Case Synopsis
The case study “Spirit Airlines” delves into the strategies used by Spirit Airlines, a low-cost carrier based in the United States, to balance the need for profit and the desire to keep fares low. The airline charges extra for extra extras such as checked bags, preferred seating, and snacks. This strategy has generated revenue and kept the airline profitable, but it has been chastised for its poor customer service and bare-bones service offerings.
The case describes how Spirit Airlines uses value-based pricing, revenue management, dynamic pricing, and bundling to achieve the best cost-to-satisfaction ratio possible. Improved on-time performance, more flexible booking options, and a new cabin design with more comfortable seats and extra legroom are just a few of the initiatives examined in the case that Spirit Airlines implemented to address customer concerns. Spirit Airlines has managed to attract and retain a loyal customer base despite criticism for its low fares and lack of mandatory services.
Spirit Airlines began in 1980 as a small charter airline in Michigan (Kotler et al., 2021). Spirit Airlines is headquartered in Miramar, Florida. The airline has evolved into a low-cost carrier that serves North America, South America, and the Caribbean (Kotler et al., 2021). The airline has kept its fares low by charging extra for checked luggage, seat assignments, and refreshments.
Spirit Airlines’ reputation for providing subpar customer service is a significant issue. Many passengers have expressed dissatisfaction with the airline’s uncomfortable seats, limited legroom, and lack of onboard entertainment. Flight delays and cancellations have been an ongoing problem for Spirit Airlines, resulting in frustrated customers and negative online reviews. Many passengers have lost trust in the airline due to these issues, making it challenging to gain new business.
Spirit Airlines’ Pricing Strategy
Spirit Airlines has committed to value-based pricing as a central pricing strategy. The airline sets prices not based on what it costs to produce or provide a service but on what customers are willing to pay. This is how Spirit Airlines can keep its costs down while making a profit. The airline can keep its base fares low by charging extra for extras, making it a good choice for thrifty vacationers.
Spirit Airlines uses value-based pricing and revenue management strategies to find the sweet spot for its fares (Kotler et al., 2021). Airline fares fluctuate with market conditions, including demand, competition, and time of year. Spirit Airlines, for instance, may adjust its fares upward during the holiday travel season to account for the heightened demand for air travel (Kotler et al., 2021). Similarly, the airline may reduce prices to increase sales if there is a low demand for a specific route.
Spirit Airlines also uses dynamic pricing, which allows the company to react instantly to market fluctuations by changing ticket prices. This method allows the airline to maximize revenue by selling all available seats. Spirit Airlines uses dynamic pricing to offer discounted fares for last-minute reservations and under-demanded flights. Spirit Airlines keeps its base fares low through bundling to encourage customers to pay for optional extras like checked bags and seat assignments.
Spirit Airlines provides various packages to meet its passengers’ needs. For instance, the airline’s “Thrills Combo” package includes the ability to choose a seat, one checked bag, and early boarding (Kotler et al., 2021). Customers who value comfort and convenience while traveling are the target audience for this package. On the other hand, the “Works” package features both the “Thrills Combo” and the flexibility to switch flights without additional costs (Kotler et al., 2021). Customers seeking leeway in their vacation scheduling will find this package particularly appealing.
Spirit Airlines’ Airfares Charged and the Expectations of Travelers
Spirit Airlines is profitable despite its low fares because it consistently exceeds customers’ expectations. This is possible by employing a business model emphasizing essential transportation services at rock-bottom prices. Spirit Airlines can meet its customers’ expectations because of its honest approach to pricing. The airline is transparent about its fees, so passengers know what they are getting into. Customers are more likely to feel safe making purchases after seeing this information laid out clearly.
Spirit Airlines can offer low fares because it places a premium on efficiency and cutting costs wherever possible (Kotler et al., 2021). The Airbus A320 family is the airline’s only plane, so upkeep is easy, and prices are low. In order to minimize idle aircraft time and increase efficiency, the airline uses a point-to-point routing system. Spirit Airlines can offer low fares without sacrificing profitability thanks to these streamlined processes.
Spirit Airlines goes above and beyond for its customers because they offer cheap flights. The airline positions itself as a low-cost option by emphasizing its low starting prices. By keeping their prices low, the airline can attract customers trying to minimize travel expenses. The airline uses digital platforms like Facebook and Twitter to interact with its customers and spread brand awareness (Kotler et al., 2021).
Spirit Airlines has delivered what its target market expected, despite criticism about its lack of amenities and customer service. The airline has built a solid reputation for providing excellent value to its customers through a combination of competitive pricing and honest pricing disclosure (Kotler et al., 2021). Moreover, by catering to budget-conscious passengers, the airline can strengthen its position in the fiercely competitive air travel market.
Reference
Kotler, P., Bowen, J. T., & Baloglu, S. (2021). Marketing for hospitality and tourism.