Southwest Airlines Marketing Strategies - Essay Example

?Mission The mission of Southwest Airlines is to provide the top quality service, the delivery of which would take place with a lot of friendliness, warmth as well as pride among the employees who would work in tune with the spirit of the company. The company wants to provide every people of the world the opportunity to fly. The company has the intention of providing the employees with a work environment that would be a stable one and there would be equal opportunity for all the employees in the organisation irrespective of any cast, creed, religion, gender or sexual orientation to grow in their career and nurture their talents. The company encourages the employees to be creative in their own way while performing at the workplace. Goals and Objectives The company has the goal of ensuring that there is no compromise on the quality when the people fly in Southwest Airlines. The employees are to be trained in such a way that they always come forward to address the needs of the customers whenever required. Safety of the travelers during the flight time is also one of the aspects that South-western Airlines wants to ensure on a day to day basis. The company is popular for its low cost Airline services. South western intends to retain this strategy in the future course of its business as well. Thus it would want to increase the frequency of the flights and would try to maintain the prices at the low cost segment so that it is able to retain a larger market share (Lauer 218). SWOT Analysis SWOT analysis is an important marketing analytical tool that helps an organization to determine its key internal strengths, weaknesses and external opportunities, threats. Southwest Airlines is known as one of the leading low cost airlines. This part of the marketing plan will conduct a SWOT analysis for southwest Airlines. Strengths Southwest Airlines is one of the leading and successful low cost airlines around the globe. The organization implemented several key and effective business strategies in order to achieve potential competitive advantages and maximize the business profit. Marketing The organization has a strong General Counsel Department in marketing in order to review each and every marketing material in order to maintain potential target customer base. Effective promotional strategy helped the organization to create huge brand awareness among the target customers. Product The organization uses Boeing 737s as its products. The organization always tries to ensure the quality of the product. As all the planes are Boeing 737s; the turnaround, training and maintenance costs are contained. In addition to this, the organization has no meals, central reservations, baggage handling and assigned seats (Gittell 137). Financial The financial position of the organization is quite strong with 3 billion US dollar in cash. The organization generates 716 million US dollar in free cash flow in the tear 2012. Figure 1: Free Cash Flow (Southwestonereport 33) In addition to this, the organization returned 422 million US dollars to its stakeholder. Technology Integration of advanced and modern technology increased the business perform ace of the organization. In addition to this, utilization of several modern technological equipments in each and every business operation process helped the organization to reduce its business operation cost. Management It is important for a service providing organization to ensure healthy work place environment in order to enhance effective business performances. Southwest Airlines has an effective, fun loving, strong and employee oriented culture that helps the organization to focus on several business aspects. Synergy Effective customer service helped the organization huge customer preference. 28 years of long reliable and safe operation increase the brand loyalty of the airlines. In addition to this, the route systems of Southwest Airlines have grown significantly. Effective environmental sustainability training program in employees program helped the organization to maintain a strong relationship with stakeholders and publics (Renga and Mentges 72). In addition to this, effective green and sustainable business process helped the organization to make a good business sense. Competitive Advantages Effective market research, steady growth of the organization and well planned business strategies helped the organization to achieve significant competitive advantages within the saturated industry. Currently, the organization has 243 Boeing 737 planes. The airlines used to carry almost 50 million passengers in a year. Due to these effective business expansion and customer service management processes, the organization achieved several prestigious awards, such as Triple Crown Customer service award. The airline is maintaining constant business profit for long 24 years. Moreover, Southwest Airlines achieved top ranking in terms of Airline service quality surveyed by The National Institute for Aviation research. Cost Reduction The organization successfully adopted cost leadership business strategy. It helped the organization to provide quality service in low price (Hitt and Ireland 135). The airline successfully maintains the business operating expenses and costs per available seat at near about 15-20% below industry average. (Southwestonereport 25) Southwest Airlines integrated AirTran into southwest. The Southwest airlines incurred a total 183 million US dollars in AirTran integration. This integration helped the organization to reduce some business operation cost. SBU Analysis (Stars and cash