Carrying on from last week’s blog “Finding Your Competitive Advantage,” this week we look at how WestJet found success by finding its niche in the airline industry.
WestJet is a unique case because it was able to position itself as a company that offered both lower prices and better service than its competitors. That’s something many businesses would like to accomplish but easier said than done. Back in 1996, West Jet took a look at its main competition, namely Air Canada, and found a segment in its market that wasn’t being served adequately by the airline industry. This reflects the importance of knowing your target market and understanding customer “pain” points. West Jet identified this segment as families that travelled with children by a vehicle. This segment was not prepared to pay more than $200 an individual to reduce travelling time. But given an option of flying for less than $100, WestJet realized that these travelers would choose to fly at these prices to reduce the “pain” of driving long distances. But it wasn’t as simple as saying that reducing prices would translate into business success. WestJet’s financial analysis indicated that they would be able to generate a profit at these prices but only if costs were controlled and the company would have to start small. In order to control costs, the company decided to invest in one type of aircraft to serve main cities in Canada instead of investing in different models of aircrafts needed to reach all cities and communities. Although this reduced the size of their target market, it reduced WestJet’s costs and, as a result, they were able to offer lower prices than their competitors. WestJet also decided to formulate a superior customer service plan. They had noticed that the competition did not have great customer service and this was an area that could be improved on. So, in short, that was the company’s plan. Reduce rates and increase customer satisfaction.
At that time WestJet didn’t know whether their business plan would translate into success. We all know WestJet succeeded in its venture but it doesn’t seem like they did anything special. They lowered prices and increased customer service. Sounds simple, right? But back in 1996 they were the only company to realize that the “family segment” was an unserved market in the airline industry. They realized an unmet need and developed a model to serve this need. They studied their competition and realized that there was room for customer service improvement. They found a niche position in the airline industry and developed a model that would allow sufficient margin for profits. There was a lot of planning involved before the venture began and, as a result, WestJet uncovered a great opportunity. So before you go out and declare lower prices and promise to increase customer satisfaction, remember, take the time to research and understand your target market and competition. It will help you decide how to position yourself in the marketplace and develop the right business model. Good luck in finding your edge!