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Allegiant Airlines Finding A New Customer Segment Case Solution

Solution Id Length Case Author Case Publisher
2019 1104 Words (6 Pages) Arpita Agnihotri, Saurabh Bhattacharya Ivey Publishing : W17093
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Allegiant is a budget airline that has attained a high degree of profitability since its inception in the year 1997. The business model of the airline is distinct in the aviation industry. Allegiant innovated in the human resource management, marketing, and operations management of the industry to capture a large market segment. However, the unabated growth of the organization is accompanied by low customer satisfaction levels and delays in the flight schedules (Shaw, 2012). The analysis of the case study evaluates the strategic options available for Allegiant to sustain its profitability despite the criticism of its service levels. 

Following questions are answered in this case study solution

  1. Introduction & Problem Statement

  2. Analysis 

  3. The Alternatives 

  4. Recommended Action Plan 

Case Analysis for Allegiant Airlines Finding A New Customer Segment Case Solution

2. Analysis 

Allegiant’s competitive advantage is ruthless cost-cutting. The benefit of this approach for the business is to create a new market rather than competing on acquiring customers from other airlines (Shaw, 2012). The majority of Allegiant’s travellers are those who wouldn’t have travelled had Allegiant’s low-cost offer not been available (Seo & Park, 2018). The airline has given an alternative to casual travellers to travel by air as a replacement for traveling by road. This objective is achieved by only offering the essential services to the travellers without adding the costs of:

  1. Inflight entertainment

  2. Serving beverages to the travellers

  3. Adopting high overhead costs of large airports

The strategy of Allegiant Airlines is in alignment with the marketing theory. The market penetration pricing strategy states businesses can acquire a significant market share if it introduces its service at a lower price than the existing service providers (Chiu, et al., 2016). According to the theory of market penetration pricing, a business can attain economies of scale and early customers by the adoption of this strategy. The downside of this strategy is the absence of customer loyalty. Customers whose purchase decision is driven solely by low-cost tend to switch once they find a service provider that offers a lower price (Shaw, 2012). 

Allegiant’s marketing strategy has been much better than its operational plan. Even though the operations management of the airline paid little attention to the safety and maintenance of aircraft; the marketing strategy kept pace with the emergence of marketing media. For instance, the marketing communication channels employed by Allegiant relied predominantly on social media rather than traditional mass media (Seo & Park, 2018). The marketing theory states social media marketing is much more targeted in comparison to marketing via mass media channels. Also, the former entails a lower cost per person reach than the later (Tsai, et al., 2011). 

3. The Alternatives 

The analysis of Allegiant’s data from the perspective of the marketing and management theories give way to two strategic alternatives for the airline. These alternatives are discussed along with their respective benefits and drawbacks in the ensuing paragraphs:

  1. Forward integration – the strategic choice of forwarding integration entails the airline should focus on providing end-to-end solutions to its target market. A predominant proportion of Allegiant’s target market is holiday and vacation travellers (Tsai, et al., 2011). Currently, Allegiant has a direct alliance with several hotels to cater to accommodation to its customers. However, the airline doesn't sell a complete holiday or vacation package to them. The airline can increase its revenue by assuming the role of a holistic vacation planning service (Tsai, et al., 2011). 

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