Practice Prize Paper --Applying a Dynamic Model of Consumer Choice to Guide Brand Development at Jetstar Airways

Peter Danaher, John H. Roberts (), Ken Roberts () and Alan Simpson ()
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John H. Roberts: College of Business and Economics, Australian National University, Canberra, Australian Capital Territory 0200, Australia; and London Business School, London NW1 4SA, United Kingdom
Ken Roberts: Forethought Research, Melbourne, Victoria 3000, Australia
Alan Simpson: Forethought Research, Melbourne, Victoria 3000, Australia; and University of Melbourne, Carlton, Victoria 3053, Australia

Marketing Science, 2011, vol. 30, issue 4, 586-594

Abstract: This paper describes the use of a marketing science model by Jetstar, a subsidiary of Australia's leading airline, Qantas, to effectively and profitably compete in the low-cost carrier marketplace. We trace the evolution of the Jetstar strategy from a baseline calibration of its initial position, to its efforts to attain price competitiveness and service parity, followed by its highly focused, cost-effective service delivery strategy. We develop a hierarchical model with parameters estimated at the individual level. This allows us to study not only how service design and pricing initiatives shift the perceived performance of Jetstar relative to its competitors but also how the airline can move market preferences toward areas in which it has competitive advantage. The contribution of the research is substantial. The Jetstar market share went from 14.0% to 18.1% during the first five quarterly waves of the research, and profits went from $79 million in 2006-2007, before the study was commissioned, to $124 million in 2008-2009.

Keywords: airlines; consumer choice; Bayesian estimation; service management; marketing strategy (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:30:y:2011:i:4:p:586-594

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