In a capitalist world, what differentiates one product from another? Is it the better quality, how long it lasts, the customer experience, or the price? In an economy where millions of companies offer the same service, companies have to be innovative to make their product stand out over their competitors. Spirit Airlines is completely differentiating themselves by sticking to their basics and attracting customers with their incredibly low fares. Read on or listen to this interview on our podcast!
As a college student, price matters a lot to me. I choose the lower quality product or service because of the price. In addition, being a cross country student born and raised in the Bay Area, but attending school on the East Coast, the cost pressure is even greater every college break. While studying in Spain the last semester, I really got a taste of the out-of-country bargains: I used Ryanair Europe's premier ultra low cost flight carrier to get around the entire continent. A flight from Athens to London for 15 euros? Sign me up. To hear a airline that could compete with those kinds of prices even existed was baffling me - until I saw the hilarious ads for Spirit Airlines, with the value offering that's perfect for me: the simplicity of getting a flyer from Point A to Point B for as low as possible.
Most consumers wouldn't consider flying a "bundled service" -- it seems like you just pay for the flight and your business is done. However, for most major airlines that flight does consist of a free drink, free movies, 2 free checked bags, and many other amenities. That is where Spirit is changing the game. Spirit offers ultra low cost airfare by basing their prices on simply the flight and adding the extra bundles later. What does this mean? You and I will have a cheaper flight because Spirit has each individual flyer pay for a checked bag instead of assuming that we all have checked bags. You'll give up more leg room by allowing 180 people instead of 150 people on the plane, so that all of our collective tickets are cheaper. In the end, by choosing an airline that uses an unbundled model or a "bare" fare meaning the naked price of just the transportation, I get the best deal possible. "Bare," in fact, has become part of the airline's marketing strategy, immortalized by infamous glass-pane dancer shuttle making its way around Vegas and beyond.
Spirit Airlines wasn't always the low cost air provider, but thanks to experienced airline industry CEO Ben Baldanza he turned the established airline into it's own "startup" by reinventing the company. Baldanza discussed how he uses a 2x2 matrix to analyze problem and through the business model application they compared airlines all over the world and divided them into 2 categories: airlines that make a stable income vs. cyclical airlines. The cyclical airlines were extremely profitable when times were good, but when gas became too expensive and security threats hit many fell into bankruptcy and vertical integration losses. Baldanza dove deeper into the analysis of the companies earning a stable profit and from there found they could be divided by extremely high end airlines and extremely low fare airlines. In this Spirit has succeeded because they know their customer: while there is usually a clientele willing to spend more for the nicest planes, the customer base of flyers willing to forgo the luxuries of bundled airlines for the lowest price is even bigger.
Once the plan to become America's best ultra low cost flight carrier was set into motion, their brilliant marketing strategy aided in the execution. Spirit differentiates themselves through their branding by offering sales that have catchy and somewhat borderline risque deals that relate to current pop culture -- events such as the Grande Sale. What makes these promotions stand out besides their cleverness their ability to relate to the one thing the customer cares for the most: the low price. Spirit has succeeded in directing these fun marketing campaigns to drive ticket sales without spending the hundreds of millions of dollars that their competitors do.
Spirit Airlines is such an anomaly because they are a guppy in a lake of sharks -- yet they're more than holding their own. Spirit is able to maintain itself as the most profitable and fastest growing airline in the industry (20% growth per year) by acknowledging the specific customer they need to reach and ignoring customers unlikely to use their services. As the CEO Ben Baldanza said, Spirit Airlines is an airlines that caters to customers who pay for their tickets themselves. When a customer is going away for a three day weekend, they are probably willing to give up the luxuries of bundled more expensive airlines so they can save the price difference at the actual destination. Baldanza acknowledges that corporate America is not Spirit's main demographic because companies are paying for their employees and clients and want to pay for their luxuries. But next time you want to fly and it's on your own dime, check out the airline company that is sticking to the basics.