Trading Value for Money Leads to Profits. Amazing!

Poking fun at the airlines is too easy these days but I think Southwest shows how you can actually make profits by giving value to your customers in exchange for money (crazy concept, I know!) in an otherwise troubled market.

According to the New York Times today, Southwest just posted a profit for their 69th straight quarter. A very big part of this has been do to their savvy fuel hedges limiting their exposure to the run up in oil. However, they have also revamped their pricing structure by not only raising fares, but offering a new class that gives advanced boarding, a free drink and an extra frequent flyer credit. The new class, Business Select, could generated about $100 million in new revenue.

Compare this to the other airlines who have not protected their fuel prices and are charging for previously ‘free’ services, such as baggage, without adding any additional value, terminally angering their customers.

Southwest, meanwhile, is advertising that ‘bags fly for free’ on their home page. I imagine that their executives must have to suppress giggles quite often as they dance around the rest of this sclerotic industry.

Are you offering value to your customers, visitors, clients or members? Taking captive markets for granted is risky in the long run: they have a habit of breaking out eventually.

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