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Classic Airlines is the world?s fifth largest airline, deploying an impressive 2,300 flights daily to 240 cities. Last year, it earned $10 million on $8.7 billion in sales. Despite the profits, Classic is experiencing negative media, declining stock prices, and rising costs of fuel and labor over the past year. In addition, to the destructive reports and low employee morale
, Classic?s Board of Directors is requiring a 15 percent cost reduction over the next 18 months. Leadership must implement a nine-step problem solving method to identify the challenges, opportunities, solutions, and desirable end results to restore customer loyalty, employee morale
, and stock prices.
The nine-step problem solving method is defined as: step one, developing a problem statement; step two, identifying the potential cause of the problem; step three, verifying the likely causes by gathering data; step four, identifying possible solutions; step five, evaluating alternative solutions; step six, determining the best solution; step seven, identifying and assessing the risks; step eight, implementing the solution; and step nine, evaluating the results (http://www.managment-hub.com). These steps will be explained in detail to assist Classic Airlines with the challenges faced today.
Step One: Describe the Situation
Classic Airlines is suffering from self-inflicted operational issues. Expanding too quickly created a financial crisis with a domino effect. Falling stock prices, declining customer loyalty, and low employee morale
have resulted. In addition, the media has nothing positive to say about the airline industry because of increasing fuel and labor costs. As a result, the Board of Directors is mandating a 15 percent across-the-board cost reduction over the next 18 months (University of Phoenix, 2011).
Classic offers a rewards program to its frequent flying customers, however the program is difficult to understand and frustrating for the employees
to explain. Classic also recently purchased a Customer Relationship Management (CRM) system to capture valuable information about the customer?s experience, but the services features are not well integrated. Poor communication exists between the system?s phone and web channels, resulting in duplicate information from customers and collection of inaccurate data. If Classic does not increase sales or decrease costs; bankruptcy will be inevitable.
Step 2: Identifying the Potential Cause of the Problem
Classic?s rewards program is much more restrictive than those offered by its competitors. Frequent fliers are allocated only ten seats per flight and some direct international flights are prohibited entirely. In addition, Classic?s reward program requires more miles for reward eligibility and imposes blackout dates during holidays. Also, rewards can only be redeemed for companion tickets once every two years and pre-boarding passes require the redemption of
reward miles rather than accompanying every rewards flight.
is deteriorating because of negative press and endless complaints from customers. Explaining the rewards policy to customers is nearly impossible for employees
that struggle to understand them. The time and energy invested in employee
training has not benefited Classic or its customers. Employees
do not have the authority to make previsions for loyal customers attempting to redeem reward points.
The CRM system has obstructed a high level of customer service. The system was supposed to decrease the amount of time the representatives spend on the phone or drive customers to the internet to avoid talking to them at all. The system has the power to seamlessly integrate the phone channel with the web channel. This application has not been well incorporated in the system creating the inability for Classic to determine if the customer has interacted over both channels (University of Phoenix, 2011).
Classic?s leadership team is not supportive of the marketing department and is driven by numbers. The CEO and CFO have taken the advice of the marketing department in the past by reducing the flight costs in hopes of luring the customers back from the competitors. The price reduction proved to be a price war with competitors and customers did not respond. Their focus on numbers has resulted in tunnel vision and lack of customer focus.
Classic is the only airline without an alliance agreement. The lack of an alliance limits the flight options available therefore limiting customer?s rewards accumulation and redemption options. The high costs for Classic are directly related to lack of growth. Since they are the only airline not in alliance they are forfeiting global presence. In addition, Classic implemented a fuel-hedging program locking in fuel prices for the next year without considering the group rate an alliance would offer.
Step 3: Verifying the Likely Causes by Gathering Data
Reward customers were interviewed to determine service and membership issues and rate the effectiveness of the program. The results demonstrated 51 percent were dissatisfied with the service upgrades they received and 38 percent of them are dissatisfied with the number of miles earned per flight. Customer interviews revealed that 56 percent of the rewards members are dissatisfied with the options available with the redemption program and 68 percent would not recommend the program to a friend or colleague.
exit interviews illustrated a high frustration level. Employees
believed the crippled CRM program was designed around the wrong performance measure. The system is used to determine the amount of time the customer is on the phone, instead of gauging the customer?s satisfaction. The employees
believed the CEO was oblivious to the customer?s complaints. Corporate management needed to listen to employees
to learn how to repair the client relationship. Overall, the employees
were satisfied with the salary but were easily swayed to join other companies in order to find greater job satisfaction. A high turnover rate has led to an excessive recruitment and training costs.
Step 4: Identifying Possible Solutions
The Classic Rewards program should be restructured. There should not be a restricted number of seats for frequent fliers. The companion ticket should be available for redemption at any time and pre-boarding passes should be a complimentary service instead of requiring the redeeming reward points. All of Classic Airlines? flights should be available to loyal reward customers.
There are not enough incentives between the three tiers of the program membership. Gold members receive a monthly statement, newsletter, and special promotions from Classic?s partners. All members should receive the monthly statement, newsletter and special promotions. Offer one complimentary upgrade to first class each year for silver members and three complimentary upgrades to first class each year for gold members.
should have a process to offer suggestions to the CEO, either by email or a face to face meeting. Exceptional proposals should be recognized at quarterly and staff meetings. Enroll the employee
in customer service seminars to increase customer satisfaction. In addition, the employees
should have the authority to upgrade customers to first class for delays or canceled flights.
