airline loyalty model
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TheAirlineCustomerLoyaltyModel
Arelationalapproachtounderstandingantecedents
ofcustomerloyaltyintheairlineindustry
Masterthesis
Cand.merc.(MCM)
DepartmentofMarketing
CopenhagenBusinessSchool
SubmittedonApril17,2009by
JudithBenner
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Abstract
The objective of this thesis is to contribute to the understanding of drivers of customer
loyaltybyexploringthedynamicsofcustomerbrandrelationshipsandtheroletheyplayfor
thecreationandmanagementofcustomerloyaltyintheairlineindustry.
The particular relevance of the research objective arises from the intensification of
competition in the airline industry and the extensive consolidation that is expected to
accompany it. These market challenges make the retention of valuable customers an
essential prerequisite for the achievement of a sustainable competitive advantage and,
hence,theairlinesoverallsuccess.
Relevantliteraturefromrelatedfields,suchasrelationshipandservicemarketing,formthe
foundation for the development of the conceptual airline customer loyalty (ACL)model.
Centeredontheconceptofrelationalbenefits,thismodeldepictsimportantantecedentsto
customer loyalty intheairline industry.Relationalbenefitsaretherebydefinedasbenefits
customers receiveasaresultof theirengagement incustomerbrand relationships. In the
courseofthisstudy,threetypesofrelationalbenefitsareidentifiedasbearingrelevancefor
theairlineindustry:social,psychological,andfunctionalbenefits.
TheACLmodelisempiricallytestedemployingstructuralequationmodelingonprimarydata
collectedfromanonlinesurveywith276participants.Theresultsrevealthatthreedistinct
pathstoairlinecustomerloyaltycanbedistinguishedwitheachbeingcharacterizedbyone
of the observed relational benefits. Accordingly, they are defined as the social, the
psychological,andthefunctionalpathtoairlinecustomerloyalty.Eachpathoriginatesfrom
distinct brand performance characteristics,moves along the respective type of relationalbenefits,andresultsincustomerloyaltyeitherdirectlyand/ormediatedbythedimensions
of relationship quality customer satisfaction and relationship commitment.Managerial
implicationsonhowtomanageairlinecustomerloyaltyareinferredalongthesethreepaths,
accentuating the particular relevance of socialpsychological aspects of customerbrand
relationships for the management of airline customer loyalty. By combining important
brand and relationshiprelatedconcepts, this thesisprovidesaholisticperspectiveon the
management of customer loyalty in the airline industry that has to date beenmissing.
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Tableofcontents
I
Tableofcontents
Listoffigures................................................................................................. IV
Listoftables................................................................................................... V
Listofappendices......................................................................................... VII
Listofabbreviations.................................................................................... VIII
1 Introduction............................................................................................. 1
1.1 Researchquestion.......................................................................................................3
1.2 Subquestions..............................................................................................................4
1.3 Definitions....................................................................................................................4
2 Methodology............................................................................................ 5
2.1 Methodologicalorientationandresearchapproach..................................................5
2.2 Overallresearchdesign...............................................................................................7
2.3 Thesisoutlineanddemarcation..................................................................................7
3 Theairline
industry
..................................................................................
9
3.1 Airlineindustryspecificities.........................................................................................9
3.2 Keybusinessmodelsintheairlineindustry..............................................................11
3.3 Customersegmentation............................................................................................13
3.4 Loyaltyprograms.......................................................................................................15
3.5 Industryoutlook........................................................................................................16
3.6 Chaptersummary......................................................................................................17
4 Conceptualandtheoreticalfoundationforthedevelopmentofthe
airlinecustomerloyaltymodel................................................................ 17
4.1 Theconceptofcustomerloyalty...............................................................................18
4.1.1 Theinfluenceofcustomerloyaltyonafirmsprofitability................................18
4.1.2 Definingcustomerloyalty...................................................................................19
4.1.3 Customerloyaltythroughrelationshipmarketing.............................................22
4.2 Customerloyaltythroughrelationshipsbetweencustomersandairlinebrands.....23
4.2.1 Theservicedominantlogicofmarketingintheairlineindustry........................23
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Tableofcontents
II
4.2.2 Theservicebrandasarelationshippartner.......................................................26
4.2.3 Relationalbenefitsasabasisofairlinecustomerloyalty...................................27
4.2.4 Relationshipqualityasmediatorbetweenrelationalbenefitsandcustomerloyalty..................................................................................................31
4.3 ChaptersummaryidentificationofconceptstobeincludedintheACLmodel....33
5 Theairlinecustomerloyaltymodel......................................................... 35
5.1 Theinfluenceofairlinebrandperformancecharacteristicsonrelationalbenefits.35
5.1.1 Theinfluenceofsocialbrandperformanceonrelationalbenefits....................36
5.1.2 Theinfluenceofairlineimageonrelationalbenefits.........................................37
5.1.3 Theinfluenceofbrandselfcongruenceonrelationalbenefits.........................39
5.1.4 Theinfluenceoftrustworthinessonrelationalbenefits....................................40
5.1.5 Theinfluenceofservicequalityonrelationalbenefits......................................42
5.1.6 Theinfluenceofperceivedvalueonrelationalbenefits....................................43
5.1.7 Theinfluenceofcocreationofvalueonrelationalbenefits..............................44
5.1.8 Theinfluenceoftheairlinescountryoforiginonrelationalbenefits...............45
5.1.9 TheinfluenceofFFPattractivenessonrelationalbenefits................................46
5.2 Consequencesofrelationalbenefits.........................................................................47
5.2.1 Consequencesofsocialbenefits.........................................................................475.2.2 Consequencesofpsychologicalbenefits............................................................49
5.2.3 Consequencesoffunctionalbenefits..................................................................51
5.3 Theinfluenceofrelationshipqualityoncustomerloyalty........................................52
5.3.1 Theinfluenceofcustomersatisfactiononcommitmentandcustomerloyalty 52
5.3.2 Theinfluenceofrelationshipcommitmentoncustomerloyalty.......................53
5.4 GraphicalillustrationoftheproposedACLmodel....................................................54
6 Empiricaltestingoftheproposedairlinecustomerloyaltymodel...........54
6.1 PLSasresearchmethod.............................................................................................54
6.1.1 SelectionofPLSasresearchmethod..................................................................54
6.1.2 ApplicationofPLS...............................................................................................55
6.2 Datacollection...........................................................................................................56
6.2.1 Internetsurveyasdatacollectionmethod.........................................................57
6.2.2 Questionnairedesign..........................................................................................57
6.2.3 Courseofdatacollectionanddescriptivedataofsample..................................58
6.3 Operationalizationofconstructsandvalidationofmeasurementmodel................59
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Tableofcontents
III
6.3.1 Exploratoryfactoranalysis..................................................................................59
6.3.2 Operationalizingbrandperformancecharacteristics.........................................60
6.3.3 Operationalizingrelationalbenefits...................................................................64
6.3.4 Operationalizingrelationshipquality..................................................................66
6.3.5 Operationalizingcustomerloyalty......................................................................66
6.3.6 Validationofmeasurementmodel.....................................................................67
6.4 Validationofstructuralmodelandsubgroupcomparison......................................68
6.5 Discussionofempiricalfindings................................................................................70
7 Managerialimplications.......................................................................... 78
7.1 Thesocialpathtoairlinecustomerloyalty...............................................................79
7.2 Thepsychologicalpathtoairlinecustomerloyalty...................................................82
7.3 Thefunctionalpathtoairlinecustomerloyalty........................................................85
8 Conclusion............................................................................................... 86
References.................................................................................................... 90
Appendices.................................................................................................
