Sample Management Case Study on Southwest Airlines

Southwest Airlines: Target Market and Market Segmentation

In every business, identification of the target market is imperative for a sustained and effective marketing plan. It involves deciding on the intended consumers, whose needs will be satisfied by the goods or services traded. Such a group of consumers forms the target market of the company comprising of people with similar or distinct preferences for the offered goods or services. Southwest Airlines Inc is one of the respected businesses, ranked among the Fortune 500 companies for two decades continuously.[1] The airline started as a small company in 1971 but grew to a successful airline, serving about 100 million customers annually.[2] The following is a description of target marketing and market segmentation, with reference to Southwest Airline Company.

Identification of the target market forms the basis for decisions such as pricing, advertising, business location and other market decisions. Moreover, marketing strategies are made depending on the buyer preferences and characteristics, and whether the buyer is the end consumer or intends to resell. From this perspective, markets are either consumer or business markets. Consumer markets refer to a market where the buyer is the end consumer while business markets involve selling to another business for resale or government agencies for distribution.[3] Why do businesses practice target marketing? Target marketing enables focus on the needs of the intended consumers, and thus consumer satisfaction and loyalty. Airline companies differentiate themselves by offering different flying experiences and varying the fares. Southwest business in the airline industry is a consumer market, where the consumer pays directly for transport service as well as other embellishments intended to improve comfort and flying experience.

However, with a heterogeneous market whereby customers have unique preferences, it is challenging to satisfy each individual liking. Hence, market segmentation becomes crucial for effective and practical marketing strategies. Market segmentation involves grouping of consumers under variables that enable a company to satisfy the needs of a group of consumers in certain consumer market group. Once the diversity among consumers is recognized, segmentation based on practical attributes enables consumers’ categorization into homogeneous groups.[4] The criteria for forming such groups should have characteristics that are identifiable, accessible, unique needs, substantial and durable. For large markets, segmentation of a consumer market has four main consumer characteristics. They include; Demographics, psychographics, geographics and purchase behavior.[5] In addition, there are unique features in a service or product that are beneficial to the target customer.

Demographic segmentation divides consumers based on age, gender, marital status, education, family size and life cycle, occupation, income, social class, race, generation, religion and nationality. Age and generation determines the attraction and consumption of products and services. Thus, promotion of goods and services requires appealing to the targeted age group consumer. Marketers have promoted certain products and services with social class insinuations. Gender also differentiates the needs of men and women and in creating masculine and feminine attitudes. In addition, income of the target consumer determines the choice of product or service, and pricing.[6]

Southwest has an extensive target demographic, which attracts customers that are mindful of price and do not mind lack of luxuriousness. Among the three main airline businesses models that include full-service carrier, charter carrier, and low-cost carrier, Southwest were the inaugural low-cost carriers in United States.[7] The company started by flying passengers between Dallas, San Antonio, Houston and Texas. Later the company continued to connect passengers through other cities in United States. The cost-effective strategies such as doing away with embellishments reduced costs, and flying of cheap to maintain Boeing 737 only. The airline became attractive to small business owners, middle-income families, young adults and short-distance travelers.[8] Since Southwest Airlines has been a domestic United States carrier, most of the travelers are American citizens. Demographic variables are the commonly used in market segmentation due to the clear patterns observed in consumption among the various demographic classes. For example, flight schedules flexibility, cost of fares and luxury provided would be determined by the social-economic status of the customer. Business travelers have become a target market for the airline. Mostly they are aged between 30-49 years, who are regular users of mobile technology, and make use of the internet service offered in the planes. Although business travelers are frequent flyers, they are also mindful of the expenses and the no-frills cost becomes attractive. The airline has become desirable to both men and women, and according to a survey by Buyology company in 2012.[9][10]

Under geographic segmentation, the consumer market is divided into different geographic units, where products and services are supplied. Such regions could be country borders, neighborhoods or counties. Companies localize their operations through advertising, promotion, and sales efforts to fit customers from certain regions. Southwest has been a domestic carrier concentrating on connecting people in USA. The airline flies to 93 destinations in USA, and has become the number one domestic carrier. Southwest headquarter is at Love Field in Dallas, and has merged and acquired competitors such as Airtrans to increase their presence in the US cities. Such mergers have enabled Southwest to operate from large airports like LaGuardia in New York and Hartsfield-Jackson in Atlanta, where many international travelers need to be connected to other cities.[11] Geographic segmentation has also been in form of point-to point network creating air travel links to cities in America.

The third type of segmentation is the psychographic segmentation divides consumers into groups founded on their lifestyle or personality profiles. Psychographic segmentation considers the values, lifestyle, interests, opinions and interests that put consumers into a homogeneous group. It supplements geographical and demographic profiles by creating an understanding of individuals in the same sub-segment group. The reason as to why a consumer chooses a given service or product enables effective strategies to satisfy the needs of the customer. In the consumer market, there exist attitudes, emotions and beliefs that can be perceived or real.

For example, a seller of luxury items would advertise with class aspect included, which can create the desired attitude to the target customer. In Southwest, the company has created a niche as a low cost carrier, fun to fly with, and flies on short routes.

