Marketing

[auerbacs]

Does anybody have any privileged information on marketing strategy? I understand intuitively that a tiny domestic airline probably doesn't need to advertise worldwide, but how does the formula actually work? Would that tiny airline gain any tangible gain in image from advertising worldwide? Somewhere in the depths of the formula, is there a domestic company image which affects flights at home and an international company image that affects pax demand elsewhere?

And on another note, is there a CI that one should target? Is a CI of 50 going to have a significant advantage on my LFs over a CI of 40?

One more question regarding marketing: does it cost more to maintain a CI of 90 than a CI of 40. In other words, is it a good strategy to race your CI up towards 100 and then to just hold it there or does it cost more to hold CI at higher levels?

Really, I'm just curious about the marketing function in general. Any information you could give me would be great, because right now it feels like I'm just stabbing at the dark in my marketing strategy.

Thanks!
Auerbacs
Southern Cross Airlines (which you've never heard of... it barely exists)

[Sigma]

Does anybody have any privileged information on marketing strategy? I understand intuitively that a tiny domestic airline probably doesn't need to advertise worldwide, but how does the formula actually work? Would that tiny airline gain any tangible gain in image from advertising worldwide? Somewhere in the depths of the formula, is there a domestic company image which affects flights at home and an international company image that affects pax demand elsewhere?

When it comes to Marketing you can ignore the whole "City", "State", "Country", "Worldwide" thing.  They don't actually mean anything, you're always only advertising in your served locations (which is why marketing expense scales on the number of routes you operate).  Likewise, whether you're a "Regional", "Domestic", or "International" airline makes absolutely zero difference when it comes to Marketing plan or the effectiveness of the different types of marketing.

Instead, it may help to think of it as "Levels 1-5".  And each "level" has a much greater cost than the previous one.

How fast your CI goes up in simply a function of the money you spend.  That's it.  It doesn't matter one bit whether you choose a "Worldwide" marketing plan or you decide to go with, say, two "Country-wide" plans that cost the same amount of money.  As long as the total spend is the same, your CI will go up at the same exact rate.

And on another note, is there a CI that one should target? Is a CI of 50 going to have a significant advantage on my LFs over a CI of 40?

There is no "right" answer to this question, anymore than there is to, say, "Is moving 100,000 pax better than 50,000?" -- Because "it depends".

If you're not facing any competition, whether your CI is 10 or your CI is 100 isn't of particular importance.  If you are, and you competition has a CI of 10, then it doesn't matter all that much if your CI is 50 or it's 100 -- you're greater than them.

That said, you don't really know what your competition's CI is -- and CI is right up there with one of the most important variables that pax look at when choosing carriers.  So you shouldn't ever get too lax about it.

There's also the matter of costs, which goes to the next question

One more question regarding marketing: does it cost more to maintain a CI of 90 than a CI of 40. In other words, is it a good strategy to race your CI up towards 100 and then to just hold it there or does it cost more to hold CI at higher levels?

I'm not 100% sure what you're asking here, so I will explain it all this way and hope I answer the question....

A CI of 90 will cost many times more to maintain than a CI of 40.  But there is no difference between the weekly cost to get a CI, and the cost to maintain it.  You spend the money, a percentage of your total revenues, and if gets you to a CI of 90 then you'll stay at a CI of 90.  You don't get to cut it back later -- not unless you want it to go down anyways.  Now, what percentage of your revenues it takes to get to a CI of 90 (or whatever) changes depending on the number of routes you operate.  The more routes, the more money it costs to maintain a given CI.  2 airlines moving the same number of pax but one operating hundreds of small routes might take 40% of their revenues to get to a CI of 100, but another that operates only a few very dense routes might spend less than 5% to maintain the exact same CI simply because they don't have to advertise in as many locations.

