MRKT19049. Customer Relationship Marketing
Assignment Topic: A Research Report
Does true loyalty really exist in relationship marketing of airline industry ?
The rapid growing number of interested in relationship marketing is extremely high, and customer loyalty is a hottest topic of the relationship marketing especially in service industry. Due to popularity of customer's loyalty concept, many people are confusing between repeat purchases behavior and loyalty scheme This report aims to investigate the existence of true loyalty customer in relationship marketing of airline industry. Which will focus on distinguishes between truly loyal and mere repeated purchases behavior. And also underline the importance factors that driven behind true loyalty customer.
The findings shows that true loyalty customer can be measure by determine the relationship between relative attitude and repeat purchase behavior. Attitude ional is an importance factor in create customer true loyalty, some of customer attitude are, satisfaction, confident, feeling.
Moreover, this report shows that relationship between customer and service staffs could lead to customer loyalty to the company. Future more, from the survey, we are now understand the group of customer loyalty of the airline industry, and used appropriate strategies to achieve higher degree of loyalty.
The following recommendations have been made:
Marketer should keep in mind that characteristic of true customer loyalty include attitudtional, and behavioral.
Develop relationship between customer and service workers
Move "Spurious loyalty" customer to become "True Loyalty" customer
Develop loyalty shame that include emotional bonding.
Table of contents iii
Title page ÃÂ
Executive summary ÃÂÃÂ
Table of contents ÃÂÃÂÃÂ
1.0 Introduction 1
1.1 Background 1
1.2 Aim 2
1.3 Scope 2
2.0 Literature review 3
2.1 Establish research hypothesis 4
2.2 Methodology 6
3.0 Analysis 7
3.1 Secondary data analysis. 7
3.2 Primary data analysis. 9
4.0 Conclusions 11
Reference List 13
There are undoubtedly a growing number of interests in the subject of relationship marketing. It seems to become more essential marketing area for managers in today highly competitive business environment to build strong relationships between firms and theirs customers. Webster (1992), state that the relationship marketing concept is highly support by current modern business trends. Ndubisi (2004) supported that many firms are now focusing on strong organization and customer's relationship to obtain information on what is the best way to serve customer and keep them away from the competitor. And according to Gronroos, (2006) the importance of customer relationship marketing concept cause American marketing association to update its marketing definition, which include value for customers and customer relationship in their new definition. Hence, to build customer relationship can benefit both company and the customer from mutual reward and also, by create relationship with customers, the firm can gain quality information of marketing intelligence for better marketing strategy plan (Rapp and Collins, 1990)
The object of customer relationship is to retain customers by gaining their loyalty based on mutual commitment (Little and Marandi, 2003). Due to popularity of customer's loyalty concept, many people are now confusing between repeat purchases behavior or price base competition and loyalty scheme. Therefore, it is importance to understand the actual impact of the underpinning of relationship marketing of customer loyalty. These knowledge will help in better management of firm and customer relationship and in achieve higher level of loyalty among customers especially in airline industry.
The objects of this report is to investigate the existence of true loyalty in relationship marketing of airline industry, which will focus on distinguishes between truly loyal and mere repeated purchases behavior. It will focus more closely on airline industry which primary research on this report will studies on this area to find the relationship between true loyalty customers in relationship marketing of airline industry. This report will also try to answers the importance factors that driven behind true loyalty customer of commercial airline industry. And many of used full approach to create true customer loyalty are include in this report.
The scope of this report includes.
Distinguishes between truly loyal customers and repeat purchase behavior.
Discusses and analysis new loyalty model, which support true loyalty concept.
Discusses and analysis the results of primary research on true loyalty.
Defined factors driven behind true loyalty concept.
Discusses the importance factors to create loyalty in relationship marketing of airline industry.
Many researchers in relationship marketing subject are tying to find an agreement of brand loyalty model. As state in Uncles, Dowling and Hammond (2003) article, customer loyalty is normally conceptualised in 3 different ways. First, customer loyalty come from favourable attitude or beliefs towards brand, and manifested in an emotion attachment to brand, which allows us to gain supplemental understanding of loyal behavior. Second, it can be identified purely in term of customer behavior, the repeat buying of a brand which this concept later argue that focusing on only the behavioral aspect of loyalty would overestimate the share of true loyalty customer, because there are always customer who are force by some situation to continue purchase the same product or used same distribution channel. Lastly, Uncles et al. explain about contingency approach which contains the relationship between behavior, attitude and loyalty are influence by variables factors such as an individual particular situation or current circumstances or both of these.
