Classic Airlines Marketing Solution

Classic Airlines Marketing Solution 1

Classic Airlines Marketing Solution

Desmond Harris

MKT561Marketing

February 11, 2013

Instructor: Louis Chavez


Abstract

The paper will use a nine-step problem-solving model to solve Classic Airline’s marketing

problems. The paper will apply a robust problem-solving process for the internal and external

pressures contributing to Classic Airline’s current crisis. Define the objectives, issues, and

obstacles in the marketing department, and provide marketing resources available to resolve the

current crisis with recommendation for solution.

To help Classic Airline with their current challenges the paper will follow a nine-step

problem-solving approach below.

The Nine-Step Problem-Solving Model

Step 1: identify and define the problem

Step 2: frame and measure the problem

Step 3: Set end-state goals

Step 4: identify alternatives to solve the problem

Step 5: evaluate and select the best available strategy

Step 6: implement best strategy

Step 7: evaluate results

Step 8: develop and implement the appropriate changes

Step 9: continual improvement


Classic Airline, step 1: identify and define the problem

Taking time to define the problem clearly calls for an analysis to identify the current

processes and operation from start to finish. The point is to identify key issues, objectives,

obstacles, and opportunities that may involve ethical dilemmas, stakeholder’s perspectives, and

concepts.

Problems

According to Classic Airline facts Classic Airline is the world’s fifth largest airline in the

industry, they have approximately 32,000 employees, has a 19% decrease in their Reward

members program, and a 20% decrease in flights. The firm is due for a significant change, the

board of directors have issued a18 month/15% cost reduction mandate, and the crisis has resulted

in a 10% decrease in stock prices (UOPX Portal, Classic Airline). Classic Airline needs to define

the current internal and external issues concerning their over-expansion, and rising fuel costs.

This resulted in costs cutting in their efficiency process and has presented a higher passenger

load ratios.

Objectives

The objectives of the marketing department is to increase the employee and consumer

confidence levels by cutting down on cost while maintaining employee and consumer

satisfactory levels (UOPX Portal, Classic Airline). The commercial airline industry has been

rapidly experiencing changes, and as a result of these changes Classic Airline was presented with

several challenges. According to research the flight industry is now recovering from the

aftermath from “September 11” and experiencing the effects of an economic downfall. The high


costs have hit the consumers so hard that frequent fliers have cut back on discretionary spending

for travels (Plunkett Research, 2012).

Issues

The issue affecting Classic Airline is its performance levels in customer service; the

organization has lost touch with its consumers. The management has not established an

innovative marketing strategy, programs, or procedures to retain consumers. Classic Airline

implemented a customer relationship management (CRM) system in 1989 to provide a

foundation to support their customer loyalty programs (UOPX Portal, Classic Airline).

Unfortunately, the system did not support the multiple channels; it did not deliver function across

department integration, effectively influence customer satisfaction, or improve the reward

memberships. According to Plunkett Research Online (2012) “the travel industry expenditures

are decreasing and e-commerce is gradually replacing many jobs.” Following the understanding

from the research, Classic Airline needs to define their opportunity by adapting through new

techniques to improve their existing customer relationship management (CRM) system, establish

a better planning process to increase their customer loyalty, values, and satisfaction.

Stakeholder Groups

The importance of implementing the right strategies and marketing planning must not lose

sight of its multiple stakeholders; it should align the interest with the organizational goals.

According to Kotler, and Keller (2006, p. 58, Para. 3) “today’s businesses are increasingly

recognizing that unless they nurture other stakeholders (customers, employees, suppliers,

distributors) the business may never earn sufficient profits for the stockholders. A company can

aim to deliver satisfaction levels above the minimum for different stakeholders.” The stakeholder


involvement exists at every level in an organization; it acts as a trade-off that should be balance

with consumer needs and wants. Classic Airline can justify this by building a relationship that

connects a new improvement philosophy with their stakeholder’s interest in mind. Creating a

sustainable value for the organization can later be mediated and optimized. Classic Airline needs

to transfer their high level of efficiency by encouraging their employees to get to know the

consumer, and in turn will allow the organization to form a clearer picture for meeting the target

markets. Implementation for a new improved CRM system would provide Classic Airline with a

cross functional communication framework that would close the communication gap between the

stakeholders.

