Classic_Airline_Marketing_Solution

Classic Airline Marketing Solution University of Phoenix MKT/571 Tish Brooks September 11, 2011 Problem Solution: Classic Airlines Classic Airlines commands a fleet of more than 375 jets and serve 240 cities with more than 2300 daily flights and is the world’s fifth largest airline. (University of Phoenix). Today there is an uncertainty about flying. Combined with today’s market sharply rising and declining stock prices, it is becoming more difficult for Classic Airlines to sustain expenses and profitability. It has become increasingly challenging to maintain working capital at an acceptable level because of increasing fuel costs. Labor is increasing rapidly which is limiting their ability to provide a competitive frequent flier program. Classic Airlines with its 25 years of operation has grown to an organization of 32,000 employees and earned$10 million on $8.7 billion in sales. As a result of the September 11 terrorist attacks, the economy declined and Classic Airlines has suffered as well. Over the past few years, their share prices have decreased by 10% and they have declining employee morale because of all the negativity from Wall Street. They have seen customer loyalty decrease 19% in the Classic’s Rewards Program of active members and a decrease of 21% in the number of flights per remaining members. There is an urgent need to turn around the present situation. One way they would like to do this is by using its’ CRM system more to their advantage. Classic Airlines would like to use CRM to identify the areas inside its current customer’s base that need immediate attention and focus their attention more on customers’ satisfaction. Amanda Miller, CEO is focused more in on reducing overall costs than how satisfied their customers are. The current focus is on the whole operation and how to reduce overall costs, but by doing this they are bypassing the customers’ wants and needs. Classic Airlines desperately needs to re-focus on its’ customer service operations and establish high standards in which to provide exceptional customer service and gain customer’s loyalty back. Amanda Miller is working with the marketing team to gather ideas on how they can improve the frequent flier program with measurable methods that justify the ROI while keeping the cost to a minimum. In addition, the Board recently mandated a 15% across-the-board cost reduction over the next 18 months. Describe the Situation /Issue and Opportunity Identification Customer’s confidence is declining, rising fuel and labor cost has contributed to limit competition for the value frequent flier and Classic Airlines is not taking advantage of the tools that most companies use to control the marketing mix factors. “Having selected the target market consumers, the firm must take steps to satisfy their needs. Someone in the organization’s marketing department, often the marketing manager, must take action and develop a complete marketing program to reach consumers by using a combination of the four tools, often called the four P’s.” (Kerin-Hartley-Berkowitz-Rudelius, 2005). Even though Classic Airlines can not control any environmental factors such as the customers’ wants and needs or the expansion or contraction in the economy, Classic Airlines must look-forward and applied any measure to deal with these factors and be ahead of the competition. The Board of Directors not only wants 15% cost reduction over the next 18 months in order to increase profits and avoid facing bankruptcy but to strengthen its frequent flier program and be able to measure the return on investment. Classic Airlines has the opportunity to benchmark companies that are facing similar problems and come out with successful alternative solutions. Customers are dissatisfied with the service provided by Classic Airlines according to the recently released Customer Loyalty Report. Customers are unhappy with the service they receive when calling the help desk and the rewards program. Classic Airlines is not using its CRM system to its fullest extend because it wasn’t set up correctly and will need to re-configure the system to put the customer as a priority for the benefit of the business. “Customer value is the unique combination of benefits received by targeted buyers that includes quality, price, convenience, on-time deliver, and both before-sale and after-sale service. Firms now actually try to take place a dollar value on a loyal, satisfied customer.” (Kerin-Hartley-Berkowitz-Rudelius, 2005). Classic Airline is the only airline without an alliance agreement and because of that is limiting its flight options available to customers; therefore, the customers can not benefit from the frequent flier program and earn and redeem reward miles. The disadvantage of not having an alliance is that it limits the search flight option to Classic Airlines routes and the customer has to spend more time visiting websites to obtain flight information. Josef Wymann from Skyway Airlines has offered Kevin Boyle to joint forces for an alliance that would benefit both companies and it will be wise