Customer Segmentation Revisited and The Airline Industry - Case Study Example

Student Name: Subject: Marketing Topic: Marketing Research Analysis for the Singapore Airlines Tutor: Institution: Date Due: 30th November, 2011 TABLE OF THE CONTENT EXECUTIVE SUMMARY 3 INTRODUCTION 4 3a: Statement of the Problem 4 3b: Purpose of the Study 4 3c: Importance of the Study 5 3d: Research Objective (s) 5 4. LITERATURE REVIEW 5 4a: Critical analysis of past research 8 4b: key hypotheses 10 5: RESEARCH METHOD 11 5a: Subjects 11 5b: Research Instrument (s) 11 5c: Data Collection Method 11 5d: Research Hypothesis and Statistical Analysis 12 5e: Assumptions 13 5f: Limitations 13 6: RESULTS OF THE STUDY 13 Descriptive summary of the respondents 13 Regression analysis results 17 7. Conclusions 18 8. Recommendations for further research 19 19 9. Appendices 20 9b: Tables 21 References 22 EXECUTIVE SUMMARY The objectives of this paper are; to determine the price sensitivity of customers, reputation of SQ that may influence customers purchase decision, in-flight tangible services such as modern appearance of aircraft and clean environment and intangibles such as excellent services, pleasant experience, and the service quality of cabin crews, check in counter and ground staffs, and the purchase intention of customers with regards to travelling with SQ. also, the consumer demographic data was collected and analyzed. The basis of these variables authenticates the level of brand resonance in the minds of the consumers, achieved by the communication of its brand attributes through positive performance outcomes that are independently promoted by the function of variables. The four variables that are put to test are: human factor (aircrews’ presentation and service performance), physical environment (in-flight service), brand reputation and pricing. The survey is based on the consumer perception on various services provided by the Singapore Airlines. Data was captured using a structured questionnaire based on the Likert scale, which is commonly used to scale responses in survey research. The data was analyzed with SPSS, to determine measures of central tendency, frequencies and inferential statistics which comprised of regression, ANOVA, correlation and Cronbach’s test for reliability of internal data. The governing hypothesis is based on the following variables; the consumer sensitivity to prices, reputation of SQ, in-flight services, and the quality of services which are stratified in terms of the demographic factors such as age, gender, marital status, employment status, and monthly income. A total of 100 consumers were interviewed. INTRODUCTION The research sought to evaluate various variables and their influence on the consumer’s choice in selecting Singapore Airlines (SQ). A market survey was carried out from 100 consumers and the following variables were analyzed using Statistical Package in Social Sciences (SPSS). 3a: Statement of the Problem This research report seeks to evaluate key factors that might influence consumer’s choice in selecting Singapore Airlines (SQ) among other airline companies. A market survey was conducted to validate the conceptual formation. The researchers collected data using structured questionnaire with a Likert scale on various variables. The respondents were further categorized in terms of gender group, age, marital status, employment status and monthly income. Six (6) categories of the variables were considered in the survey. 3b: Purpose of the Study The purpose of the study is to analysis customers’ attitude and behavior towards various features of Singapore airlines travel products and services that influence the customer’s decision in purchasing tickets and choosing this airline for travel. At the end of this study we shall be able to identify key factors affecting consumer purchase behavior in the Singapore airline. 3c: Importance of the Study The importance of this research is to evaluate the influence of demographic factors, price sensitivity, reputation, in-flight services, service quality to the customers’ purchase intention for SQ airlines. Further, the interrelations between these factors are investigated to show how they can be used as a predictor of the purchase intention of customers. Also the consistency or reliability of the factors is evaluated to show their reliability and to show the customers’ expectations on air travel service and products. 3d: Research Objective (s) The main aim of this research is to study the major dependent and independent factors that influence consumers’ choice and behavior for preference to Singapore Airlines compared to others. The research looks at the factors in relation to demographics that may affect the customer’s perception of the SQ and that would affect the purchase intention. 4. LITERATURE REVIEW Many studies have looked into the airline industry service attributes. The main aim of this literature review is to understand the power of factors biasing purchase decisions linked with measurement of consumers’ involvement. Consumption overheads are decisively subdivided in unity to the classification prepared by the Statistical Office of the European Communities. The carried out survey demonstrated that the key factors biasing purchases of all product groups are products’ characteristics and the perceived quality. Alongside this, goes the factor price, though the product group health price did not come out in the scale of the perceived importance at all. Consumers vary tremendously in age, gender, marital status, employment, and other demographic factors. In common cases Consumer behavior is influenced by the buyer's characteristics and by the buyer's decision process. Buyer distinctiveness includes four key factors: cultural, social, personal, and psychological. In-flight service is an important aspect of airline operations, especially from the viewpoint of keeping hold of satisfied customers and magnetizing new ones. In order to understand passenger needs and wants aboard an aircraft several of quantitative research has been done. The total in-flight experience includes several components ranging from in-flight cabin seats, entertainment and foodstuff and the customer service from cabin staff among others. Amplified competition and choice coupled with deteriorating expectations of the level of airline services, especially with catering