Miles & More and Lufthansa Airlines - Term Paper Example

 “Miles & More” And Lufthansa Airlines Introduction: Deutsche Lufthansa Aviation Group is an international aviation group of company operating in five segments of business that includes the Passenger Airline Business, Logistics, Maintenance Repair Operations, Catering, and Information Technology services. The group comprising of more than 400 auxiliary and allied companies, has been presenting itself as a leader in all the different segments of businesses. The executive board of the group’s organization involving four members is responsible in determining the company’s strategies that ensure improvements in the group’s performance. Each business segment is supervised by separate boards and responsible for the individual business outcomes. The group’s fundamental strategy focuses on “quality and innovation, safety and reliability”. Shareholders are given significant importance by the company and provided with utmost value. The group’s views represent their businesses to be “strategically, operationally and financially” well positioned that efficiently deals with the economic changes in the market; the profit margins been given greater concern than the size of the company (Lufthansa Group Company Portrait). The company’s marketing strategy is comprised of four basic objectives that include gaining share in the market by regular management of the sales channels, ensuring generation of revenue from its customers, concentrating on different customer segments, and growing and increasing “sales platforms” for promotion of group airlines and associated partners. Number of passengers has been found to be increasing for Lufthansa airlines with their “focused marketing activities”, thus enabling the increase of the company’s market share in European markets. The company had initiated several new marketing practices that increased the satisfaction level of the customers to a great extent. The “share of business customers” for the company has been quite ahead of its competitors even at the time of the economic slowdown in and after 2008. The company thus keeps on focusing on new product facilities for its customers targeting different market groups. Miles & More is a “customer loyalty program” of the company through which “customer loyalty strategies in the field of social marketing” are being put into practice (Lufthansa Investor Relations). This report would primarily focus on the marketing strategies of Lufthansa with particular emphasis on the Miles & More marketing strategy of the company enhancing the company’s marketing plans. About Miles & More at Lufthansa: Miles & More represent a leading “frequent traveler programme” in Europe. The Miles & More program of Lufthansa was the “first successful bonus program” in the recent times and has also provided as a fundamental strategy for many other companies, proving to be very popular in the market. The main purpose of this strategy is to increase the loyalty of customers. This is done by addition of any mile, which a customer has flown through Lufthansa airlines, to a personal account of the customer without depending on what charge the customer had paid for the flight. Awards or special services were provided to the customers after a certain number of miles have been covered by him; many times these special services being renewed to “free private flights” (Kühnle, 52). Lufthansa increased value addition for its customers through Miles & More. However with other companies duplicating the strategy, Lufthansa planned for additional features to the program and thus “added additional possibilities” for its customers to earn miles. The customers are now facilitated to obtain bonuses with flights that are associated with all the company’s partners of Star Alliance. Also, miles can be earned with other partners as well that include Miles & Travel, Miles & Event, Miles & Money, Miles & Communication and Miles & Shop. The members of Miles & More have been found to increase every year with presently having around “7.5 Million members” that makes Lufthansa’s Miles & More the “largest frequent flyer program in Europe” (Kühnle, 52-53). Along with the existence of similar programs by the other airline companies, Miles & More have been Lufthansa’s one of the most important marketing “instrument” that differentiates the company from its competitors. This marketing program has helped the company to increase its ticket sales as well its turnover. The multiple use of the Miles & More facilities, the distinguishing feature of the program forming a “separate brand” for the company, and the elongated continuation of the program in the market, can be used as benchmarks for the marketing results of the aviation company (Kühnle, 53). The differentiation of Lufthansa with other competitors in regard to the Miles & More program occurs with the presence of three different miles that include Award miles, Status miles, and HON circle miles (Schulze et al., 7). Award miles can be earned and used for flights on Lufthansa or other partner companies. There is particular validity period for the miles awarded depending on the frequency with which a customer travels through Lufthansa or other partners’ flights. Status miles are different from the award miles as these cannot be earned but are obtained when a customer takes a flight on Lufthansa or the allied partners or on the members of Star Alliance. These primarily identify the customers who are “frequent flyers” based on which members may become eligible for a higher status with the higher number of status miles obtained by the customer. HON Circle miles are obtained when a customer flies on “fully integrated partner airline” and these require attaining the highest status on Miles & More. The process of accounting takes place in a way that whenever a customer takes a flight on Lufthansa or the partner alliances, miles get credited to the personal account of the customer. The value of the ticket determines the number of miles to be attributed. However, apart from flying, Lufthansa has other facilities as well that provide customers with miles and include hotels, cars in rentals, retail stores, mobile phone providers and banks (Schulz et al., 7). The use of Miles & More in Lufthansa’s marketing policies: