Airline Passengers: Service Innovation & Branding Strategies

Introduction

Service development is an important criterion to attract and retain customers who are loyal and satisfied. But even more important is to retain customers who are loyal, as well as profitable. Innovative and attractive services are an answer to customers who are demanding. So marketing of the services for airline passengers can be of three types:

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There are three kinds of companies; those that simply ask customers what they want and end up as perpetual followers; those that succeed – for a time – in pushing customers in directions they do not want to go; and those that lead customers where they want to go before customers know it themselves (Hamel & Prahalad, 1991, p.85).

So the main idea is to provide what the customers want or innovate new offerings to the customers, and this process must follow customer’s input. The situation is even more competitive for business class airlines where there are many full services airlines contesting for this market segment. Further competition in this section is characterized by price as well as through product enhancement (Douglas, 2005).

This competition for attracting business customers becomes even more acute during economic downturn when customers are reluctant to spend extra for business class travel. This leads to understanding what may retain and gain customer loyalty in the time of economic recession. For this research, I assume that the recessionary pressure is weakening the customer demand (IATA, 2008) can be maintained through designing of innovative service offering. This paper proposes the areas that I intend to cover in the final research and the brief review of literature that will help in conducting the study.

Background Study

The overall revenue of the airline sector has declined after the beginning of the recession (IATA, 2008). The airline’s revenue from business and first class has declined (MacInnis, 2009). The decline in business class travel has been for all regions like Europe America and Asia dropped except for Africa-Middle East (MacInnis, 2009). In case of business traveller, more people are shifting to economy class due to the recessionary situation. This trend is more prominently noticeable for short-haul flights where no-frill low cost airlines have started gaining more business travellers than full-service airlines (MacInnis, 2009). This indicates that the recessionary phase has affected business class seat demand.

Aims & Objectives

Thus, the demand for business class travel has declined considerably. Further there is a shift of business class traveller from business to economy class (MacInnis, 2009). In order to attract new customers, airlines decreased their fares and presented discounted promotional fares to maintain the passenger number. But reduced prices failed to lead to higher demands: “Promotional fares meant to encourage continued travel in spite of increasing job cuts and financial turbulence have exacted further pain on the industry’s bottom line, according to IATA, which represents 230 airlines including British Airways (BAY.L), Cathay Pacific (0293.HK), United Airlines (UAUA.O), and Emirates [EMIRA.UL].” (MacInnis, 2009)

So it is clearly evident that prices alone cannot change demand for airline services, especially for business class fliers. So it is important to identify other factors which can potentially lead to a greater service demand. One factor that needs attention is the service package. IATA survey of corporate travel shows that frequent flier schemes are a main determinant in choosing an airline and its service for long-haul flights (IATA, 2009). So it is important to develop a package offering which will lure corporate customers to go for business class travel without further reduction in prices.

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So the main aim of the paper is to identify ways in which a non-price strategy can increase the demand and profitability of the business class segment of the airlines. The aim of the paper is to identify a marketing mix which will help in boosting back sales of the business class seats. So the proposed research question is if improved banding, service quality and service innovation can drive up demand for business class seats in a recession?

Literature Review

The literature review will present various researches and theories which have been done on the increase of demand through improved service innovation, branding, and service quality in the airlines industry.

Service innovation is required to understand customer needs and demands in order to serve customers better. Gustafsson, Ekdahl, and Edvardsson (1999) conducted a case study analysis of Scandinavian Airlines Systems (SAS) to identify the how in turbulent times the airlines industry has neglected passenger needs and thus has led to reduced demand. The study identified 40 problems which the customers encounter which travelling by air and thus indicated a drastic need to alter the service offerings (Gustafsson et al, 1999). They needed to develop a service clearly focused on “customers’ perception of the service process” (Gustafsson et al, 1999, p.357). According to them, the customer’s perception identification is crucial in developing an innovative service, which can be done by mapping the service experience of the passenger throughout the travel process. Similar view has also been expressed by Edvardsson (1997) who also believed that understanding and monitoring the travel process is crucial for identifying the innovations in the service that need to be offered.

Given that service innovation is a crucial feature, I will then try to understand the importance of business class marketing. Business class prices differ with airlines which depend on the willingness of passengers to pay depending on the service quality perception of the airline (Douglas, 2005). This leads to the importance of the quality of service provided by airlines to business class customers.

