How do airlines segment consumer markets?

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Most flights are filled by passengers traveling for a variety of reasons. But each consumer was "segmented" or categorized by the airline, and each is likely paying a fare based on different factors.

History

In early days of commercial aviation, all passengers paid the same price for their tickets. By the 1960s, family plans were an option and airlines began discounting fares for round-trip purchases. This was the beginning of market segmentation.

Types

According to Airline Marketing and Management, airlines segment consumer markets by travel purpose. The most common segments are business, individual leisure, inclusive tours and student/military.

Function

Airlines can maximize revenue by charging more for those needing flexibility (business travelers) and fill seats on unpopular flights via lower fares, such as by people traveling on leisure or returning to a university.

Techniques

Sophisticated inventory management systems control the number of seats sold according to the fare. Each fare is assigned a booking code, and the system allows higher fares to be available for sale until the aircraft is full. Demand models forecast how many seats to save for business travelers who pay more, but also need flexibility to book close to the flight date.

Benefits

By segmenting consumer markets, airlines can maximize revenue and operate more profitably, and thereby offer more departures. As a result, business travelers get more departure options and leisure travelers can buy low fares on flights where seat capacity is expected to exceed demand for business travel.

Source:

Airline Marketing and Management

Airline Revenue Management

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How do airlines segment consumer markets?

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