Customers using Miles & More credit cards provide the company with great advantages. Most importantly, it characterizes a broad resource for “datamining”. Collecting information about the customers and creating their profiles becomes an easier task that depends on the use of the credit card by the customer. This enhances greater understanding of the “needs and expectations” of the customers and accordingly improved and enhanced services may be provided to them (Schulz et al., 10). Miles & More has proved to be a most advantageous measure for the customer relationship management of the company that has enhanced the level of satisfaction among the travelers increasing sales and revenue for the company. Being the first to initiate such a marketing program, the company also has a “first mover advantage”. It has been found that “13 million people” are members of the programs conducted by the Miles & More; among the total number of participants, “11 million members” are found to be from the domestic market of Lufthansa in Germany (Schulze et al., 35). The ability of the company in achieving its business objectives gets enhanced with increasing loyalty among the customers. This also helps the company to remain the largest player in its “home market”. Moreover, the marketing program of Miles & More has gradually evolved into a “perceived independent brand” from a “frequent flyer program” that it had initiated the marketing plan with. The sales of the company are thus supported to a large extent by this program (Schulze et al., 35). It has also been argued that products by Lufthansa are more striking in comparison to other competitors. This was primarily owing to the Miles & More “air travel miles program”, accompanied by the different advantages with an increase in the number of flights (Lee, 32). In the last few years, immense competition has been faced by Lufthansa. Private jet products have been created by the company that was also copied by other similar programs in Austrian, KLM and others. As part of its marketing policies, the company has also taken measures in improving its “premium cabins” along with introduction of “airport lounges” for passengers who pay higher in comparison to others that has enhanced the growth and development of the company. Also, the Miles & More program has been controlled. The Miles & More loyalty program stands among the most powerful tools in Europe with respect to marketing of the products. As Antinori, a board member of the company, stated that the main task of Miles & More is “winning new customers” , “developing customer relationships” and “gaining their commitment” towards the airline facilities of Lufthansa such that they may remain loyal towards the company over a long period of time (Airline Strategy Awards). It is possible that the customers of Lufthansa airlines may already have membership with any other airline company in any of the loyalty programs that those companies are providing. In these cases, the intention of the Lufthansa airlines is not to prove to its customers that they are better than others; rather customers are tried to be influenced to join the Miles & More loyalty programs that would provide them with “extra advantages” through exclusive facilities on different flight routes. Trying to express different beneficial offers provided by the company as well as the quality and innovation of the company to customers is expected to gain new customers even if they are satisfied with the facilities by other providers. However, with the gain of new customers, the company also has to focus on maintaining the reputation of the company and keep satisfying its customers to the level such that they remain loyal to the airline service provider (Schulze, 29). The Present Scenario and the Position of Lufthansa’s Miles & More: In the current scenario, three strategic alliances are controlling the airline market worldwide that include the Oneworld which is a strategic alliance between British Airways and American Airlines, the Star Alliance led by the alliance between Lufthansa and United Airlines, and the SkyTeam formed by the strategic alliance of Air France-KLM and Delta Airlines. All these alliances have been found to involve marketing plans of frequent flyer programs. The essential value of a frequent flyer program is dependent on “network breadth”. A passenger using the Miles & More loyalty scheme of Lufthansa may accumulate miles by flying through other members of Star Alliance like the United Airlines, Thai and others. Instability in the market and inherent likelihood of a company’s position getting dominated may arise as a consequence of “deregulation and liberalization” in the airline industry (Stabler, Papatheodorou & Sinclair, 146-147). The Need and Performance of the Marketing Program of Lufthansa Airline: Lufthansa airlines being the largest airline in Europe, and a “flag carrier” of Germany, operates to provide its services to several domestic locations as well as international destinations that include Africa, America, Asia and Europe. With increasing global competition, the company realized the importance of focusing on customer retention and increasing the loyalty of the customers towards the company. Thus the company started focusing on ways to improve the customer relationships through personalized emails and other improved marketing strategies. A part of this marketing strategy involved focusing on the Miles & More loyalty scheme that is based on frequent flyer programs. The airline company in order to achieve the targeted plan, focused on improvements of its “cross-channel marketing capabilities” that intends to combine several intricate procedures together towards creation of an integrated system for both the new customers as well those who were already existing. The above mentioned policies followed by the company benefitted the Miles & More participants in having details of information they needed as well as offers depending on the information available from their account profile. The cross-channel marketing practices of the company aided the company to convey greater experience of their brand to both new and old customers (Customer Spotlights Lufthansa). It is particular in line with the other airline companies in the market that Lufthansa enhanced