Service Quality And Relationship In Airline Industry

In today’s globalised and competitive environment, quality service has become one of the important sources of competitive advantage, especially in the service-based industry. (Hersh, 2010) Delivering high qualification of service would be profitable for service organisation, although it is difficult due to it would depend on different customers’ perceptions and experiences. Moreover, in order to build a strong brand, relationship marketing also stands for a crucial role in the overall strategy. Relationship marketing has become more and more important nowadays as marketing has changed from transaction to relationship based. Gronroos (1991) has redefined marketing as establishing, retaining and improving relationship with customers and other stakeholders and when the objectives of both parties are met, there would be a profit. Due to the issue of service quality and relationship marketing has proven its importance and position in the industrial management and marketing, the concept of offering high quality service and enhancing customer relationship has widely been considered in the marketing activities.

Airline industry is one of the best examples of service based industry and it has shown that the market of airline has becoming competitive due to the deregulation and airlines choices. Therefore, providing high service quality and building strong relationship are the key drivers of one company’s survival and competitiveness. Numbers of researchers have applied service quality and relationship marketing theories and concepts to airline industry. Since Park et al (2009) mentioned, delivering good service quality is essential in airline industry due to it can impact customer satisfaction, customer loyalty and the choice of company, Shaw (2004) stated that the characteristics of airline service make the industry has the opportunities to practice relationship marketing.

The aim of this paper is to illustrate the effect of service quality and relationship marketing on airline industry therefore the paper is going to be organized as follow. The literature would indentify the general aspects of service quality and relationship marketing and illustrate the main features and characteristics. Following is how these two issues affect to airline industry and define relevance and implementation within the industry. Finally, some company examples will be shown in order to demonstrate the importance of relationship marketing in airline industry. In addition, the recommendation of better relationship marketing management would also be suggested.

Characteristics and features of service quality and relationship marketing

This paper proposes to evaluate relevance and implications of service quality and relationship marketing to airlines industry. The following review presents the relevant literature leading to the establishment of the propose. The characteristics and features of service quality and relationship marketing will be discussed in this section.

Service quality

Service quality is a consumer’s overall impression of the relative inferiority/superiority of the organisation and its services (Bitner & Hubbert, 1994). Perceived service quality is defined as an international judgment or attitude relating to the superior service. (Zeithaml and Bitner, 2003) Due to more and more people have the awareness of the importance of service quality, it has been widely discusses by several researchers. Parasuraman, Zeithaml and Berry (1991) addressed that offering high qualification of service has been recognized as the most effective and relevant way to demonstrate that a company can set itself as a unique and competitive position in the look-alike market. Moreover, companies should be concerned with the service quality issue because it has shown that unqualified service can drive customer loyalty to decrease by 20%. (Goodman, 1989) Therefore, it is obvious that service quality has strong impact on business performance, customer satisfaction and loyalty. (Gurau, 2003)

It is hard to control the perception of service quality. Comparing to product quality, service quality is more difficult for consumer to evaluate. Furthermore, the perception results from the comparison of customer’s expectations with the factual performance. In addition, quality can not only be evaluated by the outcomes of service but also the process of service delivery. (Gourdin and Kloppenborg, 1991)Therefore, there would be the quality gaps and Zeithaml, Berry and Parasuraman (1988) developed the service quality model indicating the five gaps possibly occurring between the management of consumer perception of service quality and the tasks related to service delivery. (See appendix figure 1) From the model, it is clear that Gap 1 occurs when consumer’s expectations differ from management perception of consumer expectations; Gap 2 results when management can not meet what customer’s expectations; Gap 3 exists when there is the difference between service quality specification and the actual service delivery; Gap 4 develops when the actual service delivery can not meet what consumers have been promised. Finally, Gap 5 is resulted depend on the size and direction of the four gaps.

It is widely accepted today that service quality is a multidimensional concept. There are two perspectives of quality measurement: internal and external. Internal perspective focuses more on the conformance to requirements, conversely, the external perspective concern about the customer perception, customer expectation, customer satisfaction and customer attitude. Nowadays the external perspective has become more important due to the growing customer awareness, varying customer tastes, and increasing customer expectations. SERVQUAL which was developed by Parasuraman, Zeithaml, and Berry (1988) is one of the most popular models used to examine the service quality issues. When using SERVQUAL to examine the service quality, it has to assume that consumer can evaluate service quality by comparing whether the perceptions achieve their expectations. (Park et al, 2005) Although SERVQUAL has been widely used across various industries, some researchers indicated the limitations of SERVQUAL. Carmen (1990) argued that it is difficult to use the 22 SEVQUAL exactly and Cronin and Taylor (1992) also noted the limitations of SERVQUAL due to the disconfirmation paradigm do not have a good performance.

