Southwest Airlines
Abstract
This research paper is aimed at getting into depth about the operations of the Southwest Airlines, how it accomplishes it goals and challenges its facing when competing with its competitors. The paper also covers various techniques used by the company to promote its services and offer better services. I will cover the four Ps of marketing used by the Southwest Airlines in its operations i.e. product, price, place and promotion. The four Ps of marketing are very essential for any business to succeed and make profits because they are decision making parameters. The introduction part will give a lime light about the Southwest Airlines and briefly how it operates. Then the main body covers all the techniques used and the four Ps of marketing explained. Lastly, there will be a conclusion of the paper which looks into the future of the southwest airline and challenges its facing.
Introduction
Southwest Airlines is one of the low-cost airlines in America which has got its headquarters at Dallas, Texas. It has been one of the recognized airlines in the U.S. airline industry. By the year 2009, it was the largest airline in the world measured by the number of passengers carried per year. Up to date, Southwest Airlines is the third largest commercial airline in passenger fleet of aircraft among the rest of the world’s major commercial airlines. For twelve consecutive years, from 1991 through 2002 Southwest Airlines has been rated among the top five major carriers in the world by the department of Transport (DOT). This is attributed by its on-time performance, minimal customer complaints and best baggage handling (David, 2006). Other similar companies are working very hard to place first in the annual performance but Southwest Airline is the only airline to, ever hold the triple crown for its good annual performance. Southwest features in the magazines as the most preferred company and also among the 100 best companies to work for. In 2002, a southwest airline was placed first among airlines for its best services and customer satisfaction. It was also ranked first for the 30 best stocks since the year 1972. Southwest has been operating on the profit margin for over thirty years.
Main body
Southwest Airlines main goal is to maintain its lead as the best commercial airline in the world in terms of customer satisfaction, on-time operations and good luggage handling. To accomplish this, Southwest airline adopts various sales promotion methods to sensitize people on the services offered, times of travel and terms and conditions that customers must adhere to enable the airline serve better. One of the techniques used by the airline to accomplish its marketing objective is advertising. This technique is important in reinforcing the high quality services offered by the airline company and increase sales. If a company offers low priced services, advertising is used to compensate the difference by ensuring more sales are achieved and hence bigger profits accrued. Under the marketing mix, pricing is divided into two categories i.e. price determination and administration. Price determination is the activities that are considered to arrive at a specific price of a service. To fix their low prices fares, Southwest considered its competitors and the need to maintain its position in the airline industry. Price administration refers to attaching basic prices to particular sales situations like special sales, location of the service or position held by distribution members. Advertising is the means through which a certain message is communicated to prospective customers and hence money must be spent in the same. Advertising is always cheap since it uses mass media to reach customers and also it can use visual and emotional devices to increase persuasiveness of the message to targeted people. (Batra, n.d). In any market, promotion is highly recommended to ensure that the services or the goods in the market are recognized by the potential customers. Therefore efficient communication is needed by the use of efficient means to advertise the service. Southwest airlines uses electronic media like television, newspapers, comic book, revenue magazine which is the performance marketing tool, NBA all star sweepstakes, promotional campaign, offering discount to customers and offering videos on air etiquette. Southwest’s ads are aimed at convincing the customer that what it offers is the best and offers the real value to them. It aggressively uses internet to market its services and it was the first airline to create a home page on the Web. This worked well for the southwest in that those who visited the site were turned to be buyers. Fifty per cent of its revenue is generated through online booking.
Southwest airlines employ a number of tactics in order to maintain its position as the best airline in the world and maintain its profitability. Its competitors are loosing customers on daily basis while southwest airlines gains flights daily. A southwest airline carries the most passengers in U.S. (Brancatelli, 2008). Southwest airlines appear to know something that its competitors do not. It cuts down its costs by keeping things simple and consistent. This also helps to maximize assets and it helps manage customer expectations. It uses the following tactics to remain on top of the market; one plane fits all where southwest airlines uses only one type of aircraft i.e. the Boeing 737 series unlike its competitors who uses different types of aircrafts. This save southwest maintenance costs in terms of spare-parts inventories and training mechanics. This also allows for flexibility without involving costly disruptions and reconfigurations when using a different series of aircraft on a network. Southwest airline uses a tactic referred to as point-to-point flying where their crafts fly non stop between two points. This minimizes time a planes uses on ground and therefore reduces delay hence preferred by the most customers. Its competitors uses what is called hub-and-spoke system where a jet collects passengers from a central position and distributes them to different destinations and vice versa. This automatically results in time wastage and accruing unnecessary costs. This tactic enables the southwest airline to be higher in completion than its potential competitors.
