The loss was set in motion years ago. Still, it was hard to see my favorite airline, Midwest Express, lose the last vestige of its identity today, its name. It’s recent acquirer, Republic Airlines, also owns Frontier airlines. Republic wisely decided it could not afford to invest in two brands and Frontier better defines the combined companies.
“The best care in the air,” Midwest’s brand promise, was not spin. First-class sized seats, food you’d enjoy on land and friendly service, complete with freshly baked and still warm chocolate chip cookies garnered industry awards year after year. An airline started by a corporation understood how frustrating business travel is and found a solution for frequent travelers.
In every industry there are new entrants and established players driving the market lower in terms of prices and oftentimes (as in airlines) benefits. If you lack the lowest cost structure, you will fail following competitors down the pricing curve while trying to hold onto some of your higher benefits, which is what Midwest Express tried to do. Slowly the big seats disappeared, then the great food, with only the cookies remaining at the end.
What should Midwest have done? Hindsight is always easier than in-the-moment decision making, but the question is relevant as price-competition is getting intense in most markets. I’d argue that Midwest needed to change its business model. Incrementally pulling costs out of its current model was doomed to fail.
- Go upscale. Could Midwest Express have partnered with Northwestern (now Delta) or United to serve their major routes, offering higher service at below first-class prices? The majors need to differentiate themselves – Midwest Express might have been an asset in the process.
- Dramatically narrow the target market. Focus solely on the business traveler, becoming the business airline, much as some winning banks are business banks. An airline designed by and for business travelers would look and act very differently along all dimensions of an organization.
- Move to a new (geographic) market. AirTran, unable to acquire Midwest despite repeated tries, was fighting an aggressive price war in Milwaukee that Northwest then matched. There is no end to cities desiring a hub airline and states willing to invest bucks to attract one. Did Midwest try?
- Reposition price. This is what Target has done to Walmart. The hidden message behind every Target ad is “You get what you pay for.” In airlines, safety, comfort and time matter a lot. How might Midwest have redefined its value promise and built yet more advantages to move its target market to pay a premium, limiting the discount airlines to a smaller share of the market than the discounters eventually took?
- Change the revenue model. I am frustrated by searching for acceptable schedules and prices, and paying penalties for late choices and changed choices. Might Midwest Express have charged a set fee per year per traveler based on total mileage and/or number of trips, with freedom to change schedules or book late? Radical for sure. But the new revenue model might have appealed to frequent travelers and prevented price shopping on every trip.
These ideas may or may not have worked. But for sure, trying to beat a competitor who has a cost advantage and uses it to compete on price will get you no where, fast. The only reason Sears has lasted this long is because of the power of its Kenmore and Craftsman brands (and its Lands End purchase). Once Sears distributes unique brands through other channels, as rumor has it, we’ll be saying goodbye to the retail chain.
Are you trying to win at a price game you cannot win? Stop. Differentiate your business model.