Cows) BCG Matrix analytical tool has been implemented in this study to determine the performance of several products and services of Southwest Airlines. There are four elements in a BCG matrix, such as stars, cash cows, question marks and dogs. Airline services can be considered as stars due to strong market share and generation of large sum of cash. Cargo services are the cash cows due to its high return on asset comparing to the market growth rate. Weaknesses Several other competitors are trying to emulate similar business formulae of Southwest airlines. The organization is failing to implement differentiated business strategy in business process. In addition to this several competitors are offering shuttle services for the passengers. The organization failed to tap the unreached domestic market. These are the major weaknesses of Southwest Airlines. Product Life Cycle Analysis Product life cycle is an important marketing analytical tool that helps an organization to determine the competitive position of a product within its lifecycle. There are four stages in product life cycle, such as introduction, growth, maturity and decline. Looking into the business performance, customers’ preference and sales growth rate, it can be stated that the Southwest Airlines has reached to the maturity stage of a product life cycle. The organization is operating its business practices since 1972. The sales growth down went down due to intense market competition and aggressive business activities of competitors. Profit per unit of Southwest airline is falling due to differentiated demand of people. The organization implemented product and mix modification strategy. Southwest cargo service is the major example of it. Looking into these characteristics it can be stated that the organization reached to the maturity stage in the product life cycle. The organization is failing to introduce new differentiated service or products in this maturity stage of product life cycle. It is the major weakness of the organization. SBU Analysis (Question Marks and Sleeping Dogs) Car rental and hotel reservation services are considered as the question marks as these services have low market share and these services do not generate huge cash comparing to the organization’s other services. Question marks are the products that grow rapidly but generate lesser cash. The organization does not have sleeping dogs. Opportunities This part of the study will help the organization to determine the external environmental opportunities that can help the organization to achieve competitive advantages. Social Southwest airline is popular for its high customer services in low price. In addition to this, effective customer and employee friendly business models help organization to develop an effective brand value. Its high brand value motivates the job seekers to be a valuable part of prestigious southwest family. On the other hand, effective customer service, high in-flight safety aspect and significant customer engagement process increased the customer loyalty. It is true that the organization is operating within a service providing industry. Therefore, it is important for the organization to make sure high quality customer services in economic price level to moderate the degree of market competition. However, the organization succeeded to fulfill the satisfaction level of the target customers. Technological The organization uses highly modified and advanced Boeing 737 aircrafts. It helps the organization to abolish the burden of extra training and development programs for the pilots. In addition to this, technological advancement and availability of modern technological tools in the country helped the organization to implement high technology in business process that helps the organization to minimize overall business operation cost. Threats Several economic challenges, legal or political barriers and intense industry competition can affect the business performance of the organization. Economic It is true that the organization is considered as one of the leading and popular low cost airlines. Recent financial crisis and economic slowdown affected the purchasing power of people. However, the organization used to implement economic pricing strategy for the ticket prices based on cost leadership strategy. But, constant hike in jet fuel price is making it difficult for the organization to continue with the constant ticket fares for the target customers. Legal or Political Several governmental regulations regarding safety, environmental sustainability, increase in facility tax rates and wage distribution for the employees can create several legal barriers for Southwest airlines. Competition The airline industry is becoming highly competitive. Several airlines, such as United Airlines, Jet Blue Airlines and Virgin America airlines are trying to provide high quality in-flight customer service in low cost in order to achieve competitive advantages. Most importantly, several organizations are adopting the similar business model of the Southwest airline. This aspect increased the degree of industry rivalry for the organization (Hill and Jones 172). Grand Strategies Southwest Airlines is the most leading and popular low cost airlines due to effective implementation of cost control process and cost leadership strategy in the business operation processes. Apart from all these, the organization also implemented several valuable business growth strategies that helped the airline to maximize its market share. Market Penetration Southwest airlines try to provide several differentiated benefits and services for its target