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. 2 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 3 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 4 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, 5 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. 6 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. 7 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 8 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 9 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. 10 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 11 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. If there are suggestions to be made, the leaders are there to hear them. The leaders also, surprisingly, help with ground work such as baggage handling. This type of organization allows Southwest employees to feel free to do their job and continuously improve upon whatever needs to be improved without many restrictions or pressure. Trust (p. 296) Southwest has confidence in its employees‘ abilities to make wise decisions. This trust grants its employees a very elastic sense of freedom to do what they feel is right. Due to this sense of freedom, Southwest employees work harder and are able to do their jobs the way that they think is the best when unique situations arise. Inspire each other Southwest employees are full of morale and work to inspire one another within the organization. Southwest has established LUV LINES Magazine, in which employees who see a colleague offering positively outrageous service are encouraged to write up the scenario for all other employees to read about in the magazine. Every year there is an awards ceremony that is held to encourage exceptional service and through this, helping the employees to understand the value of Southwest even more. Customers’ perspective: Price The purpose of the low price fares is to allow almost anyone to have the opportunity to travel by planes. Southwest is happy to devote their best efforts for their customers. 12 All passengers are welcome, be it full-time workers, single parents looking to spend time with their separated children, or just travelers looking to go somewhere where they have not be able to afford to go before. Southwest also has the ability to increase the number of flights that they serve per day instead of raising their fares. This allows everyone to arrive at their destinations without having to pay a higher fare. Simplification Unlike traditional airlines, Southwest simplifies its business. Southwest considers customer convenience and provides good service. Southwest does not rely on the seat reservation model. It also takes very little time to get tickets and one can sit at any available seat when they check-in. Service, on time Southwest can turn its plane in 10 minutes. One poignant example of Southwest‘s exceptional turnover speed is when a student wrote to Kelleher, and told him they were arriving 15 minutes late to class, Kelleher changed the flight schedule to accommodate them. They are willing to pay more to let customers feel respected. Culture Southwest airline has ―Southwest spirit‖, which is deep in everyone‘s heart. They treat each other like family members. Good interpersonal relationship and communication ability won‘t leave with Kelleher. If Kelleher leaves Southwest, the organization would still be able to function with the same dedication as before. Storyteller Southwest is much more than a one-man show. It gives opportunity to everyone to create their own stories. Kelleher is a storyteller, who attracts everyone and affects everyone through him stories. The company has created a tribe storyteller, but surely, based on the legendary service Southwest has provided over the years, Kelleher is not the only one. 13 Question 4: Despite the economic downturn in the United States, Southwest‘s position will continue to remain unassailable by competitors and industry environments. Southwest is the leader of all of the airlines in the United States for its ability to attract customers based not only on its low-fares and exceptional service, but also on its ability to change and evolve as it needs to. In recent years, the global price of oil has caused many airlines to collapse as airlines were forced to raise ticket prices and lose customers. Airlines were also hurt by low ridership rates. Southwest Airlines was able to overcome these issues, and it will continue to do so. In the greater part of 2008, the price per barrel of oil soared to the highest that the world has ever seen. As a result of this, world gas prices also increased and as such, it became more costly to operate airplanes. Due to rising oil costs, and other factors such as a weak economy (leading to poor ticket sales), many different airlines went bankrupt and were subsequently absorbed by other airlines. This has affected many airlines, but the airlines that are the most affected are low-cost airlines because they run on a lower operating income compared to normal carriers. Although Southwest Airlines is also a low-cost carrier, it has effectively escaped this fate. Southwest’s oil contracts (Source: Bailey article under works cited) 1. Starting in 2000, Southwest, under Gary C. Kelly as C.E.O., purchased hedges against higher fuel costs 2. Southwest, through 2009, is able to purchase oil for $51 a barrel 3. While other airlines were forced to bear $90 barrels of oil, Southwest didn‘t 4. Other airlines had to drastically raise their tickets costs to keep up with oil prices, but Southwest didn‘t as much. Sluggish economy Due to the sluggish economy, many potential passengers are mainly concerned about price before other factors. Southwest is suitable for this type of customer in the current economic environment. This is an advantage for Southwest because it is typically the lowest-cost airline. Southwest Airlines is also protecting its position as the dominant airline in the United States by looking into new ways that it can continue to evolve. Southwest is not stagnant; it is the only airlines in the United States to consistently post profits because it continuously grows and cuts areas that posts losses for them. Southwest is also currently looking to try new strategies that it has not tried in the past—namely, to expand service into international travel markets within the next two years. 