Just Plane Smart

Prabhat Chandra Shiv Shakti Ranjan Manish T Praful Gupta Rajeev Yadav Himanshu Shekhar

The setting
It s summer of 1993 Southwest is expecting delivery of two uncommitted planes McGlade needs to find a way, to put these planes in operation, keeping the organizational objectives are intact Final decision would have to preserve the Southwest culture and spirit 12 time winner of the coveted triple crown award

About Southwest
Started as a intra-state operator in Texas Budget airline philosophy, survived a severe price-war Operating out of Dallas s Love Field airport, hence the ticker LUV 7th largest in the country by April 1993 Expanded to become a national carrier, serving major cities Short-haul, high-frequency, lowcost strategy

The Southwest Model

People skills of Southwest Compensation Hiring - Identify attitudes rather than skills - Rigorous interviewing - Peer hiring Culture -Varied with position - At par with industry norm - Pension through a profit-sharing plan

-H A Patina of Spirituality -ugs common across office - Casual dress code - Field visits - Strong guidelines to everyone - At par with industry norm - Pension through a profit-sharing plan

Structure -Centered on team-building - Cross-training encouraged - Broad latitude offered - 10% of stock held by employees

Advancement -Recognition, an important element - Celebrations quite common - Most promotions internal

After lengthy deliberation at the highest executive levels, and extensive consultation with our legal department, we have arrived at an official corporate response to Northwest Airlines Claim to be number one in Customer Satisfaction

Liar Liar. Pants on Fire

Product: Southwest s product is travel Competition - not just other airlines but any mode of transportation. 1. frequent, conveniently timed flights and low fares. 2. point-to-point route system as compared to hub-and-spoke 3. direct nonstop

Target Market: Market Segmentation cost- and value-conscious consumers. mostly male small business executives travel short distances prefer low cost fares frequent schedules The other half consists of value-conscious consumers (male, female, families, and senior citizens) best value for their dollars Senior citizens are a sub-segment that receives special attention than a loyal customer - customer evangelist

Competitors and Competition 11 major carriers (2003): 1. Alaska Airlines 2. Aloha Airline 3. America West 4. American Airlines 5. Continental Airlines 6. Delta Airlines 7. Northwest Airlines 8. TWA 9. United Airlines 10. U.S. Air 11. Southwest Airlines Southwest s brand exudes an element of fun: Obviously Fun Love Theme, Love Potions(on-board drinks) Love Machines( ticket writing machines)

Product Positioning only low-fare short-haul high-frequency point-to-point carrier fun to fly

Average cost of serving meals per passenger in the industry - $5 For Southwest s -20 cents Seemingly weird thingsNot assigning seats Weird Color Scheme

Product Positioning Example of Southwest Airlines nuttiness use of the word love One ad titled "How Do We Love You?" - flight schedule. Another ad titled "We're Spreading Love" - the rapid growth of the airline. Word "love - dedication to customer service

Marketing Strategies Southwest offers a travel product that is built around flights targeted to specific demographics and ticket pricing that is simplified so that passengers know exactly what they are getting for what they pay. Building Brand Loyalty What is the Southwest Effect? 1. Air fares go down 2. Tourist traffic increases 3. Economic mini-boom ensues

Marketing Blitz !!!!

- Smart Campaign

Pricing Strategies 1. Charge the lowest possible fare 2. Compete with all other forms of transportation, including automobiles

Distribution and Promotion Product Distribution Strategies SWA does not rely on travel agents Travel bookings - direct marketing Does not interline or offer joint fares with other airlines

Instead of increasing fares when market gets busier and more people are flying, it simply increases the number of flights.

Southwest's Internet ticketing saves it $50 million a year, or 1% of revenue

"We're not competing with other airlines. We're competing with ground transportation"

Promotion Strategies: Marketing Mix Southwest Airlines wants to differentiate itself from other airlines as the airline that can get passengers to their destinations when they want to get there, on time, at the lowest possible fares while having fun. Frequent Flyer Awards Rapid Rewards-based on number of trips taken

Advertising Don t believe the hype. Fares offered by other discounters and airlines on the Web are not good buys. Southwest attempts to do three things in their advertising: 1. intrigue 2. Entertain 3. persuade

Way of showing Southwest s philosophy that every customer is equally important as the other and making ALL passengers feel special.

We d like to match their new fares but we d have to raise ours!!"

Television Sports Advertising Internal Marketing 1. Sports television programming 2. Reaching the corporate set via sports and other venues 3. In 2000, Southwest renewed its multi-year sponsorship agreement with the National Football League (NFL).

Core Business - Customer Service business they just happen to provide airline transportation Southwest s philosophy - Service for Smiles and Profits Encourages employees to treat customer service as the most important aspect of their job

Public Relations 1. Aims for Free publicity 2. Triple Crown Award for the fifth time in a row 3. Named a plane Triple Crown One and painted 24,000 employee names on it

CEO Kelleher, "We want people who do things well, with laughter and grace."

OPERATIONS

 Did all of its ticketing (not making seats available through computerized systems)  Did not operate in the hub-and spoke route system

Travel agents had to contact the airlines directly to book seats

SWA passengers flew non-stop origin to destination. Did not promote connecting services Savings in reduced taxi time, fewer gate holds and less in-air waiting time It doesn t coordinate its services with other airlines

 Flew into uncongested airports of small cities, less congested airports of large cities  Did not transfer baggage directly to other airlines  Only drinks and snacks often peanuts served on board

OPERATIONS

 84% unionized labor force but its labor relations were excellent  Only flew Boeing 737 - Fleet of 150 and avg of 1500 trips per day.

Usually do not share the ground handling crew until unavoidable Other airlines flew variety of jet aircrafts, as many as 5 distinct ones including McDonnell Douglas, Airbus and Boeing 737 s had average life of 20 years

Average age of SWA years(lowest in the industry)

was

 Differentiation in terms of turnaround time , 2 out of 3 planes were turned-around in 15 mins.

US industry average was 55 mins.

Pilots contributing new ideas to save fuels

Cost Cutting
Buying fuel from vendors who offer best prices : Carry inventory if possible

Fuel costs