As a fledgling operation, how does a startup company compete within an established market in terms of price, performance and promotion Issues
On February 1, 1973 Braniff airlines announced a half-price “Get Acquainted Sale” on all flights between Dallas and Houston. This was Southwest Airlines most profitable route. Southwest had to decide how to respond to Braniff Airlines move. Southwest Airlines is a startup business
* They faced barriers to entry; lack of capital, equipment, manpower, airplane berthing spaces, no consumer identity There are would be 3 players in a competitive and price sensitive market; Southwest Airlines, Braniff Airlines, and Texas International Airlines (TI) Airlines are competing to serve customers who fly in and out of airports in three cities; Dallas/Fort Worth, Houston, and San Antonio. * The focus of the marketing efforts would defining, prospecting, and targeting customers who are traveling intra-sate and not inter-state * The three routes involved are Dallas-Houston, Dallas – San Antonio, and San Antonio – Houston Southwest was facing legal challenges regarding it’s right to exist. * Braniff and Texas international alleged that they already served these routes and that their was insufficient demand to support another carrier
Prior to Southwest launch, these cities were serviced, intra-state, by Braniff and TI. These airlines’ service represented legs of longer interstate flights. * Braniff operated a fleet of 69 planes serving the US, Mexico, and South America. Had revenue of $256mm and carried $5.6mm passengers * TI was a regional carrier serving southwest states and Mexico. They had revenue of $32mm and served 1.5mm passengers. Their fleet consisted of 45 planes. * Local travel between Dallas and Houston averaged 483 passengers/daily. This was the most important route * Braniff serviced 86% of these customers
Texas International was regarded as a short haul carrier and Braniff was an interstate and international carrier. Service by these two carriers, within Texas, represented legs of much longer flights * Service by the interstate carriers was spotty. These flights were often full so it was hard to get reservations for travel within the state of Texas * Many cancelled flights
* Consumer research revealed a high level of customer dissatisfaction * Braniff operated the Boeing 727 which required a large crew. TI operated the MD DC-9 In sum these two carriers did not service the Texas consumer very well. They had large crews, inefficient aircraft, and were usually booked so that there was no space available to serve the needs of Texas intra-state travelers. However, the three airlines were competing for customers in an expanding market. Total average daily passenger market increased by the following: 483 in 1967, 534 in 1970, 603 in 1971, 767 in 1972.
The targeted consumer base is local travelers who are flying within the state of Texas * Texas is a large state with extremely large distances between its main population centers of Dallas/Fort Worth, Houston, and San Antonio * The combined population of these cities was 4856000
* These cities were among the fastest growing in the nation * 89% of Southwest travelers were regular business commuters These consumers responded favorably to advertising and were price sensitive Marketing Mix
Southwest Airlines offered discount airfares to the cities of San Antonio, Dallas, and Houston. In order to do this, they initially purchased 4 Boeing 737 aircraft for $16.2mm * These jets required smaller crew size than the 727 flown by Braniff and were larger than some of the turboprops flown by TI * Offered 12 daily round trips between Dallas and Houston and 6 daily between Dallas and San Antonio * Used the Hobby Airport in Houston which was an airport preferred by customers in...