Marketing solutions for Classic Airlines' financial decline and customer satisfaction

Problem Solving Model for Classic Airline

Company Overview

Classic Airlines is ranked as the fifth largest airline globally with the net income of $10 million and $8.7 million operating revenue. Before 2008, the company recorded a net income of 71 billion and $8.5 billion operating revenue. However, evaluation of the company financial records reveals that Classic Airline recorded $61 million decrease in the net income within one year. Careful assessment of the company financial positions reveals that the company net revenues had declined because Classic Airline recorded a decline in customer participations due to the consistence rising in fuel and labor costs. Couple with rising in fuel costs, the outcome of aftermath of September 11, 2001 generally led to the decline in airline market.

Thus, Classic Airline was unable to attract more customers because both internal and external marketing programs that the company implemented failed to meet the stakeholders' expectations. Generally customers' comments include "wants quality service," "I don't need the perks, just get me there on time." "You should have your executives listen in on customer service calls sometime."(MKT 571 P. 5). The outcomes were the decline in sales and profitability. To address the problem, Classic Airline needs to come up with an effective marketing solution to boost sales and profitability. (University of Phoenix (2008).

Objective of this paper is to develop marketing solutions to address financial problems that the company is currently facing. The paper uses a nine-step problem solving model marketing solution scenario to address the current problem that the company is facing. (Hung, 2009).

Problem Solving Process

"Nine step problem-solve model is perhaps the most innovative method to address the organizational problem. The model assists in the application of knowledge, problem solving skills, and higher-order thinking and self-directed to address organizational problems." (Hung, 2009 P. 118).

A traditional problem solving process has nine steps:

1. Identifying the problem as well as setting solution objective,

2. Analyzing the situation

3. Identifying the key uncertainties,

4. Brainstorm for the solution by identifying the workable solution,

5. Collect data to analyze the alternatives,

6. Develop an plan for action and implementation,

7. Implement the plan,

8. Evaluation process to follow up how the decisions work out.

The Situation

Issue & Opportunity Identification

Classic Airlines has been operating for more than 29 years and the company operates with fleet of more than 375 jets serving across more than 240 cities of 2,300 daily flights. The company is currently facing problems due to the escalation cost of operations and lack of innovation. Additionally, customers are not generally satisfied with the services they receive.

Moreover, "consumer confidence also appeared to be waning. By January 2005, Classic's declining Classic Rewards program measured a 19% decrease in the number of Classic Rewards members, and a 21% decrease in flights per remaining member. Loyal customers were jumping ship and the ones still aboard seemed to be flying less frequently -- or at least less frequently with Classic Airlines." (University of Phoenix, MKT 571 P. 571).

Although, management of Classic Airline understand that they are currently facing challenging problems, however, they have not yet figured out the strategy to correct the issues. It is very critical for the management to identify the strategies to address fundamental challenges facing the company.

Challenges Identification

It is very critical for the management to address challenges facing the Classic Airline. Presently, the company stock prices have declined. In December 2003, the company stock price was $33.20, however by December 2004, the company stock price declined to $28.93. (See Table 1). The whole issue general declined employee's morale.

Table 1: Classic Airline 2003 and 2004 Stock Price.

2003 Classic Airlines' Stock Price

JJan

FFeb

MMar

AApr

MMay

JJun

JJul

AAug

SSep

OOct

NNov

DDec

Stock Price

$36,25

$36,00

$35,80

$34,90

$35,35

$36,85

$36,20

$35,40

$34,77

$34,25

$33,68

$33,20

2004 Classic Airlines' Stock Price

JJan

FFeb

MMar

AApr

MMay

JJun

JJul

AAug

SSep

OOct

NNov

DDec

Stock Price

$32,15

$35,36

$29,87

$26,50

$28,90

$30,08

$36,75

$31,11

$30,01

$32,22

$27,86

$28,93

Source: (MKT, 2003, MKT, 2004).

Overview of the case reveals that the company is not putting high priority on the marketing plan. Typically, the company membership's classic rewards have been reduced by 20%. Recently, the management mandated a 15% cost reduction across all departments within the next 18 months and the new policy is serving as threats to the company marketing opportunities and has become challenges to the whole organization. (The Table 2 Classic Airline cost reduction goal). The environmental scanning will assist the company to achieve progress.

