Sustainable Customer Relationships

Classic Airlines Classic Airlines (CA) is the world’s fifth largest airlines that must balance its marketing program while coping with a mandated across-the board cost reduction by the board of directors. This calls for a of 15% cost reduction over the next 18 months while negotiating labor costs through the airline’s union employees and improving customer service.

Facing low employee morale, decreasing customer satisfaction, rising fuel costs, high union wages, a nonfunctional CRM system, negotiations with union officials and future airline alliances and partners, CA has elected to implement a new analytical Customer Service Management (aCRM) product development (University of Phoenix,2008,Classic Airlines,p. 1). The core problems stem around CA losing customer confidence in its Classic Rewards Program (CRP) and losing Wall Street and media confidence.

CA must focus on a marketing program to connect it the customer’s needs and sustain and attract loyal customers. The current executive team values are divided, with CEO Amanda Miller and CFO Catherine Simpson valuing the financial numbers which is in sharp contrast to the values of the customer, employees and shareholders held by CMO Keith Bolye and VP Renee Epson over customer service. The union senior VP Doug Sheflin knows that without a compromise between union and airlines the status quo will not be able to meet the current and future wage costs.

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Senior VP John Hartman over human resources has trained the employees with the necessary skills and sees the employees as valuable assets in the customer and marketing effectiveness. Marketing in the form of environmental scanning can identify the factors of social, economic, technological and competitors that CA faces. Until CEO and the board establish a mission which will guide its organization, there may be organization resistance and delay in reaching its overall business strategies.

Customer relationship management (CRM) is a broad term that involves people, processes, and technology to improve relationships and existing customers who will result in improved customer retention and profitability (Kerin, 2006, p. 8). Using environmental scanning, identifying the marketing strategy and establishing a marketing relationship will direct and guide CA in meeting customer needs , identify the resources needed, the competitors they face and future trends in the Customer Relationship Management system.

Incorporating Enterprise Risk Management, profitability index with interactive marketing will allow the marketing program to address customer needs and sustain customer relationships to reflect the changing trends in customer purchasing behavior. Describe the Situation Issue and Opportunity Identification Classic Airlines is the fifth largest airlines in the world. In the business for 25 years, CA has 375 jets that service 240 cities with more than 2300 daily flights. Classic Airlines earned $8. 7 billion in sales.

CA made $10 billion profit which means that most of the revenue went to operating the company. With 32,000 union employees CA retains their top salary that is above industry’s average. In addition the board has voted for a 15% reduction over the next 18 months. The company is threatening bankruptcy, decreasing value on Wall Street, unfavorable media, decreasing customer satisfaction and low employee morale. The current CRM system is not fully functional and the Classic Reward frequent flier program has been losing loyal customers.

Other challenges include continual high fuel costs and high wages paid to the union employees. CA’s challenge is to find a way to improve customer satisfaction within their Classic Rewards Loyalty Program by identifying and meeting customer’s needs and, therefore, improve the return on investment (ROI) (University of Phoenix,2008,Scenario Two,2008). Several opportunities exist for Classic Airlines which includes a forecasting of sales, a marketing mix and a situation analysis to determine the feasibility of a new analytical Customer Relationship Management program.

CA may need for the present to just update the current CRM to a functional capacity to meet customer’s needs. Establishing the short-term of finding the solutions to update the current CRM might save costs and establish a long-term aCRM portfolio as a long-term goal .According to Seget (2008), the aCRM model uses analytical models and databases to integrate information that will enhance the customer desire for functionality as well as provide time sensitive information for prompt decision making by pharmacists, managers and others that rely on the CRM processes.

It will definitely allow CA to focus on negotiating with the high wages of its current union employees who are above the industry standards. The CMO Boyle can begin to devise marketing strategies on focusing on marketing segmentation, marketing-mix and focus on the needs of the customers who are loyal and attempt to retain them as well as attract new ones. To obtain customer feedback without alienating them CA may consider, online surveying, telephone surveying and other interactive marketing.

Interactive marketing creates customer value, customer relationship and customer experience. Kerin (2006) agrees, “Interactive marketing creates customer value by providing time, place, form and possession utility for consumers” (p. 6). Interactive marketing, marketing segmentation marketing-mix and forecasting can help identify customer needs and increase customer relationships. Stakeholder Perspectives/Ethical Dilemmas The ethical dilemmas in the Classic Airlines scenario are the conflict interests and values of the CEO Miller and CFO Simpson versus the rest of the leadership team.

