Southwest Airlines key success factors

PAGE 1 Southwest Airlines Term Project Services Marketing Dr. J. Chris Lin Fall, 2008 Group 10 Yi-Ping Dani Judy Joy Ann Peter Frank Ted “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.” – Southwest Mission Statement. Question 1: A. Targeting the niche market Southwest Airlines’ secret to its success is very straightforward. Southwest clearly defines its existing purposes, which is to provide the lowest fares for business and leisure travelers traveling between states. Instead of competing with large-scale airlines to fly international routes, Southwest focuses on “point-to-point” interstate short trips, and more on maximizing the profitability than focusing on market share. This strong vision outweighs the allurement of international flight market, keeping Southwest airline concentrated on its own niche to gain profit. B. Cost-consciousness Since low fares have become its selling point, decreasing the cost becomes very important. Southwest Airlines tries to save money by simplifying its operating process. Utilizing strategies such as having “One type of aircraft”, “cash-register receipts as tickets”, “no computer reservation system” and “no meal service” are some examples of its low cost strategies. C. Speed and Efficiency Southwest knows that airplanes generate revenue only when they are in the air. Accompanied with the “point-to-point” strategy, Southwest chooses to operate by the most efficient way of adopting the concept of “high average velocity” instead of conventional “hub-and- spoke” system. D. High Service Quality Furthermore, Southwest understands that its “low fares” strategy cannot be achieved at the sacrifice of good service. Southwest defines the essence of its business as service, stating, “We are not an airline with great customer service. We are a great customer service organization that happens to be in the airline business.” According to the five dimensions in SERVQUAL, Southwest has great performance in the dimensions of reliability, responsiveness, assurance, and empathy. E. Flat Organization (a) Southwest has a lean structure and informal code of conduct. The leanness leads to the cross-functional communication. Employees can connect with managers or even the president immediately whenever they want to deliver opinions and suggestions. Its hierarchy is quite simple so that department supervisors can manage employees very well and both sides can maintain good and direct communication. (b) Southwest realized that the real ownership of an organization doesn’t come from how much stock one owns. Southwest claims, “Ownership is the result of believing that you can make a difference, then acting on that belief in everything you do.” Southwest empowers its employees to solve service problems in a timely manner without asking supervisors for permission. They are encouraged to offer extraordinary service and their judgments are trusted, whether they are flight attendants or engineers. (c) Southwest believes the more employees know, the more they care. The most updated information about Southwest is easily available for every employee. It lets employees know the profit of Southwest is not only the president’s concern, but also related to your employment security. If every employee understands how the company makes money and how a single customer would influence on the performance of profitability, they would know their service to each customer mean a lot. In this case, they are more eager to suggest solutions for reducing cost and the front-line service providers can be in a better position to provide better services. F. Successful Internal Marketing (a) The Southwest culture is to serve people in a fun and innovative way, but at the same time, make profits. Southwest’s human resources department, also called” The People Department,” has its own principles to select employees. The motto is, “Employees are hired for attitude and trained for skill.” (b) Southwest believes that it should satisfy its employees first and then they would satisfy its customers. The secret for the success of Southwest Airlines is that it never sacrifices happy employees in order to satisfy customers. In other words, Southwest uses the Market-Focused Management Model. It believes that the company should trust and stand on its employees’ side because sometimes customers might be wrong. (c) Southwest lets inexperienced workers be hired as interns to learn from a good well-experienced employee for a period of time. This is done so that a newbie can observe the essence of Southwest culture from the demonstration of the experienced one. It also trains employees to put their own shoes on other colleagues of different departments. They have the chance to experience other department’s work so that they can understand others’ difficulties and become more willing and natural to help. Also, managers often come to walk around to work with the front line employees to understand their working and difficulty. (d) Southwest tries to let employees know that it is not a company but a big family. The profit sharing plan is an example. Also, Southwest promotes celebration. Every year, there are many times to celebrate for the new opening of an airport or for someone to be the best server of the year. They care about each other and even the president can know somebody is sick and needs encouragement. G. Successful External Marketing (a) Southwest doesn’t promise one thing and deliver the other. Southwest is very careful with the promotion and advertising it delivers to its customers. Southwest applies risk reduction strategy to its advertising. Southwest tells customers directly what it can offer, such as the lowest prices and exceptional service, but does not promise any meal service; utilizing this strategy, customers would not have the wrong expectations. However, Southwest often uses an, “Under promise and over deliver” strategy to demonstrate its reliability. (b) Its ads attract customers’ attention in the very beginning and create some kinds of humor to impress them. While facing competitors, Southwest defends itself also with correct truth by a humorous tone in the ads. Southwest keeps its stance while reflecting its culture and good quality in ads. H. Successful Interactive Marketing (a) Because of the success of internal marketing, employees of Southwest are satisfied. Employees provide service from the bottom of their hearts, and they often think that this performance is just “doing the right thing.” (b) In the moment of truth or critical incidents, they