Table 2: Classic Airline Cost Reduction Goal

Cost Reduction Goals By Department

Quarterly Reduction to Meet 15% Reduction

Department

Q1

Q2

Q3

Q4

Q5

Q6

Total

Administrative

3,00%

2,00%

3,00%

5,00%

5,00%

6,00%

18,50%

IT

2,50%

2,50%

2,50%

2,50%

2,50%

2,50%

14,10%

Operations

2,00%

1,50%

1,50%

2,00%

2,00%

2,00%

11,50%

Marketing

3,50%

3,50%

3,50%

4,00%

4,00%

5,00%

21,50%

Sales

2,00%

2,00%

2,00%

2,00%

2,00%

2,00%

11,50%

Source; MKT (nd).

Stakeholder Perspectives and Ethical Dilemmas

Overview of the stakeholder's perspective reveals that customers are not happy with general situation within the company, and there is no unification of employees. Moreover, Classic Airline is facing stiff competitions with other airline companies. The management needs to formulate a strategic decision to address challenges facing the company. Classic Airline needs to enhance service quality through innovation, efficiency, and effective customer services. The company needs to employ an effective marketing strategy to enhance quality of services delivered.

Framing "the Right" Problem

Classic Airline needs to employ all the best strategies to achieve growth and profitability. The company must employ effective marketing tool to forecast future demand and market potentials by formulating an effective long-term marketing objectives. The paper identifies internal marketing as an effective tool to improve employee's morale. "Internal marketing' has been widely used by academics in portraying an emphasis on viewing employees as partners to an organization's efforts at achieving organizational success rather than as a cost." ( Doukakis, 2002 P. 87). The goal of internal marketing is to improve the attitude of employees and skills in order to enhance customer expectation.

"The underlying assumption of internal marketing is by viewing employees as the organization's most valuable asset and treating them as internal customers, the organization will gain a competitive advantage and achieve its objectives. At the heart of the internal marketing concept is the notion that employees represent an internal market within an organization." ( Doukakis, 2002 P. 87).

Classic Airline needs to employ internal marketing strategy which includes employee's training, and development, coaching and communication to enhance the company success. (Kerin, et al. 2006). More importantly, Classic Airline should use four Ps marketing framework to rise to the top. The 4 P's marketing mix includes Price, Product, Place and promotion strategies. The company could use the variables of 4 P's to achieve organizational goals. Typically, Classic Airline needs to offer a competitive pricing, improve on the quality of service delivered as well as enhancing effective CRM (customer relationship management). The company should also use innovative marketing strategies by implementing effective promotion. Above-mention strategies will assist Classic Airline to boost its profitability.

"End-State" Vision

The ideal end state vision of Classic Airline is to become a leading airline company. The company could achieve this vision by making a positive change. Classic Airline could form marketing alliance with Skyway Airline and other top Latin American airline to boost the company marketing promotion. More importantly, Classic Airline should focus on a large geographical target market and should offer different incentives to attract large number of customers. The company must also form a cross-functional team to assist the unification of employees. The company should formulate new strategic goals in order to become more efficient airliner.

Identify the Alternatives

Success of any organizations is to create value for customer and meet customers' needs. A business will not be able to survive without customers. Evaluation of the business of Classic Airline reveals that the company has lost the customer's patronage in the last few years leading to a decline in the overall revenue and net profits. The company could achieve a competitive market advantages by implementing a strategic marketing process in order to create value and deliver excellent services to customers. The company should allocate resources to design a strategic marketing mix to reach the target market. The essence of marketing plan is to assist the company to forecast customer demand. Thus, Classic Airline should create a unified effort to develop a marketing program that would cover overall customer relationships and achieve company goals.

Evaluate the Alternatives

Classic Airline should invest significantly to achieve the company objectives. Using marketing tools, the company will be able to predict customer's behavior. In a contemporary business environment, marketing has become a strategic tool that organizations use to achieve competitive market advantages. The advance in technology could assist an organization to evaluate the success of marketing instantaneously. Classic Airline should evaluate different marketing alternatives and choose the best to assist the company to enjoy market advantages. The company could use guerilla marketing tools or internal marketing strategies or employ CRM system to be more effective airline organization.

Identifying and Assessment of Risks

Fundamental actions that Classic Airline should take include:

Analyzing competitive landscape,

Identifying current and future demand,

Forecast future demand and market potential.