A dilemma also exists between the values and interests of the CA management and leadership team and the stakeholders. While the CEO and CFO are driven by numbers and a “pragmatic approach” these interests conflict with the overall business strategies and that is to increase customer satisfaction by reducing costs (University of Phoenix, Scenario Two, 2008, p. 1). The company is trying to improve the return on investment (ROI) and at the same time improve the frequent flier program, pay the union employees high wages and implement a new aCRM product.

In fact, according to Seget (2004), “Wisdom prevails in conducting project feasibility, forecasting and marketing-mix and marketing-mix research before considering a new aCRM product . implementation” (p. 25). Classic Airlines must reach a balance through stakeholder’s involvements at all levels in attempting to balance the interests and value of all the individuals, departments and organizations. CA must focus on being a “best service” benchmarking company as a goal because providing the lowest price while utting costs and remaining competitive in the marketplace, is unrealistic thinking.

“For example, it is not possible to simultaneously provide the lowest-priced and highest-quality products to customers and pay the highest prices to suppliers, highest wages to employees, and maximum dividends to shareholders” (Kerin,2006, p. 3). That is why an environmental scanning, a product analysis or four p's, and a situation analysis will clarify where the company product or service has been, its status and where it wants to be.

The marketing program will identify where CA is, the competitor’s trends, and the customer current and prospective customers (Kerin, 2006, p. 12). Developing a marketing mix, an environmental scanning will identify the need of the stakeholders to be involved in every level of the decision making process and the development of an aCRM product implementation. The marketing program is a method of bringing an exchange between all the stakeholders to sustain valuable customer relationships. Frame the “Right” Problem

Classic Airlines will remain competitive in its industry and expand its global influence and brand loyalty by including its stakeholder’s voice and valuing its customer voice. Other opportunities for CA to achieve its goals of restructuring and implementing new initiatives such as its upgrade of its current CRM and a new aCRM product development will help sustain customer loyalty, increase customer satisfaction and provide the employees with the skills and automated technology that can meet the customers’ needs.

In order to meet the changing environmental factors such as regulatory and fierce competitors and reduce labor costs, CA will use marketing strategies such as environmental scanning, sales forecasting, segmentation are opportunities to increases return on investment (ROI) by identifying and meeting customer’s needs.

According to Kerin (2006),: “The American Marketing Association, representing marketing professionals, states that ‘marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders” (p. 1). CA will ensure that the ROI will be accomplished through accountability and leadership of the CEO, board members and senior executives.

Valuing the voices all stakeholders will ensure that the values, thics and interests are filtered through a corporate decision making and implementation process. CA will ensure that its new initiative will be defined in its corporate governance, mission statement, employee booklet, union booklet and risk management policies. CA will remain a leading worldwide airline organization that focuses on marketing strategies that include direct forecasting, linear trend extrapolation, market segmentation, product differentiation, sales force surveys, survey of buyers intentions and usage rate strategies that will keep CA a leader among the airline industry.

Identifying customer changing needs via profitability index, customer audits will allow CA remain profitable as well as efficient in delivering the best practices in airline services to it loyal customers and future one. Fuel hedging, smaller planes, business partnerships and alliances will be strategies that will be analyzed and implemented to allow costs to be transferred into customer value benefits. Describe the “End-State” Vision

Classic Airlines(CA) will be restructured in its philosophy, mission and goals to be a cost-effective and efficient company by focusing on the “ stakeholders voice” in implementing a new analytical Customer Relationship Management (aCRM ) and a Enterprise Relationship Management (ERM) ) product development. Customer and employees as well as top executives who ethics values the customers, the employee and the shareholders will be valued within all levels of the stakeholders communication.

The core competencies includes values of the aCRM that will align with the overall organizational goals of valuing the customer’s voice , sustaining customer relationships, and providing utilities that will create efficient and effective services. Thus the goal of profitability will be achieved through the values of profitability and social accountability and responsibility of the CEO and board members of CA (University of Phoenix Scenario 2, 2008, p. ).

Achieving US and globalization as a benchmarking organization stems from an aggressive and proactive marketing program that will operate through an updated CRM system and a future aCRM system that is designed to compensate future environmental changes and thus customer changing needs. An effective marketing program will benefit the customer and stakeholders by assessing the needs of the customer and satisfying those needs (Kerin, 2006, p. 5).

