Problem Solution: Classic Airlines 1

Running head: PROBLEM SOLUTION: CLASSIC AIRLINES

Problem Solution: Classic Airlines

Jim Moore

University of Phoenix

MBA 570: Sustainable Customer Relationships

Group MBAA0EO7A0

Milton Peters

December 8, 2008
 Problem Solution: Classic Airlines 2

Problem Solution: Classic Airlines

Classic Airlines, the world’s fifth largest airline, has been in business for 25 years and

employs over 32,000 people. Classic Airlines has a fleet of 375 jets, serving 240 cities and

operating over 2,300 flights per day (University of Phoenix, 2002). A decline in sales, market

share, profitability and membership in the rewards program has resulted in the airline facing a

restrictive climate in the industry based on airline consolidation and extreme competition. Based

upon the declining metrics and the latest customer loyalty report, Chief Executive Officer

Amanda Miller has tasked members of the leadership team with making sweeping improvements

to the frequent flier program. By using methods that will promote a measurable return on any

investment while still meeting the cost reduction goal and without discounting fares, reaching the

end-state vision is within reach. In addition, the Board of Directors recently mandated a 15%

across-the-board cost reduction over the next 18 months. Classic Airlines desires to boost

consumer and employee confidence by keeping costs down while increasing customer and

employee satisfaction in the company. To accomplish this, Classic Airlines will need to analyze

customer feedback to understand long-term forecasting and marketing objectives. The objective

of this paper is to present Classic Airlines’ issues and opportunities, stakeholder perspectives,

ethical dilemmas, definition of the problem, the end-state vision and propose the optimal

solution.

Describe the Situation

Issue and Opportunity Identification

Classic Airlines has several diverse factors influencing their marketing activities which

are largely uncontrolled. The company is faced with rising fuel and labor costs. These large

increases have forced cost-cutting through high passenger load ratios and better efficiency,
 Problem Solution: Classic Airlines 3

however, these costs remain an obstacle to high profitability. The airline industry is still

recovering from the effects of 9/11 after over-expansion following the downturn. Consumers

have also shown less willingness to travel on lower discretionary income in light of recent fuel

prices. Each company in the industry is facing similar issues, yet competition has increased.

Classic Airlines must identify where to cut costs yet continue to provide a positive return on

investment for shareholders.

Classic Airlines is facing declining consumer confidence in the airlines with a 19%

decrease in rewards members and of those members there has been a 21% decrease in activity.

Some members of the executive team appear to be more concerned with financial numbers rather

than improving customer service. Classic Airlines needs to maximize customer needs and

increase brand loyalty to regain customer and investor confidence. Marketing has become

increasingly important because it puts the customer first to achieve the company’s goals; Classic

Airlines’ marketing needs to know as much as they can about current and potential customers.

Classic already collects data on key customer comments which should continuously used to

leverage marketing efforts.

Classic Airlines has a solid base to start from to rebuild customer relations. The customer

should be at the core of the business to help determine consumer requirements. The company

already possesses an advanced Customer Relationship Management (CRM) system and they

have the opportunity to restructure a more integrated and valuable system using the existing tool

to its full advantage. The company could integrate the system across the phone and web portals

so they could extract more information from their customers to help improve the customer

experience. “CRM systems are tailored mainly for interactive marketing rather than large-scale

batch operations, and to work well as outbound channels they need real-time methods to - as the
 Problem Solution: Classic Airlines 4

saying goes - reach out and touch someone: e-mail and telemarketing” (Fowler, 2003, ¶ 6).

Classic Airlines could do a better job at performing customer segmentation analysis to

position the product for more than just leisure and business travelers. Classic Airlines needs to

focus on head-to-head positioning by competing directly with the other major airlines. Classic

Airlines should also seek to differentiate through service and quality (Kerin, Hartley, Berkowitz,

& Rudelius, 2006). Classic Airlines must understand why each consumer books and why they

are traveling. Classic Airlines has already identified that the segmentation strategy is outdated

and does not match what customer values. The CRM system could help to create and automate

personalized marketing to communicate with customers and increase loyalty. The software needs

to build profiles on its customers to help serve each individual customer. This, in turn, will

increase web site visits and ticket sales.

