Classic Airlines Marketing Solution
Industrial expansion and fierce competition for market supremacy has led to technological competition in the aviation industry. To remain in existence in this unpredictable market Classic Airlines and its competition must constantly implement changes by design or by market events instigated by its competitors. Classic Airlines has become the fifth largest airline company since its establishment 25 years ago among its competitors. The firm??™s fleets consist of more than 375 aircrafts, which fly to 240 cities, and have more than 2,300 scheduled flights daily. Classic Airlines in the past have done very well for itself infiltrating the market. The firm recently earned $10 million on an $8.7 billion in sales. This financial stability and wealth has permitted the firm to grow/employ 32,000 employees to operate/manage the organization??™s daily operation. Although the firm is profitable, it is no stranger to challenges that have bestowed a level of uncertainty on the organization, which has affected the firm??™s stock prices. Consumer confidence has declined and loyal customers are opening up to other airlines marketing and advertisement offering. The rising cost of fuel and labor has put a strain on the firm??™s operation. For Classic Airlines to maintain and enhance on its existing situation as the fifth largest airline, the firm will need to make some difficult decisions/changes.
Internal and External Pressures
Although Classic Airlines was profitable the previous year, the firm experienced a 10% drop in market share prices. This occurrence is blamed on the firm internal employee??™s morale and external customer scrutiny, which has been at its highest. Customer loyalty and dissatisfaction has led to 19% decline on the firm internal customer??™s reward program. There is a 21% decline in flights with its remaining member (Classic Airlines, 2011). Also to make the situation worst, the events that occurred on September 11, 2001 affected the airline industry. This life/business changing event has lead to a restructure of the aviation industry, in which Classic Airlines Board of Directors stipulated a 15% cost reduction throughout the organization for 18 months (Classic, 2011). The firm will also need to enhance/expand the organization frequent flier program with a measurable return on investment formula within the firm??™s cost reduction goal. In the industry, Classic Airlines is one of a few carriers that do not have an affiliation or alliance with any other airline. This is because the organization believes no other firm can provide the same level of services that Classic Airlines provides to their customers. Customer development will facilitate the firm to enhance its marketing campaigns, fine-tune budgets, and to shift accurately its resources to take advantage the industry??™s market trends. Classic Airlines ought to conduct informational surveys and promotional marketing commercials during the organization on and off peak seasons. The more unbiased data Classic Airlines collects from its diverse sources and customers, the more precisely the organization will be able to forecast to meet its customers and potential customers needs. Therefore, Classic Airlines has to make its employees and customers retention there one priority to put an end to this problem. Another issue is implementing a pricing strategy, which is compatible and competitive with the rest of the aviation industry. Classic Airlines will also need to forecast accurately the industries changing market and it bases of operation relating to fuel consumption and maintenance of it fleet. For this reason, Classic Airlines current methodology and the organization culture need to be united as one to promote this approach. This in the future this will create opportunities for Classic Airlines to concentrate on the root of all its problems.
SMART is an acronym that identifies five steps a firm can take to implement a change or manage a project. SMART represents specific, measurable, achievable, relevant, and time-based goals. This simple tool will be used to clear the realm of unclear goal-setting into obtainable goals and vision for Classic Airlines. The firm has to distinctively identify what the firm wants to achieve. Classic Airlines wants to increase its market share by recapturing and luring back its customer base through customer satisfaction/reward program. This has decrease, among other issues such as a deteriorating reward program, employee morale, and the rising cost to operate have affected Classic Airlines share prices in the past year. Classic Airlines will have to come up with measurable goals. The firm has to distinctively define the programs, which are measured so it can understand whether or not it can achieve its projected goals. Classic Airlines Board of Directors stipulated a 15% cost reduction throughout the organization for 18 months. The firm has to measure the effects of this cost reduction plan versus the programs/goals on the firm??™s position to retain its employees, customers, and to increase its customer satisfaction, which equates to an increase in share price. These makeable goals must be attainable and Classic Airline must recognize it margins, and abilities. The firm can set its goals high enough to extend beyond its level of comfort, but it must maintain a level still within the firm??™s capabilities. Classic Airline can make changes to the frequent flier program to give out more points based on sitting arrangement and flying class such as first class, business, and coach. These points can then be used by the customer to upgrade his or her next flight. These goals must be relevant and be in sight of the firm??™s short or long-term goal. The goals stipulate must also be in line with the Classic Airlines value and be adjustable to surpass any marketing scheme or gimmick a competitor may introduce or implement. Last, the time of completion of these goals or targeted deadline should be clear with a date or a time frame when the firm intends to achieve each goal identified by SMART. This can be done with weekly/monthly meetings charting the progress of Classic Airlines 15% cost reduction throughout the organization, the increase of customers in the frequent flier program and its current share price because the implementation of these goals.
