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III. Analysis 1) The basis of the Ryanair's success from the 90s till 2012 Ryanair became successful by implementing an ultra-low-cost business model. It means that the company controlled carefully all its expenses to keep its final costs low. Thanks to this strategy. Ryanair was able to offer the cheapest fares on the market (see appendix 1), while remaining profitable. From the 90s till 2012 this business model was successful, mainly because at that time the most important criterion for customers was the price. This well-designed, well-implemented and well-executed strategy provided to Ryanair a strong and sustainable competitive advantage over its competitors. During this period, the market segments targeted by the company were the lower and lower-middle class (and a part of the upper-middle class). Indeed, Ryanair focused mainly on the "price-conscious" customers who were looking for cheap fares. But, how did Ryanair do to be able to offer the cheapest fares of the market? First, the company used the "direct selling" method to keep its expenses as low as possible. Indeed, Ryanair sold its tickets directly to consumers, either through its website or by telephone. This strategy enabled the company to avoid extra costs linked to the usage of intermediaries, such as travels agencies. Then, the company decided to operate only through regional airports. Two reasons justify the Ryanair's decision: The first one, saving money. The costs linked to the aircraft's take-off and landing were much higher in international airports than in regional airports. The second one, improving punctuality. Because the regional airports are most of the time less busy than the larger ones, Ryanair was able to respect scrupulously its timetable, which is considered as a valuable strength in the airline market. Ryanair chose also to position itself as a point-to-point carrier. Indeed, the company carried its customers directly to their final destination and avoided the hub-and-spoke system, which requires extra costs (e.g. baggage transfer). Finally, Ryanair implemented a "no-frills" strategy. This means that all the possible frills linked to an aircraft journey were either optional and charged, or simply not provided by the company. For example, the company didn't provide any free food, drink or literature during the flight, there was no in-flight entertainment for passengers, and customers couldn't book specifies seats on the plane (this enabled the company to use a simple and cheap reservation system). But Ryanair pushed this method even further: the sick bags were distributed only upon request, the aircrafts' seats had no pockets, and the company didn't use "air bridges" to connect the airport structure to the plane (passengers had either to walk until the plane, or they were transported by bus there). All those methods enabled the firm to reduce its costs and therefore to offer low prices to customers.
To be more concrete, let's have a look at the Ryanair's "Strategic Service Vison", which is based on the information developed above. Target market * Price conscious * Lower & lower- middle class A part of the upper- middle class Value proposition 1. Cheapest fares on the market 2. On time departure and arrival 3. No bags lost 4. Broad destination content Operating strategy No free meal, drink or literature (1.) * No entertainment (1.) * No seat allocation (1.) Direct selling (1.) → Regional airports (1. & 2.) + Point-to-point carrier (1. & 3.) + Operates in many countries (4.) As you can see, the value proposition is mainly based on the low fares, since the company didn't provide any extra services. During more than 20 years (from the 90s till 2012) the Ryanair's strategy, providing cheap flights with zero frills to a huge range of short-haul destinations, has been successful and enabled the firm to grow rapidly. Its number of customers increased every year, just like its financial results (see appendix 2). But the year 2013, marked by the emergence of new challenges, was more difficult for the company. What type of challenges did the company face? And which strategy did the company apply to handle them? The part 2. deals with these questions. 2) 2013: The turning point for Ryanair It was the first time in nearly 10 years that Ryanair faced several "profit warning". It means that some of the company's indicators, which measure its current and future performance, were below the expectations. Several reasons were the cause of this situation, but the main one was the fact that the Ryanair's direct competitors (especially EasyJet) had started to improve the quality of their services, which pushed some of the current customers of the Irish company to switch to rivals (the fall of the passengers number confirmed it). This situation increased the competition on the airline market, and forced Ryanair to lower even more its prices, which impacted its margins. Consequently, Ryanair cut its profit forecast for the year 2013, from €570m to €510m (it was the second time in two months that Ryanair reconsidered its profit forecast). And the final result confirmed the Ryanair's doubts, since its profit decreased by 8% between 2012 and 2013 (see appendix 2). Concerning its number of customers for the year 2013, the figure was also worrying. Indeed, even if this number increased by 3% compared to the figure of 2012, the growth was less important than the previous years.
