Classic Airline's Marketing Problems - Research Paper Example

Classic Airline's Marketing Problems In today’s competitive environment every organization looks for maximizing growth and profitability by concentrating the attention on the strategic marketing. A strategy is a plan that integrates the goals and policies of the organization with the decision and series of action into a unified whole. Strategic plan can be implemented at any level of the organization and pertaining to any of the functional area of the management. Thus strategies can be applied to production, marketing, financial and corporate level. If one look towards the marketing strategy of an organization then there may be product, price, promotion, distribution, marketing research, sales and advertisements of the merchandize, which can be some of the most effective strategies. “Strategy is more concerned with effectiveness rather than efficiency and it is the process of analyzing the environment and designing the fit between the organization, its resource and objectives and the environment” (Proctor, 2000, p. 1). Classic Airlines was considered to be fifth largest airline corporation in the world. It has a fleet of about 375 jets that operates in about 240 cities. It has over 2300 flights daily. It has spent about 25 years from inception and has occupied a large segment of the market and has grown like anything. It has employee strength of about 32,000 employees and earned about $10 million on a sale of about $8.7 billion. Though Classic Airlines is a profitable organization but in recent years it is struggling with the increase in cost and reduced customer confidence. This paper focuses on the problems that Classic Airlines is facing and develops a clear understanding of the internal and external pressures contributing to Classic Airline’s current crisis, the objectives and obstacles of the marketing department, and the marketing resources available to resolve this crisis through the implementation of the nine step model. The Nine Step Model 1. The Scenario Issue Identification Classic Airlines has been operating for last 25 years in the airline industry. It was into a profitable business but in recent times it has started facing challenges regarding waning customer confidence and rising cost particularly of fuel and labor. The loyal customer seems to lose confidence and the other customers who used to travel frequently has started to be less frequent with Classic Airlines. This was a huge setback for them in terms of revenue. While going through the data one can see that for several months in the year 2003 and 2004, the company was running in a loss (Excel: Financial data 2003 & 2004).The negativity shown by the Wall Street, the public, the media and the customers has exaggerated the employee spirits. Moreover due to a rise in cost, Classic Airlines had to limit the valued frequent fliers. A travel downturn started in September 2001 but after it subsided Classic Airlines overestimated the reversal and expanded very quickly investing a lot of money (Case Study: CLASSIC AIRLINES). Challenge Identification The number of customers who used to travel through the Classic Airlines has decreased drastically. “By January 2005, Classic’s declining Classic Rewards program measured a 19 percent decrease in the number of Classic Rewards members, and a 21 percent decrease in flights per remaining member” (Case Study: CLASSIC AIRLINES). The CEO of Classic Airlines said that the Customer Loyalty report shows that about 160,000 loyal customers were flying with other airlines other than Classic Airlines. He says that “average number of flights per member is down more than 20% as well”. This has also affected the company’s Stock Prices. “Classic has seen a 10% decrease in share prices in the past year” (Case Study: CLASSIC AIRLINES). The data shows that in the year 2003 the stock prices have fallen drastically after the month of June and touched $33 in the month of December. Year 2004 also experienced up and downs in the stock price (Excel: Stock Price 03-04).The unplanned and quick expansion of the company has made the company to face difficulties. Due to this reason they were facing a restrictive cost structure (Case Study: CLASSIC AIRLINES, p. 1). To counter with this crisis and to restrict any type of further crisis the Board of Directors of the company has “mandated a 15 percent across-the-board cost reduction” for the next eighteen months. Apart from the mandate the company has also found ways to implement frequent flier program in order to demonstrate a significant return on investment (ROI). Apart from this the company should also go for some “environmental scanning”. The term environmental scanning refers to in depth analysis of the political, economic, social and technological trends that affects and influences the business industry and the total market (Kroon, 1995, p. 76). Stakeholders Perspective Classic Airlines is currently in a state where it is losing customer, profitability, employee morale and high competition. The company has planned not to discount the air fares and neither to cut their margins further (Case Study: CLASSIC AIRLINES, p. 3). So this suggests that the company is planning to implement new marketing strategy. Apart from this the company also pays special attention to the innovation, quality, customer services and efficiency. Marketing is mainly concerned about meeting the customer’s need in order to attract and retain them. If a company does not meet the changing expectation and need of the customer then the customer will move to those who provide the expected need (Blythe, n.d., p. v). 