Classic Airlines’ loyalty rewards program needs to be revamped and once the program is

restructured, it needs to be properly marketed to the target customers. The company was over-

concerned with prices and not as concerned with the loyalty program so it has not grown with the

customers and the company. The loyalty program should be fully integrated with the CRM

system to produce best results. Customer feedback has already indicated that most business

passengers do not put price at the top of their list when choosing an airline. These travelers desire

specific benefits and services.

Classic Airlines has the opportunity of building a new alliance with Skyway Airlines

which many stakeholders would see as a strength-builder in the eyes of the industry. The alliance

would afford the customer added value by offering a more extensive set of rewards. Weber

(2005) states a number of benefits to airline alliance partners, obviously from the airlines’

perspective, “increased revenue and passenger numbers, greater reach, access to slots/gates and
 Problem Solution: Classic Airlines 5

greater frequency of services, more comprehensive route networks, economies of scale in

marketing, service costs, and the eradication of duplication of operational efforts” (p. 257).

Classic Airlines would be able to market this new alliance to maintain and attract new customers

over other airlines.

Classic Airlines’ internal stakeholders, specifically its employees, are suffering low

morale due to the public’s negative outlook, fear of job cuts and insecurities. The employees

listed the following on the consulting survey: “They want to feel valued, have career

opportunities and information available” (University of Phoenix, 2002). Motivated employees

are the cornerstone to a successful company therefore Classic Airlines needs to treat their

employees as internal customers, understand what the employees want, need and how the

company can deliver to boost morale.

Stakeholder Perspectives/Ethical Dilemmas

In addition to examining the issues, the company must consider the the stakeholders and

the associated ethical dilemmas. Classic Airlines has four main stakeholders in this scenario: the

employees, company management, shareholders and the customers. The employees in this case

have several interests that do not appear to be addressed by the company. The Vice President of

Human Resources has worked to educate employees on their importance to the organization. The

employees desire better compensation, job security, benefits, growth and advancement

opportunities. At times, management’s interest in company productivity may interfere with the

need to provide incentives and motivation for employees. If customer service employees are

satisfied with their jobs, they will be able to tend effectively foster good consumer relationships

which, in turn, will boost growth and shareholder value.

Shareholders desire a return on their investment and to feel secure that the company is
 Problem Solution: Classic Airlines 6

working in the shareholder’s best interest. The investors have chosen to invest in Classic Airlines

and have a right to be informed when the company is experiencing difficult times and what any

strategies or tactics will be employed to turn a profit. The stockholders want to know the trends

and the sales forecasts; management needs to give them the most informed answers, even if those

numbers are not what the shareholders want to hear.

The Executive management and CEO, Amanda Miller, identified the necessity of

positioning Classic Airlines for success by revamping the customer rewards program.

Management realizes that the the airline must improve the relationships with customers and

establish credibility with employees. Customers’ needs for better service may come in conflict

with cost restructuring. The customers want better service, amenities, flexibility, maximum

frequent flyer miles,and easy access to all the locations that they want to go, with the least

amount of layovers. They want to do this safely, on-time and with no problems with luggage

handling. Customer service can be a costly expenditure that management mistakenly sees as an

easy target. Classic will need to tailor their services with what customers truly value at heart – a

reality that management needs to face when considering how to restructure the rewards program.

Frame the “Right” Problem

After analyzing and understanding the issues, opportunities, and stakeholder perspectives,

Classic Airlines must formulate a problem statement that will help the company make the best

decision. The problem statement is - Classic Airlines will maintain its strategic position in the

airline industry by creating customer confidence and loyalty, improving profitability and aligning

with its stakeholders. This will enable Classic Airlines to become financially secure through

growth opportunities, formation of strategic alliances, the revamping of its marketing strategy

and exceeding customer expectations.

 Problem Solution: Classic Airlines 7

Describe the “End-State” Vision

Classic Airlines will maintain its position of being the fifth largest airline in the industry.

Classic Airlines will increase profitability and customer satisfaction, which will collaterally

improve the airline’s market share. The one-year goals attached to increasing market share

include a 15% increase in new customer base, a 20% increase in customer loyalty and a 30%

increase in customer satisfaction, measured by surveys and feedback. Classic Airlines’ reward

program will be revamped to reestablish customer loyalty through forming new alliances with

other airlines. In addition, the airline will address the problem of rising fuel cost by incorporating

a system that will save on fuel consumption and reduce costs without sacrificing quality service.