Relationship marketing

Relationship marketing is built on three distinct but interrelated approaches. Most of the contributions are based on the behavioural perspective. Relational constructs of trust and satisfaction, conceptualization and economic evaluation of customer retention, and internal relationships are attributed to behavioural perspective. (Hansen, 2000) Shi et al (2009) also noted that customer satisfaction and commitment are the constructs that can apply to describe the properties of customer relationship. Network theory and new institutional economics are the other theoretical approaches in relationships marketing. The network approach concerns with the relationship between business to business marketing. Moreover, it has been argued that networks of relationships are composed of multifaceted, complexes, and long-term social systems. On the other hand, economics approach utilizes the modern economic theories to clarify the development and analysis of relationships. (Hansen, 2000)

Trust, commitment, satisfaction and communication are the four important dimensions in relationship marketing. There are several authors have argued that trust is a central construct of developing successful relationship with customer. (Eisingerich & Bell 2007; Soureli et al. 2008; Liang et al. 2009) Bauer et al (2002) stated that trust is a prerequisite construct for the successful relationship marketing, while Cyr et al (2007) believed that it is essential in RM. Furthermore, commitment is also important when the long-term relationship is established. Liang and Wang (2006) found that when commitment becomes more remarkable, the relationship would be more stable. Satisfaction which is defined as the overall evaluation according to the purchase and consumption is also important in RM. It has been argued that it is essential for each partner to deliver high-level satisfaction when doing business. (Sheth and Parvatiyar, 1995) Communication appears to be an important dimension on managing long-term relationship. (Doney et al, 2007) According to Goodman and Dion (2001), communication is widely accepted in both social and business relationship. Furthermore, some researchers believe that communication is like the glue which can gather and make marketing relationship stable.

Diller (2000) has developed a seven-principle framework of relationship marketing; information, investments, individuality, interaction, integration, intention and selectivity. The framework refers to the necessities that company has to establish relationship with customer. Moreover, the aim of this framework is to build strong database of customer-oriented information, to offer customized and individualized service, to keep the interaction and integration with customer and to maintain a good relationship with customer. To incorporate all the aspects according to Diller is the key to a successful relationship marketing initiative. Having a strong relationship with customer means that customer retention also plays an essential role in relationship marketing. In addition, it has been argued that customer loyalty and repeat purchasing behaviour are also referring to retention. (Heskett et al, 1994) Managing good customer retention can benefit a firm and increase the profitability because retention can lead to cost reductions and sales increases. (Reichheld and Sasser, 1990) Hansen (2000) stated that managing good customer retention may increase expertise of customers therefore the service costs might reduce. Moreover, the sales will grow aw the result of the increased expenditure over time, positive word of moth by loyal customers and re-purchasing of loyal customers.

Relevance and implication of service quality and relationship marketing in airlines industry

It is now clear that service quality and relationship marketing stands for important roles especially in the service based industry. As airlines industry is the one of the main representatives of airlines industry, it has shown that there are more and more researches related to service quality and relationship marketing in the airlines industry have been growing due to they are essential and important issues for company’s survival and competitiveness. In this section, the paper is going to focus on the importance and relevance of service quality and relationship marketing to airline industry.

Service quality to airline industry

As mentioned previously, high service quality can make a company gain competitive advantage therefore delivering high qualification of service to customer is important for airlines to survive and show the differences in the competitive market. Park et al (2009) stated that a successful company usually implements a customer driven strategy which is concerned more on service quality and unique characteristics. Moreover, it has shown that service quality plays a significant role in the airline industry due to it can be the driver of passenger satisfaction, loyalty and choice of airline. (Aksoy et al, 2003)

It is quite difficult to measure the service quality due to there are wide variety of factors influenced customer. Customer always concerns about the ticket price, schedule reliability, flights frequency, food delivery, baggage delivery, and cabin service. Most of the airline services studies have use SERVQUAL to evaluate the service quality. However, it is not appropriate to measure all aspects of airlines service because there are both intangible and tangible attributes are involved in the airline service. (Tsaur et al 2002) For example in-flight meals, frequent flyer programs, seat space and legroom are the important issues that have to be emphasised is the airline service, but SERVQUAL does not address these important aspects. Therefore, it would be more relevant to derive the nature of airline service quality dimensions and evaluate the effects derived dimensions than just use SERVQUAL to measure the quality.

