The present paper uses a problem solving model in order to present a solution to the existing crisis within Classic Airlines. After analyzing both the internal and the external factors that are currently generating the crisis, the solution is presented, along with key elements related to the correct and efficient implementation of it. The paper focuses on the importance of Customer Relationship Management (CRM), not only in a crisis situation, but as a continuous working tool, due to the increased demands of customers and due to the value represented over time by loyal clients versus new ones.
Marketing nowadays has a very difficult task of responding to the needs of very different persons and groups: shareholders, clients, the community and so on. Marketing has changed in its theory and practice in the last decades and today it seems that the strategy that produces the best results regards putting the focus on the customers. Marketers need to understand the customer’s needs and to translate them into services (Kotler 2006). From this strategy, companies have identified also the need to create and implement the concept of loyalty. But the behavior of consumers is not always 100% predictable and customer loyalty is gained very hard but lost very easy. According to IATA (The International Air Transport Association), in 2011, the airline industry will be under the influence of the same factors like last year making the struggle for profitability increasingly more difficult (IATA, “IATA Economics”). Increase in the number of regulations, oil prices and natural disasters will continue to impede this vital activity to the international trade. Aircraft capacity is also a problem. Following the fact that in recent years the number of aircraft owned by companies has not increased, many new aircraft will enter the air fleet of various operators and aircraft that have been withdrawn from use due to lack of demand will return to flight. All these new aircrafts were ordered before the crisis, so the operators now have to identify means to use them (IATA, “IATA Economics”).
Next, we also need to address the issue of oil prices. On one thing, all analysts agree: the price per barrel will increase. But how fast? Industry growth over the past 10 years was largely due to low-cost operators, which have lower operating costs than traditional air carriers. This also happened in the past, when the barrel was 40 dollars (Hanlon 7). But in current times, when the barrel reached $ 100, over 50% of operating costs of low-cost companies are represented by the costs of fuel, making it very difficult for them to be competitive (Klimenko 441- 465).
Classic Airlines overview
Classic Airlines is the world’s fifth larger airline operator, having a fleet of 375 jets that connect 240 cities around the world with 2300 daily flights. The company was established 25 years ago, and since then its development was constant, reaching nowadays a turnover of 8.7 billion dollars with the help of over 32000 employees (University of Phoenix 1). Although the company is still generating profit, due to an increase in international competition, public’s concern with airline security and the continuous changes in customer behavior related to their financial spending, the financial results are far lower than the expected ones. This translates into a 10% decrees in share prices, and what concerns even more the company, CA registered a 19% decrees in the number of rewarded members and a 21% decrees in the number of flights per remaining member (University of Phoenix 1). Facing the increasing cost of fuel and the increase in the cost of labor, the Board of Directors has issued a 15% cost reduction policy in order to avoid bankruptcy.
However, many of the executives from Classic Airlines, including the CMO Kevin Boyle think that they can bring the situation back and regain customers by focusing on the company’s existing customer satisfaction program: Customer Relationship Management. Unfortunately, Kevin Boyle may have to face the opposition of other executives that do not trust this program; his task will be to convince them that the program is valid and that the long term return will be the one expected by the entire company: the regaining of the lost customers.
As already stated, CA faces an internal conflict that needs to be resolved before any of the new products and/or programs reach the customers. It is essential that a consensus is reached, because any change in the company policy and/or strategy will need to determine changes towards all employees. Of course the resistance to change is one of the elements that will need to be addressed, and it cannot be efficiently resolved without a common view from all of the stakeholders. Until now, the company had a top-down strategy based on efficacy of operation; however, this switched the focus from the customers and generated bad market responses. The solution resides in a bottom-up strategy, where employees will need to focus their attention to the demands and needs of the customers, so that the information collected from the market are clear and trustworthy. Also, a vital role in the overall strategy has to be represented by the establishment within the CRM program of a communication flux that puts into direct contact both the internal and the external stakeholders.
CRM Overview and Implementation
Customer Relationship Management (CRM) is a business philosophy that describes a strategy that places the customer at the center of all activities and culture of an organization (William, Bernhardt, McLeod, Rife and Grabill 43). This strategy is implemented with the help of IT applications and the new, regular developments in the IT industry can help an organization to adapt its strategies regularly. The main concept of CRM is relatively simple. For years companies have focused their efforts on lowering costs and improving efficiency within the organization. They focused more on internal process, often automating the back-office functions elements such as production, logistics and finances. By contrast, the management efforts invested in customer-related activities such as sales and marketing often were considered secondary activities.
As the market consolidates and suppliers become more efficient in providing services or products, rival offerings are becoming increasingly difficult to distinguish. At the same time as the quality of services and products is improving, customer expectations and demands are also increasing. As long as the customer is allowed to change the supplier, is becoming increasingly difficult for a company to retain loyalty. It is therefore very important for a modern company to have a system that can shorten the response time to customer requests, providing quality support and services. Through a good management regarding the customer relations, profitability can be increased. And this is essentially what defines Customer Relationship Management (William, Bernhardt, McLeod, Rife and Grabill 10-34).
The CRM philosophy is represented by the recognition of the fact that long-term relationship with the customers can be one of the most important assets of an organization that can provide a strong competitive advantage and improved profitability (Whittemore 2008). Customer Relationship Management (CRM) consists of a complex system composed of methodologies, strategies, software and web applications that help a company to organize and manage customer relationships. CRM facilitates the interactions with the customers using the most efficient, faster and more sophisticated mean of communication - the Internet (Whittemore 65). It is a solution that centralizes employees, processes and data from a company so that they could better serve customers and increase their loyalty.
Classic Airlines earned 8.7 billion dollars from sales, but the real issues is related to the fact that the company lost a lot of its loyal customers and this due to a lack in efficiency in implementing the CRM system; the internal conflict is also a factor that contributed to this situation.
The CRM system needs to be used as a tool aimed at market segmentation. The main idea of this process is that the company needs to focus in different ways to different categories of customers. It is impossible for an organization to have the same level of profitability with all categories of clients. Also, the customer relation strategies need to be differentiated according to the needs of specific customer groups. The level of details at which the segmentation can be realized depends on the amount of information that travels from bottom – up within the organization.
The internal stakeholders of the company have to understand that a loyal client is more valuable and more profitable over time, than just new business. And also, new attracted businesses are inefficient if dealt only on a one time relation. All new businesses need to be transformed into loyal customers and this can be achieved only by an efficient implementation of the CRM system, and a consensus from all the stakeholders about the specific strategies.
Because the implementation of the CRM system is also an issue related to change management, all top executives need to act like leaders and not just as managers in order to both motivate and coordinate the employees, towards achieving the company goals. As the company already has a high level of operational efficiency, the task in hand can be structured as follows: identification and awareness of the existing problems:
Strong market segmentation using the tools provided by the CRM system
A bottom-up communication system
The implementation of a CRM based operating philosophy
Implementation of effective leadership
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