In addition, some researcher belief that satisfaction is the first step in create customer loyalty. According to Little and Mardini, (2003) If the experience just fulfils expectation, they are satisfied, but in reality no one can guarantee that satisfaction customer will lead to customer loyalty. This support by a survey by British Airway, found that 13% of complete satisfied customers did not intent to fly British Airway again (Weiser, 1995) However, many researcher beliefs that when satisfied customers continue to purchase, trust and commitment will be create which will lead to loyalty.
On the other hand, while some researchers claim that loyalty has only one dimension, it is commonly argue that loyal is a two dimensional construct, which contain both behavior and attitude. This two dimension loyalty concept was first developed by Day (1969). After ward, many various modification of this concept have been suggested. Some of the best known is by Jacoby and Kyner (1973), and Mahony, et al. (2000). And the most popular model is the loyalty typology model writhed by Dick and Basu (1994).
Establish Research Hypothesis
After review many sources both from textbooks and journal articles which focus on loyalty, the literatures shown that there is no universal agreement between loyalty concepts. However, if we look more closely from customer's point of view, we can see that the meaning loyalty is simple. According to McKenna (2005), Furtune magazine released "top 100 best companies to work for" and the number 1 vote from this popular magazine is supermarket chain store: Wegmans. With it sale of 3.4 billion dollar and a 67 store locate in many places across US such as,New Jersey, New York , Virginia and Pennsylvanian. The store spokesperson claims to build "shopping experience" with their huge store departments such video rental, bookstore, dry cleaner and child play centre. But what really importance from this news was the fact that Wegmans got more than 7,000 letters from people across the US in 2004, and about half of them from people pleading with Wegmans to come to their town. Now that's true customer loyalty.
Another good example from Sridhar (2003) article, Let imagine that, in one day, you are checking into a flight as an economy class passenger. The services staff at the airline counter hand you a boarding pass and say, "We are happy to give you an upgrade to a business class seat, Sir" How did this happen to you, you wonder, and then you realize later that you fly with that airline very often, and their have tracked you as a frequent flyer. You might think that this is the way their want to say thanking to you as loyal customer. In fact they don't stop at this point. Next time you book your flight, they also tell you will get a free transfer between airport and city. They continue to make you feel special. All of this process happened without your keeping track of frequency flyer mileage point, or applying for upgrades or redeeming free ticket at all. At the end, surly, you will be their true loyalty customer.
As shows in 2 examples above, there is a similarity between 2 examples, which is an emotional bond. In McKenna (2005) article claim that many of retailer activity that they call customer loyalty programs, for example, buy 10 coffees or car washes and get 11th for free are not loyalty, for him, these type of programs are frequency, simply because people can not buy a persons loyalty. He also suggests that true loyalty is to create thought an emotional bond. This support by Mattila, (2001) she said that "I argue here that true loyalty cannot be assured by promises of free items and gift certificates, because there is more to loyalty than frequent patronage" this is a mistake of most retailer by equate loyalty with repeat purchases which lead to loyalty programs that focus on offering points toward discounts on future purchases. Moreover she claims that what retailer really need involve attitude, behavioral and emotional commitment to the retail shop.
In addition to Harvey Thomson, author of Who Stole My Customer?, says that "the key of effectively competing for loyalty is ensuring the quality of the customer experience, not the quantity of customer rewards" (Compton, 2005, p. 14). Thomson claim that frequent flyer mile or points of airline industry and credit card company are very easy to copy and it is not true loyalty, but it just another from off price based competition and the customers will change to the competitor if they find another card with more give more point to redeem or an easier way to get those free airplane tickets.
From the facts above we can now see the difference between repeat purchase behavior and loyalty. And we can conclude that emotional bone, attitude and behavior are characteristic of true loyalty. This support by Dick and Basu,(1994). His article state that customer loyalty model can be measure based on behavior to that brand or store and a customer's relative attitude to brand or store. Therefore, the research on this report will be build around Dick and Basu loyalty model, to find the existence of true loyalty customers in relationship marketing in airline industry, and underline the main factor in crated of true loyalty customer.
The main research was a survey of 12 oversea students who's all have frequency flyer card of Airline Company. The reason for choose oversea student as the respondent because, these students had have experience with airline company, when they come to study in Australia. The 2 dimensions of loyalty model was ask to test on the respondents relate to both attitudinal and behavioral of the respondents. The questionnaire was desired to answer in number 1-4 from strongly disagree to strongly agree. And some questions will be ask for the respondent's opinion to their frequently flyer airline. And why they buy tickets from that airline4
The questions on attitude will be asks on satisfaction, confident and feeling to the airline that they have frequency flyer program. And the cut of point between high attitude and low attitude will be the number 1-4, such as when the respondent rate 1 or 2 on satisfaction question, it mean the respondent has low satisfaction, on the other hand, if the respondent rate 3 or 4 on satisfaction, they are said to be high satisfaction.