The 18-month goal attached to reducing operating costs is a 15% decrease.

Identify the Alternatives and Benchmarking Validation

After a thorough review of the problems, actions, and results for Classic Airlines and

other companies, the analysis revealed three key concepts that each corporation either did well or

failed to accomplish. These concepts involve integrating and enabling different channels with

existing CRM, performing customer segmentation analysis, revamping the rewards program,

expanding strategic partnerships and alliances and reducing costs.

Hawaiian Airlines (HA) was successful in concentrating on enabling its current CRM

methodologies by enabling the web channel. This effort resulted in HA’s price responsiveness to

be more agile and responsive to market forces and competition. Aloha Airlines, unfortunately,

wasn’t so adept at this process and ended up filing for bankruptcy after 60 years of doing

business. Aloha Airlines, having not taken risk into consideration or doing a thorough scanning

of the competitive landscape, failed in sustaining business and booking rates. Classic Airlines is

losing their competitive edge in the airline industry and must focus on creating a quality product
 Problem Solution: Classic Airlines 8

that will strengthen the bond between the company and its customers, resulting in a long-term

customer loyalty. The key objective for Classic Airlines is to determine what their customers

need in order to increase sales and booking rates without regard to channel. This can be

exemplified by JetBlue’s success in market research of customer’s desires. The research revealed

that customers want low fares, exceptional loyalty program benefits, more comfortable seats,

more on-board entertainment options and world-class customer service. JetBlue leveraged an

effective CRM system to improve its service offerings and become a carrier of choice in a

competitive landscape. Classic Airlines should follow JetBlue’s discovery and enable its CRM to

take advantage of customer needs and implement them. Classic Airlines does not have an

effective CRM and does not focus on customer relationships (University of Phoenix, 2002).

Classic Airlines could build a new alliance with Skyway Airlines which would help

Classic become the industry leader in this arena. Classic Airlines should look at other rewards

programs and understand that many successful programs use alliances to create synergy and

create growth through offering additional travel destinations. Ohmae (1989) raises the

importance of growth and reduction of fixed costs by forming partnerships, “To compete in the

global arena, you have to incur – and defray – immense fixed costs. You need partners” (p. 144).

Classic Airlines could rely purely on cost-cutting in order to turn the company’s profit-

margins problem around while waiting for the market to improve. Aloha Airlines, as previously

mentioned, attempted this strategy and was unsuccessful. The competitive landscape, at the time,

did not afford Aloha’s return to higher rates – without making other cuts in service routes or

flight frequency, Aloha Airlines could not return to a competitive state.

Evaluate the Alternatives

Classic Airlines will need to create value and establish new systems and procedures to
 Problem Solution: Classic Airlines 9

optimize productivity. With the help of other successful companies that are in line with their own

goals, Classic Airlines can begin to establish diversification in the airlines forum and show

stakeholders the benefits of a new venture. To be an industry leader, Classic Airlines will need to

embrace innovation facilitated by close interaction with consumers and other vital stakeholders.

The first goal, increase revenue, will be directly affected by having a sound CRM. A

properly managed CRM will guarantee future obligations are met, which in turn will increase

revenues and cash flow. Increasing profitability can be achieved by streamlining operations

across the organization. By analyzing the problems Classic Airlines can identify issues should

revenue or booking rates decrease.

Increasing customer loyalty participants and expansion of the customer base, the second

and third goals, can be achieved by revamped marketing techniques. A restructured rewards

system with the new alliance will help in meeting this goal. Although the process of expansion

increases capital expenditures in the near term, long-term effects of this program eventually help

the growth of the organization. By having an unyielding marketing management system the cash

conversion cycle will be drastically reduced.

The fourth goal, improving customer and employee satisfaction, is achieved by

implementing a solid CRM and instituting a viable restructuring plan. The restructuring plan

needs to be presented to the board of directors, management and employees. Classic Airlines

should also share the plan with its contractors, vendors and third-parties to glean professional

feedback. Classic Airlines should replace weak members of top executives and the board of

directors. Then reduce management layers because often unprofitable companies are bloated

with middle managers. Above all, communication of all changes to the main stakeholders

identified is essential and will boost morale and reduce uncertainty.

