Product Development and Pricing Strategies - Assignment Example

Marketing of the Table of Contents Table of Contents 2 Introduction 3 The Nine-Step Model 4 Identify the problem 5 Issues 5 Opportunity 6 Stakeholders Perspective 6 Framing the correct problem 7 The vision of the company 7 Identification of the alternatives 8 Evaluation of the alternatives 9 Identification and assessment of risk 10 Internal and External Factors 10 Decision making 11 Framing and implementing the solution 12 Alliance 12 Internal Marketing 12 Evaluation of results 13 Conclusion 13 Introduction Increasing competition in today’s globalised economy has put the organization under the pressure of designing effective marketing strategy. Marketing is the process of developing and implementing the idea of pricing, promotion and distribution of products and services such that they create exchanges that generates satisfaction in the objective of the organization and individual (Ferrell and Hartline, 2010). Marketing strategy provides the best opinion to the organization regarding how it can use its resources and skills in the market place so that it can run the business profitably (McDonald, 2007). The marketing strategy is mainly concerned regarding the four P’s and the objective of the organization. Flexibility in the marketing strategy creates a positive influence on the performance of the organization (Pride and Ferrell, 2010). In a competitive economy successful marketing is all about customer focus, positioning and attaining competitive success (Lancaster and Massingham, 2010). Classic Airlines is the fifth largest airline in the world. It has a fleet of over 375 jets that flies over 240 cities. Classic Airlines has about more than 2300 flights flying daily. It has been operating in the airline industry for more than 25 years. It has employee strength of more than 32,000. In the year 2004 the company has recorded earnings of $10 million and sales figure reached $8.7 billion. But being in a profitable business, Classic Airline has started facing some problem that has reduced its profit by significant numbers. A large number of factors has played major role in creating this crisis situation. This study focuses on understanding the current situation of the airline, identifying the objective and finally designing a marketing plan that would help the company to come out of this crisis. The Nine-Step Model Classic Airline is facing certain problems that have resulted into reduction of sales and profit of the company. The company wants to plan marketing strategy that would boost not only sales but also profit of the company. The current situation of the company is analysed using Nine-Step Model that has been shown below Identify the problem Issues The increasing uncertainty in the airline industry has affected Classic Airlines whose stock prices are showing a downwards trend. The stock prices in the year 2003 have shown a continuous downfall after the month of June. In the year 2004 though the stock price was seen to increase but most of the time it was hovering around $31.00. Moreover the employee morale was also affected by the negativity from media, public and Wall Street. Figure 1: Stock Price movement for year 2003 and 2004 (Source: Classic Airline-Excel) The confidence of the customers were also seen to be wanning, which is evident from the decine in the membership of the Classic Reward Program by 19%. There has been a reduction in the ‘flights per remaining member’ by 21% (Classic Airline: Case Study). Loyal customers have been also seen to fly less frequently. This situation has been further worsen by the increase in the cost of labour and fuel. Moreover the overestimated expansion of the company due to the reversal after the downturn of 9/11 terrorist attack, has lead to a restrictive cost structures. All these factors are responsible for such a crisis situation of the company. Opportunity To fight against such crisis the board of Classic Airlines has mandated the 15% cost reduction across the board for the next 18 months. It is also finding ways that would improve the frequent flier program and create good returns on the investment. Table 1: Cost reduction done by various departments Classic Airlines Cost Reduction Goals By Department   Quarterly Reduction Required To Meet 15% Goal Department Q1 Q2 Q3 Q4 Q5 Q6 Total Administrative 3.00% 2.00% 3.00% 5.00% 5.00% 6.00% 18.50% IT 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 14.10% Operations 2.00% 1.50% 1.50% 2.00% 2.00% 2.00% 11.50% Marketing 3.50% 3.50% 3.50% 4.00% 4.00% 5.00% 21.50% Sales 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 11.50% (Source: Classic Airlines-Excel) Stakeholders Perspective Stakeholders are those individuals who are suppose to experience loss or gain in the event of failure or success of the strategy implemented by the organization (Kirch, 2008). Though the management of the company has decided to implement several steps in order to avoid any further crisis but the rumours are seen to evolve that if the company fails to meet the reduction then it would face bankruptcy. This has created a crucial situation for the stakeholder of the company who have equal chances of gain and loss. Framing the correct problem The main problem that lies with the organization is firstly the reducing confidence of the customers and secondly the loss in employee morale. The employees of Classic Airline were amongst the highly paid individual in the airline industry. Apart from this there were other programs for the employees such as ‘route bidding’ and ‘thirty and out’ that made the experience of the employees better. But according to the General Counsel of Classic, Ben Sutcliffe, high labour cost was one of the major causes for jeopardizing the future of Classic (Press Release by Labour Union). This was further exaggerated by the negativity shown by Wall Street, public and media that cause the employees to lose morale. At the same time the customers were also complaining of poor service quality of Classic Airline which happened to be much better