Remaining a competitor in the airlines industry means continuing open negotiations and compromise with the airlines union to keep pilots and employees competitive wages with the industry, while reducing costs and retaining loyal customer, increasing customer service and retaining skilled employees and sustaining the Classic reward program that is both efficient and effective in customer service. Recommended measures to determine if the CRM and marketing strategies are effective include profitability index, customer value benefits, and the measurement of rate and customer satisfaction surveys.

Identify the Alternatives and Benchmarking Validation Alaska Airlines began in 1932 in Anchorage, Alaska with 17 million passengers annually with flights to over 60 cities and 3 countries. Alaska Airlines is familiar with marketing strategies to remain competitive in the airline industry. Alaska Airlines faced a financial crisis similar to Classic Airlines who faces possible bankruptcy, a 10% decrease in stock market shares and negativity on Wall Street (University of Phoenix, 2008). In 1972 Alaska Airlines was in the then Ron Cosgrave and Bruce Kennedy came on board in 1972, the airlines was in a financial fight for its existence.

Led by quality leadership, the management restructured the goal of the organization and began bringing people together to save the failing company (Alaska Airlines, 2008). Leadership conducted a “differentiating marketing” in providing superior customer service as the key. Using a differentiating marketing allowed Alaska Airlines to survive more tumultuous times during the deregulation of airline industry and the recent rising fuel costs. Kerin (2006) agrees that, “The existence of different market segments has caused firms to use a marketing strategy of product differentiation.

The strategy involves a firm’s using differentiation mix and advertising to help consumers perceive activities such as product (service) activities as being better than the other competing products “(p2). Classic Airlines can begin improving its profits and market shares by focusing on marketing strategies such as “best services” in its industry by aligning a customer-centric focus and include the stakeholders in the new restructuring of the company. Classic Airlines can follow AKL’s lead in forming partnerships and alliances to expand its international market.

Both parties view the partnership as a pairing of their expansive international networks and allowing ALK an opportunity to build a platform for international growth from the West (Global airlines, 2008, p. 2). This means double benefits for their customers allowing them the additional options offering by the two companies and a chance to redeem mileage points from either of the two airlines. The Disney logo and brand name was built in 1923 on the foundation of The Walt Disney Company. Disney was founded by Walter Elias Disney and cofounded by his brother Roy Disney.

The Walt Disney Company has an estimated $35 million in annual revenues (Wikipedia, 2008,p. 1). Disney works includes his alter ego Mickey Mouse, Disneyland, records, movies and the Walt Disney World Resort. What is noteworthy of this entertainment, movie empire is the extent of its marketing strategies to communicate with their customers. Using a marketing mix, Disney’s business strategy encompasses the integrated marketing communications (IMC) that communicates a brand loyalty and consistent messages across all audiences.

The IMC is used by Disney via its management team and its internet customers. Disney takes many types of promotional mix as a direct marketing tool to communicate in an exchange with brand loyal customers and with potential customers. This allowed Disney to combine advertising, direct marketing, personal sales, sales promotion and public relations to inform customers of their products, persuade them to use them and remind them of the benefits after they have used them(Kerin,2006,p. ).

Having targeted their population segmentation, Disney’s IMC and direct- marketing techniques via large mass mailings, an internet websites and internet-linked kiosks allow loyal customers and potential customers to inquire about their products and services. The IMC, direct marketing, marketing-mix and promotional-mix allows Disney to exchange information with consumers and keep updated of consumers changing purchasing behaviors.

As Classic Airlines works on updating the functionality of its current CRM and prepares for the aCRM product development, the company can benefit from a direct marketing approach. Therefore, Classic Airlines must streamline its operations in reducing staff, eliminating aircraft with high maintenance, negotiate wage salaries to match the industry market, focus on smaller planes and improve its rewards program. Once the costs have been reduce, investments can made towards the CRM system that will allow for targeting its marketing population segmentation.

Kerin (2006) states, “Like personal selling, direct marketing often consists of interactive communication. It also has the advantage of being customized to match the needs of specific target markets. Messages can be developed and adapted quickly to facilitate one-to-one relationships with customers “(p. 7). With a well developed functional CRM and aCRM data warehouse, Classic Airlines can focus on communication exchanges through direct marketing and other forms of IMC to attract new customers and maintain loyal customers. Evaluate the Alternatives

In Table 3, all the goals were ranked 5 because the aCRM is a software highly integrated system of providing massive information and data on a time-sensitive arena, there will take many stakeholders and business processes to make this new product development and implementation successful. The best features of the original alternatives were combined to create a short list of second –tier solutions because it was imperative that Classic Airlines created a change management by clearly defining its mission, objectives and align them with their aCRM objectives.

