Conference Details
• Research Papers – 22 Nos
– ROMI in CRM - 4 Papers
– ROMI in Distribution and Firm Value - 4 Papers
– ROMI – Measuring Returns - 4 Papers
• Return on Marketing Investment : A Case Study of
Domestic Airline Industry in India
– Long Term Impact - 2 Papers
– Services and ROMI - 2 Papers
– ROMI and Brand Management - 6 Papers
• Presentations – 3 Nos
• International – 14, Indian - 11
RETURN ON MARKETING INVESTMENT:
A CASE STUDY OF DOMESTIC AIRLINE
INDUSTRY IN INDIA
Dr. S C Bansal
Associate Professor, IIM, Lucknow
Dr. Mohammed Naved Khan
Senior Lecturer, Department of Business Administration
Faculty of Management Studies & Research, AMU, Aligarh
Vippan Raj Dutt
Manager (System/Maintenance), IT Department, Indian Airlines, N Delhi
Need for the Study
 Substantial Growth in Domestic Air Market
 Entry of Low Cost Carriers in 2003
 Pressure on all Airlines to Reduce Fares
 New Marketing Initiatives
 Need to Measure and Enhance Return on
Marketing Investments
Research Objectives
 Identify the customer equity drivers that
have the greatest impact
 Compare performances of airlines on
these drivers
 Attempt to project ROI from improvements
in those drivers
Airlines Studied
 Indian Airlines & Alliance Air (IA)
 Jet Airways (Jet)
 Air Sahara (Sahara)
 Low Cost Carriers (LCC)
 Air Deccan
 Kingfisher
 SpiceJet
Scheduled Domestic Carriers
Full Service Carriers
IA
Jet
Sahara
IC
9W
S2
1st Aug, 1953
5th May, 1993
3rd Dec, 1993
Aircrafts (Classic / Small)
61/6
43/8
19/7
Destinations
(Domestic/Intl)
58/18
43/5
23/3
250
285
124
Business /
Economy
Business /
Economy
Business /
Economy
Market Share (Oct 2005)
29.6
35.5
12.4
Load Factor (Oct 2005)
66.1
72.1
72.7
Pax Carried 2004-05 (Mil)
7.1
8.0
2.3
Turnover 2004-05 ( Cr )
5,363
4,400
2,317
Profit / Loss 2004-05 ( Cr )
65.61
392
- 17.5
Airline Code
Start Date
Daily Flights
Class of Flight
Scheduled Domestic Carriers
Low Cost Carriers
Air Deccan
Kingfisher
SpiceJet
DN
IT
OS
Aug 2003
May 2005
May 2005
Aircrafts (Classic/ Small)
7 / 15
7/0
5/0
Destinations (Domestic)
57
12
11
Daily Flights
195
52
38
Economy
Economy
Economy
Market Share (Oct 2005)
11.6
6.0
4.7
Load Factor (Oct 2005)
74.1
54.1
88.1
No Frill
Airline
Value Carrier
Absolute
LCC
Airline Code
Start Date
Class of Flight
Airline Positioning
Conceptual Framework
Marketing Investment
Driver Improvement(s)
Improved Customer Perceptions
Increased Customer
Attraction
Increased Customer
Retention
Cost of Marketing
Investment
Increased CLV
Increased Customer Equity
Return on Marketing Investment
Return on Marketing Investment
 The Switching Matrix
 Provides the probabilities of brand choice for all
future purchases by each customer.
 Customer Lifetime Value
 Net present value of a customer’s contribution
stream
 Customer Equity
 Total of the discounted lifetime values summed
over all of the firm’s current and potential
customers.