14 Southwest adding stops at airports with good potential markets (Wikipedia) 1. Southwest is continuing to expand to new markets that it doesn‘t already serve. The next major market that it is poised to enter is Minneapolis/St. Paul in 2009. Currently, Southwest does not serve an airport between Wisconsin, all the way to Wyoming. With the addition of this new point in Minneapolis, Southwest will drastically open up the regional market, and in the future, possibly create more opportunities for additional expansion if demand calls for it. 2. Southwest is also continuously adding new routes that are demanded Southwest has purchased ‗rights‘ at New York‘s LaGuardia Airport, which is considered one of the most convenient airports in terms of location within the city. Southwest had previously lost its rights there, but had it reinstated because of popular demand Southwest cuts flights with poor sales 1. Southwest is cutting 196 daily flights by January 11, 2009. Reasons include fuel costs, the state of the economy, and practical reasons such as cold weather causing engine problems 2. Southwest cuts unpopular flights to free up planes for more popular routes 3. Not every route is a success, and to remove the poor sellers means that there is more chance to find a new winner. Southwest’s expansion into international travel under code-sharing 1. Southwest is planning to expand from domestic travel also to international travel Some of the countries in negotiation include: Canada, Mexico, England, and Caribbean island nations Contracts are already under negotiation, should be completed by 2010 2. In order to codeshare, Southwest works with other airlines such as WestJet (Canada) and Volaris (Mexico). It can then share the routes that these airlines own and use it for their name as well. As of New Years 2009, the world oil market has once against stabilized. It is, however, already too late for the dismantled airline carriers to re-emerge. Some bankrupt carriers like Delta are currently having a second chance to operate, and since Delta‘s markets include business travelers as well as typical travelers, it is currently posting some profits. Ultimately, however, Southwest will be able to maintain its dominance in the market of U.S. air travels because of its ability to grow and change with the times. 15 Question 5: Southwest Airlines stewardesses always let passengers enjoy their journey by telling some interesting jokes and stories, which make many customers enjoy their flight, despite lacking other forms of entertainment. In a longer haul flight, such as in a five to six hour flight, stewardesses would have a very difficult time to maintain their enthusiasm. In such a situation, Southwest would have to upgrade its facilities, or hire more stewardesses such that one could take a break while the other serves. It is obvious, in this case, that hiring more stewardesses would not make sense because they would just take up passenger space. Ultimately, this would mean that Southwest Airlines would have to upgrade its airplanes to include in-flight entertainment, and subsequently, Southwest‘s future passengers would have to carry the burden of these costs. Southwest could choose to add some forms of entertainment without installing costly equipment on every plane. However, this strategy would also be very costly in the long run. When one takes into account that Southwest has over 300 aircrafts, it is immediately obvious that even if Southwest provides newspapers and magazines, that its daily or even weekly and monthly distribution costs would quickly add up to become a financial burden. It would be cheaper in the short run to choose magazines and books; however, in the long run, installing electronic entertainment would be cheaper. Regardless of the choice of entertainment, Southwest would have to pay a lot of money in order to entertain its passengers on long haul flights—and the fares would also increase. A five to six hours transcontinental flight with no food and movies would be very boring. As such, most consumers would probably choose to pay more for proper amenities like movies and food. I think having no food or movies is tolerable for a flight that is up to three hours. Any longer, however, the passengers would probably be willing to pay more. An exception to this case might be if saving money is the primary goal. Southwest provides nuts as a snack, which is terrific for a short-haul flight, but in a long-haul flight, nuts will probably not be sufficient for many American customers. Yes or No: Should Southwest Airlines enter long haul flights? Yes: Cheap low cost flights for faraway destinations o This is one of the main competitive advantages of the Southwest brand. o Convenient for consumers traveling from LA to NYC, that is also looking for a cheaper alternatives compared to other major carriers. 16 More chance for profits due to new market opening up o If Southwest extends their brand into long haul flights, it would attract budget-conscious customers looking for no-frills flights without transfers. Not too many competitors in the low-cost markets for long-haul flights o JetBlue, TED, TransAir, and Virgin Atlantic are low-cost airlines; however, they are relatively more expensive than Southwest. It is true, however, that these competitors also offer many amenities that are available in other full-priced carriers that Southwest currently lacks. No: Uncertainty of economy – not so much money for holiday travels o Long-haul flights are very costly, and the economy is not doing well so the leisurely travel segment has been hit particularly hard. o Reduced profits High fuel costs (not a current issue, but perhaps in the future) o It might be more costly to fill the gas tanks all the way full in order to support longer-haul flights. Short haul flights don‘t have this issue. Perhaps need to upgrade entertainment and/or serve more than peanuts o Longer-term flights would exhaust stewardesses that typically entertain, so there would be new forms of entertainment o The food might have to include more than peanuts because peanuts are probably not enough to sustain appetites of hungry Americans for long periods of time. In the short-term, might be more costly for passengers to travel Southwest than for its alternatives o If Southwest upgrades its facilities, then the costs would first have to be passed onto consumers, and perhaps later, can drop. Yes or No: Should Southwest Airlines fly internationally Yes: Code-sharing with other airlines can save costs of expanding into this market by themselves o Southwest doesn‘t have to establish brand new customers, but can share customers with other airlines. Few low-cost competitors that fly internationally (JetBlue, Virgin Atlantic) o Southwest would join JetBlue and Virgin Atlantic in being several of the only American budget carriers that fly to international destinations. 