marketing unit VI case study and DQ question

Marketing Excellence Southwest Airlines

Southwest Airlines debuted in 1971 with little money but lots of personality. Marketing itself as the LUV airline, the company featured a bright red heart logo and relied on outrageous antics to generate word of mouth and new business. Flight attendants in red-orange hot pants served Love Bites (peanuts) and Love Potions (drinks). Today, it is Fortune’s seventh-most admired company in the world.

How did a small-budget airline accomplish so much? Southwest’s business model is based on streamlining its operations, which results in low fares and satisfied, loyal consumers. The company uses a point-to-point routing system, flying thousands of shuttle trips between different pairs of airports or “points” and carrying more passengers per plane than any other airline. Each aircraft averages 6.25 flights a day, flying for almost 12 hours. Southwest can accomplish such a feat because it avoids the traditional hub-and-spoke system and has extremely fast turnaround. In its early years, it turned planes around in less than 10 minutes. Today it averages 30 minutes—half the industry average.

Southwest’s unique boarding process also helps expedite departure. Instead of getting assigned seating, passengers are put in one of three groups (A, B, C) and given a number when they check in. Group A boards first and in numerical order (for example, A1–A30). Once on board, passengers may sit anywhere they like.

Southwest also saves by flying only Boeing 737-700s and 737-800s. This simplifies the training process for pilots, flight attendants, and mechanics and lets management substitute aircraft, reschedule flight crews, and transfer mechanics quickly and effortlessly.

One of Southwest’s biggest cost savings techniques is its strategy of purchasing fuel options years in advance. Jet fuel is an airline’s largest expense and now accounts for 35 percent of operating costs versus 13 percent just a little more than a decade ago. Many of Southwest’s long-term contracts allowed the airline to purchase fuel at $51 per barrel, a significant savings especially during the 1990s and 2000s when oil spiked past $100 per barrel. Analysts estimate it has saved more than $2 billion this way.

Southwest also improves its fuel efficiency by making its planes lighter. Crew members power-wash the jet engines each night to remove dirt, planes carry less water in bathrooms, and seats have been replaced with lighter models. Because the airline consumes approximately 1.5 billion gallons of jet fuel each year, every minor change adds up.

Southwest has expanded by entering new markets other airlines overprice and underserve. These usually include secondary cities with smaller airports, whose lower gate fees and reduced congestion promote faster turnaround and lower fares. The company believes it can reduce fares by one-third to one-half whenever it enters a new market, and it expands every market it serves by making flying affordable for more people. Southwest acquired Air Tran in 2011 for $1.4 billion, expanding its consumer base and adding new destinations like Richmond, Memphis, and cities in Mexico and Puerto Rico, its first international locations.

Southwest has pioneered unique services and pricing programs such as same-day freight service, senior discounts, Fun Fares, and Ticketless Travel. The airline was the first with a Web site, the first to deliver live updates on ticket deals, and the first to post a blog. In recent years, it has added revenue through premium ticketing features like premium boarding positions at the gate and early bird check-in, which automatically assigns the best seat possible.

Throughout Southwest’s history, its advertising has focused on low fares, frequent flights, on-time arrivals, and a top safety record. The company uses humor to convey its warm, friendly personality. Its tagline, “Ding! You are now free to move around the country,” was a parody of in-flight announcements. The lighthearted attitude carries over to entertaining on-board messages, crews who burst into song in the terminal, and several personalized aircrafts, including three painted like flying orca whales.

Despite its no-frills service, Southwest wins the hearts of customers. The company consistently ranks at the top in customer service for airlines and has the lowest ratio of complaints per passenger. It has been Fortune magazine’s most admired U.S. airline since 1994 and one of its five best places to work. Southwest’s financial results also shine; the company has been profitable for 41 straight years, with no layoffs despite a travel slump created by the slow economy and fears of terrorism. When other airlines started charging for baggage, drinks, and snacks, Southwest went against the tide with a “bags fly free” policy.

Although the hot pants are long gone, Southwest’s NYSE stock symbol is LUV, and red hearts are found across the company, embodying the idea of employees “caring about themselves, each other, and Southwest’s customers.” “Our fares can be matched; our airplanes and routes can be copied. But we pride ourselves on our customer service,” said Sherry Phelps, director of corporate employment. In fact, having a sense of humor is a selection criterion for hiring. As one employee explained, “We can train you to do any job, but we can’t give you the right spirit.”

