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Classic Airlines Marketing Solution

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Running head: CLASSIC AIRLINES MARKETING SOLUTION

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Classic Airlines Marketing Solution University of Phoenix Marketing MKT 571 Melodi Guilbault

CLASSIC AIRLINES MARKETING SOLUTION Classic Airlines Marketing Solution

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Marketing is an essential tool for the prosperity of businesses both small and large. Marketing is literally everywhere in the activities that people engage in both formally and informally. The concept of marketing is to identify and meet human and social needs while meeting profitability standards and benefits for the businesses share holders by creating, communicating, managing, and delivering value to customers (Kotler & Keller, 2006). In today’s economy it is difficult to prosper and be noticeable in the business world due to limitless competition, especially when marketing a business’s services and products. How a business markets its services and products is a defining aspect that can be distinguishing factors from competition. A business’s competition can instigate and implement changes in the marketing design to remain competitive and to prosper in the industry. The airline industry is currently an industry that has fierce competition but has suffered many setbacks due to the tragic events of September 11, 2001, competitive pricing strategies, labor costs, and fuel costs. Classic Airlines is the fifth largest airlines in the industry since its inception 25 years ago with 375 jets, which have 2300 flights daily serving over 240 cities. Classic Airlines has over 32,000 employees and in the last financial fiscal year earned $10 million on $8.7 billion in sales (University of Phoenix, 2011). However, since the terrorist attacks of September 11, 2001 the airline industry has experienced a downturn in travel due to the uncertainty about flying and the result was a market decrease in stock prices and share prices. Based on the affect in the airline market the industry is under intense scrutiny. In addition, fuel and labor prices have increased and customer loyalty has decreased. Classic Airlines is not immune to these debilitating price increases and decline in customers. While the net income for

CLASSIC AIRLINES MARKETING SOLUTION

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Classic Airlines had a successful $10 million for the last financial fiscal year this was a decrease of $61 million from the previous year (University of Phoenix, 2011). This is a substantial decline that can lead to bankruptcy for Classis Airlines and a product redevelopment marketing strategy needs to be undertaken to improve the selling of products/services in an existing market (Brown, Webster, & Steenkamp, 2005). Problem Statement Classic Airlines wants to continue to be a major contender in the airline industry and must be willing to make significant changes to the companies’ marketing strategy. The goal for Classic Airlines is to regain customer loyalty, increase employee morale, share holder interests, customer service, and frequent flyers while maintaining current travel prices with a reduction in business costs. Classic Airlines currently has both internal and external pressures that are contributing to current crisis in the business. Internally Classic Airlines has suffered a loss of 19% of their reward members which has resulted in a reduction of air travel of 21% by its loyal members. Due to a change in Classic Airlines Customer Relationship Management (CRM) system that reduced call time, the customer service representatives have not been able to establish a rapport and relationship with their customers. This resulted in an outburst of dissatisfied customers and an unprecedented amount of customer complaints. The idea behind the change in the CRM system was to reduce costs and enhance efficiency. However, this was not the result of the change in the system. In addition to poor customer service Classic Airlines is facing low morale from employees due to the reduction in share prices based on the negativity that has been reported by Wall Street, the media, and the public. Because of the decrease in shares and the economic strain on the airline industry, Classic Airlines Board of Directors have insisted on a

CLASSIC AIRLINES MARKETING SOLUTION 15% cost reduction over the next 18 months. This reduction will hit the marketing department

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extremely hard as the marketing expenses are astronomical and the executives of Classic Airlines have lost confidence in the marketing department and their ability to strategically market Classic Airlines services over their competitors (University of Phoenix, 2011). Externally Classic Airlines faces an uncertain public and their willingness to travel due to terrorist attacks. The tragedies that occurred affected the bottom line of the airline industry and its market shares. In addition to the shrinking market share Classic Airlines is experiencing high fuel and labor cost, severe price cutting from competitors and the ability to compete for frequent flyers. If Classic Airlines is unable to turn the customer losses and financial losses around they can be facing bankruptcy (University of Phoenix, 2011). Classic Airlines must develop a plan that includes specific, measurable, attainable, relevant, and timely goals. This is a five step process for business goals referred to as SMART. By establishing SMART goals this will give Classic Airlines the ability to create and accomplish the necessary goals set forth by management using the appropriate business tools. Classic Airlines must overcome its current business challenges by having specific business goals. Currently Classic Airlines specific goals are to increase a new customer base, increase Classic Airlines reward membership, raise stock price to $36.85 or more, increase total frequent flyer travel by, improve Customer Relationship Management (CRM) system, increase employee morale and consumer confidence while implementing a 15% overall cost reduction in the organization and without discounting airfare (University of Phoenix, 2011). In order to implement procedures to achieve these goals Classic Airlines needs to measure activity by monitoring the desired goals. In order to increase the stock price of Classic Airlines shares the market needs to be monitored for the share price fluctuations and the amount