So it will go up as time goes on and you add more routes.  In order to reduce the micromanagement of your Marketing outlay, your Marketing budget will automatically scale to always maintain your CI at whatever level your allotted spending allows.  So, if you get your CI to 90 and it costs you $500/wk, but then you go and triple the number of routes you run, your Marketing budget will scale up to match so that you always maintain a CI of 90.

One of the problems is that it kinda goes up in spikes.  So you might establish a bunch of routes, it won't go up at all, then you add one more route and it decides it needs to scale up -- suddenly your Marketing expense goes up by millions of dollars a week.  When your airline is very large, that spike can be QUITE large if you're running a fairly low margin.  It can suddenly make your airline unprofitable.

One strategy that has its proponents is to throw LOTS of money into CI to start with and run your CI up as high as you dare.  Since your Marketing expenses are a function of the number of routes that you have, if you can start your game by dominating just a few very dense routes, you can run your CI up very high before you go and have to spread out to a lot more destinations to get more pax.  If you wait until late in the game to sink money into CI, it'll cost a LOT more money.  Ultimately, the cost to maintain that CI of 100 of 2 airlines of identical number of routes will be the same -- but if you got your CI to 100 when you only had 2 routes then spread to 50 other destinations, it'll cost you a LOT less to get to a CI of 100 then someone who slowly worked their way up to a CI of 100 while expanding their airline.  It's a tradeoff though -- sink money into Marketing to start and you miss out on buying more planes.  There's a balance to strike in my opinion.

Really, I'm just curious about the marketing function in general.

It kinda seems like voodoo science at first.  But it really boils down to one very simple thing:

The more you spend, the more your CI goes up.

It really is that simple.  Set it and it will increase.  It will eventually level off -- that's as high as that outlay will take you.  It will scale to keep you there.  If you want to get a higher CI, you'll need to add either another plan or upgrade one of the existing ones to one of a wider scope -- either way you just need to spend more money.  However you do it, whether by adding a small local plan or by upgrading one from State to Worldwide, that's up to you, it really doesn't matter as long as the outlay goes up.

[Talentz]

I knew Sigma was around here to answer that





Talentz

[auerbacs]

Thanks Sigma! That explanation really helps. In the question about the cost of maintaining a CI, I had assumed that marketing spending represented a rate of change of CI, so that if you spent a lot, the rate would slowly increase until it got to 100. What a given marketing spending actually represents (divided by number of routes, of course), from your explanation, is an actual CI, rather than a rate of change in CI. So If I spend 10,000 a week on 5 routes, that might represent a CI of 40, let's say, so my CI will rise or fall slowly but eventually approach that value and stay there. That conceptual understanding of the marketing cost representing an actual CI rather than a rate of change is definitely handy to know. I have two small subsequent questions from what you said. I think they're both pretty simple. Sorry to bombard you  

1) All that nonsense about newspapers and radio is just that, nonsense - it just matters how much you spend. So two tv promotions, even if they're identical, have more effect on CI than a varied tv/radio combination, simply because one spends more on the two TV strategies, right? In other words, overlapping advertising campaigns is not a problem. The system may as well just ask for you to specify a value that you want to spend on advertising that week, but presumably the designers wanted to make it prettier with these other variables, right?

2) What happens to my CI and RIs if I relocate. I understand that you lose your routes when you relocate, but if I have a 100 route image on the Christchurch to Auckland route (and its return) while I'm based in Christchuch, and I then move to Auckland and operate that same route (this time originating from Auckland), will I be able to keep that route image despite the change in base? And am I also correct in assuming that CI is unaffected by a relocation? Even if I move my airline from New Zealand to Bahrain, my CI won't be affected, right?

Again, I really appreciate all of your help. I'm just starting to get into the underlying formulas of the game to make sure that my strategies aren't flawed.

[Sigma]

That conceptual understanding of the marketing cost representing an actual CI rather than a rate of change is definitely handy to know.

Exactly.  And the rate of change is derived from the difference between what your expense would be to maintain your CI in a given week compared to what you've got budgeted.

