Looking at the history, it has been observed that the aviation industry was not always as thriving as it is today. It has also been subject to many economic recessions, wars and terrorist attacks which in turn have had a negative effect on the industry. However, in the present scenario, it can be safely said that the industry’s profitability is directly proportional to the nation/ world economy.
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Airlines nowadays, invest heavily in enhancements. The sole purpose of such high powered investment is to attract new customers and retain its existing customer base. This is also known as “augmented service” as airlines constantly work on newer methods and services so as to keep pace with the ever growing consumers needs. Keeping this in mind, The Frequent Flyer Programs (FFP’s) method is used by airlines to ensure customer loyalty. (http://www.memoireonline.com/07/08/1314/m_air-france-klm-strategy0.html)
However, the flyers in today’s scenario have many options available and therefore they are more price sensitive than ever before. Airlines indulge in different sets of prices; one is the premium pricing wherein they maintain a certain minimum price so as to keep up with their brand image. Second, is the value- for- money pricing wherein the airlines aim to charge a mean price for the services it provides and ensure the consumers feel satisfied by the services for the price the airlines has charged them. Third, is the Cheap value pricing, herein the airlines compete with each other solely on price. This pricing strategy is usually adopted by the “no- frills” airlines and it helps out beat competition and helps set off immediate purchase of tickets by the prospective flyers.
The aim of the research titled “Market Research on decision making process of air travellers” is to understand the consumer behaviour and derive the most influential factors affecting the consumer’s decision making process.
1.2 Research objective
The following objectives have been laid out for this research:
Understanding the influential decision making factors for an air traveller
Evaluate the attributes related to brand loyalty, pricing and service quality
Understand and evaluate the dynamics of consumer buying behaviour
Evaluate the most influential factor triggering the behaviour for an air traveller.
The research has been conducted using both qualitative and quantitative research methodologies. The survey was conducted amongst Royal Holloway college population. For qualitative research – focus groups were conducted and for quantitative research – activities such as survey and questionnaires were performed. The collected data has been analysed and the findings and the outcomes have been discussed using the SPSS software. (http://adg.stanford.edu/aa241/intro/airlineindustry.html)
2. LITERATURE REVIEW
This report forms its base from the review of many available literatures based on different aspects and their influence on a consumer for air travel. Research has been conducted on many different literatures relating to brand loyalty, pricing, service quality and consumer behaviour in an airline industry and tried to figure out the gaps and the links allowing the group to frame the objectives of the research.
The airline industry from the past had been witnessing many ups and downs and the mergers and acquisitions. Generally the trend shows that major airline companies enter into alliance with other airline line company to benefit on economic of scale and helps them to enter a new market (Gudmundsson, S. V. 1999).Articles on branding of major airlines reveals that Corporate branding generates image in the market which can also help in moving to the new market but transferring business from one place to another causes more in occurrence of cost. Corporate brand management is an overt convent between organisation, customers and stakeholders (Balmer, J. M. T. 2001).The article “Alliance brands: Building corporate brands through strategic alliances?” by Dr. Hong-Wei He, Brand management Vol. 13, No. 4/5, 242-256, April – June 2006 talks on improving corporate image, recognition, awareness, competence and facilitates in the market through corporate alliances. The literature investigates on the takeover of traditional and weak airlines by the new and emerging ones and further argues that in future there might be only ‘one world brand’ called as the ‘super-brand’ finally. Branding can be achieved through regularity in customer experience, reputation, recruitment and training, and obliging fractious (cross) cultural issues.
Different studies notify that other than the brand, micro level dynamic price changing affects the consumer behaviour. Literatures like “Are airlines’ price-strategies different? Bilotkach V, et al. Journals of air transport management 16(2010) 1-6 analysed on different price strategies of different airlines. While analysing they studied feasible differences in individual airlines price dynamism relating to strategy. After finding data’s and analysed, offered fare quotes in website front face. It returned standard deviation of 2.79 which may allow offer by low fair provider by reducing cost in firms operations. It resulted into nature of competition and approached to offer not only actual purchases, need to offer fare quotes. Result implies that use of price strategy is observable and effective because this article focused on price without paying any attention on product differentiation.
