Marketing Management

July, 2011

Agenda Agenda

• About the company • History• Facts• Mission• Products and Services• Price• Marketing Strategy• Distribution Strategy• Promotions• Recognitions• Competitors• Conclusion

About The Company

•Gary Kelly is Chairman of the Board, President & CEO

A publicly traded company (NYSE: LUV)

Headquartered in Dallas, Texas

35,000+ Employees, 82% unionized

•The United States’ most successful - Low-fare, high frequency - point-to-point carrier - No Frills airline (no meals, no in-flight movies)

•Business Sectors; - Passenger - Freight - Other

History

In 1971 by Rollin King and Herb Kelleher founded the company with one simple notion “"If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline."

Southwest Airlines commenced Customer Service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities-Houston, Dallas, and San Antonio and in 1979 flew to all the major cities in Texas. In1989 - Exceeded the billion-dollar revenue mark and became major airline

http://www.southwest.com/html/about-southwest/index.html?int=GFOOTER-ABOUT-ABOUT

http://www.blogsouthwest.com/blog/flashback-fridays-southwest-airlines-early-san-antonio-days

FactsFacts

•Largest U.S. carrier based on domestic

passengers carried in 2010.

•Fly more than 88 million passengers in 2010

•1st major airline to offer “ticketless” travel

•1st major airline to have its own web page 1st airline

to offer online booking.

•1st airline to offer satellite-enabled WiFi

•As of Sept 2010, Southwest.com is largest airline

site in terms of unique visitors

•As of June 2011, Southwest operates 552 Boeing

737 aircraft among 72 cities in 37 states

http://www.swabiz.com/html/about-southwest/history/fact-sheet.html

2010 Financial Statistics2010 Financial Statistics

• Net income: $459 million • Net income, excluding special

items: $550 million • Total passengers carried: 88

million • Total RPMs: 78 billion • Average passenger load factor:

79.3 percent • Total operating revenue: $12.1

billion

• Southwest Yearend results for 2010 marked Southwest's 38th consecutive year of profitability

http://media.corporate-ir.net/media_files/irol/92/92562/D10K.HTM

http://www.southwest.com/html/about-southwest/history/fact-sheet.html

Mission

http://www.southwest.com/html/about-southwest/index.html?int=GFOOTER-ABOUT-MISSION

Customer Service

http://blog.marketingmetricshandbook.com/2010/02/customer-satisfaction-and-retention/

http://www.southwest.com/html/customer-service/index.html?int=GFOOTER-CUSTOMER-CUSTOMER-SERVICE

“We like to think of ourselves as a Customer Service company that happens to fly airplanes”

Customer Service

In 2010, Southwest Airlines led the U.S. Department of Transportation Customer Satisfaction ranking. Only 27 customer complaints per 100,000 customer boarded

http://www.southwestonereport.com/people_cu.php

Products and Services

•Fly to 72 cities in 37 states

•Fly 3400 flights per day

•Fly more than 88 million passenger in 2010

•Major airline that provides;

-low-fare

-short-haul

-high-frequency

-Point to point service

Map - DestinationsMap - Destinations

•*Service to Newark, NJ began March 27, 2011.*Service to Greenville-Spartanburg, SC and Charleston, SC began March 13, 2011.

http://www.southwest.com/html/cs/travel_center/routemap.html

Products & Services

http://www.southwest.com/html/air/corporate-travel.html

Allows members to get direct access to the front of ticket counter and security lanes

No fee on changing the flight

Low cost option allows customers to obtain better boarding position

Get priority lane access and priority boarding

Allows to check in one stroller, one car seat free of charge, in addition to two free checked bags.

At minimum charge provides satellite based internet service

Products & Services

A forum where you share your stories and travel advice, rate hotel, restaurants and more..

