Classic Airlines and Marketing 1

Classic Airlines and Marketing

Betsy Vázquez Valentín

University of Phoenix

Marketing – MKT/571

Saturday, June 5, 2010

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Abstract

Classic Airlines is confronting an overall decline in demand, and decrease in their market share

in the airline industry. As a result of this situation, their share prices have suffered a 10 percent

decrease in the past year. Their frequent flyer program known as Classic Rewards has

experienced a 19 percent decrease in membership participation. Also, the flights (traveling) of

their frequent flyer members have decreased by a 21 percent (University of Phoenix, 2005).

This scenario represents a threat for investors. To overcome this financial crisis and avoid

bankruptcy, the Board of Directors has given Classic Airlines’ top management, the task of

developing a marketing strategy to increase the participation of the frequent flyer program.

This strategy must be executed along with a 15 percent, across-the-board, cost reduction over the

next 18 months (University of Phoenix, 2005). This task has been assigned to a team within the

company. The team must come up with alternative recommendations and solutions to please both

the Board of Directors and Classic Airlines’ top management.

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Classic Airlines and Marketing

The Classic Airlines business scenario presented in this report is an example of the

marketing of services. Although the primary concern comes from the investors, Board of

Directors, and top management, to increase the return of investment (ROI), the tool being used,

for this purpose, is marketing. In this case the product (and service) is their frequent flyer

program. The Classic Rewards program represents a product within the airline. Therefore it can

be said that what is being marketed is a combination of a product and a service (Kotler & Keller,

2006).

In order to promote, regain, and increase the participation of the members of this

program, the company must identify challenges and opportunities of the company, and of the

airline industry. One of the challenges of the industry is the increase of the cost of fuel. This is an

external factor that the airline cannot control. At the same time this issue does not allow the

company to develop a strategy based on pricing. The Board of Directors has also made it clear

that the company must decrease their costs by a 15 percent. Also in the past, this strategy did not

meet the company’s objective.

Challenges and Opportunities

The recommendation for the fuel cost consisted in fuel-hedging. This recommendation

promises an across-the-board, cost reduction of 12 percent, but still the company must address

the objective of increasing the frequent flyer program. According to the survey, research and the

customer service efforts, the Classic Rewards program shows a segmentation of two types of

frequent flyer. These are two target markets that show different needs and preferences. At a

marketing level the company has to focus in identifying the needs of their clients (Kotler &

Keller, 2006).
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Classic Airlines has a customer relationship management (CRM) program that it is not

being used at its maximum potential. The claims made through customer service are not being

used as a primary tool to identify the clients’ needs and preferences. Their automate customer

service is leaving some customer dissatisfied with the service provided. Classic Airlines top

management and Board of Directors are not giving priority to this critical area. This dilemma

also demonstrates a challenge in the current corporate culture.

Corporate Culture

The company’s culture at a top level management shows a tendency of rejecting some

new tendencies. This is demonstrated through their resistance to accept the airlines alliance. This

can also be an opportunity for Classic Airlines to do efficient and effective marketing. The team

chosen for this task will also have to face internal challenges within their organization.
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References

Kotler & Keller. (2006). Marketing management (12th ed.). New Jersey: Pierson-Prentice Hall

University of Phoenix (2006). Classic Airlines Documents . Retrieved from University of

Phoenix, MKT/571 – Marketing course website.

University of Phoenix (2006). Scenario: Classic Airlines – Company Overview. Retrieved from

University of Phoenix, MKT/571 – Marketing course website.