for Kevin to forecast potential sales before presenting the proposal to Amanda Miller. Stakeholder Perspectives/Ethical Dilemmas Three major stakeholders are involved in this scenario; customers, employees, the Board of Directors and upper management. All have different concerns and interest; starting with upper management, Amanda Miller is worried about that membership for the Classic Reward is down 20% and more than 160,000 loyal customers are flying with the competition. She is disappointed with Kevin Boyle regarding his price cut advise that become a “bridge to no where” leaving no room to cut margins any further. Kevin, Renee and John are also worried that if they don’t push back the frequent flier program, they won’t be able to restore stock prices. They are also concern about the inoperability of the CRM system. Kevin Boyle is addressing the 15% cut in marketing expenses. Amanda Miller, CEO sees the airline industry driven by numbers while Kevin Boyle, CMO and Renee Epson, VP of Customer Service see the industry driven by people. The Board of Directors has mandate a 15% cut overall for the next 18 months and requested to upper management to elaborate a marketing plan oriented to increase customer loyalty and revenues without increasing expenses. Upper Management is concerned about employees’ turnover and layoffs due to the low employee’s morale and the unavoidable expense reductions. Job dissatisfaction and uncertainty are increasing. Employees at Classic Airlines are concerned with how the internal change will affect them and how the change will give them recognition and opportunities for advancement with fairness and salary adjustments. Even though the majority of employees believe that the company they are working for is stable, they also believe that the company is not giving them the status they deserve. Lack of communication is originating a grapevine which even though, represents an unofficial way of communication; is a signal that organizational changes are taking place. Employees have to be treated with fairness to avoid perceiving an inconsistency between their beliefs, feelings and behavior. Customers are the third part missing to complete the loop and are interested in receive the best service and value for their money. They are looking for a provider that offers excellent rewards programs. They know that competition between airlines is hard and they are better off with small airline companies such as JetBlue. Customers are wanting the highest amount of service for the best value. Frame the “Right” Problem Classic Airline will do what is necessary to be the leader in the airline industry. By completing the re-configuration of their current CRM system, they will be able to improve customer service and satisfaction. They must do this to in order to re-gain the loyalty of their current customers and add new one’s. Describe the “End-State” Vision Classic Airlines are going to become a leader in the airline industry by improving their frequent flier program and increasing their customer base. They will make the necessary changes needed to improve customer satisfaction and loyalty, while reducing their expenses over the next 18 months as mandated by the Board of Directors. They have been asked to reduce costs by 15% in the next 18 months. Their goal is to also become number one in the airline industry. Identify the Alternatives and Benchmarking Validation Classic Airlines can implement any of the following alternatives to help them achieve the goals stated in the end-state vision. One option is to partner with other retail companies offering rewards with products similar to “ThankYou Network.” This would allow them to diversify the rewards and not just offer discounts for frequent flier but combine this with offers for other products and services. Another option could be to partner with Skyway Airlines for marketing only. This would help ensure the partnership contract eliminates any concerns Classic Airlines may have to minimize the risk of litigation. The third option could be to partner with Skyway Airlines for not only marketing but operations as well to make sure that the alliance prioritizes the existing customer needs. A fourth option could be to put all of the above together and launch a Classic Rewards program independently. Finally, final option could be to not change anything at all, but offer additional training to the current employees on how to upgrade the current CRM product. Research was conducted on 3 different companies who have faced similar problems as Classic Airlines. This is in order to identify possible solutions that could contribute to the success in the launching of the new analytical CRM product. The companies researched were; Walser Auto Group, Citigroup Card, and Southwest Airlines. Walser Auto Group, (Successful) Walser Auto group is one example of how reconfiguring the CRM system can improve customer service and win their loyalty back. Walser Auto was opened in 1956 and their goal was to develop a network of automobile dealerships centered on customer service and to offer the leading service