its focus on the customer relationship management. The main intention of the company was not only to increase its profitability but to also “cover the entire target market” covering both customers from economy class to first class people. The Miles & More program has been important for the company because the company believes that the customers are the brand “ambassadors” for the company. Their experiences and demands require the utmost attention from the company’s policies. The members of Miles & More frequent flyer program have the privileges for several advantages as have been mentioned earlier as well. The greater number of times the members will take flights, the higher will their status rise that allows them to have greater advantages through special services. This happens with the customer achieving the “frequent traveler” status (Schulze et al., 4-6). Challenges: The Miles & More program provides the customer with several advantages. However certain problems are also faced in the process. This is mainly because the owing to the presence of a number of status and miles, the process seems to confuse the customer. The process to be followed in applying for the Miles & More card through the website is not planned in a simple way hence proving to be difficult for the customer to understand. Only after having the clear idea does a customer understand the process regarding attaining the status and the validity of the status. Greater problems may arise when customers are interested in applying for the credit card of Miles & More that is “co-branded with VISA”. Since every status has a related credit card that may be applied only when a customer attains that status, thus a doubt regarding the credit card being constant with changes in status remains. Also, observations on different websites indicate that several customers have complaints regarding the “quality of services” not being consistent at all times. Here it can be realized that the major concern of the company would be to focus on training its employees in a manner such that customer needs and expectations can be served in an improved and enhanced way (Schulze et al., 5). Lufthansa’s Marketing Strategy and Relevance of Miles & More: An Analysis: As different studies reflect, Lufthansa aviation group or the airline company of Lufthansa is a leading company in Europe. In the modern world of globalization where competition is prevailing at all levels of businesses, it is a necessary requirement for every business organization to focus on enhanced marketing strategies to maintain its position in the market. If the case of Lufthansa is considered, it can be realized that the company had realized the need for greater customer satisfaction and greater loyalty on the part of the customers towards the company to remain as the leader. The initiation of the marketing processes based on special offers and services came as a solution to the company. Miles & More loyalty program that is based on the frequency of a customer’s taking flights on Lufthansa or allied partners like the Star Alliance is a very popular marketing program and has been found to be followed by other companies as well. This implies that customers are interested in this program and enjoy the benefits that these marketing policies provide their customers with. The introduction of Miles & More in the marketing management of the company reflect the importance of the company’s enhancing its improvement in performances in marketing of its products and services. The company has always been focusing on increasing its market share along with addressing different target market segments, ensuring revenues from the customers. With increasing competition and competitive companies following similar measures of marketing, Lufthansa took the concern of expanding its marketing techniques and reach out to the customers with greater offers made towards their satisfaction. Thus, the company planned on different special services that the customers would be provided with if they are capable of reaching the status of being a frequent flyer and higher than that. The more higher a status could be reached by a customer, the more advantages it had for him. The frequent flyer program is used by several airline companies as a means of providing customers with rewards for being loyal to the company’s facilities. Customers frequently taking flights are rewarded with facilities that may provide them with free flights or enhanced services. As might be expected, the customers were very interested in the process since the special offers prove to be highly satisfactory and advantageous to them. The impact of this was gradually seen on the company’s performance like Lufthansa with increase in sales and revenues. The company was leading in its marketing strategies and keeping up with its enhanced features that are targeted towards achievement of revenues from customers along with satisfying the customers by fulfilling their demands and expectations. The Miles & More has proved not only to be an effective marketing policy for the company but it has been highly significant in achievement of the goals of the organization. The marketing strategy formulated by the management of Lufthansa towards gaining more customers and increasing revenues, also focused on providing customers with different miles awarding programs depending on the class of flight that they take on Lufthansa and other allied partners of the company. Also, the distances covered through each flight are taken into consideration. Accordingly double miles, bonus miles are set and provided to the customers; the awards capable of being exchanged for flights, up gradation, travelling, events, or merchandising award. These facilities have been found to be “convenient for business” tours. Thus more and more of these reward programs are used by the airline industry to attract greater number of customers and encourage them to use these services provided by the company (Lufthansa Miles & More). A SWOT analysis on the Miles & More marketing program of Lufthansa airlines reflect that the major strength of the company lies in its size and the brand name of the company. The customer base for the company is naturally huge with a large database being maintained. The portfolio of the product