kids

To tell a good story and engage with a wide range of audiences, it requires a diverse set of characters. They have to look and act different. It would be a boring story if everyone was the same.

That’s one reason why Mattel has added new dolls to its Barbie collection. The latest addition is a series of different Ken dolls, with different body types, skin colors, eye colors, and hair styles. Kids can now select Ken with a ‘man bun’, cornrows, and freckles. It might make us smile to see Ken with a man bun hair style, but Mattel now has a wider number of Barbie styles than ever before. In total:

  • 40 new dolls
  • 7 body types
  • 11 skin tones
  • 28 hairstyles
  • 100+ diverse looks

The “New Crew” has a large line-up of dolls in almost all shapes and styles. Last year’s more diverse Barbie collection helped increase the division’s worldwide sales by 7%. Mattel’s research also shows that for every six to eight Barbies a child has, there is one Ken doll. All the more reason to show a wider range of looks to keep kids of all shapes, colors, and sizes interested in playing with Barbie dolls.

One future Ken idea: facial hair!

Group Activities and Discussion Questions:

  1. Discuss children’s toys as a market. How diverse are today’s toys for kids of all sizes, shapes, and colors?
  2. Show the new Ken and Barbie dolls: http://barbie.mattel.com/en-us/about/fashionistas.html
  3. Video: https://youtu.be/c3jbh1PMsOk
  4. Discuss the four primary marketing strategies: market penetration, market development, product development, and diversification.
  5. Which strategy is Mattel using for this product? Why?
  6. Divide students into teams. Have each team select one of the four different strategies and explain why that strategy could be used to market the new Ken dolls.
  7. Have each team determine the marketing mix (4Ps) to support their strategy choice.

Source:  Brandchannel.com, Ad Age Daily, other news sources   

Leave a comment

Filed under Classroom Activities

Sharing Happy Hour with Pets

Americans increasingly treat pets as more than just an animal or belonging – we treat our pets as important members of the family. Pet owners now look for healthier choices and lifestyles for pet care, fundamentally shifting consumer behavior and spending. The pet care industry represents more than $20 billion in the U.S., and, according to Nielsen Research, 95% of pet owners consider their pets to be part of the family. This attitude carries over into shopping for food, treats, toys, and specialty items.

Therefore, it was just a matter of time for companies to develop new product so that humans could share celebrations and happy hour beverages with their pets. The newest category of product is faux wines for cats (and dogs, too)! With clever names and packaging, the category is expanding. People can buy their kitties bottles of “Catbernet,” “Pinot Meow,” and “Meowgarita” from Denver-based Apollo Peak. Or, buy “Dog Perignon” and “Dogtini” from Pet Winery in Fort Myers, Fla.

Of course, since alcohol can harm animals, these wines are actually alcohol-free. Using organic ingredients and catnip, the beverages are aimed at people who want to enjoy celebrations with their pets. But, as most cat owners know, cats can be quite finicky. In taste tests, some cats loved the products, while other cats simply showed their disdain.

Happy hour, meow?

Group Activities and Discussion Questions:

  1. Poll students: How many have pets? How much do they spend on their pets?
  2. Show the Web site for Apollo Peak: http://www.apollopeak.com/
  3. Also show Pet Winery: https://www.petwinery.com/
  4. Videos can be viewed at:

https://youtu.be/g1b4V_DJ-oo

  1. The Chew: https://youtu.be/4DiO8MZTmnU
  2. Divide students into teams.
  3. Using a market-product grid, have students develop target markets for pet owners. Then, put categories of products across the top (Ex: food, toys, treats, wine…)
  4. Which target markets represent the best opportunity for pet wines?
  5. How should the products be marketed?

Source:  New York Times, Nielsen Research

Leave a comment

Filed under Classroom Activities