This is a recent brand audit some classmates and I did on Southwest. It\'s always interesting to dig into a brand you know and respect. We found some interesting insights about where the airline has been and where they are going.
LISA Why fly Southwest? “Great Value. Excellent Service. Our Mission. Fly Southwest Airlines because you want to be treated like a person.” Brand equity built around low fares, customer service, corporate culture that fosters high employee morale. Went from small intrastate airline in Texas almost 40 years ago to a large domestic carrier. Has set a standard of service in the industry and other points-of-difference that make it hard for competitors to match Southwest purchased AirTran in May, 2011, we will get into more details about this. A threat to its brand equity. Recommendations: 1. AirTran merger – slowly implement changes, be mindful of what customers expect. Abandon the AirTran name eventually. Not as much brand equity, hasn’t been around as long, not built on a customer service foundation. 2. Continue to capitalize on key profit-generating differentiators that allow it to prevail in the competitive domestic airline industry, particularly Rapid Rewards. We recommend modifications. Also including but not limited to no bag fees, no change fees, low fares, and early-bird check-in. 3. Keep a closed reservations system.
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LISA According to Southwest’s 2010 Annual Report, domestic airline industry is volatile, intense, extremely competitive, highly unpredictable, subject to many challenges, and plagued by bankruptcy. Pricing and routes are two key competitive factors across the industry Last month American Airlines was the most recent airline to file for bankruptcy. In addition to high labor costs it was the influx of competition from low-cost carriers like Southwest putting pressure on demand and fares that led to the filing. Over the last 22 years all major airline carriers have filed for bankruptcy as some point in time. Competitors: large airlines like Delta, United, US Air, American, etc. Low-cost carriers like jetBlue, Virgin America, USA3000, Allegiant Air, and more.
LISA Southwest competes mostly with low-cost carriers on product and service offerings like customer service and battles with the large airlines for market share. From September 2010 – August 2011, Southwest had second highest market share at 14.7% behind Delta. All large carriers in the top spots except for Southwest. Low-cost carrier jetBlue is seventh with only 4.5% market share.
LISA Evaluating Southwest’s strengths and weaknesses along with the opportunities and threats it faces inside and outside its organization will lay the groundwork for Southwest to make strategic decisions around its brand, product, and services. STRENGTHS: Number one, low cost structure. Achieves by operating a single type of aircraft (Boeing 737-700) and providing point-to-point rather than typical hub-and-spoke service used by large airlines. Leads to high employee productivity so that it can turn planes around quickly, serve its markets with convenient flights and low fares. Others are no bag fees for the first two checked bags and no assigned seating or first-class so that all travelers are treated equally and can sit wherever they choose. jetBlue is the only other major competitor that does not charge a fee for the first checked bag. Dedication to customer service on which it has built a strong foundation over the last 40 years. On soutwest.com describes itself by saying “We like to think of ourselves as a Customer Service company that happens to fly airplanes.” Lastly, 4.7% market share in the industry and YoY revenue growth position it favorably in an industry plagued by bankruptcy and external controlling factors. All of these strengths have helped it build strong equity for its brand. WEAKNESSES: Some of its strengths are also its weaknesses. Not offering first-class service or segmented seating on its airplanes may be unappealing to some business travelers or the wealthy who refuse to fly ‘coach.’ Only operates Boeing 737’s. Some travelers may prefer either large airplanes for longer duration flights or small planes for very short flights. Lack of routes internationally puts them at a competitive disadvantage in recent years and was driving force behind AirTran acquisition. Mow serves international markets close to the US like Mexico and the Caribbean but does not yet offer full international service. THREATS: Faces a number of threats from its external environment and competitors. High costs are currently a significant threat because its low cost structure is one of its greatest strengths. May want to evaluate the amount it spends on advertising and promotion costs each year – has spent more than its competitors by at least$30M in each the last three years. Competition is fierce overall and coupled with external factors; pose an ongoing threat. Competitor