in the industry. When CRM systems were made available in mid 1990’s, Walser Group purchased the system and implemented in in Walser. In the beginning, they were pleased with the service it was providing them, but in time it had become ineffective and limited in the usage because their customer base had expanded. He became very concerned about losing his current customers and sales because of the poor service he was now providing. Mr. Walser hired a consulting firm DealerSocket, a provider of CRM solutions to test pilot at Walser Toyota the old Walser’s CRM program and the upgrade to his old CRM system offered by DealerSocket before committing to the contract even though it meant paying for both services concurrently for a period. Mr. Walser after the demonstration decided to switch to the new CRM system. He stated; “Our Toyota dealership alone has 1500 customer inquired or walk-ins per month. That’s 18000 potential buyers per year who give us all of their information and trust us with the information. Of that number, 11000-12000 don’t buy. The question is where do they go' DealerSocket gives me the tool to answer that question and more importantly gives the ability to get them back to the store.” Classic Airlines similar to Walser Auto Group could hired a consultant to research its CRM system, identify its faults and propose the re-configuration not only to identify its customers needs and satisfy them but also, provide an excellent customer service to gain back customers’ loyalty. Citigroup Card (Successful), Citigroup joined “ThankYou Network” successful. Citi Cards® is part of the worldwide operations of Citigroup Inc., the top large-scale financial services company with some 200 million customer accounts in more than 100 countries. With the on-growing competition in an effort to retain its customers’ base Citigroup created its “Citi® Diamond Preferred® Rewards Card” and joined the “ThankYou Network” which was a different kind of rewards program offered by its competitors. Loyalty for Citigroup is extremely important and wants to make sure that winning the customer’s confidence is in favor of the organization to establish a long lasting relationship. Citigroup wanted to keep its customers happy offering a variety of options and possibilities to earn points for every transaction on its credit cards. Citigroup understood that competition was very strong in all sectors and wanted its clients to know that the company maintains its loyalty to them. Citigroup understood that a happy client will always buy more and that one of the first things that the clients look for, is the saving inmoney. Citigroup with the join of the ThankYou Network allows the client to reward him or herself with anything he or she could possibly want; even cash with the redemption of the accumulated points. Classic Airlines could research into a system similar to the “ThankYou Network” to offer its clients a possibility to use his or her frequent flier miles not only for travel discounts but to redeem the miles for reward points to be able to use them in exchange for products with a participating company. The participating company or companies will get travel tickets in return for the exchange. Southwest Airlines (Successful), after the 9/11 terrorist attack succeed in gaining the trust of air travelers implementing its new marketing strategies in targeting customers, product placement, and advertising. Southwest was founded by Texas businessman Rollin King and lawyer Herb Kelleher in 1966 and has grown to 375 Boeing 737 jets and has become the United States major short-haul, low-fare, high-frequency, point-to-point carrier. Southwest product as any other airline is travel and segments its market by the kind of customers who use the service. The majority are cost-and-value alert consumers. The cost oriented prefers low fares and frequent schedules. The value oriented seeks the best value for their dollars and there are sub-segments between the value consumers such as senior citizens and Hispanic market which is the fastest growing group in the United States. Southwest projects its icon so that its customers are able to distinguish its product from its competitors. Southwest value its customers so its product is cost-efficient and pays special attention to its customers’ feedback. Southwest doesn’t assign seats so the airplane can leave faster than the average plane and uses the word “love” as advertisement tool. The color of the planes is another tool to market Southwest Airline since many people don’t like the color but the service provided. Classic Airlines could use the same strategies that Southwest used to segment its market and identify its customers as profitable (economy and business class) and non-profitable (leisure travelers) with emphasis in customer service at all levels to re-gain customers loyalty which means more profits. Evaluate the Alternatives There are two alternatives that obtain the middle to high scores. The first alternative is “Partnership with retail companies that offer different reward products similar to “ThankYou Network” that