South west pricing strategy was a unique strategy different from the normal conventional industrial strategies. Initially, it sought to retain the lowest air tickets for certain routes that it operated.
Therefore, the airline created some policies which included; flights with no first class, non assigned seats, flying one type of air craft, limited in-flight entertainment and offering no retirement benefit plans for its employees.
Considerably, the formulation of these policies led to the success of this company making it to dominate over the first three decades. The strategy required little cost to maintain its cost centers as compared to other airlines.
Generally, each class of customers desire different qualities and values. For business class travelers, price is not a limitation to them.
However, their major concerns are; the ease at which can tickets can be changed, first class comfort, assigned seating arrangement, convenient and frequent flights to their destinations, convenience in arrival time and availability private airline lounges.
On the contrary, leisure travelers look for low cost airlines with no additional fees.
Compared to their competitors, south west airline has shown better improvements in catering for its customers needs. The airline prefers flying a bus route rather hub to spoke pattern.
Additionally, It has evaluated it’s under performing routes so as to develop profitable city routes with its destinations to non crowded airports. Notably, this has helped the airline to save on time for its customers.
Moreover, the airline has created customer loyalty with leisure travelers as compared to other airlines which only consider business class models. Its destinations are always on schedule with more frequent, non stop flights.
Lastly, the company has pledged to always maintain the best customer care in the most efficient and effective way.
One of the vital internal factors affecting the airline pricing decisions would be lab our costs. South west case clearly shows this aspect through their earlier policies. According to the company, profit sharing for employees would reduce lab our cost. Other factors include, marketing policies, objectives and supply.
For instance, initially, the main objective was to retain low prices and create high profit margin. Today the company has revised its policies so as to curb the increased competition by creating new routes and offering business class travels which have very enticing policies though higher in price.
To eliminate high ticket prices from sales agents they only allow for online booking. On the other hand, Supply depends on capacity the airline can deliver to a specific destination.
South west airline aims at delivering full capacity during flights by incorporating the leisure travelers who are not on a schedule. Additionally, they are offered discounted fares so as to fill in the empty seats.
External factors include; rates and taxes, government regulations, completion, demand and fuel costs. Notably, fuel prices make up the largest component than all the other variables that affect price.
Majority of the airlines are feeling the impact of the increasing fuel prices making their pricing strategies less effective and inefficient.
The airline has managed to increase its prices and still maintained its customer loyalty and reputation through discounts. Among its marketing campaigns include, no charges for baggage and change tickets. This is different compared to other caries which charge up to 50 dollars.
Preferably, this is a major reason why the prices of the company remain high since it incorporates the extra charges in baggage and change fees in its ticket price.
However, other airlines maintain their prices low by distributing the travel expenses so as to lower the normal travel price to extra charges in luggage and travel change tickets. Lastly, the airline has limited its on line ticketing to only one site ‘The south west.com’ which limits the customer to compare prices.
From its background the company has been consistent in its growth. It has managed to make tremendous achievements from maintaining customer loyalty and low prices even with high fuel prices.
Through this we can definitely conclude that the airline can sustain its pricing strategy and freely compete with other airline such as the Jet Blue.
Jet blue is a real threat to the company. Currently, the airline has purchased an Air Tran with an aim of expanding its routes. South west should look unto this matter by purchasing the most modern air crafts such as the dream liner which is efficient on fuel.
The airline ought to continually expand its business destinations to as far as China, Turkey and Dubai which are the current popular business markets. In addition, it should increase its promotional strategies by closely paying attention to the insights of the customer.
Practically, it is very expensive for a round trip ticket noting that some customers will at some point require no luggage either on return from destination or when flying to out. Creating some discounts on these cases might ease the cost for passengers and build more customer loyalty.
Lastly, I would recommend free internet for on all planes in southwest airline. This would be very enticing to business travelers and would be a unique strategy than no carrier has recently formulated.