(Kotler 490-491)

Kotler, Philip T., Kevin Keller. Marketing Management, VitalSource for Columbia Southern University, 15th Edition. Pearson Learning Solutions, 2016-11-01. VitalBook file.

The citation provided is a guideline. Please check each citation for accuracy before use.

Marketing Excellence Amazon.com

Founded by Jeff Bezos in 1995, Amazon.com started as the “world’s largest bookstore” and, ironically, owned no books. Bezos promised to revolutionize retailing, however, and over the years he has blazed a trail of e-commerce innovations that many executives have studied and companies have followed.

Amazon initially set out to create personalized storefronts for each customer by providing more useful information and more choices than found in a neighborhood bookstore. Readers could review books and evaluate them on a one- to five-star rating scale, while fellow browsers could rate the reviews for helpfulness. The company’s personal recommendation service aggregated buying-pattern data to infer who might like which book. Amazon also introduced its revolutionary one-click shopping, which allowed buyers to make purchases effortlessly with a single click.

Amazon started to diversify its product line in the late 1990s, first with DVDs and videos and then with consumer electronics, games, toys, software, video games, and gifts. The company continued to expand its product offerings and in 2007 launched Amazon Video On Demand, allowing consumers to rent or purchase films and television shows to watch on their computers or televisions. Later that year, it introduced Amazon MP3, which competed directly with Apple’s iTunes and had participation from all the major music labels.

Amazon’s most successful product launch was the Kindle, its branded electronic book reader that delivered hundreds of thousands of books, magazines, blogs, and newspapers in a matter of seconds. As thin as a magazine and light as a paperback, the device has been the company’s best-selling product since 2009. Today, you can find virtually anything you want on Amazon.com. The company has successfully established itself as the biggest online retailer in the world by enabling merchants of all kinds to sell items on the site.

In addition to its core business, Amazon also runs an “Associates” program that allows independent sellers and businesses to receive commissions for referring customers to the site in a variety of ways, including direct links and banner ads as well as Amazon Widgets, mini-applications that feature the company’s wide selection of products. Associates can create an Amazon-operated online store easily, with low risk and no additional cost or programming knowledge. Fulfillment by Amazon (FBA) takes care of picking, packing, and shipping the merchant’s products to its customers.

One consistent key to Amazon’s success is its willingness to invest in the latest technology to make shopping online faster, easier, and more personally rewarding for its customers and third-party merchants. During peak season in 2012, the company sold approximately 306 items per second, or 26 million items per day. Small wonder that it continually looks for ways to improve delivery. For a $99 annual fee, Amazon Prime provides unlimited free express shipping for millions of items. While free shipping and price cuts are sometimes unpopular with investors, Bezos believes they build customer satisfaction, loyalty, and frequency of purchase orders.

In 2013, Amazon.com announced a partnership with the U.S. Postal Service to begin delivering orders on Sundays. Bezos also predicted on 60 Minutes that the company may use drones in the near future to make same-day delivery of lightweight products within short distances of distribution warehouses. (Critics find this unlikely for many reasons, though.)

Amazon has also maintained competitive and low prices throughout its product expansion. The company understands how important it is to keep its prices low in order to drive the volume it needs to remain a market leader and expand geographically. Amazon’s practice of selling books at heavily discounted prices, however, has upset some of its channel partners in publishing, as have its attempts to become a publisher in its own right.

From the beginning, Bezos has said that even though he started an online bookstore, he eventually wanted to sell everything to everyone through Amazon.com. The company continues to invest significantly in technology, is focused on the long term, and has successfully positioned itself as a technology company with its wide range of Amazon Web Services. This growing collection of infrastructure applications meets the retailing needs of companies of virtually all sizes. Amazon has successfully reinvented itself time and again and created a critical channel for merchants around the world who are able to reach more than 244 million customers worldwide.

(Kotler 522-523)

Kotler, Philip T., Kevin Keller. Marketing Management, VitalSource for Columbia Southern University, 15th Edition. Pearson Learning Solutions, 2016-11-01. VitalBook file.

The citation provided is a guideline. Please check each citation for accuracy before use.