Obstacles

To add to the current issues and objectives, an internal transition happen when current

(CEO) Amanda Miller was hire in 2000 and promoted in 2002 replacing the former (CEO) Jack

Broadway. Unfortunately, the transition came at a critical time that presented differences in

values and focus for Classic Airline. Under the new (CEO) leadership, Miller believes that

priority number one should focus on operational excellence; the results from this belief have left

Classic Airline vulnerable and doing so has set the organization back. The internal focus at this

time should consider the opportunity that consumers need to be valued and that the competition

is adapting faster toward continuous improvement. The cutbacks and costs cutting are obstacles

that obstruct the profitability for Classic Airline to advance in the industry. The implementation

of a marketing plan is important and necessary to achieve Classic Airline’s goals. According to

Kotler and Keller (2006, p. 33/34, Para. 4) “It operates at two levels: strategic (laying out the

target markets and the value proposition to be offered) and tactical (specifying the marketing

programs and the financial allocations to be implemented over the planning period)”.


Step 2: frame and measure the right problem

When framing and measuring the right problem it involves collecting the baseline data in the

current process. When performing this process states the right challenges that come into effect

for determining the best possibilities from the analysis. This measures the current levels’ of

performance and gives access toward measurements for future gain in the organization.

Knowing Classic Airline has earned $8.7 billion in sales; the organization still has an

ineffective customer relationship management (CRM) system that hinders profitability and

reduces a yield from their consumers. A marketing metrics can serve as a measuring system that

can quantify, compare, and interpret Classic Airlines marketing performance. The internal and

external measurements can be achieved if Classic Airline understands what it wants to measure.

In Classic case a customer performance or stakeholder-performance scorecards could assist with

year-to-year customer-based measurements or track satisfaction levels that yield effects toward

performance.

Observing Classic Airline’s past stocks purchases for 2003 compared to 2004 it depicts a

drastic drop from 2003 to 2004. Leading to the 15% cut in Classic’s operating cost to the

organization and hindering fewer improvements in their customer service departments. Classic

Airline may need to implement a tracking system for their market shares awareness. This can be

implemented by using one of the three basic market measurement trackers systems as a favorable

tool. The three market measures are used to indicate shares in the entire market, served market,

or relative market share helping to indicate improvements throughout marketing process.

At this stage Classic Airline needs to make another analysis of the broadest problems like

investing with another commercial airline to improve its marketing strategies, implement a new


customer relationship management system, or follow a holistic marketing approach with

marketing concepts. Classic Airline is suffering from a lack of customer relationship

management integration, lacking the proper data mining focus, uncertain in the customer

relationship, and has no type of enterprise thinking. Changing their priorities is definitely needed

following a new process that addresses the importance of customer needs, create criteria that find

market segments, create value drivers, provide approaches to customer retention, and leverage

stakeholder feedback. The best opportunity that yields the highest outcome would be to

implement a new (CRM) system; Classic Airline will be able to raise the shareholder price and

cut costs without any discounting of their airfares.

Step 3: Set end-state goals

When an organization sets its end-state goals it allows the organization to realize what it

wants to become.

Classic Airline had to follow an unfair end-state vision that locked the organization in to a

15% cost cut. The end state goals will provide a new strategy for Classic Airline to focus on

giving the organization a direction of choice and creating a sustainable strategy through time.

Enhancing communication links to inform internal function necessary for building a successful

marketing model. The decision-making can be adjusted to fit the strategies throughout the entire

organization. Classic Airline will also need to organize in accordance to the customer

relationship management strategy and follow a strong risk management approach to balance risk

with customer focus. A good structure to follow would be an enterprise wide risk management

approach (EWRM) to focuses on continuous assessment and works with relationship marketing

techniques. Implementing the right strategies with the end state vision will allow Classic Airline


with the process to achieve the 15% costs cutting, address customer needs, identify market

segments, drive value, leverage customer feedback, and build retention need for solving

problems. Classic Airline goals for implementation and organization can help to achieved

possible saving from the fuel hedging program, start to win back the frequent fliers, and even

raise Classic Airlines reward memberships to their desired position.

Classic has several reasons to how and why the organization is experiencing their challenges

but the number one comes from the efficiency process that has been over shadowing the strategic

understanding. Realizing that Classic been following an efficiency process for at least two years

now; changes are needed to ensure that the organization will not be heading for bankrupts. In the

end Classic will have to maintain a vision for their employees who can combine both efficiency

and strategy to continue to grow and stay on top.

