Product Market Analysis
Product/Service Mix
With an experience in the airline industry of over four decades, Southwest Airlines has polished its low fare flying policy. Economy flying across various United States destinations is SA’s main product that has become an eponymous for the company (Southwest Airlines official website, n.d.). Its product mix includes rapid check ins, two free checked pieces of luggage under specific sizes and weight, no reservation policy and a friendly crew that engage travelers during their flights, which is SA’s personal signature (Southwest, 2014). Southwest product differentiates from other airlines’ products because it comprises the largest Boeing fleet in the world, allowing it to operate around 3900 departures daily in the peak seasons (Southwest Airlines official website, n.d.). In addition, it connects customers with other flights operators serving international destinations, doing so with low budgets and effective operations aimed at optimizing time (Southwest, 2014).
Target Market
Southwest Airlines serves customers who travel across United States, targeting budget travelers who need to reach domestic destinations, traveling at the most convenient prices and having fun while doing this (Baker, 2014; Southwest, 2014). The airline company targets consumers who travel for business, offering the Corporate Travel & Groups product that guarantees commercial and gainful agreements, or business select program, which rewards travelers with drinks or points for the miles they accumulated with SA (Southwest Airlines official website, n.d.). It also targets the passengers who travel for pleasure, offering Southwest vacation product or Southwest gift card, suited for celebration or gift giving purposes (Southwest Airlines official website, n.d.).
Positioning
Positioning defines a firm’s chosen competitive strategy comparatively with its rivals, which combines its resources for delivering a unique and unifying experience for meeting the needs of the targeted population (West, Ford & Ibrahim, 2014). Southwest Airlines is not solely positioned as a low – cost carrier, but also as a time-efficient airline that expresses a “Fun-LUVing Attitude” (Southwest, 2014, p. 50). Its mix of internal resources and capabilities, such as being on time due to time reducing boarding and flying operations, no – frills, point – to – point destinations, friendly team or no sitting reservation creates a unique positioning for the company.
External Situation Analysis
Main Competitors
Southwest Airlines is US’ most successful low – cost carrier and the largest domestic airline (Southwest, 2014). Nevertheless, it is not without rivals, as many airline companies copy the Southwest model, aiming to capture SA’s market share. Its main competitors are JetBlue Airways, Virgin America or American Airlines. JetBlue Airways is also a low-fare carrier specialized in cheap point- to – point flights, allowing economic flights due to the fact that it has the newest fleet in the industry, which optimizes its fuel consumption (Tarver, 2015). Virgin America recently joined forces with Alaska Airlines and combined their services that include on-board high tech entertainment, food & drinks and a loyalty program that challenge Southwest Airlines especially in its Californian routes (Martin, 2016). American Airlines is a reputable international carrier, who nevertheless struggles to maintain its position as the second largest airline in the world by booking passengers and “reducing cost per available seat miles”(Tarver, 2015).
Other than the direct players in the airline industry, Southwest’s competition comes from the non – airline sector, hence the substitute products are considered a major threat for SA. The company initially considered that its competitors were the drivers or individuals traveling by bus or train rather than using its services (Hill, Schilling & Jones, 2015).
Market Environment
A series of industry – related factors can positively or negatively impact Southwest’s activity. Fuel prices can affect the demand and implicitly the carriers’ practiced fares. In an unstable economy the fuel price impacts the operational costs and the airline industry is vulnerable to such changes that might affect its performances by determining companies to raise their ticket prices in order to cover expenses (Wittman & Swelbar, 2013). On the other hand, a rise of fuel prices negatively impacts all carriers, including the land carriers, limiting the threat of substitute products. Nevertheless, unstable economies can impact the general travel, by decreasing corporate and individual consumers’ miles, which could negatively affect SA. However, SA is known for the Southwest effect, which refers to the decrease of fares as the passenger traffic increases (Wittman & Swelbar, 2013).
Environmental regulations that require strict fuel efficiency to reduce the greenhouse emissions positively affect the organization, as it has the opportunity to save energy and the cost of energy and to recycle waste, saving resources by prolonging their life cycle.
The dependency of a sole supplier, as it is the case of SA whose fleet is fully composed of Boeing airplanes, can have both positive and negative effects on the company. It has positive effects because it optimizes the production costs and it provides an integrated flying experience. It has a negative impact because the supplier has a big bargaining power, making SA vulnerable to quality or price changes.
External Environment
Other external factors that can affect the company include:
political aspects, such as taxation of commercial activities or higher taxes for pollution can affect the company’s performances;
economic aspects, such as the rise of oil and gas prices or economic crises and instabilities hamper SA sustainability;
social factors – the population growth implies a bigger market for SA to attract its market share; low cost fares attract customers that would otherwise traveled by train, bus or car;
technological aspects – the high speed internet availability allows more passengers to purchase tickets online and check online, making the office operators obsolete; consumer reviews can create buzz around the company, or negative publicity, in case of negative feedbacks;
Marketing Mix
Product
The product that Southwest Airlines commercializes is, as described above, the low-fare friendly flying across United States, with special packages designed for business travelers and for vacation seeker clients. It serves 78 domestic airports, reaches 98 destinations, and carrying over 100 million travelers annually (Southwest official website, n.d.). A major aspect of its product is the fact that its flights are operated in downtown rather than intercontinental airports, in order to reduce the travel time required for reaching the large airports located outside the city and the waiting time associated with the large airports (Hill, Schilling & Jones, 2015).