and service provided through the group enhance satisfactory outcomes over the customers’ demands and expectations. The marketing strategies are thereby targeted towards keeping up with this position of the company in the minds of the customers. However the Miles & More program has been found to have certain disadvantages or weaknesses as well. As it has already been mentioned earlier, the application process for the program may seem to be very confusing and complex to many of the customers. The process explained through the websites has been not presented in a simple manner. Moreover, the chances of customers having associations with other airline marketing programs as well need to be taken into consideration. However, the company has greater opportunities through following this marketing strategy since it still has a “low membership in emerging markets” thus implying that targeting these markets could generate greater number of customers and thus higher revenues. Also the Miles & More credit cards may be extended to other major markets. Lufthansa along with focusing on the strengths and opportunities that lay with the company should keep in consideration the probable threats that these loyalty programs being used as a “commodity” may bring about. Moreover, competitions are also prevalent from other airline companies and customers in the “economy segment” may change their preferences depending on choices available to them (Schulz et al., 35). Thus it can be realized that the marketing strategy- Miles & More- of Lufthansa although having proved to be interesting and attractive to the customers, also needs to take concern of some of the weaknesses that it possesses. However, to overview the overall strategy, it can be understood that Lufthansa has been very innovative and customer oriented in formulating its marketing strategies. Focusing on the goals and objectives of the organization, the management has been following measures in its marketing management that has not only increased the number of travelers for the airline company but also enhanced the positive outcomes of the facilities provided to different classes of customers. The marketing of the company thus experienced increase in the sales and financial performance of the company which have been the key goals for the company along with satisfying the customers. The importance of formulating an appropriate marketing strategy is also reflected from Lufthansa’s use of the Miles & More frequent flyer program. The concerned topic had been chosen for the study to understand how an airline company, in this study the company being Lufthansa, formulates its marketing policies towards achievement of its objectives. From the overall study, it can be analyzed that Miles & More being an innovative and attractive measure of marketing is very popular among the airline companies, initiated by Lufthansa and followed by several other companies. It can be reflected from the perspective of the organization that stressing on marketing policies towards attracting more and more customers has always been the primary concern for the Lufthansa airlines. This has been realized through the study of their Miles & More program that has been focusing on their increasing marketing and sales of their product and service along with satisfying the customers with improved services that they prefer to receive. Thus the Miles & More loyalty program has been proving to enhance the relationship of the company with its customers with the major focus being on gaining higher revenues. Conclusion: The research report was focused on the Marketing Of An Airline Company- Lufthansa- and its strategies being capable of enhancing the business outcomes. The study has reflected that formulation of marketing strategies play a major role in the company. In the prevailing international competition and companies following each other’s policies, Lufthansa has been found to give considerable stress on improving its marketing policies through introduction of innovative techniques to attract newer customers as well as provide greater satisfaction to the existing customers. The Miles & More program has been one of the most important marketing measures for the company that has increased the number of customers with their greater participation in the rewards process and increasing their degree of loyalty for the company. The rewards, facilities and the special services provided through this marketing process targeted towards achievement of both improved customer relationships as well as increasing sales and revenues of the company. The company has been found to be successful in its endeavor by following the Miles & More strategy. Although weaknesses also prevail in the process that the company needs to consider and take measures towards improving them, yet from the overall study it can be concluded that an appropriate marketing strategy is highly essential for every organization and this has been highlighted by the Lufthansa airlines focusing on the Miles & More loyalty program. References 1) “Customer Spotlights Lufthansa”, Responsys, 2011, August 26, 2011 from: http://www.responsys.com/why/spotlight-Lufthansa.php 2) Kühnle, Timo. Customer Loyalty Program - Tourist Destination and Bonus Card System, Munich: GRIN Verlag, 2007 3) Lee, Darin. Advances in Airline Economics: Competition policy and antitrust, England: Emerald Group Publishing, 2006 4) “Lufthansa Group”, Lufthansa, n.d., August 26, 2011 from: http://konzern.lufthansa.com/en/company.html 5) “Lufthansa Investor Relations”, Lufthansa, n.d., August 26, 2011 from: http://reports.lufthansa.com/2009/ar/groupmanagementreport/businesssegmentperformance/passengerairlinegroup/salesandcustomers.html 6) “Lufthansa Miles & More”, Maps of World, 2010, August 27, 2011 from: http://www.mapsofworld.com/referrals/airlines/airline-frequent-flyer-programs/lufthansa-miles-and-more.html 7) “Marketing Presented to Lufthansa”, Airline Strategy Awards, 2009, August 26, 2011 from http://www.strategyawards.com/uploads/assets/unsorted_files/Lufthansa%20citation.pdf 8) Schulz, P. et al. Customer Relationship Management: Lufthansa, Munich: GRIN Verlag, 2007 9) Stabler, Mike. Papatheodorou, Andreas. & M. Thea. Sinclair. The Economics of Tourism, London: Taylor & Francis, 2010 Read More