The company could employ market research to identify both marketing opportunities and problems. With marketing research tool, the company should define market problems as well as systematically collect and analyzing information that would assist the company to take immediate action. Marketing research is the process identifying marketing problem and analyzing information in order to take immediate actions. The broad goal of marketing research is to reduce risks and uncertainties to assist a marketing manager to take a perfect decision. Typically, Classic Airline could implement 5-step approach in the market research.

Define the problem,

Develop the research plan,

Specifying and collect relevant information

Develop findings,

Take immediate marketing actions

Since Classic Airline is currently operating with limited resources, guerilla marking is a strategy that the company could employ to enjoy market advantages. Moreover, the company must be able to attract more customers by offering incentives. Classis Airline should also constantly updating current customer relationships. Typically, customer service is extremely importantly and the issue must be taking serious in the contemporary business environment. Thus, Classic Airline must deliver an outstanding customer value which includes: best service, best price, and best product. The best strategy that Classic Airline should adopt is to use horizontal diversification strategy that entails adding new products to the existing product and services in order to boost sales. On the other hand, conglomerative diversification is the strategy by which firm market new products that are unrelated to the existing product. These alternatives could assist Classic Airline to rise above the competitors.

Developing and Solution Implementation

The implementation plan is very critical to achieve marketing plan goals. The implementation plan involves using the company time and resources to achieve the company marketing goals. The implementation plan is very difficult because of the difficulties in meeting timeline; manage resistance to change and other internal resistance. To overcome these challenges, Classic Airline must prepare for the implementation in advance. Typically, the company should initiate the planning phase which should start immediately. The primary goal of planning phase is to assess all competitive and market environment. SWOT analysis is critical tool that could be used in the planning process. SWOT analysis describes organizational appraisal in order to evaluate a company internal Strengths and Weaknesses as well as its external Opportunities and Threats. (Kerin, Hartley Berkowitz, et al. 2006). However, there is a possibility that Classic Airline may face challenges in its marketing program implementation because of some factors such as internal resistance to change. Resistance to change may occur because some employees may be concern about their job security. Moreover, some employees may believe that the marketing implementation may affect their career and promotion within the company. Dialogue with employees is the best strategy to make employees understand the benefits of the program to the organization. Thus, Classic Airline should invest in internal and external marketing to be able to implement its marketing program successfully which will assist the company to become a leader in the airline market. Classic Airline should employ effective communication to persuade employee to support the program.

"Essentially, communication process is by informing, persuading, and reminding. Employees and management need to communicate with one another to carry out their work activities. Internal communication plays an important role in exchange transactions. Internal communication could be used to persuade employees to accept new policies and philosophies." (Doukakis, 2002 P. 88).

Results Evaluation

Classic Airline should evaluate the marketing program through bi-annual job appraisal. The goal is to ensure that employees are 100% satisfied. The end-state vision after the program implementation is to ensure that employees are united and be able to work collective on all the company's project. The case reveals that employee's moral was low and there was a finger pointing leading to division among employees. Moreover, there was lack of unity and lack of effective communication among employees. The paper suggests internal marketing strategies to assist the company to retain employees as well as attracting new employees to the organization. The direct feedback from employee is the best way to evaluate the acceptability of the program.

Financial goals are another end-state vision that the company must accomplish to attain the company financial target and increase profitability within few years. Since the company intends implement marketing program to achieve changes, a metric to evaluate the results is to ensure that the actual marketing expenses are less than budgeted expenses of the program. By following this strategy, the company will be able to spend less on its marketing program. The company is targeting to achieve a competitive market advantages by offering best and effective flyer program. The company also aims to offer frequent-flyer program that competitors could not easily copy. A metric to evaluate this end-state vision is to ensure these options could not be easily duplicated. These options will assist Classic Airline to achieve competitive market advantages.

Conclusion

This paper identifies various problems that Classic Airline has faced within the last few years. Before 2008, Classic Airline recorded huge financial success with net income $71 billion. After 2008, the company net income declined which was serving as threats to overall company's success. Analysis of the company reveals that Classic Airline is having internal problem because there is no unity among employees leading to the decline in employee morale. To address these problems, this paper use nine-step problem solving model to address various problems that Classic Airline is facing. The paper suggests that Classic Airline should employ internal communication strategy to ensure that employees are united. Using this strategy, the company will be able to achieve a competitive market advantages. The paper also identifies customer's relationship tool to retain customers as well as attract new customers. Classic Airline also needs to change its external marketing plan to identify and deliver what customers want. The marketing plan presented in the paper will assist Classic Airline to integrate customer requirements to organizational goals.