100
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Listoffigures
IV
Listoffigures
Figure1:MosttravelledseatingclassbyUKbusinesstravelersin2007................................14
Figure2:Loyaltymatrix............................................................................................................21
Figure3:Theexchangeversustherelationshipperspectiveinthemarketingprocess..........24
Figure4:ConnectionsbetweentheidentifiedconceptstobeincludedintheACLmodel....34
Figure5:TheACLmodel...........................................................................................................54
Figure6:Thethreepathstoairlinecustomerloyalty..............................................................78
Figure7:Thesocialpathtoairlinecustomerloyalty...............................................................79
Figure8:Thepsychologicalpathtoairlinecustomerloyalty..................................................82
Figure9:Thefunctionalpathtoairlinecustomerloyalty........................................................85
Figure10:ThestructuralACLmodel......................................................................................133
Figure11:DifferencesintheACLmodelbetweenbusinessandleisuretravelers................137
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Listoftables
V
Listoftables
Table1:Comparisonoflowcostcarriersvs.networkcarriers...............................................12
Table2:Overviewofdefinitionsofcustomerloyalty..............................................................19
Table3:Operationalizationofairlinereputation....................................................................60
Table4:Operationalizationofbrandselfcongruence............................................................61
Table5:Operationalizationoftrustworthiness.......................................................................61
Table6:Operationalizationofservicequality.........................................................................62
Table7:Operationalizationofperceivedvalue.......................................................................62
Table8:Operationalizationofcocreationofvalue................................................................63
Table9:Operationalizationofairlinecountryoforigin...........................................................63
Table10:OperationalizationofFFPattractiveness.................................................................64
Table11:Operationalizationofsocialbenefits.......................................................................64
Table12:Operationalizationofpsychologicalbenefits...........................................................65
Table13:Operationalizationoffunctionalbenefits................................................................65
Table14:Operationalizationofcustomersatisfaction............................................................66
Table15:Operationalizationofrelationshipcommitment.....................................................66
Table16:Operationalizationofcustomerloyalty....................................................................67
Table17:HypothesistestingfortheACLmodel......................................................................68
Table18:Qualitycriteriaforthemeasurementmodel.........................................................100
Table19:Qualitycriteriaforthestructuralmodel................................................................102
Table20:Summaryofsurveyparticipantssociodemographiccharacteristics...................117
Table21:Summaryofsurveyparticipantssituationalcharacteristics.................................117
Table22:Overviewofconsultedstudies...............................................................................118
Table23:Studiesconsultedwithrespecttosocialbrandperformance.............................119
Table24:Studiesconsultedwithrespecttoairlineimage..................................................119
Table25:Studiesconsultedwithrespecttobrandselfcongruence...................................120
Table26:Studiesconsultedwithrespecttotrustworthiness.............................................121
Table27:Studiesconsultedwithrespecttoservicequality................................................122
Table28:Studiesconsultedwithrespecttoperceivedvalue.............................................122
Table29:Studyconsultedwithrespecttococreationofvalue.........................................122
Table30:StudyconsultedwithrespecttoFFPattractiveness............................................122
Table31:Studiesconsultedwithrespecttosocialbenefits................................................123
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Listoftables
VI
Table32:Studiesconsultedwithrespecttopsychologicalbenefits...................................123
Table33:Studiesconsultedwithrespecttofunctionalbenefits.........................................124
Table34:Studiesconsultedwithrespecttocustomersatisfaction....................................124
Table35:Studiesconsultedwithrespecttorelationshipcommitment..............................125
Table36:Studiesconsultedwithrespecttocustomerloyalty............................................125
Table37:Measurementitemsincludedinquestionnaire.....................................................127
Table38:KMO andBartletttestforconstructsofbrandperformancecharacteristics......128
Table39:Rotatedcomponentmatrixforconstructsofbrandperformancecharacteristics128
Table40:KMO andBartletttestforconstructsofrelationalbenefits.................................129
Table41:Rotatedcomponentmatrixforconstructsofrelationalbenefits..........................129
Table42:KMO andBartletttestforconstructsofrelationshipquality...............................129
Table43:Rotatedcomponentmatrixforconstructsofrelationshipquality........................129
Table44:KMO andBartletttestforcustomerloyaltyconstruct.........................................130
Table45:Componentmatrixforcustomerloyaltyconstruct................................................130
Table46:Latentvariablecorrelations....................................................................................130
Table47:Correlationmatrixforformativevariableservicequality....................................130
Table48:Calculationofvarianceinflationfactor(VIF)forservicequality..........................131
Table49:Coefficientsofdetermination(R)forendogenousconstructs.............................131
