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    Promotion Strategies and Return on Investments

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    Considering that airlines compete based on routes, flight times, and price; will the Investment Lufstansa is making in its airport lounges, will the Return on that Investment be positive, negative, or neutral? Defend your position.

    ROI = Profit / Investment = Turnover x Margin

    Turnover = Sales / Investment

    Margin = Profit / Sales

    The Situation

    Michaels, Daniel (2009, March 3). Airlines Unveil Luxury Lounges --- Despite Downturn, Lufthansa Rolls Out Upscale Amenities For Top Fliers. Wall Street Journal (Eastern edition). New York, N.Y. B8. HTM available via TUI eBrary at
    http://proquest.umi.com/pqdweb?did=1654207531&sid=1&Fmt=3&clientId=29 440&RQT=309&VName=PQD
    on April 10, 2009

    BACKGROUND: Lufsthansa is investing in Luxury Lounges. Starting on March 3, 2009 at Frankfurt Airport, Lufthansa's first-class passengers will have access to a new 12,000-square-meter lounge featuring a full-service spa, spacious bathrooms with whirlpool tubs, and a bar offering 84 different single-malt whiskeys.

    In CASE4, consider that (1) Lufsthansa is (a) targeting a segment of its market and (b) switching its promotion from the quality of its (i) airplanes or (ii) flight service to lounge facilities; and (2) the ease to which the differentiated product can be duplicated.

    You should also bear in mind that a fundamental goal, as with all the cases you build in MKT501, is to stimulate your learning. Your answers should therefore aim to demonstrate that learning.

    In preparing your CASE4, ensure that you demonstrate your learning of the marketing concepts and frameworks for analysis outlined in the modular learning objectives. In particular, in answering the question, ensure that you demonstrate your understanding of promotion and factors affecting promotion success, as well as your learning from previous modules.

    Note that this assignment does NOT require you to prepare a detailed essay. Instead use section headings for each of the topics you address in your paper followed by a discussion of that topiic.


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    Solution Preview

    First name Last name
    Instructor's Name
    Course Number
    05 October, 2009
    Yi Lufstansa Airlines
    The airlines business of late has become very intense. The battle has shifted from skies to ground services. The customers are becoming more demanding than ever. Globally it's a known fact that the business class travelers are the major revenue contributors for the airlines companies. The current case of Lufstansa opening up new upscale amenities is a case of more focused & consumers centric approach towards customer servicing (Bloomberg, 2009).
    Lufstansa is one of the leading airlines carriers in the world. Lufstansa is among the only few airlines that is still making profits. The airline has always focused on providing good on board services to the customers. But now the battle seems to have shifted to the ground. Airlines are offering premium lounge services to their business class & frequent flyers. Lufstansa not to be left behind has also joined the battle (Lufstansa Annual Report, 2008).
    The business class travelers across the world have decreases at a faster pace as compared to other class of flyers. According to The International Air Transport Association (2007) international premium ticket sales fell 13.3% in December compared with 2007. Economy traffic fell less sharply at 5.3%. The shrinking in the business class travelers has forced the airlines companies to go all out to win the loyalty of the premium customers (The Wall Street Journal, 2009).
    Lufstansa proposes to invest 150 million Euros in this up-gradation of the passenger amenities at the airports. Having a close look at the balance sheet of the Lufstansa airlines the airlines overall ROI last year was 0.77% (Business week, 2009). The specifics of the revenue addition due to the improvement in passenger amenities have not been disclosed by the company in its annual report (Lufstansa Annual Report, 2009).
    Looking at the trend emerging in the airlines industry this move of the Lufstansa airlines seems to be a positive move as far as the revenue addition goes, considering the scenario that the passengers are ...

    Solution Summary

    The solution examines promotion strategies and return on investments.