Application for desktop and iPhone, delivers exclusive, limited-time-only airfare deals on select flights

Small pets are allowed in flight cabin at $ 75.00 fee

Weekly email that provides information on all deals including air, hotel, car rental

App for Blackberry and iPhone allows to access same feature as southwest.com

Provide customizable leisure vacation packages

Services for business travelers

http://www.southwest.com/html/travel-extras/business-select.html

•Priority Boarding

•Premium Drink

•Extra Rapid Rewards Points

•Fly By Priority Lane Access

Online tool that allows business travelers to plan, book, and purchase a Travel on Southwest Airlines

2012 Services…2012 Services…

•Acquisition of AirTran Airways, which closed May 2, 2011 for about 3.2 billions

•After complete integration mid-2012, Southwest will expand service to 38 additional destinations

•Will offer direct international service to Mexico and Caribbean and also Atlanta, largest US city not served by Southwest prior to the acquisition Southwest fleet

•Southwest Airlines will add AirTran Airways's 88 Boeing 717 aircraft to their fleet totaling 640 fleet

Southwest Effect

•This term was coined to describe the boost in air travel by DOT in 1993.

•The Southwest Effect - When Southwest starts flying into the new city;

-Air fare drops

-Increase in air travel

-It’s Business Model is major inspiration to other low cost carriers

http://en.wikipedia.org/wiki/Southwest_Airlines#Southwest_Effect

http://www.blogsouthwest.com/news/a-word-southwest-effect-david-m-rowell-aka-the-travel-insider

Southwest Effect

http://www.gadling.com/2010/05/21/southwest-airlines-cheap-fares/

Brand Loyalty

- Low-priced fair

- “Southwest Spirit” of Employees

- Employees committed to “doing the right thing”

- Customer-friendly policies on handling complaints

"Our people are our single greatest strength and most enduring long term competitive advantage."

Gary Kelly, CEO Southwest Airlines

http://www.southwest.com/html/about-southwest/index.html

Pricing Strategy

http://ostpxweb.ost.dot.gov/aviation/airlinebusinessmodel.htm

•Branded themselves as low fare-airline

•Charge the lowest possible fare

•Operates on Point to point not hub-spoke model

•Flies only one type of fleet Boeing 737 so saves money

•20-minute turnaround time so high aircraft utilization

•No seat assignments

•No meals – no frills, snacks only

•No electronic entertainment

•Small airports, back gates

•No seat assignments

•No baggage transfers to other airline

•No connection with other airlines

•Paperless tickets (e tickets)

•Single-class of service so more seats are used

Marketing Strategy

• First-time Fliers • Business Travelers (Point – to – Point) • Dissatisfied customers from full-service

airlines • People who travel by Road, Rail • Cost and value conscious consumers• Small business executives• Travel short distances• Prefer low cost fares

Target Market

Distribution StrategyDistribution Strategy

• Direct marketing – - Via Internet – 84% of tickets in 2010 sold

thru Southwest.com - Phone - No travel agents - Do not use any other reservation system

websites - Does not offer joint fares with other

airlines

• Online booking tool for business travelers - SWABIZ.com – allows business

travelers to plan, purchase, and track business travel thru their companies web page.

Social Media and Internet MarketingSocial Media and Internet Marketing

http://swamedia.com/

PromotionsPromotions

Rapid Reward program to earn free air ticket

Discount on air fare for 10 or more people traveling together

Provide customizable leisure vacation packages

Ad-Campaigns

Online Advertisement

DING - Application for Desktop, iPhone and Blackberry that notifies the customer of hot limited-time-only airfare deals on flights

Click N Save - Weekly email to Inbox that provides travel deals on Southwest flights, car rentals, hotel offers, cruises and Southwest Vacations

Advertising SlogansAdvertising Slogans

• “Just Plane Smart”• “THE Low Fare Airline”• “Symbol of Freedom”• “Wanna get away?”• "The Somebody Else Up There Who Loves You" • "Grab your bag, It's On!“• “fees don’t fly with us”

SponsorshipsSponsorships

http://www.southwest.com/html/southwest-difference/community-involvement/sponsorships.html

"Official Airline" Sports Team Sponsorships"Official Airline" Sports Team Sponsorships

SponsorshipsSponsorships

http://www.southwest.com/html/southwest-difference/community-involvement/sponsorships.html

"Official Airline" Sports Team Sponsorships"Official Airline" Sports Team Sponsorships

•http://www.southwest.com/html/southwest-difference/community-involvement/sponsorships.html

PartnershipsPartnerships

Southwest Airlines to Increase Service To Mexico With Volaris Partnership

http://swamedia.com/releases/05fbe1c7-4826-25f5-1b8c-19004dc2ea77

http://swamedia.com/releases/d040b542-390e-0611-e12c-5c004dcbfcfb

http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=152637

Southwest Airlines is teaming with the Student Conservation Association (SCA) for the Conservation In Action Tour

Partner with Sea World in their 40th Anniversary celebration. This sweepstakes gives 40 families the chance to enjoy a VIP experience

Charitable Giving's & Volunteerism Charitable Giving's & Volunteerism

• SWA serve the community through a program titled “Share the Spirit”.

