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

Author

Listed:
  • Peter J. Danaher

    (Melbourne Business School, University of Melbourne, Carlton, Victoria 3053, Australia)

  • 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)

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.

Suggested Citation

  • Peter J. Danaher & John H. Roberts & Ken Roberts & Alan Simpson, 2011. "Practice Prize Paper --Applying a Dynamic Model of Consumer Choice to Guide Brand Development at Jetstar Airways," Marketing Science, INFORMS, vol. 30(4), pages 586-594, July.
    • Handle: RePEc:inm:ormksc:v:30:y:2011:i:4:p:586-594
    DOI: 10.1287/mksc.1100.0619
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    References listed on IDEAS

    as
    1. Zhou, Kevin Zheng & Brown, James R. & Dev, Chekitan S., 2009. "Market orientation, competitive advantage, and performance: A demand-based perspective," Journal of Business Research, Elsevier, vol. 62(11), pages 1063-1070, November.
    2. John R. Hauser, 1978. "Testing the Accuracy, Usefulness, and Significance of Probabilistic Choice Models: An Information-Theoretic Approach," Operations Research, INFORMS, vol. 26(3), pages 406-421, June.
    3. Wright, Alice A & Lynch, John G, Jr, 1995. "Communication Effects of Advertising versus Direct Experience When Both Search and Experience Attributes Are Present," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 21(4), pages 708-718, March.
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    Cited by:

    1. Ken Roberts & John H. Roberts & Peter J. Danaher & Rohan Raghavan, 2015. "Practice Prize Paper—Incorporating Emotions into Evaluation and Choice Models: Application to Kmart Australia," Marketing Science, INFORMS, vol. 34(6), pages 815-824, November.
    2. Whyte, Randall & Lohmann, Gui, 2015. "The carrier-within-a-carrier strategy: An analysis of Jetstar," Journal of Air Transport Management, Elsevier, vol. 42(C), pages 141-148.

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