Price
The flight tickets are cheap and convenient. In addition, the price of a ticket allows free luggage check-in for the first two bags and permits the rescheduling of flights for free (Martin, 2016). The airline also offers discounts for early booking (Southwest Airlines official website, n.d.). The price per seat miles averaged at 13.76 USD in 2014, as compared with Americans Airlines 15.84 USD (Hill et al, 2015).
Placement
The company’s headquarter is in Dallas, but its planes fly across 40 states in US and it is 100% reliable on the online reservation system, with no travel agents and no other reservation system than their own website (Southwest Airlines official website, n.d.). Furthermore, starting 2016 the company operates international flights to nearby destinations such as Aruba, Mexico City, Bahamas or Costa Rica (Southwest Airlines official website, n.d.).
Promotion
Its promotion strategy include direct promotion approaches that refer to the direct contact with the customers during the ticket purchase or during the flight, which gives SA’s crew the opportunity to engage their travelers in short and vivacious games, singing or rapping, creating memorable travel experiences (Forgione, 2014). Its promotion approach also include classical advertising strategies, social media and internet marketing or sponsorship for sport teams (Hill et al., 2015). “Bags Fly Free” campaign or the catchy slogan that highlights the different fare structures, such as “Wanna Get Away”, the cheapest, for early purchase, “Anytime”, communicating the free rescheduling or “Business Select”, promoting priority boarding and the frequent flyer opportunity (Katzen, 2015).
Environmental Sustainability
Southwest Airlines is committed to protecting the planet by eliminating waste, reducing its carbon footprint, saving resources, recycling, diverting materials and reintegrating them in creative, green solutions (Southwest Airlines official website, n.d.). The results of its environmental initiative include saving 73,688,161 MWh in 2015, improving its impact with 29.3% since 2005; the company continues to strive to become more sustainable by creating lighter fleets, purchasing renewable jet fuel starting with 2018 (Southwest Airlines One Report, 2015).
Its environmental sustainability is communicated in its shareholder and investor communication, but the communication towards its clients or other stakeholders focus on other aspects, such as the free luggage, free rescheduling and other services rather than its environmental efforts. The insufficient communication of its environmental effort towards the clients might not seem as an error, giving the fact that organizations must primarily seek to comply with the environmental laws that regulate their business. However, considering the fact that customers are becoming increasingly concerned about environmental sustainability and develop an environmental consciousness and behavior, not communicating its sustainability strategies and efforts implies that SA lacks the opportunity to further optimize its pro-environmental actions. The company could engage its clients into its environmental protection plans, by determining them to change printed tickets for electronic tickets and save paper, for instance (Sarkar, 2012).
Other initiatives that the company could adopt for further improving its environmental sustainability could focus optimizing operational efficiency by reducing the onboard weight, which would imply less fuel consumption, hence less carbon footprint (Sarkar, 2012). The company could initiate programs for reducing the normal fare per route for the passengers who choose to travel with only one small luggage, or providing sustainability points that could add up to free travels for specific destinations for encouraging like this the light traveling. The company could also reduce the flight hour and eventually retire the old fleet that is more likely to impact the environment, replacing it with newer and more sustainable airplanes. Another trend in energy saving that the company could adopt for reaching an improved environmental sustainability would be to use economic light bulbs or solar energy for its on-board lighting for the night flights (Sarkar, 2012).
References
Forgione, M. (2014) Southwest, other airlines take safety talks to new, hilarious heights. Retrieved from http://www.latimes.com/travel/deals/la-trb-air-safety-instructions-20140417-story.html.
Hill, C.W.L., Schiling, M.A. & Jones, G.R. () Strategic management: Theory: An integrated approach. Boston: Cengage Learning.
Katzen, B. (2015) Southwest Airlines. Oregon: University of Oregon Investment Group.
Martin, H. (2016) Southwest Airlines’ California dominance to face challenge from Alaska – Virgin merger. Retrieved from http://aviationblog.dallasnews.com/2016/05/southwest-airlines-california-dominance-to-face-challenge-from-alaska-virgin-merger.html/.
Sarkar, A.N. (2012) Evolving green aviation transport system: A holistic approach to sustainable green market development. American Journal of Climate Change. 1: 164-180.
Southwest (2014) Without a heart, it’s just a machine. Dallas: Southwest Airlines.
Southwest Airlines (n.d.) Official website. Retrieved from http://investors.southwest.com/our-company/corporate-profile.
Tarver, E. (2015) Who are American Airlines’ main competitors? Retrieved from http://www.investopedia.com/articles/markets/092315/who-are-american-airlines-main-competitors.asp.
West, D., Ford, J. & Ibrahim, E. (2015) Strategic marketing: Creating competitive advantage. Oxford: Oxford University Press.
Wittman, M.D. & Swelbar, W.S. (2013) Evolving trends of U.S. domestic airfares: The impacts of competition, consolidation and low – cost carriers. Cambridge: Massachusetts Institute of Technology.