 Problem Solution: Classic Airlines 10

Identify and Assess Risks

Classic Airlines needs to choose the most viable solutions and perform further evaluation

of risks and benefits. Based on an analysis of alternative solutions and how these solutions meet

goals established by stakeholders’ needs, the secondary alternative was a clear winner. However,

Classic leaders have to bear in mind the risks and benefits associated with each available

alternative and the leaders must consider all these before choosing and implementing a specific

solution.

The major risks involved with seeking out and entering into alliances and partnerships

with other carriers include loss of customer base due to discontent with partner, alliance

members not adhering to agreements and lack of leadership buy-in. These are all low-probability

risks, however the consequences can be devastating to Classic Airlines’ profitability including

decreased revenue and customer inconvenience. Mitigation strategies for these risks include clear

communication to customer base before negotiating an alliance, foster strong relationships with

alliance members and draft a clear project plan for leadership buy-in.

With expanding the CRM component, there are risks of high-cost overruns, loss of

control with project scope, misalignment of goals, lack of change management and analysis does

not bring useful information. Budget-related risks are medium to high probability, however they

can be mitigation through the rough consequences by creating a high-performance team to

oversee the project and all aspects, conduct thorough research of contractors and vendors and

ensure that proper market segments are identified. The consequences of the risks include CRM

system would fail before implementation, heavy and unplanned financial outlays and resistance

to change on the part of stakeholders.

An overhaul of the current rewards program does not carry heavy risks, however, the
 Problem Solution: Classic Airlines 11

risks still need to be considered. Risks may include no membership increase, high costs of

analyzing and developing and lack of internal stakeholder buy-in. Budget considerations are high

probability, however the other risks are medium to low. The consequences include resistance to

change, cost overruns and implementation failure, all carrying high severity. The mitigation

techniques would again include clear communication, strong key-player emplacement for project

management and clearly documented project scope with necessary change management controls

in place.

Make the Decision

Any recommended solution should be made only after Classic Airlines has assessed and

analyzed existing marketing strategies and identified the various opportunities available for

improving marketing efficiency from benchmarked companies. Each recommended alternative

solution had an optimal individual strength that best satisfied one of the end-state goals. The

optimal solution for Classic Airlines will be a combination of the alternative solutions that

provide for integrating CRM, restructuring the awards program, and joining the marketing

alliance.

The optimal solution will allow Classic Airlines to meet their end state goals. Using the

above systems will allow them to build their brand image and profits, reduce operational costs,

and meet all customer demands. Analyzing and responding to ethical issues will give them the

ability to maintain a positive relationship with all vendors and stakeholders, while avoiding any

conflicts of interest.

Develop and Implement the Solution

In proceeding with the secondary alternative and most optimal solution, overhaul rewards

program and enter into additional alliances with other carriers, Classic Airlines first begin to
 Problem Solution: Classic Airlines 12

improve on the customer’s satisfaction through CRM. After finding the correct company to sub-

contract to and agreeing on price, the system will be upgraded. Along with the changes, a

representative of the new CRM software will take several weeks to train key players in

management.

The next phase will be to build strategic business alliances with business to improve the

rewards program. This will require several weeks of benchmarking and research to find the right

company and products. The marketing department will then begin its campaign to introduce the

first phase of the revamped rewards program.

Evaluate the Results

Classic Airlines has several options it can use to measure the results of the decisions it

made regarding its customer relationship management. When evaluating results, importance

must be taken to examine both quantitative and qualitative results. The first measurements will

be quantitative, where as the success will come from improved revenue as will be evident on the

monthly/quarterly financial reports and daily stock prices. A second measurement will be

qualitative which will be derived from questioning the passengers and employees through

surveys and the results provided by reports generated through the use of the CRM system.

