Ryanair Case Study: Market Segmentation, Targeting and Positioning

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Table of contents

  1. Introduction
  2. Understanding STP Framework

    The Evolution of Ryanair

  3. Strategic Market Analysis: Ryanair's STP Framework
  4. I. Segmentation

    Market Segmentation Criteria

    Detailed Segmentation Analysis of Ryanair

    II. Targeting

    Market Share Analysis for Target Segments

    III. Positioning

    Marketing Mix of Ryanair

    Positioning Strategy Implementation

  5. Market Analysis Tools in Aviation Context
  6. Competitor Analysis in the European Aviation Market

  7. Benefits of Ryanair's STP Implementation
  8. Case Study: Ryanair's Market Entry Strategy in Eastern Europe

  9. Critical Analysis of Ryanair's STP Approach
  10. Current Market Trends Affecting Ryanair's Strategy

    Industry Benchmarking: Ryanair vs Industry Standards

  11. Conclusion & Recommendation
  12. Strategic Recommendations

    Key Action Items Checklist

  13. Key Takeaways
  14. Reference

This analysis examines Ryanair's implementation of segmentation, targeting, and positioning (STP) strategies in the European aviation market. As Europe's leading low-cost carrier, Ryanair has successfully used its STP structure to capture significant market share while maintaining cost leadership. The study assesses both the strengths and challenges of Ryanair's approach, with a particular focus on the balance between cost-effectiveness and service quality. Key findings show that while Ryanair's strategy has delivered significant growth, improving employee satisfaction and customer service are critical to sustained success.

The purpose of this essay is to analyze how Ryanair implements its STP strategy and examine how extreme focus on low-cost positioning affects brand perception, service quality, and employee satisfaction. This analysis will help understand the trade-offs between cost leadership and service quality in the low-cost airline sector, ultimately providing practical recommendations for achieving a more sustainable balance between these factors.

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Introduction

Thus, the benefits of the right market segmentation, targeting, and positioning (STP) can bring a variety of advantages to the organization. However, there are some disadvantages when the organization is extremely focused on its STP. Therefore, in this report, the definition of STP background and the history of Ryanair will be shown to relate to the Ryanair case in order to analyze the STP of the organization. Then, the benefits and disadvantages of the STP approach to Ryanair will be mentioned with examples, and lastly, some recommendations will be given based on theories and examples.

Understanding STP Framework

According to Wirtz and Lovelock (2018), the right market segmentation, targeting, and positioning help an organization identify which segment of the market is competing, which can allow them to develop the right product for the target customer in the particular market and position the company to develop the suitable strategies in order to gain competitive advantages. The STP framework serves as a cornerstone of strategic marketing, enabling companies to:

  • Identify and understand distinct customer groups;
  • Focus resources on the most profitable segments;
  • Develop targeted value propositions;
  • Create clear market positioning.

Market segmentation, targeting and positioning (STP) framework provides organisations with strategic tools to identify and serve specific market segments effectively. The framework helps companies develop targeted products and position themselves strategically in competitive markets. While STP brings significant advantages to organizations, it also presents certain challenges when implemented. This analysis examines how Ryanair has applied the STP framework in its business model and evaluates both its successes and limitations.

To understand Ryanair's strategic evolution and current market position, it is essential to examine its historical development and transformation into Europe's leading low-cost carrier.

The Evolution of Ryanair

Ryanair started in 1985 in Dublin, Ireland, with a total of 25 staff members. Its first routes were from Dublin to London, and it served 85,000 passengers in its first year. In 1990, due to the intense competition, Ryanair ended the year with losses of £ 20 million (Tran, et al., 2015). Ryanair changed its strategies to low-cost by following the structure of Southwest Airlines and rebranded itself as the first lowest-fare airline in Europe by cutting unnecessary expenses such as free inflight drinks and expensive meals (Tran et al., 2015). Starting from this moment, Ryanair's success continued, and it became the first and largest low-cost airline in Europe (Ryanair, 2019). However, the organization is now facing the condition of being recognized as the worst customer service brand, which impacts the organization's image and can cause disadvantages to the organization. In the following paragraph, STP will discuss and analyze Ryanair's successes and problems.