The price sensitive strategies might not lead to huge profit generation but by offering good customer service can improve profitability of the organisation. Article on “The impact of frequency of use on service quality expectations: an empirical study of trans-Atlantic airline passengers” by Dr.Kien-Quoc Van Pham et al.2006. The journal of American academy of business, Cambridge Vol.10, No.1; reveals that service quality is considered as an attitude which results by comparing expectation of customers and performance of firm to satisfy consumers.
The global shift in paradigm from manufacturing to customer value (physical evidence), has created important value to improve revenue of the firm. But some of the firms which adopted quality focused initiatives rarely failed to improve management performance, perception of customer service improvements leads to improve in profitability (Buzzell and Gale, 1987).
The analysis done in the above mentioned article uses SERVQUAL model to measure and analyse the flow and relationship of each variable. The research methods applied by understanding components of SERVQUAL, to know, how passengers from their potential expectation of airline service quality in context of frequency of travelled and antecedents. The resulting data’s analysed with student’s parametric – mean emphasis.
By this research and analysis customers indicated that a boost in loyalty is needed and the management should continue the service to make the flying experience reach a level of maximum satisfaction. Simultaneously firms need to give much attention on providing promissory, accurate and dependable services by keeping customers keen interest in mind and simultaneously understanding their needs.
According to, Anonymous & Thomas (2001); customer service plays an important role in airline industry. Apparently still passengers are abusing service and complaining on same and common problems. The article “A correlational study of how customer service and consumer perception of airline customer service affect the air rage phenomenon.” by Joyce A. Hunter, Journals of air transportation. Vol. 11. No 3 – 2006 explains about the services deterioration impacts on consumer perception. It explains about when airlines refused to recognize the customer service has created and became a dangerous and decline in travelling by public and airlines employees, which in turn has fuelled a new observable facts. This article refers this phenomenon (fact) as “air rage”. Dr. Joyce A. Hunter raised question and explained on reversal diagonal of negative perception, air rage and customer satisfaction. This research study presented consumers services and there impacts on air rage. This article reflects that service as one of the most important in an airline industry; it’s a different dimension of product differentiation and substitution
Finally, it was viewed that the impact of brand, pricing and service quality on a consumer of an airline industry generates dynamic effects in the behaviour and it is believed that there is some sort of an either direct or indirect link between these above mentioned factors and it plays a pivotal role in influencing consumer behaviour. Based on this mentioned review, the objectives of the market research were developed.
3. UNDERSTANDING CONSUMERS BUYING CHARACTERSTICS
Understanding consumers buying behaviour/ pattern is imperative for any firm’s success and growth. Flyers are segmented into two broad categories. First is customer’s willingness to pay and second, customers flying for business, leisure, education etc. (Gilbert, 1996). This form of segmentation is done beyond the FFP’s airlines offer to their customers. The latter form of segmentation is also known as “behavioural segmentation” and is sub-divided into the passengers characteristics namely age, gender, income etc; their duration of journey; their duration of stay and their frequency of flying. Further to this, business and leisure travel can be sub- categorised into exhibitions, conferences, meetings, corporate responsibility etc and holidays, visiting family and friends, permanently shifting base etc respectively.
An airline puts in extra resources to categorise these two segments as their travelling preferences are completely different. For instance, a business traveller seeks comfortable flight timing, a direct flight and an option of last minute cancellations. The duration of stay of a business traveller is much shorter than that of a leisure traveller. Leisure travellers on the contrary, are more price conscious as they self- pay for their tickets.
In the above mentioned model, the “stimuli” – namely the 4 P’s; price, promotion, product, place as well as other factors such as customers’ demographics, lifestyle, economic and environmental conditions etc, also known as the external factors, play an influential role in the consumers buying behaviour. The next stage after the stimuli is the “transformer” stage wherein the buyer’s mindsets such as their beliefs, values, motives, perception etc conclusively generate a buyer’s response thereby influencing the consumers’ final purchase.
Referring to the model, it can be seen that the airline’s ticket price and the place of departure along with the consumers perception of the airline brand he/she chooses to fly and also the motives/ needs behind their trip in turn influences and decides the consumers final buying decision.
4. THEORIETICAL VIEW ON DECISION MAKING FACTORS
4.1 BRAND LOYALTY
Brand loyalty can be defined as “Extent of the faithfulness of consumers to a particular brand, expressed through their repeat purchases, irrespective of the marketing pressure generated by the competing brands” (businessdistionary.com,2010).