Table50:Calculationofvarianceinflationfactors(VIF)forstructuralmodel.......................132
Table51:StoneGeisserQforendogenousconstructs........................................................132
Table52:Criteriafortheevaluationofsignificantdifferencesbetweensubgroups...........134
Table53:Calculationoftvaluesforsubgroupcomparison.................................................134
Table54:Hypothesistesting;subgroupcomparisonofbusinessandleisuretravelers......135
Table55:ComparisonofRforbusinessandleisuretravelers.............................................136
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Listofappendices
VII
Listofappendices
Appendix1:QualitycriteriaforthevalidationoftheACLmodelinPLS...............................100
Appendix2:Questionnaire....................................................................................................104
Appendix3:Descriptivedataofsample................................................................................117
Appendix4:Measurementscalesreviewedforoperationalizationofconstructs................118
Appendix5:Measurementitemsincludedinquestionnaire.................................................126
Appendix6:Resultsofexploratoryfactoranalysis................................................................128
Appendix7:Calculationsforvalidationofmeasurementmodel..........................................130
Appendix8:Calculationsforvalidationofstructuralmodel.................................................131
Appendix9:Subgroupcomparison.......................................................................................134
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Listofabbreviations
VIII
Listofabbreviations
ACL Airlinecustomerloyalty
AirRep Airlinereputation
AMOS AnalysisofMomentStructuresAVE Averagevarianceexplained
Bsc Brandselfcongruence
cf. Confer(compare)
Comm Commitment
CoO Countryoforigin
CoV Cocreationofvalue
e.g. Exempligratia(forexample)
etal. Etalli(andothers)FFP Frequentflyerprogram
FunBen Functionalbenefits
i.e. Idest(thatis)
IATA InternationalAirTransportAssociation
LISREL LinearStructuralRelationship
LMU LudwigMaximiliansUniversitt,Munich
Loy Loyalty
p. PagePerv Perceivedvalue
PLS Partialleastsquare
pp. Pages
PsyBen Psychologicalbenefits
Sat Satisfaction
Sbp Socialbrandperformance
SEM Structuralequationmodeling
Servq Servicequality
SocBen Socialbenefits
SPSS StatisticalPackagefortheSocialSciences
SQ Subquestion
Trustw Trustworthiness
VIF Varianceinflationfactor
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1
1 Introduction
Runningairlinesprofitablehasalwaysbeenagreatchallenge(cf.Doganis,2006).Inaddition
tointensecompetitiondiminishingairlinesprofits,airlinesareexposedtomarketvolatility,
legalregulationsrestrictingoperations,andadisadvantageouscoststructurewithhighfixed
costs(Delfmann,2005,p.12;Shaw,2007,p.54).Theongoingderegulationandliberalization
of the industryover thepast years,whichhas, inter alia, resulted in the removalof fare
restrictions,havefurtheralteredthecompetitivelandscapebyencouragingtheentryofnew
competitorsinthemarket.Inparticular,lowcostcarriershavebecomeadrivingforceinthis
competitivelandscape.Incontrasttotraditionalnetworkcarriers1,whichtypicallypursuea
servicedifferentiationstrategy, lowcostcarriersfocusprimarilyonkeepingtheiroperating
costs low, thus taking over cost leadership. These developments have had extensive
repercussions on the European airline industrysmarket structure, resulting in increased
price competition. In an industry that has always beenmarked bymarginal profitability
(Doganis,2006),thiscompetitiononpricehasledtofurtherprofitdecline.Today,numerous
airlines in Europe are struggling tomake profits or are facing bankruptcy, implying that
extensiveconsolidationactivitiesare forecast for theEuropeanmarket.At thesame time,
therelentlesspricecompetition,especially intheshorthaulsegment,putsairlinesservice
atrisktobeperceivedbycustomersasarathergenericoffering.
In such a highly competitive environment, customer loyalty has become an increasingly
effectivemeansforsecuringafirmsprofitability(e.g.Reichheld&Sasser,1990;Reinartz&
Kumar,2002).Customerloyaltyreferstoacustomersrepeatedsamebrandpurchasewithin
a given category,basedon a favorable attitude toward andpreference for theparticular
brand.Empirical findingshave revealed that increasedmarket shareanddecreasingprice
sensitivity among customers are particular contributions of customer loyalty to a firms
profitability (Chaudhuri&Holbrook,2001).Theestablishmentandmaintenanceofa loyal
customer base should, therefore, be (and inmany cases already is) a key objective for
airlines, since it promotes a sustainable competitive position in the market place.
Consequently, the retentionofvaluable customers isan importantobjectiveand requires
airlinemanagement tounderstand theunderlying factors thatreinforceairlinecustomers
loyaltytowardagivenairlinebrand.
1 Thesecarriersareoftenalsoreferredtoaslegacyorflagcarriersastheywereformerlystateowned.Foradetaileddescription,pleaserefertoChapter3.2.
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2
Customerloyaltyrestsinparticularonthebrand,whichplaysanimportantroleincustomer
retention.Abrand canbedescribedasaclusterof functionalandemotionalvalues that
promises a unique andwelcome experience (de Chernatony et al., 2006, p.819) for its
customers.Bycreatinguniqueassociationsandfeelingsamongcustomersthataredirectlyand exclusively connected to the given airline, the brand helps airlines differentiate
themselves from their competitors. In addition to its differentiation function, the brand
servesasapotentialrelationshippartnerforthecustomer.Thecustomerbrandrelationship
canevolveanddevelopthroughcontinuouspositiveinteractionsbetweenthecustomerand
thebrand (e.g.Grnroos,2007,p.331)andprovidesairlineswith theopportunity tooffer
theircustomersbenefitsthatgobeyondthecoreairtransportservice(cf.HennigThurauet
al.,2002,p.234).Insuchrelationships,customersperceivetheairlinebrandasalegitimate
partner in the relationship dyad (Sweeney&Chew, 2000; cf. Fournier, 1998). Customers
constructrelationshipswithbrandssothattheyprovideandaddmeaningandvaluetotheir
lives (Sweeney & Chew, 2000; Fournier & Yao, 1997). This value is generated by the
relational benefits resulting from the relationship with the brand as perceived by the
customer (cf. Aaker, 2002, p.95; HennigThurau et al., 2002, p.234). Ultimately, the
customer decides whether the relationship with a given brand generates value or not.