???No company can succeed if its products and offerings resemble every other product and offering??? (Kotler & Keller, 2007, p. 151). By implementing a problem-solving paradigm, Classic Airlines can resolve any challenges and take advantage of opportunities. The paradigm can serve as a valuable tool for all types of businesses. It identifies ethical problems, creates strategy/solutions, and defines subsequent issues that can occur. The paradigm, as outline below can assist with creating positioning/dealing with the competition and developing pricing strategies and programs, which are beneficial to Classic Airlines. The process should also include the development of SMART by:
??? Defining /recognizing the problem ??“ having a true understanding of the problem.
??? Measure the problem- a define performance level that will be measured against future performance.
??? Set the goals- goals that provide a course of action and are measurable.
??? Determine root causes- ascertain why the current process at the present is functioning the way it is.
??? Select best strategy- settle on a strategy that will cohesively solve the problem.
??? Implement strategy- implement the solution based on the strategy.
??? Evaluate results- Assess the effect of the solution.
??? Implement appropriate changes in the process- enhance and perfect the process.
??? Continuous improvement- augment the process continuously
(BPI Consulting (2010), Problem-Solving Model).
To become once again profitable by deciphering Classic Airline set challenges and goals. The firm must focus on the goals set challenges, which are to increase the lack of ticket sales, share prices, employee morale, rewards program, and a challenge of a 15% cost reduction. The goals and challenge will be administered by steps identified by SMART, which are specific, measurable, achievable, relevant, and time-based goals.
The most significant issue threatening Classical Airlines is the rising costs of fuel and labor. For Classic Airlines and the aviation industry strives on its fixed and variable cost to break-even or to record a profit. Record breaking oil prices and increasing government scrutiny since 9/11 has put a tremendous strain on the air transportation industry. For this reason, Classic Airlines has to take a good look at it operation practices and introduce new efficient/effective ways to address Classic Airlines Board of Directors goal of 15% cost reduction throughout the organization. This means eliminating/reduction of staff on current job positions and outsourcing their high priced internal maintenance process on its aircrafts. Purchasing a new and more fuel efficient airplane, currently it is out of the question but in the near future this cost saving and profit increase can be used to improve its aging fleet.
It is no secret that Classics Airline needs to make major adjustment in their organization if the firm wants to survive this competitive market. The firm will need to take a good look at consolidating its labor force and improve in areas that its rival competitors have improved post 9/11. On its 32,000 employees currently employed with Classic Airline, the firm will need to trim the excess by both offering early retirement to its employees and examining its mode of operation with redundant position being eliminated. The firm??™s first most important approached should be to outsource the fleets maintenance versus doing it in house. The maintenance process is Classis Airline biggest bulk of expense. This process is not just costly for Classic Airlines but throughout the industry many airlines have introduced and integrated the outsourcing process to their mode of operation. By implementing these changes, the firm will become more effective/efficient and able to make cash readily available.
???Their business plans differ in many ways, but theres one area where major airlines and their cut-rate competitors agree: maintenance is a lot cheaper when its performed by lower-paid mechanics working for outsourcers. JetBlue, Southwest, America West, Northwest and United are among the carriers who outsource major maintenance of their aircraft to contractors in other countries, according to a report in The Wall Street Journal.