• In 2010 Southwest Airlines received 16,678 donation requests and distributed more than 29,664 tickets and $1,266,950 in cash in response, for a combined value of more than $11.6 million in total contributions

• Relationships with nonprofit organizations on both a local and national level. Support by committing resources of time, tickets and monetary donations.

• Support “The Ronald McDonald House program” by sponsoring golf tournament

• Support families Facing Serious Illnesses thru Medical Transportation Grant Program

•1984 - #1 in customer satisfaction (4th year in a row)

•May 1988 - First airline to win the Triple Crown award

•2009 - Ranked # 2 in Top 20 Best Companies for Leadership list (Business Week)

•April 2010, Ranked as the top-rated brand among the nation's small-and midsized-business owners and top executives, for a second year in a row

•In November 2010, ranked # 1 in the Zagat Airline Survey, in the following categories:  Top Website; Best Customer On-Time Estimate, Best Luggage Policy, Best Value, and Best Checkin Experience for Domestic Airlines.

•In December 2010, Southwest Airlines was named “Best Low Cost Airline in North America” by Business Traveler Magazine.

•In 2010 - Rank second in customer satisfaction survey conducted by J.D. Power

• In March 2011, Ranked fourth in World's Most Admired Company list (Fortune magazine)

http://www.southwest.com/html/about-southwest/history/fact-sheet.html

Recognitions

Competitors

http://www.hoovers.com/company/Southwest_Airlines_Co/rrykki-1-1njea3.html

Environmental InitiativesEnvironmental Initiatives

• Paperless tickets • Part of our environmental policy is striving to meet our annual goal of

zero recorded environmental violations in our operations. • Fuel savings and reduction in greenhouse gas (GHG) emissions – thru

use of efficient planes with winglets • In the air, to reduce emission, initiated programs such as efficient flight

profile speeds, aircraft specific performance monitoring,• “Green Planes” – made with environmental friendly material , light

weight to save fuel and reduce GHG emission, use of recyclable materials

• Comprehensive engine wash program, along with gate services and an industry-leading Ground Support Equipment (GSE) electrification program.

• Recycling and Waste Reduction – aim to increase the quantity of materials recycled on board by 10 percent over our 2010 levels

Safety MeasuresSafety Measures

• For Southwest, Safety of Customers and Employees is number one priority.

• Southwest supports the culture that identifies risks to the operation and workplace

• Southwest proactively deals with these issues before they become injuries or accidents

• To accomplish this goal the following Company policies are established:o All employees are responsible to comply with all governmental

safety regulations and guidelineso Employees are responsible to follow Company policies and

procedureso Encourages proactive reporting Culture, no disciplinary action

against any Employee for reporting a Safety occurrence

ConclusionConclusion

• In its 40th year of service, Southwest Airlines continues to differentiate itself from other low-fare carriers by offering a reliable product with exemplary Customer Service.

• Since its initiation, Southwest has managed to grow in a controlled fashion by adding only a few new cities each year.

• Southwest has proven itself to be successful and analysts believe that it will continue to be profitable as long as it never ceases to offer customers efficient and low cost air transportation, with continuous aggressive promotion and strong commitment

• Southwest will remain the preferred airline for providing low fares.

• After Mexico, future target market would be Canada or Hawaii

Resource CitationResource Citation

http://www.southwest.com

http://www.southwestvacations.com/generalInformation/aboutUs.aspx

http://swamedia.com

http://en.wikipedia.org/wiki/Southwest_Airlines

http://www.hoovers.com/company/Southwest_Airlines_Co/rrykki-1-1njdap.html

http://mobile.southwest.com/

Book – Southwest Airlines by Chris Lauer