High/Low Pricing Strategy in Airline Marketing
This paper analyzes the marketing challenges facing the airline industry in the post-9/11 era, with particular attention to rising fuel costs, price-sensitive consumers, and bankruptcy threats to major carriers. It surveys several marketing strategies available to airlines and argues that a high/low pricing approach — targeting both the bargain-seeking majority and the luxury-spending elite while abandoning the mid-market — is the most effective response to the changed competitive landscape. Real-world examples, including Southwest, JetBlue, Delta's Song, United's Ted, and Lufthansa's premium frequent-flier program, illustrate how carriers have begun to adopt this polarized strategy.
- Status of the Industry: Post-9/11 and fuel costs devastate airlines
- Marketing Problems Facing Carriers: Price sensitivity dominates consumer airline choice
- Alternative Marketing Strategies: Quality and regional branding as possible approaches
- The High/Low Marketing Strategy Defined: No-frills low-cost model adopted by JetBlue, Southwest
- Why the High/Low Strategy Is Most Effective: Mid-market has eroded; polarized segments remain
- Examples of the High/Low Strategy in Practice: Delta Song, United Ted, and Lufthansa premium tiers
- Conclusion: Marketing must abandon mid-level spending entirely
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What makes this paper effective
- Uses concrete, relatable examples — such as the Baltimore/Washington-to-Fort Lauderdale fare comparison — to ground abstract marketing concepts in real consumer behavior.
- Structures the argument progressively: industry context first, then problem identification, then strategy alternatives, then a defended recommendation supported by real carrier examples.
- Clearly identifies and dismisses the mid-market option rather than ignoring it, which strengthens the case for the high/low approach.
Key academic technique demonstrated
The paper demonstrates applied industry analysis: it connects macroeconomic events (9/11, the Iraq War, fuel prices) to firm-level marketing decisions, then uses industry case studies (JetBlue, Southwest, Lufthansa, Delta's Song) to validate the recommended strategy. This moves from diagnosis to prescription using real-world evidence rather than purely theoretical reasoning.
Structure breakdown
The paper follows a problem-solution structure across seven sections. It opens with industry context, identifies the core marketing problem (price sensitivity among consumers), surveys alternative strategies, defines and defends the high/low strategy, and closes with examples from actual carriers. The conclusion reinforces the central argument by calling on marketing departments to formally abandon mid-market spending.
Status of the Industry
In the wake of the terrorist attacks of September 11, 2001, the industry hardest hit in America and around the world has been, without a doubt, the airline industry. Faced initially with empty planes and frightened fliers, confidence in security measures and the general safety of air travel has gradually returned — perhaps by necessity — but airlines are still daunted by increased security costs, strong pilots' and airline workers' unions, and stiff competition.
Recent world events have also compounded the airlines' difficulties. Take fuel costs, for instance. The sharp rise in fuel costs associated with the second Iraq War forced every airline to change routes and raise ticket prices. Air France, for example, was compelled to cancel its nonstop flights to Vietnam — a major source of revenue over which it had held a de facto territorial monopoly — because of enormous fuel costs. Air France now must, like every other airline, offer only one-stop flights to Vietnam (Gooch, 2005).
As a result, some of the cornerstone airlines in America either filed for bankruptcy or were on the verge of doing so. This list includes such giants as U.S. Airways, United Airlines, American Airlines, Delta Airlines, Midway Airlines, and several smaller carriers. These events made very public the struggles of the airline industry. Several airlines, including U.S. Air, even asked their employees to forgo wages and work without pay for a period of time to help their employer stay afloat.
Marketing Problems Facing Carriers
These industry ailments have created serious new marketing problems and exacerbated existing ones. The critical challenge facing the industry in the post-9/11 era is the revelation that price has become the overwhelming determining factor in airline choice. If two airlines offer even remotely similar routes, the decision a business or pleasure traveler makes is rarely based on the number of stops, the airport, the reputation or size of the airline, or the frills and amenities offered on board. Travelers are more than willing to accept a smaller, more distant airport to save money.
For instance, a leisure traveler is more likely to choose a flight priced at $180 between Baltimore/Washington and Fort Lauderdale that makes a stop in Atlanta on a smaller carrier such as AirTran than one priced at $231 flying nonstop from Washington National — the preferred airport — to Miami — the preferred destination — on a larger, better-regarded carrier such as American Airlines.
The purchaser will often ignore the fact that reaching the alternative destination and buying snacks en route will more than offset the $51 in savings. The rise of the internet and global distribution systems (GDSs) has both helped and hurt the airline industry by making it easier than ever for customers to comparison-shop on price. Quality is largely overlooked, and price alone drives the decision.
On the marketing front, this presents a formidable challenge: How does an airline market to a customer base that cares only about price and is willing to make decisions against its own best interest simply because an initial fare looks marginally lower on an internet travel site?
Alternative Marketing Strategies
One marketing strategy is to dramatically improve amenities and offer such outstanding service — in terms of customer care, food quality, and on-board products — that customers begin to weigh quality alongside price when making their choice.
Another strategy is to market national carriers as regional carriers in the cities where they maintain hubs. For example, even though Continental and Delta both offer nonstop service to Atlanta from several cities, the natural first choice tends to be Delta, since the airline has successfully marketed itself as Atlanta's home carrier, while Continental is associated with its Newark hub.
The High/Low Marketing Strategy Defined
The marketing strategy that has proven most effective, however, is to aggressively accentuate low costs by cutting frills and eliminating hub-based routing systems in favor of short, nonstop hops — even for the largest national carriers. This is the model followed by successful low-cost carriers such as JetBlue and Southwest Airlines.
These airlines are able to compete against giants like United and American by slashing fares, marketing a no-frills image, flying shorter distances, and choosing cheaper, slightly out-of-the-way airports. JetBlue, for instance, flies to Fort Lauderdale rather than Miami; even though Delta may serve Miami directly, JetBlue still wins the fare through its lower price and no-frills marketing approach.
Airlines operating in this environment must recognize that they are in a price-sensitive market and direct their marketing dollars toward advertising low-cost fares and the elimination of charges for amenities that travelers no longer feel they need (Mercer Management Consulting, 2002).
At the same time, carriers must also market to the small but extremely wealthy segment of fliers who travel in luxury regardless of cost. Crucially, however, the product offered to this segment must not be a mid-level offering — the difference between a mid-tier product and a low-cost product is minimal and, from a marketing standpoint, negligible. Instead, airlines must offer a clear choice: a genuine low-cost option or a genuinely premium one. The near-indistinguishable gap between mid-level and low-cost products has been proven to generate little marketing traction.
Conclusion
The airline industry is suffering, and marketing departments must take the lead in acknowledging that the competitive environment has fundamentally changed and that strategies must change accordingly. Marketing teams should concentrate their resources on the low-cost market and the super-premium market, and resist the temptation to spend dollars pursuing a mid-level market that has effectively ceased to exist.
Bibliography
Adams, Ed. (2005). "Low-cost carriers." www.navigant.com
Gooch, Daniel-Robert. (2005). "Air France suspending non-stop Vietnam flights." Commercial Aviation Today, Feb. 28, 2005.
Mercer Management Consulting. (2002). "Impact of low cost airlines." www.mercermc.com
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