actions around fares, fees, and advertising campaigns and external factors like economic events, terrorism, and government regulations not only affect Southwest directly but can impact the entire industry at any time. Lastly, if it were to ever be in a supplier dispute with Boeing or if Boeing were to experience its own troubles. Southwest uses only Boeing aircraft while many of its competitors have multiple aircrafts in their fleets. Taking a risk by relying on only one type of aircraft. OPPORTUNITIES: Southwest can attempt to alleviate threats and overcome its weaknesses by strategizing around its strengths and focusing on opportunities. Greatest opportunity at the current time is led by its merge with AirTran. CEO Gary Kelly has said the acquisition was about overall growth, citing “more low fares, more Customers, more destinations, more aircraft, more jobs, and more profits.” Another growth opportunity when it introduces a new aircraft, Boeing 737-800, to its fleet in 2012. It can seat 25-30% more travelers than its existing Boeing 737-700 so Southwest will be able to add seats without increasing the number of flights in some airports and improve fuel efficiency and serve longer routes, including those over water, more economically. Lastly, generating incremental revenue from the company’s new Rapid Rewards program and revamped reservations system is another opportunity. In March, 2011, Southwest replaced its old Rapid Rewards program with a new one where members earn points for each dollar spent as opposed to credits for each flight flown, so essentially higher fares will earn more points than lower fares. Many believe the overhaul of the program was done to not only reach more customers but business travelers in particular who tend to purchase airline tickets at the last minute at higher fares. Southwest’s new reservation system, implemented in 2010, allows it to better serve international markets.
LISA Competition in the domestic airline industry impacts Southwest’s brand positioning and strategy - it influences and affects decisions positively or potentially negative. Positive example is when most competitors started charging for checked bag fees. Southwest leveraged its no bag fees through “Bags Fly Free” ad campaign. Ad campaign fits well with Southwest’s brand positioning and strategy of managing a brand that reflects customer service and friendliness but was still affected by competition. A potentially negative example is the Southwest-AirTran merger earlier this year. Competition one of the main drivers behind the decision to purchase AirTran as Southwest was discovering the need to grow and expand in the industry. It remains to be seen how exactly Southwest’s brand positioning and strategy will change as a result of the merger.
ALLISON Reliable carrier with the quickest turnaround , taking on average fifteen minutes to turnaround an incoming craft and prepare it for departure. Doesn’t serve full meals and only flies one type of aircraft , the Boeing 737. Employees : Southwest fosters an environment of high employee morale, encouraging hard work, high-energy, fun, local autonomy, and creativity. This results in excellent customer service which has been another source for building the brand’s equity over the years. Ticket Policy : Southwest does not offer first class or assigned seats, allowing customers to sit anywhere within the plane for the same price. However, the company follows an A, B, C boarding structure. The sooner a consumer “checks-in”, the better boarding assignment (letter and number combination) they receive. Unique programs : Southwest launched their “EarlyBird Check-In” program in 2009. This low-cost option offer consumers the convenience of automatic check-in before the traditional 24-hour check in, and gives them the benefit of an early assigned boarding position. With the company’s popular “Bags Fly Free” campaign, consumers do not have to pay a fee to check their bags like they would on other airlines. This point of difference has not only been successful for the company but it has helped build their equity and reputation of Southwest being a more affordable and accessible airline. No Change Fees” campaign where consumers do not have to pay fees or penalties to change their flight. Product distribution strategy : The company’s product distribution strategy is another way Southwest is able to keep their fare prices competitive. Unlike other airlines, Southwest does not rely on travel agents or travel sites to sell their products. Most bookings are done primarily through direct marketing, the internet or by phone—eliminating the expense of the middleman. Campaigns and slogans : The company has also built their brand from their creative advertising efforts and popular slogans “You are now free to move about the country”, “Just Plane Smart”, and “Grab your bag, It’s On!”. Route system : Southwest doesn't use the hub-and-spoke network the legacy carriers use.