By developing strategic alliances with other companies, Classic Airlines will be able to

provide its customers with destinations that are not presently available. Within the strategic

alliances, Classic Airlines may be able to better use or even prevent having to lay up it resources

aircraft during winter months. However, senior management and the workforce need to

understand that the loyalty program is not just points and gifts, the program is a true reflection of

Classic Airlines.
 Problem Solution: Classic Airlines 13

Conclusion

Classic Airlines is faced with the need to make a definite, strategic shift within its

operating structure. The goal is to evaluate all options available with regards to the updating

Classic Airlines’ rewards programs, value-added consumer packages and CRM solutions to

optimize key elements of the company’s overall business plans. For Classic Airlines to reach its

end-state, effective customer relationship management will be essential. This includes effective

forward looking environmental scanning, improved forecasting, and organizing for current and

future CRM initiatives. To manage its recovery and future growth, Classic Airlines must ensure

it maintains adequate customer levels and have plans in place to handle fluctuations in buying

patterns by its consumers. By fully marketing the benefits of expanding into new market areas

through strategic alliances combined with better customer service, Classic Airlines will one

again be a successful airline.

.
 Problem Solution: Classic Airlines 14

References

Fowler, J. (2003, October 1). CRM is a four-letter word. Direct, 15(13). Retrieved December 4,

2008 from General OneFile.

Ohmae, K. (1989, March/April). The global logic of strategic alliances. Harvard Business

Review, 67(2), 143-154. Retrieved December 5, 2008 from EBSCOhost database.

Kerin, R. A., Hartley, S. W., Berkowitz, E. N., & Rudelius, W. (2006). Marketing (8th ed.). New

York: The McGraw-Hill Companies.

University of Phoenix. (2002). Scenario Two: Classic Airlines. Retrieved November 19, 2008,

University of Phoenix, Week Four, Resource. MBA 570 – Sustainable Customer

Relationships Course Web site.

Weber, K. (2005, February). Travelers’ perceptions of airline alliance benefits and performance.

Journal of Travel Research, 43, 257-265. Retrieved November 22, 2008 from SAGE full-

text collections.

