No matter what industry you're in, offering that irresistible $5 chicken can make all the difference.
Expert Analysis by Bill Murphy Jr., Founder of Understandably and Contributing Editor at Inc. (@BillMurphyJR)
March 15, 2025
A Southwest Airlines Boeing 737 takes off from San Diego International Airport. (Photo: Getty Images)
This piece explores brand identity, loss-leader strategies, and the fallout from Southwest Airlines ending its iconic Bags Fly Free perk. But before diving into that, consider how some companies continue to provide offerings that might not be the most profitable—simply because customers love them.
Take Ikea, for example. Beyond selling furniture, they offer a cafeteria with extremely affordable, low-margin meals. It might seem odd for a furniture retailer to operate a cafeteria, but these offerings win over devoted fans and keep them returning.
The Magic of Loss Leaders
Another case in point is Trader Joe’s famously lenient return policy: return almost anything at any time (as long as it’s not abused), a policy so effective that a quick search for “Trader Joe’s refuses return” barely turns up any results.
Then there’s Costco, which has mastered the art of the loss leader by keeping its rotisserie chickens priced at $4.99—a rate unchanged since at least 2000. This strategy has become so synonymous with irresistible value that I refer to it as “the $5 Chicken Rule.”
Now, Southwest Airlines seems to be straying from that same principle.
The Key Issue
While Southwest has never actually sold rotisserie chickens, it has long been celebrated for its unique, customer-friendly policies—practices that have defined its brand. The Bags Fly Free policy, once so central that Southwest even trademarked the phrase, is now being scaled back dramatically.
Industry insiders warn that scrapping such a beloved perk will erode the airline’s brand equity. In fact, during an investor call last year, CEO Bob Jordan emphasized that beyond competitive fares and schedules, “Bags Fly Free is the number one reason customers choose Southwest.”
This isn’t an isolated change. Southwest is also abandoning its historic open seating model, a staple for over fifty years, and is revamping its Rapid Rewards frequent flyer program—despite earlier assurances that no changes were on the horizon.
Chasing Short-Term Gains
A thoughtful comment from a Southwest fan on Reddit recently struck a chord with me, comparing the discontinued Bags Fly Free benefit to another infamous loss leader at Costco—the $1.50 hot dog and soda combo. While I may not be a fan of hot dogs or soda, my loyalty lies with chicken, making the $5 Chicken Rule especially resonant.
So, what shifted at Southwest? Shortly after CEO Jordan highlighted the importance of free baggage, the airline came under pressure from activist investor Elliott Investment Management. The resulting settlement—which included relinquishing board seats and implementing profit-driven changes—was warmly received by Wall Street, as evidenced by a surge in stock prices. In fact, one analysis estimated that Jordan personally profited nearly $1 million from the jump, given his substantial shareholding.
A Lesson Learned
I now find myself questioning why I ever got so attached to an airline’s quirks. Yet, this serves as a powerful lesson for any business owner: examine your offerings and ask, “What unique features keep customers returning—even if they aren’t directly tied to my core products?” Sometimes, those small touches are worth preserving, even if they squeeze profit margins.
Bottom Line:
Be more like Costco—with a focus on creating irresistible value—and less like Southwest, which seems to be sacrificing customer loyalty for short-term gains.
And never stop selling that $5 chicken.
The opinions expressed here are solely those of the author and do not necessarily reflect the views of Inc.com.
P.S. Don’t forget—the preferred-rate application deadline for the 2025 Inc. 5000 is this Friday, March 21, at 11:59 p.m. PT. Apply today!
