Individual Assignment: Classic Airlines Marketing Solution Essay

Bryan Spearman July 22nd, 2010 Abstract In the case study of Classic Airline (CA), the paper use problem-solving model to solve CA’s marketing problem. After taking into account of the internal and external pressures contributing the CA’s current crisis, the new objective of implementing strategic market plan to resolve solution is clarified; furthermore, potential issues of implementation is also considered to ensure impact of the plan. The paper will also highlight that implementation of improved CRM which expected to significantly improve the profitability of the organization. Successful implementation requires effective leadership, targeting market group, realizing shared vision among stakeholders and appropriate delivery strategies. Classic Airlines Marketing Solution For every successful organization, a question is often brought forward by the management: What philosophy should guide a company’s marketing efforts? Should organization focus its strength first on the interest of stockholder, the customers or the society? Often times, these interests are in conflict with one another. Since the mid-1950s, the marketing philosophy had shift from product centered â€Å"make to sell† toward customer centered â€Å"sense and respond† philosophy. Thus the questions of marketing are finding the product that fit customer’s need instead of other way around. [ (Philip Kotler, 2006) ] Facing fierce global competition, companies had realized the importance of retaining healthy customer relationship because every companies knows it is far more cost effective to retain a loyal customer than to acquire a new one. According to Plunkett Research Online, the 2009-2010 periods for commercial airlines are expecting some rough ride ahead: consumer budget is tight while companies are cutting down business traveling expenses. To combat with economical hardship, airlines are fighting to cut routes, removing older models of air planes and reduce the fuel cost; at the same time, competing on best price and total service package to the customers. [ (Plunkett Research Ltd. , 2009) ] The Problems at Classic Airline The Classic Airline (CA) is world’s fifth largest airline that operates 375 jets serves 240 cities with over 2300 daily flights. In the last 25 years, the company had grown into an organization of 32000 employees with multi-billion sales. [ (University of Phoenix, 2005) ] Due to the difficulties with increasing global competition, overexpansion within the organization, changes in customers spending, and increased concern with airline security; CA along with its competitors in the industry are dealing with issues of growing stress and reduced financial gain. Increased uncertainty had triggered a drop in stock price; thus CA has seen a 10% decrease in share price. To make the situation worse, the company had also shown 19% decrease in number of reward members and 21% decrease in flights per remaining member. (University of Phoenix, 2005) With rising cost especially in fuel and labor, CA is tight up financially in its ability to compete effectively in the market. Furthermore, the board of director mandated 15% cut in cost or the company will face bankruptcy. A key component of the business model affecting both competiveness and profitability is the structure of the marketing portfolio within the company. In fact, Classic Airlines is struggling with a number of marketing challenges both internally within their corporate culture as well as with their external marketing portfolio. Some senior executives such as newly promoted CEO Amanda Miller believed in focusing organizational resources on operational excellence and financial stability thus gives less attention to marketing. As a result, the shift in priority had caused the firm more vulnerable in this critical time which consumers needs should be valued as most important of all others. Meanwhile, CA’s competitors are learning fast in continuing improvement in customer satisfaction to regain their market share. Opportunity Identification Targeted at the problems at home, also lies opportunity to success. Because the executives of Classic Airline believes that they can turn the things around and improve the current situation, First opportunity is to increase customer satisfaction through the company’s existing program called Customer Relationship Management (CRM). Using this information, CA can determine what it needs to focus on to bring customers back. Though the CMO, Kevin Boyle is a big supporter of this program; he might be facing disagreement with other executives down the road during the implementation process since they don’t have much faith on how marketing department can be benefited from the program Stakeholder Groups and Shared Vision Stakeholder alignment is an important part of marketing planning thus holds a key to the success of implementation of problem solution. The potential of conflict of interest is inherent in any organization. Conflicts may exist whenever a group or an individual is paid to serve and support another from a position of assumed trust and responsibility. † [ (Emlyn Neuman-Javornik, 2006) ] Before any product reaches to consumers, it must connect with all stakeholders in every levels of the organization first because CA’s employees will be affected by these changes and so will their perfo rmance in the future. Can the risk due to the conflict of interest be eliminated once for all? Unfortunately, the answer is no; but the progression of actions that cause potential risky situation escalating to the point of