Case introduction
Southwest is one of the airlines in America established in the year 1972 and provides air transport services in both domestic and international domains. SWAirline is a customer service company and operates on low costs with services focused on maximizing value and at the same time offer great benefits to consumers. The company flies 737 narrow-body planes with no class partitioning. The airline has developed over the years through their outstanding marketing strategies which have enabled them to remain relevant even amid hard economic times. These include their customer handling practices and pricing strategies.
SWOT Analysis
Strength
The airline does not assign seats making passengers be at free will to choose their comfortable seats. Their planes are not partitioned giving all passengers the same services and comfort. The company has strong links with customers owing to its strong marketing strategies which include effective communication. Their competitive advantage of operating at low cost has made the airline dictate market prices, forcing other airlines to comply with the strategy for competitive reasons. Passengers are attracted to their on-time services, baggage handling capabilities, and full-time flight operations.
Weaknesses
Some of their weaknesses include lack of sufficient amenities making them charge low traveling fees per passenger. Even though at some point, this has provided them with a competitive advantage. The company misses a lot of revenue through its “bags fly free” strategy.
Opportunities and threats
Opportunities lie in the fact that the company can utilize their customer handling service through online booking. While other airlines charge online booking fees, SW airlines should instead subsidize online services for the benefit of their customers. They offer full services to passengers despite the charging lowly contrary to other airlines operating on cut services. Threats within the industry include rising costs on labor and fuel within the international markets. Southwest also faces stiff competition from potential airlines within the industry such as USAirways, Continental, United, and Delta Airlines.
Marketing Strategies
The airline has succeeded in communicating its lack of amenities making the company charge lower compared to other competitors within the industry. Consumers’ expectations are normally high in this industry hence any lower standards lead to their demoralization and hence negative attitude towards the company. They expect that the equipment will be of high quality and in top working condition and as such faulty electronics and seats are not acceptable.
Southwest has succeeded by deviating from the norm and having humorous flight attendants providing entertainment to passengers as opposed to electronic entertainment. Comfort is reinforced through the provision of pillows even as some airlines are eliminating them to cut on costs and provide in-flight snacks. Customers want to have peace of mind, free from worries of delayed and/or canceled flights, and poor baggage handling.
Southwest has excelled at on-time performance, baggage handling, fewest complaints, and canceled flights. Customers may want to get value for money but they also want to save by cutting on costs. Southwest remains the low-cost producer and the low-fare service provider in the US and has developed a strategy of maintaining the position by not increasing prices even as all other airlines rush in hiking their prices. The airline has ensured this through the “bags fly free” ad campaign. Southwest chose to side with consumers on this by not taking advantage of the revenue obtained from bag charges (Kotler and Keller, 2007).
The company has excelled at on-time performance, baggage handling, fewest complaints, and fewest canceled flights creating a good image to consumers concerning its service delivery strategies, hence the up-to-the task of delivering value for money. No added fee has been experienced with the Southwest despite the excellent services they offer. While other airlines are introducing and increasing baggage fees, Southwest has sided with the consumers by offering them a “bags fly free” policy.
Pricing Strategy
Increased market share translates to increased revenue which usually translates into a higher profit margin. Instead of an increase, profitability goes down because pricing is no longer a key to differentiating factors in this industry given that all airlines have decreased costs. This means that airlines have to put extra effort into finding ways of differentiating themselves from fellow competitors for profitability.
Eliminating pillows in planes does cut on costs, but this may lead to passenger discomfort hence may boycott using the airline’s services. In this case, the airline pricing goes down, and at the same time losses incurred because the quality of services rendered is below customer expectations. Businesses exist to meet consumer needs and hence make profits, once a business is not doing the latter then it’s only a matter of time before it’s completely unable to do the former. In this case, the airline pricing goes down and profitability goes down as well.
For customers, baggage fees are an extra cost on airfares they already consider too expensive considering the current economic crisis. The airline’s strategy of competing by not adding fees is driving home the message that it is the only cheaper means and unique service airline within the industry. This combined with the fact that it has excellent services makes customers eager to use their planes thus increasing its market share.
Questions for Discussion
- Customers expect to get value for the money they spend. They expect to get what was communicated no less. One of the reasons Southwest has succeeded in the market compared to its competitors is because the airline operates exactly under its advertised standards hence leveraging on consumer expectations. Customers expect quality service from the staff alongside the comfortable flight which SW airline has delivered.
- Southwest has focused on providing key amenities needed by customers and not on those that are dispensable or rather providing amenities just because every other airline in the industry is doing it. One of the ways is through serving snacks instead of meals. It ends up providing the customers with enough sustenance until they arrive at their destination at a lower cost to the airline and therefore to the customer. Value is also ensured through its 737 narrow-body planes having no first and second class sections. At the same time passengers’ board on a first-come, first-served basis, a procedure preferred by most customers. Instead of electronics, they utilize humorous flight attendants at no extra cost.
- One of the main benefits to airlines of cutting costs is increased market share. This is because customers are always looking for ways to spend less and save more. This has made many airlines cut their costs thus bringing the average airline prices a little lower. The strategy of cutting costs may lead to increased profitability which is one of the major benefits. Once airlines begin reducing their expenditure, the ultimate result would be revenue exceeding expenses by a bigger margin hence increasing profits. This could enable the lowering of prices, leading to increased market share due to a large customer base. One of the risks of cutting costs is that the quality of services delivered will have to suffer because the airline still has to break even and/or make profits. Cutting costs may also lead to downsizing within the company hence making the majority lose their jobs.
- The airline’s current strategy is rooted in increasing customer benefits while decreasing costs. To increase revenue, every other airline has added their baggage fee with one airline- Spirit Airlines- recently announcing that it intends to charge customers to stow carry-on bags in the overhead cabin. Southwest on the other hand has chosen to side with customers and not take advantage of the revenue stream from charging for bags. The “bags fly free” ad campaign has communicated to customers that it is the only US carrier that does not charge for checking luggage thus truly differentiating it from its competitors (Lane et al, 2008). The increased market share translates to increased revenue thus making such a strategy sustainable.
Solutions and recommendations
The company should strive to maintain the lowest fares within the industry. As much as pricing is not the key differentiating factor right now, it still matters in the decision making of consumers making it a factor worthy of consideration. It should maintain open communication lines with customers, for example, through feedback to keep up with the ever-changing customer demands as well as know which areas it is doing well in and what areas need improvement.
At the same time Company’s success within the airline industry is dependent on their broad assessment concerning the needs and preferences of the targeted consumers. Segmentation presents vast opportunities to the company making possible the process of identifying specific consumer needs hence enabling the application of appropriate measures (Cravens and Piercy, 2009).
References
Cravens, D., & Piercy, N. (2009). Strategic Marketing. New York: McGraw Hill.
Drewniany, B. J., & Jewler, A. J. (2008). Creative Strategy in Advertising. Boston: Thomson publishers.
Kotler, P., & Keller, K. (2007). Marketing Management. Upper Saddle River, New Jersey: Pearson.
Lane, R. W., Kleppner, O., & Russell, T. J. (2008). Kleppner’s advertising Procedure. Upper Saddle River: Prentice Hall-Pearson.