How do Challenger Brands succeed in a marketplace that is saturated with larger and better-funded competitors? They have to individualize themselves, find their niche and offer something nobody else does. Allegiant Air, a low-budget airline based in Las Vegas, Nevada, has done just that.
Allegiant Air does not focus on comfortable seats, in-flight entertainment or first-class services. In fact, they offer none of the above. The company takes every opportunity to cut costs, from purchasing used planes to packing so many passengers on each aircraft that the seats can no longer recline. Their employees are paid below the industry standard and the planes fly into smaller airports in less convenient cities taking advantage of cheaper rent.
Although they are a low-budget airline, Allegiant manages to make an incredible $11.22 per passenger each way. Comparatively, the average airline makes only 37 cents per passenger. This is due to their frugal business practices as well as their fee structure. Passengers are charged extra to book online or over the phone, to store a carry-on in the overhead container, to reserve a seat in advance and even to pay with a credit card.
Yet, even with the poor customer service and high fees, people continue to fly Allegiant. That’s because the airline offers routes from under-serviced cities like Missoula, MT and Youngstown, OH to high-profile vacation spots including Las Vegas, Orlando, and Honolulu. The company also offers hotel and rental car packages, as well as tickets to shows, festivals, theme parks, and other unique attractions (Allegiant takes a commission, of course).
For Allegiant, it is not the journey that matters, but the destination. All of the company’s marketing materials center around two things: low fares and the dream vacation. As their Facebook page explains, “Whether you want to soak up the sun on one of Florida’s sandy beaches, hit the links in Phoenix or try your luck in Las Vegas, Allegiant has a vacation for you.”
Whether or not you agree with Allegiant’s business model, the reality is that this once struggling airline earned a net profit of $78 million last year on revenue of $909 million. That 8.6 percent profit margin was the highest of any U.S. airline.
The secret to Allegiant’s success? Good Challenger Brand strategy. Instead of going head-to-head with large, established airlines, Allegiant offers what others won’t: flights to small towns at affordable prices. “The model evolved out of survival,” says Maurice J. Gallagher Jr, the company’s CEO.
Allegiant Air has made a name for itself by offering a unique service. It has dominated its niche market and is now reaping the benefits, making it a prime model for Challenger Brands everywhere.