2. Focusing on the main problem The case study says that the employee morale has been the lowest due to the negativity portrayed by the Wall Street, media and public. This suggests that Classic Airlines should employ some internal marketing policies in order to assist the employees. The notion of internal marketing was first projected in the year 1970. The basic premise of internal marketing is that “to have satisfied customer, the firm must also have satisfied employees” (Ahmed & Rafiq, 2012). This can be achieved by treating the employees as customers. One has to apply the principles of marketing in order to design the job and increase employee motivation. This strategy has witnessed several successes and is not confined to any particular service area. According to Berry and Parasuraman “internal marketing is attracting, developing, motivating and retaining qualified employees through job product that satisfies their need. Internal marketing is the philosophy of treating employees as customers and it is the strategy of shaping job products to fit human needs” (Ahmed & Rafiq, 2012). The other challenge is regarding the decreasing number of customers. Since Classic Airlines falls under service industry and it does not wants to discount its air fare so it should concentrate more on its service quality. The 5 I’s of services should be followed like “intangibility, inconsistency, inseparability, inventory and interaction” (Berkowitz, 2010). Services are intangible that is they cannot be felt, touched or heard. They can only be encountered. The major challenge in marketing is to make intangible services to show their tangible benefits. In service industry the main aim behind the objective of reducing the inconsistency is to achieve standardization. So Classic Airlines should attempt in reducing the inconsistency in people delivered services. Service cannot be separated from the individual who delivers them. In service industry when any employee delivers service but it goes unutilized then it results in inventory. The service business should manage the cost of inventory by managing service deliverer and by shifting the demand. Quality interaction between the customer and the service provider is important (Berkowitz, 2010). Apart from these, Classic Airlines should progress the quality of their products, devote more on upholding the products, offer competitive price, enhance CRM system and employ innovative marketing policy. The above mentioned strategies would help Classic Airlines to develop appropriate marketing mix that would initiate customer relationship. 3. The vision The main vision of Classic Airline is to become the leading service provider in the airline industry. This can be achieved by implementing successful and proficient Customer Relationship Management system that may bring about some positive development in the company. The company Classic Airlines has entered into a marketing alliance with Skyway and a top Latin American airline that can help the marketing team of the company (Case Study: CLASSIC AIRLINES, p. 7). Classic Airlines has also taken up some measures to save cost that may serve as an alternative to the fund fuel hedging and also subsidize a certain portion of the marketing budget. The ideas include “reduction in the number of reservation operation centers, eliminating the travel agent’s commissions and development of employee buyout or attrition program” (Case Study: CLASSIC AIRLINES, p.11). Classic Airline should target a large market and also offer incentives to the customers for flying in their airline. The company has to work on the employee satisfaction and motivation too. This would help in increasing the employee morale. 4. Identification of alternatives The primary aim of Classic Airline is to understand the need of the customers and to provide the customer with appropriate product and services to satisfy their needs. If there is no customer to whom the company could sell its product then the company will cease to exist. Classic Airline was facing the major problem in decline of their customer. This problem has given rise to decrease in revenue and company profit. The success of an organization lies in the fact that how an organization can link its customers initiatives with the corporate goals. Classic Airlines can create a competitive advantage by connecting each steps of the strategic marketing process with the significance and quality for the customers. Classic Airline should design amalgamated company wide attempt in order to develop marketing strategy that would link customer relationship initiatives with the organizational goals. The first step to implement this is that the company should enter into a commitment to make the customer’s need their first priority. The company needs to design such marketing and business strategy that would balance the organizational synergy and satisfy the wants of the individual customers. 5. Evaluation of Alternatives In order to be successful Classic airlines heavily invest on marketing in order to understand the human behavior. The company should also assess the associated risk and challenges related to these alternatives. While planning the optimum solution, the company should analyze and consider the other factors that are offering challenges to the company in becoming the leading service provider in the airline industry. The company can tie up with other companies in order to upgrade their current Customer Relationship Management, instruct the managers to be effectual leaders and to center of attention should be on internal marketing and special importance should be given to the marketing strategy. 6. Identification and Assessment of Risk The Classic Airlines should perform a proper market research by defining the market problem, collecting the information, analyzing the gathered information, understanding the opportunities available and finally going with the recommendations. The aim objective of the Classic Airline is to be the largest service provider of the airline industry. In order to understand and work coherently a SWOT analysis is done. Strength The company though has a decreasing number of customers and reducing employee morale but still it has a number of strength. Classic Airline was considered one of the top salary paying companies to the pilots and employees amongst all other company’s operating in the airline industry. Even when other competitors were paying low due to their cost cutting process, Classic Airline continued paying high. “Route bidding” (Word: Press Release Outlining Classic’s Position with Labor Unions, p,4) practice done by Classic Airline enables the flight attendants to balance between their home and work. The auto craft mechanics union AMFA claimed that union and management shares a mutually supportive and professional relationship (Word: Press Release Outlining Classic’s Position with Labor Unions, p,4). Classic Airlines also have an effective Frequent Flier Program that may help the company in attracting customers. From this program the clients may earn reward points, which they may use for travelling or any other service provided by the company (Word: Classic Rewards Frequent Flier Program Overview, p. 3). Weakness The company though pays high and has other motivating factors for the employees yet the employees have a low morale. This serves as the prime weakness for the company. An unsatisfied employee cannot deliver 100% towards his job. Hence service provided to the customers will get hampered. The customer also complains regarding