CLASSIC AIRLINES MARKETING SOLUTION of shares being sold. To increase the Classic Airlines reward system, ticket sales need to be monitored for the amount of sales and new customers. By monitoring the ticket sales this will also give Classic Airlines the ability to monitor their financial performance and return on income. In monitoring ticket sales Classic Airlines can determine how the ticket sales are being made; either by travel websites, commercial advertising, or ticket counters sales. Establishing the trends that are being developed in the airline industry will enable Classic Airlines to emphasize which areas need to be improved. By monitoring ticket sales and the market stock price Classic Airlines will be able to address all goals that are to be improved and adjust marketing strategies in those areas. Classic Airlines needs to be realistic in the goals that they want to achieve. Often

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businesses set goals that are not attainable and end up wasting a plethora of funds for ineffective marketing designs and strategies. In making goals attainable proper tools need to be implemented. Implementation of a training program for both employees and managers to understand the weaknesses in the Classic Airlines rewards program and lack of ability to gain new customers is essential. Customer satisfaction is key to increasing a new customer base, regaining customers, creating a better oriented CRM system, and increasing the frequent flyers will ultimately increase Classic Airlines stock price with an end result of increasing employee morale. Understanding the desired new infrastructure of Classic Airlines directives by executives will increase employee awareness of the desired customer satisfaction. Employees that understand the desired customer satisfaction can then take measures to increase customer service, again resulting in increased stock prices and employee morale. Classic Airlines is a service business and “service companies know that positive employee attitudes promote strong

CLASSIC AIRLINES MARKETING SOLUTION customer loyalty” (Kotler & Keller, 2006). Goals that Classic Airlines can truly promote and attain. As in any business plans executives, management and customers need to understand the relevance for new procedures that are to be implemented. In Classic Airlines situation the

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relevance of the new business goals is extremely important as these goals can prevent bankruptcy of Classic Airlines and prevent loss of employment. The relevance of the business goals that Classic Airlines employees need to understand is that by promoting great customer satisfaction and service, can contribute to the success of the business. Having goals that are specific, measurable, attainable, and relevant are extremely important but there is one factor that is critical to the success of a business and that is timeliness. Any great business plan can be disastrous if not implemented in a timely manner. Due to excessive price cutting and fierce competiveness of the airline industry Classic Airlines needs to implement their desired improved customer relations over the next 12 months and a reduction in costs over the next 18 months (University of Phoenix, 2011). The timeliness of these business goals will give Classic Airlines the ability to stay competitive in the industry as the fifth largest airlines and possibly improve its position even more in the market. Classic Airlines has established the desired goals in their company and now need to develop various alternatives to assist in achievement of these goals. In order to achieve these goals Classic Airlines can use the business tool benchmarking. Benchmarking examines other industries that have faced the same challenges and promotes the best practices, product offerings, and processes developed by other companies (Kotler & Keller, et al, 2006). The overall goal is to increase profits by increasing the customer base, customer satisfaction, and reducing costs.

CLASSIC AIRLINES MARKETING SOLUTION Achieving these overall goals can be attained by improving the CRM system, restructuring the Classic Airlines reward/frequent flyer program, and fuel hedging. Currently the CRM system is not focused on customer satisfaction. Loyal customers are finding other ways to travel and not giving the customer the opportunity to appropriately voice their dissatisfaction. The CRM system is actually a fundamentally sound system and a robust system that has global accessibility. The problem within the CRM system is how Classic Airlines interacts with customers. Classic Airlines is literally not listening to customer’s wants and social needs but rather pushing customers toward the internet based system so that there is no dialogue (University of Phoenix, 2011). This lack of dialogue has resulted in the decrease of loyal customers. In order to correct these faults Classic Airlines needs to interact with their customers and listen to their wants and needs. Similar situations have been dealt with in the automotive industry and sales began to fall because of the lack of interaction with the customer’s wants and needs. In order to improve the customer satisfaction desires a CRM system called DealerMine was implemented. This CRM system was able to examine customer desires and report on “touch points” that required improvement (Couretas, 2006). Classic Airlines CRM system has the ability to take customer interactions and dialogue and produce daily reports that show trends, identify issues, evaluate sales and service personnel and provide the ability to correct the problems in a timely manner. Classic Airlines needs to increase their customer base and this can be achieved by implementing changes to their reward/frequent flyer program. Classic Airlines reward/frequent flyer program is directly related to their reputation and financial stability. The key to improving these systems is customer satisfaction. Improving customer satisfaction will increase the existing customer base and gain new customers while inspiring loyalty.