destruction can be and should be prevented beforehand. [ (Emlyn Neuman-Javornik, 2006) ] The key step is management awareness and proactive action taken to minimize the risk factors. An effective risk-management program based on three critical phrases: Creation, Communication and Commitment. Creation is referring the solid cross-companywide statement of policy which states a clear expectation and govern ethical standard of conduct toward the all stakeholders including employee, managers, suppliers and officers; Communication, allows all levels of stakeholder to understand the statement policy and oversee any differences before it progresses; Last and most importantly, the commitment of employees, managers, partners and suppliers to invested in the company’s policy and shared vision as same as they are equally liable for the consequence if violates the policy. (Emlyn Neuman-Javornik, 2006) ] â€Å"The creative difference between reality and the vision is a way of seeing progress and an objective that serves as a motivator for a lot of people. † [ (Senge, 1997) ] Senge also states that the vision should come from all levels within an organization instead of being applied â€Å"top down†. Despite the individual belief and differences, it is vital for Cl assic Airline to establish a shared vision among all stakeholders in order for the organization continues creating value. In addition, the importance of a shared vision is the core of the company which allows teams learning to happen throughout the stages of product cycle. In fact, company that learns faster as a team than its competitor has a clear competitive advantage thus is more flexible toward changes. [ (Senge, 1997) ] In the case of Classic Airline, management had been working hard to maintain a high level of efficiency; however the passive approach has its limitation thus incapable of continuing improving when deals with worse market response. Therefore, the core competency must shift toward customer centered business operation. Employees must be encouraged to know and listen to the consumer’s voices which allow a clear channel of communication. As a result, the info collected from bottom up will help marketing team to shape a clear picture in how to meet market demand with effective strategic solution. In addition, a cross-function communication network must be established which integrated with CRM system to close the communication gap between external and internal stakeholders. Problem Solution An Overview of Customer Relationship Management â€Å"CRM systems can be viewed as information systems aimed at enabling organizations to realize a customer focus. † [ (Bull, 2003) ] Though CRM has gained an increasing popularity in improving and meeting marketing demand; however, the studies had shown a great number of failure in CRM implementation. According to Giga surveys: companies generally underestimate the complexities of CRM, lack of clear business objective and tend to invest insufficient resources into the program; thus Giga survey have estimated 70% of companies are likely to fail. (Whittle, 2001) ] The truth is that CRM system is evolving over the years as market demand changes. Because the leaders oversees not only the internal running of operation but also monitor the external environments changes; and are best positioned to set the vision and strategic direction for CRM project. In addition, the top executive is more cost aware than middle management thus has stronger control over the expenditure of project over the long run. [ (Bull, 2003) ] Classic Airline had earned $8. 7 billion in sales; however, the ineffective CRM system had reduced yields from consumers and failed to maintain loyal customers. The firm suffers CRM integration problem due to unclear direction in dealing with customer relationship. Therefore, a set of priorities must be established to set straight forth the focus of the CRM system which is to identify consumer needs, assisting market segmentation, discover value and cost driver, improving customer retention and leveraging stakeholder feedback. Holistic Market Approach Classic Airline could apply the concept of holistic marketing which based on four components: relationship marketing, integrated marketing, internal marketing and social responsibility marketing. The goal is to have more comprehensive approach that goes beyond the traditional marketing strategies in order to deliver highest value to the customer. [ (Philip Kotler K. L. , 2006) ] In the relationship marketing, the company can update and strengthen the CRM program to collect data required based on the goal to understand the need, wants and demand of the customers; as the same time, integrated marketing enable multiple marketing activities to communicate thus deliver value and maximize each activities’ joint effect. As a result, two objectives that can be achieved: lower the cost of marketing and implement a solid customer service solution to increase sales. [ (Philip Kotler K. L. , 2006) ] Notably, internal marketing must be incorporated into the solution process which to ensure every stakeholders within the organization embrace and participate the marketing principle especially the senior management. â€Å"Holistic approaches to CRM help organization co-ordinate and effectively maintain the growth of disparate customer contact points or channels of communication. [ (Bull, 2003) ] By placing CRM system as the heart of holistic marketing approach, new solution allows company undergoing transformation needed to emphasis on customer orientated business process with higher flexibility and adaptability to