The evolution of easy jet online revenue contribution
Easy Jet Case Study
The evolution of easy Jet’s online revenue contribution
EasyJet was founded by Stelios Haji-Ioannou, the son of a Greek shipping tycoon who reputedly used to ‘hate the Internet’. In the mid 1990s Haji-Ioannou reportedly denounced the Internet as something ‘for nerds’, and swore that it wouldn’t do anything for his business. This is no longer the case since by August 1999, the site accounted for 38 per cent of ticket sales or over 135,000 seats.
This was past the company’s original Internet contribution target at launch of 30 per cent of sales by 2000. In the period from launch, the site had taken more than 800,000 bookings since it was set up in April 1998 after a shaky start of two sales in the first week and one thousand within the first month. In March 2000 EasyJet increased its online discount to £2.50 for a single trip – a higher level of permanent discount than any other airline. By September 2000, Internet sales reached 85% of total sales. Since this time, the growth in proportion of online sales has decreased. By 2003, over 90% of all sales were online.
The articles relate the tale of the owner’s office being graced by a photo of the owner with horns on his head and a Mexican moustache on his upper lip. The image was contributed as a complaint by an aggrieved customer. The nature of the entrepreneur was indicated since he sent the customer two free tickets.
The company was originally set up in 1994. As a low-cost airline, looking to undercut traditional carriers such as British Airways, it needed to create a lean operation. To achieve this, Haji-Ioannou decided on a single sales channel in order to survive. He chose the phone. At the time this was groundbreaking, but the owner was encouraged by companies such as Direct Line insurance, and the savings, which direct selling, would bring.
Although Haji-Ioannou thought at the time that there was no time to worry about the Internet and that one risk was enough, he was adaptable enough to change. When a basic trial site was launched, he kept a close eye on how popular the dedicated information and booking phone line was (having a web-specific phone number advertised on the site can be used to trace the volume of users on the site). A steady rise in the number of calls occurred every week. This early success coincided with the company running out of space at its call centre due to easy jet’s growth. Haji-Ioannou related, ‘We either had to start selling over the Internet or build a new call centre. So our transactional site became a £10 million decision.’
Although the success of EasyJet could be put down solely to the founder’s adaptability and vision, the company was helped by the market it operated in and it’s chosen business model – it was already a 100 per cent direct phone sales operation. This meant it was relatively easy to integrate the web into the central booking system. There were also no potential channel conflicts with intermediaries such as travel agents. The web also fitted in with the low-cost EasyJet proposition of no tickets, no travel agents, no network tie-ups and no in-flight meals. Customers are given a PIN number for each order on the web site, which they give when they get to the airport. Page 3
Sales over the Internet began in April 1998, and although easy jet’s new-media operations were then handled by Tableau, a few months ago easy jet took them in-house.
The Internet is important to EasyJet since it helps it to reduce running costs, important for a company where each passenger generates a profit of only £1.50. Savings to EasyJet made through customers booking online enable it to offer at least £1 off to passengers who book online – this is part of the online proposition. Online buyers also benefit from paying the price of a local call, instead of the standard national rate of easy jet’s booking line. The owner says that ‘the savings on the Internet might seem small compared to not serving a meal on a plane, which saves between £5 and £10, but when you think how much it would cost to build a new call centre, pay every easy jet reservation agent 80 pence for each seat sold – not to mention all the middlemen – you’re talking much more than the £1 off we give online buyers’. What about the risks of alienating customers who don’t want to book online? This doesn’t worry the owner. He says ‘I’m sure there are people who live in the middle of nowhere who say they can’t use the Internet and will fly Ryanair instead. But I’m more worried about keeping my cost base down, and finding enough people to fill my aeroplanes. I only need six million people a year, not all 56 million.’
The Internet marketing gurus say ‘put the company URL everywhere’. EasyJet has taken this literally with its web address alongside its Boeing 737s.
EasyJet frequently varies the mix by running Internet-only promotions in newspapers. easy jet ran its first Internet-only promotion in a newspaper in The Times in February 1999, with impressive results. Some 50,000 seats were offered to readers and 20,000 of them were sold on the first day, rising to 40,000 within three days. And, according to the marketing director, Tony Anderson, most of these were seats that otherwise would have been flying along at 600 mph – empty. The scalability of the Internet helped deal with demand since everyone was directed to the web site rather than the company needing to employ an extra 250 telephone operators. However, risk management did occur with a micro site built for Times readers (www.times.easyjet.com) to avoid putting a strain on easy jet’s main site.
