The Airline industry divides buyers into different
The airline industry is made up of different groups of buyers therefore it is important to segment your customersproperly, before accessing their bargaining power.
Airline industry divides buyers into different segments and eachsegment has different bargaining power according to their level of need. We have discussed six of these segments here:The business traveller segment: The business-class segment is the most important segment of airline industry. In thissegment, traveller doesn’t pay his own fare but it is paid by employer for which he/she is travelling for. This segmentrequires high quality service. They cannot predict the timing of their travel in advance and they have to travel morefrequent. Therefore price is inelastic for this segment which means buyers have less bargaining power.
1The leisure travel segment: The leisure-travel segment consist of those customers who have to pay their own fares andthey travel through economy class. They travel at vacations with their family or alone to tourist places. This segment iselastic to price, which gives them high bargaining power.
Any increase in fare may result in the negative demand forairline services.2The personal travel segment: This segment has one aspect similar to leisure-travel segment in which customer paystheir own fare from their own pockets. On the contrary customers have tighter timing and route constraints whichrequires service like business travellers segment. E.g. emergency travels brought up by some family matters.
Bargainingpower is considered to be low in this segment as quality of required services is high.3The religious travel segment (Hajj, Umrah, Christmas): The religious-travel segment consist of those customers whotravel for purpose of religious obligations. They travels in huge numbers and at specific dates. They can travel througheconomy and business class and mostly they pay more than usual because of busy flights schedule for those specificdates. Since they have no other substitute to travel on those dates, they are vulnerable to higher prices which meanstheir bargaining power is low.4The guest worker travel segment: The Guest-workers segment consist of those customers who are away from theirhomes and working in foreign countries. Their employer pays for their travels but unlike business class they travel1(Kassem M.
S., 1989)2(Kassem M. S., 1989) (Alessandro Borgogna, 2016)3(Kassem M. S., 1989)4(Kassem M. S.
, 1989)2through economy section of flight. They travel annually or at time of emergency. Since this segment does not requirehigh services they have moderate bargaining power. 5Cargo segment: The air-cargo industry consist of customers who are sending their shipments from point A to point B viaairlines. The air-cargo industry accounts for only 1% of whole cargo industry, but the values it transports, is worth 35%of whole industry.
They are valuable customers for airline industry and for growth prospect this is key segment. Goodsthey are transporting is valuable commodities and requires unique services e.g.
Capacity considerations (volume,weight, hazmat, and dimensional), highly controlled transport, direct routing and reliability. Since it requires premiumservice to transport such good, airlines are charging high price and the customers have less bargaining power.6