Introduction
Purpose
Contemporary businesses are currently faced with a new marketing principle: creating added value for customers.
Creating added value, however, is compounded with diverse challenges in its definition, with some theories claiming that creating value does not only entail providing customers with services that are within their expectation, but providing them services that are beyond their expectations(Craven 2002, p. 57). But how can a firm successfully create value for its customers?
This report will focus on the case study, “Southwest Airlines” to give an informed review of added value by critically analyzing two business strategies adopted to create value for the customers: servicescape and service innovation.
Servicescape model is critical for creating added value because physical appearance is the first experience that customers are exposed to, while service innovation is critical because any company wishing to prosper must keep its business operation in line with the dynamic technological changes.
Definition of Value Creation
Added value is a term that is related with customers’ feelings after they take a step of purchasing a product or a service. Thus, creating value for customers can be defined as assessing the benefit the customers get after they deduct their expense from purchasing a product or service (Craven 2002, p. 59).
It is, indeed, true that many customers expect more than a service or a product from the firm, as a vast majority of them depict the need for mental and emotional relationship with the companies, because they think that this creates value for them (Christopher & Ballantyne 2002, p. 83).
An overview of the Company
Southwest Airlines is a service industry that aims at offering its customers with distinctive air transport services. The company started in 1971, with an aim of providing its customers with air transport at a lower cost (Southwest Airlines Co. n.d.).
Eventually, the company adopted a strategy that seeks to provide its diverse customers with added value by making sure that the services exceed the price paid by the customer as well as what the customer expects to pay for the services. The company believes that creating value is one of the crucial activities the firm would take to attain a competitive edge.
Even though the company started with purchasing products that were diesel powered, it has managed to replace its components and equipments with modern equipment, which are environmentally friendly, at a reduced cost (Southwest Airlines Co. n.d).
More so, it has managed to come up with more innovative products in the new airport lounges and the business class products. The company has also managed to come up with a number of trained personnel who take care of the children while their parents are in the “business class.” This new experience within the industry creates an added value for the customers.
The value creation in the Southwest Airlines has been attributed to effective value creation models. This report will critically analyze two value creation models that have been adopted by Southwest Airlines, namely, service innovation model and servicescape model, with a view of establishing the viability of the models in creating value for the customers.
Through a number of recommendations, the report will shed light on how the company can improve its value creation for its customers.
Analysis and Findings
Value Creation through Servicescape Model
Sevicecsape model involves recognizing the rationale behind considering physical attributes of a service industry as a key marketing point (Grönroos 2007, p.176). This plays a critical role in enhancing first impression for the customers, and hence the overall brand image of the company.
In the Southwest Airlines, the customers have many opportunities of getting in touch with the company’s environment as they await their flights. Thus, servicescape is a critical model that is able to assess added value for the customers of the Southwest Airlines.
Using the servicescape framework, one is able to concur that the physical attributes of the airplanes and the exterior attributes of the airport are critical in value creation (Looy & Dierdonck 2001, p. 183). And in a bid to explain the rationale of considering physical factors as critical in value creation, the model groups these factors into three categories: ambient condition, size and symbols category, and the spatial layout category.
This model aims at assessing whether these environmental factors add value to the customers by evoking positive impression.
Value Creation in the Southwest Airlines through Servicescape Model
The Southwest Airline takes advantage of its attractive airplanes in the “business class” to provide added value for its customers. Using the ambient condition, the customers are provided with added value by preventing them from pointless noise, which emanate from the aircrafts as well as the outside environment (Southwest Airlines Co. n.d).
The soundproof components facilitate this, while noise from one passenger to the other is eradicated by the use of earphones provided to each passenger. The strategy provides sanity in the “business class,” making sure that the customers are not adversely affected by adverse environmental factors within the setting.
More over, this strategy does not only endeavor to make sure that sound pollution is minimized, but it provides an avenue for ensuring that the plane gets enough oxygen at all times.
Sight is another critical component that has been put out into consideration in a bid to create added value for customers. This has been achieved by making sure that the airplanes receive enough amount of light, taking into account different periods within the “business class.”
For case in point, during the business hours, the customers are provided with different lighting from the sleeping hours (Southwest Airlines Co. n.d.). The sound absorbers, which facilitate control of noise, are kept out of the customers’ sight.