Table 1
Issues and Opportunities Identification
Concept Application of Concept
in Scenario or
Simulation
Customer value Classic Airlines is in a
highly competitive
industry and must
differentiate their product
from the competition
through both a service
and cost perspective.
They can gain loyal
customers by providing
the benefits that targeted
customers’ desire.
Classic should listen to
key customer comments
such as “Treat me like a
person, a paying
customer, which is what I
am” (University of
Phoenix, 2002).
Market Classic Airlines is trying
Orientation to focus on its customers’
towards the needs by placing its focus
“customer era” on CRM processes to
understand its customers
and know exactly what
they desire. Classic will
be able to use this in their
marketing campaign to
satisfy the customer
through personalized
customization.
Global Classic Airlines has been
Competition offered a marketing
Problem Solution: Classic Airlines
Reference to Specific
Course Concept
(Include citation)
“Customer value is the
unique combination of
benefits received by
targeted buyers that
includes quality, price,
convenience, on-time
delivery, and both before-
sale and after-sale
service” (Kerin et al.,
2006, p. 15).
“An organization that has
a market orientation
focuses its efforts on (1)
continuously collecting
information about
customers’ needs, (2)
sharing this information
across departments,and
(3) using it to create
customer value.The result
is today’s “customer era,”
in which firms seek
continuously to satisfy the
high expectations of
customers” (Kerin et al.,
2006, p. 20).
“Intense competition in
today’s fast-paced
15
Personal Experience
at your Organization
Although my firm’s
service offerings cater
to a niche market, it is
very dynamic and
continues to grow. One
paramount value that
we have is truly
showing the customer
they are valued and
listening to the
customer’s issues.
My firm focuses on the
customer’s needs, not
just based on what the
customer voices, but
also on market research
and a proactive
approach by observing
industry and trends in
the marketing arena.
My firm was acquired
by our biggest
 Problem Solution: Classic Airlines 16
alliance opportunity that domestic and global competition in
would integrate all markets has caused September. In the time
customer-facing elements massive restructuring of leading up to the
to improve the customer many American industries acquisition, and even
experience (University of and businesses. American during acquisition talks
Phoenix, 2002). This managers are seeking and negotiations, we
revamping could help ways to achieve success received daily updates
Classic Airlines be in this new, more intense from the CEO
successful under extreme level of global regarding the state of
global competition. competition” (Kerin et al., the competition and
Members of airline 2006, p. 15). motivation to “out-sell
alliances can advertise and out-service” the
their partnerships and competition. During the
generate loyalty. This negotiation of
alliance could set them acquisition, we were
apart from other airlines still out-selling the
and create demand for competition to
Classic Airlines’ rewards influence a “sweeter”
program. deal.
Segmenting and Classic Airlines has one “Market segmentation My firm offers a
Targeting product and two main involves aggregating service which will
Markets market segments, the prospective buyers into differ in features based
business traveler and the groups that (1) have upon the market
leisure traveler. The common needs and (2) segment – individual
company also segments will respond similarly to a emailers, resellers, or
different types of marketing action. Market email service
frequent fliers up to top- segments are the providers/marketers.
level frequent fliers. relatively homogeneous We tune our service
Classic Airlines knows groups of prospective packages according to
that upper-echelon buyers that result from the the segment and
reward customers do not market segmentation encourage loyalty by
place a high importance process. Each market discounting if
on price, rather quality segment consists of necessary.
and service. The people who are relatively
marketing campaign similar to each other in
needs to be segmented to terms of their
appeal to each type of consumption behavior”
customer and cater to (Kerin et al., 2006, p.
them. 233).
Psychological The decline in the Classic “Psychology helps My firm has enjoyed
Influences: Airlines’ rewards marketers understand why increased customer
Perception - program, the loyalty and how consumers satisfaction rates year
Problem statistics and the exit behave as they do. In after year due to our
recognition interviews give data to particular, psychological focus and commitment
Classic Airlines that is concepts such as to customer service,
crucial to understand the motivation and attending to the
decline in business personality; perception; customer’s voiced
 Problem Solution: Classic Airlines 17
revenue statistics and learning; values, beliefs, needs, and being
negative feedback. and attitudes; and lifestyle proactive about making
Classic needs to are useful for interpreting sure the customer is
understand needs of the buying processes and exceedingly satisfied
customer are linked to directing marketing with their interaction
the problem with the efforts (Kerin et al., 2006, from initial sales
CRM product. Classic p. 126). approach to
Airlines needs to conduct implementation and
research to understand ongoing support of our
their customers. service.
 Problem Solution: Classic Airlines
Table 2
Stakeholder Perspectives and Ethical Dilemmas
Stakeholder Perspectives and Ethical Dilemmas
Stakeholder Groups
with Competing Values The Interests, Rights, and
Values of Each Group
List: Group X
versus Group Y
Chief Executive Officer The CEO, Amanda Miller, is a
vs. Senior Management center of accountability as the
leader of the organization her
decisions will determine the future
of the company. Presently
Amanda’s decisions are opposite
her staff’s where alliances are
concerned.
Employees vs. Classic Interests: career progression plan,
Airlines on the job training, incentive plans,
motivation
Values: ability to support family,
productivity, accountability
Customers vs. Classic Interests/Rights: customer care, fair
Airlines price, convenience, timeliness,
quality, incentives, options,
innovations
Values: honesty, integrity,
accountability, trust
18
Course Concept
“Meaningful customer
relationships are achieved by
the firm’s identifying creative
ways to connect closely to its
customers through specific
marketing mix actions
implemented in its marketing
program” (Kerin et al., 2006,
p. 16).
Uncertainty is plaguing the
employees who are worrying
about their job security during
an industry downturn and
amid cost-reductions. The
employees feel under-valued,
insecure; want to have career
opportunities and information
available, and a challenging
and motivating work
environment. When
employees are not motivated,
their customer service tends to
suffer and will conflict with
the customers’ desire for good
service.
Classic Airlines’ executives
need to properly identify key
drivers of customer value and
understand their customer.
Currently they are not
effectively using the
marketing research from
 Problem Solution: Classic Airlines 19
Stockholders vs. Classic Interests/Rights: increased
Airlines confidence, return on investments,
receive high dividends, optimize
revenue, early notification and
involvement
Values: integrity, loyalty
customer surveys which
leverage customer feedback
and indicate what business and
leisure travelers’ desire from
Classic Airlines.
Classic Airlines must
restructure and differentiate to
beat out the competition which
will increase shareholder
value. Classic Airlines must
bring back the dissatisfied
frequent flier. The company
must analyze
industry/competitive trends to
benchmark best practices to
make the shareholders happy.
 Problem Solution: Classic Airlines 20

Table 3

Analysis of Alternative Solutions

Alternative Solution Evaluation Matrix

GOALS

Increasecustomer retention rate

Increasefrequentflyer rewards

Increasecustomer satisfaction
Expand customer base
programmembership
IncreaseRevenue