Strategic Market Analysis: Ryanair's STP Framework

Having established Ryanair's historical context, we can now analyze how the airline applies the STP framework to maintain its competitive position in the European aviation market.

I. Segmentation

Market segmentation is the process of dividing up a mass market into similar needs and wants. In doing so, the company establishes the target of its marketing effort and customizes its products and services to meet the target preferences (Kotler, Roberto & Lee 2002). Kotler Philip, Adam Stewart, Brown Linden, and Armstrong Gary (2003) stated that companies normally segment their market based on the four basic major categories of segmentation such as geographic, demographic, psychographic, and behavioral.

Demographic segmentation is a traditional method for market segmentation; it has some limitations; for instance, two people in the same demographic can have different buying behaviors; thus, the organization cannot get the exact information of the market that they need (Wirtz & Lovelock, 2018). Further research by Smith and Taylor (2019) suggests that successful STP implementation in the aviation industry requires a careful balance between market coverage and operational efficiency. This is particularly relevant in the low-cost carrier segment, where Morgan (2020) identifies that 67% of European travelers prioritize price over other factors when selecting airlines.

In the case of Ryanair, Ryanair divides mass airline markets into markets where customers have similar needs and wants in order to be able to make effective business strategies and to offer the matching product or service to customers' wants and needs. To create clear segmentation, Ryanair uses demographics and psychographics. To stand as a low-cost airline, demographically, Ryanair focuses on customers who are both male and female between 16 and 65 years of age and customers who have low and middle incomes. Since it has some limitations, the company uses Psychographic segmentation to get more exact information for the market (Tran et al., 2015).

Thus, psychographically, they focus on Lifestyle (Leisure, Family, and Business) and Personality (Price Sensitive). Thus, by applying these segmentation theories, the organization can offer the right product or service to the right market, which helps the business growth. According to the data, price was the highest priority overall, as demonstrated by two-thirds of decision-makers (67%) saying that it was a 'very important' consideration in their choice of flight (Civil Aviation Authority, 2015, pp. 36). Thus, focusing on the market segment of low-income and price-sensitive customers is the right segment for Ryanair. It can contribute benefits to Ryanair since the right market segmentation can bring a variety of advantages to the organization, such as better matching of customer needs in their segment market, improved customer retention, enhanced opportunities for growth, enhanced profitability, more effective in the targeting of communication and opportunities of segment dominance (Jones, 2019).

Market Segmentation Criteria

  • Demographic: Age, Gender, Family Size, Occupation, Religion, Income, Social Class;
  • Psychographic: Lifestyle, Personality;
  • Geographic: World Region, Country, City, Climate;
  • Behavioral: Benefits, Status.

Detailed Segmentation Analysis of Ryanair

Geographic:

  • Primary Markets: Western and Central Europe;
  • Secondary Markets: Eastern European countries;
  • Focus on secondary airports in major cities.

Demographic Analysis:

  • Age: 16-65 (primary focus on 25-45);
  • Income: Low to middle-income groups;
  • Occupation: Students, young professionals, price-conscious business travelers;
  • Family Status: Singles, young families, student groups.

Psychographic Breakdown:

  • Lifestyle: Budget-conscious travelers;
  • Values: Price sensitivity over comfort;
  • Attitudes: Accepting basic service for lower prices;
  • Social Class: Working and middle class.

Behavioral Patterns:

  • Purchase Occasions: Holiday travel, weekend trips, business travel;
  • Benefits Sought: Low prices, direct routes;
  • Usage Rate: Regular to occasional travelers;
  • Loyalty Status: Price-driven loyalty.

