Scenario Two Problem Solution 1 Running head: SCENARIO TWO PROBLEM SOLUTION

Scenario Two Problem Solution University of Phoenix June 22, 2003

Scenario Two Problem Solution

Scenario Two Problem Solution 2 Classic Airlines is the worlds fifth largest airline with a fleet of more than 375 jets, which is serving 240 cities with more than 2,300 flights daily. Classic Airlines is growing to an organization, which has 32,000 employees since it started there operations. Last year Classic Airlines recorded $10 million profit with $8.7 billion in sales. Even though the airline is profitable, the share prices have decreased by 10% during the past year and the employee morale has been at its lowest due to increase in the uncertainty in the airline industry from all sectors of the economy. As of January of 2005 Classic Airline's customer loyalty rewards membership is on the decline as evidenced to the 19% decrease in the number of Classic rewards members and 21% decrease in flights per number of remaining members. Classic Airlines Board of Directors recently mandated over the next 18 months a 15% across-the-board cost reduction. Within the constraints of the mandate, Classic Airlines also needs to improve the frequent flier program with methods that will demonstrate a measurable return on any investment while still meeting the cost reduction goal. Classic Airlines is also facing restrictive cost reorganization due to overly expansion plans based on anticipated rebound of post September 11 travel. Describe the Situation Issue and Opportunity Identification Several different factors influence the largely uncontrolled marketing activities of Classic Airlines. Classic Airlines has been working on cutting cost through high passenger load ratios however, they are still having a difficult time with the profitability because of the high fuel costs and high maintenance cost.

Scenario Two Problem Solution 3 Classic Airlines is an industry that is still trying to recover from the events that happened on 9/11 and over expansion. That period has caused the consumers to be hit with high cost that have made them cutback on their discretionary travel spending (Plunkett Research, 2007) Classic Airlines is not the only airlines that has this problem they all are faced with similar type of issues. By doing this it will cause Classic Airlines to identify cost-cutting opportunities so they can show a positive return to their investors. Classic Airlines has seen a declining confidence with a 21% decrease in member flights moreover, a 19% decrease in rewards to members. The executive team at this time seems to less concern with what is causing the decrease in numbers and more concerned with the numbers decreasing. The executive team will need to look at how they are going to need to improve the brand loyalty and customer confidence as related to the airline industry. It will be important that the executive team focus on the marketing of Classics Airlines to the customers. Classic Airlines currently has a database on key customer comments; they need to make a plan on to use this to determine what the consumers think Classic Airlines. This will allow Classic Airlines to develop a solid customer base. This customer base should be based on a policy that will be customer orientated and made to determine if customer needs are met. Classic Airlines has an advanced Customer Relationship Management (CRM) system. By using this system Classic Airlines will have the opportunity to fully use there customer data. With the Customer Relationship Management (CRM) system, they have an opportunity to gain data from web portals, from the phone, and form other information collection centers. The Customer Relationship Management (CRM) database will also

Scenario Two Problem Solution 4 help the Classic Airlines to customize the individual consumers experience to enable the customer to be treated like human in steady of a number. (Beal 2007) The customer segmentation analysis will improve the position that Classic Airlines will meet the needs to the consumer. Understand how Classic Airlines is directly competing with the other major airlines is a task that Classic Airline must undertake. They should differentiate their product into individual niches that customers want. (Kerin 2006) The customer segmentation analysis will help Classic Airlines to understanding why each customer chooses to travel with the company that he or she choose. Classic Airlines has determined that they have an outdated customer strategy. Classic Airlines hope to use the Customer Relationship Management (CRM) system to fix this and improve the relationship between Classic Airlines and their customers. This will possible though the customer reward program. Since Classic Airlines has identified that they have an outdated strategy they understand that they will need to reorganize the program to improve customer loyalty. The Customer Relationship Management (CRM) system will be necessary in determining these changes. Classic Airlines has determined that when passengers are choosing an airline most of the passengers do not put price first when choosing a airline, Classic Airlines determine most passengers want certain services, benefits, and functions. Classis Airlines will be able to take advantage of a new alliance with Skyway Airlines, which is seen as an opportunity for Classic Airlines to strengthen there position as an industry leader. Skyway Airlines partnership with will add value to the customer by increasing the value of their rewards program. This will be accomplished by increasing the number of destinations that Classic Airlines have available to them. Classic Airlines