market changes. Identification of Right Customer Groups According to Newell, CRM is a useful tool in terms of identifying the right customer groups; in another word, assisting with market segmenta tion in order to provide appropriate service and product to different level of market groups. (Newell, 2000) ] The basic idea of market segmentation is that a company cannot have equally profitable relationship with all customers. By targeting consumer with different product and services according to their lifestyle, individual taste and financial ability will create a win-win relationship in which both parties received maximum benefit from one another. Newell had stated that identifying customer groups is the idea of distinguishing between transaction and relationship customers; which transaction customer are highly volatile thus have less to no loyalty other than obtaining the max benefit per transaction with best price. On the contrary, the relationship customer have far more potential for loyalty as they often prepared to pay a higher price within their financial ability for a range of reliable goods and services. [ (Newell, 2000) ] Generally, relationship customer will less likely to defect once establish a relationship; however, he will expect consistent quality service as a return for his loyalty. Relationship customer is far more cost effective than new customer because they had already understood the process and requires less persuasion; as the same time, he will be able to provide useful feedback to improve quality services of the organization. Delivery of CRM System Another dimension of market problem solution is CA’s ability to deliver the strategy successfully. CRM strategy is only effective if they deliver positive outcome; therefore, customer focused CRM system may not be enough with current consumer demand. Not only CRM will be able to assist the organization to predict future market demand, but keep the organization strong as a market leader. The studies had shown that fundamental goal of CRM is to improve organizational profitability though efficient and effective customer relationship. If the CRM strategy is struggling to impact profitability of organization after the initial implementation period; clearly, the strategy is failed to accomplish its goal. [ (Bull, 2003) ] In the case of Classic Airline, to revise and establish a stronger and effective CRM system: the top executive must clarify the expectation and announce an overarching theme to CA employees. The top executive must assume a strong leadership role within the organization to lead the transformation of the business process and passed down to the bottom level. When employees are more anticipated, the transformation process will be easier to implement. Value is ultimately built on the improved relational variables cultivated between business unit as CA experience learning as a team. As a result, manages and employees’ behavior will help improving the existing organizational culture so all stakeholders are motivated to work toward the common goal. Although the risks associated with transformation is relatively high, CA must utilize CRM system with proactive models to address the challenges/trends that market demand in a timely manner because strategy nd efficiency should always exist alongside each other. Alternative Solution and Benchmarking â€Å"When organizations want to improve their performance, they benchmark. That is, they compare and measure their policies, practices, philosophies, and performance measures against those of high-performing organizations anywhere in the world. † (James Cavanagh, 2000) Southwest Airline i s one of market leader in airline industry which has a reputation of delivering consistently high quality of customer service and employee performance. Southwest airline is reported that 2009 marked as their 37th year of consecutive profitability which proven their immovable leadership within the industry. (Gary C Kelly, 2009) During the period of recession, Southwest Airline had continued to dedicate quality of customer service as their top priority and led the industry with lowest customer complaint ratio. The organization is constantly seeking new opportunity to enhance customer experience. Examples of their initiatives are early bird check-in which encourage customer online-reservation; P. A. W. S that are welcoming customer with pet aboard and last, in flight internet that installing satellite-delivered broadband to onboard passenger. [ (Gary C Kelly, 2009) ] CA should learn from Southwest Airline which is developing strategic planning based on consumer focused philosophy. With new updates and perfected CRM system, CA will be able to establish more stable customer relationship in order to regain the competitive advantage in the market. Conclusion Marketing is the life and breathes of an organization, and the organization must be reminded how its strategic marketing solution should be based on consumer satisfaction consistently. Encompass the body of the paper, it is confirmed that CRM is a complex and holistic concept that requires appropriate business process and integrated systems. After identification of existing problems, alignment the stakeholders’ value and creation shared vision; Classic Airline had come to conclusion that in order for the successful implementation of updated CRM system to impact the profitability, CA need to execute effective leadership and risk management, targeting the right marketing group and evaluation within CRM strategies. The future of CA relies upon a collaborated effort infused with productivity and team work.