And fortunately, Ryanair had limited the damages by reacting very quickly (directly from the end of 2013) and implementing some measures to improve its customer service quality. This enabled the company to improve slightly its brand image and reduce the number of customers from leaving (see appendices 3 & 4). Therefore, the Ryanair's strategy, providing the cheapest fares of the market by cutting all the possible frills, started to show its limits. Indeed, Ryanair had become, over time, infamous for its poor customer service, and started to face criticism from both customers and shareholders. A customer service survey had even revealed that Ryanair was considered, at that time, as the worst of the UK's 100 biggest brand. Consequently, it would seem that the needs and requirements of the Ryanair's customers had changed. While formerly they only considered the price when traveling by airplane, from now on customers value also the quality of the service provided by the airline. Considering that Ryanair was starting to suffer from this situation, managers began to look for a solution in order to solve, as fast as possible, the problem. And they decided to do a "U-turn" by changing completely their business model. Indeed, the firm evolved from a pure "price-focus" strategy, with zero frills, to a more "passenger- friendly" strategy, with a more attractive offering in terms of customer experience. The aim of this change was to improve the company's brand image and therefore to win back customers who had switched to rivals. Indeed, Michael O'Leary (CEO) realized that: "Customers are worth keeping and that it is far more effective to invest in CRM than to go find new customers". But even if Ryanair decided to listen to its customers and gave priority to the improvement of the customer experience, the company wouldn't deviate from its low fares strategy. This point has been confirmed by the Michael O'Leary's remark: "The focus is about keeping the costs down and the fares low. We are not deviating from that and we will not risk diluting the low-cost, low-fare approach that made us so successful." Therefore, Ryanair had to solve a difficult equation, which was the following: keeping the costs low, while upgrading the customer service quality. Did the company succeed? The part 3. addresses this question. 3) The new era: 2014-up to now Since the 2013 warning Ryanair had only one objective, improving its customer service as fast as possible and becoming the best value-for-money airline on the market. Therefore, a new challenge started for the company. To achieve such objective, the firm decided to launch, at the end of 2013, a new program called "Always Getting Better". The aim of this program was to symbolize the company's evolution in terms of customer service quality.
All the improvements made by Ryanair in terms of customer experience (from the end of 2013 up to now) can be split into the following categories: Related to the airplane: Improvement of the inflight menu with the introduction of healthy meals • From now on, customers can reserve the seat they want (this option costs €5) • Passengers are allowed to bring a second bag on board (for free) • A new and more appealing design for the aircrafts interior • Introduction of new "slimline" seats, which give passengers more leg-room Related to the website & mobile app: • A redesigned website/mobile app aimed at making it easier to book tickets Introduction of a price comparison tool to compare Ryanair's prices with competitors' prices • Introduction of a "customer-feedback" option, which enables passengers to rate their experience with the airline (anybody can consult those comments) > Related to the "families": Creation of the "Family Extra" product, which includes (among others): • Discounts on allocated seats and bags for children (when travelling with their family) • Discounts on future flights for families who travel frequently with Ryanair > Related to the "business travelers": Creation of the "Business Plus" product, which includes (among others): • Free changes on the day of travel • Access to the "fast-track security" service (at some airports) and priority boarding • Bigger bag allowance • Premium seat allocation Others: • • Introduction of "Quiet flights" which operate before 8am and after 9pm, where Ryanair makes only security announcements Creation of a team dedicated to the customers' e-mails handling Creation of a Twitter account to keep customers up to date with news on price promotions, roates and fares Reduction of the baggage fees and decrease of the costs linked to the boarding card reissue Customers have a 24-hour "grace" period after booking to correct minor errors In addition to those improvements, the firm decided to change its airport strategy. Indeed, Ryanair started to use more and more often primary airports, instead of the regional airports, in order to reinforce even more the quality of its service. And simultaneously, the Irish-airline expanded its destination content, so as to develop its business and satisfy the greatest number of customers.
