Allegiant Airlines: Finding a New Customer Segment

Description

Founded in 1997, Allegiant Airlines (Allegiant) was one of the most profitable ultra-low-cost airlines in the United States. Allegiant maintained high profit margins by targeting the uncaptured market segment for leisure travel and using a unique way of managing cost and revenue drivers. Allegiant avoided direct competition with traditional airlines and captured the new market of price-sensitive leisure travelers. After employing extreme cost-reduction and revenue-enhancement strategies, Allegiant achieved one of the highest profit margins in the industry. In 2015, despite inexpensive airfares, Allegiant received low scores on customer satisfaction. The airline also faced labour and safety issues by the end of 2015, but it took several steps to resolve the issues in 2016. With increasing competition, rising costs, and low customer satisfaction, maintaining long-term profitability remained a challenge for Allegiant. How could the airline sustain its position in the market?

Learning Objective

This case is suitable for undergraduate and postgraduate programs in courses on marketing management and strategic management. Through a discussion of the case, students should be able to do the following: ·Recognize how a start-up can employ blue-ocean strategy to carve a niche segment for itself. ·Understand the segmenting, targeting, and positioning strategies of Allegiant. ·Understand possible pricing strategies in the airline industry. ·Discuss promotional mix, with special emphasis on nontraditional advertising strategies. ·Discuss the concept of customer-value creation. ·Understand how high profitability and low customer satisfaction go hand-in-hand. ·Discuss the sustainability of Allegiant’s profitability.

Keywords

airlines Blue ocean strategy Competition customer value positioning segmentation travel ultra-low-cost airline