Park, Robertson, and Wo (2006) have conducted an investigation into the perception of passengers of price and airline service quality, passenger satisfaction, brand of the airline and perceived value of the passenger. They argue that these factors determine the intention of the customers to do a repeat purchase. Their methodology was collection of structural data from Australian international passengers using maximum likelihood estimator. Their study showed that price did not affect customer satisfaction but it affected directly the customer’s perception of quality of service, the brand, and value. For business class passengers Part et al. believe as they pay a higher price as compared to economy class travelers, they expect “better services when compared with economy class passengers” (Park et al, 2006, p.376). This study also indicates that improving service quality will increase the customer’s repurchase intention (2006). This indicates that the business class passengers are also affected by service quality. Here I must say that as Douglas (2005) pointed out, serving business class passengers from individual passengers. This is so because the decision to travel and the travel planning is done by according to the company policy rather than by the passenger themselves (IATA, 2009). So the target customers for the airlines are not the passengers by rather the companies who book the ticket. So the processes which need most attention are “partners” and “convenience” (Douglas, 2005, p.221). Partners indicate that the airlines need to coordinate and form alliance with the corporate to ensure frequent flying through its airlines and strong networking. The main value to the business customer is convenience of travel. This indicates that time for business travelers are of high importance. So importance is laid on “elapsed journey time, assuming a shorter flight time to be more convenient” (Douglas, 2005, p.221).

Another important factor that gains importance is the value offering of the airlines to business class passengers. The value is defined in term of service and convenience. Today convenience for business class passengers is also to use mobile phone on board (IATA, 2009). So it is important to provide special features to the business class travelers which will help them in their business rather than only concentrating on luxury and comfort. This has been proven by research. A study by Mason (2000) suggest that low cost airlines will be a more attractive option for business travel than full service business class flights for small and mid-sized firms. The low cost airlines use a strategy to sample their product to business users, which is often transformed into a repurchase (Mason, 2000). So the offering in such cases is “Affordable Business Class” (Mason, 2000, p.116). This shows that the offerings must follow the basic needs of the firms rather than providing extra frills which cost more and add no value from the business point of view.

Proposed Methodology

Method

In this section, we will discuss the proposed methodology that will employ for this qualitative study and justify it. Denzin and Lincoln defined qualitative research as “a field of inquiry in its own right”, along with being “complex, interconnected family of terms, concepts, and assumptions” related to “methods connected to cultural and interpretive studies” (Denzin & Lincoln, 2005, p.2). Qualitative research is based on two characteristic styles i.e. documentary/historical and field study (Crabtree & Miller, 1999). Field research methodology is the most accepted method while working with human field with the intent to get a “holistic, realistic, description/explanation” (Crabtree & Miller, 1999, p.4). A qualitative research in the human field is done through the use of case study, grounded theory, anthropology/enthropology, action research narrative research, etc (Baker & Hart, 2008).

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Mostly airline research has been conducted through quantitative customer survey (Edvardsson, 1997; Douglas, 2005), or quantitative modeling (Park et al, 2006). For this paper, I propose to use a case study methodology. Case study analysis has been a popular qualitative research method for the studies related to airline industry service quality and innovation studies (Gustafsson et al, 1999; Chan, 2000; Bamford & Xystour, 2005).

For the purpose of this study, I employed action research method (Remenyi et al, 1998). This research method was developed in the 1960s and has been found to be a useful tool for areas where change management is required and/or identification of improved strategies or process are involved (Remenyi et al, 1998). According to the suggestions of Moore (1999) for conducting a proper action research, the project must have a continuous chain of evaluation of the proposed research area which will enable the research to provide solutions which can be applicable in a dynamic form for a continuous span of time. The advantages of action research are that they are conducted real-time and everyone can see the process and the result. Here I choose a case study analysis over grounded theory even though it is more apt in capturing the reaction of individual or group behavior (Baker & Hart, 2008) because there is a lot of confusion in this system regarding the “how the method of grounded theory has been used” (Baker & Hart, 2008, p.161). Further this research process depends on the coding method which the individual researches uses thus creating various interpreting methods, which creates a problem for the analysis portion. Ethnographic study is not applicable in this research as it is useful while doing market segmentation based demographic data and thus is not suitable for the purpose of the proposed research (Baker & Hart, 2008). A case study method is a more useful tool as it helps in analysis “an event, an activity or individual perspectives and managerial implications” (Baker & Hart, 2008, p.161). A case study analysis helps in doing away with complex statistics as well as helps in qualitative theory building even though it does not negate using quantitative data (Gummesson, 2005). A case study research is “provides the researcher with an input of real world data from which concepts can be formed and propositions and theory can be tried.” (Gummesson, 2005, p.322) So case study research is an apt methodology for answering the research questions for my research.