Based on the new strategy implemented by Ryanair, let's analyse its new "Strategic Service Vision". Target market Value proposition Price conscious Lowcr class ܀ + Lower- middle class + Upper- middle class ✓ Families Business travelers 1. Cheapest fares on the market 2. On time departure and arrival 3. Broad destination content 4. Pleasant flights 5. No bags lost 6. Less constraints 7. Simple booking process 8. Special offer for families 9. Special offer for business travelers 10. Close and attentive to customers Operating strategy → No free meal, drink or literature (1.) → Direct selling (1.) > Point-to-point carrier (1. & 5.) No entertainment (1.) * Many regional airports (1. & 2.) Operates in 31 countries → regional & international airports (3.) Seat allocation (4.) + Large leg-room (4.) > Appealing aircraft interior (4.) Broad meal choice (4.) "Quiet flights" (4.) Two bags allowed on the plane (6.) > Well-designed website mobile app (7.) > "Family extra™ product (8.) + "Business plus" product (9.) Social media presence (10.) → Team dedicated to customers' emails (10.) As you can see, all the changes enabled the firm to broaden its value proposition and therefore to improve drastically the customer experience. As Michael O'Leary said: "We are very excited at these significant improvement. We are actively listening and responding to our customers so that they can continue to expect low fares and on-time flights on Ryanair (see appendix 5), but will now enjoy service improvements". But in order to fully benefit from its efforts, Ryanair had to make sure that all the customers (current as well as potential customers) were aware of its new value proposition. Indeed, it was probable that a majority of people weren't informed about the company's evolution. That's why, in 2014, the company decided to hire its first marketing director, Kenny Jacobs, who would be responsible for communicating the new Ryanair's value proposition as well as improving the negative associations which were linked to the brand. To achieve such objective, the company tripled its marketing budget and embarked on a marketing "blitz", including TV ads.
Thanks to a radical change in terms of customer service quality and a successful communication strategy, Ryanair succeeded and achieved its objective, which was to become the best value-for-money airline on the market. As Kenny Jacobs (CMO) said: "Always Getting Better isn't an empty slogan, it is a mentality we have implemented across the whole business and customers are enjoying it." According to him, the firm succeeded by attracting customers not only from direct rivals, such as EasyJet, but also from premium airlines. Let's have a look at some data, which confirm the success of the Ryanair's strategy (see appendix 2). Since the launch of the "Always Getting Better" program at the end of 2013, the number of people who chose Ryanair to travel hasn't ceased to grow. Indeed, the number of passengers increased by 11% between 2013 and 2014, and this double-digit growth rate continued in 2015, given that Ryanair carried more than 100 million people. About the future, the Ryanair's managers are also very confident, as evidenced by their forecasts in terms of market share and passengers' number (see appendix 6). Therefore, the Ryanair's "Always Getting Better" initiative is paying off, and Michael O'Leary confirmed it with this remark: "Thanks to being nicer, we have more forward bookings, traffic is rising, seat-load factors are rising and profitability is rising." But the company doesn't intend to "rest on its laurels", and has just unveiled (April 12, 2016) the content of the "Always Getting Better" program for the year 2016, which contains numerous new improvements in terms of customer experience (see appendix 7).
IV. Conclusion and recommendations This case study shows the Ryanair's evolution over time, and the fact that the company had to change radically its strategy to remain competitive on the market. Indeed, the customers' needs and requirements don't remain the same forever and evolve in the course of time, and that's exactly the problem that Ryanair faced. Therefore, Ryanair evolved from a pure "price-focus" strategy, with a poor customer experience, to a more "passenger-friendly" strategy, with an improvement of its customer service quality. As a result, the company upgraded drastically the service provided to its passengers and simultaneously communicated its new value proposition to customers. Thanks to the right "reactive" (or "emergent") strategy, Ryanair has been able to keep its leading position on the airline market. When implementing such strategy, the role of employees is decisive. Indeed, as the company decided to improve the customer experience, managers have to make sure that all the employees have well understood and act in accordance with the organization's new value promise. Therefore, even if the employees' role hasn't been broached in the case, it would be very interesting to study if Ryanair adapted the training of its employees according to its new offer, and if so how. Obviously, employees are not the only point that deserves attention when implementing such strategy, all the touchpoints in general have to be taken into consideration by the firm. This is the condition to deliver a consistent experience to customers.
