Marketing Problems Faced by Classic Airlines - Case Study Example

 Classic Airlines marketing Solution To solve the marketing problems faced by Classic Airlines (CA) this paper will explore the nine step problem solving model. The first step of the model begins with describing the situation whereby the key concepts are identified along with the ethical dilemmas, stake holder perceptions, issues and opportunities. The second step requires the right framing of the problems so that the problems are specifically stated in making the different possibilities to be examined. The third step entails the end goals to be identified whereby Classic Airlines will be able to foresee what it desires to become. The benchmarking validations and alternatives will be identified in the fourth step that will permit Classic Airlines to view how other companies develop and use different techniques in overcoming the given weaknesses and implement the most efficient practices in those areas. Step five will allow Classic Airlines to evaluate the different alternatives and to decide amongst the given possibilities. After the right choice has been made, step six will entail that the company identify the risks and look at the negative impacts of such actions as also the potential risks attached to the actions. Step seven requires the company to make decisions in allowing for the risks to be recognized and investigated and the decisions are taken on the basis of the given facts. In taking the eighth step, the company will implement the solutions and define the required work, how it will be executed and who all will be held responsible for the same. The ninth step requires all results to be evaluated which will enable the company to get an idea of the expected outcomes and whether they are in alignment with the stated goals. Issues and Opportunities Classic Airlines is the fifth largest airline in the world with a large fleet of 375 jets that connect over 240 cities with almost 2300 flights on a daily basis. The company has grown consistently and presently has 32,000 employees. Last year the company recorded sales revenues of $8.7 billion and profit of $10 million, and although the company is making profits, there has been a ten percent decline in its share price and morale of employees is seen to be declining. This is primarily due to the increasing scrutiny being placed on the airline industry from different sectors in the global economy. Customer loyalty has declined by 19% and about 21% of customers have shifted to other airlines. The airline is experiencing a restricted cost structure because of the buoyant expansion arrangements planned on the basis of expected recovery of passenger traffic after the 9-11 attacks. The Board of Directors of the company had recently required a 15% reduction in the cost being incurred by different functions. In meeting such objectives CA has to improve upon its frequent flier programs by using techniques that will result in a measurable return on investment while at the same time resulting in reduced costs. Problem Solution Classic Airlines is plagued with a major problem concerning its customer service position. It appears to be losing touch with its customers and management is unable to establish the necessary operational processes and service elements. It is faced with the issue of innovating marketing programs which will increase business, attract new customers and retain loyal consumers. Over 160,000 loyal customers are said to have shifted to other airlines and the frequent flier program is no longer proving to be attractive to retain the present frequent flier customer base. Another challenge pertains to C A’s customer relationship management program. Till recently C A’s CRM system was considered to be the best in the airline industry but it is now evident that the company’s CRM that was put in place as a cost saving measure, is no longer a successful marketing tool. Under the circumstances, the senior management of Classic Airlines must introduce immediate remedial measures in preventing the company to file for bankruptcy if the company is unable to bring about the mandated 15% cost reduction in the coming 18 months. Vision In efforts to bring a turn around in the present state of affairs, CA aims at using its CRM systems in order to identify the customer segments that require immediate attention by focusing more on customer satisfaction. However, Amanda Miller, CEO, feels that the focus should be more on reducing costs than on enhancing customer satisfaction. Amanda also believes that operational excellence should be the top priority, which she feels is the prime reason for making the company vulnerable to the vagaries of the market at a time when customers wish to be valued. The company needs to develop new priorities in terms of meeting consumer need, create realistic standards for identifying market segments, establish value enhancements, focus on demonstrated customer retention techniques and leverage stakeholder responses. Alternative Solutions Identifying market segments require information about the relevant consumer groups that demand the products which must be accompanied by focused strategies that meet consumer aspirations. Commercial airlines need to be well prepared by providing specific products and services that are in keeping with their budget constraints, and e-commerce abilities. As a result of the success of online registration systems, most