Question One

Southwest Airlines has long been the standout performer in the U.S. airline industry. It is famous for its fares, which are often some 30% lower than those of its major rivals. These low fares are balanced by an even lower cost structure, which has enabled Southwest to record superior profitability even in its down years. Indeed, Southwest has been profitable for 41 consecutive years, making it the envy of an airline industry that has seen more than 180 bankruptcies since 1978.

Southwest operates differently than many of its competitors. While operators like American Airlines and Delta route passengers through hubs, Southwest Airlines flies point-to-point, often through smaller airports. By operating this way, Southwest has found that it can reduce total travel time for its passengers. They are not routed through hubs and spend less time on the ground - something that most passengers value. This boosts demand and keeps planes full. Moreover, because it avoids many hubs, Southwest has experienced fewer long delays, which again helps to reduce total travel time.

Southwest's high reliability translates into a solid brand reputation and strong demand, which further helps to fill its planes and consequently, reduce costs. Furthermore, because Southwest flies point-to-point rather than through congested airport hubs, there is no need for dozens of gates and thousands of employees to handle banks of flights that come arrive and depart within a 2-hour window, leaving the hub empty until the next flights arrive a few hours later. The result: Southwest operates with far fewer employees than do airlines that fly through hubs.

To further reduce costs and boost reliability, Southwest flies only one type of plane, the Boeing 737. This reduces training costs, maintenance costs, and inventory costs while increasing efficiency in crew and flight scheduling. The operation is nearly ticketless and there is no seat assignment, which reduces costs associated with back-office functions. There are no in-flight meals or movies, and the airline will not transfer baggage to other airlines, reducing the need for baggage handlers. Southwest also has high employee productivity, which means fewer employees per passenger.

All of this helps to keep costs low. In 2014, for example, Southwest's cost per available seat miles flown was 13.76 cents, compared to 16.80 cents at Delta and 15.84 cents at American Airlines.

a. Define the concept of market positioning and outline the various positioning strategies by giving specific examples. Which market positioning strategy has been used by Southwest Airlines over the years, based on the information provided in the mini case study?

b. Considering the positioning strategy you suggested above, describe an appropriate target group for the company in the particular market. Also, recommend a media mix that would effectively allow Southwest Airlines to reach this group. Justify your recommendations.