Week 3 Assignment MKT 571

PRODUCT DEVELOPMENT AND PRICING STRATEGIES

Classic Airlines Marketing Solution

MKT/571

March 14, 2011

Steven Knabe

Obviously Classic lack basic marketing concept, and this have further deteriorate the image

of the company and alienate its customers. Kotler and Keller (2007) stated that” a product is

PRODUCT DEVELOPMENT AND PRICING STRATEGIES 2

anything that can be offered to a market to satisfy a want or need.” The product been offered by

Classic have failed to address customers want or need and the competitors have seized the

opportunity to attract some of the Classic customers and shrink both Classic market and profit.

Been in the airline industry for over 25-year, Classic airline have not demonstrates its

marketing strategy, and this has been the root cause of major financial setback facing the

company. Business unit strategic planning process would be used to assess the Classic present

condition and recommend appropriate course of actions to re-strategize the company for better

performance and efficiency.

Business Mission

Dedication to the highest quality of customer service delivered with a sense of warmth,

friendliness, caring and company spirit.

External Environment

Similarly, it is extremely important to assess the strengths and weaknesses from external

environmental, mitigate the impact, and explore the opportunities.

Environmental Factors Opportunities Threats

Social / Demography Cost leadership, offer

package deals, baby boomers

Low Threats

Economic Offer family packages,

reduce fares

Decline profit, recession,

price of crude oil

Technology Wireless, social networks, Terrorist threats, mechanical


security passes failure

Regulation Medication and assistive

devices, special luggage,

Allergies and Disabilities

Safety standards/policies,

temporary certifications

Environmental Going green initiative Co2 emission, high cost

Competitive Frequent Flyer , Form

alliance, No or reduced

charges for Luggage

Monopoly, unfair

competition

A business unit has to monitor key macro environment forces that affect its ability to earn profit

(Kotler & Keller, 2007). A marketing specialist must be equipped with the necessary tools to

scan constantly the environment for opportunities and threats. Apparently, Classic operates in a

competitive environment and the need to routinely scan the environment for possible threats and

opportunities cannot be over-emphasized. Activities of major competitors such as American, and

Southwest airlines will be evaluated and incorporated into Classic new strategy. Absence of

defensive marketing action could lead to lower sales or profit (Kotler & Keller, 2007). In light of

this threats will be classified according to seriousness and likelihood of occurrence.


Goal Formulation

Developing specific goals is crucial to Classic continuous existent. However, the goals must

be attainable and realistic. Some of the goals that could be pursed by Classic are vacation

packages, cruise deal, special assistance for instance assisting customers with disabilities,

traveling with pets, health, and well-being, children traveling, senior, frequent flyer, and family

travel. To reposition Classic in the competitive market, it is important to clearly state the goals

which it intends to achieve over a specific period of time. Below matrix summarized Classic

market penetration strategy. Classic could maintain the old pricing strategy as a way of re-

entering the marketing along with effective promotional services in different places to effectively

market the new product.

Special Product Service

Market

Segmentation

Frequent

Flyer

Family

package

Affordable

Rates

Baggage

Discount

Transportation/

Special

assistance

Quiet

Room

Pets

Service

Women/Children X X X X X X X

College Students X X X

Disables X X X X X


Business men X X X X

Elderly X X X

Non-profit

Organization

X X X X

Strategy Formulation

For Porter (1985: 47), “Strategy is concerned with positioning a business to maximize the

value of the capabilities that distinguish it from its competitors.” He further argues that a firm

ability to increase its profit is dependent on its ability to influence the competitive forces in the

industry or to change its market position in relation to competitors and suppliers (Burnes, 2004).

Cost leadership strategy would be the best option for Classic at this stage of transition. Past

cost reduction programs have not physically achieve significant growth and expansion rather it

has further worsening the situation and gradually driving the company into a ditch.

Comparatively, American and Southwest airlines are two major airlines currently practicing cost

leadership structure, and they are thriving in the industry. For example Southwest airlines offers

many products and services to its patrons, among the programs been offered by these airlines are

special assistance, which includes customers with disability, customers requesting extra space,

children traveling, traveling with pets, vacation package, cruise deals, and family package.

Aforementioned programs have assisted Southwest and American airlines to increase their

market shares and profitability. It is apparent that Classic have invested enough in various cut


reduction programs however, the little is been done in the area of actively increasing their

customers. Financially, the company is not doing well, therefore, Classic could reduce the

number of its airlines to 300 by selling some of it and the money raise could be used to

reorganize the company and also give a face lift to the remaining aircrafts. Additionally, Classic

needs to concentrate on increasing new customers by 10 percent over the next three months; this

would be achieved by investing in creative and appealing marketing programs. Moreover,

Rewards program has to be reviewed so as to appeal to the new targeted market.

Alternative strategic option that Classic could pursue is forming an alliance with Skyway

airline in Europe. Skyway is well known all over Europe and the success recorded by the

company is as result proactive management approach to the market. Alliance with Skyway will

covertly introduce Classic to the European market in form of market and consequently ride on

the goodwill already established by Skyway.

Kotler and Keller (2007) stated that “good marketing is the art of finding, developing, and

profiting from opportunities.” Obviously, Classic would tremendously benefit from this

opportunity and thereby expand it market by penetrating the European market. Product, services,

and promotional alliance with Skyway will complement and offset Classic weaknesses and

reduce cost. Moreover, alliance with Skyway will pave way for both companies to leverage their

respective strengths. On-time flight data would improve significantly as a result of refurbishing

the aircrafts.

Implementation

Practical implementation is the main driver of any strategic decision. Since the strategy has

been clearly formulated, support programs have to be put in place that will act as a catalyst that


will aid successful implementation of the programs. Aggressive advertising both local and global,

employees training and customers’ buy-in. Stakeholders’ inputs is essential in moving the

company forward in a new and productive direction. Joint advertisement with Skyway will boost

Classic image both home and abroad, likewise, efforts must be intensified to maintain the steady

increase in the number of participants in the loyalty program. Classic sales forecast for the current

fiscal year is as follows:

Classic Airlines 2011 Sales Forecast

(in millions) Jan Feb Mar April May June July Aug Sept Oct Nov Dec TotalOperating Revenues:Passenger $600 $650 $740 $780 $800 $820 $850 $860 $900 $910 $940 $970 $9,820

Cargo $49 $51 $54 $67 $68 $55 $78 $80 $82 $85 $90 $78 $837 Total Operating

Revenues $649 $701 $794 $847 $868 $875 $928 $940 $982 $995 $1,030 $1,048 $10,657

With operating expenses remaining constant, Classic is expected to double it net profit in the

current fiscal year. Net income is expected to double over the next years

References

Burnes, B. (2004). Managing Change. A Strategic Approach to organizational Dynamics, Fourth

Edition

Kotler, P., & Keller, K. L. (2007). A Framework for Marketing Management (3rd ed.). New


Jersey: Pearson – Prentice Hall

Documents

Week 3 Assignment MKT 571