airlines are already planning for a futuristic transformation towards e-ticketing capabilities on a large scale. The pressures created by such demands are leading to conflict within companies, which can be resolved by refreshing cross functional procedures. In implementing such solutions the airline can combat employee turnovers and deal with moral fluctuations. According to Kerin et al (2006), “firms spend billions of dollars annually on marketing and technical research that significantly reduces, but doesn't eliminate, new product failure” (Kerin et al, 2006). It is important to discover the primary needs and wants of customers on a consistent basis. The climate of the airline industry is changing fast in the present global scenario and can be effectively dealt with by establishing close contact with the changing patterns and available data to formulate realistic policies. The best means to influence the customer is to be in touch with him and ask him about his expectations. There are specific factors that determine the demand for an airline’s services and Classic Airlines is preparing in this regard to improve upon its CRM systems in order to keep pace with industry patterns. Classic Airlines must consider that “it is marketing’s job to make these departments understand that without happy, satisfied customers who buy the organization's product, there is no company and there are no jobs” (Kerin et al., 2006). Eventually customer satisfaction should form the basis for decisions to be taken by Classic Airlines. Although the CRM systems in C A had so far focused on increased efficiencies, the stock prices of the company declined by 10% and clientage decreased by 19%. Irrespective of the company’s capacity to reduce fuel costs by 12%, it is having problems in enhancing values in other fields. The target customers have to be leveraged and efficiencies enhanced without compromising on stake holder satisfaction. An ideal way to establish the new CRM systems is to announce a reward scheme for CA employees. There are a lot of opportunities in the industry provided the management takes effective control over leadership roles in introducing transparent methods of governance because if employees feel at ease, the transformation can be effected without hurdles. Additional value is also built if the relational variables are cultivated amongst the different business departments. A major challenge for CA is to understand how the company can perform as a distinct entity against a collection of alienated factions. A consistent plan of improvement across the entire enterprise will stimulate all teams including consumers, stake holders and Board of Directors. In the context of the problem faced by Classic Airlines, DeLoach has aptly remarked that “As power shifts with suppliers and consumers, innovative companies are altering the competitive balance in their respective industries to revolutionary business models built on relationships and innovative uses of technology,” (DeLoach, 2004). There are several risks associated with the transition that the airline industry is experiencing and Classic Airlines should use proactive models in addressing the challenges as revealed by consumer enquiries. It is important for Catherine Simpson, CFO, to be well posted about the primary focus that has to be made on enhanced efficiencies. It is imperative for strategic planning to be linked with high levels of efficiency. The CRM systems will have to be restructured in introducing cross functionality that is well aligned with consumer aspirations. Eventually CA’s success depends upon its ability to leverage the functions efficiently. The main reason for the difficulties faced by CA is the over emphasis of efficiency over strategic thinking. It is essential for the company to ensure that employees inculcate the commitment, skills and attitude that is required in meeting customer expectation and to maintain customer loyalties. Employees must be given the responsibility to maintain a vision which combines understanding of efficiency and strategy. Analysis of Alternatives Benchmarking plays a vital role in the successful evolution of any company. It is helpful to discuss the issues pertaining to United Airlines and Southwest Airlines in this context. United Airlines has made a distinct reputation for itself by making use of sophisticated technology in its functioning. It offers services that are unique as compared to other airlines, such as in flight wi-fi, tolerable cell phone usage policy, entertainment options, satellite phones and ports for DC power outlets. The airline provides support in this regard through its web site in conveying its concern for the customer and in reflecting its sincere efforts in providing affordability and expedience. Southwest Airlines has succeeded in delivering high value to customers and employees on a consistent basis, which is a major reason for its record breaking 36th successive year of profitability as of February 2009. The company’s success also lies in the fact that it takes realist initiatives for revenue growth; it has strong liquidity positions, adopts fuel hedging and maintains very cordial relations with customers. The company places immense significance on concepts of relationship marketing. Classic Airlines ought to learn from these airlines in adopting consumer focused philosophy that should be adopted in the new CRM systems. CA should accord high priority to consumer focus