The repeat purchase behavior is identified by total number of travel with every airline compare by the number of travel with the airline that they have frequency flyer program. If the result is more than half of the total number, it can said to be high repeat purchase.
For example, if the respondent total number of travel equal to 6 times. And they travel with the airline that they have frequency flyer program with 4 times. Which more than half of the total number of traveled; it can conclude that they are high repeat purchase behavior. On the other hand, if the numbers of travel with the airline that they have frequency flyer program with are lower than total number of travel with every airline, than we can conclude that the respondent has low repeat purchase behavior.
3.1 Secondary data analysis:
Testing the predictive existence of true loyalty customer in airline industry requires measures of both attitude and behavior related to customer loyalty. Attitudinal loyalty is measured by reference to components of attitude such as beliefs, feeling and purchasing intention. Those customers who have a stronger preference for involvement in or commitment to a brand are more loyal in attitudinal term. Behavioral loyalty is measured by reference to consumer repeat patronage and buying.
Relative attitude and behavior
Dick and Basu loyalty (19994) model defined attitude as represent an association between an object and an evaluation. Such as, accessibility, confidence, emotion, feeling or mood, satisfaction, and expectation. But, he also notes that in some situation where customer who has low attitude continues to purchase products because they don't have alternative option but continue the relationship or which they are insufficiently motivated to seek out. While, Behavioral of loyalty can be identified by repeat patronage and repeat purchase action of the customer.
He also identifies 4 types of loyalty groups according basis of relative attitude and repeat patronage, show in figure 1. Customers who has high level of attitudinal and behavioral are show as 'true loyal', for those customer who has high behavioral loyalty but low attitudinal loyalty as 'spurious loyal', for this group of customer may reflect inertia and high switching costs. And those people with high attitudinal loyalty, but low behavioral loyalty as 'latent loyal', And for both low behavioral and attitudinal is none loyalty.
Source: Dick, A. and Basu, K., 1994, p. 101
Also note that, from a practical point of view, the behavioral definition of loyalty is attractive because sale and profits derive from purchase behavior not attitudes to brand, which mean the manager should draw more attention to True loyalty and Spurious loyalty groups (Dick and Basu, 1994)
In conclusion, Dick and Basu model shows relative attitude and behavior approach to define the true loyalty of the customers. These studies confirm the hypothesis of this report and it shows that true loyalty dose exit in relationship marketing. More over, It also shows that situation condition of the consumer is critical affect to customer loyalty.
On the other hand, according to Brierley (1994) article, "he argues that the factors driven behind customer loyalty in commercial airline industry are not only come from attitudinal or behavioral. He claims that in some services industries such as travel and tourism, loyalty can not be always transformed effectively into repeat purchase behavior". Organization factor such as, tourist packages and corporate travel arrangement in business travel sector, are main barrier for the consumer. Many airlines may operate on the same routes which heave heavy competition while some routes may operate at a monopoly. Corporate travel regulations and company restrictions limit the freedom of choice.
In additional, as state in Bova and Johnson article, in services industries where the services is not separable from the person who providing it, such as in airline industry, the relationship between customers and service staffs given a potential mean by which a company can achieve true customer loyalty. They conclude that strong customer relationships with a company service personal lead to true customer loyalty to the company, as positive attitudes towards service staff are transferred directly to the company. Where customer has a strong relationship with many service staffs of the company, true loyal to the company is a direct outcome as the workers are perceived as a synonymous with the company. On the other hand, where the customer develops a strong relationship with only one particular service staff, true loyalty to the company is an indirect outcome and the high level of loyalty the customer has toward the service individual. In this kind of situation, true loyalty to the company is subject to the customer having continued relationship with the service staff (Bova and Johnson, 2000).
Primary data analysis
The 12 respondents whose have frequency flyer programs of difference commercial airlines have been survey by a set of questionnaires. All of them are familiar with at lease one airline company. From a brief discuss with many respondents, it found that on average, they are travel at lease 2 time per year and the most frequency flyer are travel oversea 8 time per year from Australia to Hongkong. From my experience, oversea students are the main target of commercial airline. For example, Thai airway often advertises their company in Thai news paper in Melbourne. And away sponsor Thai community in Thai food festival fair. This similar to other airline, such as Cathay pacific
airline and Singapore airline which away get involve in oversea students. It can be see that the airline industry done a good job in create loyalty though relationship marketing to their oversea student customer.
