The airline industry has reached a crossroads. The effects of the worldwide economic slump and the aftermath of September 11th attacks have severely impacted airline economics and viability. While the U.S. and certain European markets were most severely impacted, airline worldwide are striving to both regain and improve profitability. Many have focused on operational improvements to reduce costs, but the customer cannot be ignored. Customer relationships must be fostered for airlines to maintain competitive advantage and profitability in the long term. Airlines' immediate focus is on cost reductions in driving to more efficient operations. However, many airlines are turning to customer relationship management (CRM) as a tool for managing customer relationships. Unfortunately, in many cases, they have failed to recognize CRM as a holistic strategy, instead viewing it as synonymous with their frequent flyer programs.
In this dissertation I would study the challenges faced by the airline industry in the field of Customer Relationship Management (CRM) taking British Airways (BA) as a case study.
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The objective of this dissertation would be following:
CRM in itself is a very large field, taking into consideration the time factor and limitations in writing a dissertation, I would basically look into three field which directly affect aviation industry in general and British Airways in general:
Customer segmentation—Airlines Industry in general and BA in particular has till now followed mileage-based segmentation. I would study whether value-based and needs-based approaches can help guide investment decisions and drive greater insight into the needs of high-value customers or not.
CRM initiative development—BA have till now followed “fast follower” approach to CRM initiative in which airlines tend to follow the general trend. I would study whether development, in favor of investing in initiatives with a high return, which respond to the needs and desires of their own customers would be help BA or not.
Organizational design and management—Airlines need to instill a service mentality in their employees, empowering them with a complete view of the customer and clearly articulating the employee's role in the CRM strategy. I would study whether higher involvement of employees results in better CRM strategy or not.
Eagerness toward Customer Relationship Management (CRM) began to grow in 1990 (Ling & Yen, 2001; Xu, Yen, Lin, & Chou, 2002). A developed relationship with one's clients can finally result in greater customer loyalty and retention and, also profitability (Ngai, 2005). Despite the fact that CRM has become widely recognized, there is no comprehensive and universally accepted definition of CRM. Swift (2001) defined CRM as an” enterprise approach to understanding and influencing customer behavior through meaningful communications in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability. Kotler and Keller (2006) have defined Customer relationship management (CRM) as the process of managing detailed information about individual customers and carefully managing all customer "touch points" to maximize customer loyalty. Kincaid (2003) viewed CRM as “the strategic use of information, processes, technology, and people to manage the customer's relationship with your company (Marketing, Sales, Services, and Support) across the whole customer life cycle”. Bose (2002) viewed CRM as an integration of technologies and business processes used to satisfy the needs of a customer during any given interaction more specifically from his point of view Customer relationship management (CRM) involves acquisition, analysis and use of knowledge about customers in order to sell goods or services and to do it more efficiently. Richards and Jones (2008) have defined CRM as “a set of business activities supported by both technology and processes that is directed by strategy and is designed to improve business performance in an area of customer management”. Having a glimpse to the above mentioned definitions of CRM one can understand that all above authors' emphasis is on considering CRM as a “comprehensive strategy and process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer. It involves the integration of marketing, sales, customer service, and supply - chain functions of the organization to achieve greater efficiencies and effectiveness in delivering customer value.” (Parvatiyar & Sheth, 2001). Olafsson, Li, and Wu (2008) believe that a valuable customer is usually dynamic and the relationship evolves and changes over time. Thus, a critical role of CRM is to understand this relationship. This is achievable by studying the customer life-cycle, or customer lifetime, which refers to various stages of the relationship between customer and business (Olafsson Li, & Wu, 2008). In accordance with Rayls CRM falls in two categories; attracting new customers what he calls offensive marketing, and keeping the existing customers, known as defensive marketing (Ryals, 2005). While acquiring new customers is the first step for any businesses to start growing, the importance of retaining customers should not be overlooked. Reinartz, Thomas & Kumar showed that insufficient allocation to customer-retention efforts will have a greater impact on long-term customer profitability as compared to insufficient allocation to customer-acquisition efforts (Reinartz, Thomas, & Kumar, 2005). As Chu, Tsai, and Ho have retaining existing subscribers (Chu, Tsai, & Ho, 2007). Even if we put aside the existing highlighted the cost of acquiring a new customer is five to ten times greater than that of studies, which mentioned that it costs more to acquire new customers than to retain the existing customers, we can consider that customer retention is more important than customer acquisition because lack of information on new customers makes it difficult to select target customers and this will cause inefficient marketing efforts. Consequently, deep understanding of customer need and knowledge management in CRM seems to be vital in today's highly customer - centered business environment (Shaw, Subramaniam, Tan, & Welge, 2001).
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The aim of this project was to establish hypotheses concerning CRM in BA. The questions to be studied have already been mentioned above.
“Research can be defined as something that people undertake in order to find out things in a systematic way, thereby increasing their knowledge” (Saunders, 2005:3).
The research methodology can be divided into two parts, primary research and secondary research. Secondary research can be carried on with a deductive approach and survey strategy to explore relevant information attached with the research questions. We would first talk about research approach. Research approach is divided into two parts that is
- Deductive approach: In deductive approach researcher develops a theory and design a research strategy to test the hypothesis. Saunders et al. (2005) describes in an deductive way data would follow theory rather than vice versa as in inductive approach”. Deductive theory represents the commonest view of the nature of the relationship between the theory and social research, which embedded in the hypothesis, will be the concept that will be needed to be translated into researchable entities. The process need use both a skillfully deduced hypothesis and then translated it into operational terms, and specify how data can be collected in relation to the concepts that make up the hypothesis” (Bryman 2004)
- Inductive approach: in inductive approach researcher would like to collect the data and develop theory as a result of data analysis.
Researchers can follow any of the above strategy or a combined research approach (Saunders et al, 2005).
Next we would talk about research strategy. There are eight strategies are available, in the Saunders (2003) for the social science research. The eight strategies are: experiment, survey, case study, grounded theory, ethnography, action research, cross-sectional and longitudinal studies, exploratory, descriptive and expletory studies. (Saunders 2003:91) however, what need to caution is some of these clearly belong to the deductive tradition, other to the inductive approach. The different researches imply the vary measures to collect and analysis the empirical evidence. But, one of those single strategies should be though of as being exclusively in a particular research question or objective. (Saunders 2003:91).
Flick (1998) describes research questions as the doors to the research field of study. “Good research questions are those which will enable you to achieve your aim and which are capable of being answered in the research setting. It is no use asking questions that can't be answered” (Gillham, 2001:17). Further he argues that there are always constraints on what the researchers can do- ethical, practical. It is a challenge for the researcher to perform a balancing act between what you want to find out and what the settings will allow you to do. The literature review provided the base for research questions.
“Different theoretical models provide different justifications for using particular research methods” (Silverman, 2000:100). As the Saunders (2003:281) point out that the questionnaires will affect the response rate and the reliability and validity of the data you collect. Response rates, validity and reliability can be maximized by:
- Careful design of individual questions
- Clear layout of the questionnaire form
- Lucid explanation of the purpose of the questionnaire
- Pilot testing
- Carefully planned and executed administration.
We would follow a deductive approach and test our hypothesis here.
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Olafsson, S., Li, X., & Wu, S. (2008). Operations research and data mining. European Journal of Operational Research , 187, 1429-1448.
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