??? As JetBlues new A320 Airbus fleet ages, aircraft are sent to a repair hub in El Salvador;
??? America West also sends its jets to El Salvador;
??? Southwest has always outsourced its major maintenance;
??? US Airways mechanics agreed Friday to pay cuts and the outsourcing of 2,000 mechanics jobs;
??? Northwest sends its wide-body jets to Singapore and Hong Kong;
??? Bankrupt United Airlines recently won union approval to begin using outside contractors for heavy maintenance.??? (Airlines Outsourcing More Maintenance, (2005), Consumer Affairs)
At the same time that Classic Airlines management is examining its rising costs of fuel and labor, it also has to focus on its customer??™s retention and attracting/luring new customer to use the firm??™s services. Classic Airlines can make the airline more attractive to its existing customers and new customers by restructuring the firm??™s frequent flier program. Restructuring the Classic Rewards program is a challenge. If successfully implemented this program can be a major contributor towards increasing the firm share price. Classic Airline must be conscious of today??™s customers being more educated and informed than ever. The customers now have tools in place to authenticate a firm??™s claims and search for a better deal. The customer ultimately has the final say in making its choice. Kolter and Keller (2007) states, ???Customers tend to be value-maximizers. Within the bounds of search costs and limited knowledge, mobility, and income, they estimate which offer will deliver the most perceived value and act on it. Whether or not the offer lives up to expectation affects customer satisfaction and the probability that the customer will purchase the product again.??? The firm will need to cultivate its customer relationship through customer relationship management (CRM) (Kolter and Keller (2007). CRM facilitate businesses to supply a first-rate instantaneous customer service by using the customer individual account information. The foundation on what the firm know on each of its valued customer, Classic Airline can then modify its market offerings, services, programs, messages, and media. Therefore, the use and implementation of CRM is important simply because it is a contributor toward a firm??™s profitability with its collective value of the firm??™s customer base. So it is important to use CRM to improve Classic Airlines frequent fliers reward program with new rewards, to include various redemption options by giving out more points based on sitting arrangement, and flying class such as first class, business, and coach. These points can then be used by the customer to upgrade his or her next flight. This would improve consumer loyalty and retention. This would also give the firm the word of mouth advertisement it needs to attract new customers. The bottom line is that Classic Airlines must improve on its service to all of their customers, particularly to the frequent fliers. The goal of the firm using CRM must be to retain and to attract back customers, by providing an incomparable customer service, and offering more attractive choices in redeeming his or her frequent flier miles. Basically, with the use of CRM, Classic Airlines management must comprehend in how to improve and implement the number of miles for a Basic, Silver, and Gold members frequently flier program, which is readily available to the customer from one flight to another. If the frequent flier program is not enhanced the firm will keep on losing its clientele, potential/new customer, market share, and share prices. Once the frequent flier program has been perfected management can then shift its focus toward a partnership with another airline firm. This would increase flight options/routes for its customers and provide more options for its frequent flyers customer/program.
In conclusion, it is very demanding for businesses to adapt to changes. However, when a firm takes on the task in embracing revolutionary ideas by changing its organizational business culture issues a firm can go from a negative to positive outlook. This would hold true for Classic Airlines if they adopt the proposed new the cost reduction maintenance outsourcing and the implementation of CRM. The suggested cuts and implementation will improve process efficiency and allow the firm to collect valuable data about their customers to enhance customer satisfaction/retention. The cost saving on the maintenance outsourcing process will allow the firm to purchase new spacious fuel efficient aircrafts. This will also contribute to customer satisfaction and comfort. Finally, Classic Airline can investigate a partnership with another airline to expand its market potential and to expand its frequent flier program to these customers. Classic Airlines will need to stay on top of its operation processes and identify areas to make more efficient changes to continue its path in staying profitable.
Airlines Outsourcing More Maintenance, (2005), Consumer Affairs retrieved January 21, 2011 from http://www.consumeraffairs.com/news04/2005/airline_maintenance.html
BPI Consulting, LLC, (2010) Problem-Solving Model (2004) retrieved January 21, 2011 from http://www.spcforexcel.com/problem-solving-model
Kotler, P., & Keller, K. L. (2006). Marketing Management (12th ed.). New Jersey, Upper Saddle River: Pearson-Prentice Hall.
Kotler, P., & Keller, K. L. (2007). A Framework for Marketing Management (7th ed.). New Jersey, Upper Saddle River: Pearson-Prentice Hall.
University of Phoenix (2010). Scenario: Classic Airlines retrieved January 8, 2011 from University of Phoenix, MKT571 website.