PRODUCT DEVELOPMENT AND PRICING STRATEGIES

Classic Airlines Marketing Solution MKT/571 March 14, 2011 Steven Knabe

PRODUCT DEVELOPMENT AND PRICING STRATEGIES 2

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 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
Social / Demography

Opportunities
Cost leadership, offer package deals, baby boomers

Threats
Low Threats

PRODUCT DEVELOPMENT AND PRICING STRATEGIES 3

Economic

Offer family packages, reduce fares

Decline profit, recession, price of crude oil Terrorist threats, mechanical failure Safety standards/policies, temporary certifications

Technology

Wireless, social networks, security passes

Regulation

Medication and assistive devices, special luggage, Allergies and Disabilities

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

PRODUCT DEVELOPMENT AND PRICING STRATEGIES 4

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 reentering the marketing along with effective promotional services in different places to effectively market the new product. Special Product Service Market Segmentation Frequent Family Flyer Affordabl Baggage Transportation/ Quiet Pets

package e Rates

Discount Special assistance

Room Service

PRODUCT DEVELOPMENT AND PRICING STRATEGIES 5

Women/Children X

College Students

Disables Business men Elderly Non-profit Organization

X X X X

X X

X X X

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.

PRODUCT DEVELOPMENT AND PRICING STRATEGIES 6

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

PRODUCT DEVELOPMENT AND PRICING STRATEGIES 7

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) Operating Revenues: Passenger Cargo Total Operating Revenues Jan $600 $49 $649 Feb $650 $51 $701 Mar $740 $54 $794 April $780 $67 $847 May $800 $68 $868 June $820 $55 $875 July $850 $78 $928 Aug $860 $80 $940 Sept $900 $82 $982 Oct $910 $85 $995 Nov $940 $90 $1,030 Dec $970 $78 $1,048

Tot

$9,8 $83

$10,

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

PRODUCT DEVELOPMENT AND PRICING STRATEGIES 8

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