Southwest Airlines

SouthwestAirlines

Courseinstructor:

SouthwestAirlines

Southwestairline is one of the most successful companies known worldwide.There are different strategies that every firm uses with the aim ofretaining loyal customers, attracting new customers and the soleobjective of maximizing its profits and minimizing its cost. One ofthe main factors that have contributed to the success of southwestairline is the adoption of the market mix model. Market mix is modeladopted by many managers and producers in any business to enable theconsumers know the quality of their products through advertisement.Advertisement is an important aspect in a business since it shows theproduct differentiation. It enables the customers know how theproduct is different or superior that other products of similar kind.There are four main objectives in advertisement. The first objectiveis trial. Trial implies that the company introduces a new product inthe market and it becomes the company’s obligation to try andconvince the mass about the new product. This will set a go ahead forthe company to either continue with the marketing process or not. Thesecond objective is continuing. These objectives focus on retainingthe old customers. Thirdly is brand switching. This is where acompany decides to rebrand its product to attract the competitors’customers. the last main objective is switching back. This impliesthat the company wants to get back its lost customers. From theabove, it is very clear the advertisement is vital in any productionprocess. The marketing mix model is generally vital in determining aproduct’s or brand’s offer and is generally linked with the fourP’s, which are price,place, promotion andproduct.In marketing for services, these four P’s were later on modified tothe seven P’s, to put in to consideration the assorted environmentof services. McCarthy projected the four P’s cataloging in 1960’swhich was later established and adopted by producers, managers andmarketers to date.

Tostart with, productis viewed as a commodity that suits the consumers demand. It is asubstantial good, for example in the car industry the motor car isan example of a substantial good. Tangible goods are those that havean self-sufficient physical existence. For insubstantial service, anexample in the computer’s operating systems used worldwide. Allproducts are subject to a life-cycle as well as a growth phasefollowed by a development phase and finally a final stage of declineas sales decrease. Marketers should do a profound investigation onthe life-cycle of the product they are marketing and focus theirthought on diverse confronts that arise as product moves. Themarketer must also consider the product mix. Marketers can expand thecontemporary product mix by raising a certain product line’s depthor by increasing the number

ofproduct lines. Marketers should consider how toposition the product, how to exploit the brand, how to exploit thecompany resource and how to configure the product mix so that eachproduct complements the other. The marketer should also put intoconsideration the product development plans.

Thesecond P by McCarthy is the price. Price refers to the amountthe purchaser pays for the product. The price is a key feature for itestablishes the company’s profit and hence its survival. The pricewill also determine whether the company will gain more customers orlose the loyal customers. Adjusting the price has the intense effecton the marketing plan, and depending on the price elasticity of theproduct which in turn will affect the demand and supply. The marketershould set a price that matches the other fundamentals of themarketing mix. When setting the price, the seller must be aware ofthe customer apparent worth of the product. Where the customer refersto the prices of competing products and the customer’s view ofthese products attributes verses the attribute of other products mustbe taken into account.

McCarthy’sthird P is the promotion. Promotion refers to all the means ofcommunication that the marketer may utilize to supply information todiverse parties about the product. Promotion consist of elements suchas advertising, public relations, sales organization and salesbacking. Advertising covers any communication that is paid for, fromcinema commercials, radio and internet advertisements through printmedia and billboards. Public relations are not directly paid for andinclude press release, funding deals, shows, forums, seminars ortrade fairs and events. Sales staff often plays an vital role in theword of mouth and public relation.

Lastly,the fourth P is the place. Place refers to providing theproduct to a place where the customer can reach at ease. Companiescan provide the customers with the products to their places usingmethods such as franchising, selective distribution, intensivedistribution and exclusive distribution.

In1990, another scholar, proposed a four C’s model which is a moreconsumer-oriented version of the four P’s that try to improve fitthe movement from mass marketing to niche marketing.

Thefirst C according to Lauterborn is the consumers’ wants andneeds. A company will only sell what the consumer purposely wants.Therefore, it is upon the company to study the consumer’s taste andpreferences, so as to produce what they specifically want. This willenable the producers retain their old consumers and attract newconsumers.

Lauterborn’ssecond C is the cost. Price is only a part of the total costto satisfy a need or a want. The total cost will consider variousaspects such as the cost of time in acquiring the good or theservice. The other aspect is the cost of conscience that or even acost of guilt for not treating the kids. In general, it reflects thetotal cost of ownership. There are several factors that affect costsuch as the prices of products from the competitors.

Thirdly,the third C is communication. Communication is similar to thepromotion in the P model. The main aim is to provide a channel or amedia that will link the producers and the buyers. An example in thiscase is using advertisement channels to communicate to the customer

aboutthe product. Communication should be enhanced so as to enable theconsumers have clear information about the product.

