Case Study: EasyJet
The evolution of easy Jet's online revenue contribution
This historical case shows how the easy Jet Website become the main sales channel for Easy Jet from its launch in the1990s.how the internet was used for service delivery and marketing communications is also described. This case study has been retained since it is a popular case illustrating the benefit of a planned strategy to digital channels. By 2008, 98% of seats are sold online and easyJet still incentivizes people to book their cheap flight online through a £7.50 discount for an each leg of a journey.
Easy Jet was founded by stelios Haji - Ionone, the son of Greek shipping tycoon who reputedly used to 'hate the Internet'. In the mid-1990 Haji- Ioannou reportedly denounced the Internet as something -foe 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 percent of ticket sales or 135, 00 seats. This was past the company's original Internet contribution target at launch of 30 percent of sales by 2000.In the period from launch, the site had taken more than 800,000 booking 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, over90% of all sales were online.
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 channel in order to survive. He chose the phone. At the time this was ground-breaking, but the owner was encourage by companies such as Direct Line insurance, and the savings which direct selling would bring.
Although haji-Ioannou through 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 user 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 start selling over the Internet or build a new call centre. So our Transactional site become a £10 million decision.
Although the success of Easy Jet 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 percentage 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 conflict with intermediaries such as travel agents .The web also fitted in with in with the low –cost easy Jet proposition of no tickets, no travel agents, no network tic-ups and no in-flight meals. Customer are given a PIN number for each order on the website which they give when they get to the airport. Sales over the Internet began in April 1998, and although EasyJet’s media operations were handled by tableau, a few months later easy Jet took them in-house.
The Internet is important to easy Jet Since it helps it to reduce running costs, important for a company where each passenger generates a profit of only £1.50. Saving to EasyJet made through customer booking online enable it to offer at least £1 off to passengers who book online- this is part of the online proposition.
The owner say that ‘the saving 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 middleman-you’re talking much more than the £1 off we give online buyers’.
What about the risks of alienating customer who don’t want to book online? This doesn’t worry the owner. he say ‘I’m sure there are people who live in the middle of nowhere who say they can’t use the Internet and will fly Ryan air instead. But I’m more worried about keeping my cost base down, and finding enough people to fill my Airplanes. I only need six million people a year, not all 56 million.
The Internet marketing garus say ‘put the company URL everywhere’ Easy Jet has taken this literally with its web address along the side of its Boeing 737s…
Easy Jet 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 website rather than the company needing to employ an extra 250 telephone operators. However, risk management did occur with a micro-site built for Times reader(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 flight to a choice of all EasyJet destinations when 18 token were collected. In total, 100,000 seats were sold during the promotion, which was worth more than £2m to the airline. Thirty percent 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 website also acts as a PR tool. Haji-Ioannou uses its immediacy to keep newspaper informed about new promotions and offers.
The website 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 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’a losses be on ‘GO’, its budget rival to Easy Jet(the figure turned out to be £20m).Within minutes of the BA results being announced on 7 September, the Easy Jet site had the 50 flight- ticket winners from an incredible 65,000 people who had entered. In a 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 Easy Jet being granted a commercial scheduled license on the Geneva-Barcelona route. Easy Jet also called itself ‘ The web’s favorite airline', in 1999, a direct counterpart to British Airway’s slogan of the ‘ The world’s favorite airline’ for which it enjoyed a court battle.
The Creation of a mobile site:
Mobiles are clearly a huge growth area. In some countries mobile is often leapfrogging broadband as a way to get online. So we set about making mobile website where you could do all the things you can do on easyjet.com in various languages. We have seen tremendous demand for it. Wherever they are and whatever the time of day or night, Easy Jet customer, can new book their ticket , car rental etc with just a few simple touches on Europe and easy Jet's co-branded new mobile site developed especially for the airlines. Europe car, the largest airline and operator of Europe’s leading air transport network, and easy jet, the Uk’s largest airline and operator of Europe’s leading air transport network, have created a customized mobile site which enables Easy Jet customer to simply link through after their flight booking to then add a car rental to their travel plans. Since 2003,convenience, value for money and innovation have always been at the heart of the partnership between Europear and Easy Jet combines with delivering a high level of customer service.
Easy Jet has used the “easy” prefix to trial additional services as part of the easy Group. Trails include:
easy Everything, a chain of 400-seat-capacity Internet café’s originally offering access at £1 an hour. This is run as an independent company and will charge Easy Jet for banner ads, but clearly the synergy will help
with click through between two and three percent. the only concession easy Everything makes towards -Easy Jet it that café’ customers can spend time on the Easy Jet site for free. easy Rent a car, 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, which initially worked with Easy Jet 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, user can move directly from the timetable 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 Easy Jet business, it was taken in-house and Tableau now acts solely as a strategic adviser.
Source: Based on Revolution articles: Easy jet site a success in fifth month, 1 August 1998; Easy Jet promotion sells 30,000 seats, 1 November 1998; say hello to Mr e-Everything, 13 October 1999.
A) To what extend was the Internet revenue contribution of around 90% achieved ‘more by luck than judgment”?
B) Explain the proposition of using the Internet for the customer and define the benefits for the company.
C) Explain how Easy Jet uses the website to vary the different element of the marketing mix and as a marketing communication tool.
D) Why Easy Jet created a mobile site? Is it necessary for other e-commerce companies to create Smartphone friendly website.
E) For the main business risk to Easy Jet, suggest some approaches the company could use to minimize these risk.