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
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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.
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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
PRODUCT DEVELOPMENT AND PRICING STRATEGIES 5
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
PRODUCT DEVELOPMENT AND PRICING STRATEGIES 6
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
PRODUCT DEVELOPMENT AND PRICING STRATEGIES 7
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
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Jersey: Pearson – Prentice Hall