There are brands that are hated by the customers because of their poor service or poor product quality and then there are also brands that are immensely loved by the public because of their high quality service or products and also how pleasantly they treat their customers.
But after all these comes Ryan Air. It is one of the most hated companies by flight passengers because of its extra paying policy and not so good service but at the same time, a lot of people have to fly Ryan Air making it a successful airline company for a long period of time.
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What is Ryan Air’s business model?
Ryan Air has been successful in keeping the flight ticket prices extremely low which has helped them to attract a huge customer base.
Ryanair’s competitive advantage as the biggest low-cost airline in Europe stems from its ability to maintain cost leadership, offering its customers the lowest fares. This means that in order to maintain the ability to provide the service to clients at a lower cost than their direct competitors, the business must reduce its own expenses. This prompts us to examine a few crucial operational tactics that directly support Ryanair in achieving its ultimate objective of becoming the top low-cost airline in Europe. Here are some of the tactics they follow –
- All their aircraft are Boeing 737-800. This aircraft has two great features – it has the maximum number of seats it is also the most fuel efficient aircraft.
- They only fly for short routes. The average flight duration of Ryan Air is 2 hours. This gives them one advantage of using their flight more times in a single day than their competitors, also helping them to serve an extra number of passengers.
- One more thing is they try to focus on the less fancy airports. Like if one city has two airports then they will only land on the less fancy one because that reduces the landing costs.
- They will make you pay for extra services. They run a “no frills” service on board aircraft in order to reduce expenses. In other words, the fare only covers the flight. However, there are a number of additional steps that are directly connected to a service with no frills. These consist of basic seats (to maximise aircraft capacity), unallocated seats, one class of travel, fees for baggage check-in, no refund policy, and charging for any extra services. All of this considerably lowers Ryanair’s costs.
The pricing game
Not only Ryan Air but most of the successful businesses in the world are successful because of their strategic pricing.
Here are the pricing tactics you can use for your business –
1. Penetration pricing –
It’s the perfect tactic for a company launching a new product in a cutthroat industry. Companies employ this strategy to swiftly increase their market share. When a business gains traction, it gradually raises its rates after initially offering lower prices than its rivals. It can be a dangerous tactic because a company might make little to no money using it. Despite the possibility of a loss at first, a business uses other branding and marketing techniques to build a foundation of devoted clients.
2. Price Skimming –
It entails raising the price at first and gradually lowering it. The strategy’s goal is to recover as much profit as possible before rivals enter the market. It’s perfect for drawing in affluent customers who consider themselves to be trendsetters. Electronic retailers and fashion retailers are among the brands that benefit from this policy, as they rely on rapidly evolving trends. Retailers initially charge premium prices for their products, but over time, they lower the price.
3. Competitive pricing –
Also referred to as strategic pricing, it entails determining the price by researching what rivals charge. Entrepreneurs take the numbers from their competitors and adjust by a predetermined percentage. Since its goal is to draw customers to your brand and away from rivals, it’s perfect for start-ups. Businesses that use this pricing strategy keep an eye on what rivals are charging and modify their own rates accordingly. Gaining price-sensitive customers’ loyalty is the strategy’s benefit. It’s a low-risk approach that causes a company to lose out on opportunities and become unable to determine the worth of its brand.
4. Economy pricing –
Businesses that employ this strategy can price a commodity lower than rivals because they have lower overhead costs. Customers who wish to save as much money as possible are the target market. Because of the higher volume of sales, the companies receive their money back. Note that the pricing method is only effective in certain types of markets.
5. Premium pricing –
Businesses that use the approach have a strong competitive advantage and a well-known brand. You can increase the perceived value of your brand by using this technique. Here, a high price serves as a determining factor, and customers look for high-quality products and services. Even if a business lowers its prices, consumers still desire a sense of exclusivity and luxury.
Pricing is very important for any business, it plays a major role in defining whether a business will be successful or not. Ryan Air understood this game better than other companies which made it a successful airline.