Classic Airlines Marketing Review, Case Study Example

Classic Airlines has been one of the top five airline companies in the United States and continues to have over $10 million in annual profits.  Unfortunately, the company is feeling a strong reduction in the classic rewards program that was initially designed to improve the customer’s experience and become a beneficial method for retaining customers.  Their recent customer loyalty report showed extreme numbers that suggests that the company must undergo a very serious marketing campaign in order to turn around this trend and increase its customer-base, and in turn increase its overall profits.  Classic Airlines is dangerously close to filing for bankruptcy if the proposed marketing plans by the new Chief Marketing Officer, Kevin Boyle, do not have the desired impacts the company needs.

Before this case is accurately analyzed and recommendations can be proposed, it is important to understand basic marketing concepts that are crucial for the Classic Airlines team and how these concepts can be utilized to enact a goal-oriented problem-solving process.  First of all marketing is commonly defined as the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services to create exchanges that satisfy individual and organizational goals (Londre, 2009, p. 1).  In other words, the people at Classic Airlines need to enact a marketing plan that accomplishes the goal of distributing the plan and pricing, while being promoted to satisfy the customer.  Marketing research is the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company (Setiawan, 2009, presentation).  Furthermore, “a marketing decision support system is a coordinated collection of data, systems, tools, and techniques with supporting hardware and software by which an organization gathers and interprets relevant information from business and environment and turns it into a basis for marketing action” (Setiawan, 2009, presentation).  In order for the marketing team to accurately develop a marketing plan that will work to turn around the current situation, the individuals must conduct market research.  Renee Epson, the Senior Vice President of Customer Service, commonly suggests conducting market research by surveying the remaining Classic Airlines customers in order to find out what they want and how the company can better improve its service to the customers.

As this data is collected, it is important that various steps are taking to assess the market and the inner workings of Classic Airlines to develop a qualified marketing plan.  “Marketing-mix models analyze data from a variety of sources, such as retailer scanner data, company shipment data, pricing, media, and promotion spending data, to understand more precisely the effects of specific marketing activities” (Kotler & Keller, 2009, presentation).  A customer-performance scorecard records how well the company is doing year after year on customer-based measures.  A stakeholder-performance scorecard tracks the satisfaction of various constituencies who have a critical interest in and impact on the company’s performance including employees, suppliers, banks, distributors, retailers, and stockholders (Kotler & Keller, 2009, presentation).  These can both be very useful tools in order to assess the marketplace and the available options that Classic Airlines may be able to use in order to improve production and profit margins.

As the marketing plan is put into action, marketing metrics can be put into place to compare projected performance to actual performance and place a rating on the effectiveness of the plan.  These marketing metrics are the set of measures that helps marketers quantify, compare, and interpret marketing performance (Kotler & Keller, 2009, presentation).  External marketing metrics include awareness, market share, relative price, number of complaints, customer satisfaction, distribution, total number of customers and loyalty.  On the other hand there are multiple internal marketing metrics that can be used to help measure marketing performance.  These internal metrics include awareness of goals, commitment to goals, active support, resource adequacy, staffing levels, desire to learn, willingness to change, freedom to fail and autonomy (Kotler & Keller, 2009, presentation).  These marketing matrices are difficult to quantify into specific numbers and statistics, but the overall goal of any marketing plan should be to consider these matrices for achieving marketing goals.

Now that specific definitions and planned descriptions are understood, the case of Classic Airlines must be properly analyzed so that the marketing team can propose specific marketing actions to increase profits.  According to Kotler and Keller, it is important to take multiple steps in accurately developing a problem-solving solution plan for the problems associated with Classic Airlines.  The steps for the solution include clearly defining the problem by specifying decision alternatives and stating the research objectives; developing the research plan by taking available data sources and using research instruments, sampling plans or contact methods; collecting the information from the research plan; analyzing the information; and presenting the findings of the information in order to make educated marketing decisions on the plan of action (Kotler & Keller, 2009, presentation).  First of all, the problem has been defined that the Classic Airlines Company is dangerously close to filing for bankruptcy because of the economic downturn within the United States.  Its customers are choosing other airlines that may have lower prices or provide better rewards benefits.

As it was described within the case documents, consumer confidence also appeared to be waning.  By January 2005, Classic’s declining Classic Rewards program measured a 19 per cent decrease in the number of Classic Rewards members, and a 21 per cent decrease in flights per remaining member.  These numbers meant that Classic Airline’s loyal customers had been leaving the company to fly elsewhere, and what few customers it had retained appeared to be flying less frequently, with or without choosing Classic Airlines.  Furthermore, these figures were additionally described from within the Customer Loyalty Report.  This report showed that membership within the Classic Rewards program had dropped 20% from the previous years, which means that to more than 160,000 allegedly loyal customers who are now flying airlines other than Classic.  In addition to this, the average number of flights per retained member within the Classic Rewards program had dropped down more than 20% as well.  Meanwhile, the CEO and CFO were feeling the pressures of having dropped prices at the recommendation of the previous CMO and the status actually appeared to worsen.  Therefore, the marketing team is being required to develop a marketing strategy that does not include lowering prices but will improve the Classic Rewards program to at least the level it was in last year so that Classic Airlines does not have to file for bankruptcy.