the service that they used to get before is no more available now. One of the customers says “I remember the good old days, when I flew in and out of New York and you still had a Classic Club at Newark Airport. Those ladies would call my cell phone and let me know if my flight was late, book hotel rooms for me when my flight was cancelled, and always gave me little trinkets to take home to my kids. I would never have dreamed of flying on anything but Classic” (Word: Kevin Boyle - Notes From Customer Conversations). Though the company has automated customer service but still the customer needs some representative to talk. Opportunities The primary opportunities that Classic Airline has are the Customer relationship Management program and the alliance with Skyway and a top Latin American airline. The definition of Customer relationship Management originated from the Metagroep, which in 2000 defined CRM as “the automation of horizontally integrated business process involving front office customer contact points (marketing, sales, service and support) via multiple interconnected delivery channels” (ED, 2008, p. 3). Here information technology plays an important role. The Customer with the help of technology can communicate with the employees of the organization through internet, telephone or any face to face channel. IT plays a significant role in making sure that the employees are in a better position to help the customers (ED, 2008, p. 3). However in case of Classic Airline, only automated machine is not going to solve the problem, but it also requires the involvement of the employees. The CRM was not properly used by the company. But due to the crisis the company is now looking towards the proper implementation of the CRM system. The alliance will provide an idea of European perspective and the market of United States. Threat The company can get threats from British Airways, Northwest Airlines and United Airlines who are dominant and strong players in the Airline industry. They have a global recognition along with loyalty programs and loyal customers too. Apart from them the company also gets threatened by GlobalAir who has made significant changes in the frequent flier program. Previously GlobalAir was not customer focused but now it has developed effective customer retention strategy (Case Study: CLASSIC AIRLINES, pp.10-11). 7. Making a decision The Classic Airline has understood the main goal, vision, the challenges that they may face while developing the products. This understanding would help the company to fight with the crisis situation and move forward towards becoming the leading airline company. Previously Classic Airline was neither connected to its customers nor did it use its Customer Relationship Management effectively to connect with the customers (Case Study: CLASSIC AIRLINES, p. 5). But now it has understood the faults and is moving towards the solution. The senior leaders are also instructed to work on the resources that connect to the customers. The best solution that Classic Airline can think of is to design the strategic marketing process. 8. Development and Implementation of the solution After the problem has been identified and the solution has been planed implementation is the next most important thing in the nine step model. During implementation the company Classic Airline may face problems like negotiation, internal resistances and difficulties in meeting up with the deadlines. Communication between the management and the employees are of great importance during the implementation of the plan. An organization is successful only when the preparation for the implementation is done in advance. The plan for implementation has to be present not only in the initial plan but also throughout the project. There has to be a strong connection between the project design team and the implementation team (Ali, 2011, pp. 36-37). 9. Evaluation of the results The company Classic Airline was working on the crisis situation mainly due to the facts that the number of customers got reduced and the customer satisfaction was low. These two factors lead to a fall in the stock price. So one can easily understand that stock price may be one of the parameters to evaluate whether the implementation of the new plan is successful or not. The employee had a low morale due to the negativity reflected by Wall Street, media and customers. The internal marketing plan was implemented by the senior leader in order to retain and motivate the employees. The company can implement appraisal system and convenient suggestion box that would help to judge whether the employees are happy or not. In the suggestion box the employees may provide their feedback regarding the company, anonymously. The customer retention strategy included the effective CRM system and frequent flyer program. Classic Airline can develop a frequent flyer program that can never be copied by the competitors. Conclusion Marketing is all about satisfying the needs and wants of the customer along with facilitating the achievement of an organization’s objective. By giving importance to the needs and wants of the customer, the organization is more likely to pay attention to achieve the objectives in the market place. The organization has to compete with his other competitors and has to satisfy the expectations of the customers in a much better way than his rivals. Competition involves finding diverse ways to satisfy the needs and wants of the customers that will be different from other organizations who are acting in the same industry. In this pursuit the products and services are needed to be paid more attention than the physical entities. This study has proven that Customer Relationship Management has a direct affect on the performance and the overall business of the organization. Classic Airline by implementing internal and external marketing strategy has been able to improve the identifying and delivering power. They can now not only deliver service as per the requirement of the customer but also can motivate the employees to deliver optimum service. REFERENCES Ahmed, P.K.K. & Rafiq, M. (2012). Internal Marketing. CRC Press Ali, A. (2011). Project Management Anchor the Success. Azhar Ali Berkowitz, E.N. (2010). Essentials of Health Care Marketing. Jones & Bartlett Publishers Blythe, et al. (n.d.). Strategic Marketing. Select Knowledge Limited Ed, P. (2008). Customer Relationship Management. Pearson Education India Kroon, J. (1995). General Management. Pearson South Africa Proctor, T. (2000). Strategic Marketing: An Introduction. Psychology Press   Read More