Thelast C in Lauterborn model is the convenience. In the modernworld, the use of internet, catalogs, credit cards and phone, peopledon’t need to go anywhere to satisfy a want or a need and also,they are not limited to a few places to satisfy them. Marketers knowhow the target market prefers to buy, how to be there and beubiquitous, in order to guarantee convenience to buy. With the highincrease rate of technology, place is becoming less relevant.Convenience takes into account the ease of buying the product,finding the product, finding information about the product andseveral other factors.

TheSouthwest airlines have adopted the models above through thefollowing ways. First and foremost is the prizing of their goods andservices. In terms of price, why do the Southwest airlines able tomaintain its loyal customers and even attract more customers day byday? Does it mean that the company offers free service to itscustomers? Pricing is a very critical aspect, which determines acompany’s success. A change in price can cause a great impact onthe number of customers to have. Change in price can either attractmore customers or repel them away. According to a deep analysis ofthe southwest airlines company, the pricing of their flight has beena great contributor to its success. Southwest airlines charge a cheapprice on their flight. For example flying from Washington to LasVegas costs a passenger just a mare two hundred and one dollars($201) where as flight from competitors charge a roughly threehundred and twenty dollar (320$). A flight from Detroit to Tampa, thecompany charges two hundred and thirty six dollars (236$) whereas thecompetitors charge roughly five hundred and twenty seven

dollars(527$). From the above simple analysis, it is clear that in general,the southwest airlines offers cheap and affordable services to itscustomers. And according to the law of demand, demand for goodincreases with decrease in price, and the demand for same gooddecreases with increase in price as shown in the graph below.

Qdd

P

WhereQdd is the quantity demanded and P the correspondingprice. From the graph, it is clear that demand falls with increase inprice and thus demand and price are inversely proportional to eachother. Therefore lowering the flight prices has been the key factorin maximizing profits, since more customers are attracted to thecompany. According to Lautarborn, since the price is just aproportion of the cost, the lowering of price will also lower thecost. This implies that when the company lowers the prizes of theflights, this also lowers the customers cost of spending. Therefore,with the trend of reducing the flight prizes, Southwest airlines willat some day eliminate all its competitors.

Secondly,promotion is the second McCarthy’s P. In Lautarborn model,promotion is the same as communication in his C’s model.Promotion is how the company markets its products through channelssuch as advertisements. For instance, the Southwest airlines usebillboard to advertise their airlines. Billboards are erect along allmajor roads in all cities. They also place billboards on top ofbuildings in the cities as a way of marketing their companies. In sodoing, this will enable people get informed that there is a companycalled southwest airlines that exists. The people will have the urgeto know more about the company the goods and services they offer. Inline to that, the Southwest airlines have created a website as a formof advertisement. When the customer hears about southwest airline anddecides to search its information in the internet, s/he will get awebsite that in it s/he will find the kind of services offered by thesouthwest airlines. In the website, the Southwest airlines havecreated a section of how they charge flight to different destinationsand at different times. In the website the customer will find fulldetails about the company and also s/he may ask questions and will beanswered instantly by the personnel employed in the onlinedepartment.

Thesouthwest airlines also use Medias such as television and radios tomarket their company. For instance in television, they show clips ofhow easy it is to move from a country to another country for lunchand later come back to your family just in the same day courtesy ofSouthwest airlines. The advert also emphasizes on how cheap it is andtime saving. When a customer watches this clip, s/he will not haveany reason as to why he should not use the Southwest airlines. Thesouthwest airlines also advertises it buy sponsoring events such asfootball leagues. For instance, when it comes to UEFA championsleague, the southwest airlines

sponsorsclubs and in so doing, they earn fame by the company’s nameappearing on players’ jerseys and also on the advertisement boardsin the fields. This ensures that the name southwest airline reachespeople and after they get the idea about the company, they search forinformation through the internet to which they will find thecompany’s website. Advertisement is vital in marketing a company’sproduct.

Thirdlyin the McCarthy’s model of the P’s is the place. InLautarborn model of C’s, place also meant convenience.The company should know how their products will reach the targetedcustomers. The southwest airlines have a special strategy wherebyfrom their website, the customer is able to book for flights withoutnecessarily going to the company’s offices. Customers are also ableto pay for their flights online. This attracts more customers sincepeople don’t prefer queues in any place since it is time consuming.Comparing the southwest airlines with other flight companies thatlack the above online services, people will prefer the southwestairlines since no time is wasted on booking for flights or paying forthem. It is always the role of producers to look for a way throughwhich their products can be accessible to the customers at ease.