customers in order to encourage them to avail the advantages and benefits. In addition to this, several effective differentiated service portfolios attract the customers to experience the journey with Southwest Airlines. It is true that the industry is becoming highly competitive as several international and domestic players are entering into this industry to achieve competitive advantages. The organization always tries to find the major weaknesses of the competitors to develop more differentiated business strategies (Goel 134). These strategies help Southwest Airlines to penetrate the target market. Market Development In spite of its slow and steady growth rate, Southwest Airlines always tries to find out new target customer group. In addition to this, Southwest Airlines also provides special offers for the first time fliers to develop loyal customer base. Product Development Southwest Airlines always tries to ensure safety of the customers. Therefore, the organization always tries to use modified and advanced Boeing aircrafts. Introduction of new aircrafts after certain years encourage the passengers to fly with Southwest Airlines. Recently, the airline is seeking for addition distribution channel as the organization has several differentiated and diversified service portfolios (Shaw 100). It is rightly to do so as it can help them to bring efficiency in each and every business process. Diversification The organization may consider several valuable diversification strategies, such as horizontal diversification and concentric diversification. There are several opportunities for the organization to diversify its business practices. The organization can go for international flights services. Southwest Airlines already adopted diversified business strategies, such as introduction of cargo services, hotel reservation services and car rental services. Horizontal Mergers Southwest airline is planning to fully integrate the AirTran airways it within 2014. The organization is trying to achieve 400 million US dollars in net. The organization made successfully acquisition in recent past. Acquisition of Muse Air, Morris Air and ATA Airlines can be considered as an effective business expansion strategy of Southwest airlines. Morris Air influenced by the business model and business strategy of Southwest Airlines in the year 1984. The growth of Morris Air influenced Southwest Airlines to plan for acquisition. Southwest Airlines made an announcement in the year 2008 that the organization is going to buy the remaining assets and operating certificates of ATA airlines. This specific transaction did not include facilities, employees or any aircraft. Southwest airline is going to use the employees and supply chain network of AirTran for the operation of AirTran Airways in the year 2014. Southwest airline always ensures high business operation sustainability. In addition to this, effective value for the employees and customers help the organization to maintain its high reputation and brand image in the airline industry. Segmentation Southwest Airlines used to focus on different market segment of target customers. In terms of demographic segmentation, Southwest Airlines generally targets the customers of all ages. Effective customer service and implementation of cost leadership strategy helps the organization to create effective brand preference among the people of middle class, upper-middle class and upper class income groups. In terms of geographic segments, Southwest Airlines used to create brand awareness among people of several potential regions. Adequate customer service and valuable business strategies help the organization to attract several people of several regions to choose Southwest Airlines as major mode of journey. In terms of psychographic segmentation, the organization successfully attracts the people who prefer high quality customer service in economic price level. Target Markets `Medium frequency and high frequency business travelers are the major target customers of Southwest Airlines. Business executives who prefer 2-3 roundtrips per month are the major target customers. In addition to this, both male and female professional aged between 24 and 55 years used to prefer Southwest airlines due to effective differentiated customer services. The customers that used to concern about price and quality are also potential target customers of Southwest Airlines. It is discussed earlier that, the organization is trying to determine the major weakness of other competitors within the industry. This strategy helps the organization to develop new strategy so that the organization can attract the unhappy customers of other airlines. The organization introduced several differentiated services, such as car rentals and hotel reservations. These functions will help the organization to attract leisure family travelers. Effective and low turnaround time between two planes influences the business travelers to choose Southeast airlines as preferred mode of journey. Cost and time effectiveness in business operation process helped the organization to achieve potential competitive advantages within the airlines industry. Positioning Positioning of a product or service is highly important for an organization as it helps the organization to introduce the products and services based on current market demand and the needs of target customers. Southwest Airlines is the only low fair, high frequency, short haul and point to point aircrafts in America. The organization committed in its mission statement that the organization will maintain fun loving services in aircrafts to give high