and cross functionality. Risk Assessment and Mitigation With the changing face of the airline industry Classic Airlines will be challenged with making choice in regard to trade offs that do not benefit it in terms of adding customer values. With the implementation of risk reduction techniques CA can prepare itself for unexpected events and develop a stronger working system. CA analysts should understand the inherent power mechanisms and be able to assess risks and to classify the tangible elements. The CRM system that was in place so far has not helped much in tiding over the crisis since customer loyalty and stock prices have declined. Moreover, other areas such as employee morale are a big worry and the company needs to develop efficient guidelines and to reduce risks by controlling costs without compromising on stake holder values. CA must adopt the approach of Southwest Airlines in regard to hedging fuel costs and maintaining customer focus. Optimum Solutions A successful organization should be able to balance the different building blocks, amalgamate the optimum cycles of consumer responses and include within its system identification of market segments that are most suitable for it. In this context CA must adopt the relative evaluation criteria, retention techniques and relationship marketing practices within its CRM systems while the management makes consistent efforts in focusing on how to improve upon the systems that were previously not successful. It is correctly said in this regard by Bull (2003) that, “CRM strategies are only effective if they deliver positive outcomes. It is no longer good enough just to say that you are customer focused, but it matters what you do” (Bull, 2003). A new CA will have to be created in terms of changed perceptions to make use of marketing and prioritization of customer satisfaction towards products and services in order to satisfy customers and to assess customer behaviors. Such measures if implemented consistently will lead to sustainability and increased market share. Functions can be well aligned by using a strategic marketing plan through the use of effective communication and integration techniques. There is a strong need for responsibilities to become visible since accountability had been missing in the organization so far (Coyles et al, 2005). Implementation The extent to which the CRM systems will be implemented in Classic Airlines will depend on the ability of senior management to restructure the system so as to include the consumer expectations to effect the required turn around. IT personnel will have to be deployed to assist employees in reengineering the systems as per the models that prove to be successful. The management will have to face the challenge of resistance to change emanating from different sections of employees. This problem can be best addressed by arranging for information sessions that aim at communication of the relationship marketing efforts. The increasing use of internet and dependence of consumers on the same is a clear signal for CA to hasten the CRM transition. It is known that many CRM efforts do not succeed because of loss of consumer focus and process conflicts; being aware of these facts will enable CA to grow and to strengthen its relationships. Evaluation of Results Classic plans to adopt a balanced approach so that it plants long term seeds in reaping rewards that are sustainable. The management will have to ensure that CRM systems are implemented as per the required specifications. An effective method will be to enable employees to have access to the latest information by means of, for example, scorecards that inform about company performances, consumer responses and internal insights and over all stake holder information. The score cards will demonstrate that the company is performing according to organizational goals and that information is accessible to staff for processing. CA must work towards achieving such goals because “these goals must be operationalized by designing metrics to act as surrogates for the goals. Think of the goals themselves as latent or hidden constructs. The objective is to identify observable things directly related to the goals that can be measured” (Pyzdek, 2003). By focusing on customer retention the over all efficiency will be balanced. Once the CRM systems are in place, response and behavior of consumers can be tracked which will make the target customers to be viewed quantitatively and qualitatively. CA must be aware at all times that the consumer is the pulse of the company and that an enlightened perception is needed on a sustained basis to retain employees and customers. The CA management will have to change the culture of the company in realizing the significance of an integrated CRM system. The company’s future depends upon determined efforts that are infused with productivity. List of References Bull Christopher, (2003). Strategic Issues in Customer Relationship Management (CRM) Implementation. Business Process Management Journal. Coyles Stephanie, Gokey, Timothy. C. (2005). Customer Retention is Not enough, Journal of Consumer Marketing. Vol. 22, pp 101-105. DeLoach James, (2004). The New Risk Imperative-An Enterprise Wide Approach. Handbook of Business Strategy. Vol. 5, pp 29-34. Kerin Roger A, Hartley Steven W, Barkowitz Eric, Rudelius William. (2006). Marketing, The McGraw-Hill. Pyzdek Thomas. (2003). The Six Sigma Handbook. McGraw-Hill. Read More