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How Reputation Drives Nigeria’s Domestic Air Fares

By Chido Nwakanma.

Check out the scene. It is the 01 floor of the Transcorp Hilton, Abuja. Airlines have their ticketing stands and offices herein. Office or stand may be an index of how prosperous the airline is. Abuja-Lagos for that evening is almost fully booked on this Thursday. Getting out of Abuja on Fridays is a stretch but this has now extended to Thursdays.
The story of airfares on the domestic routes gets more interesting on such days. Arik Air has a slot for a princely N44, 000. What about the next morning? It is N36, 000 economy on Arik Air. However, comparatively, it is N19 000 by Medview Airline and N18 000 by Dana Air.

Welcome to the new price regime in domestic airfares driven by reputation. It bears out the thesis that reputation creates wealth, first put in quantifiable terms in the work by Dr. Charles Fombrun hitherto of Harvard Business School, Reputation: Realising Value from the Corporate Image.

Price equivalence was the norm for many years on the domestic air routes. Then smart corporate executives at cash-stressed Aero Contractors cooked up the idea of lower upfront fares to lock in income. Passengers booked two weeks ahead or more. The closer to proposed departure date the more expensive the fare.  Aero could thus turnaround the income from pre-booking several times before the passenger actually flies.  It generated cash flow for the airline, made air travel affordable to many –thus expanding the market- while temporarily positioning the airline as friendly.

It also kicked in the era of market driven prices that often seem capricious. You could be on the queue and pay N5000 more than one or two persons right ahead of you as the airlines switch prices at will.  Their counter staff are almost always incapable of providing lucid rationale for the changes, which are seemingly driven by competition, supply and demand and the operational exigencies of the business.

The variable pricing regime in domestic airfares is significant in marketing and reputation management. Marketing experts understand that price is the most significant of the Ps in the marketing relationship. Price signifies value, and all business is about the exchange of value. Price is at the intersection between the Ps of the seller and of the buyer. Price represents income to the seller and expense to the buyer all of which speak of value. Marketing traditionally speaks of the 4Ps to mean product, place, price and promotion.  However, for the consumer, the 4Ps represent purpose, performance, price and presentation.  Price is common and constant in both the Ps of the marketer and of the consumer.

Purpose and performance of that purpose determines the price a consumer is willing to pay while all of the foregoing is enhanced by its presentation. Welcome to the reputation economy.

Reputation is clearly the driver of the variable pricing regime in domestic air fares with Arik Air commanding premium pricing.  Arik’s dominance is a function primarily of perception, a key component of reputation. Since the incidents of air crashes and the link to aged aircraft, airlines with newer planes on their fleet are perceived as safer. Aero has assiduously presented the fact of its younger fleet.

The point will bear emphasis that the dominance of a particular airline on the domestic routes – resulting in commanding premium fares- owes to perception more than any other factor. Yes, it has more planes. It covers more routes. But its service delivery is not better than that of those with only two aircraft.
In the reputation economy, perception matters.

Reputation is a driver of business value. Sixty percent of respondents to a survey by The Reputation Institute believe that reputation has a high financial impact on their companies. According to the 2013 RepTrack 100 Report, respondents also acknowledge that reputation helps

•    Increase customer retention       
•    Increase in sales/revenue
•    Increase in market share
•    Reduce cost of hiring/retention
•    Increase in share price
•    Increase in profitability
•    Lower cost of doing business.

The reputation economy, the Reputation Institute states, “is a new market place reality in which people buy products, take jobs, and make investments based primarily on their trust, admiration and appreciation for the companies and institutions that stand behind them.”

As with airfares, companies in all sectors of the economy would hereafter extract value based on their reputations and consumer perception of the value they offer.  At the macro level, the Nigerian aviation sector needs a lot of work to burnish its reputation against the backdrop of statistics that cast doubts about the sector’s viability such as this: 139 private jets, 7 Airlines, 57 planes, 33 failed airlines in Nigeria.

Chido Nwakanma
is Chief Executive of Blue Flower, one of Nigeria’s leading public relations consulting firm.


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