Scenario Two Problem Solution 5 will be able to use the alliance with Skyway Airlines to market the advantages to there customers and hopefully, attract new and long lasting customers. In addition, Classic Airlines will need to address their employees low moral, caused by the publics general negativity about airlines travel and their own job insecurities. The employees stated in a survey They want to feel valued, have career opportunities and information available. (University of Phoenix 2009) The improved motivation of Classic Airlines employees will be the cornerstone of making the company successful. To accomplish this motivation Classic Airlines will need to determine exactly what their employees want and determine how they can deliver these needs and wants. Stakeholder Perspectives/Ethical Dilemmas In the scenario, Classic Airlines has four different types of stakeholders that are involved. Besides looking at Classic Airlines internal issues the stakeholder will need to understand the companies numerous ethical dilemmas. Those stakeholders are the management, shareholders, customers, and employees. Customers want to receive value from the products they purchase from the airline. The employees have several interests that do not seem to be addresses by Classic Airlines. The VP of Human Resources Department has worked on educating the employees on their importance to Classic Airlines. Career growth, improves job security, benefits, and more money are the desires of the employees. However, at times the interests of the management may interfere with need to provide the motivation and incentives of the employees. Classic Airlines need to address there employees concerns because Classic Airlines employees are satisfied then there attitudes and action are more likely to effectively tend to there customers want and needs. Classic Airlines employees deserve to work in an

Scenario Two Problem Solution 6 environment that is conducive to success and provides opportunities for growth and advancement, if Classic Airlines will improve morale and improve their abilities to work with customers. A good return on their investment will be the desires of the shareholders. The shareholders want information when Classic Airlines is experiencing hard times and they will not be profitable because they invested in Classic Airlines. The management team will provide the stockholder the trends and forecasts that are using to create the new management plan. This information must be provided to the customer even if they are not favorable for Classic Airlines. Shareholders want to see their stock values increase and the company to be as profitable as possible. Sometimes it can be hard to resolve this need with the needs of the other stakeholders. The Chief Executive Officer (CEO) Amanda Miller and executive management team have identified it to be important that Classic Airlines redesigns the customer rewards program. The management team has identified that they need to improve employee relationships and the improvement of the customer view. Classic Airlines will become financially secure through growth opportunities, allowing the updating of there marketing strategy, and meeting the needs of its present and future customers. The important for the Classic Airlines to have their mission defined so that all involved can be on board with making the company successful. Frame the Right Problem Classic Airlines is seeking to maintain their position in the airline industry by improving their customer relationship management (CRM) program. Classic Airlines has analyzed the issues and opportunities. Though this Classic Airlines will need to create, a

Scenario Two Problem Solution 7 problem statement that will help the company improves shareholder value. The problem statement will identify how Classic Airlines will develop the companys position in the airline industry though improving reducing costs, customer relations, and increasing profitability. Classic Airlines will accomplish this with new Customer Relationship Management (CRM) technologies that will achieve improves customer satisfaction that will increase revenues. In addition, Classic Airlines will research their customers in order to provide a Rewards Program that better meets the need of the customers. This will allow Classic Airlines to attract, maintain customers, and increase profitability. Describe the End-State Vision Classic Airlines will maintain its position as the fifth largest airline in the industry. In addition, Classic Airlines will increase the customer satisfaction and there profitability, which will improve Classic Airlines stockholders shares. Classic Airlines frequent flier program needs be reorganized to establish customer loyalty by creating an alliance with another company. Classic Airlines will also manage there operating expenses through reducing fuel consumption through the addition of fuel reduction system in addition, having strong relationships with their supplier. Identify the Alternatives and Benchmarking Validation Classic Airlines has identified three concepts that they need to use to identify how well their company is solving key problems. These key concepts is to updating the existing Customer Relationship Management (CRM) system to, improver customer segmentation analysis, redesign the customers rewards program and build a new marketing alliance with Skyway Airlines. This must all be done while Classic Airlines is reducing costs. By looking at other companies that have had the same type of