Attractive design is also put into consideration in the “business class.” The interior layout is designed in such a way that it offers sufficient décor, given that this class provides services to businesspersons. Thus, customer value is created through maximizing the space in a manner that facilitates efficient placing of briefcases, and thus enhancing their business discussions.
The company takes into account that providing best product /service among the alternatives should be based on what is best for the guests: using guests’ emotions, and not the emotions of the decision makers (Dibb et al. 2005, p. 57). In this regard, the company uses signs and symbols that have a connotation with the customers’ emotions, thus facilitating an increase in services.
This idea stems from the fact that increasing customer value entails making sure that they are more inclined to purchasing emotional products as opposed to the non-emotional products (Falkowski & Grochowska 2009).
With regard to staff, the Southwest Airlines exude confidence that the company is able to create added value for customer by not only improving the internal environmental factors of the Airplanes’ “business class,” but also managing the attitudes affecting the customers with regard to environmental factors (McColl-Kennedy 2003, p. 67).
In this regard, the company has created social relations and collaborated with other companies’ practices that are in line with the Servicescape strategy. And it is for this reason that the Southwest Airlines has taken the initiative of benchmarking its uniform with industries that provide designers’ clothing, which catch the eye of the customers.
Additionally, the company has already come up with a differentiation strategy that defines the dress code for the “business class,” which facilitate a business culture within the “business class,” and this add value to customers through improved cohesion between them (Bowie & Buttle 2008, p. 34).
Critical Analysis of Servicescape Model Using “3 Performance Dimension”
Using three-performance dimension, which include the customers/ employees’ relationship, the market performance, and the financial performance, the Southwest Airlines has increased its financial performance by creating value through comfort and luxury.
This has been achieved by coming up with a viable strategy that provides the “business class” customers with what they need emotionally: physical evidence (Lovelock & Wirz 2007, p. 231). And more so, the knowledge obtained from the customers helps them build a long-term relationship with the employees.
However, while all the above are valid environmental factors that continue to create added value for customers, the notion of considering physical attractiveness as prime factor in creating value for the customers fall short of its expectation in as far as marketing performance is concerned.
This stems from the fact that the strategy does not provide an avenue for measuring added value by comparing its environmental features against its competitors in order to assess its comparative strength.
If this prospect is put in place, the Southwest Airlines will not only provide high quality environmental features with low pricing strategy, but also adopt a pricing strategy that the customers are willing to pay for, as creating added value for customers can also be achieved through premium pricing of luxurious environmental features.
Service Innovation
In the recent past, service innovation has been considered as one of the indispensable functions while creating value for customers.
As such, the strategy is able to introduce customers with services that are beyond their expectation. Service innovation, however, cannot be achieved if the firm lacks a proper implementation of Customer Relationship Management (CRM). According to Kotler, Bowen, and Makens (2010, p. 413), the success rate of innovation in a vast majority of firms has been on a downward trend, especially in the hospitality industry.
Thus, assessing service innovation for the Southwest Airlines entails taking into account its three key elements: customer focused, which tries to go beyond the customers’ expectations; processed focused, which tries to increase efficiency as well as productivity of the firm; and continuous improvement, which is a continuous process of providing innovative services to the customers(Lovelock & Wirz 2007, p. 237 ).
Creating Added value for the Southwest Airlines through Service Innovation
It is imperative to mention that the Southwest Airlines operates its business operations by taking into account the dynamic technological trends happening across the globe (Southwest Airlines Co. n.d). Based on findings on incorporating technology with the firm’s services, the Southwest Airlines has already launched a website with a good customer interface, which can be accessed quickly and easily.
The product categories are clear, the product names are clear, and the site offers a good search for the services provided by the firm (Southwest Airlines Co. n.d). Value creation through this strategy is enhanced by providing the customers with an opportunity to air their views, opinions, and comments concerning the services, as this acts as a customer service center (Knox et al. 2003, p. 123).
Communicating through email and interactive social websites ,such as the Facebook and Twitter, create added value as it enhances interactivity between the company and its customers through comments and feedbacks of their comments (Bowie & Buttle 2008, p. 34).
More so, the customers in the “business class” are entitled to free wireless internet, audiovisuals, and are provided with catering services that involve high-class technology (Southwest Airlines Co. n.d). For case in point, the food and beverage services take into account the time taken by customers from ordering their food and/ or beverage to the time of service provision.