 Return on Marketing Investment
 change in customer equity—marketing expenditure
marketing expenditure
Drivers of Customer Equity
 Value Equity
 Quality, Price, Convenience
 Brand Equity
 Brand image, Brand awareness, and Brand ethics
 Relationship Equity
 Frequent flyer programs and ongoing relationship
maintenance activities
Research Methodology
 Structured closed-ended questionnaire was used
 Analysis Performed
 Principal Component Analysis with Varimax Rotation
 Multinomial Logit Regression Analysis carried out on
extracted components
 Airlines Performance Evaluated on Value, Brand Equity
and Relationship Equity Drivers
 Brand Switching Matrix
 CLV, Customer Equity and ROMI calculated
 Tools Used
 SPSS Statistical Package
 MS-EXCEL Spreadsheet Program
Limitations of the Study
 Limited number of domestic flights covered
 Feedback from passengers at a single airport
i.e. IGI Airport, Delhi
 Marketing expenditure breakup of domestic
airlines was not available
 Impact of market dynamics on customer
equity is not covered
 CLV and ROMI calculations are based on
assumptions, which may vary across the
airlines
Airline Wise Demographic Profile
IA
Jet
Airlines
Sahara
LCC
Total
Gender
Male
Female
21
2
48
12
12
8
35
10
116
32
Highest
Qualification
Matriculation or Below
Graduation
Post Graduation
Professional
1
5
4
13
1
9
19
31
1
8
5
6
2
11
12
20
5
33
40
70
Age Group
Less than 21
21 to 40
41 to 60
Above 60
1
12
10
0
3
40
13
4
3
10
6
1
0
32
10
3
7
94
39
8
Annual Income
Bracket
Less than 5 Lakhs
5 to 10 Lakhs
10 to 20 Lakhs
20 to 50 Lakhs
Above 50 Lakhs
13
7
2
1
0
22
21
11
4
2
9
3
2
3
3
14
16
7
7
1
58
47
22
15
6
Nationality
Indian
Rest of World
23
0
57
3
16
4
38
7
134
14
Domestic Flights
in last 1 Year
1–5
6 – 10
10 – 20
Above 20
11
6
3
3
33
14
9
4
16
1
3
0
30
8
4
3
90
29
19
10
23
60
20
45
148
Total
Principal Component Analysis
Airline’s Performance on Value Equity Drivers
Airline
Price
Quality of
Competitiveness
Airline
Airline
Destination
& Schedule
Value
Equity
IA
3.48
3.34
3.52
3.45
Jet
4.07
3.29
3.49
3.61
Sahara
3.50
3.50
3.37
3.46
LCC
3.36
3.95
3.89
3.73
Total
3.63
3.54
3.59
3.59
Airline’s Performance on
Brand Equity Drivers
Airline
AMA
ISA
GCC
ASCE
HES
IFP
B Eqty
IA
2.79
2.93
3.55
2.93
3.17
3.31
3.11
Jet
2.87
2.58
3.13
2.38
3.16
3.71
2.97
Sahara
2.67
2.83
3.07
2.33
3.00
2.97
2.81
LCC
2.80
2.34
2.89
2.16
3.11
3.02
2.72
Total
2.79
2.63
3.13
2.41
3.11
3.28
2.89
AMA : Airline Media Advertising;
GCC : Good Corporate Citizen;
HES : High Ethical Standards;
ISA : Information Sent by Airline;
ASCE: Active Sponsor of Community Events;
IFP : Image Fits Personality
Airline’s Performance on
Relationship Equity Drivers
Airline FFP
PF
AP
IAM
MRS
SC
HLT
RE
IA
2.21
2.62
3.38
1.97
2.14
2.69
3.41
2.63
Jet
2.31
3.11
3.18
2.13
2.16
2.56
3.58
2.72
Sahara 1.97
2.77
3.50
1.90
2.17
2.50
3.20
2.57
LCC
1.68
2.75
2.41
1.91
2.05
2.20
2.98
2.28
Total
2.03
2.84
3.05
1.99
2.12
2.47
3.29
2.54
FFP
AP
MRS
HLT
:
:
:
:
Frequent Flyer Programme
Airline Procedures
My Recognition as Special
High Level of Trust
PF
IAM
SC
RE
:
:
:
:
Preferential Treatment
Information About Me
Sense of Community
Relationship Equity
Brand Switching Matrix
From
Retention
of Market
Share in
Future
Airline
IA
Jet
IA
46%
11%
19%
18%
94
Jet
25%
66%
31%
20%
142
9%
12%
31%
13%
65
20%
11%
19%
49%
99
100%
100%
100%
100%
To Sahara
LCC
Total
Sahara LCC
Airline’s Customer Equity
Airline
Average
CLV
( CLV )
( in INR )
Annual
Passengers
( AP )
( in Millions ) #
Customer
Equity
( CE )
CLV*AP
( in Crores of
INR )
Ticketing,
Sales and
Promotion
Expenditure
( ME )
( in Crores of
INR ) #
Return On
Marketing
Investment
( ROMI )
0.1CE – ME
ME
( in % )
IA
14,378
5.8
8,339.24
695.2
20
Jet
14,420
6.9
9,949.80
433.9
129
Sahara
6,095
1.9
1,158.05
201.7
- 43
LCC
6,538
0.15
98.07
1.5
553
# Air Transport Statistics for the year 2003-2004;
source: www.dgca.nic.in
Assumptions :
Time Horizon
Discount Rate
Contribution Margin
=
=
=
3 Years
10 %
15 %
For CLV
Calculation
Change in Customer Equity
=
10 %
For ROMI Calc.
Implementation Issues
 Decision Support System
 What-if simulators to explore ROI of marketing
expenditures
 Strategic guidance w.r.t. firm’s competitive
position of Customer Equity Drivers
 Tracking Customer Equity
 Tracking of Customer Equity and its drivers at
least twice per year to :
 monitor competitive trends
 identify emerging threats and opportunities
 gauge progress of marketing initiatives
THANK YOU!
vrdutt@indianairlines.co.in