Once there was a really fun, spirited airline that flew out of Dallas, Texas. This airline positioned itself as “The End of the Plain Plane.” And, so it was. The idea was to relevantly differentiate the airline brand from the competition; to provide customers with a really appealing alternative.
This airline dressed its flight attendants in Halston (think Ultrasuede) and Pucci with Beth Levine (America’s First Lady of Shoe Design) footwear. Passengers had a good time interacting with the crew. The planes were painted with vibrant colors created by designers. Herman Miller provided fabrics for seating and furniture for the airport lounges. This airline presented an elegant feel with a patina of raciness. For customers, even though it was a “discount” carrier, there was a sense of achievable cosmopolitan sophistication. Traveling on this airline felt different.
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The airline flew domestically and offered service to international cities such as Lima, Peru; Rio de Janeiro, Brazil; Buenos Aires, Argentina; Hong Kong; Guam.
Unfortunately, the airline business faced all sorts of issues, such as regulation and consolidation. This airline was unable to forcefully overcome the changing flying environment, and eventually, it faded from view.
Adios, Braniff International.
Cautionary tale for Southwest Airlines?
Like Braniff, Southwest was an airline relevant differentiator. Born in 1967, Southwest originally took the PSA (Pacific Southwest Airlines) model, a low-cost entity flying intra-state to avoid certain regulations. (By the way, PSA was a college student’s dream. With a student ID, you could, basically, fly from LA to SFO for free.) Southwest opted for a “democratic” approach in-flight, a one-size-fits-all strategy. In a way, Southwest’s no-frills, egalitarian style was like a domestic version of SAS, the Scandinavian carrier where lying flat to sleep on an international flight to Stockholm or Copenhagen was a board behind your back.
Like Braniff’s “End of the Plain Plane,” Southwest billed itself as “Just Plane Smart.” Aside from its egalitarian in-plane arrangements, it was Southwest’s culture that made Southwest a “fun-luving” flying option. Southwest succeeded in the late 60’s environment and, for decades, parlayed its smart, creative, resourceful-driven culture into profitability. As The Wall Street Journal reported, “Southwest thrived for decades on its scrappy startup roots. Pilots helped sling bags, and flight attendants raced against a clock to tidy cabins to keep planes moving.”
Southwest is one of those brands that understood the importance of its people: your people come first. Especially in a service business, your frontline is your goldmine. And, Southwest’s people culture was its mother lode. Southwest’s culture was the epitome of an aligning culture. Brands need collaborative organizations in which all employees clearly understand their roles in brand building and know what to do and why they should be doing all of this. At Southwest, employees, regardless of function, knew what their responsibility was and what they would need to do differently to behave on the brand’s behalf.
As co-founder Herb Kelleher frequently said, “No matter how big you get, taking care of your employees – being interested in your employees, communicating with your employees, honoring your employees – is still Job One.” As one ex-Southwest executive said, “We cared about each other in a way I had not experienced in corporate America and haven’t experienced since.”
The Wall Street Journal, analyzing why Southwest – a culturally-aligned brand with an extraordinary ethos and relevantly differentiated customer-orientation – is in the financial and psychic doldrums, stated: “They put a high value on culture and their way of doing things,” said Kevin Healy, a former executive at AirTran when Southwest acquired it in 2011. “For years, it didn’t seem to matter – everybody had to figure out how to compete with Southwest. Then, they got to the point where they had to compete with everybody else.”
It is a sad commentary. But Southwest made one of brand management’s most troubling mismarketing mistakes: a disregard for the changing world. No matter how people-focused and aligned your brand is, not evolving as the competition and customers evolve is death-wish marketing.
Not paying attention to core customers and their changing wants and problems will mean a brand is not up to speed. Not innovating or renovating means a brand is not thinking about the present or thinking about the possibilities for tomorrow. Continuing to do what always worked is looking backward. Every day becomes a way in which to reproduce and defend the past. Replicating the past will not work tomorrow. Continuing to do what you know how to do means a brand is not evolving with the changing times.
“The need to evolve has become urgent, as a business model that once upended the industry has fallen behind rivals,” states The Wall Street Journal.
It may sound trite, but air travel and the air travel marketplace have changed a lot since 1967. Travelers have different expectations. Travel has become stressful, inconsistent, and, at many times, a horrible experience. The competition has changed. Competitors have created an aggressive environment. Not keeping up with the flying environment is a sin.