So, if this week your CI is 50 and it takes $5000 to maintain that and you've got $5500 budgeted, it will go up X number of points.  The following week your CI is 52, it takes $5200 to maintain that and you've still got $5500 budgeted -- the rate will slow because the difference is less.  The rate at which your CI grows slows as you get closer and closer to your budgeted amount until eventually the budgeted amount and the amount to maintain your CI at a given level are equal.

So, long and short, you effect rate of change by changing the magnitude of your weekly expense over what is required to simply maintain it at the CI you're presently at.

1) All that nonsense about newspapers and radio is just that, nonsense - it just matters how much you spend. So two tv promotions, even if they're identical, have more effect on CI than a varied tv/radio combination, simply because one spends more on the two TV strategies, right? In other words, overlapping advertising campaigns is not a problem. The system may as well just ask for you to specify a value that you want to spend on advertising that week, but presumably the designers wanted to make it prettier with these other variables, right?

Precisely.  The various medias are just subsets of the "Levels".   So you could just as easily think of it as, say, "Level 1A" or "Level 2B".  And you may have 3 different Level 2B plans going at once.  Normally, if I'm playing a tighter margin game (i.e. regional ops) this is precisely what I do -- I add one State-level plan of whatever media I can afford.  Then, as I get more profitable, I add another identical one.  And another.  Soon I've got 5 identical plans going on.  Then, as I can afford it, I upgrade them one at a time to Country-wide.  Eventually they're all Country-wide.  And so on and so forth.  This is a slower means of growing CI, but if you're running an airline with a tighter margin, it's what you gotta do.

Overlapping simply allows you a bit more micromanagement of the expense.  While upgrading one from State to Country might cost $100K more, you can add an additional State one for just $50K more.  This allows you some flexibility on your expense side.

And it has the added benefit of, as you said, looking "prettier".

2) What happens to my CI and RIs if I relocate. I understand that you lose your routes when you relocate, but if I have a 100 route image on the Christchurch to Auckland route (and its return) while I'm based in Christchuch, and I then move to Auckland and operate that same route (this time originating from Auckland), will I be able to keep that route image despite the change in base? And am I also correct in assuming that CI is unaffected by a relocation? Even if I move my airline from New Zealand to Bahrain, my CI won't be affected, right?

Relocation is something I've got absolutely zero experience with so I wish I could help you but I can't, nor do I think hardly anyone's really done it before since it has to be done so early in the game (just 3 game-months, a few real-life days) and costs so much money.  Chances are if you've got the money to afford to relocate you're not actually looking to relocate since you're profitable.

But, if I were to guess, all RI goes to zero and CI remains the same.  I believe only Rebrandings effect CI.  But I could be wrong there.

[auerbacs]

Oh yeah, good point... I forgot that you could only relocate in the first 3 months, and that it would be silly to do so given the costs. Looks like I'm going really work hard here in Christchurch Anyway, thanks again for your help Sigma.

[Gleipner]

Really good information there Sigma, although I still have one question...

A case of having for instance 1 continent TV and 1 country TV is more CI rewarding then just 1 continent TV, just because more money are being spent?

Thanks again for the info!

[johnlattanzio]

Am I correct in concluding that advertising will NOT GENERATE MORE DEMAND?

IN the real world (TM) I am sure that generating extra demand is an important part, not just promoting the CI :-)

JL

[Sigma]

No, there is no means of generating additional demand. 

RI allows you to get a greater percentage of the demand shown on the chart. 
CI allows you to get demand over a competitor.

[nnjoergensen]

Helpful reply Sigma, Thanks!

Have I understood correct?

If I have a CI of 10, and I want it up to 50, lets say that I knew it would cost $5000/week to get and maintain. would I get to 50 quicker if I budgeted $10.000/week till I got to 50, and then went down to $5000/week to maintain it?!

Noel

[slither360]

Yes.

There is a cap on how fast you can rise though - be careful not to waste money.