Classic Airlines Marketing Solution
Amy Salawu
MKT/571
February 25, 2013
Kurt Dietrich
Overview Classic Airlines put together a team to reduce overall costs by 15% and address several concerns including employee morale and customer retention. The team faces the challenge of convincing senior leadership to look beyond the bottom line becoming a customer focused organization. The team also faces the challenging of making changes without increasing costs, cutting salaries, or damaging the reputation of the company in the eyes of shareholders, customers, or employees. The paragraphs below utilize a problem solving process to tackle these challenges.
Problem Solving Solving problems does not occur in a vacuum
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“The Customer Loyalty report clearly shows, membership in Classic Rewards is down nearly 20%” (UOP (A), 2012, p. 3). The same report also reflects members point redemption for flights down 20% from the previous year. Overall membership in the program fell by 10% between 2002 and 2004 with new membership falling nearly 75% in the same period. According to the monthly financials, operating expenses increased significantly from 2003 to 2004 reducing net income from $71 million in 2003 to $10 million in 2004. The review of these reports prompted the Board of Directors to set challenging goals to save the airline.
Set the Goal The challenges of solving this problem include meeting the mandate of the Board of Director’s and presenting a solution that senior leadership feels comfortable with. Classic’s Board of Director’s requires a 15% cost reduction over the next 18 months. Chief Executive Officer Amanda Miller and Chief Financial Officer Catherine Simpson challenged the team to improve the Classic Rewards membership and usage without discounting airfare. The team must stick to the 15% cost reduction and cannot fund the marketing solution with dollars allocated for fuel hedging. In addition, General Counsel Benjamin Sutcliffe reminds the team that union contracts must not be revised to fund the marketing plan. Finding the root cause of the problem should reduce the scope of the solution.
Determine
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