Relative Importance (Weight)==> 5 4 3 5 4

Primary Alternative Solutions
ALTERNATIVE SOLUTIONS

(A)Seekoutandenter into
allianceagreements with 4 4 5 4 3
othercarriers
(B)ExpandCRMand
0 3 5 4 5
implementnewtechnology
(C)Overhaul current
5 4 4 5 4
rewards program
Secondary Alternative Solutions
Overhaul rewards programandenter
intoadditional alliances withother 5 4 5 5 4
carriers
 Problem Solution: Classic Airlines 21

Table 4

Risk Assessment and Mitigation

Risk Assessment and Mitigation

Alternative Risks and Probability Consequence and Mitigation Techniques
Severity and Strategies
Seek out and enter • Loss of client base • Decreased • Clear communication
into alliance (Low) revenue (High) of intent
agreements with • Alliance members • Customer • Foster strong alliance
other carriers not adhereing to inconvenience relationships
agreements (Low) and disatisfaction • Draft clear project
• Lack of leadership (High) plan and get
buy-in (Low) • Alliance will not leadership buy-in
be implemented
(Med)

Expand CRM and • High costs of • Resistance to • Create a high-

implement new analyzing and change (Med) performance team to
technology developing • CRM system will lead efforts
program (High) fail before it • Research
• Project scope could begins (High) contractors/consultan
be too large (Med) ts and coordinate
• Analysis yields with the project
little useful management office
information (Low) • Ensure proper market
• Delays (Med) segments are
identified and
understand customer
needs

Overhaul current • No increase in • Resistance to • Create a high-

rewards program members (Med) change (Med) performance team to
• High costs of • Cost overruns lead efforts
analyzing and (High) • Clear communication
developing • Implementation of strategy
program (High) fails (High) • Project scope should
• Lack of internal clearly outline costs
stakeholder buy-in and budget and
(Med) obtain buy-in
 Problem Solution: Classic Airlines
Table 5
Pros and Cons of Alternative Solutions
Alternative Pros
Seek out and enter into • Enables better access to
alliance agreements with other gates and destinations
carriers • Increases loyalty program
value
• Increases brand awareness
Expand CRM and implement • Increased customer
new technology satisfaction
• Increased customer
retention
• Focuses business on
segments
• Increased brand awareness
• Increased customer
perception of Class
Airlines focus on customer
Overhaul current rewards • Gets customers excited
program about their investment in
the company
• Attracts additional
business
• Promotes customer
retention
22
Cons
• Requires possible lengthy
negotiations
• Possible employee/internal
stakeholder backlash
• Integration challenges
• Costly
• Uncertain timeline
• Requires training
• Growing pains transition
period
• Costly
• Uncertain timeline
• Requires development
time
• Requires complete
stakeholder buy-in
 Problem Solution: Classic Airlines 23

Table 6

Optimal Solution Implementation Plan

Action Item Deliverable Timeline Who is Responsible

Assess and analyze existing Within 60 days Board of Directors
marketing strategies; evaluate
opportunities available to improve
efficiency by benchmarking.
Identify short-term goals in Within 2 weeks of decision Vice President –
implementation Customer Service
Budget creation and secure Within 2 weeks Chief Financial Officer
funding
Develop new marketing & Within 30 days Vice President –
segmentation analysis Marketing
Measure Results through End of the first year and mid Board of Directors and
Balanced Scorecard second year CFO

Seek CRM experts & consultants Within 30 days Board of Directors

help to form and implement
strategic plan

Table 7
Evaluation of Results
End-State Goals
Decrease operational costs
Increase customer satisfaction
Continue with creating
alliances
Increase Customer and
Employee Satisfaction
Increase Profitability
Problem Solution: Classic Airlines
Metrics
Financial statements
Customer surveys/CRM data
number of destinations and
partners
Survey results, employee
turnover, customer
complaints, frequent flier
account points increases
Financial statements
24
Target
15% decrease 18 months
85% customer satisfaction 1st
year; tiered increases
thereafter
No less then 40 additional
destinations with in one year.
Decrease employee turnover
by 5%
Decrease customer complaints
by 10%
Frequent flier mileage accrual
increase of 25%
Increase 10%