South West Airlines: Balancing The Price-Value Equation

Prepared by:

SSH

Q1: What benefits do airline customers seek when they buy air travel tickets? Has southwest done a better job than competitors of meeting the needs of

these air travelers? In what ways?

• Customer seek for better services with lower cost.

• Services may be basic what they expect and for which they are paying for.

• Southwest has created price-value strategy compared to competitors.

Prepared by:

SSH

Q2. How has Southwest executed value-based pricing?

• Giving maximum value to the customers & great benefits for the price paid.

• They communicated very effectively to customers that the lack of amenities allows it to change some of the lowest fares in the industry.

• Airline has competitive advantage for southwest expended air service into city after city.

• New low-fare carriers gained strength.

• And also provide benefits other than low-fare price.

• Special customer services, excelled on time performance, baggage handling, fewest complaints, & fewest cancelled flights. Besides their still low-cost producer & low-fare leader in the U.S

• Southwest take initiated ad campaign to communicated customers that “bag fly free” & faced criticism about does not charge for checking luggage.

Prepared by:

SSH

Q3:What are the benefits and risks to airlines of cutting costs? What impact are these factors now having on airline pricing and profitability?

• Cutting cost may have positive impact; like it saves airline’s money.

• More customer will be attracted to lower priced products (among competitors).

• Risks would be product and services would be lesser, example: is some airlines there were hidden charges for some features like using lavatory, food etc.

• Southwest airline has been known as a “No-frills”. “They’ve never pretended to have more than they do” says one experienced traveler.

• Southwest Airline don’t charge hidden prices nor they give higher expectations, they charge what they provide. That’s how they earn higher profit with low price.

Prepared by:

SSH

Q4:Does the airline’s current strategy truly differentiate it from its competitors? Is the strategy sustainable?

• Southwest tries to be the low price leader. Southwest Airlines has focused on four main strategies: being low-cost, employee-driven, future-minded, and differentiated. It refuses to charge additional fees such as baggage fees or fees for soda. It has reduced its price categories to three minimizing difference in leisure fare and business fare. It does not charge a service charge to change tickets leaving the full fare applicable to a future ticket. It is doing many things the other major airlines do not do; however, they are facing more competition today with other low cost carriers like Jet Blue. They recently purchased AirTran in an effort to expand its route base and add a major link through the world's busiest airport. Whether or not Southwest can sustain its pricing and at the same time compete with other low cost competition and cater to the business traveler successfully remains to be seen although the acquisition of AirTran will help them succeed.

Prepared by:

SSH

Q5: What marketing recommendations, including pricing recommendation, would you make to south west as a moves into the next decade?

• Add more classes (like Economy plus etc.)

• Increase its Fleet by Adding Airbus 320 with capacity of 150 passengers, and which is a new technology.

• Increase advertising and promotion Budget.

• Introduce internet facilities.

Prepared by:

SSH

Prepared by:

SSH