Kingfisher is losing ground. Vijay Mallya is seeking investment, investors are not exactly willing to oblige. Brand Kingfisher is a strong brand known for its excellent product & service offering. So what went wrong with the airlines?
Captain Gopinath, the founder of Air Deccan believes that Mallya’s big mistake was to change Air Deccan to Kingfisher Red. Kingfisher Airlines catered to the top of the pyramid while Air Deccan was meant for the base of the pyramid and came with its huge customer base and massive network.
After Kingfisher acquired Air Deccan, the rebranding of Air Deccan as Kingfisher Red left little difference between the two brands. They looked the same and offered similar services. This created inconsistency between the value proposition and the market segment to which the brands catered; Kingfisher Red remained neither low cost nor full services. With add on frills, it came out costlier than the other low cost airlines such as Indigo & SpiceJet.
Markets punished the inconsistency. Passengers started to migrate from Kingfisher Airlines Economy to KF Red, which was cheaper and almost on par. And the low cost fliers ditched KF Red for the really low cost airlines. This led to cannibalization of the mother brand while simultaneously hitting the acquired brand.
According to management theory, competitive advantage for a business is derived by either selling a product similar to the contemporary products at a lower cost or creating a unique product and charging a price premium for it. The source of competitive advantage for a business is either a Cost Advantage or a Differentiation Advantage.
Looking at the Kingfisher case, in light of the two generic strategies i.e. Cost Leadership & Differentiation, it is proven yet again that loss of focus on the generic strategies or any attempt to blur the boundaries between the two, leads a business to be ‘Stuck in the middle’.
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Very Good observation from a 'Brand Positioning' perspective.
ReplyDeleteAlthough Mr. Mallya will contend that his airlines is in 'red' due to political reasons like forced to fly in non profit making sectors as well as not being allowed charge the way he wants to in these sectors etc...
very well written.
ReplyDeletei recall some other points too. what about the general cost issues with the airline sector in general (high fuel cost/ pricing issues/ inefficiencies in using resources)? high leverage of kf airlines (mallya's penchant for debt). over payment for acquisitions?
jet is in red, air india is already in.. the low cost blurred the train going passengers and the lcc carriers (i think was not viable in any case as the cost structures are very different-- the lcc fares have imploded in a matter of 6 yrs).
also these days the fares over longer time interval for all carriers is the same. so how does that define lcc s.
And there are some structural issues in the industry whihc prevents the same carrier not able to differentiate and be low on price at the same time. BA faces the same dilemma.
Lesson learnt: Know thy users, for they are not you.
ReplyDeleteOf course apart from the positioning issue, there are other contributing factors for the downtrend in the airlines industry, such as the inadequacy of aviation policy, lack of transparency & control etc.
ReplyDelete