17 This is a major draw for budget-conscious travelers that are also looking to go to exotic locales. International destinations are desirable places to visit for leisure The market that their aircrafts can reach are considered major holiday venues (ex. Caribbean, Hawaii, England, Mexico, Canada) ―Southwest Effect‖ – when Southwest enters a new market and decreases prices up to 50% or more, flights increase by up to double or quadruple the former rates. The market segment to grow in the future o Southwest is one of the dominant players in the short-haul markets, and they are arguably the favorite carrier in this regards. In order to continue growing, Southwest may have to look into international travel as well. No: Code-sharing with other airlines could result in brand confusion and communication issues o Customers can go to the website of the carrier that Southwest code-shares with, and order tickets from there. This could cause a diffusion of Southwest‘s own brand and also create confusion. Rise in ticket costs because of international airport taxes o American domestic airport taxes are different than international taxes, and in addition, these taxes are uncontrollable to those that fly. International taxes that are particularly expensive could be turn-offs to the typical Southwest flyer. More bags to check, heavier, leading to higher fuel costs and room for mistakes o Because passengers are flying internationally, presumably for vacation, they typically would pack more. Packing more would also result in the plane weighing more, and as such, more fuel is consumed. Long flights are uncomfortable and Southwest would have to upgrade crafts, entertainment, and food o The current Boeing 737 jets may not be enough to fly long-haul flights, and Southwest may have to look into new options, which would raise their costs. o Entertainment and food are two unavoidable issues for Southwest when it comes to long-haul flights and international flights. These would add costs. 18 Short-haul international flights? Like its competitors JetBlue and Virgin Atlantic, Southwest could look into destinations for short-haul flights as well. In this way, they can continue using their current jets, and also continue serving peanuts, without sacrificing their current model of operations and their culture. Some destinations that are closer to the United States include: Puerto Rico Haiti Canada (Toronto, Montreal, Vancouver, Quebec) Mexico (Tijuana, Cancun, Acapulco, Mexico City) ―Upper‖ Central American countries (Guatemala, Honduras, Costa Rica) It can be assumed that most of these destinations are, in the eyes of most Americans, leisurely destinations to have fun. This sort of market is also open for Hispanic Americans looking to have a low-cost alternative to return to their home countries. Caribbean destinations such as Puerto Rico and Haiti are easily reachable from Southeastern US states such as Florida or South Carolina within a couple of hours. Canadian and Mexican destinations have several options for travel, and are widely reachable from many points as well. It is for these reasons that these countries would be the most suitable ones for international short-haul travel. Central American countries like Guatemala, Honduras, and Costa Rica are definitely reachable with the current aircrafts, but these destinations are more of a matter of if passengers are willing to bear longer-haul flights, and as such, as not as feasible. 19 Question 6: I: Brief introduction to Bus Company Industry in Taiwan With the opening of the market in1995, there were not just two bus companies (KUO-KUANG moto transport and Ubus) having the right-of-way on the freeway (mostly on the western Taiwan); instead, lots of bus companies joined the market to compete for which of them could have the most market share. Then, Taiwan High Speed Rail started its operation in 2006, and this may put the bus company industry in a more competitive situation for customers‘ changing preferences. Hence, the bus company industry in Taiwan now faces many struggles such as pricing strategies, providing services and the tangible decorations and equipment, and so on. It may be inevitable that some changes should be made in order to survive. The target customers in this industry are people who do not care that much about speed and time, and people who are sensitive to price, like students and elderly. People took the bus to travel on the freeway for the two major reasons in the beginning: a. the rising sense of environmental protection(the fundamental concept of public transportation) b. the lower price compared to the Railway II: Application of what we learned from this course and what from Southwest Airlines to bus company industry and some suggestions for it. We analyzed Taiwan‘s bus company industry by using models, and by doing so, we found that there are some things that can be desired when bus companies provide services to its customers. 1. Servuction model A. Inanimate environment: Companies that are not currently leading the market can attract new customers by making their buses neater and cleaner than the leading bus companies. They may also want to post some stickers inside the bus, such as on the windows, to advertise a telephone hotline that customers can call to complain or just to make suggestions on improvements. B. Contact personnel/ service provider: They should not only be employees of the bus companies, but they should also treat customers as friends. One way that they can do this is to have the bus driver perform various tasks such as delivering hot tea to passengers, and not only drive. C. Other Customers: Setting rules or punishments when someone talks on the phone very loudly or adjusts the volume of their personal TV to the top, so that they may not hinder other passengers‘ right or ruin the image of the company. 