Have you heard of WOW Air? It's a young no-frills airline in Iceland that offers bargain fares from London's Gatwick airport to two U.S. cities (via Reykjavik, Iceland, of course) and to a growing number of European destinations. The three-year-old startup uses only Airbus A 320 and A321 aircraft, for standardisation and for fuel efficiency. Entrepreneur Skúli Mogensen recognises that costs are especially favourable at this moment for two key reasons: first, 'historically very low oil prices' and second, it's a buyer's market for aircraft, which 'is a great opportunity for us'.
As a result of low costs and for marketing differentiation, WOW offers highly discounted fares to attract cost-conscious passengers who are willing to pay extra for extras such as checking luggage and reserving a particular seat in advance.
Why use price as a competitive advantage? Mogensen explains: 'You ask people what’s important to them and they say things like seat pitch – but when they go online to book they don’t get any information like that: 80% of passengers just go for price'. The deepest discounts are offered on a very few selected flights and for limited periods, to encourage immediate customer response and reinforce the bargain image.
Yet competition in the airline industry is notoriously intense, and price wars can sap the profitability of any carrier. Even with a well-crafted positioning and lots of low-cost social media marketing (Twitter, Facebook, Pinterest, YouTube), can WOW Air break through the marketing clutter and fly high for the long term?
