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Running head: Classic Airlines and Marketing

Classic Airlines and Marketing

Ruth Ah Siu

University of Phoenix

Marketing Management

MKT 571

Timothy J. Draper

January 10, 2011

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Classic Airlines is the world’s fifth largest airline whose yearly profit decreased

significantly from $71 million to $10 million in the previous year. To combat this huge loss in

profit, the board of directors has mandated a companywide 15 percent cost reduction over the

next 18 months. To achieve this mandate the chief executive officer (CEO) has assembled a

taskforce to work on a marketing plan that must show measurable positive trend within three

months. The taskforce headed by the chief marketing officer, Kevin will use common marketing

concepts to persuade the CEO and chief financial officer (CFO) of the direction Classic Airline

needs to take. These concepts are relationship marketing, internal marketing, organizational

culture, and situational analysis.

Relational marketing

Relational marketing aims at building and maintaining long-term relationships with

customers, employees, partners, and shareholders (Kotler & Lane, 2007). Established

relationships with all key players could be the key for a company to succeed in the face of fierce

competition. Despite that Classic Airline has one of the highest labor costs per seat-mile, in the

past year share prices has decreased by 10 percent, members flights and enrolment in decreased

by 20 percent, and employee morale is at an all time-low. Members of the task force believe that

the key to turning the airline around lies in working on customer relationships.

“Renee: We’ve got to reconnect with our customers. We have to show them that

we understand their needs and we understand what’s important to them.”

Scenario, January 9 meeting

Internal marketing
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Internal marketing is concerned with recruiting and training employees at all levels who

can anticipate and cater to the customers’ needs. The different levels of the organization have to

be in tune with each other in creating a customer-orientated service. Unfortunately, the upper

management at Classic Airlines has contributed to the loss profits by not only ignoring

suggestions of the senior vice president of customer service, but also failing to use the CRM

(customer relationship management) system as well.

“Renee: If we can use the CRM system to deliver the same kind of metrics and

reporting for the loyalty program that we do for our operations functions, we’ll at

least have part of the battle covered.”

Kevin: We’ve got to champion the concept that the CRM is far more than a

system; it’s a top-down philosophy that puts the customer at the center of our

business.”

Scenario – January 9, team meeting

Organizational culture.

Organization culture is the norms, beliefs, experiences that people within an organization

share. Often the organizational culture is set from the CEO downwards therefore it is difficult to

change unless the CEO desires the change. In the current setting of Classic Airlines, the CEO

(Amanda) and CFO (Catherine) convey a culture that belittles the importance of marketing and

alliances. They have alienated members of the senior executive team responsible for delivering

workable solutions.
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“Renee: The higher-up’s think they know what makes our customers tick, but

they haven’t listened at all. If they had, they wouldn’t have been surprised that

we’ve suffered a 20 percent loss in Classic Rewards

John: I’ve talked to Amanda about it but I think she has too much political capital

invested in the CRM implementation to take any corrective action.”

Scenario – January 9, team meeting

“Sometimes a business does poorly not because it’s people lack the required strengths,

but because they do not work together as a team” (Kotler & Lane, 2007, p. 53). The CEO wants

results and is not flexible to any negotiation in price. She shows little support for the marketing

strategy and is quick to disassociate herself from the taskforce. The CFO shares the CEO’s views

and would rather direct money into fuel costing measures than marketing. A 12 percent fuel cost

reduction is commendable but without a marketing plan that will address and fix the 20 percent

loss in classic frequent flyer rewards, the airline could result with no customers to fill the planes

so the “cheaper” fuel would be inconsequential.

Situational Analysis.

Analyzing the current situation is the first step in creating a marketing plan. From here

the manager can acknowledge strengths, weaknesses, opportunities and threats, and devise a plan

of action. One of Kevin’s ideas for cost reduction is reducing the number of operational centers

and eliminating travel agent commissions. “Companies must not only develop new businesses;

they must carefully prune, or divest old businesses in order to release needed resources and

reduce costs” (Kotler & Lane, 2007, p. 49). Managers need to be in touch with the market trends

so they can revamp outdated business resources and embrace new business opportunities.
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Strategic Alliances.

A manager is constantly seeking growth opportunities and because of good relationships

and reputation, an opportunity for an alliance has fallen into Kevin’s lap at an opportune time.

Unfortunately, the CEO does not belief in alliances.

“John: I don’t think Amanda and Catherine see the forest for the trees. I’ve never

understood why all of our competitions have formed alliances and we haven’t”

Renee: Because that would be too customer-focused!”

Scenario – January 17 meeting

Kevin has secured the support of the team to support an alliance and has the research and

data to sell the idea the CEO and CFO as a strategic move that would keep Classic Airlines

ahead of the competition. “Companies are also discovering that they need strategic partners if

they hope to be effective. Even giant companies – AT&T, IBM, Phillips, Siemens - often cannot

achieve leadership, either nationally or globally, without forming alliances with domestic or

multinational companies that complement or leverage their capabilities and resources” (Kotler &

Lane, 2007, p. 57).

Forming an alliance is a hard sell to the CEO but considering the benefits it brings, it may

be the answer of remaining competitive. To embrace an alliance would mean a change in

corporate culture to be more customers orientated. As discovered by the taskforce team, the key

to keeping Classic Airlines in business is hiring employees who could deliver service the target

market wants, needs, and demand. The heart of the airline’s survival lies in fostering long-term

satisfactory relationships with customers, employees, and shareholders.

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References:

Classic Airlines Scenario, Retrieved January 4, 2011 from Marketing Management week one

materials, University of Phoenix

Kotler, P., & Keller, K. L. (2007). A Framework For Marketing Management (3rd

            ed.). Upper Saddle River, New Jersey: Prentice Hall.