Airlines must focus on the brand experience, because in today’s environment a customer chooses the airline that provides the best overall value.
4.1.1 Customer Relationship Management
CRM is the process of managing detailed information about individual customers and carefully managing all “customer touch points” to maximise customer loyalty. A customer touch point is the occasion on which a customer encounters the brand and the product. Airlines touch points include; reservation, check in, in flight service, baggage handling to name a few.
CRM in airline’s industry follows the following process –
Identifies more about passengers through the database analysis conducted.
Improves and make the service more attractive.
Lure customers to purchase more regularly and try different products and provide different levels of membership – platinum, gold , silver and bronze based on revenue miles flown
Retain the customer by developing different forms of loyalty schemes.
Explicit study shows, the above mentioned processes should lead to increased customer value for the company thereby providing higher profits and hence, enabling the company to make increased investment in further acquisitions. Twenty percent of the airline’s passengers might account for eighty percent of its business. Frequent flyer programs (explained in detail in Section 4.1.2) are therefore seen as a way to build long term loyalty with these customers, potentially creating cross selling opportunities in the process.
4.1.2 Loyalty Programs
Airlines Loyalty Programs are called as Frequent Flying Programs (FFP’s)
The frequent flying program is an incentive program operated by an airline to reward its customers for their continued loyalty. . As a traveller, customer earns free miles for the miles they fly with a particular airline. The concept behind FFP is the airlines desire to retain customers for life.
Benefits of loyalty programs
The costs of serving customers are less.
Loyal customers are fewer prices sensitive.
Customers spend more with the company.
Customers pass on positive recommendations about the brands.
Price is in the midst of factors that motivates and make into action of behaviour to purchase ticket. The major reduction in price by the airlines is by reduction in the cost of operation. These airline industries adopted low cost business model to succeed in their business. Every business looks to generate and increase revenue by adopting several strategies to attract and increase consumer base. Dynamism of price is one way to make available much option to choose by different behaviour consumers.
Consumer’s especially low flier and medium fliers looks into price very aggressively. Because of brand preference and unawareness of services which is provided by airline industry in the market. Still LCC [Low cost carriers] has not efficient business (price) model. Price – price discrimination – still it’s neglected in marketing mix i.e.4P. By consideration of 4 P’s, except price everything cost in initial stage but price drive the revenue and related strategy increases profitability to the company (McCarthy and Edmond Jerome 1961). After doing longer research by Simon, Kucher and partners announced that the price increases by mere two percent would cause and reflect into double numeral income for so many companies, even those trapped upon saturated market or price war (Simon, Kucher & partners 2004). Due to ignorance of price strategy, some of the few company like Reynar and easy jet “full-grown from an addition…to a major strategic concern” (McAfee, R. Preston 2002)
4.3 SERVICE QUALITY
“Service quality is a way to measure how well the service level delivered matches customer expectations .Delivering quality service means conforming to customers expectations on a constant basis” ( Lewis & Booms,1983).
In today’s world all organizations compete to some degree on a basis of service (Zeithaml et al, 1990), so service quality becomes significantly important to achieve a genuine and sustainable competitive advantage. Service based companies such as airlines have to provide excellent service quality in order to rise in competitive global and domestic markets.
Lovelock (1985) divides the service attributes into two groups: core and secondary. Airline services is a good example, with customers (passengers) first making enquiries about the tickets and flights, making reservations, check in, going through boarding gates, boarding the aircraft, receiving all on board in flight services including in flight entertainment, meals, deplaning the aircraft reaching the destination and retrieving baggage on arrival . Each of these activities is an operations task that is secondary to the core product of physically transporting passengers and their bags between two airports, but these secondary tasks have a greater potential to generate customer dissatisfaction if poorly performed, so we can see it is imperative for airlines to create and sustain service quality.
4.3.1 Serv-qual Model
Parasuraman, Zeithmal and Berry formulated a service quality model that highlights the main requirements for delivering high service quality. This model measures service quality based on dimensions viz. tangibles, reliability, responsiveness, assurance and empathy. The entire approach was formulated on the basis that customers entertain expectations of performances on the service dimensions, observe performance and later form performance perceptions.