Marketing Excellence Best Buy

Best Buy is the world’s largest multichannel consumer electronics retailer, with $45 billion in sales in fiscal 2013. Sales boomed in the 1980s as the company expanded nationally and made some risky business decisions, like putting its sales staff on salary instead of commission. This decision created a more consumer-friendly, low-pressure shopping atmosphere and resulted in an instant spike in overall revenues. In the 1990s, Best Buy ramped up its computer product offerings, and by 1995 it was the biggest seller of home PCs, a powerful market position during the Internet boom.

At the turn of the 21st century, Best Buy faced new retail competitors, including Costco, Walmart, and Target, which boosted their electronics divisions and product offerings and often priced lower than Best Buy. The company believed the best way to differentiate itself from the competition was to emphasize customer service by selling product warranties and offering personal services like home delivery and installation. Its purchase of Geek Squad, a 24-hour computer service company, proved profitable and strategically wise as home and small-office networks became more complex and the need for personal computing attention increased. By 2004, Best Buy had placed a Geek Squad station in each of its stores, providing consumers with personal computing services in multiple channels: in the stores, online, on the phone, and at home.

Best Buy also segmented its broad customer base into a handful of specific targets such as the affluent tech geek, the busy suburban mom, the young gadget enthusiast, and the price-conscious dad. It used extensive research to determine which segments were the most abundant and lucrative in each market and configured its stores and trained its employees to target those shoppers. For example, stores targeting affluent tech geeks offered a separate home theatre department with knowledgeable salespeople on location. Stores with a high volume of suburban mom shoppers offered personal shopping assistants to help Mom get in and out as quickly as possible with the exact items she needed.

Sometimes a store experienced a new type of lucrative customer. For example, in the coastal town of Baytown, Texas, the local Best Buy observed frequent visits from Eastern European workers coming off cargo ships and oil tankers. These men and women used their precious free time to race over to the store and search the aisles for Apple’s iPods and laptops, which were cheaper in the United States than in Europe. To cater to this unique consumer, the store rearranged its layout, moving iPods, MacBooks, and their accessories from the back to the front, and added signage in simple English. The result: Sales from these European workers increased 67 percent.

Best Buy is hailed for growing into a $50 billion company virtually through one channel. However, in recent years, the company has struggled to maintain its retailing dominance. One reason is that consumers no longer have the same interest in large television sets, computers, or entertainment centers that took up so much retail space in years past. In addition, “showrooming” has become a problem, in which consumers visit stores to look, touch, and test out the products but leave empty-handed and purchase online instead. In fact, online retailers like Amazon.com have become Best Buy’s biggest competitors in recent years. The company’s overall market share in electronics and appliances is 16 percent, but it has only a 7 percent market share online. In comparison, Amazon’s overall market share in electronics/appliances is 4 percent, but it is the market leader online, with a 21 percent market share.

Best Buy has acknowledged that it was slow to respond to category and channel shifts and was too focused on a single channel strategy when consumers’ behaviors were changing. As a result, sales slipped, customer satisfaction declined, and stock value went with it. To turn things around, the company hired a new CEO who implemented a strategic initiative in 2013. “Renew Blue” was developed to reinvigorate and rejuvenate the customer experience. Online, Best Buy put a huge emphasis on improving the consumer’s experience with faster and easier navigation tools, more competitive pricing, and relevant product offerings. The company also started shipping many of its online orders directly from nearby store locations, which improved delivery time and inventory turns.

Within its 1,477 domestic retail stores, Best Buy integrated a new optimization layout, which allocated additional space to growing and more profitable products like smart phones and reduced space for declining categories like entertainment. The company also plans to decrease the number of large stores it operates and increase the number of smaller, mobile stores.

As Best Buy evolves from a single-channel to a multichannel retailer, it faces many opportunities to grow its business even further. The U.S. consumer electronics and appliance market is a $228 billion industry, and the company is making changes to compete better and capture more market share. With so many storefronts across the nation, Best Buy has a competitive advantage and can leverage these assets as it expands into more channels.

(Kotler 554-555)

Kotler, Philip T., Kevin Keller. Marketing Management, VitalSource for Columbia Southern University, 15th Edition. Pearson Learning Solutions, 2016-11-01. VitalBook file.

The citation provided is a guideline. Please check each citation for accuracy before use.