Southwest Airline – Distribution Strategy Essay
Southwest Airline – Distribution Strategy
Operating under an intensely competitive environment, Southwest Airlines carefully projects its image so customers can differentiate its product from its competitors. Southwest positions itself in all its marketing communications as the only low-fare, short-haul, high-frequency, point-to-point carrier in America that is fun to fly (Cheng, 2010). Its low-priced fares are a brand equity which it “owns” in the mathematical sense of being the only major airline with a strong score on this attribute based on consumer research. Southwest’s brand exudes an element of fun: a down-home attitude which it leverages to present the consequences of low fares in a positive light. This is great for Southwest Airlines, but they are able to improve upon this by being more transparent and allowing the customers to see exactly what their hard earned dollars are going to get them. A great inflight service crew, a possible chance for and inflight contest, pay more for a meal while inflight if needed?
What I haven’t found is the business practice Southwest has in place for people that need to eat, such as those with diabetes, elderly or in poor general health. Southwest would be wise to post these issues with their remedies and allow customers to present their own remedies. This would allow Southwest Airlines to address more of the customer issues they are and are not aware of. Bridging the apparent gap between what their business model shows as issues and what issues really lie with the flying populous. Using extreme dignity or acknowledgement might not be the first words one would think of to describe how Southwest Airlines treats passengers: no first class; no food other than peanuts; no assigned seats; no transfers of luggage to other airlines. Southwest’s in-flight service has, in fact, become pejoratively synonymous with peanuts; but the payoff in savings is huge (McDonald, 2007). Southwest has a well-defined business model that uses single aircraft type, short-hauls, secondary airports, point-to-point hubs versus hub-and-spoke to keep its costs down.
Southwest tries hard to differentiate itself by doing things that you and I would seemingly classify as weird. For example, not assigning seats in its flights helps to reinforce its image that it gets passengers to their destinations when they want to get there, on time, at the lowest possible fares. By not assigning seats, Southwest can turn the airplanes quicker at the gate. If an airplane can be turned quicker, more routes can be flown each day. That generates more revenue, so that Southwest can offer lower fares. The huge savings have built a phenomenal brand loyalty for Southwest Airlines. However, some travelers do not like to be herded into the plane and be stuck next to someone equally as large or next to the proverbial crying child. I have a family of five and if we fly via Southwest, it would be helpful if we could pay extra or board first with limitations on the location within the plane we could sit. I wouldn’t try to take up the first five seats as this would be unjust to those that would get them if I wasn’t bring my brood with me. There are areas for improvement for Southwest when it comes to gate calls, seating and inflight experience.
With the amount of monies that Southwest is saving and generating with their current business model, they could benefit not filling the plane to max like other carriers. This would allow movement of the passengers within to better accommodate issues that arise. Also, for individuals that are taller and heavier such as myself, I would be able to have more leg room or contain my kids in one area of the seats so as not to bother other passengers or at least minimize the issues as much as parentally possible. The Internet caught many carriers unaware. It added a new distribution channel, but the companies that became self-aware of this and immediately tapped into it had a much better handle on what could be done with it (Rottman, E., Sarah, H., & McGowan, B., 2007) . Southwest was paying attention. It began participating in online sales at the Basic Booking Request level, a level specifically designed for its own needs in 1995, largely to make life easier for travel agents in its home market of Dallas (Bremner, C. & Fiona, J., 2008). This method of distributing their “goods” has benefitted Southwest Airlines immensely.
Lower ticket costs, higher sales volume and cutting out the middle man, offering a pseudo bulk break method for the airline shopper. Southwest could improve on this media through progressive marketing campaigns targeting the areas of air travelers they currently do not. The elderly, young college students and those with children; these untapped areas hold a great possibility for revenue if Southwest is willing to target and market to them. Southwest employs a relatively simple fare structure, featuring low, unrestricted, unlimited, everyday coach fares as well as even lower fares available on a restricted basis (Bailey, et. al., 2009). In January 1995, Southwest Airlines became the first major airline to introduce a Ticketless Travel option, eliminating the need to print and process a paper ticket altogether (About, 2012).