Step 4: identify alternatives to solve the problem

At this stage of the problem-solving model provides a benchmarking approach to the

problem. Providing opportunities for studying the competition while developing strategies and

techniques for overcoming weaknesses while implementation into a method for fixing the

problem.

With a number of alternatives to work with; the first alternative is a strong avenue Classic

Airline could consider in raising the current shareholder wealth by implementing more costs

cutting procedures like fuel hedging. This would allow the organization to cut fuel prices in the

airline and locking in its fuel price to offset the rest of the business; this would allow Classic to

stay at a fixed 12% reduction rate. This also may not be a good idea if the gallons per-flight hits

an all-time high ratio and making it more of a problem to Classic.


According to Plunkett Research (2012) “In the U.S., major airlines have cut routes and

reduced the total number of seats available, partly by removing older, fuel-guzzling aircraft from

service. This put the airline industry in a much more efficient operating condition. U.S. airlines

are operating with much smaller staff counts. The number of employees in the U.S. scheduled

airline industry plummeted from 485,000 in 2003 to 414,700 in 2011.”

The second alternative would be to consider cutting labor costs and offsetting Classic’s

already high labor costs per-seat per-mile. This just might back fire as well because Classic is

already having problems with consumers spending and dealing with price sensitive issue within

Classic customer’s base. This would be too much of a chance to take, and it just might hinder

Classic’s future for operating and possibly bankrupt the organization.

The third alternative would let Classic implement a benchmarking corroboration to observe

and learn exactly what other airlines are doing while ensuring success or failure in their

organization. This would be a better decision for Classic because benchmarking has always been

around and has been a part of every successful business. Keeping up with competition is always

important, and it also helps with the organizational transitions. This approach would favor

Classic and can be valuable to the company in regard to how the competitor companies; like

Southwest and United Airlines are yielding to an even higher standard in the airline industry.

Southwest actual uses a consumer focused philosophy, works very well with the customer

relationship management system (CRM), and Classic Airline needs to consider this approach.

Step 5: evaluate and select the best available strategy

At this stage of the problem-solving process it provides opportunity to make judgement

between the alternatives and provides a clearer choice in the decision for the alternatives.


Classic Airline will have an opportunity to judge the alternatives from the previous step, this

way the best decision can be made between alternative choices, and define that alternatives best

fits the marketing strategy. This evaluation needs to benefit Classic Airline and provide the

airline with a starting point for recovering from the economic downfall and miss concepts from

the last two year of service. The decision has to involve the best interest of the organization as a

functioning unit throughout the entire organization plus benefit the stakeholder, shareholder, and

stockholder needs as well as wants. The choices must provide a clear and complete set of steps,

strategies, plans, technique, systems, and technology that can appropriately mix, monitor,

manage, perceive, direct, and drive Classic Airline toward a sustainable market position that will

keep growing.

Judging from the first choices; Classic would not be making a good choice in the fuel

hedging plan or by cutting costs. This plan would hinder Classic’s main goal; even if it produces

a way to reduce the overhead in the expenditures, raise stakeholder wealth, and provide a nice

profit. The problem with this plan is that trying to stay ahead of the competition and stay at the

top of the industry could not be achieved.

The second plan involved cutting labor cost and making more cut backs with no regard to

the organization. This would also hinder one of the main reasons for staying in business to make

a profit. This plan would not add wealth to Classic Airline, but instead it would only raise the

stock prices even higher, and upset the valued Union alliance the organization worked so hard to

get. The value in this decision would out weight any choice or change at this time for the

business; because this would affect the already worsening employee morale problems that

Classic Airline is experiencing already.


The best choice for Classic Airline would be to follow the last alternative of benchmarking

to observe and complete with other airlines. This alternative works well with any other strategies

and planning made by the company. Classic Airline needs to establish several effective

operational processes that provide procedures that are service oriented. Follow a constructed

marketing program that can connect with the entire structure internally and externally. Build an

info structure that would permit only a positive framework about the company and capture

traveler needs and interest, while creating customer satisfaction. These goals can be reached by

Classic if the organization reconfigures their customer relationship management program and

strategies. Using a top down philosophy with a strong communicational concept that addresses

only the needs, and wants of stakeholders (employees, customers, and community) to achieve the

goals together.