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CLASSIC AIRLINES MARKETING SOLUTION Delta Air Lines was the leading airlines in the world in year 2009 and served over 170 million passengers (www.delta.com). But despite the recent success of Delta Air Lines it was necessary to file bankruptcy in 2005 due to the same dilemmas that Classic Airlines is experiencing such as rising fuel and labor costs, customer dissatisfaction, and loss of customer

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loyalty. Delta Air Lines had to make changes in its marketing strategy, budget balancing, quality of services, pay reductions, alliances, and SkyMiles frequent flyer program. Since these changes have been implemented Delta Air Lines is one of the top ten airlines worldwide and its SkyMiles frequent flyer program is the world’s largest (www.delta.com). The implementation of the SkyMiles program is the reason that Delta Air Lines gained success. Launching this program was a strategic marketing process with innovative ideas such as establishing a three tiered pricing system for award travel, doing away with expiration of miles, creating alliances with competing airlines, and different membership tiers that cater to business and pleasure travelers (www.delta.com). Classic Airlines can learn from the experiences incurred by Delta Air Lines and implement the same strengths within their reward/frequent flyer program. By adjusting the current reward/frequent flyer program to satisfy both business and personal travelers, Classic Airlines can regain customers, obtain new customers, and encourage customer loyalty. Classic Airlines must make a reduction in costs of 15% over the next 18 months in order to avoid bankruptcy. These reductions in costs will affect the marketing, operations, administrative, sales and IT departments. In an effort to reduce costs, Classic Airlines implemented a fuel hedging program that has currently reduced fuel costs by 12%. In year 2004 Classic Airlines spent $1,176,000 on fuel which equated to a savings of $158,000. By continuing with the fuel hedging program Classic Airlines has the ability to save $335,000 based

CLASSIC AIRLINES MARKETING SOLUTION on gallon per flight for the desired 4,100,000 flight for fiscal year 2005 (University of Phoenix, 2011). Fuel costs directly affect ticket prices which resulted in devastation to the airline

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industry. By locking in prices from the previous year this can consequently increase shareholder wealth and increase customer base. By continuing to reduce fuel costs airline ticket prices can maintain stability and the funds saved can be allocated to the marketing department to be used to improve the rewards/frequent flyer program and other marketing strategies to acquire new customers. Not only the airline industry is affected by increasing fuel prices, it affects the automotive industry as well. Chrysler had seen a decline in sales as fuel prices increased and needed to develop a plan to inspire new customers and customer loyalty. In order to inspire customers to purchase Chrysler cars a fuel hedging program was offered with the purchase of a vehicle. Chrysler offered their new car buyers a payment card that would allow them to purchase fuel at $2.99 a gallon for the next three years. While this did not completely stop the decline in sales at Chrysler it did reduce the decline by one third. This marketing strategy increased a new automotive customer base for the Chrysler automotive sales industry, increased Chrysler financially and acquired a new customer that was loyal because of discounted fuel prices (Tozzi, 2011). In order to accomplish these goals Classic Airlines must be willing to look at various alternatives such as an alliance with competing airlines, improvements within the Customer Relationship Management system, more effective marketing strategies and applying a holistic approach to marketing within the organization. However, the implementation of new strategies does not come without risk. Any change in the business world must appropriately assess the potential liabilities. Classic Airlines needs to evaluate potential risks such as loss of skilled

CLASSIC AIRLINES MARKETING SOLUTION employees, more time investment, and possible loss of customers during the improvement

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process and additional costs. However, Classic Airlines will need to make a decision as to which improvements to implement that will have the highest reward with the least risk. Based on the alternatives that have been provided in the five step business tool SMART, Classic Airlines should implement improvements to their CRM system. By implementing the improved CRM system, customer satisfaction can be achieved which will result in an increased customer base both existing and new, and will have an end result of a stock market increase, resulting with increased employee morale. Classic Airlines is an industry that has seen many challenges but has the ability to turn these challenges into success. Within the Classic Airline industry there are established marketing resources that can be utilized, such as the executive staff, employees, and shareholders. Classic Airlines has the unlimited resources of their employees to establish effective, efficient, and progressive relationships with their customers. By using their cross functional communication framework, the CRM system, employees will have a clear and concise view of their target market and an accurate utilization of their market resources. By improving the customer relations Classic Airlines is putting the customer as a priority and will be able to regain their place amongst the leaders in the airline industry.

CLASSIC AIRLINES MARKETING SOLUTION References Brown, S. W., Webster, F. E., & Steenkamp, J. E. (2005, October). Marketing renaissance: opportunities and imperatives for improving marketing thought, practice, and infrastructure [Journal]. Journal of marketing, 69(4), 1-26. Retrieved from http://www.jagsheth.net/docs/does_marketing_need.pdf Couretas, J. (2006, October 2). Mining for gold. Automotive news. Retrieved from http://www.autonews.com/apps/pbcs.dll/article?AID=/20061002/SUB/60927008

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Kotler, P., & Keller, K. L. (2006). Marketing management (12th ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall. Kotler, P., & Keller, K. L. (2007). A framework for marketing management (3rd ed.). Upper Saddle River, New Jersey: Pearson-Prentice Hall. Tozzi, J. (2011). Builders, landscapers use pricelock to hedge fuel like southwest. Retrieved from http://www.bloomberg.com/news/2011-04-21/builders-landscapers-use-pricelock-tohedge-fuel-like-southwest.html University of Phoenix. (2011). Classic Airlines Scenario. Retrieved from University of Phoenix, Marketing website

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