Following Cathay-Pacific's announcement that it would cut up to 600 jobs in its largest restructuring in decades, we asked two branding consultants for their input on whether the airline's positioning contributed to its problems, and what it should do now. While branding may not be the cause of Cathay's woes, the company's failure to meaningfully articulate what 'Life Well Travelled' means—and translate that into an experience people want—hasn't helped. Read on for the diagnoses and prescriptions.
Cathay’s job cuts reflect an industry-shaking reality that travel patterns and preferences have evolved radically over the last 20 years. Travel is commoditised. Routes are saturated, often with cheaper options offered by low-cost carriers. Pillows, WiFi, meals, entertainment, preferred seats and luggage have become optional extras. Competitive pricing is an unavoidable reality. Cathay (and other airlines) must adapt. Traditional management models are slow and disconnected from the consumers they aim to serve.
This is a challenge for many other consumer brands that want to compete in the 'new economy', where consumers expect to purchase quality at the very best price.
We’ve seen this recently with the Kraft-Heinz and 3G Capital merger, which reduced staffing levels. Now that Kraft-Heinz business has smaller teams, it is able to make decisions faster and respond to market conditions quicker. Similarly Coca-Cola has just laid off 1,250 people in its corporate offices, and Mondelez did so late last year. If decisions are decentralised, this can make for a leaner, more agile business. As Rupert Murdoch said, "the world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.”
So what are the implications for the Cathay brand?
I would not expect many consumers stop flying or considering Cathay because of layoffs. Many consumers will still consider Cathay and buy if the value proposition is right (right route, right time, right price). Layoffs have become common, and brand loyalty is very low; most people have a 'consideration set' and this corporate decision is unlikely to affect that.
Moving forward Cathay needs to decide between two very different business strategies:
- Compete on price, with an economic, price-driven model. Cathay has existing aircraft with seats it needs to fill. However it is also public knowledge that it already lacks sufficient pilots. In addition, the company has Cathay Dragon, which actively plays in this segment.
- Compete on product by delivering more premium experiences, in the same way that Singapore Air has managed to do. This might lead to loss of passenger volume, but deliver higher margins.
Branding is not a visual plaster, but a tangible extension of the business model—how the business engages, how it performs, how it delivers its services. The airline needs to answer the question, What is the Cathay way? How does it deliver against its brand promise of ‘Life Well Travelled’. This could include:
- Enhance the consumer experience (offering ancillary services pre and post flight)
- Make the flight more memorable (Virgin Airlines created a bar for business class)
- Use technology where possible (such as speedier check-ins)
- Equip the consumer-facing teams to be able to offer a new style of service to today's consumers.
Once the business decision is clear, you can review the branding and communications. It is a brand with significant equity, so it could be an evolution rather than complete change.
More on Cathay Pacific
When Cathay Pacific launched its new brand positioning 'Life Well Travelled' in early 2015, it set out a lofty ambition for what the brand was going to deliver. And while Cathay has done a nice job communicating the idea through social channels and advertising, the idea hasn’t been pulled through to the experience it offers. The products and services offered onboard haven’t really changed. The in-airport experience is the same. Cathay Pacific simply hasn’t delivered on what 'Life Well Travelled' was meant to do, which was to make the travel experience better for its customers. So I don’t think the brand positioning is the problem. I think the problem is that Cathay Pacific never thought through how it was actually going to deliver on that promise.
To drive growth, brands need to be clear about two primary things: where to play and how to win. Where to play means getting clarity around who your target audience is and what those customers want and need. And how to win should be focused on what you need to deliver to meet customers' needs.
What Cathay needs to do now is ensure it understands who it's designing its airline experience for. Given that the company is currently getting squeezed at the top from premium Middle Eastern airlines and at the bottom from low-cost carriers, it needs to understand what people expect and want from a full-service airline that sits between those two poles—then create a clear 'design target' around which it builds its experience and offers.
As for how to win, Cathay needs to bring to life what 'Life Well Travelled' means. It must identify new products, services and experience ideas that are going to enable it to actually deliver a better travel experience.
Brands in situations like Cathay’s tend to be very reactive. The first thing they tend to do is what Cathay is doing, which is make changes to operations. But brands in these situations really need to think about undergoing a transformation across all aspects of their business. If all they do is scale back their operations to run the same business they’re running now in a leaner way, things will only continue to decline.
Brands in similar situations should see restructuing as an opportunity for reinvention. And not just at the operational level, but by taking a hard look at their customer strategy and putting customers at the center of their business strategy.
The aviation industry is ripe for disruption, and it’s going to take a leadership team that’s willing to break the mould to truly make a difference.
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