Step 6: implement best strategy

The best solution that Classic Airline can make is that of implementing a new and improved

customer relationship management (CRM) system. This can be justified by the benefits that the

system will bring to the business; it can restore Classic Reward Memberships program, stay in

tune to its customer needs and wants, increase employee morale by gaining more business, and

create an effective loyalty program.

The key to restoring the reward program is simple implementation of the (CRM) system and

analysis will provide Classic Airline with a deliver system that can report and measure customer

info while differentiating business from leisure traveler needs. Building back up the service

through customer relationship can make distinction toward a more diverse business system of

excellence and rebuild the Frequent flier program and point systems can be fulfilled accordingly.


So the best answer for Classic Airline is to use what the organization already has and reconstruct

from it by adapting new strategies and planning to improve the old system while following a set

philosophy that relates to the company.

Step 7: evaluate results

Looking over the decision and re-evaluating for the last time the results of choice, Classic

Airline will be able to regain the company’s share price back and reach that $36 mark that they

want to achieve. This will only come if Classic Airline can stay on top of their service and

reconnect with effective marketing strategies. The business can stay on top of every challenge as

long as they continue to stay direct in their marketing issues and use an effective (CRM). If

Classic cuts down the budget cost by 15% making it amount $53,985, 000, this would be less

than the previous amount of $359 million and this would be net income that could be used in

other areas.

The organization can penetrate the market through the various traveling agencies and agents,

to target newer channels by using the new (CRM) system. The new system will not only provide

new money spending channels but also build up a new database for consumers and marketing

department information that will be able to reach their desired goal 733,000 and 4,100,000

flights. The new customer relationship management (CRM) system will provide any addition

training needed to support the customer service representatives (CSR) and their departments can

react better to future needs of the customers.

Step 8: develop and implement the appropriate changes


Arriving at this stage, the appropriate changes will be needed to be implemented from the

top down perspective. Classic airlines will need to define the nature of every job, assignments

must come from every management role, and the development should be ongoing throughout

new programs to ensure that gains remain constant for a certain number of times. The company

development drives must be directed to deliver a precise job description from the relationship

management, and departments must assign a manager to each key customer at this stage.

Step 9: continuous improvement

At this stage of the process the importance of continuously monitoring and improvement to

the process will provide an understanding of the expected outcome. This will also keep Classic

Airline with a way to stay in continuous awareness of the end-state goals. Classic Airline will

also have to keep up with process and measurements for continuous improvement in every area

to maintain the 15% budget costs through reducing fuel cost and replacement of old planes. The

marketing for Classic should improve as long as Classic sticks to the new and improve (CRM)

system; by staying on top and focus toward the share pricing and Reward Membership. The

understanding is clear that environmental, labor, competition, and the price of fuel will always be

issues that need to be addressed first. Observation in these issues is of extreme importance and

need to combat against as they become problems.

Conclusion

In the case of Classic airline dilemmas it is clear that the need for a new marketing strategy

will help to retain its present customer base while trying to target a new customer base. Classic

airline already uses a customer survey process and needs to maintain this approach to help

acquire the needed information to establish new customer trends and achieve a marketing plan.


Implementing a customer relationship management system (CRM) and using holistic concepts

will provide the needed solution throughout the planning stage.


References

Business Insider, Inc. (2013). Martin Zwilling, Strategy, Nine Steps to Effective Business

Problem Solving. Retrieved February 10, 2013 from

http://www.businessinsider.com/nine-steps-to-effective-business-problem-solving-2011-7

Kotler, P., & Keller, K. L. (2007). A framework for marketing management (3rd ed.). Upper

Saddle River, NJ: Pearson Prentice Hall.

Kotler, P., & Keller, K. L. (2006). Marketing management (12th ed.). Upper Saddle River, NJ:

Pearson Prentice Hall.

Plunkett, Jack W., Plunkett, M. B., Steinberg, J. S., Faulk, J., & Snider, I. J. (2012). Introduction

to the Travel Industry.Airlines, Hotels & Travel Industry. Retrieved February 10, 2013, from

http://www.plunkettresearchonline.com.

University of Phoenix, (2013). Classic Airlines Scenario. Retrieved February 11, 2013 from:

www.ecampus.phoenix.edu

Classic Airlines Marketing Solution

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