Thus, the company has adopted a technique that limits this time. The customers are thus able to order foodstuffs using computer, which also makes sure that the nutritional value of the food is clearly displayed, thus providing customer value with respect to efficiency and knowledge.
Critical Analysis of Service Innovation using ‘Key Elements of Service Innovation”
Enhancing customer interaction through the social media depicts that the company is ‘customer focused’ and upholds ‘continuous improvement’ areas. Through this casual relationship, the company creates added value in terms of loyalty.
‘Continuous improvement’ is derived from the fact that websites call for a continuous upgrading in order to provide the customers with updated information. Providing the customers with services that are ordered via internet depicts that the company is “process focused,” and this creates added value in terms of convenience and time management.
Recommendations
Physical Evidence
Even though the Southwest Airline is able to create added value through the already adopted strategies, I would recommend it to allocate more space on waiting areas, as it has allocated more space for the flight services, leaving the clients with inadequate waiting facilities, including the lounges.
Although this is based on grounds that the surface area for the income-generating areas should supersede the waiting areas, it is paramount for the company to create added value by increasing the number of equipments and facilities within the waiting area to avoid views characterized with congestion.
Additionally, the waiting areas should display certificates of merit in order to create added value for customers with regard to trust and quality (Bruhn & Georgi 2006, p. 144).
Service Innovation
The services within the “business class” can be improved by making an effort of averting the technological terminologies and giving way to business terminologies.
This stems from the fact that adopting business terminologies is paramount since the first step of service innovation entails communicating with the customers using clear terms that would help them communicate with the company in an effective manner (Bowie & Buttle 2008, p. 43).
This strategy can be achieved by adopting universal language standard, including choice of language during the point of sale systems. More so, creating value for customer at the service innovation entails striving to provide the customers with diverse services that are of the same service category all at once (Kotler, Bowen, & Makens 2010, p. 421).
This can be facilitated by collecting customers’ information with regard to demand on services, as well as gathering personalized information such as information on the last call from a particular customer.
Conclusion
Creating value for customers cannot be defined without assessing the benefit customers get after they deduct their expenses. The process can be achieved through adopting a viable framework(s) that is in line with the business operations.
Using the servicescape model, the Southwest Airline has managed to create value for its customers though a number of dimensions, including the ambient condition, signs and symbols, and engaging the staff as well as the customers in the process.
Thus, the Southwest Airlines has been in a position of providing its customers with increased excitement, exclusive environment, as well as high quality values.
The service innovation, on the other hand, has facilitated added value creation through innovative products that are in line with the current technological trends. In turn, this has created room for exclusive services, including wireless internet connection in the “business class,” which has helped to provide the customer with services, which are beyond their expectations.
Thus, the service innovation creates room for fun, luxurious experience, trust, and relaxation. And despite the challenges faced by the company, it is, indeed, true that it has managed to create added value for its customer through service innovation models as well as the servicescape model, a value that is beyond their customers’ expectation.
List of References
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Bruhn, M. & Georgi, D. 2006, Services Marketing – Managing the Service Value Chain, Prentice Hall, Essex UK.
Christopher, M., Payne, A., & Ballantyne, D. 2002, Relationship Marketing: Creating Stakeholder Value, Elsevier Butterworth-Heinemann, Oxford.
Craven, R. 2002, Customer is King: How to Exceed their Expectations, Virgin, London.
Dibb, S., Simkin, L., Pride, W., & Ferrell, O. 2005. Marketing: Concepts and Strategies (5ed.), Houghton Mifflin Company, Boston.
Grönroos, C. 2007, Service Management and Marketing: A Customer Relationship Management Approach (3rd ed.), Wiley publishers, Chichester.
Knox, S., Maklan, S., Payne, A., Peppard, J., & Ryals, L. 2003. Customer Relationship Management: Perspectives from the Market Place, Elsevier Butterworth-Heinemann, Oxford.
Kotler, P., Bowen, J., & Makens, J. 2010, Marketing for Hospitality and Tourism (5th ed.), Prentice-Hall International, London.
Looy, B. & Dierdonck, R. 2001, Services management: an integrated approach (2nd ed.), Prentice Hall, London.
Lovelock, C. & Wirz J. 2007, Services marketing: people, technology, strategy, Prentice Hall. London.
McColl-Kennedy, J. 2003, Services Marketing: A Managerial Approach, Wiley, Milton, Qsld.
Southwest Airlines Co. n.d., We make it easier. Web.