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Classic airlines and marketing - Essay Example

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The Airline industry has changed a lot in the past decade. The cost of doing business in this industry went up after 9/11 as security and insurance cost increased. The biggest cost driver in the airline industry is fuel.The current price of crude oil is $112.77 a barrel (Oil-net, 2011)…
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Classic airlines and marketing
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"Classic airlines and marketing"

The Airline industry has changed a lot in the past decade. The cost of doing business in this industry went up after 9/11 as security and insurance cost increased. The biggest cost driver in the airline industry is fuel.The current price of crude oil is $112.77 a barrel (Oil-net, 2011). Classic Airlines is facing problems as the firm has not been effective at retaining customers. In the last year the firm has lost 20% of the member of its customer loyalty program. The firm has lost approximately 160,000 recurrent clients. Another issue is that the remaining members of the loyalty program have reduced their travel consumption by 20%. The firm attempted to gain market share by lowering their prices, but the strategy backfired and started a price war. Classic Airline cannot afford to lower their prices any more. The firm currently seeks a 15% cost reduction across the board. The effect of this strategy is that the marketing budget would be reduced by 15%. The price variable for Classic Airline is currently a constraint. The company needs to lure back customers without offering a price reduction. The organization has internal problems within its executive management team. There is a lack of respect for the importance marketing has towards the success of the company. The CEO of the company views marketing as a soft discipline. The other executives feel that money spend on marketing could be spent on better uses such as investing in the fuel hedging program. Read More
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