Once this has been accomplished it was in the best interests of the stakeholders that a culture of change be established internally before commissioning the aid of external CRM consultants. Due to the amount of organizational resistance due to Classic Airlines original exclusion of the stakeholders in particular the employees, it was best to incorporate any outside help only after internal organizational change and a culture of customer-centric, product-centric and employee rewards for performance were in place. Identify and Assess Risks

Many risks can be identified with the implementation of the new product development. Beginning with the risk of organizational resistance, CA will achieve more by including all the stakeholders, especially the customers in a buy-in or adoption of the new product initiative. If CEO and Board fail to incorporate a culture or organizational change by aligning the new aCRM product objective with the overall objectives of the company, the new product development and completion may be in jeopardy.

As most benchmarking companies have found that an evaluation of product feasibility s the first research before adopting the new product initiative. The project feasibility will detail costs, risks, labor costs and other assessments needed to make an informed decision about proceeding with the idea. A more profound tangible risk is if enough skilled employees have. A more profound tangible risk is if enough skilled employees have the technical skills to make the new product development a success. Other risks include costs, going pass projected timeframes, and other external risks, such as the vendors failing to supply financial backing.

Other risks include software compatibility risks, decrease in profitability and returns. Risks can be mitigated by planning a risk analysis and risk management to align with every department decision making in investments and other decisions that impact the overall value of the firm. According to Seget (2008), key findings includes a risk management WBS plan is needed for CA to implement risk management principles and incorporate them in their job functions. Risks can be tracked and contingency plans in place in case they fail.

Implementing risk management in every phase of the aCRM process will ensure that “potential risks” are identified early on in the product development. A solid risk management plan can help CA face the “unknowns”; deal with “unfavorable outcomes” and “unexpected uncertainties. ” Just as the profitability analysis makes good business sense in considering any aCRM and marketing-mix program, conducting a profitability index makes good business sense to determine if the business objectives have been met. Make the Decision The final decision is to develop and implement a new aCRM to remain competitive within the industry.

However, to do that a project feasibility and project analysis will be conducted first. Both authors, Kerin (2004) and Segat (2006) agrees to results of a project analysis and market research be completed before any new CRM initiative. These finding will be placed into the new aCRM portfolio that will detail the labor costs, financial investments and workforce needed to complete the product. A management change and organizational culture will be adopted through the mission statements, governance policies, code of ethics and risk management policies.

An internal marketing approach will allow an exchange between all stakeholders. Marketing segmentation will allow CA to indentify the customers who will increase the return of investments (ROI) by conducting marketing-mix programs to identify their needs. Customer surveys will allow CA to not only identify those needs but to satisfy unmet needs and identify changing consumer behavior. The challenge for CA is not measuring the ROI or measuring the effectiveness of its total business strategies but determining the effectiveness of the customer-focused strategies.

Klenke (2003) suggests that, “It makes good business sense to bring the project to a final conclusion by determining if the projected results actually were delivered as suggested in the business plan that management approved… A decision must be made whether or to return to the pre-project situation if that is still an option” (para. 139). Develop and Implement the Solution The biggest opposition to any CRM new initiative is organizational resistance to organizational change.

The goals it to focus on the greatest resource of Classic Airlines and that is the employees, management and departments and divisions that will be equipped through communication, two-way feedback, employee communication surveys, and an organization culture that values the communication, feedback and decision making of the employees. CA will create an organizational culture within four weeks by communication, mentoring, modeling the new aCRM product project by allowing the employees to engage two way communication, decision making and two way feedback.

CA will resolve its unclear objectives by clearly stating them in their employee handbook. Once a feasibility report is conducted and the return on investment (ROI), market ratios and profitability ratios are concluded, CA will proceed to forecasting, internal marketing and environmental scanning. Employee surveys as well as feedback surveys and employee questionnaire will be distributed. The employees, customers and stakeholders will be engaged throughout the product development and implementation.

The senior management, change champion, financial officer and human resources departments will be responsible in gathering the research and reporting back to the CEO and board members. At that point information will be disseminated at all levels from the CEO and board through face to face meetings, employee internet, meetings, corporate magazine and other informational channels. Evaluate the Results The success of the current CRM and implementation of the new aCRM will be measured with ongoing forecasting and marketing-mix research.