LISA Southwest is a brand that resonates with its customers because the company has built and strengthened its brand equity over time. It occurs when a harmonious relationship exists between a brand and its customers. Customers exhibit a high degree of loyalty to the brand and actively look to interact with the brand and share their experiences with it. Not achieved easily by most organizations and is usually only attained after all other steps in building a brand are complete. This pyramid is a Customer-Based Brand Equity model developed by Kevin Lane Keller, a professor of marketing at Dartmouth College. Keller says there are four steps to building a strong brand that can be achieved through six building blocks. The final and most valuable building block in the process is brand resonance at the top of the pyramid. Keller says the premise of the pyramid model shows that the ultimate power of a brand resides in the minds of customers based on the emotions they have associated with the brand over time. First, it established its identity, or brand salience. Second, to create a meaning for its brand, developed its brand imagery and brand performance with consumers through its business model of operating as a low-cost carrier with a dedication to customer service. Next, judgments and feelings about the brand were formed. Good value, competent, and trustworthy. Fun and one that creates satisfaction. Lastly, the end relationship and identification a customer has with Southwest’s brand is its brand resonance – in this case ugh loyalty, attachment, and engagement. Southwest has strong brand equity and has built brand resonance, but it is difficult to assess the value of the brand to the company. Brands can be a company’s most valuable asset but do not easily have a financial value associated with them and are missing from the balance sheets of many companies. It is difficult to measure the success of a brand if its value is unknown, but it is difficult to determine the value of a brand. Interbrand, a company that creates and evaluates brand values, formulates a yearly list of the world’s top 100 global brands using a specific methodology to determine brand value as a business asset. The method considers all the ways in which a brand touches and benefits its organization by evaluating the financial performance of the brand and products, the role of the brand in purchase decisions, and the strength of the brand. The ending value can then be used as a guide for brand managers to make informed business decisions and for investing purposes. Southwest could use a similar approach to determine the value of its brand and it would likely rank very high because in the domestic airline industry, at least, it has to-date performed well financially, also through brand resonance its brand plays a significant role in customer purchase decisions and it has built strong brand equity over time.
LISA Difficult to assess the value of the brand to the company. Brands can be a company’s most valuable asset but do not easily have a financial value associated with them and are missing from the balance sheets of many companies. It is difficult to measure the success of a brand if its value is unknown, but it is difficult to determine the value of a brand. Interbrand, a company that creates and evaluates brand values, formulates a yearly list of the world’s top 100 global brands using a specific methodology to determine brand value as a business asset. The method considers all the ways in which a brand touches and benefits its organization by evaluating the financial performance of the brand and products, the role of the brand in purchase decisions, and the strength of the brand. The ending value can then be used as a guide for brand managers to make informed business decisions and for investing purposes. Southwest could use a similar approach to determine the value of its brand and it would likely rank very high because in the domestic airline industry, at least, it has to-date performed well financially, also through brand resonance its brand plays a significant role in customer purchase decisions and it has built strong brand equity over time.
CJ Continuing to add new airports and destinations 2010 Acquisition of AirTran Airlines – enter Atlanta for head-to-head competition with Delat New Fleet – Boeing 737-800 gives more seats, uses less fuel International destinations – Mexico and Caribbean Rapid Rewards – builds loyalty of business travelers
ALLISON What are the distinguishing attributes of the product (features and benefits)? Southwest differentiates itself from the competition through its unique products and services. Consumers are able to purchase inexpensive tickets have better seat selection since Southwest does not offer first class or assigned seats and doesn’t charge more for certain seats. Exceptional service : When a consumer flies Southwest, they experience a high-energy, fun and seamless travel experience (reducing the stress and anxiety created when flying). Employees enjoy working for Southwest because of how well they are treated by management. As a result, they provide outstanding customer service to its travelers. Convenience : Since there isn’t assigned seating, Southwest can turnaround planes the quickest from when an incoming aircraft arrives to when it departs – resulting in fewer delayed flights and more routes flown each day. Cost-saving programs : Consumers can save money by taking advantage of their “Bags Fly Free” and “No Change Fees” programs. This cuts back on the expenses associated with traveling with luggage and changing flight reservations. Packaging and labeling: Southwest maintains a consistent brand image from its marketing efforts to its packaging and labeling efforts. The company uses the same design elements like its red, yellow and blue colors on its aircrafts, website, promotional materials, ticket holders, etc (i.e. when looking up in the sky, it is very easy to tell when it’s a Southwest aircraft because of the bright-colored packaging and labeling used on the planes). The images used also portray a fun and friendly personality, which is consistent with what the consumer will experience when flying with Southwest.