Having said this, denuding the brand’s culture and the brand’s focus on employees is also a sin. Southwest cannot hope to succeed in its staying-alive strategies if it wrecks its employee-based, aligned culture.
Southwest’s new focus on financial engineering will be painful for its loyalists and committed employees. Financial engineers, such as the ones putting pressure on Southwest’s C-Suite, do not care about brand. Financial engineers see strong brand equity as an opportunity to extract value rather than extend brand strength. This is a form of brand extortion. Proponents of financial engineering, such as those seemingly hovering around Southwest, take brand loyalty for granted. Investments in continuous improvement and innovation are decreased as dividends and share buybacks are increased. Monies are siphoned from R&D, customer insight research, service and support, and marketing resources.
When brands are starved of resources, they can no longer compete successfully. Consumers notice when brands no longer satisfy needs, problems, or changing habits. Employees suffer. Brand trust erodes. Without brand trust, there is no brand value. Creating a brand trust deficit is one of the more sinister effects of financial engineering.
Southwest’s recent history described by The Wall Street Journal reflects the pressure of financial engineers. “Last year, Southwest faced down Elliott Investment Management, which tried to oust the airline’s top leaders and accused them of being insular and clinging to outdated strategies. A truce left Chief Executive Bob Jordan in charge but gave Elliott’s chosen directors several board seats and significant sway.”
Now, CEO Jordan must improve financial results. Straight out of the financial engineering playbook, Mr. Jordan reported $500 million in cost reductions by 2027. Southwest’s free-wheeling culture is taking a huge hit as the Board of Directors demands “deeper and faster cost-cutting.” As one ex-employee opined, “The people of Southwest have to be the culture,” she said. “The company can’t make the culture.”
Financial engineers are so focused on profits that they forget “you cannot cost-cut your way to enduring profitable growth.” Just ask the owners of Kraft Heinz who have spent the last decade attempting to resuscitate the Kraft Heinz iconic brand portfolio decimated by management’s zero-based budgeting strategy.
Part of the current Southwest financial engineering “turnaround” strategy is massive job cuts, something employees thought would never happen. Southwest has long boasted of never having an involuntary layoff over more than five decades. However, Southwest is “re-organizing” its workforce. “Employees believed the airline’s commitment to avoid layoffs was sacrosanct.” After all, this is what co-founder Kelleher believed.
According to Bloomberg, “The layoffs may have a greater impact on Southwest’s vaunted culture than on its cost-reduction plan. The airline’s care for its workers is a key part of the philosophy.” Herb Kelleher believed, and rightly so, “… that happy employees would lead to happy customers, profitability and happy Southwest shareholders.” After all, Southwest’s “stock symbol is LUV and hearts adorn many of its planes.”
Along with layoffs, Southwest is initiating what some observers say is an “extensive makeover.” Southwest is evolving its egalitarian approach, introducing “premium options” offering more leg room. Southwest will also segue to assigned seats. There will be redeye flights. Southwest is holding on to its bags-fly-free policy, for now. The financial engineers want Southwest to make money for shareholders regardless of whether or not Southwest stays Southwest.
Focusing on the activist pressure, Bloomberg wrote that Elliot’s argument point to these facts: Southwest has not adapted to a changing airline industry. Competitors now offer the same “bare-bones economy fares” as Southwest while also providing “premium options to appeal to a wider set of customers.” True. But, is it necessary to force Southwest to ditch its culture? If you do not love your people, do not expect your customers to love your brand.
Southwest Airlines lost its relevance in a fast-changing world. Brands must never lose touch with the customer, the customer’s needs, their occasions and their competitive sets. Brands must never take their eyes off the ways in which the world is changing. It is essential to be anticipatory and flexible. It is absolutely imperative to understand how the brand can stay relevant in a changing environment. And, then, brands must develop the strategies and tactics necessary to implement these insights.
For an established, iconic brand like Southwest, the way forward is to figure out ways in which the brand can use its authority and specialness for new ideas to keep the brand breathing and viable. Protect the core. Cherish your employee base. Otherwise, Southwest will find itself in commodity corner. While revitalizing Southwest, its executives must commit to keeping the Southwest flame alive.
Contributed to Branding Strategy Insider by: Joan Kiddon, Partner, The Blake Project, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
At The Blake Project, we help clients worldwide, in all stages of development, create meaningful differences that underpin competitive advantage. Please email us to learn how we can help you compete differently.
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