Another technique that ensures that southwest airline remains on top is its simple in-flight service in which there is a decent coach cabin that spacious compared to that of its competitors. Southwest airlines do not offer meals but only beverages and snacks. This saves time to clean, unload a flight and restocking the plane which enables southwest airlines jets to fly one extra trip per day which translates to extra revenue. No frills, no fee is another tactic where southwest airline sells one-way fares and their prices are kept low. This cuts the costs down as complex fares are expensive to manage. They ensure that the prices are inclusive i.e. southwest doesn’t have extra charges like fuel, standby travel and allows for two luggage check free. Since southwest airline use identical jets, travelers are already familiar with the services they will get when they purchase a flight.
Strong management is another tactic employed by the southwest airline to remain on top of its competitors. Its management has avoided practices that could raise costs or complicated the normal travelling process. Management positions are lean but productive where top management of southwest generated ten times more profit than their counterparts from other network carriers (Brancatelli, 2008). Southwest airline has strong employees union which ensures that there is a happy workforce. Eighty seven per cent of its employees belong to a certain union. They have never had any strike and more so southwest staff is the highly paid. It has 30% fewer employees per craft than the competitors and hence lowest non-fuel cost per seat mile. All this is aimed at increasing revenues accrued by the southwest airline and compete efficiently with other network carriers. Southwest airline ensures that the increasing oil prices do not affect the cost for running the airline as 40% of the costs of an airline are brought about increasing oil prices. It has accomplished this through its aggressive fuel-hedging program which enabled it to save approximately $3.5 billion. It paid $1.98 a gallon for fuel which was about a dollar less than its competitors in the first quarter. Southwest airline is flexible to changes in oil prices through the use of the fuel-hedging program. Southwest has proven it can survive every airline-industry downturn, grown fast and profited immensely when the business resumes to normal.
According to David (2006), the major goal at southwest is the major goal which pushes them to keep costs low and quality high. The airline’s operations are safe, frequent, low cost flights that ensure that the passengers get to their destinations on time and often close to their destination more than its competitors who use larger airports far from the cities. Southwest believes that skills can be taught but willingness to grasp the concepts cannot (Hill, & Jones, 2009). Its motivates its employees to work hard by offering incentives where all employees are covered by a profit sharing plan which translates to the more the employees work, the more profit southwest makes and the more they become rich. At southwest, you will find a pilot together with the attendants assisting passengers into the plane unlike in other network carriers where a pilot cannot be involved in such an activity. Southwest does this to get the plane off the ground as quickly as possible because they are aware that a plane cannot make money while on the ground. This flexible and inspired workforce has led to higher productivity reduces the need to employ more employees. This strategy has helped them a lot in maintaining their caliber in the airline industry and to withstand the stiff competition from the like companies. However, in the year 2008, southwest faced a major challenge when its competitors network airlines which include American and United decided to reduce their costs. They did this through whatever means possible like going through bankruptcy which allowed them to record profits in some area while competing directly with the southwest airline. In order to attract travelers, southwest found it worthy to update its services and offering internet connections to its customers on board (Topics.nytimes.com, 1).
The marketing mix strategy is greatly used in the southwest airline for better management and for decision making. It refers to how the four Ps of marketing i.e. product, place, promotion and price are inter-related to produce a meaningful result that targets the potential customers. Southwest has taken into consideration all these parameters into consideration to ensure its business stands-out and gives its competitors a hard time in the market. Skills are usually required to ensure that the four Ps are blended properly to achieve optimal results. For increased revenue to be achieved, experimenting on the market status and conducting research are essential when coming-up with a successful marketing mix. By realizing that marketing mix is a combination of tools which are used to satisfy customers and achieve a company’s goals, when used well result in increased revenue and remain on the profit margin for a long duration of time no matter how the dependent products in the market fluctuates.
Conclusion
Southwest airline future seems bright. Currently, it provides services to only sixty three cities which mean there is an opportunity for tremendous expansion. The only impediment is that its competitors have learnt all the tactics that southwest uses and they are also using them to gain consumers. Although southwest has always used a conservative tactic to remain on top in the market, this might work against it because its competitors are using faster growth means for competition. Many cities have requested southwest airline to start operation in their areas due to the good services they offer. However, when it fails another company will take over. For any business to sustain itself in the market, it must observe the four Ps of marketing i.e. product, price, place and promotion. This marketing mix enables a business to compete well and make profits continuously without fluctuations despite the changes of the dependent commodities. The four Ps are the parameters the managers use to make marketing decisions relating to the internal and external constraints of the marketing situation. The goal is always to make decision that centers the Ps and result in increased revenue.