This innovation was born out of necessity after it was tossed out of three other computer reservation systems (United, Continental and Delta’s, as these airlines felt threatened by Southwest’s competitiveness). This innovation allows customers to completely bypass the computer reservation systems of major airlines by obtaining a confirmation number and showing up for the flight (Wilkening, 2012). Customers loved the idea and the paperwork was reduced tremendously therefore, saving money. This practice is now pervasive in the industry, due to its cost savings ability. Currently, if a customer wants a printed ticket, there is usually a surcharge of $20; and if a passenger uses a travel agent, there is an additional $25 service fee (Ranson, 2011), yet these fees do not get passed onto the Southwest Airlines customer. Southwest Airlines hit the mark with their self-ticketing and kiosk options for air travelers.
One way they could improve is to allow printing from home/office via email attachments like most other carriers. A possible smartphone application download could bused so you as the customer merely needs to have your phone on you and the ticket with barcode present in order to board or clear baggage check in. This will allow for an even faster boarding option, quicker flight boarding thus creating less gate to takeoff time; creating larger revenue and more flights per day. Unlike other airlines, SWA does not rely on travel agents to distribute their products. Travel bookings on Southwest Airlines are done primarily through direct marketing: by phone and the Internet (Arsenault, 2009), without a middleman. Southwest also does not interline or offer joint fares with other airlines, nor does it have any commuter feeder relationships (Taneja, 2008). This lack of middleman is very lucrative for Southwest Airlines, generating large revenues and saving that they pass onto the consumer. Southwest Airlines would be wise though to have a help section on their website that was truly insightful.
The current help section is cumbersome and makes for an unpleasant experience for those having problems. Install a live chat feature and/or a call back feature like some competitors have. This will make the purchasing experience a positive. Happy customers spread good advertising to one or two people while unhappy customers spread the word to ten or more. Overall the distribution plan Southwest Airlines employs is working in conjunction with their business model and has done so for over 40 years. There are several strong areas that have carried southwest through tough times as they were tried and true methods.
With the advent of the internet and the quick escalation of social media sites, blogs and forums; Southwest Airlines has had to re-engineer its distribution plan to include these. There are and always will be areas for improvement and growth in the ever changing, fast paced environment of today’s digital world. Key areas to improve upon include marketing to demographic areas outside of the current business traveler, use other means of selling/advertising besides Southwest Airlines website, use more non-traditional ticketing methods and allow for seating alternatives for those needing some assistance. If Southwest can keep its eye on the airline monetary prize and embrace these few changes, they will be around for another 40 years.
About Southwest. (n.d). Retrieved 05 May 2012, from http://www.southwest.com/html/about-southwest/index.html Arsenault, S. (2009) Airline loyalty: a new prospective. UNISYS. Retrieved 05 May 2012 from www.unisys.com/transportation/insights/insights_compendium/WO-Airline_Loyalty.pdf Bailey, C. D., Collins, A. B., Collins, D. L., & Lambert, K. R. (2009). An Analysis of Southwest Airlines: Applying the Horngren, Datar, and Foster (2006) Strategic Profitability Analysis Approach. Issues In Accounting Education, 24(4), 539-551. Bremner, C. & Fiona, J. (2008) World travel marker global trends report 2008. World Travel Market and Euromonitor International. 1-29 Cheng, K. (2010, November). Evaluation of us legacy airlines distribution strategies. Journal of Air Transport Management. 16(6), 337-339 McDonald, M. (2007, August). Changing channels. ATW, Air Transport World Magazine. 12(2), 5 – 9 Ranson, L. (2011). North America: disciplined returns. Airline Business, 27(8), 34. Business Source Complete, EBSCOhost (accessed April 22, 2012). Rottman, E., Sarah, H., & McGowan, B. (2007). How social computing changes the way you sell travel. Forrester. Retreived 04 May 2012 from www.forrester.com/research/document/excerpt/0,7211.42100,00.html Taneja, N., (2008) Simpli-flying, optimizing the airline business model. Retreived 05
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 9 January 2017
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