Since these approaches allow for prediction of future trends of customers and organizational buying behaviors it can also predict the possible increase of revenues and profits that a certain product might generate. Measures such as productivity increase, cost reduction and increase in revenues are more reliable metrics in measuring and evaluating the benefits of the CRM implementation. (University of Phoenix, 2008) Many benchmarking companies like PeopleSoft, according to Seget (2004), may fail in its first product CRM attempt.

PeopleSoft adopted a PeopleSoft CRM that failed to deliver in terms of functionality for the end-user, the consumer. PeopleSoft developed another system called Peoplesoft8 that address the issues of functionality that their former system failed to deliver. Metrics such as productivity, increases in revenues were some of the measures used by PeopleSoft8. Like Classic Airlines they were facing criticisms of lack of functionality for their customers and had a problem with vendor, supplier and human resources staffing.

They became successful in adopting a new “PeopleSoft 8 CRM” that focuses on employees, targeting customers, supplier relationships and vendor relationships. Seget (2004) agrees that the success of PeopleSoft 8 CRM (PS8) was due to the focus on human resources centric or –HR-centric. Functionality was also a major concern for PS until their adoption of the PS8-CRM. Although Classic Airlines’ new aCRM is not up and running, CA can learn from PS8 by acting quickly by fully integrating the PS8 CRM system and forming a business alliances and partnerships to maximize their aCRM efforts.

PeopleSoft has been successful enough to use profits to acquire and merge with other companies and partners (Seget, 2004, p. 80). Other measures include SWOT analysis, gap analysis, and profitability index and churn rates to determine if the objective has been met. Evaluations and customer surveys must be ongoing to allow management to adjust and change their focus as customer behavior and trends change. Conclusion Classic Airlines like most industries are embarking on a fairly new concept, the CRM. Although CRM is a computer based software that provides integrated on demand information for customers, physicians, vendors and ther stakeholders, the system is only as useful if designed around the customer’s needs, wants and expectations.

According to Seget (2004), the aCRM model uses analytical models and databases to integrate information that will enhance the customer desire for functionality as well as provide time sensitive information for prompt decision making by pharmacists, managers and others that rely on the CRM processes. While Classic Airlines is in its infancy, CEO Amanda Miller must present a project analysis and project feasibility before undertaking the new aCRM product development (Kerin, 2006).

According to Kerin (2006) environment scanning and must be conducted not only on its customers but on its competitors as well. Marketing target segmentation, internal marketing, aCRM initiatives, customer surveys and customer audit all work together in reaching an overall business strategy, satisfying the needs of the customer. Classis needs to reduce costs, maximize ROI, match union pay with the industry and restructure the organization with a product-centric and customer-centric focus.

Achieving US and globalization as a benchmarking organization stems from an aggressive and proactive marketing program that will operate through an updated CRM system and a future aCRM system that is designed to compensate future environmental changes and thus customer changing needs. An effective marketing program will benefit the customer and stakeholders by assessing the needs of the customer and satisfying those needs (Kerin, 2006, p. 5). Classic must remain competitive by promoting value for all vendors, supply chain and stakeholders.

To measure the effectiveness of the aCRM project and current CRM and marketing program must use customer surveys, profitability index and customer audits to determine if the objectives of CRM and marketing strat4egies are being met. Measurements must be conducted on a continual basis to allow management to make adjustments and decisions to align the CRM with the business overall business strategies.

References

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4. Global airlines face daunting challenges- more mergers and partnerships (2008). Retrieved November 25,2008 from the University of  Phoenix, Plunkett Research database. Kerin, R. A. , et. al. (2006).
5. Marketing, 8e. Customer relationship and value through marketing. | |New York: McGraw- Hill. | |Klenke, M. , Reynolds, P. , Trickey, P. (2003).
6. Leveraging Customer Relationships, 1e. Tactics to leverage customer relationship. Leyh Publishing Company. Seget, S. (2004).
7. The Pharmaceutical CRM Outlook. Optimizing returns from operational and analytical crm. Retrieved November 5, 2008 from the University of Phoenix Library Business Insights database. University of Phoenix. (2008).
8. Automating a Support System. Retrieved November 16, 2008, from the University of Phoenix, resource, Simulation. MBA570-Sustainable Customer Relationships Course Web site. University of Phoenix. (2008).
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10. MBA570-Sustainable Customer Relationships Course Web site. Walt Disney. (2008). Retrieved November 26,2008 from the Website: http;//en. wikipedia. org/wiki/Walt

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