9 step problem solving – classic airlines

Classic Airlines 9 step problem solving model MKT/571 – Marketing Classic Airlines 9 step problem solving model There are many internal and external factors contributing to Classic Airline’s current crisis. Falling Stock prices, Low employee morale, rising fuel costs and declining consumer confidence are some of the challenges Classic is facing. Internal dissent among upper management and restrictive cost structures are posing a direct problem to the Marketing team. I will sort through all of the symptoms, opinions, feelings and facts to determine the real problems plaguing the company.

Considering the marketing departments goals, obstacles and resources, I will use a problem- solving model to define the problem, then build solutions, implement and evaluate solutions to the problem, Define the Problem Classics’ Customer Satisfaction, Loyalty and membership in the Classic Rewards program have substantially decreased. Classic is dealing with a loss of customer base and a decrease in activity from their most frequent flyers. Increased fuel costs and high employee salaries have driven operating expenses up, resulting in a 61 million decrease in net income from prior year.

Stock prices have fallen 10% within the last year and employee morale is the lowest it’s ever been. Following September 11th Classic along with the entire airline industry, experienced a major decline in business. Classic overestimated the turnaround of the slump and expanded operations prematurely resulting in a restrictive cost structure and a competitive disadvantage against younger airlines. This allows younger airlines to break into the market taking bigger risks to offer customers what they want.

Competitors can offer lower prices that Classic would not be able to match without taking a loss. In addition Amada Miller, CEO has stated that there is no room for Classic to lower its flight prices. At the suggestion of the former Chief marketing Officer Amanda Miller agreed to lower prices on flights and feels that it was a major mistake. The results have not been beneficial for Classic or its shareholders. She believes that it has forced Classic into a potential price war that can’t be won.

The Board of directors have imposed a 15% cost reduction companywide to be implemented over the next 18 months. Amanda and CFO, Catherine Simpson seems to place all the blame for Classics’ crisis on marketing which is resulting in their lack of support for marketing efforts and ideas. The current CMO, Kevin Boyle is experiencing residual effects from the decisions of his predecessor. Added pressure from Ben Sutcliffe, SVP & General Counsel, is directed at marketing to steer clear of any actions that would jeopardize the current relationship and agreements with the Unions.

Kevin Boyle and the marketing team must come up with a marketing strategy to bring the Classic Rewards program back to and exceed its former status while contending with all of these factors. Gather Facts, Feelings, and Opinions A Customer Interview performed by Renee Epson, SVP Customer Service, on 500 Gold and Platinum Classic reward members revealed that members are unsatisfied with the features of the Classic Rewards program. Fifty percent are unhappy with the amount of miles earned per flight and 70% of members are unsatisfied with the service upgrades and the reward redemption options.

The most disparaging result is that 68% of the Classic rewards members would not recommend it to a friend or colleague (University of Phoenix, 2012). This is very damaging to Classic’s image and program success since one of the best marketing tools in the service industry is Word of mouth. Service industries depend on satisfied customers referring their service to other potential customers. Customer expectations have been disappointed and have resulted in a loss of customer base. The Customer loyalty report shows that new enrollments in the program have dropped from over 40, 000 per month to less than 10, 000 per month within the last year.

There were 160, 000 loyal members lost in the same time period. Of the remaining members, Loyalty is waning, flyer frequency has dropped 20% and customers have revealed flying more with other airlines. The Customer Relationship Management (CRM) system is not being used to its full capabilities. According to Renee Epson “ we configured the system in a way that doesn’t integrate the phone channel with the Web channel. If our customers choose to interact with us over both channels, we don’t know they’re the same person” (University of Phoenix, 2012). The required time and money to set up this function was not allotted for in its initial set up.

According to an exit interview of the former VP of Marketing “ We spent an unbelievable sum of money to implement one of the best platforms available, and we couldn’t (or wouldn’t) spend the extra little bit to fit the system around the needs of our customers… you’ve got to capture customer contact at all points of interaction with the company to provide the proverbial ” 360-degree view of the customer” (University of Phoenix, 2012). This flaw creates a break in communications between customer service representatives and customer’s resulting in confusion and frustration on both sides.