Thelast P in McCarthy’s model is the product. In Lutarbornmodel, the product in McCarthy’s model is also referred to ascustomer’s wants and needs. The company’s duty is toensure they offer high quality products to its customers. Thesouthwest airlines flight is of high quality and passengers travelluxuriously at the expense of their flight fee. Unlike otherairlines, passengers are not transported together with cargo. Thispromotes luxurious journeys despite the low cost charged.

TheSouthwest marketing-mix strategy was successful due to the followingreasons. First and foremost the southwest airline company had anintense study about its competitor’s way of marketing theirproducts. Just as the Ethiad airline sponsored Manchester footballclub, it adopted this tactic and started using the same channel tomarket itself. This ensured Southwest airline attracted morecustomers. The second reason as to why Southwest airline becamesuccessful is after analyzing its competitors’ charges per flight.The Southwest airline later lowered its flight charges. Thisattracted more customers since the law of demand states that “afall in price leads to an increase in demand”. After analyzing thequality of the service offered by other airlines, the Southwestairlines improved their quality by introducing luxurious jets. Thismade its standard level of offering quality services above itscompetitors.

Thesouthwest airline adopted a system of offering discount to itscustomers. The discount was up to 70% for all frequent customers.This encouraged the people to frequently use the southwest airlinesso as to benefit from the discount offers. The Southwest airlinesalso ruled the market after introducing the open distant booking forflights. The open distant system ensured a customer books his flightirrespective of their distant from the port. Since people developed aphobia of queuing lines, this made people abandon their originalairlines and adopt the Southwest airline system. The southwestairline also ensured that people are also able to pay for theirflights at their local banks or using their smartcard online at thecomfort of their homes. After attracting the greatest number ofcustomers, the southwest airlines purchased more planes and thisenable the company have their flights at different destinationsaround the world.

Otherthan giving the customers first priority, the company has alsomaintained a good relation with workers. Workers are motivated bybeing given offs and also promotions. The workers’ families arealso taken good care of by being provided security, proper housingand also great allowances. This motivates the workers to work moreand whole heartedly. When the work is done with a clean heart, theproducts becomes more efficient and of high quality.

Thesouthwest airlines may and may not be able to maintain a competitiveadvantage when other airlines lower their prices. In order for thesouthwest airline to maintain its competitive advantage, it muststrategize on other factors such as communication, product andconvenience. Since the price will now be at the same level, thesouthwest airline should instead look on how to improve the servicequality. A strategy such as picking passengers from their local townsusing the company’s bus can have a great influence on the product’squality. The company should also strategize on how the informationabout the company reaches the mass. Since other airlines sponsor onlyfootball, the southwest strategy should ensure it sponsors allpopular games such as rugby, basket ball or even car racingcompetitions. This will ensure the people playing such games have thename of the company written on their jersey and also the company logoto appear on the racing cars.

Thecompany should also improve the convenience of their products totheir customers to an extend of booking a flight and even paying forit through the simplest garget, the mobile phone. In so doing, thecompany will maintain its competitive advantage failure to whichother airlines will start grabbing the greatest markets share.

The southwest airline has adopted most of the elements in the P and Cmodels. First and foremost, it has adopted the system of open distantoperation. The customers are able to book their flights through theinternet and also pay for their flights using their Master Cards.This has enabled the company have the greatest market share for goodconvenience. On the other hand, the company has adopted a goodadvertising method where it markets itself online and through Mediassuch as radio stations, televisions and even local newspapers.

Onsimilar line, the southwest airline has a quality product though notwholly. Though there is still room for improvement, the qualitystandard of their flights is still above many airlines. According tothe theories initially discussed, it is essential for any company tohave a good communication skill. This refers to how information aboutthe product reaches customer. In the model, franchising is a good wayof advertising. This implies that a parent company allows anothercompany to use its brand name in marketing its product. A goodexample is when the Coca-Cola Company allows other companies andorganizations like football tournaments use its name. the southwestairlines has not yet implemented this kind of advertising method. Inorder to maintain the competitive advantage, the company shouldensure it has utilized all the advertisement models.

Wordof mouth is another important form of advertisement that manycompanies ignore. Big companies such as Southwest airline areconcentrated on large forms of advertisement and put less focus onverbal advertisement which is minor though of great importance. It isalways very difficult to convince a customer that a product is ofquality just by the look of the eye.

Conversationis very important since the customer is able to ask questions aboutthe product and get instance answers there and then. Good receptionalso plays a vital role in advertising any company’s product. Howthe receptionists receive customers will have a great impact on thecustomer’s decision about the product. It is very essential forcompanies to put more emphasis on verbal advertisement which theSouthwest airlines lack

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