In order to edge out consumers in the airline industries, there are elements that differentiate the services offered. According to a research by Milaly Tokhi, the first aspect of air travel experience is that the service is intangible and is measureable by customers upon experiencing the service. Secondly, the inconsistency in promotion and fare charges determines psychographic segmentation. Thirdly, the company should create a brand image that inseparable from the service. Thirdly, there should be smooth operations allowing flow of inventory to ensure a good experience.[12] Southwest Airlines has ensured that customers experience fun and entertainment notwithstanding the no-frills philosophy. Customers are entertained and served pleasantly in order to create the fun in flying with Southwest.

Behavioral segmentation separate out consumers into groups based on attitude toward the product, utilization of, or reaction to the product. Marketers build market segments using various behavioral variables based on consumption behavior.[13] They include aspects such as occasions, consumption rate, attitudes, benefits, and loyalty. Companies have used occasions and seasons such as holidays to promote their product usage. For example, beverage companies such as Coke increase promotional budgets during Christmas in order to increase sales during such times. For travelers, introducing offers and user benefits, with the intention of attracting more users. Holiday seasons have high usage rate of air travel as people fly to distant places to visit tourism sites or family members that live far off.

Southwest has rapid reward program that benefits frequent users, who earn points from flying and using partners services such as hotels. The users gain points that are redeemable even in form of flights. Such a program ensures sustained loyalty base market for frequent fliers. Also Southwest has diversified their products to appeal to the corporate customer. They have products tailor made for business travelers, which include business select and early bird check-in. in addition, Southwest has created a brand through its corporate culture that has embedded values that put the customer first. Their vision and mission expressly articulate the culture that is, to “Connect people to what’s important in their lives through friendly, reliable, low-cost air travel.” To become the World’s Most Loved, Most Flown, and Most Profitable Airline. Their employees who serve with cheer practice a fun-loving attitude that enhances quality customer experience.

According to a research by Michael, customers rate an airline by qualities, which include: Timeliness that refers to keeping of time and avoiding flight delays. The second aspect is assurance of the customer service through committed service delivery. Thirdly, is the convenience in the use of the airline by ensuring that there is ease in ticket reservations, check-ins. Comfort, safety and security are also determinants of customer choice for an airline. In addition, beyond loyalty programs, airlines need to enhance customer experience and sense of belonging. Southwest has positioned itself as a low-cost carrier; however, they also try to give commendable customer service. The treatment of customers by employees has been vital in making Southwest a successful and unique airline.[14] They have created a brand that is synonymous with dependable and friendly workforce. Consequently, satisfactory customer service has attracted and sustained loyal customers.

In conclusion, identifying a target market is valuable because it enables marketers to build up strategies for designing of a product, pricing, distribution, advertisement, market positioning, and continual improvement of products or service. Description of the target market and segmentation are essential for satisfying the needs of the customers. Although segmentation creates seemingly homogeneous groups, they are heterogeneous when individuals are considered. Therefore, there should be a balance created by diversifying the benefits and features of products, in order to capture many customers in a given sub-segment. It ensures that the product covers broad elements, for example, a product can be differentiated demographically by age but serves the same basic purpose. For example, motor dealers design various motor vehicles, which are promoted with factors such as age, family, or class. Southwest broad segmentation has ensured that the airline attracts business class as well as leisure travel. The inclusion of Wi-Fi and in-flight entertainment enable internet use and fun in travelling as entrenched in their mission. For airlines, preserving a loyal customer base, and rigorous advertisement and promotions add to psychological part that creates the attitude and enthusiasms to travel. The concentrated marketing strategy of Southwest has created a niche that the airline is a low-cost carrier. Such a legacy has propelled the company to supremacy in the US domestic market.



Cento, Alessandro. The Airline Industry: Challenges in the 21st Century. Springer-Verlag Berlin Heidelberg, 2009. DOI: 10.1007/978-3-7908-2088-1

Clemes, Michael D., Christopher Gan, Tzu-Hui Kao, and M. Choong. “An empirical analysis of customer satisfaction in international air travel.” Innovative Marketing 4, no. 2 (2008): 50-62. Accessed May 17, 2015.

Larsen, Nynne. “Market Segmentation-A framework for determining the right target customers.” Thesis, Aarhus School of Business, 2010. Accessed May 17, 2015.

Miles, Sandra Jeanquart, and W. Glynn Mangold. “Positioning

[1] Southwest Airlines Company. Corporate Fact Sheet. Accessed May 17, 2015.

[2] Southwest.

[3] Nynne, Larsen. “Market Segmentation-A framework for determining the right target customers.” Thesis, Aarhus School of Business, 2010, 2

[4] Ibid.,6

[5] Ibid., 7

[6] Ibid., 7

[7] Cento, Alessandro. The Airline Industry: Challenges in the 21st Century. Springer-Verlag Berlin Heidelberg, 2009,19.

[8] Southwest Airlines Company. Corporate Fact Sheet.


[9] U.S. Department of Transportation, Bureau of Transportation Statistics, NHTS 2001 Highlights Report, BTS03-05

[10] Mutzabaugh, Ben. Southwest Airlines Is U.S.’s “Most Desired” Brand


[11] Ibid.

[12] Milaly Tokhi. “A Case Study on Classic Airlines: Practical Marketing Solutions.” The Journal of Business Studies Quarterly, 18


[13] Nynne, Larsen. “Market Segmentation-A framework for determining the right target customers.” Thesis, Aarhus School of Business, 2010. 2


[14] Clemes, Michael D., Christopher Gan, Tzu-Hui Kao, and M. Choong. “An empirical analysis of customer satisfaction in international air travel.” Innovative Marketing, 2009,50