February 11, 2013
Classic Airlines is the world’s fifth largest airline experiencing some of today’s challenges associated with the airline industry. Despite its profitability, Classic Airlines is seeing a drop in consumer confidence, a decline in its Rewards membership, and a decrease in flights taken by its remaining members. Rising operating costs were countered with price reductions, but still have not increased its Rewards membership. To further address the shrinking margins, Classic implemented a 15 percent cost reduction mandate across the company, with marketing taking the brunt of the cuts. (University of Phoenix, 2008)
Tasked with turning Classic’s image around and bring back its loyal customers is Kevin Boyle, the newly hired Chief Marketing Officer. Boyle spent his first six months gathering information, examining the environment, and formulating a strategy; also referred to as utilizing the marketing intelligence system. (Kotler, Keller, 2006) Boyle discovered that a high rate of customer dissatisfaction stemmed from the company’s customer management program (CRM).
A past colleague of Boyle, Josef Wymann, offered him a possible solution of forming a marketing alliance to build upon the CRM. A study of the macroenvironment showed that the trend of forming marketing alliances was popular among several of Classic’s competitors. (University of Phoenix, 2008) The alliance offers companies the opportunity to maximize the effectiveness of responding to customers’ needs.
Research into the demographics of Classic’s customer base revealed the majority of its customers were business travelers. A commonality between the business traveler and leisure traveler was the demand for low fare prices. Other factors in the segmentation strategy, such as behavior, personality, and lifestyle, widely varied between the two types of customers. (University of Phoenix, 2009)
Internally driven factors also challenge the marketing team’s