previously. Hence these two were the major problems of the company. The vision of the company The vision of the company Classic Airline is to be the leading service provider in the airline industry. The company wanted to achieve this target by revamping the Customer Relationship Management (CRM), which was already there in the company but was not used in a strategic way. The revamp of the CRM may provide a positive development towards attracting and retaining the customers. The company had also planned to enter into alliance with a top Latin American company and Skyway that would provide them with most strategic reward options, which in turn will change the baseline experience of the customers. The company has also planned to take some strategic steps like reducing the number of reservation operation centre, reduce the commission of the travel agents and develop the attrition program of employees. Moreover the market segmentation was also restructured. Identification of the alternatives The two major problems that were affecting the sales and profit of the company was the decreasing number of customers and the declining employee morale. The customers were seen to demand for good customer service like on time arrival, taking care of the baggage and presence of a service representative apart from the automated system. At the same time the employees were having low confidence on the airline because of its present situation. So it is clear that if the numbers of customers increase that would eventually provide the solution for the whole problem. The alternatives to these problems are mentioned below. The CRM needs to be completely refurbished. The CRM should be as such that it provides a connection between the objectives of the organization and the requirement of the customers. The CRM would also help the company to identify the needs of the customers and accordingly the organization can develop the strategies (Sugandhi, 2003). It also helps Classic Airline to identify the untapped market potential, new technological requirements and strong points of the company. This in turn will help the organization to develop proper customer attraction and retention strategy. Classic Airline should revise the segmentation of the customer. The previous segmentation of the customers was based on the pricing of the service since they considered price to the driving force behind customer opting for a certain airline. But the recent comments from the customer revealed that they were not concerned about price but about value that the airline provides. Customer comments like “I don’t care if it costs a couple of bucks more, if you can assure me I’ll arrive on time and be treated like a human being, I’m with you”, provides proof in this regards. If the service provided to them offers good experience then it would adds to the value and they will be less concerned about spending more. So the main attention should be on value not on price. The frequent flyer program should be as such that it provides connection with the customers need. The alliance with the other two airlines will also provide Classic Airline with a huge potential to attract more customers. When the company is thinking of increasing the number of customer travelling with Classic then this may be a good decision. Moreover in airline industry alliance is a very common thing. The employee morale should be enhanced and they should be taken into confidence by the company. Effective communication along with some efficient employee related programs can be helpful. In simple words internal marketing should be implemented. Evaluation of the alternatives After developing the alternatives, evaluation becomes the most significant step. The success of the strategy depends upon this step. Each alternative should be matched with the core competencies, capabilities and strength of the firm. The best fit alternative should be chosen as such that it is feasible to the organization. The success of the organization lies in the fact that it should link the customer requirement with the organizational goals (Ireland, Hoskisson and Hitt, 2008). Classic Airline can create competitive advantage by connecting the process of strategic marketing with the service quality provided to the consumers. Classic Airline should immediately take care of its customer otherwise it may lose the market share. Thus this makes improvement of the frequent flier program and CRM and proper segmentation strategy the most significant facets of the marketing strategy. For an organization employees are as important as the customers. If the employees feel that their both personal and financial needs are not satisfied then they tend to search for better employers who will satisfy their needs. This leads to loosing of employees. More over there is a linkage between the happy employees and the customer satisfaction. Satisfied employees are seen to serve the customers better. In this regards internal marketing is assumed to play a vital role since it contributes heavily towards the retention level and the staff turnover of the organization (Brink and Berndt, 2009; Egan, 2007). Hence the effect that internal marketing would bring upon customers is really essential at this point of time. Identification and assessment of risk The risk can be identified and assessed only after gather information about the organization, scrutinizing each and every detail very minutely and then finally assessing the risk involved. In this case the risk can be identified and assessed by scanning the internal and the external factors playing behind the crisis. Internal and External Factors Though the company has a problem of decreasing number of customers and low employee morale yet it has some very strong policy that makes the airline quite attractive. Classic Airline is considered to the highest paying airline as compared to other airlines operating in the industry. At the time of crisis when other airlines were seen to lower the salary of the employees, Classic Airline was the only one who continued to pay high. There are some