obtained 4.60 due to the closest relationship in meeting the end-state goals. The second alternative is “Partner with Skyway Airlines to merge the marketing and operation of the companies” that obtained 4.15 due to the highest expectancy in meeting the customers’ needs and the shared cost between the companies. Even though these two alternatives obtained high scores, the evaluator believes that the blend of the two alternatives will be the optimal solution that will take Classic Airlines to fulfill its goals and occupied the number 1 position in the industry. Identify and Assess Risks To find an experience partner could be a time consuming and could bring the possibility of disagreements between them. Time is of the essence for Classic Airlines to implement the right solution to keep the existing customers pleased and re-gain loyalty. Customers want the best value for their money and with any solution there will risk and consequences associated with the decision. Joining forces with a network similar to “ThankYou Network” will be beneficial not only for the company but for the customers that will spread the rewards points towards what they really need or want. The expenses incurred in the implementation could be high but beneficial at the long run. Hiring a consultant will be a plus. Partner with Skyway Airlines will be an asset for Classic Airlines but convincing the Board of Directors for the alliance will be difficult due to the conservative way of thinking. An alliance will result in benefits for both companies and will allow Classic Airlines expand its market share becoming global. A feasibility study is recommended before submitting the proposal to the Board of Directors. Make the Decision After completing the risk and mitigation assessment, the optimal solution has been determine to be a combination of the following alternatives; partnering with a company that offer a rewards network similar to “ThankYou Network” and merge with Skyway Airlines taking advantage of its marketing and operations experience to implement the code-sharing level, integrate all customers-facing elements and deliver a seamless program. Develop and Implement the Solution The implementation of this optimal solution will be immediately starting with the re-shaping of the existing CRM systems by an outside consultant to meet Classic Airlines marketing requirements and prepare for the alliance. This action will be performed by an outside consultant under direct supervision of Kevin Boyle and will take approximately 30 days. The second item will be preparing a partnership proposal for the alliance with Skyway Airlines under the supervision of Ben Sutcliffe and Kevin Boyle. It will take approximately 30 days. Meet with Amanda Miller for the presentation and approval of the proposal to be presented to the Board of Directors (2 days). Meet with Board of Directors for the approval (3 days). Offer a press conference to inform customers of the new alliance and changes (30 days). Launch the new marketing campaign (60 days). This action will be performed by Kevin Boyle. Finally Classic Airlines will implement the “ThankYou Network” rewards program (30 days). The overall implementation will take approximately 7 months from start to finish and the change will be progressive. Evaluate the Results Classic Airlines end-state goals will be met successfully. Classic Airlines profits will increase by 15% in the next year after the alliance and to monitor the increase the CFO will conduct quarterly reviews suggesting corrective measures in case of any deviation. Customer loyalty will increase by 80% with the new rewards program with the re-structure of the CRM system since Classic Airlines will be able to identify trends, understand customer behavior, explore what-if scenarios and predict outcomes. Classic Airlines will be a global company and will be able to generate more customers with its market expansion. As a result of the innovation Classic Airlines will become a product leader. Conclusion Classic Airlines will become a global leader in servicing the air travel industry with its re-structure CRM solutions system. Classic Airlines will execute explicit plans to make safe the future of the company and will be able to identify its customers purchasing decisions and forecast customer’s trends to be ahead of the competition. Classic Airlines will secure its customer loyalty to its product. They will also expand to carry on the growth and profitability and remain as the leader in the air travel industry with Skyway Airlines alliance. References Citigroup Website http://www.citicard.com – Retrieved 11/01/2008 EBSCOhost Website http:\www.ebscohost.com. ezproxy.apollolibrary.com – Retrieved 11/07/2008 Kerin-Hartley-Berkowitz-Rudelius. Marketing, 8ed. 2005 The McGraw-Hill Companies Southwest Airlines Website http://www.southwest.com – Retrieved 11/01/2008 ThankYou Network Website http://www.thankyou.com – Retrieved 10/30/2008 University of Phoenix http://www.mycampus.edu – Retrieved 11/03/2008 Walser Auto Group Website http://www.walser.com/ou/walser-corporate – Retrieved 10/30/2008