Hence, it is fundamental for the establishment of customer loyalty to understandwhat
potential and existing customers expect from their relationship with an airline brand.
However,sincecustomerspersonalitiesandlifestylesdiffer,asdoestheirevaluationofthe
relationshipwiththebrand,customercharacteristicsmustalsobetakenintoaccount.
Withtheobjectiveoffosteringcustomer loyalty,airlines introduced loyaltyschemes inthe
1980sand1990s.Thesesocalledfrequentflyerprogramsawardcustomersforflightstaken
with the given airline.While theseprogramsattractagreatnumberofairline customers,
skepticismhasbeenexpressedwhethersuchprogramsinfactleadtotruecustomerloyalty
basedon apositive attitude toward andpreference for thebrand.Critics assert that the
reasonwhycustomersrepurchaseatickettotravelwiththegivenairlinerestsaloneonthe
rationalandeconomicbenefitstheairlinesfrequentflyerprogramoffers(cf.Plimmer,2006;
Dowling&Uncles,1997).Givenfrequentflyerprogramsquestionableeffectwithreference
to the creation of customer loyalty, other drivers of customer loyalty in the commercial
airlineindustrymustbeconsidered.Severalstudiesontheantecedentsofcustomerloyalty
in theairline industryhavebeencarriedout (e.g.Ostrowskietal.,1993;Parketal.,2006;
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3
Zins, 2001). This thesis, however, takes a different approach and argues that the
considerationof thedynamics that result fromcustomerbrand relationshipscangenerate
newknowledgeabouthowcustomer loyaltycanbecreatedandmaintained in theairline
industry.
1.1 Researchquestion
Basedonthepreviousdiscussion,thisthesisresearchobjective istogain insights intothe
dynamicsof customerbrand relationships in theairline industryand theeffect these can
have on customer loyalty. To achieve the stated objective, the research focuses on the
identificationofimportantdriversofairlinecustomerloyalty.Thisfurtherestablishesamore
profound understanding of customers appraisal of specific airline brand characteristics.
Furtherconsiderationofcustomers influentialrole inrelationalexchangeselicitstheneed
topayspecialattentiontothosecharacteristicsthatdifferentiateairlinecustomersfromone
another.The knowledge gained from this research studyprovides a foundationonwhich
recommendations directed at airline managers can be built. Consequently, this thesis
approachestheresearchquestionfromamanagerialperspective.
Inconsiderationof thepreviously formulatedresearchobjective, theoverarching research
questionofthisthesisis:
Whatkindofbenefitsdocustomersseekwhentheyengageinrelationshipswithairline
brands,andhowcantheserelationshipsstrengthenairlinecustomerloyalty?
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1.2 Subquestions
Basedon thisoverall researchquestion, the following subquestions (SQ) tobeanswered
are:
1.3 Definitions
Themostimportantconceptsmentionedintheresearchquestionandthesubquestionsare
brieflydefinedbelow.Moredetaileddefinitionsareprovidedinthefollowingchapters.
First,theinterchangeableuseofthetermsairline,airlinebrand,andairline/brandimagein
this thesismust be addressed. The term airline in general relates to the company that
provides the actual air transport service. However, this thesis concentrates on the
relationshipbetweenagivenairlineanditscustomers.Customersprimarilyperceiveairlines
asbrands, i.e., in termsofthebenefitstheairlineprovidesthem.Thebrand,ontheother
hand,cannotbecreatedbytheairlineperse,butisbuiltbythecustomer(Grnroos,2007,
p.331).Brandimagethusrelatestotheassociationsacustomerlinkstoaparticularairline.
Inthiscontext,customer loyaltyisdefinedasacustomersrepeatedsamebrandpurchase
withinagivencategory,basedonafavorableattitudetowardandpreferenceforthespecific
brand.Amoreelaboratedefinitionofcustomer loyalty ispresented inChapter4.1.2. It is
worth mentioning that several different descriptions of loyalty are discussed in the
literature,e.g.,customer loyalty,brand loyalty,orservice loyalty.Here,thetermcustomer
loyaltywasexplicitly chosen toemphasize that this research study focuseson the loyalty
customersexhibittowardaspecificairlinebrand.
SQ1:Howdorelationalbenefitsaffectcustomerloyaltytowardaspecificairlinebrand?
SQ2:Howdofundamentalairlinebrandperformancecharacteristicsinfluencethe
relationalbenefitsperceivedbyairlinecustomers?
SQ3:Howdodifferencesinairlinecustomercharacteristicsmoderatetheairlinecustomer
loyaltymodel?
SQ4:Whatmanagerialimplicationscanbeinferredfromtheresultsofthisstudy?
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Therelationalbenefitapproachassumes thatboth thecustomerand theserviceprovider
mustbenefit from the relationship if it is topersist in the long run.From the customers
perspective, themaintenance of this relationship depends primarily on the existence of
relationalbenefits.Theserefertobenefitsthatgobeyondthebasicservicesofferedbytheservice provider. This thesis distinguishes between three different types of relational
benefits:social,psychological,andfunctionalbenefits.
Itshould furtherbenoted that,whenever it isreferred to thecustomer, femaleandmale
customersareconsidered.However,forsimplicityandeasinesstoread,onlyheandhim
willbeused.
2 Methodology
Thischapterdiscusses themethodologicalorientationapplied in this thesis toanswer the
researchquestion.Furthermore, the roleof theorywithin thiscontext isassessed.Finally,
theoutlineanddemarcationofthethesisarepresented.
2.1 Methodologicalorientationandresearchapproach
With regard to theoverall researchquestionand theproposed subquestions, this thesis
objectivesare(1)togainnewinsightsintotheeffectcustomerbrandrelationshipscanhave
onairlinecustomerloyalty.Thesefindingsarearrivedatbyreviewingandexploringrelevant
literatureoncustomerloyalty,relationshipandservicemarketing,andbrandmanagement.