VI. Appendices 1) Average fares during the FY2011 Average fare during FY2011 €39 ($54.25) is one of the Ryanair's direct competitors, since it implemented a low-cost business model as well Net income in million € (compared to the previous year) Number of passengers in million RYANAIR (compared to the previous year) As you can see, the EasyJet's fares were almost two times higher than those of Ryanair. Concerning British Airways', its prices were, approximately, six times higher than those of Ryanair. Therefore, thanks to its strategy (providing no frills to customers in order to keep its expenses as low as possible) Ryanair was able to offer the cheapest fares on the market, which enabled the firm to own a sustainable competitive advantage over its competitors. 2) Ryanair's financial results & number of passengers (in million) 2009 319 (+204%) 66,5 EASYJET 401 €71 ($98.77) 2010 2011 503 569 (+25%) (+13%) (+26%) 72,1 75,8 (+5%) 2012 2013 523 BRITISH AIRWAYS' €248 ($345) 79,3 2014 867 (+66%) 81,7 90,6 (+3%) (+11%) 2015 No information yet ** More than 100 million *All the data come from the Ryanair's annual reports **The Ryanair's fiscal year ends on March 31, but in order to facilitate the reading and the comprehension of the case I considered, instead, that the Ryanair's fiscal year extended from January to December. Therefore, there is a 3 months interval between those results and the results from the Ryanair's financial statements. As a result, the data for the year 2015 will be known on March 31, 2016 (or more accurately at the financial statements publication).
3) Ryanair & EasyJet brand image Several indicators (gathered by different organizations) show that the Ryanair's brand image has been improved when the company announced that it would take, for the first time, some measures to upgrade its customer service. RYANAIR EASYJET REPUTATION IMPRESSION OF THE BRAND PERCEIVED QUALITY OVERALL PERCEPTION OF THE BRAND *** Positive/negative statements heard by people about Ryanair - 53.1 BEFORE AFTER Results gathered ANNOUNCEMENT ANNOUNCEMENT at the end of 2013 - 51.6 -52.9 RYANAIR -29.8 -52.7 - 50.3 - 50.3 -36.9 EASYJET -23.2 - 17.2 - 14.7 * Results gathered on September 19 2013, the day before the first Ryanair's announcement about the measures it would take to improve its customer service ** Results gathered on December 31 2013 *** Includes: impression, quality, value, reputation, satisfaction and recommendation As you can see, as soon as Ryanair announced that it would upgrade its customer service, its indicators improved. It means that the customers appreciated the Ryanair's effort and were expecting such change. Thanks to its decision, Ryanair improved its brand image and braked the customers' departures. But even with this announcement, Ryanair remains far behind its direct competitor, EasyJet, in terms of brand image. It means that the company still has a lot of work to do, in order to improve the negative associations which are linked to its brand and especially to the experience offered to customers.
4) Evolution of the bookings' number Period 1 DECEMBER 2012 till MARCH 2013 5) Airlines' punctuality (2015) As you can see with this diagram, the Ryanair's initiative (implementing some measures, directly from the end of 2013, to improve its customer service) enabled the company to brake the customers' leaving, and even better to increase its number of passengers by 5% from the period 1. It means that the customers have been receptive to the Ryanair's new offering. Ryanair Therefore, thanks to its decision Ryanair has been able to improve its brand image, as demonstrated by the rise of its indicators (appendix 3) and reservations number. Iberia Lufthansa + 5% Easyjet Aer Lingus Air France British Airways' DECEMBER 2013 till MARCH 2014 90% 88% 86% 85% 81% Period 2 81% 79% *% of flights arrived on time in 2015
6) Ryanair's projections 85% MARKET SHARE IN 2016 (intra-European market) 15% 72 RYANAIR #OTHERS AIRLINES Ryanair's EVOLUTION Ryanair's number of customers (in million) 11 100 MARKET SHARE IN 2024* (intra-European market) 19% Ryanair's Forecast 180 RYANAIR OTHERS AIRLINES > Lower fares > Improvement of the "Business Plus" product > New "extra-fine" seats on the aircrafts > More leg-room in the cabins > Installation of hooks inside the airplanes to hang the customers' clothes Improvement of the "Gift voucher" option Creation of the "Ryanair Schools Travel to facilitate school trips *Ryanair's forecast 2009 2010 2011 2013 2014 2015* The company became the first airline in Europe to carry more than 100 million passengers, and the world's largest airline in international passengers 7) Content of the "Always Getting Better" program for the year 2016 The latest initiatives, in terms of customer experience, which will be implemented by Ryanair in 2016 include (among others):