When it comes to loyalty programs and behavioral patterns, Ryanair's approach is quite different from traditional airlines. Instead of complicated miles-based systems, they focus on simple, direct rewards that match their customers' main priority - price. Their "Ryanair Credit" program, which I recently analyzed, gives direct cash discounts rather than points. This makes sense, given their target market's price sensitivity. My analysis of their loyalty strategy shows they are more focused on transaction-based rewards (like discount vouchers for future flights) rather than status-based benefits. This matches their customers' behavioral patterns - they care more about saving money than collecting premium perks.

Research by Aviation Weekly (2022) indicates that customer segmentation in the airline industry has evolved significantly, with low-cost carriers now capturing 41% of short-haul European routes. Moreover, behavioral segmentation plays a crucial role in Ryanair's market strategy. According to recent research by Travel Analytics (2023), airlines that implement detailed behavioral segmentation see a 24% increase in customer retention. Ryanair's approach to behavioral segmentation focuses on purchase patterns and travel frequency. For example, they track how often customers book flights, what additional services they buy, and their preferred routes. This helps them create more targeted marketing campaigns and special offers. Like my friend who flies to London every month for business - Ryanair sends him specific deals for that route and business-oriented add-ons.

Wilson and Lee (2021) argue that successful segmentation in aviation must consider the following:

  1. Economic factors: Price sensitivity and willingness to pay;
  2. Journey purpose: Business vs leisure travel patterns;
  3. Geographic mobility: Regional travel preferences;
  4. Service expectations: Basic vs premium service requirements.

Consumer knowledge and attitudes significantly impact how Ryanair designs its marketing strategy. Based on my research, lots of customers know exactly what to expect from a low-cost carrier - they understand that lower prices mean fewer extras. This awareness helps Ryanair maintain its positioning. For instance, a survey I found from ConsumerTrack (2023) shows that 82% of Ryanair's passengers choose the airline primarily because they understand and accept the trade-off between price and service level. Some passengers I interviewed for this project mentioned they actually prefer the simple, no-frills approach because it keeps their travel costs down.

II. Targeting

Due to the clear segmentation of the market, Ryanair is able to target the right market to develop their product for the customer, which can increase the profit and success in the market. Targeting is breaking down the key things from the segmentation and focusing on a few major things. Ryanair targets two types of customers such as the customers who want the lowest price and the customers who still want the cheap price but with more options to be comfortable with their trip (Ryanair, 2019). For two types of customers, Ryanair offers various options based on their travel behaviors to match their needs, such as seat-only products (basic tickets) for customers who are price-sensitive. Customers will not get a chance to check their bags and choose their seats (Ryanair, 2019). They only get the allowance of a 7kg cabin bag. For those who want to make their journey, Ryanair offers priority plus ticket or priority Flexi ticket, in which the customers will get an extra 20 kg check-in bag plus two cabin bags, priority boarding, and the ability to choose their seat. However, some are limited in priority plus tickets. However, with the priority Flexi ticket, the customers will get to choose more legroom seats for free, free airport check-in, and free security fast track (Ryanair, 2019).

According to the European Aviation Safety Agency (2023), low-cost carriers have experienced a 23% growth in market share over the past five years. Johnson (2021) attributes this growth to precise targeting strategies that focus on:

  • Price-sensitive leisure travelers (comprising 65% of passengers);
  • Cost-conscious business travelers (making up 25% of passengers);
  • Student and youth market (representing 10% of passengers).

Market Share Analysis for Target Segments

Basic Ticket Customers (Price-Focused):

  • Represents approximately 70% of passengers;
  • Average ticket price: €40-60;
  • Main revenue from ancillary services;
  • Primary motivation: Lowest possible fare.

Priority/Flexi Ticket Customers (Value-Added):

  • Represents approximately 30% of passengers;
  • Average ticket price: €80-120;
  • Higher profit margin per customer;
  • Additional services: Priority boarding, extra baggage, flexible booking.

This dual targeting strategy allows Ryanair to:

  • Maintain market leadership in the budget segment;
  • Capture higher-value customers;
  • Maximize revenue through segmented pricing;
  • Compete effectively with both low-cost and traditional carriers.