Bysynthesizingthemostimportantconceptsidentifiedinthedifferentfieldsofresearch,(2)
a conceptual model is developed which depicts the causal relationships between the
identified concepts and their influenceon airline customer loyalty. (3)Thismodel is then
empiricallytested.
Tomeettheobjectivesdescribedabove,thisthesisadoptsapositivistresearchphilosophy;
relevant literature is reviewed toestablisha suitableconceptual framework, including the
constructionofhypotheses(cf.Saundersetal.,2007,p.103).Hypothesesreferto ideasor
propositionsabouttherelationshipbetweentwoormoreconceptsthatcanbetestedusing
statistical analysis (cf. Saunders et al., 2007, p.117; Collis & Hussey, 2003, p.55). The
hypotheses formulated and subsequently tested here concern the proposition of causal
relationshipsbetweendifferentconceptsthatleadtoairlinecustomerloyalty.Consequently,
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6
thefirstpartofthestudy,whichaimstounderstandtherelevantconceptsandconstructsof
customer loyalty,relationshipmarketing,andservicemarketing in literature, isexploratory
(cf.Malhotra&Birks,2007,p.70).Thepurpose is todeducehypothesesfrom theexisting
literature and fromprevious studies (cf.Ghauri&Grnhaug,2005,p.15;Gill& Johnson,2002, p.34). The second part of the study is explanatory,with its focus on testing the
postulated hypotheses and examining the causal relationships between the concepts (cf.
Malhotra&Birks,2007,p.70;Saundersetal.,2007,p.134),tobeabletoinfermanagerial
implicationsfromtheempiricalresultsobtained.
Since themain objective of this study is to explore the underlying causal relationships
betweenvariables thatresult inairlinecustomer loyalty,adeductive researchapproach is
employed. That is, hypotheses on the causal relationships are deduced from existing
knowledge(literature),subjectedtoempiricalscrutiny(testing),and,basedonthefindings
are either accepted or rejected (Ghauri&Grnhaug, 2005, p.15). Saunders et al. (2007,
pp.117118)drawattentiontoseveralimportantcharacteristicsofthedeductiveapproach.
First, resulting from the formulation of hypotheses that need to be tested, deduction is
usually associated with the collection of quantitative data which lend themselves to
statistical analysis (Saunders et al., 2007, p.104). Becausemeasurement is an essential
elementoftheanalysisofquantitativedata,itmustbeconductedwithprecisiontoensure
themeasurementsaccuracy(Collis&Hussey,2005,p.7).Inordertoensureobjectivedata
collection, the researcher should be impartial to the subject matter being measured
(Saunders et al., 2007, p.118). Furthermore, to make the measuring of the concepts
possible,theyhavetobepresented inoperationalterms(Ghauri&Grnhaug,2005,p.15;
Saundersetal.,2007,p.118).
Finally, this research study takesamanagerialperspective.Theobjective is tounderstand
the underlying reasons for why customers remain loyal to a specific airline brand. The
insights gained can be transformed into distinctive initiatives by airlinemanagers,which
contribute to the strengtheningofairline customers loyalty.Hence, this thesisgoal is to
proposerecommendationsforairlinemanagersonhowtointensifythebondsbetweenthe
customersandtheairlinebrand.
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2.2 Overallresearchdesign
While deduction describes the general approach applied here to answer the research
question,theresearchdesigndetailsthenecessaryprocedurestoobtaintheinformationto
answerit.Itfurtherspecifiestheroleoftheoryandtheunitofanalysis.
Theemploymentofadeductiveresearchapproachrequiresthecollectionofaconsiderable
amount of representative quantitative data. Consequently, a survey is themost suitable
researchstrategyforthisstudy,sincethecollectionofa largeamountofstandardizedand
structured data is thereby possible, which, in turn, allows for a quantitative analysis
(Saundersetal.,2007,p.138;Malhotra&Birks,2007,p.266).Adetaileddiscussionofthe
typeofsurveyconductedandthedataanalysisprocessispresentedinChapter6.
This thesismain research question necessitates profound knowledge on what kinds of
benefitscustomersseekinarelationshipwithaselectairlinebrand.Intheconceptualpart
of this thesis, theory, i.e., a system for organizing concepts in a way that produces
understanding and insights (Zaltman et al., 1977 in: Ghauri& Grnhaug, 2005, p.39) is
appliedto identifytheframeworkskeydependentand independentvariables. Inaddition,
theoryprovides guidanceon theoperationalizationof the key variables identified. In the
analyticalpartofthisthesis,thetheoryonwhichtheairlinecustomerloyaltymodelisbuilt
guidesthedataanalysisstrategyandtheinterpretationofresults.Furthermore,thefindings
arrivedatareinterpretedonthebasisoftheliteraturereviewedandpreviousresearchand
areintegratedintheexistingbodyofknowledge(cf.Malhotra&Birks,2007,p.51).
Concentrating on customers particular attitudes and behavior toward airline brands, the
researchquestionclearlyidentifiesairlinecustomersasthedesignatedunitofanalysis.For
reasonsofgeneralization,thisstudyaimstocoveraheterogeneousconsumerbase.Airline
customersingeneral,therefore,constitutetheunitofanalysis.
2.3 Thesisoutlineanddemarcation
Thissectionbrieflyintroducesthecontentsofeachoftheindividualchapters.Italsodepicts
thisthesislimitations.
ChapterThreeprovidesabrief introduction to theairline industry, its current challenges,and its twomost prominent businessmodels: network carriers and lowcost carriers. In
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8
addition,dimensionsforcustomersegmentationarediscussed.Furthermore,frequentflyer
programs(FFPs),a loyaltyschemespecifictotheairline industry,are introduced,andtheir
advantagesanddisadvantageshighlighted. Itmustbenotedherethatthechapter focuses
onairline industryspecificitiesand forecasts thatweremadeprior to theoutbreakof thefinancial and economic crisis. What effect the current developments will have on the
industryinthelongtermisdifficulttoassessandbeyondthescopeofthisthesis.