When customers feel their issues are not being addressed quickly and efficiently loyalty is lost. Another issue Renee Epson has is that the CRM system is being geared towards tracking call times instead of its true objective of customer relationships. Former customer service representatives stated” I never could understand why the CEO cared so much about how long our calls were. I thought I was supposed to be in ” customer service”, and it seemed like I was judged by how fast I could get rid of customers” (University of Phoenix, 2012).

Another former customer service representative suggested “ Don’t focus so much on how long the customer is kept on the phone. Getting off the phone fast doesn’t always mean the best thing for the customer… Listen to your customers. People didn’t seem to be as happy with us my last couple of years as they were in the beginning” (University of Phoenix, 2012). Renee Epson, SVP Customer Service has made statements that the CEO and CFO are “ driven by the numbers” (University of Phoenix, 2012). Amanda used call time reports to monitor which Customer service Representatives had longer calls.

Renee believes that Amanda wants shorter call times to show the need for less customer service representatives which would result in reducing headcount and cost savings. CFO, Catherine Simpson is only concerned with pulling money away from Marketing to put towards fuel-hedging. Catherine stated “ Every dollar that we spend on marketing (Classic Rewards included) is a dollar that won‘ t go to fuel-hedging. ” Identify the Real Problem At the root of all the factors contributing to Classics crisis the true problem is the lack of customer focus. Classic must focus on the wants and needs of their target market which are business and leisure flyers.

These customers have voiced their opinions and Classic can see what and where the underlying problems are. The Philosophy of the company from the CEO down to the airplane mechanics must be a customer first mentality. Decreased call times with customers should not be a driving factor in customer service. The Classic rewards program must make a valuable offer to its members in order to keep them flying with Classic. Classic must at least meet the bar set by competitor’s reward programs and attempt to exceed what they are offering. A holistic marketing orientation could benefit Classic tremendously.

Holistic marketing encompasses relationship marketing which aims to build mutually satisfying long-term relationships with key parties – customers, suppliers, distributors, and other marketing partners. It also includes integrated marketing which calls for marketers to incorporate marketing programs to create, communicate and deliver value to consumers (Kotler & Keller, 2006). Generate Possible Solutions Possible solutions to solve the direct problem would be to commit the time and money necessary to get the CRM systems telephone and website channels integrated. Provide improved efficient customer service to customers to win back loyalty.

Analyze and adjust the rewards program to allow more mileage earned per flight, less blackout dates around Holidays, easier connection options for members and more reward redemption options. Provide more routes and destinations for the Business flyers. Join the Tri-Star Alliance proposed by Josef Wyman Marketing Director of Skyway airlines. Other solutions include downsizing by reducing the number of reservations operations centers. Lowering Employee salaries to match industry standards but still maintain a slight edge over competitor salaries so that employees remain loyal. Evaluate the Alternatives

Each solution can result in positive or negative outcomes. Integrating the CRM channels will finally provide a 360 degree view of customer service but on the other hand it will take time and money to accomplish. Will the cost exceed the 15% cost limitation set companywide? If it does, will it be worth it to go over budget to increase customer satisfaction in the end? Keeping in mind that increased customer satisfaction will result in more referrals back to Classic airlines. Downsizing reservation centers or lowering salaries will help Classics bottom line but how will the employee Unions react to this?

Classic has built one of the best relationships with its employee unions and could jeopardize it with even a slight adjustment as warned by Ben Sutcliffe, SVP & General Counsel. A reduction in reservation centers could also create a backlash from customers and rewards members who already feel they are not receiving efficient customer service. When GlobalAir made drastic cutbacks to its frequent flyer program two years ago angry customers organized a campaign against the airline and “ promised not to let up until the voice of the customer was heard” (University of Phoenix, 2012).

GlobalAirs’ image suffered tremendously until recently with the renovation of their frequent flyer program. Joining the Tri-Star Alliance will kill many birds with one stone. It will provide increased destinations and routes for business and leisure travelers throughout Europe and South America with plans for growth into Asia. An alliance will lower costs through shared promotions, marketing and eventually operations through group fuel purchasing. It will provide a simplified flawless frequent flyer program that consumers can understand with more options for rewards, upgrades and partner affiliations.