The next steps in Kotler and Keller’s marketing problem-solving plan is to develop the research plan and collect the data, which the marketing group effectively performed.  They implemented customer surveys, SWOT analyses of the top three competitors within the industry, and even examined the costs and benefits of an alliance opportunity with an airline company in Zurich.  The fourth step in the evaluation model suggests analyzing the data.  The customer input surveys revealed some very important information.  Namely, the Classic Rewards program would not likely be recommended by 68% of the current customers and there are some major concerns that Classic Airlines performance does not provide customers the assurance of traveling to their destinations on time.  This information is very important in assessing the available options because it provides the marketing team with the thoughts and feelings that the current customers have.  Renee Epson was stating for years that the company did not have any interest in listening to what the customer had to say, and that the company actually reduced customer service lines to automated lines in order to cut costs.  Meanwhile, this had a negative impact because the customers were not being spoken to by an actual individual and lost the sense of value that they would receive had they not been speaking with a machine.  Even advancements in online ticketing have reduced the personal touch that customers enjoyed receiving from Classic Rewards in its previous years.  In this case, technology and economic reductions in costs have made the customers feel unappreciated and would rather fly with another airline company instead.

After the data has been collected and analyzed, a decision or group of recommendations can be utilized in order to offer suggestions for improvement to the CEO, CFO and review board.  Unfortunately, the CEO and CFO of Classic Airlines do not believe that the marketing steps are going to be viable options and will likely increase the costs of the company, instead of working to decrease the costs.  The CFO actually reminded the group that they must engineer the marketing turnaround with a 15 per cent reduction in marketing expenses, which was ruled upon by the review board.  These upper level management professionals are very stuck in their ways and after having been recommended by a previous marketing officer to cut costs, it actually worsened the problems that Classic Airlines were facing.  Furthermore, the CFO is completely in favor of advancing her fuel-hedging program that helped reduce costs by 12% through a process of locking in a fixed price on fuel for one full year.

The marketing group decided that the problems were not with the CRM system, but rather the philosophy behind the usage of data that was being provided through the system.  Customers had been providing feedback for several years, but nobody was there to listen.  Therefore the marketing team can offer many different recommendation to help reduce costs while appealing to the needs and demands of the current customers while also attempting to retrieve new customers to improve the Classic Rewards program and bring profit margins back to the level they were last year.  Some of these recommendations will be based upon the customer survey report that was put together by Ms. Epson and provided very useful feedback.  First of all, the company must begin to eliminate some of the automation from the process of interacting with customers.  This can be achieved by hiring additional trained customer service representatives that speak directly with the customers.  These representatives can also follow up with customers that have purchased their tickets online in order to avoid any technological problems or miscommunication, and provide the customer with a sense of respect and value that they have lost in the recent years.

Another important suggestion would be to alter a few of the aspects of the Classic Rewards program that are no longer beneficial.  Although the company has a very strong program that rivals anyone else in the industry, it appears to be very restrictive at first glance.  The plan only supports mileage reimbursement for six select hotel chains within the United States.  The company could begin additional negotiations with other hospitality providers in order to increase this number and provide the customer with options that could be highly cost-efficient for them.  Meanwhile, a major concern from the customers is to be able to have a guarantee that the flight will make it to their projected destination on time or ahead of schedule.  The marketing plan could involve a reduction in future airfare for customers that enroll in the Classic Rewards program but do not arrive on time to their destination.  This forces the company to continue to provide quality production, while enabling the customer to feel assured that everything will go according to plan, or they will receive additional benefits.  Finally, a cost-efficient internet or in-print campaign could be conducted to promote these changes to the Classic Rewards program, and even a telephone campaign could be utilized by customer service representatives to current and previous customers that had been enrolled within the program in order to explain the changes in additional benefits.

These changes do not require any large amounts of funding, in fact the marketing team put together a list of recommendations to reduce costs that could work towards the 15% reduction or provide the marketing team with the funds necessary for any additional marketing ideas.  The ideas include reducing the number of reservations operations centers, eliminating travel agent commissions, and developing an employee buyout or attrition program.  These suggestions would need to be approved by the union, but they face no major opposition from being able to help reduce the overall costs of the Classic Airlines organization.  These suggestions should be shown in a professional format to suggest decreases in costs and increases in overall benefits.  Additional customer survey should be taken to help decide upon viable Classic Rewards changes in benefits, especially the ones that have been proposed.  If they are deemed effective by the customers, they should be enacted as soon as possible and advertised to improve the profit margins, please the shareholders, and eliminate the possibility for bankruptcy.

References

Kotler, P., & Keller, K.L. (2009). Conducting marketing research and forecasting demand. Retrieved from http://www.wright.edu/~james.munch/kotler_mm13e_basic_04.ppt

Londre, L.S. (2009). Marketing, IMC, advertising, promotion, media and more. Retrieved on October 12, 2009, from Web site: http://www.londremarketing.com/documents/Nineps05122009.pdf

Mason, R.B., & Staude, G. (2007). A Marketing MIX Model for a Complex and Turbulent Environment. Retrieved on October 12, 2009, from Web site: http://wlv.openrepository.com/wlv/bitstream/2436/18700/1/Mason%20(Acta%202007a).pdf

Rader, C., Comish, R., & Comish, J. (2008). Customer Satisfaction: Cognitive Dissonance vs. Brand Preference. Retrieved on October 12, 2009, from Web site: http://asbbs.org/files/2008/PDF/R/Rader.pdf

Setiawan, W. (2009). Marketing management 12e. Retrieved on October 12, 2009, from Web site: http://winsetia.de/serious/ISBN_0131457578_Marketing_Management_12e_chapter01.pdf