are willing to provide extra services even though it might not be their duty. (c) Southwest encourages employees to exert individuality while providing service. They regard every customer as special guests and give them personal attention according to their specific needs. Thus, they are more capable of creating a “legendary service,” which might be beyond customers’ desired services. SWOT analysis for Southwest Airline A. Strength (a) Concentrating on the niche market (b) Cost-consciousness (c) Speed and Efficiency (d) High Service Quality (e) Flat Organization (f) Successful Internal Marketing (g) Successful External Marketing (h) Successful Interactive Marketing All the success factors mentioned above are the strengths for Southwest. All of these are combined to be the strong culture of Southwest which is difficult to be copied. B. Weakness (a) Sticking to its niche forces Southwest to think small and make effort to simplify the business operation. (b) Consistent low fare has been always an advantage for Southwest airline. However, a “small company “operating strategy and the promise to keep price low also inhibit the company from expanding. To some degree, Southwest is limited to explore more possibilities. C. Opportunity Short-haul business traveler market is a potential market. Point-to-point trips between cities are a new niche in airline industry. It’s easy to understand that anybody can offer high fares and high service quality, and low fare with poor service. However, Southwest is committed to provide low fares with great service. It’s unusual and quite difficult in the industry, which also differentiates Southwest from other airlines and gives Southwest more opportunities in the airline industry. D. Threats Other large-scale airlines could offer lower fares to compete with Southwest. With the improvement of other ground transportations, Southwest might face the decline in customers’ need for affordable short-haul carriers. Question 2: Service Gap The difference between a customer’s expectations of a service and perception of the service actually made. · Most passengers would expect that an airline company would impose one particular seat per passenger, but for Southwest Airlines, passengers can choose their seats according to the in sequence of the time that one checks in to board. This may cause passengers who want to choose seats that enable them to stretch their legs or seats that is along the aisle, or besides the window to consider other airline companies in order to reserve seats according to their own preference. · With cheap tickets, new customers may assume that Southwest Airlines might perform services less professionally based on low training budgets or acquire cheaper facilities to lower the cost. This may prevent the company from earning business from pickier travelers. Although this kind of customer would be happy to pay less for tickets, they may not be willing to endure poor service or have poor equipment. Service Quality · Reliability 1. Southwest Airlines is keen to keep its promises. For example, they have remained its low fares ever since they started to operate the firm. 2. The company has established a good personnel and communication channel which allows messages to circulate quickly within the company. The advantage of this is that all the employees are permitted to discuss the problem together and work out a solution that is welcomed by everyone. Customers are more likely to have the service presented to them correctly due to the fact that it has been well discussed. 3. Southwest does not use the more traditional "hub and spoke" flight routing system that is adopted into most other major airline’s operating systems. Southwest prefers the "Point to Point" system instead. This means that Southwest can serves more cities with more flights than other airlines a day. 4. The company insists on an error-free record. Southwest Airlines uses the Boeing 737 for all their aircraft which has simplified training, maintenance and ground operations for the company. This decision is probably the reason why Southwest Airlines has never had a passenger fatality due to an accident. · Responsiveness 1. Employees are supposed to answer the phone within the first ring of the call, making sure that their customer has people answering to them. 2. Southwest Airlines employee’s are selected according to their passion for the job, and therefore shows the willingness and readiness to perform a service. 3. Southwest Airlines allows their employees to make major decisions on their own, giving them the authority to speak out loud, and also grants permission to deal with special circumstances the might occur during the flight. As a result, most of their employees can give prompt service when needed, without having to wait for their boss to report back before they are allowed to remediate the situation. 4. All the employees of Southwest Airlines work as a big family, and everyone in the crew share the responsibility of cleaning up the aircraft, and enabling their planes to have the take-off again after a spending very short period of time after the ground duty. Southwest Airlines have, in fact, pioneered a rapid turnaround service on keeping its aircraft on the ground for less than twenty minutes. Beside the fact that they have all the people working to get the plane ready for the next flight despite of the original duty , Southwest Airlines has also gone into the effort of change the internal design of the aircraft in order to speed up the time of ground duty. · Assurance 1. In 1995, Southwest Airlines started a non-ticket policy, which removed the possibility of customers losing their ticket before boarding the plane. 2. Employees of Southwest Airlines are consistently updated with the firm’s business operations and have sufficient knowledge to answer questions that might be aroused by customers. 3. Southwest Airlines tries to create an image that they care for the passenger. Some of their slogans include "Just Plane Smart," "The Somebody Else Up There Who Loves You" and "THE Low Fare Airline". The airline's most current slogan is "A Symbol of Freedom", all has the traits that Southwest Airlines are in your shoes thinking what is best for you. 4. Southwest Airlines has a reliable safely record that makes customers feel that he/or she will not be in risk or danger. 5. Offers convenient operating hours. · Empathy 1. Southwest Airlines tries to make things simple for customers so that they will not be confused by its system. Southwest Airlines does not reserve seats for customers so that customers will not have to go looking for their seats, but instead passengers can choose the seats that have not yet been taken. 