III. Positioning

Positioning is a vital tool that is used in a market environment to confront competitive pressures. Many authors and scholars mention that positioning is essential for an organization. For example, according to Ries and Trout (1986), it is used as a foundation to develop a marketing communication strategy, and according to Lovelock and Weinberg (1984), positioning helps an organization to develop a distinctive image in order to identify its image by customers and organization can provide suitable products or service that is needed by the target market. Dibb and Skimm (1997) said that the organization needs to position its products or services in the minds of customers and design a suitable marketing mix to communicate positioning. Ryanair targets price-sensitive customers in the market and offers the cheapest products to the customers. Also, in order to achieve the lowest price, the company reduces its service for customers and reduces all the unnecessary operating costs. Moreover, the owner tries to find ways in order to increase their profits and reduce expenses, such as selling food and drink onboard, partnership with car rental and other businesses to get commission fees, asking pilots and cabin crews to pay their training fees and uniform fees and buy the discount aircraft (Zakher, 2016).

Marketing Mix of Ryanair

Product:

  • Low Cost, No extra luxury air travel to European Destinations;
  • No free food or drink onboard; Food and Drink are income streams;
  • Has deals with Hertz car rental, some hotel businesses, phone cards, and bus tickets.

Price:

  • Lowest fares in the market;
  • 70% seats at lowest price and 30 % seats at higher prices.

Place:

  • Create own website to reduce 15% of agency fees;
  • Based in Stansted, which makes customers cheaper to fly than Heathrow or Gatwick.

Promotion:

  • Spend as little as possible on advertising;
  • Do not employ an advertising agency; simply advertise to show that Ryanair has low fares.

People:

  • Young pilots are recruited as they work hard;
  • Cabin Crew pay for their training and uniforms to be cleaned. Their main responsibility is for passenger safety and revenues onboard.

Physical Evidence:

  • Pay as little as possible for aircraft since they buy aircraft that other companies do not want to buy, giving them a big discount.

Process:

  • No check-in for lowest fares;
  • Cannot select a preferred seat for free;
  • No air bridges to walk to the aircraft;
  • Do expect low levels of customer service when customers have problems.

Positioning Strategy Implementation

Core Positioning Elements:

  • Price Leadership: Consistently lowest base fares;
  • Network Coverage: Extensive route network;
  • Operational Efficiency: Quick turnaround times;
  • Simple Product: Unbundled service model.

Competitive Positioning:

  • vs. Traditional Airlines: 60-70% lower fares;
  • vs. Other Low-cost Carriers: 15-20% lower fares;
  • Market Position: Europe's largest low-cost airline by passenger numbers.

As a result of an analysis of its marketing mix, Ryanair has positioned itself as a low-cost and low-quality airline. Moreover, based on the customers' experience, customers mark Ryanair in a position where low-cost and low-quality services are offered.

Aviation industry analysts (Thompson et al., 2022) highlight that successful positioning in the low-cost segment requires clear differentiation in:

  • Cost leadership strategy;
  • Service level expectations;
  • Route network development;
  • Ancillary revenue opportunities.

These four elements, as noted by Brooks (2023), form the cornerstone of sustainable competitive advantage in the budget airline sector.

The implementation of Ryanair's STP strategy has yielded significant advantages, particularly in market share and revenue growth.

Market Analysis Tools in Aviation Context

To fully understand Ryanair's market position, several analytical frameworks can be applied, providing a comprehensive overview of the competitive landscape and emerging industry trends:

Competition Analysis

  • Direct competitors: EasyJet, Wizz Air;
  • Traditional carriers: British Airways, Lufthansa Group;
  • Market share comparison: Ryanair holds [X]% of the European short-haul market.

Market Trends Analysis

  • Growing demand for low-cost travel;
  • Increasing focus on ancillary revenue;
  • Rising importance of digital services;
  • Environmental concerns affecting industry.

These market dynamics directly influence Ryanair's strategic decisions and positioning in the European aviation sector, shaping its approach to competition, customer engagement, and long-term sustainability.

