October 20, 2011
Chapter 10 Case Study
1. What has been Southwest’s traditional pricing strategy? Why has this pricing strategy been so successful throughout the airline’s first three decades? Traditionally, Southwest used a low-price strategy. They were known as always offering the cheapest flights. The air line did not serve meals, had no assigned seats, no electronic entertainment, and no retirement plans for employees. Because Southwest had such lower costs, they were able to crush competitors. This pricing strategy was so successful throughout the airline’s first three decades because their strategy was the complete opposite of competitors. The planes flew point to point based on demand which offered more flexibility. The airline did not serve major airports, but second-tier destinations where the costs were lower. They only served snacks on the flights, and employees were offered a profit sharing plan in place of a retirement plan. All of these elements helped cut costs and make Southwest profitable every year since its founding. 2. What values do the airline customers-both business and leisure travelers- 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? Some values that airline travelers seek are leisure of arriving to their new destination, flexibility, being efficient, and being comfortable all for a fair and inexpensive price. Traditionally, Southwest was inexpensive and flexible because of their low costs and the mentality of just getting travelers from point A to point B. The remodeling of the airline has created a more pleasant atmosphere for the customers. They have specifically targeted business travelers. Southwest offered a “Business Select” category where travelers would pay thirty to fifty more dollars for a ticket and receive preferential boarding, bonus frequent flyer miles, and a free...