The following model identifies the five gaps that cause unsuccessful delivery
GAP 1 GAP 3
(Including Pre and
Word of mouth
Figure Servqual Model
Source: Zeithamlet al, 1990
HIGHLIGHTS OF GAP
REASON FOR GAP
Between Expectation & Management Perception
Management’s false perception of customers needs and wants.
Between Management Perception & Service Quality Specifications
Management does not set a performance standard despite identifying customers wants
Between Service quality Specifications & Service Delivery
Poorly trained service staff or staff’s incapability of fulfilling the standards set by the organisation
Between Service Deliver & External Communications
Company’s representatives, brand ambassadors and advertising strategies play an influential role in determining consumers’ expectations.
Between Perceived Service & Expected Service
Consumer perception is directly proportional to organisations service quality.
As an airline they should mainly concentrate on gaps 3 and 5 to deliver high standard of service quality.
Based on these gaps there are five determinants of service quality
Tangible :The appearance of physical facilities , equipments and staff
Reliability: The ability to perform the promised service dependably and accurately
Responsiveness: The willingness to help customers and provide prompt service
Assurance: The knowledge and courtesy of employees and their ability to convey trust and confidence
Empathy: The provision of caring and individualised attention to customers
5. VALUE ASSESSMENT USING MEANS – END MODEL
The means – end model helps analyse the three aspects namely; brand loyalty, service quality and pricing in cohesion and how all the three functions are interdependent and inter related. It also helps explain the value assessment process (Woodall, 1997 and Zeithaml, 1988) and can be further sub categorised into valuable concepts such as; desired value, received value and perceived value and quality.
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5.1 Desired Value
The first step for any consumer is to identify their needs and look for a product which will fully or even partially fulfil their desires and needs. Flint and Woodruff (2001) defined desired value as, “customer’s perception of ideal value received from a product offering in achieving a desired outcome.” For instance, a passenger flying first class is looking to feel satisfied and prestigious by being treated royally by the airline crew, to be served the best of alcohol in-flight and not have to wait at the airline check-in counters. This is the desired value the consumer is hoping to derive for the price he has paid to the airline. According to Manyiwa and Crawford -2002, “consumers make choices so as to achieve desired consequences and values. Values in turn guide the choices and preference for attributes and consequences.”
The exploratory research led to the development of a dynamic survey questionnaire. The order of questions in the questionnaire was deliberately schematic that is, first were simple questions so as to develop trust further leading into the behavioural elements. The choice of the scale for answers was carefully selected allowing the respondents to provide a middle alternative as well as providing distinction without overlapping response and confusion. A general question followed by sub questions allowed respondents to clearly choose the options.
A random sample of people having experienced air travel atleast once amongst the Royal Holloway population were analysed for the market survey. Based on the thumb rule of covering 5 % of the population for a research survey, Royal Holloway represented approx 8000 to 9000 against the numbers contributing the total population. Out of the total population 5 % was taken as the target to cover under the survey sample and the groups surveyed a total of 487 respondents and out of which 463 survey forms were considered for data analysis and rest were discarded due to the partial fulfillment of the questionnaire.
10. DATA COLLECTION
Data collection took place at Royal Holloway campus, Surrey-Egham from Monday, March 15th, 2010 until Friday, March 19th 2010. The research resulted in 487 questionnaires collected. Four researchers were exclusively appointed for getting the questionnaire filled. Researchers approached passengers at all the busy locations of the campus so as to get the population representing RHUL in a mixed form. The departments, library premises, Hub and the coffee bars were a few locations that were effectively utilized for filling up the questionnaire.
The researchers approached the population at the above mentioned locations and inquired regarding their willingness to participate in the survey. The respondents were briefed on the research intentions and invited to participate in the survey. The participants were also informed that it would take a maximum of 8-10 minutes to respond to all the questions of the survey questionnaire.
11. DATA VALIDATION
The analysis was done with a sample size of around 480 members and out of which it was filtered to 463 data’s exactly since there were some amount of sampling error to be seen while doing the survey. With the stipulated time intervals, the survey was restricted to RHUL and corresponding segmentation of the air travelers were done with the campus in mind. The survey was also tested for the invalid data and this analysis identified that many respondents had filled up multiple answers for the same survey question. This was identified during the coding process and was later filtered.