Chapter Four concentrates on the review of existing literature in the fields of customerloyalty, relationship and servicemarketing.With reference to customer loyalty, various
definitionsdiscussedinacademicliteraturearepresented,andthedifferentcomponentsfor
definingtrueloyaltyareassessed.Asthefocusofthisstudyisontheidentificationoffactors
thatinfluencecustomerloyaltyratherthanontheanalysisofcustomerloyaltyassuch,anin
depth analysis of different levels of loyalty or a comprehensive discussion of loyaltys
influence on a companys profitability is beyond the scope of this thesis. By considering
relationshipmarketingsprimaryobjective,namelybuildingandstrengtheningrelationships
withcustomers,thisstudyintendstocontributetothecurrentunderstandingofthedrivers
ofcustomer loyalty.To furthercontemplate thenatureof servicesand the specificitiesof
service marketing, analyzing customerbrand relationships is a feasible approach. Here,
specialattention isgiven to the relevanceof relationalbenefitsandrelationshipquality in
the longterm maintenance and enhancement of such relationships. By processing and
evaluatingexistingknowledgeandsynthesizing it, the focusof theresearch is refinedand
conceptsforinclusionintheconceptualmodelaredetermined.
Based on the insights gained from the literature review and the results from studies
previouslyconductedinthefieldsofrelationshipmarketingandcustomerloyalty,theairline
customer loyalty (ACL) model is conceptualized in Chapter Five. Hypotheses on causalrelationships that existbetween thedifferent constructsof themodel arepostulated for
subsequentempiricaltesting.
Chapter Six focuses on the empirical testing of the airline customer loyaltymodel. Theanalyticalapproachisintroduced,anddetailsonthedatacollectionprocedureareprovided.
Furthermore,theoperationalizationoftheconstructsisdescribed.Followingthevalidation
ofthemodel,theresultsoftheempiricalstudyarepresented.Thechapterconcludeswitha
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discussionon theempirical findingsbasedon the inferencesarrivedatbyanswering sub
questionsone,two,andthree.
ChapterSevencombinesthetheoreticalinsightsgainedfromtheliteraturereviewwiththeempirical findings based on the conclusions to subquestions one, two, and three to
deliberatemanagerialimplications.Thus,subquestionfourisaddressed.
ChapterEightpresentsfinalconclusionsandsuggestsdirectionsforfutureresearch.
3 Theairlineindustry
Thischapterprovidesabriefoverviewonthespecificitiesofthepassengerairlineindustry.
First,anoutlineofhistorical,legal,andeconomicfactorsispresentedbeforetheindustrys
twodominantbusinessmodels,networkcarriersandlowcostcarriers,areintroduced.The
chapter further addressesmarketingrelated aspects that characterize the airline industry
such asdimensions for customer segmentation and frequent flyerprograms.The chapter
concludeswithaconcisefutureoutlookoftheindustry.
3.1 Airlineindustry
specificities
Until themid1980s, thehighlyregulated airline industrywasdominatedby international
airlineswhichwere fully,or at leastmajorityownedby theirnational governments.This
was primarily because governments realized that air transport would be of major
significance for economic and social development, as well as for trade (Doganis, 2006,
p.223).Topromote their countryspower, status,andprestige (Hanlon,2007,p.7),each
statedesignatedoneairline,thecountrysflagcarrier,tooperateflightsonbilateralroutes
between thosecountrieswithwhichair traffic rightshadbeenexchanged (Doganis,2006,
p.223).Sincethemid1980s,thesuccessiveliberalizationoftrafficrightsandregulationshas
facilitatedtheprivatizationofstateownedairlines.Today,mostareeitherfullyorpartially
privatized,orare in theprocessofbeingprivatized (Doganis,2006,p.225;Hanlon,2007,
p.15).However,alargenumberofformerlystateownedcarrierscontinuetocommemorate
their historical heritage in their names and in the colors of their corporate design (e.g.,
BritishAirways,AirFrance).Whileliberalizationinitiallyspurredtheprivatizationofairlines,
italsotriggeredtheentryofnewcarriersinthemarket.Facedwithincreasingcompetition
and, simultaneously, decreasing government subsidies traditional carrierswere forced to
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abandon old market practices and become more competitive and customeroriented
(Doganis, 2006, p.224). At the end of the 1990s, traditional flag carriers faced new
challenges from the emergence of lowcost, lowfare carriers2 entering themarket and
alteringthecompetitivelandscape.Again,traditionalcarriershadtorethinktheirstrategiesandincreasetheirflexibilityinordertoadapttothechangesinthemarketplace.
Theairline industryhasbeencharacterizedbyheavyregulationswhich limitairlinesroom
formaneuver.Whileother industrieshavepavedthewayforcompaniestotransform into
global players, the principle that airlines should be substantially owned and effectively
controlledbynationalsfromthegivenstateinwhichtheairlineisregistered,hasprevented
airlines from becoming truly global businesses by obstructing crossborder merger and
acquisition activities (Hanlon, 2007, p.9; Doganis, 2006, p.54; Shaw, 2007, p.53). To
overcometherestrictionsimposedbythisnationalityrule,airlinesformedglobalalliancesas
ameanstosecuresomeofthebenefitsalargersizeandscopeoffer(e.g.greaterpurchasing
power,betterdistributionofmaintenancecosts,etc).Whilethe1990switnessedanoutright
alliancebuilding frenzy, three major alliances, namely Star Alliance, oneworld, and
SkyTeam3, now dominate the competitive landscape (cf. Doganis, 2006, p.85,99). Shaw
(2007,p.110)assertsthattheformationofallianceswasnotameansinitself;rather,itwas
an indispensable detour, since crossborder consolidation activities continue to be
restricted by regulations.Moreover, Hanlon (2007, p.10) argues that the existing airline
alliances may prove to be precursors to actual crossborder mergers, considering that
governmentimposed constraints and regulations on foreign ownership are progressively
beingrelaxed.