2. Passengers on the Southwest Airlines have one less reason to feel sick because Southwest Airlines only serves peanuts, and not full meals. With less food in their stomach, passengers are deducing the risk of experiencing a queasy stomach during a plane ride. · Tangibles 1. Southwest Airlines and The Mark Travel Corporation entered into an agreement to give customers an option to buy complete vacation packages. These packages include the flight tickets, hotel accommodations, transportation options and guidance that you might need during your trip. 2. The employees of Southwest Airlines have worked hard to make their appearance innovative and appealing for their passengers. 3. Although is no in-flight entertainment, Southwest Airlines is known for colorful boarding announcements and crews that burst out singing. The crew tries to catch your attention in pursuit of living up your travel on the plane. This might be one of the reasons why Southwest Airlines can maintain such a high customer satisfaction. 4. Tickets used to be made out of plastic which can be recycled and used over and over again. Customer Value Product Value 1. Southwest Airlines became one of the first airlines companies to have a web site. 2. Southwest Airlines served smaller meals rather than the meals that are served by full service airlines, with small snacks and soft drinks for shorter flights and meriting the customers with "Snack Pack" of prepackaged goods for longer flights. In the 2000s these meals typically exceed the food served on full-service airlines. Service Value 1. Southwest Airlines has fought against the development of a high-speed rail system in Texas in order to bring convenience to its customers. 2. Southwest Airlines has been persistently increasing the number of gates and is constantly on the search for unrestricted flights to new domestic destinations which allows people to choose the airport closer to their final destinations. 3. Customers are left to choose their own seats on the plane, which helps the airline to board passengers faster. In addition, the company also has a rapid turnaround rate which altogether gives passengers an image that Southwest Airlines can make a rapid recovery after a flight. This is ideal for customers who are in rush to get somewhere taking the plane. Personnel Value 1. Southwest Airlines lets it employees become one of the shareholders of the company. Besides meriting the employees for their hard work, it also motivates employees to put their efforts in making the company a more profitable company. Under this system, employees act on their own accord to treat customers well, due to the fact that their fate is connected more inseparably with the company. Image Value 1. Southwest Airlines have constantly promoted themselves to be a low fair airline in the term of pricing. It has tried to explain to their customer that they are not offering a special bargain for customer, but rather that they are selling the tickets continuously at a low rate. Even customers without a lot of money can now take a plane due to Southwest’s low pricing. 2. Southwest Airlines give a strong image of being capable to solve problems when they occur. Southwest Airlines was originally incorporated with many lawsuits to fight for. Some of the incumbent airlines of that time (Braniff, Trans-Texas, and Continental Airlines) initiated legal action, which consulted to legal battles in order to keep Southwest Airlines on the ground. In the end, Southwest won, and had from then on has been considered a company that has the ability to deal with difficulties. 3. Southwest Airlines is one of the world's most profitable airlines, posting a profit for the 35th consecutive year in January 2008, giving its customers the good image that they are operating the company in good hands. Question 3: 1. Key Characteristics The heart for service Southwest exists to serve a purpose, which is not just to make a profit .They are not focused on themselves and their individual departments. Their focus is on servicing the needs of people they care about, even if this involves some self-sacrifice. Humor Every employee of Southwest is creative and has his or her own personality. Their original clothing and dress, humorous conversations, and interesting broadcasting lead to a relaxing and delighted atmosphere. It can relieve the stress and pressure for passengers that take Southwest Airlines as well as create additional entertainment for everyone onboard without spending additional money. Sincerity Too much emphasis on deference can build a wall between people. It’s hard to express ones true self in an environment that is focused on providing the most professional service. Instead, Southwest employees always treat everyone properly with their heart, and they do it not because the company requires them to, but because they want to. This is part of the Southwest spirit. Enthusiasm (P.287)- Every employee of Southwest is emotionally-connected with their company, and as such is willing to do anything for the beneficial growth of Southwest. Every employee infects each other with an extreme sense of joy and satisfaction; therefore as a result, customers are also influenced by the employees’ delight and are, consequently, may also feel happiness. This is how Southwest became one of the most efficient airlines. 2. Satisfaction with Southwest Employee’s perspective: Relaxed work environment Just as wearing one’s favorite clothes can help let someone relax, Southwest Airlines also has many ways to let their employees relax as well. There are gadgets, games, and other creative outlets readily available on planes and in the corporate offices to make it easy for employees to engage in breaks. Having a humorous time cuts down on the time spent on feeling stressed and creates a work environment that is interesting and fun. Hold the new information The more employees know, the more they care about the company. If employees are armed with latest information, they are more likely to make a correct decision. It is also important to let employees hold important pieces of new because it allows them to feel that they are important, and within a community of people who also care. This allows the employees to feel a sense of self-confidence. Horizontal organization The leaders of Southwest are not in a prominent or unreachable position. Any employee can enter their offices to discuss anything at any time