Scenario Two Problem Solution 8 experiences, Classic Airlines will be able to avoid common problem that arose for them companies. Marriott International, Inc (Successful) Marriott International, Inc. is a leading lodging company. Marriots heritage can be traced to a root beer stand, which was opened in Washington, D.C., in 1927 by J. Willard and Alice S. Marriott. Marriott International today has more than 3,200 lodging locates that are located in the United States and 66 other countries and territories. (Marriott International, Inc 2009) hereby, looking for at other successful company as benchmarks for this, Marriot is a good example of how to implement a Customer Relationship Management (CRM) system. Marriot use a standardized Customer Relationship Management (CRM) system though out their chain of hotels. This allows Marriot to give a more personalized service to their customers in all the different hotels. Marriot uses the Customer Relationship Management (CRM) system with all their customers interactions therefore; the employees are able to target the customers, which bring the most money and business to the company. Marriot had been able to use the Customer Relationship Management (CRM) system to improve the profitability, sales, customers satisfaction, and strengthen brand loyalty. By using the Customer Relationship Management (CRM), system to create a travels guild for customers based on preferences shown in the past visits to Marriot hotel chain. These customers have shown to improved satisfactions scores when surveyed. Classic Airlines has recognized the value of customer loyalty and how important the customer it is for the profitability of the organization. (Caterer Search 2004) Hawaiian Airlines (Successful)

Scenario Two Problem Solution 9 Hawaiian Airlines, Inc. is always committed to delivering the highest-level customer service
by making customers air travel as easy and best experience for every customer. Hawaiian Airlines customers comfort is of the primary importance to Hawaiian Airlines, the safety of the customer is the first concern of Hawaiian Airlines. On the web site Hawaiian Airlines states Since 1929, Hawaiian Airlines has built a reputation for safety and hospitality. In 1999, the Air Transport Association (ATA) and its member carriers developed Customer First, an Airline Customer Service Commitment. Hawaiian Airlines was commitment in participate in the customer first program and they strive to further improve there service demonstrates there ongoing dedication and sight on improving Hawaiian Airlines air travel. (Hawaiian Airlines 2009)

All Hawaiian Airlines employees receive training so that they will have commitment to the Customer First program service plan that are implemented in a manner that will reflect Hawaiian's commitment to serving there customers at levels set forth in that plan. (Hawaiian Airlines 2009) Hawaiian Airlines Customer First training plan covers customer service skills, service recovery skills, specific job skills, and aligning service standards and expectations with the company vision, values and critical success factors. (Hawaiian Airlines 2009) Classic Airlines will need to benchmark there rewards program and possibly position to a larger market than just business and leisure travelers. Classic Airlines should try to use Marriotts system to help create and automate a personalized marketing plan to try to gain frequent and returning customers. Classic Airlines would like to build the same type of customer loyalty, which Marriott International, Inc has used to run their business efficiently. Classic Airlines Customer Rewards will need to redesign their program to meet their customers needs. Marriott International, Inc executive team meets on a monthly basis to analyze the data from their Customer Relationship Management (CRM) system. The executive will use this data to create new marketing plans and brainstorm new ideas. Marriot is continuously changing and updating their system to reinventing