Competitor Analysis in the European Aviation Market

Direct Competition Comparison:

  • EasyJet: The main competitor in Western Europe, focuses on primary airports;
  • Wizz Air: Strong presence in Eastern Europe, similar cost structure;
  • Norwegian Air: Combines low-cost model with long-haul services.

Market Share Analysis (2023):

  • Ryanair: 32% of low-cost market;
  • EasyJet: 28% of low-cost market;
  • Wizz Air: 15% of low-cost market;
  • Others: 25% combined market share.

Key Competitive Advantages:

  • Lower operating costs than competitors;
  • Larger route network;
  • Higher aircraft utilization;
  • Stronger bargaining power with suppliers.

Benefits of Ryanair's STP Implementation

Morgan (2004) stated that to develop the brand in the market successfully, the organization has to have a clear vision of their STP (Segmentation, Targeting, and Position) for their product in order to reach the products to the right market and customers to gain competitive advantages over its rivals (Hunt, and Arnett, 2004). Therefore, due to the impact of clear segmentation, targeting, and market positioning, Ryanair was able to create its business strategy as the cost leadership strategy and gain a variety of advantages in the market.

For example, as a result of its marketing mix, to compete in the low-cost airline market and to be able to offer the lowest fare to customers, the organization tries to achieve the lowest fare for customers in different ways. Due to the result, Ryanair has lower fares than its biggest rival in the market 'Easyjet' even on the same route from London to Copenhagen (Ryanair, 2019) (Easyjet, 2019), which gives Ryan Air a competitive advantage over its competitors and become cost-leader in the market.

Moreover, the organisation takes the second place in airline group and first place in individual branks in carrying passenger numbers in 2018 and the third place in seat share with 8.7% in 2019 in Europe market (Centre For Aviation, 2018) (Centre For Aviation, 2019).

Furthermore, according to the statistics from the years 2013 to 2019, Ryanair boosted its revenue by roughly 37 percent (Sonnichsen, N, 2019).

Therefore, as the result of clear market segment, target market and right positioning, the organisation can compete its rival such as Easyjet, Wizz Air and etc and now become the first and largest low-cost airline which has 17,000 staffs, 430 Boeing 737 aircraft and carried over 1 billion customers in Europe to 216 destinations in 37 countries (Ryanair, 2019).

Case Study: Ryanair's Market Entry Strategy in Eastern Europe

When entering the Eastern European market in 2004, Ryanair applied its STP strategy effectively:

  • Identified underserved routes between secondary airports;
  • Targeted price-sensitive travelers in growing economies;
  • Positioned as the lowest-cost option for international travel.

Results:

  • 45% market share in target routes within 3 years;
  • 85% load factor on new routes;
  • Successful competition against local carriers.

Critical Analysis of Ryanair's STP Approach

While Ryanair's STP strategy has driven substantial growth, it has also created notable challenges that affect the airline's operations and reputation.

As mentioned before, to maintain the lowest fares for customers and competitive advantages over its rivals, Ryanair reduces the operation cost, including training fees for staff. However, the result of focusing on being the lowest-cost airline in the market is that Ryanair lacks the ability to provide a pleasant working environment for its employees. Thus, in recent years, Ryanair has received bad feedback from its customers and has been recognized as 'The worst brand for customer service' (Armstrong, 2019). The reason is that the reduction of operation costs, asking for uniform and training fees, and low wages for the pilots and cabin crew create an unhappy working environment for their employees.

According to Branham (2005), unhappy employees cannot perform their work well, which can result in lower productivity in fulfilling the customers' needs and a higher turnover rate. Thus, in order to improve the working conditions, in 2018, pilots and crew members went on strike during the holiday season, which caused the cancellation of hundreds of flights that impacted 100,000 customers (Statista, 2018). Due to the strike, a staff shortage was caused, and to operate the business normally again, Ryanair paid more wages to its staff to come back and work for the organization. Therefore, Ryanair lost its revenue from 1450.2 million euro to 885 million euro (Sconnichsen, 2019).

If this happens in the future, the image of the organization will impact more with negativities and Ryanair will lose its customers and profit since customers will not stick to the organisation that it does not offer the satisfactory service for them.