12. SURVEY FINDINGS
Having used the focus group for the questionnaire development, the questionnaire survey was able to analyse some key findings. The survey findings were based on the three types of analysis. The convolution of all the findings gave us a deeper insight on how the travelers decided to perceive the three aspects namely branding, service quality and Pricing. The Survey findings also helped to conclude among many aspects of consumer attitude towards the three mentioned factors. There are three types of analysis which was conducted for the research
Thus, Descriptive analysis was able to conclude facts such as the importance of service quality in the airline sector and how the consumers were categorising each of the sub factors associated with service quality and the value that each of the service qualities brought to the consumers. It was inferred that Branding did not evolve as the most vital role in the decision making process of the air travellers. The analysis was able to conclude under the notion that Ticket Pricing was the key influential factor.
12.2 INFERENTIAL ANALYSIS
The purpose of using inferential analysis is to derive upon a conclusion for a certain set of hypothesis. While using descriptive analysis it was understood that Pricing factor served as key aspect in the decision making process of the air travellers. In order to give a proper justification to the claim, two hypotheses were defined and were tested to decide whether the pricing factor served as a major source of significance for the consumers while deciding upon their travel decision
12.2.1 HYPOTHESIS 1
Hypothesis: There is a significant difference among the Frequent Fliers and Low fliers on how they perceive the Pricing factor as an important role in decision making process of air travel’.
The following analysis was tested with the Independent T sample Test with variables being high fliers and Low fliers. The Levene’s Test for Equality of Variance showed sig value to be .000 which was of strong evidence.
The test results are referred in Appendix C.1
12.2.2 HYPOTHESIS 2
The following hypothesis was tested among all the categories of the fliers.
Hypothesis: There was a significant difference among the three categories of fliers (frequent fliers, Lower fliers and Medium Fliers) on how they perceive Pricing factor as an important role .
The following analysis was tested using one way Anova Test and Based on evidence shown in appendix it was inferred that the hypothesis was proved right with sig value = .000.
Using Inferential analysis was justified that the Pricing factor for the consumers seemed to be of varied significance among the different forms of fliers be it the frequent fliers or the Medium fliers or the low fliers.
The test results are referred in Appendix C.2y
12.3 ASSOCIATIVE ANALYSIS
The purpose of the associative analysis was done to confirm the importance of all the three sectors namely service quality, Branding and Pricing Factor and how these attributes were associated for the consumers. As a part of Associative analysis it is seen that the following attributes were associated. Using SPSS tool the below mentioned findings were formulated.
Figure Results of Associative Analysis
The following findings were derived out of the associative analysis.
There was a weak degree of association among “how the brand value was perceived within the air travellers”. Thus it can be concluded that consumer’s preferences towards branding did not have an important associative influence since as we see that the consumers were not filling to pay a higher price for a particular airline. Branding was not the major source of aspect that played a key role in the decision making process of the air travellers.
There was also a key finding that associative analysis gave deeper insights on the service quality factors and Consumers had a stronger association and importance to the following factors
Less Stressful travel experience while taking a flight,
Importance of Flight timings and frequency of flights
Cleanliness of the cabin
Frequency of flights for travelling
With service quality some factors like Gourmet Quality Meal and Airport Lounge access had a weaker set of association with the consumers.
The analysis also revealed that the consumers had a stronger association with responding to the importance of refundable tickets, in-flight entertainment. This showed that consumers were ready to pay more if they could get refundable tickets from the airlines. It is evident from the associative analysis that Ticket price served as a major attribute for the consumers and it had a significant association than branding. Associative analysis was also able to give us an in depth understanding of different factors that are linked with service quality
This research is focussed more on the consumer behaviour towards the airline sector and ignored research based on the industry structure.The research catered to its prime importance of consumer’s decision making process but it is always important to note that many environmental factors influence the consumer behaviour. The limitation of the whole research was restricted within the RHUL campus based on the stipulated time for the Market research project.
The research was able to achieve the objective of understanding the key influential decision making factors for an air traveller and their importance to the consumers while deciding on the flight travel. At first, the report used qualitative analysis to derive upon the various attributes of branding, pricing and Service quality. Qualitative analysis explained that service and the Quantitative analysis helped justify the findings. The Research is related to the theories and the report concluded the Importance of the three aspects namely: Price, Service Quality and Brand Loyalty.
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