However, the result of the survey shows that only 3 respondents out of 12 or 25.5 % of the respondents are in group of the "true loyalty", (see figure 2 for details). This support the hypostasis of the true loyalty does exit in airline industry. The result of the survey support by Brierley (1994) He claim that true loyalty customer is very rare in some service industry. Moreover, the larges group of loyalty is "spurious loyalty" which has high repeat purchase behavior but low level in attitude. As state in Zins (2001), customer that has low attitude in brand but continue to purchase the products may be from 2 main reasons. Firstly, lack of alternative option and secondly, high personal sacrifice. Both factors are highly relevant in commercial airline industry. Flight routes are not only characterized by connecting from point A to point B. Schedule factors such as number of flight per day, time, and stop over contribute to the customer's over all value. And the benefits of airline frequency flyer program influence the personal sacrifice involved.
Figure 2: Oversea student's loyalty group.
In additional, many respondent claims that the frequency flyer card that they hold have little affect to their decision to purchase airplane ticket, the main factors contribute to buying decision depend on the Schedule, prices, stopover, services quality, corporate image and the frequency flyer program of the airline industry, is only one those factors.
One of the frequency travelers in this report state that, he sees the frequent flyer program as a bonus from the airline, "At six time return flight from Melbourne to Japan you get a gold card status with Japan airline but what if you fly with others airline, you still get a gold card and the same mileage and may be same free awards to redeem."
The results from the respondents agree with the discussions that I had mention before in this report that in airline industry where are very limit to the Schedule, destination, time and stopover, the benefits of loyalty program might not affective in some situation.
Loyalty management is become more concern in relationship marketing., the understanding of the underlying factors involve in loyalty will help the airline marketer to improve the passenger retention rate. Losing a customer either definitely or in terms of a reduced repeat purchasing rate entails a decline in sales volume and it means that new customers have to be attracted by more concentrated marketing activities. It is commonly known that gaining new customers is more expensive than serving present customer groups (Little and Marandi, 2003).
This report has investigated the true loyalty in relationship marketing of airline industry and analysis the reason driven behind customer loyalty in airline industry. The main research of this report shows that true loyalty customer does exist in airline industry but the number is low. It found that the largest group of customer is spurious loyalty with high repeat purchase and low attitude to the airline because they are limit to situation, motivation and sacrifice. In addition, this report shows that the main factors involve in create true loyalty customer are attitude of the customers toward bran, which include emotion, feeling or mood, satisfaction, and expectation. The finding of the type of loyalty and the factors driven behind loyalty concept can help manager understand consistent with what is generally assumed about the determinants of loyalty and improve their service to achieve higher degree of customer loyalty. Moreover, the relationship between customers and service staffs is also importance in services industry especially in airline industry to create true loyalty customer. Given that, relationships between customers and service staffs offer managers an inexpensive means by which true loyalty to the company can be developed. In my opinion, commercial airline service is delineated by complex service bundles. There are hundreds of particular service characteristics bundled with varying situational constraints and external influences. From all of these factors the idea of relative attitudes could not be affirmed in the case of the commercial airline industry.
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1. How often you travel by airplane each year?
Answer Ã¢ÂÂ¦Ã¢ÂÂ¦Ã¢ÂÂ¦.. per year.
2. What airline that you has frequency flyer card? (the most highly used one)
3. I'm satisfies with the airline services.
Ã¢ÂÂ¡ Strong disagree Ã¢ÂÂ¡ Disagree Ã¢ÂÂ¡ Agree Ã¢ÂÂ¡ strongly agree
4. I'm feeling confident with the airline services
Ã¢ÂÂ¡ Strong disagree Ã¢ÂÂ¡ Disagree Ã¢ÂÂ¡ Agree Ã¢ÂÂ¡ strongly agree
5. I have a good attitude toward the airline.
Ã¢ÂÂ¡ Strong disagree Ã¢ÂÂ¡ Disagree Ã¢ÂÂ¡ Agree Ã¢ÂÂ¡ strongly agree
How many time that you travel with this airline each year?
Answer Ã¢ÂÂ¦Ã¢ÂÂ¦Ã¢ÂÂ¦Ã¢ÂÂ¦Ã¢ÂÂ¦per year.
7. What is the main reason for choose airplane tickets?
8. Please, give your opinion about airline frequency flyer program.