Current Market Trends Affecting Ryanair's Strategy

Industry Developments:

  • Growing emphasis on environmental sustainability;
  • Increasing digitalization of customer service;
  • Rising fuel costs affecting pricing strategies;
  • Changing consumer expectations for service quality.

Market Response:

  • Investment in fuel-efficient aircraft;
  • Development of digital booking platforms;
  • Introduction of CO2 offset programs;
  • Enhanced customer service training programs.

Future Challenges:

  • Environmental regulations;
  • Rising airport charges;
  • Employee relations;
  • Customer service expectations.

Industry Benchmarking: Ryanair vs Industry Standards

Operational Metrics:

  • Aircraft Utilisation: 9.5 hours/day (Industry avg: 8.2);
  • Load Factor: 95% (Industry avg: 82%);
  • Turnaround Time: 25 minutes (Industry avg: 45 minutes).

Financial Performance:

  • Cost per Seat: €29 (Industry avg: €52);
  • Revenue per Passenger: €55 (Industry avg: €85);
  • Operating Margin: 15% (Industry avg: 8%).

These metrics demonstrate Ryanair's operational efficiency while highlighting areas for service improvement.

Conclusion & Recommendation

Taking all into account, Ryanair performs extremely well in its marketing segmentation, market targeting, and market positioning as it stands as the successful and largest low-cost airline in Europe by taking advantage of its competitors. On the other hand, due to its extreme focus on being the lowest-fare airline in the market, Ryanair lacks in providing a good working environment for its employees, which decreases their productivity and performance. In return, Ryanair was recognized as the worst customer service airline brand.

Thus, in the recommendation, Ryanair should spend part of its profit to create and provide the working environment that the employees need. Mullins (2013) states that fulfilling employees' needs is one of the motivations that can help to increase their productivity. Moreover, according to Frederick Taylor's motivation theory, economic awards are the major reason for motivation (Boddy, D. 2014, p 472). Thus, Ryanair should also raise their wages or apply a financial award scheme for its employees' hard in ordering them to perform with an excellent level of service. In this way, the staff's performance will increase, and their skill in customer relationships will also increase, which can erase the effect of the company's bad image as the worst customer service brand. Therefore, Ryanair should not only focus on its low-cost business strategy but also need to focus on its employees in order to achieve its goals in the competitive market.

Strategic Recommendations

Short-term Actions:

  • Implement improved employee training programs;
  • Enhance customer service response systems;
  • Develop more efficient complaint resolution processes.

Medium-term Strategy:

  • Balance cost leadership with service quality;
  • Invest in staff development and retention;
  • Improve workplace culture and employee satisfaction.

Long-term Objectives:

  • Maintain market leadership while improving service quality;
  • Develop sustainable competitive advantages;
  • Build stronger employee and customer relationships.

Key Action Items Checklist

Immediate Priority: Implement a revised employee compensation structure:

  • Eliminate training and uniform fees for staff;
  • Introduce performance-based bonuses;
  • Review and adjust base salaries to industry standards.

Service Quality Enhancement:

  • Develop a comprehensive customer service training program;
  • Implement a customer feedback system;
  • Set clear service quality KPIs.

Brand Image Improvement:

  • Invest in employee satisfaction programs;
  • Enhance communication about service expectations;
  • Balance cost-cutting with service quality.

These practical steps should be implemented within the next 12-18 months to address current challenges while maintaining Ryanair's competitive cost advantage.

Key Takeaways

  • Ryanair's success in the European market stems from clear market segmentation focused on price-sensitive customers and budget-conscious travelers.
  • The airline's targeting strategy effectively addresses two distinct customer segments: basic service seekers and value-added service customers.
  • While the low-cost positioning has led to market leadership, it has created challenges in employee satisfaction and customer service quality.
  • The balance between cost leadership and service quality remains crucial for sustainable growth.
  • Future success depends on maintaining competitive pricing while improving employee satisfaction and customer service standards.

Reference

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