Anderson says, ‘The airline promotions are basically designed to get rid of empty seats’. He adds, ‘If we have a flight going to Nice that’s leaving in 20 minutes’ time, it costs us very little to put some extra people on board, and we can get, say, £15 a head for it’. Flight promotions are intended to avoid attracting people who’d fly with EasyJet, so advanced booking schemes are intended to achieve that.
A later five-week promotion within The Times and The Sunday Times newspapers offered cheap flights to a choice of all EasyJet destinations when 18 tokens were collected. In total, 100,000 seats were sold during the promotion, which was worth more than £2m to the airline. Thirty per cent of the seats were sold online, with the rest of the transactions being completed by phone; 13,000 orders were taken over the Internet in the first day alone with over 15,000 people on the site at one point.
The web site also acts as a PR tool. Haji-Ioannou uses its immediacy to keep newspapers informed about new promotions and offers by phoning and e-mailing journalists and referring them to the web site rather than faxing.
The web site is also used as an aggressive tool in what is a very competitive marketplace. Haji-Ioannou says ‘Once we had all these people coming to our site, I asked myself: “Why pay a PR company to publicize what we think when we have a captive audience on the site?'” For example, easy jet ran a competition in which people had to guess what BA’s losses would be on ‘Go’, its budget rival to EasyJet (the figure turned out to be £20m). Within minutes of the BA results being announced on 7 September, the EasyJet site had the 50 flight-ticket winners from an incredible 65,000 people who had entered. In a Page 4
similar vein a section of the site was entitled ‘Battle with Swissair’, giving easy jet’s view that Swissair’s head had persuaded the Swiss government to stop EasyJet being granted a commercial scheduled licence on the Geneva-Barcelona route. EasyJet also called itself ‘The web’s favorite airline’, in 1999, a direct counterpoint to British Airways slogan of ‘The world’s favorite airline’ for which it enjoyed a court battle.
Following the brand extension success of Virgin, EasyJet has used the ‘easy’ prefix to offer additional services as part of the easy Group:
• easy Everything, a chain of 400-seat capacity Internet cafes originally offering access at £1 an hour. This is run as an independent company and will charge EasyJet for banner ads, but clearly the synergy will help with click through between two to three per cent. The only concession easy Everything makes towards EasyJet is that cafe customers can spend time on the easyjet site for free.
• easyRentacar, a low-cost car rental business offering car rental at £9 a day. These costs are possible through offering a single car type and being an Internet-only business.
The articles report that Russell Sheffield, head of new-media agency Tableau, who initially worked with EasyJet had an initial problem of color! ‘He says there was a battle to stop him putting his favorite color all over the site.’ The site was intended to be highly functional, simply designed and without any excess baggage. He says ‘the home page (orange) only had four options – buy online, news, info, and a topic of the moment such as BA “go” losses – and the site’s booking system is simpler to use than some of its competitors’. He adds: ‘great effort was put into making the navigation intuitive – for example, users can move directly from the timetables to the booking area, without having to go via the home page’.
The site was designed to be well integrated into easy jet’s existing business processes and systems. For example, press releases are fed through an electronic feed into the site, and new destinations appear automatically once they are fed into the company’s information system.
Measurement of the effectiveness of the site occurred through the dedicated phone number on the site, which showed exactly how many calls the site generated, and the six-month target within six weeks. Web site log file analysis showed that people were spending an average of eight minutes a time on the site, and better still, almost everyone who called bought a ticket, whereas with the normal phone line, only about one in six callers buys. Instead of having to answer questions, phone operators were doing nothing but sell tickets.
Once the web site generated two-fifths of EasyJet business, it was taken in-house and Tableau now acts solely as a strategic advisor.
Reference: E-Business and E-Commerce Management by Dave Chaffey. 3rd Ed. Page 5
You are invited, as an experienced consultant, to put together a strategic plan (the final report), on the basis of the evidence supplied in the case study. The plan should include the following deliverables (These should conform to sections of your report):
You are required to produce a report entitled, “eMarketing consultation document for Easy Jet”. Further guidance on the expected content and structure is provided below.
eMarketing Review Document (words – between 4000-5000 words)
Briefly summaries the approach taken in the report, and the key findings
Background – briefly describe the background context of the organization. This can include, for example, historic information on the company’s formation, the financial performance, and the key products and services.
Present Position and Industry Analysis: You should consider analyzing the organization’s current position using both of the following tools: SWOT and PEST
What eMarketing strategy has the organization adopted or is planning to adopt?
What is the value proposition and differential advantage of this strategy?
How is the management creating new core and extended value for customers?
How is the management balancing their online and offline promotion methods?
What impact is the implementation of strategy having upon the performance of the business?
Legal and ethical issues
What legal and ethical issues does the organization need to consider with regard to the gathering, processing, distribution and use of information on the Internet?
Harvard style of referencing