Southwest Airlines Marketing Practices

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Southwest Airlines marketing practices

– market segmentation

• Üzleti Angol 1. -

BGE-KKK-Marketing Mesterszak

Patakfalvi Hegedűs Dorottya

VCKU7M

2016.05.

Southwest Airlines marketing practices – market segmentation

Air Southwest was founded in 1967 and in the beginning it incorporated to cater three Texas cities but few years later in 1971 it change its name to Southwest Airlines. Today, Southwest Airlines is "the largest low cost carriers and the sixth largest airlines" (Reuters, 2007) in the U.S. airlines industry.

Moreover, Southwest Airlines is also known as a discount airline because of the low fares, non-frills flight services since 1973 which is a source for Southwest Airlines to have a rapid growth and popularity amongst the American people.

Southwest's further plan was to expand into major airport hubs such as Boston, Washington D.C., Atlanta, New York City) as to increase their travelling routes to new areas

Southwest Airlines is a low cost carrier for mainly business and vacation travellers by providing different types fare and services. The 4 P's of marketing mix that influence SWA are the following:

Product: The main core product of Southwest's is offering air transport services, and in which they are using only Boeing 737 as to transport their customers, and besides that Southwest's is a low cost carrier which does not require upmarket, luxuries services.

Place: The type of distribution channel used by Southwest's is a direct distribution channel where they sell their product directly through their website. SWA is cooperating closely with other service providers (hotels, car rental agencies) so in their website, customer is able to purchase flight ticket, hotel room and car rental services at the same time. Besides that, this distribution strategy is to reduce cost to their end user so Southwest can ensure competitiveness and to ensure their product remain low cost.

Pricing: Southwest Airlines is using 'price discrimination' to target their customer. This concept used to ensure customers have the power to choose the type of fares they preferred as to suit their income level and expectations in term of services. Besides this general strategy, the airline offers package deals with bundled pricing, and penetration pricing when entering a new area.

Promotion: The promotion strategies use by Southwest Airlines is 'Below the Line' promotional activities which are using various types of promotions besides advertising itself to promote their promotion packages, air fares and their services; to ensure their promotion reach a broad target market. Since southwest is a low cost carrier which does not require having expensive advertising because it will incur additional cost where Southwest will unable to keep their cost lower.

Southwest's using sales promotion strategy to encourage travellers to travel more often. For example, the Senior Fares which provides 20 % knock-down price to all senior citizen in the U.S. as to make air travel cheaper, besides that Southwest's also provides cheap flight at an introductory offer as low as US$ 59 from time to time as to encourage more people to travel.

Target marketing includes three main phases, which a company needs to follow for a successful operation. Segmentation of the market, where considering variables for segmentation, profiling emerging segments and validating segments emerging are the key steps. At the targeting stage you have to decide on a targeting strategy and how many and which segments to target. Finally at the positioning phase, the company has to focus on costumers perceptions, position the product and design the marketing mix.

Segmentation: When segmenting consumer markets, there are base variables which a company should analyse: geographic, demographic, psychographic and behaviouristic variables.

SWA as to find the perfect market, it evaluated the income bracket, lifestyle, purchase occasion, benefits sought of the consumers and as a result it targets cost-conscious, no-frills travellers, looking for the best value for their dollar. The airline focuses its marketing efforts on middle-class families, small business owners, those traveling short distances, and young adults.

Targeting: Southwest could use differentiated target marketing. The airline focuses mainly on business travellers who take several short haul flights between destinations that Southwest serves. These frequent fliers are crucial to the success of Southwest’s strategy as the airline relies on operating several short haul flights a day between locations.   

Positioning: The positioning of Southwest is based on identification of the competition and its position on the market, analysing the consumer’s perception of the competitor, as well as analysing the consumer’s preference, and finally making and monitoring the position.

To successfully secure its market position, Southwest needs to be extremely cost-efficient. Southwest has a well-defined business model that uses single aircraft type, short-hauls, edge of town location, secondary airports to keep its costs down. Southwest tries hard to differentiate itself by doing seemingly weird things, which has proved invaluable. 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.