other programs designed by the company like route bidding and ‘thirty and out’, which may be lucrative for the employees. The CRM was also regarded to strong for the company but in recent years it was not utilized properly, which created the crisis situation. Moreover the Frequent Flier program designed by the company would help them in attracting customers and retaining them. The main weakness of Classic Airline lays with the fact that the morale of the employees was getting lower and some of them suggested that the CRM and IT department needs to be strong. The employee who is not satisfied will not be able to deliver 100% towards his job. Hence the service provided to the customer is getting hampered. Customers are seen to complain regarding not getting sufficient service from the service provider, which they used to get previously. Whatever may be the scenario, Classic Airlines is having huge potential to gain back its old form. The marketing alliance with the top Latin American company and Skyway would provide them with most strategic reward options, which in turn will change the baseline experience of the customers. This will expand the flier program by providing more miles and rewards, strengthen the position of the partners entering into alliance and provides an opportunity of expansion of operations. The major threat from which Classic Airline is suffering is rumour of getting bankrupt that is further worsening the situation. This type of rumour may further affect the employee morale and the customer’s confidence too. So the company should immediately adopt effective steps so that it can prevent itself from any type of uncanny situation. Moreover in an industry where alliance is most common and businesses have been seen to benefit from them; in such an industry if the company fails to utilise such an opportunity then it would end up in heavy looses. Decision making After the pros and cons have been deeply analysed and the vision and the position of the company has been understood taking an immediate decision becomes the next important step. The company should now improve the CRM and the frequent fliers program. They should take the feedback of the customers very seriously and should start working on it. They should bring back the confidence within the customer so that they may again feel the attraction to travel with Classic Airlines. Apart from this the employees should be also taken into confidence. Internal marketing should be implemented to achieve this. Framing and implementing the solution The two main steps that need to be implemented to bring the company back in form are internal marketing and alliance with the other two Airlines. Alliance In order to make this alliance work, the three partners need to work together by respecting each other’s organizational objectives. Since Classic Airline will be entering into some new market so for effective results should increase the workforce. In this respect they should go for selection and recruitment process. This alliance will also expand the Frequent Flier Program by keeping the customers feedback in mind. The problems that were there in the previous programs should be eradicated. Moreover the program should be devised as per the requirement of the segment the company wants to hit. Internal Marketing Special focus should be given on employee motivation and satisfaction. If the employees lack motivation then it will affect the service delivery, which in turn will affect the satisfaction experience of the customers. Customer satisfaction should be given special attention. The employees should be aware of the activities that may create satisfaction among the employees. All the functions that are taking place within Classic Airline should be well coordinated and integrated. None of the function should operate isolated. Tools like marketing communication and promotional activities should be used to make the employees aware of what is happening within the organization. This approach will make them feel to the part of the organization. Evaluation of results After the strategies have been implemented, next is the step of evaluation. The outcome of the strategy implementation should be thoroughly evaluated so that if there is any gap left may be soon eradicated. At the same time if the strategy is not giving the desired output, proper measures should be designed to get the result (Varma, Budhwar and DeNisi, 2008). In this case of Classic Airlines if after the implementation of the strategy they do not get the appropriate result then they may look for some further rectification. Conclusion Marketing deals with satisfying the requirements of the customers and making them pleased along with making the organization achieve its objectives. At the same time the organization has to also compete with its rivals in order to stay in the market. To be in the competition the organization needs to find diverse ways and continuously upgrade itself. The study has shown how Classic Airline was caught in a crisis situation since it did not pay attention toward its customer. This made its profit to fall and caused reduction in its sales. This again caused an impact on the stock prices of the company, which in turn lower the morale of the employees. Hence by implementing appropriate internal marketing strategy and entering into alliance the company can regain its profitable position. REFERENCES Brink, A. and Berndt, A. (2009). Relationship Marketing and Customer Relationship Management. Lansdowne: Juta and Company Ltd. Egan, J. (2007). Marketing communications. Connecticut: Cengage Learning EMEA. Ferrell, O.C. and Hartline, M.D. (2010). Marketing Strategy. Connecticut: Cengage Learning. Ireland, R.D., Hoskisson, R.E. and Hitt, M.A. (2008). Understanding Business Strategy: Concepts and Cases. Connecticut: Cengage Learning. Kirch, W. (2008). Encyclopedia of Public Health. 2 Vol. Berlin: Springer. Lancaster, G. and Massingham, L. (2010). Essentials of Marketing Management. London: Routledge. McDonald, M. (2007). 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