Since most of the concerns are intangible, company only can learn whether passengers are satisfied or dissatisfied with the service from their responses. Therefore, the gap will possibly occur. Gourdin and Kloppenborg (1991) has identified the possible factors that passengers, airline managers, and government concern and illustrated the significant differences. From figure 2, it is cleat that both passengers and managers have the same agreements of the factors are important in the airline service: convenient check-in and connections, taking-off on time, clean aircraft, the complaint mechanism, and so on. (See appendix figure 2) However, there are still some areas that managers and passengers have no agreement therefore the Gap 1 which is consumer’s expectations differ from management perception of consumer expectations will exist. For example, passenger concerns more about on-board comfort and regarding delay informed than the managers did. (Gourdin and Kloppenborg, 1991) Recall to previous section, managers should prevent the existence of Gap 1, since mismanaging here will disrupt the whole service delivery system. Therefore, a successful company should avoid and concentrate on minimizing gaps.

Relationship marketing to airline industry

Airline industry is now the first industry that generally adopt relationship marketing concept. Airlines must execute relationship marketing in order to survive particularly in today’s globalize and competitive environment. (Liou, 2009) The main propose of relationship marketing is to retain customer and make them become loyal, increase market share and brand awareness. The fundamental value offering such as availability and a convenient time-schedule, punctuality, safety should be served, if not, the company can not survive. People Express is the example which is unable to be on time and meet those requirements. However, the above-mentioned elements are the basic requirements in order to satisfy customer and if the company plans to retain customer loyalty, the company should build good relationship and match the needs of each specific segments. Thorsten (2000) argued that if an airline would like to execute a relationship marketing concept successfully, it has to understand and recognize the importance of the following statements.

To build customer relationship but not the customer databases is the first thing that an airline should implement. Moreover, an airline should have the marketing capability and establish customer orientation or the information about customers would be worthless. (Thorsten , 2000) The databases and IT audits would be the back-up which can be used to treat customer appropriately. Using information to improve services is another aspect that Thorsten (2000) has pointed out. It is essential for each airline to gather information of the most profitable customers in order to provide better service and improve the relationship. As mentioned in the previous section, communication is one of the important dimensions of relationship marketing therefore to communicate appropriately with the right segment would be helpful to maintain the relationship. Otherwise, company should emphasize the most important drivers of behaviour. Although there are not many drivers, the airline still needs to identify the real one in order to define specific micro-segments. Finally, the most important thing is to build long-term relationship marketing programs. (Morgan et al, 2000) Unlike the traditional transaction marketing concept, relationship marketing can build and retain the long-term customer relationship which can lower the company cost and increase the profitability. A successful relationship should build on trust at the beginning then search appropriate elements to satisfy and communicate with different segments. Therefore, in order to build good relationship, company should plan a program which is gathered the information of customer’s action and reaction.

The frequent flyer program (FFP) is one of the relationship marketing strategies in airline industry in order to develop customer loyalty. (Gilbert,1996) American Airlines is the first airline which implemented FFP by providing a package designed to encourage loyal passenger purchasing and reward them based on the distance flown on the airline. (Cheng et al, 2008) For customer, the other benefit of FFP is that it also can be use across the partner airlines. Like the previous-mentioned statements, successful relationship marketing is to meet every specific segment’s needs and FFP can execute the purpose well. Yang and Liu (2003) found that FFP still play a strategical role in the airline’s loyalty plan. However, nowadays it can not be guaranteed that providing FFP can keep customer loyal due to almost every airline hold an FFP. (Jarach, 2002) Therefore, company should plan a program which can collect customer’s action and reaction in order to meet their requirements. Internet would be one of good channel. Doganis (2001) stated that company can collect information of valuable customer through the internet therefore it seems that internet would be the potential channel for airlines to improve relationship with customer. Therefore, the website strategy is worth for airlines to provide integrated and customized service.

Impact of relationship marketing on airline industry

In today’s complex and globalized business environment, relationship marketing has become one of the most crucial sources of competitive advantage for airline business enterprise. Not only the international airline but also the low cost airlines have noticed this situation and started to implement relationship marketing in order to gain and keep its competitive position within the industry. According to Kupka and Jamart (2009), Air Berlin as the fifth biggest European low cost airline has also started to focus on the relationship marketing by offering high service quality, setting up 24 hours hotline centre, and providing a frequent flyer program which is rarely happened in low cost airline market. Due to Air Berlin stands out differently, their profit and customer has grown rapidly. Therefore, it can be said that relationship marketing is the way that can differentiate itself, maintain customer and enhance its market share. The following statements are going to focus on British Airways which has already been creating successful through relationship marketing.