The CRM system should incorporate the phone and web channels. Implementing this system will allow Classic to identify the customer as the same person if they use both channels. The system should be used to make the customer the main focus of the company by integrating the reservation and customer service functions.
Classic?s leaders should participate more with the marketing department. They should determine ways to cut costs from other departments to give the marketing department an opportunity to increase loyal customers. The top leaders should embark on a leadership retreat to learn about teamwork and communication.
An alliance should be formed between Classic and other vendors to enhance the service provided to customers. Expanding the market by joining other groups will reduce costs by sharing customer service and other expenses. An alliance will provide a global network and brand recognition worldwide.
Step 5: Evaluating Alternative Solutions
There are alternative solutions to the problems Classic is facing. The rewards program could focus more on redeeming points for cash or online purchases. Members could also redeem one point per flight-mile with no minimum or maximum miles per roundtrip. To stay competitive with other airlines, a concierge baggage handling for gold members would be a great alternative.
satisfaction could be increased with weekly management meetings. Creating secession plans for management positions generates high morale
. Lastly, designate an employee
of the month with special parking and free lunch.
The CRM system should be monitored and managed by the marketing department. Understanding the data and implementing new processes should be their responsibility. This will allow marketing to make changes to their plan as needed to focus more on the customer rather than the phone call length.
Another solution would be to form an alliance with another airline that has brand recognition and customer loyalty in the US. Classic would be able to offer shared expenses and rally against environmental organizations as a united front. Aligning with another airline would increase loyal customers and secure the rewards program.
Step 6: Determining the Best Solution
The best solution for Classic involves two changes; first the rewards program. Changing the rules allowing the customer to redeem rewards on any flight will increase satisfaction. In addition, all seats should be available for frequent fliers. Companion tickets should be redeemable for all flights. Silver Reward?s member should receive one upgrade a year and gold members should be offered three upgrades a year.
Second, form an alliance with Skyway Airlines. The plan will enable a ?code-sharing level, integrate all customer-facing elements, and deliver a seamless program? (University of Phoenix, 2011). Aligning with Skyway will create a network of partners. Once the program is established, the network can expand into other positive ventures.
Step 7: Identifying and Assessing the Risks
The risks associated with the solutions are the inability to reduce costs by 15 percent. There is the possibility upon start-up the solutions may have costs associated with them. The Board of Directors may want to see only reduced costs with no other solutions.
Changing the rewards program may not get past customers to return to Classic. The only people that would appreciate the restructured program are current customers. Previous customers may be happy with the competition and unwilling to give Classic another chance.
The risks of forming an alliance with a company overseas could be disastrous. Customer service and reward redemption will be decided by multiple vendors. Decisions made in Europe and Latin American could directly affect the brand name negatively. Keeping the customer under one company is easier to manage; an alliance can potentially cause the customer to be forgotten in the global company.
Step 8: Implementing the Solution
To implement the solution, the marketing team must present the solution quickly and prepare for an immediate launch. The marketing team will become the leader of the organization and control all parts of the process. Results of the changes will be reported in three months to the Board of Directors. A measureable, positive trend will be reported at that time.
The restructured rewards program will be implemented immediately. A marketing campaigned will start with mailings, TV commercials, and radio advertisements. The market will be saturated with the company?s name and rewards program.
Second, a training program will be initiated by the Human Resource department for all employees
. The training program will assist the employees
with customer service issues. In addition, the employees
will be empowered to offer reward points or upgrades to customers that have experienced a delay or cancellation in flight.
Next, the CRM system will be updated to conduct all functions needed to track customer experiences. The Information Technology (IT) department will implement the changes immediately and begin training upper management on the utilization of the data. The marketing department will correlate the phone and web channels data to begin analyzing the customer?s encounters.
Skyways Airlines representatives will present an alliance solution to leadership. The presentation will demonstrate successful alliances and positive growth aspects of the transaction. Once the leaders of the company understand the alliance, they will present it to the Board of Directors.
Step 9: Evaluate the Results
The success of the final solution will be evaluated by using the number of returning customers, new customers and increased scores on satisfaction surveys. For example, if a current Classic Rewards member increased the number of flights taken in a month, the solution is a success. If the data obtained from the CRM system was used to assist customers quickly and efficiently, it is a success. The alliance with Skyways Airlines will prove to be successful if the market share increases.
Classic Airlines has acquired much success in the 25 years of operation and will continue to do so through creative modifications. The transformation will occur over three months and the results will prove the nine-step problem solving method was a success. Restructuring the Classic Rewards program was the first positive change to improve services for the customers. Second, the employee morale
improved by soliciting feedback and implementing employee
suggested changes. Consolidating and improving the CRM system proved to become a vital aspect for customer feedback and forecasting future needs of the company.
Classic Airlines has the tools and resources to be the leader in the industry. Management can use the tools to receive continuous customer feedback and alter the program as needed. Classic will gain market share by increasing the number of customers and enhancing the customer?s experience. Aligning with Skyway Airlines will benefit the market share with brand recognition and shared expenses. The solutions will enable long term marketing strategies for Classic and help them continue to grow and prosper.
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