Classic Airlines (CA) must compete in a dynamic 21st century global economy with a limited budget and the prospects of limited capital resources. Therefore, profit maximization becomes a function of performance management of fiscal, customer, and facility operations. Streamlining of operations will not only save on internal operating costs, the analysis will also remove processes that do not add value and to which customers may not want to experience in the first place. For example, "I know you may need to automate customer service control costs, but there should always be the option to talk to a real person." (Boyle, 2004)
The program membership into the company frequent flier program is 80% business travelers and 20% leisure travelers
. Core operations and customer service practices should be centered around the expectations of this class of customer. The process with respect to the trip a business traveler expects to receive on the airline should be mapped with all unnecessary processes removed. "I don't need the perks, just get me there on time." (Boyle, 2004) Customer feedback is critical to reinventing the airline and facilitating a new travel experience for the passenger. If travel time and expeditious travel are the critical points to passenger contentment, the idea is to improve the gate access to obtain expedited wait times. If these gates cost more to rent or purchase, then the costs from perks and additional benefits may be eliminated to provide for this expedited travel.
The pressure on Classic Airlines to move forward and gain market share is increasing exponentially as competitors are poised and ready to proceed with revitalized marketing and execution of strategies to enable growth. The top competitor, British Airways, is a global organization with flight paths on all major continents and all major cities. Additionally, brand recognition favors British Airways (BA) as most all travelers are familiar with the brand of airline.
"The only somber note of the festive occasion was sounded by Ben Sutcliffe, Classic's General Counsel. Noting that Classic has one of the highest labor costs per seat-mile, Sutcliffe observed that customers are price-sensitive, and that if Classic continues to carry the highest labor cost of any airline in the industry, it will jeopardize Classic's future." (Boyle, 2004)
The cozy union relationship may work at the present however, the implication from the GC of Classic is to start planning on labor cut or a reduction in salary as a percentage of total cost as the current rate of pay is unsustainable. When the reality strikes to where management must make reductions in expenditures to salaries, the union may not decide to renegotiate an unfavorable contract for their workers and a strike may then ensue. This area presents a potential conflict of interest and a constraint in future operations for CA.
Customers have a strong loyalty to BA and consider their frequent flier programs to be competitive in the market place. The question becomes, just how competitive are CA's frequent flier program in comparison? Brand loyalty among the CA clientele does not seem to be as strong of a bond in comparison to BA. This is to be of concern for CA in terms of competitive analysis in the market place and in game theory terms, competitive disadvantage to lose market share to BA.
The labor unions and subsequent contracts ostensibly are in good standing and the workers compensated well for the type of work provided. To commemorate the successful union relationship, the Classic the Wright Stuff ® Trophy, awarded to a number of unions including the Aircraft Mechanics Fraternal Association (AMFA), the Air Line Pilots Association (APLA), and the Association of Professional Flight Attendants (APFA)
Notably, the unions were vocal in their support of Classic Airlines and the management ability to proceed without making any labor cuts in the face of rising fuel costs and burgeoning industry challenges. Flight paths were increased and the ability for Classic to outbid other airlines to better assist the flight attendants to enjoy an acceptable work/life balance. According to Boyle, "The Flight Attendants (APFA) explained how Classic had expanded the choices of routes available to flight attendants by implementing new route-bidding practices advocated by APFA." (Boyle, 2004)
A strong management-union relationship is critical to preventing the labor strikes and issues with flight schedules that may be delayed or rescheduled due to labor issues. CA's ability to work tangentially with union delegates is notable of an organization that respects its workers and values the contribution. Boyle states, "The aircraft mechanics union (AMFA) described Classic's union-management relationship as "professional and mutually-supportive," and shared some examples of fruit borne by that relationship. "With our 'Thirty and Out' retirement program, a mechanic can start at age 20 and be retired by age 50," noted one AMFA spokesperson. "Both the company and the union benefit when employees can know that thirty years of work pays off for everyone." (Boyle, 2004)
The marketing efforts appear to be among the top enablers for CA as the ability to exact specific information from executives, customers, and create a positive brand image is significant when considering the level of competition and the significance of facilitating customer loyalty in a waning phase. Specific marketing obstacles were presented by British Airways, as their brand recognition is a strong presence to the airline customer base. BA's ability to promote their frequent flier program with the support of strong customer loyalty and brand recognition exemplifies the level of competition in the industry.
The marketing department faces numerous challenges presented as a function of other parts of core operations. The customer service line of rewards is failing and is being passed onto the marketing department as their responsibility. A lack of brand management and customer support has reduced the capacity of the marketing department to address this issue effectively and there is much reservation to whether or not the department will accomplish the goal of improving the membership levels of the Classic Rewards.
Northwest Airlines provides an established marketing program with a dominant presence in the branding arena. This mean Northwest Airlines (NA) can spend less on marketing to keep each loyal customer, and has a lower marginal cost in marketing to attract new customers or to retain current ones. Classic Airlines is struggling to retain its current customer base and has a much lower percentage of its clients as 'loyal' in comparison to British Airways and Northwest Airlines.
United Airlines (UA) is also a highly recognizable brand with a great deal of consumer confidence and a strong track record. The high degree of loyalty enjoyed amongst its customers creates competition for Classic as the heavy penetration of UA in the North American market is a threat to the current and future market share of Classic.
"Marketing efforts from other companies in other industries indicate "marketers need to think through five-levels of the product, each of which adds value; the core benefit, basic product, expected product, augmented product, and potential product. Products can be classified in terms of durability and reliability. Consumer goods can be convenience goods, specialty goods, or unsought goods. Industrial goods can be materials and parts, capital items, or supplies and business services." (Ketler & Keller, 2007)
SMART end-state goals are essential to providing a strategy outlined as measureable goals necessary to steer clear of potential calamities. Considering Classic is currently in its maturity phase in terms of marketing strategy, the ideal approach is to engage in "market modification, product modification, and marketing-mix modification. Using market modification, the company might try to expand the market for its mature brand by expanding the number of brand users. This is accomplished by converting nonusers, entering new market segments (as AARP is doing by reaching out to younger, more active seniors), or winning competitors; customers (the way Puffs facial tissues is always wooing Kleenex customers). Convincing current customers to increase their usage of the brand also can increase volume." (Ketler & Keller, 2007)
Classic's potential strategy of removing all unnecessary services on the flight to free up capital to expedite services is a method that may allow the marketing department to increase the expected volume per flight, daily. Market modification is a function of the feedback received by the marketing department from customers with regard to their comprehensive airline experience.
"With product modification, managers try to stimulate sales by modifying the product's characteristics through quality improvement, feature improvement, or style improvement. Quality improvement aims at increasing the product's functional performance -- its durability, reliability, and speed. Feature improvement adds new features that build the company's image as an innovator and win the loyalty of market segments that value these features. Product managers can try to stimulate sales by modifying other marketing-mix elements such as prices, distribution, advertising, sales promotion, personal selling, and services. Sales promotion has more impact at this stage because consumer buying has reached an equilibrium; psychological persuasion (advertising) is not as effective as financial persuasion (sales promotion deals). Although brand managers use sales promotion because its effects are quicker and more visible,…