Thecyclicalnatureoftheairlineindustry,withitsgrowthcyclescloselylinkedtochangesin
theworldeconomy,isoneofitsmajoreconomicidiosyncrasies(Doganis,2006,p.4;Mason,
2005,p.19;Shaw,2007,p.64).However,thisdirectrelationshipbetweeneconomicgrowth
andairtraveldemandseemstohaveweakened,mainlyasaresultoflowcostairlinesthat
offer lower fares and thus stimulate demand irrespective of the economic situation
2 Lowcostcarriersareprimarilycharacterizedbytheirlowoperationalcosts,enablingthemtoofferlowfaretickets.
3 StarAlliancehas19memberairlines.AmongthemareAirCanada,AirChina,Lufthansa,Scandinavian
Airlines,SingaporeAirlines,Thai,andUnited(StarAlliance,2009).oneworldhas10memberairlines,includingAmericanAirlines,BritishAirways,CathayPacific,JAL,andQuantas(oneworld,2009).SkyTeamhas11
memberairlines,includingAirFrance,Alitalia,SouthernChinaAirlines,DeltaAirLines,KLM,andNorthwestAirlines(SkyTeam,2009).
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(Doganis, 2006, p.18). Airlines furthermore have to cope with marginal profitability
(Doganis,2006,p.4;Hanlon,2007,p.5).Theairlineindustryscoststructurewithhighfixed
costs relative to variable costsmakes volume a crucial factor for securingprofits (Taneja,
2003in:Tiernanetal.,2008,p.213).Whiletheconstantemergenceofnewcompetitorsandthe simultaneouspulloutor failureofothers intensify the industrysdynamics, additional
pressure isexertedby the customer,who isgainingpower inan increasingly transparent
market made possible by the easily accessible information on the Internet on prices,
conditions, and consumer rights (Mason&Alamdari, 2007, p.303; Delfmannetal., 2005,
p.12).
3.2 Keybusiness
models
in
the
airline
industry
Ingeneral, four fairlygenericbusinessmodelscanbe identified in theairline industry: (1)
network airlines, (2) lowcost airlines, (3) charter airlines, and (4) regional airlines
(Bieger&Agosti, 2005, p.50). Since network airlines and lowcost carriers represent the
dominantbusinessmodelsintheinternationalairlineindustry,onlythesetwomodelswillbe
furtherelaboratedon.
Networkcarriersare firstandforemost characterizedbyanextensiveinternationalroute
network with a complex hubandspoke system that includes short and longhaul
connections(e.g.Doganis,2006,p.149;Franke,2004,p.15;Tiernanetal.,2008,p.214).In
mostcases,networkcarriersevolvedfromformerlystateownedflagcarriers.Traditionally,
they have pursued a full service differentiation strategy. Different seating classes and
corresponding preflight, inflight, and postflight services function as a means for
differentiation and further facilitate the targeting of multiple customer segments
(Pompletal., 2003, p.6; Tiernanetal., 2008, p.214). Offering loyalty schemes such as
frequent flyer programs and belonging to one of the threemajor airline alliances (Star
Alliance,oneworld,andSkyTeam)complementnetworkcarriersdifferentiationstrategy(cf.
Tiernanetal.,2008,p.214).Yetnetworkcarriersprofitabilityonshorthauloperationshas
beenheavilyunderminedbytheexpansionoflowcostcarriersandtheirimpactonpricing.
Airlinebusinessexperts(e.g.Mason&Alamdari,2007,p.306;4Doganis,2006,p.266)argue
thatthefuturebusinessmodelofmajornetworkcarrierswillbebasedonanextensivelong
4MasonandAlamdari(2007)conductedaDelphistudywith26airtransportexpertsinordertodetectfuturetrendsconsideringEUnetworkcarriers, lowcostcarriers,andconsumerbehavior.
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haulnetworkbackedbyalliancestoprovideaglobalspread,andsupportedbyashorthaul
anddomesticnetworkreducedsignificantlyinsizeandimportance.
Incontrast tonetwork carriersbusinessmodel,which isbasedon servicedifferentiation,
lowcost carriers pursue a strategy of cost leadership. The traditional low cost model
concentratesonmaximumaircraftutilization, theoperationofa singleaircraft typeonly,
andkeeping toshort turnaround timesatsecondaryor lesscongestedairportswith lower
fees (e.g. Bieger&Agosti, 2005, p.53; Doganis, 2006, pp.147; Hanlon, 2007, pp.58). An
overview of themost important operation and product features distinguishing lowcost
carriersfromnetworkcarriersisprovidedinTable1.
Operation/product feature Low-cost carriers Network carriers
Airports Secondary, less congested (by andlarge)15-20 minute turnarounds
Primary (hubs)Higher turnaround times due tocongestion and labor regulations
Aircraft Single aircraft type (e.g. Boeing 737,Airbus A320)High utilization (over 11 hours/day)
Multiple aircraft typesModerate utilization
Connection Point-to-pointNo interliningNo baggage transfer
Hub-and-spokeInterliningCode share, global alliance
Distribution Mostly direct via Internet booking Travel agentsInternetCall center
Fares LowSimple structure
Complex structure
In-flight Single classNo seat assignmentPay for amenities, onboard selling
Multiple classSeat assignmentComplimentary amenitiesIn-flight entertainment
FFP No (by and large) Yes
Target group Leisure, price sensitive businesstravelers
Leisure and business
Table1:
Comparison
of
low
cost
carriers
vs.
network
carriers5
Owingtotheirsignificantlylowercostbase,lowcostcarriersareabletoofferpointtopoint
services at substantially lower fares than network carriers. This introduction of lowfare
servicesonEuropeanrouteshasbroughtaboutanincreaseinleisuretravel,ahighertraffic
volume,anda lossofmarketsharesforbothnetworkcarriersandcharterairlines(Mason,
2005;LufthansaConsulting,2008,p.22). Initially targeting leisure travelers, recentstudies
indicatethat lowcostcarriershavebeensuccessful in increasing theirnumberofbusiness
5Ownillustrationbasedon:WensveenandLeick(2009,p.6);Doganis(2006,p.157);Hanlon(2007,pp.58).