Scenario Two Problem Solution 10 their brand to give their customers the best travel experience possible. (ETurboNews 2008) Classic Airlines should use the Marriotts benchmarking to create a rewards program that will show their customers that they are commitment to improving services, which they the customer is demanding. Once Classic Airlines aligns with Skyway Airlines, they will be to show their customer that they have a new commitment. In addition, Classic Airlines will need to benchmark other rewards program to ensure that they are using alliances that is creating a

combined action of that is meeting the needs of the customer and is what the customer is
looking for in a rewards program. Classic Airlines could also use the position that they are currently operating on. By cutting costs and waiting for general market improvement. However, Continental Airlines tried this strategy and was not successful at it. Continental Airlines did cut cost that affected the comfort of their customers. Moreover, by doing this they lost customers to the competition that were able to provide low cost flights and a better rewards program (Arussy, 2004). Evaluate the Alternatives Classic Airlines needs to develop the procedures for improving, optimize, and value the productive of the company. Classic Airlines will need to innovative and build a close relationship with their stakeholders and customers thus gaining the company profitability. The first goal of Classic Airlines is a 10% increase in profitability that will be directly affected to how sound their Customer Relationship Management (CRM) program is operated. By having a sound Customer Relationship Management (CRM) system Classic Airlines will ensure that they will meet this goal and as long as they are using the Customer Relationship Management (CRM) system as there foundation. By properly

Scenario Two Problem Solution 11 managing, the Customer Relationship Management (CRM) system Classic Airlines will be able to insure that the future obligations to increasing revenues and cash flow are met. The second goal of Classic Airlines is to improve employees satisfaction and improved customer satisfaction, Classic Airlines will be able to be achieved by implementing a redesigned plan, which is based on the Customer Relationship Management (CRM) system. The redesigned plan will need to show the Board of Directors a plan that will show how Classic Airlines is dedicated on improving Classic Airlines employees morale and satisfaction. Classic Airlines will also need to show the employee is that they are dedicated to improving their position within the company. The best way that Classic Airlines can do this is though transparency and communicating all the changes that are being taken will improve profitability for the company. The third goal of Classic Airlines will to increasing the customer rewards participants by 5%, which will be achieved by using proper marketing techniques. The new alliances with Skyway Airlines will help achieve this goal. These alliances will show that Classic Airlines is working as a total travel company. The fourth goal of Classic Airlines will be to reduce the operational cost by 25%. Classic Airlines will be able to achieve this by steam lining their business process. Classic Airlines will need to review their current flight structure and their debts. They should be able to improve cash flow by reducing non-profitable flights if possible and the reorganization their debt. The executive management will need to review the internal business structure, it may be possibly eliminated any duplicating functions within all the different departments. The fifth goal and final goal of Classic Airlines is to increase the

Scenario Two Problem Solution 12 frequent flyer users this will involve total customer satisfaction and good customer service. Identify and Assess Risks The recommended alternatives for Classic Airlines are not without risks. This alternative involves using revised customer relationship management (CRM) software and to develop a new Customer Reward Program that will better meets the needs of their customer. The risk of this is the cost associated with developing and implementing these new programs. With the several different solutions, which are available to Classic Airlines, Classic Airlines efforts to ensure customer loyalty or sustain customer relationships could be at risk. Classic Airlines management will need to evaluate the benefits and the risks of the several solutions. Classic Airlines will need to meet goal for the stakeholders to be able to meet the risks. Make the Decision In making the decision for Classic Airlines, many companies were benchmarked. Classic Airlines has several issues to deal with and no single company will resolve Classic Airlines troubles. Any combination of alternative solutions being applied to Classic Airlines could to solve its problems. Classic Airlines will ensure that they have analyzed and assessed the existing strategies and the opportunities. Classic Airlines will use a combination of solutions that are able to blend the rewards program and Customer Relationship Management (CRM) system into a solution that will takes advantage of the company and the new alliances. In addition, Classic Airlines need a solution that will need to implement procedures for defining the ethical codes and conducts for the organizations marketing strategy. By using the defined end state goals Classic Airlines