has challenged airlines to regain the glory days of high levels of personalized service. For this reason, it is essential to understand how consumers make decisions when purchasing a Singapore airline ticket. Customer satisfaction is highly associated by the amalgamation of product attributes and pricing that is perceived value. Yang (2007) highlighted consumers commonly focus on price or high quality services that influence their choice reflects this theory. Usually apparent with different seats classifications, price-fare sensitivities and discrimination amongst consumers are vital indicators of satisfaction that is measured against the other perceived variables of service quality (Park, 2007). Here, the attributes of SQ giving its premium airline status are based on their product categories differentiation to suit a finely-tuned segmented market to suit consumers’ heterogeneous preferences are necessary to achieve the test of congruency; of expectations and satisfaction (Teichert, Shehu, & Wartburg, 2008). Therefore, in relation to SQ’s brand reputation, its deployment of price-quality schema and prestige sensitivity marketing as a positive perception of price (Yu, 2008) amongst the proliferation of low costs air carriers and promotional airfares have been acknowledged. Additionally, exclusive frequent flyers programs hosting important benefits for the major fraction of air travel passengers also supports the price factor variable to patronage (Harris, & Uncles, 2007; Yang, 2007). According to Solomon, a consumer’s behaviour is what he or she ultimately intends to do with regard to an attitude object. Behaviour and attitudes are strongly unified, with each explaining the other. Attitudes to a product and service are long long-term, and can satisfy four functions (Daniel Katz in Solomon, 2002, p. 198-199) - ‘utilitarian’, ‘value-expressive’, ‘ego-defensive’ and ‘knowledge’. These compare, represent and highlight choices between basic pain and pleasure, core values related to the self, protection from external threats or internal feelings and finally, the need for order, structure or meaning respectively (Solomon 2002). The level of in-flight service sought is mostly a reflection of one’s utilitarian or value expressive function. Attitude also encompasses feelings (affect) and beliefs (cognition), (Solomon 2002). First time or infrequent travelers may believe that flying Singapore Airlines would give them immense satisfaction. They may then carry out the behaviour, and finally form feelings about their experience. Whether positive or negative, powerful feelings could cause the consumer to behave differently in the future. They may then base their behaviour on their feelings and not their beliefs, complicated further by their perceptions to external stimuli like advertising. This order of attitude formation is known as the experiential hierarchy, which is based on emotions while the former is known as low-involvement hierarchy, where the consumer does not have strong brand preferences (Solomon 2002). In-flight service taken on its own has little scope to explain the effect individuality has on behaviour. In today’s modern world, social class and status are not portrayed through one’s travel preferences. Many top business executives and superstars or sportspersons intentionally travel economy class to depict a ‘down to earth’, thrifty or simplistic living attitude. However, under extraordinary circumstances, when an individual’s threshold of tolerance is tested, for example a strict vegetarian being served meat then perhaps, he or she may take radical action and never fly the same airline again. In some circumstances, though rare the reverse is also true, since humans’ nature tend to remember pessimistic experiences more than positive ones. 4a: Critical analysis of past research Singapore Airlines (SQ) is mapped out to 1st May, 1947 from Singapore Kallang Airport when a Malayan Airways Limited (MAL) Airspeed Consul took off. Singapore Airlines was incorporated as a wholly-owned subsidiary of the Singapore government through Temasek Holdings in 1972 and as a limited liability public company. It had three scheduled flight services initially operated between Singapore, Kuala Lumpur, Ipoh and Penang. Five years after commencing bigger capacity DC-3 aircraft were launched. This destined faster and more comfortable flights and the extension of service to other destinations such as Indonesia, Vietnam, Burma, North Borneo and Sarawak. Malayan Airways Ltd expanded progressively to international services operations. Federation of Malaysia was formed in 1963 and the airline was renamed Malaysian Airways Ltd. In 1966, the governments of Malaysia and Singapore obtained joint control of the airline, which it was renamed as Malaysia-Singapore Airlines Ltd. In 1972, MSA divided into two new entities namely Singapore Airlines and Malaysian Airline System. The remaining part of the decade was devoted to growth, development and consolidation of the newly started Singapore Airlines. The B747s, B727s and DC10s were included to expand the fleet. At Paya Lebar Airport, a secondary company called Singapore Airport Terminal Services (SATS), was established to give more efficient ground services. In 1983 Singapore Airlines’ corporate headquarters in the Changi Airfreight Centre, was officially opened. In 1998, Singapore Airlines lay down a new standard in air travel by inaugurating a new suite of products and services that was worth S$500 million in all its three classes of travel. According to the customer reviews SQ is accepted as one of the world's most successful airlines. In year 2000, SQ acquired 49 percent of Virgin Atlantic airline for US$950 million. (Securities Investors Association, Singapore, 2006). In February 2004, Singapore Airlines launched its first A340-500 by laying down a record for the world’s longest non-stop commercial flight from Singapore to Los Angeles. The Airline improved the record just months later, in June 2004, when it instigated the non-stop Singapore to New York flight and October 2006, Singapore Airlines launched a comprehensive suite of new generation cabin products. SQ is widely recognized as a leader in international air travel. Its success may be attributed to its marketing strategy and strengths that include: Capacity of maintaining low debt (debt to equity traditionally Read More