British Airways (BA) which is the first international airline service is introduced in 1919 and now BA has become one of the leading companies in British airline industry. The goal of BA is to provide premium service to customer and maintain a strong relationship with existing customer. (BA annual report, 2009/2010) BA has already developed a relationship marketing programme and differentiated with other competitors. Unlike the most airlines offer, BA does not provide discount fare based on the miles and points. (Christopher et al, 2004) Knowledge-building programme is much more important than the extra discount in relationship marketing. BA has provided a member card which is linked to BA’s customer database which can provide BA the customer’s preference and flying history therefore it can create bonds with their customers. (Barnes, 2001) Despites it, what they prefer doing is to listen to their passenger and meet their requirements. Applied to the previous section, minimising the gap of customer’s perception and the actual service task is very important for organisations in order to keep a good reputation in customer’s mind. BA has set up a group called Market Place Performance which is used to examine the airline’s performance with customer. It has shown that this team will interview over 150,000 passengers for tracking customer perception of BA’s performance. Furthermore, customer analysis and retention system (CARESS) which has been invested by BA is used to gather the complaint letters and the employees will reply them immediately to customers. (Christopher et al, 2004) From the case of BA, it is obvious that BA has done well on trust, commitment, customer service and communication which are the main aspect of relationship marketing

Nowadays, the airline industry has become more and more competitive and almost every airline has been competing on price. Although ticket fare may be an important factor whether customer will choose from you, some of people especially in the long-distance journey still believe that receiving quality service is more important than the cost. Therefore, to identify the main segment and acquire and retain them is essential in airline industry. Applied to the previous section, to set a perfect customer database system is the primary thing in order to keep the close relationship with profitable segments. The database should be closely linked with the airlines activities due to it can let the existing customer feel that they are important and make them be more willing not to transfer to competitors. As what BA has done, to set up an executive club would be relevant to manage customer databases and the flying history and to provide what target’s requirements and preference. Moreover, communication is also one of the crucial parts for maintaining customers. It is important for airlines to launch an IT system which is used to collect customer’s compliments and feedbacks and the well trained employees are responsible to resolve the problem. Southwest Airlines which has a high rate of customer retentions aim to keep investing relationship building technologies in order to gather customer information and provide better service. (Shajanhan, 2004) In addition, always doing the service recovery based on customer feedbacks is very important in airline industry. Furthermore, culture differences could be another issue that the international airlines have to take into consideration. (Cunningham, 2002) Different culture may lead to different perspective therefore when targeting on different culture-based customer, it is very important to use the right communication tools and suitable strategy to attract new customer and also keep the relationship with existing loyal customer.

Conclusion

This report is undertaken to investigate the characteristics of service quality and relationship marketing and illustrate the impact of these two issues on airline industry. From the literature, it is obvious that both service quality and relationship marketing are the key elements of differentiating themselves, gaining competitive advantages, and enhancing market share. Therefore, many airlines have started to provide good service to meet passenger’s expectation and also establish long-term relationship program in order to make the profit and competitiveness.

Airline services include in-flight meals, entertainment, legroom, baggage delivery and so on. Customer always expects to receive high quality service and if the airline performance can not meet their requirements and expectations, there would be the gap. Therefore, in order to minimize the gap and satisfy customers, airlines should listen to customers and do the service recovery. On the other hand, relationship marketing also plays an important role in airline industry. The first thing that airlines have to do is defining segmentation in order to satisfy and build long-term relationship with the most profitable target. It is essential to make customer trust the airline at the beginning and communicate with the right target appropriately. From the case of British Airways, it is no doubt that they have done well on relationship marketing through the completed relationship marketing program. Moreover, they also set up customer analysis and retention system which responds to collect customer feedback and complaint letters. It is obvious that BA has won and retained customers by creating successful relationship marketing program.

From the result, it is clear that service quality and relationship marketing are closely linked. If one company can provide good quality services and launch a perfect relationship marketing program, the company can win and maintain customer successfully and keep its position within the market. In addition, the cultural differences can be another issued that airlines should have awareness. If one airline can consider about the cultural difference and implement the right strategy, the company can sustain its market share.

Appendix

Figure 1. Service quality model

Source: Zeithaml, V.A., Berry, L.L., and Parasuraman, A., 1988. Communication and control processes in the delivery of service quality. Journal of marketing 52(2). P.36

Figure 2. Important quality in air travel

Source: Gourdin, K.N. and , Kloppenborg, T.J., 1991. Identifying Service Gaps in Commercial Air Travel.The First Step Toward Quality Improvement. Transportation Journal, 31(1), p.26.