Southwest Airlines is a company that follows the concept of market segmentation at the highest level. The company was started as a low cost regional alternative to other airlines and has maintained that philosophy for over 40 years. The company has made it success based on the segments that comprise the segmentation areas. Southwest airlines began operations in 1971, with the company's initial service taking place between Dallas, Texas, Houston, Texas, and San Antonio, Texas. By starting as a regional service they could concentrate on building loyalty and providing good service to their customers. Today Southwest has expanded their geographic service area to 62 cities in 32 states. They have focused on creating city pairs that could generate high amounts of both leisure and business travel. They also use smaller regional airports to save money and continue to pass the low cost service to the customers. As they have expanded they are now known as a national airline that can compete with the major airlines for customers.
Southwest promotes and services primarily business travelers that need to go from point to point and people who would normally travel by road or rail. Other customers come from those who are first time flyers and those who are dissatisfied with the other airlines. Offering no frills but inexpensive fares attracts many who just want a quick easy way to travel.
While many airlines are using mileage-based segmentation, Southwest Airlines is applying needs-based segmentation to gain better insight of their customers. Needs-based segmentation is used when building a service based on the shared group needs (Kotler & Keller, 2012). Southwest Airlines focuses on price sensitive consumers who will forego meals and assigned seating for low prices. In contrast, most airlines offer high priced tickets to those who are inflexible (that they cannot tell in advance when they need to fly, usually business travelers) and then sell some of the remaining seats to more price sensitive customers who can buy two weeks in advance and stay over. Customers are made to feel comfortable and are promised a fun time while flying with Southwest. Also having perks like free bags attracts customers that feel the other airlines charge too much for baggage. It turns out that Southwest customers would rather check their bags for free and pay extra to board early in hopes of getting a better seat.(Wilson, 2011) By making the flights less formal they can keep prices lower and maintain the principle to make all customers feel the same instead of dividing them by class.
Southwest has continued to show itself as a socially conscious company and has sponsored events to increase the public awareness of its services. People today feel like the airline industry has become more troublesome and a hassle with the state of air travel today. When the public sees a company that actively tries to keep fares low and offers free baggage it helps them to make their choice in choosing an airline. Southwest has built a loyal base of customers that it can count on for repeat business. The economy and financial environment has made it even more important to strive for customer service and ways to keep service affordable.
The market segmentation of Southwest has shown that the company has the right strategy in putting customer concerns first and offering lower fares. It has remained one of the most admired companies in the world and carries the most domestic passengers of any U.S. airline as of June 5, 2011(CNN Money, 2010). It has served its demographic and personal/behavior segments well. By continuing to follow their original plan of excellent service and prices they have captured a segment of the market that the larger airlines cannot match. I think the only segment that may need attention in its continued success might be geographic. Since the airline only serves the US it is denied the business for international…