20 D. Invisible Organization/ System: the company may set some rules or cultures to its company, and this may be manifested much clearer when some unpredictable incidents happen. In other words, the company will have clear procedures on how to take care of incidents that don‘t often occur. 2. Service gap Delivery gap and service gap are the two important gaps that may appear. Inadequate support and employees‘ unwillingness to perform the job may cause a problem. Because the industry is highly connected with the service personnel, any details like contact personnel having a foul mood on their face, or if a bus driver looks fatigued and ill, then the passenger‘s mood would also be unhappy, and perhaps worried. 3. Service quality Reliability: the time of each ride on the timetable should be strictly followed; in other words, punctuality is important and the company cannot delay departure to wait for late customers or to fill up gaps for empty seats to fill the bus to capacity. (This is the same concept as what Southwest Airlines has done) The lack of empathy: individual attention is very hard to obtain in this industry, but the bus company may try to strike a balance. For example, they can open the front seats to the elders, pregnant women, and children, to show that there are preferences. Tangibles: the cleanliness of the toilets can be improved. Some small-scaled companies can have the uniforms made or create brand marks for customers to recognize. 4. Servicescapes Colors of decorations, the slope of the armchairs, the height of the TV set, and so forth could cause carsickness, so they should not be overlooked when designing them. 5. Others: they can provide some free drinks and sell some snacks to passengers. What can be learned from Southwest Airlines? One of the significant factors why Southwest Airlines would stand out in its industry is that they provide the service with well-recruited people. And if the employees‘ moods are happy and their attitudes are responsible and positive, certainly the emotions are contagious to passengers. Service innovation is very important, and we think that all the companies of the bus company industry in Taiwan have to reconsider their policies pertaining to service. Regardless of considering the human resource field, the training of its employs, or the marketing strategies, everything is important to be considered, and making money should not be the primary goal—which was the previous industrialist view. Humor and relaxed style of service can be used, for example, smiling at customers or creating 21 a happy atmosphere and letting them have a very pleasant experience of taking the bus. The companies should treat their employees as human beings and friends, not just tools for making money. Once the employees feel satisfied with their companies, they would make a lot of efforts to please their customers. Hiring the right type of people to suit the culture of one company is important, too. Then, like what has been done by Southwest Airlines, bus companies in Taiwan don‘t have to distribute their workload to different employees to details because when one thing happens, each employee would think ―it is none of my business,‖ and it would severely hinder the efficiency of one company. Taiwan bus companies can also use some innovated ideas from Southwest Airlines such as: setting an image of the company (like ―love‖), and developing some products around the topic. As Southwest doesn‘t use normal boarding pass as the other competitors for the sake of convenience, Taiwan‘s companies can use some value-stored cards for the same purpose. Southwest Airlines calculated the average speed of rate in advance in order to use the time well to its extreme, and this set a good model for bus companies. Segmentation: Southwest Airlines focuses on the business passengers who seek the shortest distance flight, so the bus companies should improve its segmentation for making the most profit, like they are featured at low price, comfortable seats, or the most stops in Taiwan and so on. If this is not contrived wisely, a company may lose its customers to its competition. Customer retention: how to touch customers‘ hearts and let them develop kind of brand loyalty. Besides providing well-reputed service, giving customers some surprise is another choice such as telling he or she is the lucky one to get the free ride, coupons or some gifts. Legendary service: some service that don‘t belong to the rule, or the special service like when Southwest Airlines decided to turn back to the airport for an elderly citizen who took the wrong flight. Or another instance where the manager helped a handicapped passenger to transfer in her journey, and so on. We believe that if those bus companies have done these kinds of good acts, then what they have to do is to record them, and then to pass the story down among all staff in the company. Future scenario generation: always think, predict and vision the future. What would happen next month or next year should be planned now. And always be prepared for the changing of the market. In Taiwan, the efficient shuttle buses from one big transfer stop to local town should be considered. Due to the HSR, the market is more congested now than ever. To be prepared to reply to the threat requires senses and wisdom. 22 Works Cited Bailey, Jeff. ―An Airline Shrugs at Oil Prices.‖ NY Times. 29 Nov. 2007 <http://www. nytimes.com/2007/11/29/business/29hedge.html>. Freiberg, Jackie and Kevin Freiberg. Nuts! Southwest Airlines’ Crazy Recipe for Business and Personal Success. New York: Broadway Books, 1998. ―Southwest Airlines.‖ Wikipedia. 28 Dec 2008. 28 Dec 2008 <http://en.wikipedia.org/ wiki/Southwest_airlines#International_service>.
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