ALLISON For many years, Southwest was established in the Maturity stage of the Product Life Cycle with limited opportunities to grow in a sluggish market. However, with its most recent acquisition, Southwest can now be found in the Growth stage. In fact, “Southwest has increased passenger traffic by 25 percent.” This purchase expands Southwest’s service to approximately 38 additional destinations including the Atlanta International Airport which is an AirTran hub, a popular business-travel center, and the largest U.S. city not served by Southwest. It gains larger presence at two airports favored by business travelers: Washington’s Reagan National and New York’s LaGuardia. The acquisition is also allowing them to expand internationally into the Caribbean and Mexico.
ALLISON For many years, Southwest has been known in the market for being the most affordable domestic airline, offering the cheapest ticket prices along with other incentives. This perception has driven consumers to purchase and fly Southwest before considering other airlines. In actuality, recent research shows that Southwest prices aren’t as competitive as consumers believe. In some markets, Southwest is priced much higher than its competitors with fewer amenities offered – and prices have been on the rise. Research shows that the average Southwest ticket price has jumped 39% in the past five years while the average ticket price for the domestic industry was up only 10%. Even though ticket prices have increased dramatically because of factors like rising fuel costs, Southwest has maintained the strong perception for being a discount carrier because of its unique pricing strategy. Cost-saving programs: Their “Bags Fly Free” and “No Change Fees” campaigns appeal to their target audience, the price conscious consumer, because they appear to keep costs down by not charging fees to check bags or penalties to change tickets. Many other carriers are more transparent with their fees, charging approximately $30 per checked bag with change fees estimated at $150 for major airlines like Delta and United. While other major airlines charge per bag, Southwest is in theory charging for bags by including the fees in the overall ticket price. This unique pricing strategy makes it very hard for consumers to comparison shop . For instance, a round-trip ticket on Southwest may be slightly higher than its competitors but it could be cheaper for the consumer to fly Southwest if he/she chooses to travel with more than one bag. Unlike other carriers, Southwest doesn’t make its tickets available on travel sites like Orbitz.com and Kayak.com . In order to view the price of a Southwest ticket and compare it to another airline, a consumer must toggle back and forth between the travel website and Southwest.com . Even though this strategy may limit its potential audience, it allows Southwest to keep its fare prices low by not paying for travel agents or booking fees. Southwest’s pricing model has changed over the years, making it more in line with how other major airlines operate. A few years ago, the airline went from offering eight fares to sixteen fares for each flight. Consumers aren’t aware of all of these options because prices of fares adjust (rise) as seats sell. Southwest is able to maintain its low-cost reputation because it continues to offer cheap fares but usually for a limited time. Therefore, as these discounted flights sell, Southwest is forced to increase their prices (in some cases, charging more than their competition).
CJ understanding of benefits customers value ads try to inject fun and personality, giving the target customers a taste for what the Southwest Airlines are going to give them when they get on the plane (cheap but fun!). Their recent series campaigns for their “Bag Fly Free” and “No Change Fee” policies illustrate how they differ from other airlines. The ads highlight the benefit to the consumer (waived fees), usually in a humorous way (staged court scenes for change fees and football-like penalty flags for checked bag fees), while showing the importance Southwest puts on satisfying its customers
CJ Southwest attempts to do three things in their advertising: intrigue, entertain and persuade encourage people to visit their website for the best online deals downplay one point-of-difference while highlighting another. Although it is well known throughout the industry that Southwest features neither first class nor assigned seats, the advertising campaigns rarely touch on this difference. Instead, Southwest ads draw attention to its points of difference that the company feels consumers value the most – waived fees. Southwest continues to drive home emphasize this difference by repeating the message on southwest.com and throughout the airport. Travelers who follow the advertising call to action go to southwest.com and find the same message of waived fees throughout its website. Those who do not and book with other airlines are reminded of the difference throughout the airport.
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