Southwest Airlines

Brand Audit TeamChristine Michalak

Allison PowellKevin Powell

Lisa Salvatore

Brand Audit

December 14, 2011

Executive Summary

“Great Value. Excellent Service. Our Mission. Fly Southwest Airlines because you want to be treated like a person.”

• Low fares, customer service, corporate culture

• From small airline in Texas to large domestic carrier

• Standard of service and points-of-difference• AirTran merger• Recommendations

Introduction

“If the employees come first, then they’re happy…A motivated employee treats the customer well. The customer is happy so they keep coming back, which pleases the shareholders. It’s not one of the enduring Green mysteries of all time, it is just the way it works.”

Herb Kelleher – Founder, Southwest Airlines

Mission Statements• “The mission of Southwest Airlines is dedication to the

highest quality of customer service, delivered with a sense of warmth, friendliness, individual pride and company spirit.”

• “Foremost, we want you to know that it is never our wish to inconvenience our valued Customers. We tell our Employees we are in the Customer Service business – we just happen to provide airline transportation. It is a privilege to serve your air travel needs.”

• “More Than a Way to Fly – A Way of Life At Southwest Airlines, we consider ourselves much more than just a

business; we are a neighbor in the community where you live. We champion causes that matter most in the communities we serve by developing relationships with non-profit organizations on both a local and national level.

Source: SouthwestAirlines.com/Media

History

• Incorporated in 1967• Led by Herb Kelleher and Rollin King• Initial business plan – intrastate travel only

within Texas• Numerous legal challenges from major carriers

to prevent its launch• First flight – June 18, 1971

Current Operating Statistics

• 3,300 daily flights• 37,000+ employees• Currently serving 72 cities in 32 states• Operating 550 Boeing 737’s• Largest U.S. domestic carrier as of March 31,

2011• Currently implementing and integrating the

AirTran acquisition• Southwest received 143,143 resumes and hired

2,188 new employees in 2010Source: SouthwestAirlines.com/Media

2010 Financial Statistics

• Net income: $459 million• Net income, excluding special items: $550

million• Total passengers carried: 88 million• Average passenger load factor: 79.3 percent• Total operating revenue: $12.1 billion• 38 consecutive years of profitability

Source: SouthwestAirlines.com/Media

2011 Financial Statistics

• Operating revenues for 3rd quarter of 2011 increased by 35.1% to $4.3 billion

• Total operating revenue for the first nine months of 2011 has increased by 28.5%

Source: SouthwestAirlines.com/Media

• Domestic airline industry is volatile, intense, extremely competitive, highly unpredictable, faced with challenges, and plagued by bankruptcy.

• Pricing and routes• SWA Competitors: large airlines and low-cost

carriers

External Environment

Source: google.com/images

• Market Share in the domestic airline industry

External Environment

Source: Research and Innovative Technology Administration (RITA)

Situation AnalysisStrengths

Opportunities

Weaknesses

Threats

• Low cost structure• One plane type• Point to point service• Employee productivity• No bag fees, no assigned seats• Customer service foundation• 14.7% market share• Revenue growth year over year• Strong brand equity

• No first-class/segmented seating• One plane type• Limited international routes

• High/rising costs• Industry competition• Competitor actions• External factors• Economic events• Terrorism• Government regulations• Supplier dispute/problems (Boeing)

• Growth• AirTran merger• Boeing 737-800• Incremental Revenue• New Rapid Rewards• New reservations system

• Competition affects brand positioning and strategy.– “Bags Fly Free” campaign– AirTran merger

External Environment

Source: SouthwestAirlines.com/Media

Brand Planning and Equity

• Quickest turnaround (point-to-point service)• Employees (fosters high employee morale)• Ticket policy (no assigned seating)• Unique programs (Bags Fly Free, No Change

Fees, EarlyBird Check-In, Rapid Rewards)• Product distribution strategy (closed

reservation system)• Campaigns and slogans

• Southwest has built brand resonance

Brand Valuation

LoyaltyAttachmentEngagement

Good ValueCompetentTrustworthy

FunSatisfaction

Airlines

Low PricesDependable Service

Irreverent & “Spunky”Short-haul Trips

Source: Kevin Lane Keller, Report No.01-107, Marketing Science Institute.

Brand Resonance

• What is the value of the brand?

Brand Valuation

Source: www.interbrand.com

= $

Brand Growth

Source: www.interbrand.com

Increased Market Share

Product Strategy

• Inexpensive tickets and better seat selection• Exceptional service encouraging a high-

energy and fun environment• Convenience; fewer delayed flights and more

routes flown each day • Cost-saving programs (Bags Fly Fee, No

Change Fees)

Product Life Cycle• Growth Stage with recent AirTran acquisition

Pricing Strategy

• Prices have increased drastically over the last 5 years (39% vs. 10% industry average)

• Not featured on travel sites; difficult to comparison shop

• Cost-saving programs (Bags Fly Free, No Change Fees); fees included in overall ticket price

• Pricing model is consistent with other airlines; fares adjust as seats sell

Promotional Strategy

From Cult Following To Consumer Advocate

Promotional Strategy

• Kelleher and King created the business plan on the back of a ‘cocktail napkin’

• The Fight to Fly - http://swamedia.com/channels/By-Date/pages/1966-to-1971

• Sells one of its four planes in May, 1972 for needed cash. Ten-minute return is created

• The Wright Amendment – 1979– A law developed to protect the new airport at DFW

and would hamper Southwest’s development

Primal Branding - The Creation Story

• Southwest consistently viewed as one of the best places to work in America

• Unique leader – chain smoking, whiskey drinking• Often traveled on flights to monitor customer satisfaction• Led the company through its initial struggles and was CEO until 2001• Hired like-minded leadership• Employees purchase a full-page ad in USA Today as a special tribute

to Herb on Boss’s Day. The ad is seen by an estimated 6.5 million people. May, 1997

Herb Kelleher - The Leader

Source: SouthwestAirlines.com/Media

Current CEO – Gary Kelly

Current “Bags Fly Free” campaign

• http://www.youtube.com/watch?v=qyzzfSbz4vw

• http://www.washingtonpost.com/local/bill-targets-airline-fees-for-checked-luggage/2011/11/21/gIQAl5pHjN_story.html.

Blending Creativity andStrategy

Source: SouthwestAirlines.com/Media

• Evolve AirTran name into the Southwest brand– To eliminate threat to Southwest’s brand equity

• Southwest customers expect a certain level of service AirTran does not deliver

– Continue to slowly implement changes from the acquisition

– Eventually abandon the AirTran name completely

Conclusion andRecommendations

• Modify Rapid Rewards program– Southwest changed it in 2011

• Now earn points on fares paid, not credits for segments flown

– Consumer backlash– Appeals more to business travelers– Recommended modifications:

• Less points for a free fight (10% reduction)• Allow points for Wi-Fi access• Southwest fans gain points to use toward free flights via

social media interactions – Facebook, Twitter, blog and flickr posts, etc.

Conclusion and Recommendations

• Keep a closed reservation system on Southwest.com– No third-party travel sites– Customers cannot easily shop comparison fares– Benefits Southwest as its fares are not always so

‘low’ anymore

Conclusion and Recommendations

Questions?