Select Best Alternative The best alternative to take would be to simultaneously integrate the channels of the CRM system as well as Join the Tri-Star Alliance. These two plans encompass the Customer first philosophy and take a holistic marketing approach. Classic will provide improved customer service to its customers by finally obtaining a 360 degree view. The Tri-Star Alliance will address the wants and needs of current Classic Reward members and attract new members with its expansive options and benefits.

The shared expenses will help Classics bottom line and the strategic alliance will promote Classics image. Gain Approval and Support The primary opposition to the Tri-Star Alliance will be CEO, Amanda Miller. She is convinced that “ no one can satisfy our customers better than we can” (University of Phoenix, 2012). According to Kevin Boyle, CMO, there has never been a marketing alliance in classic’s history. The CEO and CFO, Catherine Simpson are looking to put money towards the guaranteed cost-saving technique of fuel hedging. However, the Tri-Star Alliance will prove to save on fuel and much more.

Based on SWOT analysis’ done on 3 of Classics major competitors, all airlines are focused on the opportunity of building additional alliances. All competitors are also dealing with the threat of high fuel costs (University of Phoenix, 2012). The opportunity to come out ahead of our competitors has presented itself with the Tri-Star Alliance offer. If we turn it down one of our competitor’s will surely take the opportunity. Some of the largest companies in the world can’t obtain global leadership without forming alliances to leverage resources. Many firms are rapidly developing global strategic networks, and victory is going to those who build the better global network” (Kotler & Keller, 2006). Companies are finding partners to enhance their strengths and counteract their weaknesses. One major example is the Star alliance which joins 16 airlines around the globe to offer seamless connections to 700 destinations (Kotler & Keller, 2006). Amanda will need to support the repair of the CRM system as well in order to maximize positive results. It is pertinent to have the CRM system working to its full potential prior to implementing the Tri-Star Alliance.

With the level of change that will occur, Classic must be able to monitor customers effectively. Implement the Decision With support from CEO, Amanda Miller and CFO, Catherine Simpson Classic will implement the repair of the CRM system and join the Tri-Star Alliance. CMO, Kevin Boyle will spearhead the efforts along with SVP Customer Service, Renee Epson. Evaluate Results The results of joining the Tri-Star Alliance will be monitored through the CRM system. We will track customer concerns and complaints to see if customer needs are being met.

Representatives call times will continue to be monitored only to determine what issues customers are having higher levels of difficulty with. Renee Epson, SVP Customer Service will run customer Interviews of our high level frequent flyers every quarter to gain feedback about the improved Classic Rewards program under the Tri-Star Alliance. CFO, Catherine Simpson will run quarterly financial reports to determine if there is a positive effect on Net income. The positive result may not hit the bottom line immediately so we will expect forecasts from the CFO of what can be expected.

Of course we will watch for the reaction and attention of the media as well as our stock prices. If we have not seen an increase in flight sales or increase of new members to the Classic Rewards program within two quarters we will re-evaluate the promotional aspects of the plan. In conclusion, with all of the internal and external factors creating Classics crisis, there is only one true problem and solution. Classic must accept the concept of “ the customer is king” at all levels. A strong customer focused marketing strategy will succeed as long as everyone is on the same page.

Repairing the systems already set in place at Classic will bring the company back to its former status. Employees need to be listened to as well and supported in implementing strategies for the improvement of the company. “ A smart company creates a high level of employee satisfaction, which leads to higher effort, which leads to higher-quality products and services, which creates higher customer satisfaction, which leads to more repeat business, which leads to higher growth and profits, which leads to high stockholder satisfaction, which leads to more investment, and so on” (Kotler & Keller, 2006).

Works Cited University of Phoenix. (2012). MKT/571 Marketing Classic Airlines Exhibit B. Kotler, P. , & Keller, K. L. (2006). Marketing Management, (12th Ed. ). Upper Saddle River: Prentice-Hall, Inc. A Pearson Education Company. University of Phoenix. (2012). MKT/571 Marketing – Scenario: Classic Airlines.