Southwest Airlines is changing its brand identity to begin billing for checked packages.
Getty Images
Starting Wednesday, Southwest Airlines began billing $35 for its first check bag and $45 for its second. It was the end of the airline era, trademarking “Bags are Free” and building decades of customer loyalty around that simple promise.
Southwest executives are under pressure to increase revenue by adopting bag fees, allocating seats, providing premium seats, and other practices used by larger competitors. For accountants who wield spreadsheets, these moves may make perfect sense. However, they may backfire in a major way by violating the basic principles of consumer psychology.
Three psychological triggers have been activated to the southwest
We couldn't find the best manager of action in Southwest. If there is a behavioral science team, Southwest had to consider three things before implementing new package charges.
Donation effect and loss avoidance
Behavioral economists know that people feel about two to three times more intense losses than comparable profits. Southwest customers haven't just seen a $35 change in flight costs from Point A to Point B.
Rather, they have experienced the loss of something they already “own” in their mental accounting. Established donation effects state that people value what they currently own when what they currently own is not theirs.
Leave the profits of free bags will affect Southwest customers more than an equivalent increase in fares.
Brand consistency catastrophe
Robert Sialdini's principle of consistency tells us that people try to align their actions with beliefs and past actions. As humans, we are more likely to trust people who behave in a consistent way.
Southwest literally recorded the trademark “Bags Fly Free” and built an entire advertising campaign about what's different from other airlines. This major reversal contradicts its aging brand image. This change creates cognitive dissonance that undermines trust well beyond the fees themselves.
When customers chose the Southwest, they chose to avoid exactly this kind of nickel and dimming. Now they question the next possibility that other promises could break.
Anchor problems
This is where Southwest moves become particularly dangerous. The customer is “anchored” as a “unpublic” airline. The $35 price feels disproportionately expensive as it compares to a $0 mental anchor rather than a similar price from a competitor.
The anchor works in both ways. For example, if your airline has been charging $60 per bag for years, setting the price at $35 seems like a bargain.
Delta, United and American charge similar amounts, but Southwest's fees get worse because expectations are broken.
What numbers really teach you
Southwest's own research created a picture that interests him. In September, it predicted it had won between $1.5 billion from its bag fees, but lost $1.8 billion in market share.
Nevertheless, Southwest went anyway, with nearly 10% stakes and immediate returns demand for activist investor Elliott Investment Management.
An early warning sign is already displayed. Social media backlash is quick and brutal. One Instagram post about the change received over 14,000 replies. This is about 50 times more normal engagement. The emotions are not beautiful.
Increases the impact that CMOS should watch
Confusion in mental accounting. Customers budgeted their southwest trip with the aim of free bags. Now they are forced to recalculate the total travel costs and the possibility of discovering Southwest is no longer the cheapest option if the fees are included. Social Proof Cascade. Early claimants are causing negative word of mouth for the virus. The “Southwest is just like everyone else” story quickly spreads as it violates core differentiation. The complexity of choice. Southwest customers have partially chosen the airline to avoid the complexity of their decisions. Add basic economic tickets, board the priority options, and the pricing structure creates the exact confusion that customers have avoided and escaped from other airlines.
Southwest competitors use it
Delta CEO Ed Bastian quickly recognized the gift Southwest gave him a competitor.
Both Americans and Delta have announced special short-term status matches that they are trying to suck up from their most loyal customers in the Southwest. United continued to offer previous status matches for the Southwest Flyers.
What CMOs can learn
Don't break your core promises. If a brand's basic value proposition is built around a specific customer interest, changing it requires extraordinary care. Southwest's “Bags Fly Free” was more than a policy, it was their identity. Understand your client's mental models. Southwest customers not only bought transportation, but also simplicity and transparency. Breaking that mental model affects not only specific transactions but the entire relationship. Calculates the total cost of the change. Southwest's own research shows that policy changes lose more in market share than they have been earned in revenue. When principles of behavioral science contradict financial pressures, ignoring the human aspects of the client rarely works.
Conclusion
Southwest forecasts annual package charge revenue of $1.5 billion. However, if our own research on losing $1.8 billion in market share proves accurate, this could be a textbook case of how short-term financial pressures destroy long-term brand value.
The actual test isn't whether Southwest can raise $35 per bag. It's whether we can continue to gather something from long-term, loyal customers who have a lot of motivation to look elsewhere. It's too early to tell you how this is shaking, but it's clear that despite the brand experience changes, we're making a risky bet to retain most customers.