Scenario Two Problem Solution 13 will be able to create systems that will build or redesign their brand image, reduce operation costs while meeting customer demands and building profits. Develop and Implement the Solution Classic Airlines needs to define the implementation of the chosen solutions by first creating a timeline for the implementation of the solutions. With the timeline management will be able create an implementation plan that the employees and management team of Classic Airlines need to provide support to ensure the plan is successful. The key tasks will be delegated by the CEO to a leadership team to ensure that the proper tasks are being performed correctly. The management team of Classic Airlines could employ a consultant firm to help with the implementation of the Customer Relationship Management (CRM) system. By using, an outside firm to help the implementation they may be able to bring fresh viewpoints to the organization that is able to improve the total Classic Airlines business plan. Evaluate the Results Classic Airlines will need to ensure that their plans implemented are effective, to ensure this Classic Airlines will have to develop a series of strategic standard of measurements that will be used to measure the effectiveness of the programs. With these standards, Classic airlines will be able to create a type of report within the company that will be able to show how bad or how good the company is doing. With a good standard Classic Airlines will be able to track the revenue of the company, which is cash flow and operating income. This revenue track will then be able to compare to the airline market growth rates though out the year. The standard report will help evaluate how the data is defined and measured. However, Classic Airlines does need to be careful and not over

Scenario Two Problem Solution 14 analyze the data because, an organization that researching the customer more than investing may overlook profitable ideas. The key standard as defined by Classic Airlines management will need to be review monthly to ensure that the plan is on scheduled. An annual audits need to be developed to ensure that the companys results are meeting the new plan. The results of the audits will need to review against the target plans that will reflect success of the company. Conclusion Classic Airlines is facing a situation where the need to improve their customer satisfaction while the company need to cut costs. Classic Airlines is feeling the pinch of competition and must find a way to remain competitive in the airlines industry. Classic Airlines will be able to improve their relationships with employees and customers by implementing a rewards system, which allows them to meet the customers needs and will ties this to employee rewards. If Classic Airlines is successful, they will increase their customer base and should continue to remain a top player in the airlines industry market.

Reference Adams, Cary W. (2008). Customer satisfaction and customer loyalty are the best predictors of customer retention, Retrieved June 16, 2009 from http://www.adamssixsigma.com/Newsletters/customers_results.htm

Scenario Two Problem Solution 15 Arussy, Lior. (2004). Dont Burden Customers With Your Costs. CRM Magazine. Volume 8 Issue 1, p26. Retrieved June 16, 2009 from EBSCOhost website. Beal Barney, (2007). Is there a CRM lesson in JetBlue's snafu?. SearchCRM.com. Retrieved June 16 2009 from http://searchcrm.techtarget.com/news/article/0,289142,sid11_gci1244592,00.html Caterer Search. (2004). CRM technology: Reaping the benefits in hospitality. Retrieved June 16, 2009, from http://www.caterersearch.com/Articles/2004/06/24/53949/crmtechnology-reaping-the-benefits-in-hospitality.html Deal Duane W., (2002). Recruiting and Retention. GlobalSecurity.org. Retrieved June 16, 2009 from http://www.globalsecurity.org/military/library/congress/2002_hr/deal.pdf ETurbo News. (2008). Marriott International has best showing ever at Freddie Awards. Retrieved June 16 2009, from http://www.eturbonews.com/2681/marriottinternational-has-best-showing-everHawaiian Airlines (2009) Customer First. Retrieved June 10, 2009, from http://www.hawaiianair.com/ Kerin, R., A., Hartley, S., W., Berkowitz, E., N. & Rudelius, W. (2006). Marketing (8th ed.). New York: The McGraw-Hill Companies. Marriott International, Inc (2009) Corporate Information Retrieved June 16 2009, from https://www.marriott.com/corporateinfo/default.mi Military Connection. (2008). Air Force Benefits. Retrieved June 16 2009, from http://www.militaryconnection.com/benefits.asp?xgroup=Air%20Force Plunkett Research. (2007). Introduction to the travel industry. Retrieved June 16 2009,

Scenario Two Problem Solution 16 From http://www.plunkettresearch.com/Industries/TravelAirlineHotelTourism/tabid /213/Default.aspx University of Phoenix (2009) Week Four scenario Classic Airlines. Retrieved June 2, 2009 from University of Phoenix, Week Four, rEsources, MBA 570.