value to target customers. In addition to this, low and effective turnaround time helps Southwest Airlines to target the busy customers who used to travel twice or thrice in a day. The organization always implements cost leadership strategy in the business processes in order to overcome threat of industry competition. Most importantly, this cost leadership strategy helps the organization to reduce the business operation cost and implement competitive pricing strategy. Moreover several differentiated services for target customers, extra benefit for existing members and first fliers, and discounted ticket fairs in several occasions help the organization to satisfy the needs of several target customers. Southwest airlines always try to ensure the safety of the customers (Giachetti 154). The organizations always use modern and technologically advanced aircrafts in order to ensure the safety of the passengers. These favorable aspects help the organization to target price and quality concern passengers. Four P’s of Marketing Mix Framework Four Ps of marketing mix is considered as one of the important strategies marketing tool that helps an organization to develop effective product, price, place and promotional marketing strategies based on the nature of target market and market position of the organization. Products & Services The product or the service that SWA provides would be the airline services by the airways carriers. The company at the present scenario uses the Boeing 737 for the transportation of the customers. Since the company provides low cost air travel services during the time of the flight there are no facilities for any luxury facilities like service of the high quality of food or other amenities. However, the safety of the customers is also another issue that the company considers to be of utmost importance (Lovelock 79). The tangible parts of the service that the company provides are the assistance by the flight attendants who generally serve the water and ensure the basic safety requirements. The company incorporates a sense of spirit and warmth in the employees while they would deliver these services. There is a scope of segmentation in the services that the company provides. Pricing The price at which the company would sell its services would depend on a large number of factors. If the company has considerable market share then it would have a great amount of control over the pricing of the products. The company would also maintain a level of profit in the price that the company sets (Kotler 224). The costs that the company incurs would also be incorporated in the price. All these would be applicable for SWA. South-western has cut down on the luxuries that are generally offered by the other airlines. In this manner it has been able to set the price of the services at a much lower level compared to the average market prices. This strategy has helped the company in getting the market share which in turn has contributed to the revenue of SWA (Dubrin 132). The company has also provided heavy discounts in order to capture the market of the price sensitive flyers. Promotion Mix The company has been incurring huge expenses in order to promote the brand. The modern media is being used for advertisement. The company is in a laid back position in the use of social media as a tool for promotion. This is a form of advertising that the company is working on. The company through its promotion strategies makes the young people and the user of social media aware of the various low cost pricing packages that the company has. To participate in the social causes and issues like any kind of natural disaster rescue operations has been one of the strategies of the brand to maintain good public relation and to promote the brand to the general public (Evans, Stonehouse and Campbell 23). Placement Place is the point at which the service are delivered by the airlines. It is important for SWA to indentify the locations between which the flights will operate. The company distributes their tickets through their website. Along with that the tourism management companies would also act as the channels for the distribution of services of South-western airlines. The airline services are provided to almost 64 cities and thus the entire market of the US can be captured. The holiday destinations have also been considered apart from the major cities of the US. Works Cited Dubrin, Andrew. Essentials of management. Stamford: Cengage Learning, 2008. Print. Evans, Nigel, George Stonehouse and David Campbell. Strategic management for Travel and Tourism. New York: CRC Press, 2012. Print. Giachetti, Ronald. Design for Enterprise System. New York: CRC Press, 2011. Print. Goel, Sharad. Airline Service Marketing. New York: Pentagon Press, 2009. Print. Hill, Charles and Gareth Jones. Strategic marketing Theory. Stamford: Cengage Learning, 2012. Print. Hitt, Michael and Duane Ireland. Competing for Advantage. Stamford: Cengage Learning, 2008. Print. Kotler, Philip and Kevin Lane, Keller. Marketing Management. Englewood Cliffs, NJ: Prentice Hall. 2006. Print. Lovelock, Christopher H. and ?Jochen Wirtz. Services Marketing – People, Technology, Strategy. New Jersey: Prentice Hall. 2011. Print. Shaw, Stephen. Airline marketing and Management. London: Ashgate Publishing, 2012. Print. Southwestonereport. Financial Position. 2012. Web. 25 Nov. 2013. . Lauer, Chris, Southwest Airlines. London: ABC-CLIO. 2010. Print. Gittell, The Southwest Airlines Way. UK: Tata McGraw-Hill Education. 2004. Print. Renga, A. and Mentges, M. Pacific Southwest Airlines. Arcadia Publishing. 2010. Print. Read More