South West Airlines: Balancing The Price-Value Equation. Case Study Question Answer

1. South West Airlines: BalancingThe Price-
Value Equation
Prepared by:
SSH

2. Q1:What benefits do airline customers seek when they buy air travel tickets?
Has southwest done a better job than competitors of meeting the needs of
these air travelers? In what ways?
• Customer seek for better services with lower cost.
• Services may be basic what they expect and for which they are paying for.
• Southwest has created price-value strategy compared to competitors.
Prepared by:
SSH

3. Q2. How has Southwest executed value-based pricing?
• Giving maximum value to the customers & great benefits for the price paid.
• They communicated very effectively to customers that the lack of amenities allows it to
change some of the lowest fares in the industry.
• Airline has competitive advantage for southwest expended air service into city after city.
• New low-fare carriers gained strength.
• And also provide benefits other than low-fare price.
• Special customer services, excelled on time performance, baggage handling, fewest
complaints, & fewest cancelled flights. Besides their still low-cost producer & low-fare
leader in the U.S
• Southwest take initiated ad campaign to communicated customers that “bag fly free” &
faced criticism about does not charge for checking luggage.
Prepared by:
SSH

4. Q3:What are the benefits and risks to airlines of cutting costs?What
impact are these factors now having on airline pricing and profitability?
• Cutting cost may have positive impact; like it saves airline’s money.
• More customer will be attracted to lower priced products (among
competitors).
• Risks would be product and services would be lesser, example: is
some airlines there were hidden charges for some features like using
lavatory, food etc.
• Southwest airline has been known as a “No-frills”. “They’ve never
pretended to have more than they do” says one experienced traveler.
• Southwest Airline don’t charge hidden prices nor they give higher
expectations, they charge what they provide.That’s how they earn
higher profit with low price.
Prepared by:
SSH

5. Q4:Does the airline’s current strategy truly differentiate it from its
competitors? Is the strategy sustainable?
• Southwest tries to be the low price leader. Southwest Airlines has focused on four main
strategies: being low-cost, employee-driven, future-minded, and differentiated. It refuses
to charge additional fees such as baggage fees or fees for soda. It has reduced its price
categories to three minimizing difference in leisure fare and business fare. It does not
charge a service charge to change tickets leaving the full fare applicable to a future ticket. It
is doing many things the other major airlines do not do; however, they are facing more
competition today with other low cost carriers like Jet Blue.They recently purchased
AirTran in an effort to expand its route base and add a major link through the world's
busiest airport.Whether or not Southwest can sustain its pricing and at the same time
compete with other low cost competition and cater to the business traveler successfully
remains to be seen although the acquisition of AirTran will help them succeed.
Prepared by:
SSH

6. Q5:What marketing recommendations, including pricing recommendation,
would you make to south west as a moves into the next decade?
• Add more classes (like Economy plus etc.)
• Increase its Fleet by Adding Airbus 320 with capacity of 150 passengers, and
which is a new technology.
• Increase advertising and promotion Budget.
• Introduce internet facilities.
Prepared by:
SSH

7. Prepared by:
SSH