I am a huge fan of Herb Kelleher the straight-talking, wild turkey drinking, and smoke-filled Southwest founder who passed in early 2019, but they were almost put out of business before they got started.
When Southwest stated at the beginning of airline deregulation they were only able to fly in the state of Texas, but Braniff Airways a large Texas Airline decided they would try to run them out of business rather than compete.
Braniff decided to undercut Southwest’s $26 fare to a $13 everyday fare even though it would mean they would both bleed money. Braniff wasn’t worried because they still ran profitable interstate routes that were still regulated & guaranteed them profits.
Rather than rolling over & dying Southwest came up with a great tactic they placed a full-page ad with the Braniff CEO’s picture telling the public
If you think $13 is the right amount to pay for flying between Dallas and Houston, then pay us $13 and we will be happy to put you on the plane and give you a great flight. But if you appreciate the competition and low fares Southwest has brought to the Texas skies, pay us $26 and we will show our appreciation by giving you a free bottle of premium whiskey when you get off the plane. Southwest Airlines ad 1973
The promotion was so successful that Southwest became the largest liquor distributor in the state of Texas during the promotion.
Braniff eventually ended the price war and Southwest went on to be profitable in 1973 & every year since. Braniff would declare bankruptcy within a decade of the incident, which also led to the company being indicted & convicted of violating Anti Trust laws in 1982.
TakeAway for VRM’s
Similar to Braniff there are plenty of large Venture Capital & Private Equity backed companies that may be able to spend crazy amounts of money to compete for advertising attention, but it doesn’t mean they can buy their way to victory.
They may be able to bid up PPC costs, but great service & a little ingenuity can still beat behemoths when you change the rules of the game to be about more than money.
Here is a great interview with Herb Kelleher before his passing.
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