Market Tokyo

Virgin Atlantic Airways just celebrated the 10th anniversary of its inaugural flight to New York. It has experienced tremendous growth within those years and has become Britain’s second largest long-haul airline. Virgin has gained recognition for its attentiveness to quality and innovative product development by realizing that they are not only in the airline business, but the entertainment and leisure business as well.

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This mentality helped them prosper throughout the ten years, but now Richard Branson, the airline’s chairman and founder, has turned his vision to expansion. The primary issue facing Branson is what should become of his international long-haul airline. To determine this, he needs to decide how to gauge whether there is the need to expand, and if so, which new markets the airline should serve. Additionally, he needs to create a plan that allows him to manage demand and capacity so that Virgin can maintain a relatively high load factor, insuring their profitability.

Expansion and Culture At the time of their 10th anniversary, Virgin served eight cities with a fleet of twelve planes, half of which would be brand new by the end of 1994. Branson had plans to expand his fleet to 18 planes, which would serve 12 or 15 routes by 1995. Before he expands, I would suggest conducting market research to determine the need for additional routes. If Virgin expands without taking into consideration customers wants they will fail to meet gap 1. Not knowing what customers expect is one of the main causes of not delivering to customer expectations. To meet this gap, surveys should be used to determine which routes Virgin will expand to (assuming he is able to obtain a bilateral travel agreement for those new cities), then planes can be purchased accordingly.

Since its inception in 1984, Virgin has been able to maintain high load factors soon after opening new lines (Exhibit 6). To be profitable in the airlines industry a 70% load factor is desired and Virgin has been able to keep their loads at or above this level in all but one market, Tokyo (data ranging from 1984-1991). Their success can be attributed to their attentiveness to customer needs and desires or gaps 2. Virgin has managed to understand and predict customer expectations and has used them to develop customer-driven designs and standards. Looking at exhibit 5, one can gather the amount of thought and research that went into the design of each class. Their attentiveness to their customers’ expectations has enabled them to gain a loyal customer base that is able to see past some of their shortcomings such as timeliness.

Another reason for Virgins success has been their closure of gap 3. Employees have been able to deliver the high quality service desired by customers. For example, Virgin employees are taught to serve the “Virgin Way,” they realize that they are not a bus service, but a memorable experience in the sky. They are not just there to accommodate guests; they are part of each customer’s experience and have the opportunity to turn each trip into an outstanding experience. Although airline stewardesses have a tough job filled with emotional labor, the stewardesses at Virgin are so committed to the “Virgin Way” that instead of focusing on small issues, they see the larger picture, exceeding expectations of the customer. Virgin has realized the importance of service employees and has worked hard to hire the right people who fit into their vision.

Now that Branson wishes to expand Virgin, he should draw on the customers and employees that have become loyal to his company. Virgin should not change the service they offer or their atmosphere in anyway. The off and onboard ambiance is what personifies Virgin and keeps its customers loyal, despite Virgins’ timeliness issues. They operate a successful long-haul international carrier and they must be sure they do not lose quality as they expand to serve more locations.

Market research should be conducted to see which new routes customers would value being added to the Virgin line. A survey should be formed and sent out a measurable market. By defining a measurable market, Virgin will be able to recognize the markets needs and periodically assess how they are serving that market (which will be useful once the new routes are established.) This market should encompass everyone in the Virgin Freeway travelers’ program. Targeting the frequent travelers would ensure that the research is gathered from the target market and also let those customers feel like they are part of the company.

Additionally, the surveys should be distributed amongst employees to reinforce and confirm their ownership within the organization. Until this point in the case, the culture of Virgin had been open and flat. They had a loose organization and a high level of communication and interaction within all levels of employees. This culture was fostered by Branson who gave his home phone number to all staff members and encouraged them to call him at any time with suggestions or complaints.

It was this investment in employees that lead them to love their job despite the fact that Virgin paid relatively low salaries. Letting employees have a say in new routes will only reinforce this culture by showing them that management really does care about their suggestions. Virgin employees were highly satisfied and so were their customers, thus the groups fed off each other to produce profits for the company (figure 11.3).

The surveys distributed to these two groups should be used to determine two major issues; which city they should expand to and second when the customers would most use this route and for what purpose (business/pleasure). The survey should be concise, asking employees and customers which of the following routes they would most desire service to (Washington D.C., Chicago, Auckland, Sydney or Johannesburg), how often they travel and how often they would use the new route/s. An extra questions should be added to the customers’ questionnaire to find out why customers chose the routes they did, was it for business or pleasure? After this data is compiled and combined with industry trends, Branson should roll out the top three routes in a progressive manner using the same flashy advertising he is famous for.