Research Design and Data Collection

The research aim of the proposed paper is to understand the effect of improved service quality and innovative service on business class seat demand. The data will be collected from the company website of the airlines under study. The airlines I will study will be a low cost airline and a full-service airline in Europe, which provide business travel. The mode will be help in understanding the company offerings through their promotions and schemes and then comparing the both vis-à-vis their business class sale and revenue. This will provide a process of identification as to which airline is more successful in time of recession and why. The service offerings of the company will be clearly available from the company websites and we can easily understand the trend of the offering by drawing a timeline based on the business class promotions and offerings. In-depth interviews will provide more insights into the research.

Limitations

The study will be based on secondary research. So the case study will not be based on primarily data collection, which may provide data which has been manipulated or skewed by the company or other research agency. Further, the validity of the data cannot be confirmed because the research will not be based on primary data.

Conclusion

The proposed paper aims to demonstrate that an improved service innovation and quality will affect the demand for business class seats positively. The study will be based on a case study analysis of the airline companies in Europe. The case study will be developed using the data from secondary as well as a few primary sources. Apart from this, the research will try to provide solutions and recommendations as to how they can change their marketing mix and product offering and attract more customers.

Reference

Baker, M.J. & Hart, S., 2008. The Marketing Book 6th Edition. Oxford: Butterworth-Heinemann.

Bamford, D. & Xystour, T., 2005. A case study of service failure and recovery within an international airline., Managing Service Quality vol. 15 No. 3, p. 306-322.

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Chan, D., 2000. The story of Singapore Airlines and the Singapore Girl., Journal of Management Development Vol. 19 No. 6, p. 456-472.

Crabtree, B.F. & Miller, W.L., 1999. Doing Qualitative Research. London: SAGE.

Denzin, N.K. & Lincoln, Y.S., 2005. The Discipline and Practice of Qualitative Research. In Denzin, N.K. & Lincoln, Y.S. eds. The SAGE Handbook of Qualitative Research. London: SAGE. p. 1-32.

Douglas, I., 2005. Do business class air fares capture added value for airline alliance membership?, Journal of Revenue and Pricing Management vol. 4 no. 3, p. 219-227.

Edvardsson, B., 1997. Quality in new service development: key concepts and a frame of reference., International Journal of Production Economics Vol. 52, p. 31-46.

Gummesson, E., 2005. Qualitative research in marketing., European Journal of Marketing Vol. 39 No. 3/4, p. 309-327.

Gustafsson, A., Ekdahl, F. & Edvardsson, B., 1999. Customer focused service development in practice., International Journal of Service Industry Management Vol. 10 No. 4 , p. 344-358.

Hamel, G. & Prahalad, C., 1991. Corporate imagination and expeditionary marketing. Harvard Business Review, July-August, pp. 81-92., Harvard Business Review, p. 81-92.

IATA, 2009. Corporate Air Travel Survey. Market Research. IATA

IATA, 2008. IATA Economic Briefing. Web.

MacInnis, L., 2009. More business travellers flying economy-airlines body. Web.

Mason, K.J., 2000. The propensity of business travellers to use low cost airlines., Journal of Transport Geography 8, p. 107-119.

Moore, N., 1999. How to Do Research: The Complete Guide to Designing and Managing Research Projects. London: Library Association Publishing.

Park, J.W., Robertson, R. & Wo, C.L., 2006. Modelling the Impact of Airline Service Quality and Marketing Variables on Passengers’ Future Behavioural Intentions., Transportation Planning and Technology Vol. 29 No. 5, p. 359-381.

Remenyi, D., Williams, B., Money, A. & Swartz, E., 1998. Doing Research in Business and Management. London: Sage Publications.

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