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travelersinEuropeaswell(Mason&Alamdari,2007,p.302).ThoughEuropeexperienceda
virtual lowcost boom in 2002/2003with over a dozen new airlines entering themarket
(Doganis,2006,p.161),severalofthemhadtopulloutofthemarketsoonthereafter,since
they couldnotoperateprofitablyorwere takenoverby competitors (Anonymous, 2006,p.19).Thusfar,itseemsthatthelowcostcarrierbusinessmodelisonlysuccessfulonshort
haulroutes.Thoughseveralcarriershavetriedtoadoptthelowcostbusinessmodeltolong
haulinternationalroutes,suchattemptshavetodatebeenunsuccessful(cf.Simon,2008).
3.3 Customersegmentation
In order to define distinct target groups, customers are typically segmented along
demographic, psychographic, and/or behavioral dimensions (cf. Peter & Olson, 2008,
pp.370;Solomonetal.,2006,p.9).Shaw(2007,p.24)specifiesthreevariablesalongwhich
passengers in the airline market are traditionally segmented: (1) passengers journey
purpose(reasonfortravel),(2)thelengthoftheirjourney,and(3)theircountryorcultureof
origin.Oyewole&Choudhury (2006),on theotherhand,contend thatpurchase situation
factors also represent useful segmentation dimensions. Accordingly, they differentiate
betweenreasonfortravel,frequencyoftravel,classoftravel,andtypeofairlineused.6Since
thereasonfortravelconstitutesthemosttraditionaldimensionalongwhichcustomersare
segmented in theairline industry (cf.Teichertetal.,2008,p.229), it isdescribed inmore
detailinthefollowingsection.
Airlinecustomerscanessentiallybedividedintobusinessandleisuretravelers.Whilethere
maybesomeexceptionstothesetwodimensions(e.g.pilgrimage,medicaltransport)most
of the trips takenby airlinepassengers fit intooneof these two categories (Shaw,2007,
p.24).Businesstravelershavelongbeenthemostimportantcustomersegmentforairlines
duetotheirrelativeprice inelasticity(Hanlon,2007,p.35).Whilebusinesstravelers inthe
pastgaveemphasistoflexibilityandserviceoverpriceand,therefore,generallypurchased
firstandbusinessclasstickets,alargeproportionofthiscustomersegmentseemstonowbe
givingpreference topriceoverservice,andseemswilling tosacrifice flexibilityandfrills in
returnfor lowerfares(Mason&Alamdari,2007,p.302).Thisdevelopment iscorroborated
byrecentstudieswhichrevealthatinparalleltothedecreaseofbusinesstravelerswhofly
6 Intheirstudy,Oyewole&Choudhury(2006)analyzetheinfluencethefourdifferentpurchasesituationscanhaveontheimportanceconsumersattachtoservicesintheairlineindustry.
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business class on shorthaul routes the proportion of passengerswho choose lowcost
carriersforbusinesstravelroseto71%in2004/2005fromonly28%in1998/1999(Company
Barclaycardin:Mason&Alamdari,2007,p.302).Indicatorsusedinthesestudiesshowthat
businesstravelcontinuestoexpand,butthattheexpendituresforbusinesstravelareunderincreasing scrutiny (Barclaycard Business, 2008, p.3). In 2007/2008, 55% percent of UK
businesstravelersstatedthattheyflyeconomyclassmostoften(cf.Figure1)ascompared
to46% in2006/2007.While41%of thebusiness travelersparticipating in theBarclaycard
survey cited business class as being their main class of travel in 2001, their number
decreasedtoonly11%in2007(BarclaycardBusiness,2008,p.5).
Figure 1:Mosttravelled seating class byUK business travelers in
20077
IATAs (2007) CorporateAir Travel Survey found that the keydeterminants forbusiness
travelersairlinechoice forshorthaul flights included frequent flyerprograms,convenient
departureandarrivaltimes,aswellaspunctualityofflights.On longhaulflights,themain
factorsinfluencingbusinesstravelersairlinechoicewerefrequentflyerprograms,nonstop
flights,andseatcomfort.
Air travel demand in the leisure travel segment is primarily influenced by ticket price,
travelersdisposableincome,andtheiravailablefreetime(Graham,2006,p.16),wherethe
amountofdisposableincomeisprincipallydeterminedbyeconomicwealth.Graham(2006,
p.16)pointsout that greaterjobpressure and concernsoverjob security actuallydeters
employees from taking leave for extended periods, which has contributed to the trend
towardshortervacations.Lowerfares,ontheotherhand,implythatfrequentshortertrips
7Ownillustrationadaptedfrom:BarclaycardBusiness(2008,p.5).
55%
15% 14%11%
5%
0%
10%
20%
30%
40%
50%
60%
Economy Premium
economy
Low cost First/business Not stated
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arenotnecessarilymoreexpensivethanthetraditionalannualleave(Mason,2005,p.303),
which has led to an increase in the frequency of shorter trips taken by leisure travelers
(Graham,2006,p.16).Inrecentyears,theleisuretravelmarkethasgrownmorerapidlythan
thebusinesstravelmarket(Hanlon,2007,p.35;Dresner,2006,p.30).Hanlon(2007,p.35)estimates that the current breakdown of theworldwide demand for air travel between
leisureandbusinessliesatapproximately80/20.
3.4 Loyaltyprograms
Considering thishighly competitive landscape, airlinesneed toundertake great efforts to
retaintheirprofitablecustomers.Shaw(2007,p.241)suggeststhatrelationshipmarketing,
i.e., putting equal or greater emphasis on the maintenance and strengthening of
relationships with existing customers than on the acquisition of new customers, is an
effectiveconcepttobepursued inordertoretaincustomers.Loyaltyprogramsthatcenter
on passengers whose air travel demands are generally less price elastic (e.g. business
travelers) (Hanlon, 2007, p.85) and expected to be so in the longterm, constitute an
importantcustomerrelationshipmanagementtool(Liu&Yang,2009,p.104).
Liu and Yang (2009, p.94) define loyalty programs as longtermoriented programs that
allowconsumers toaccumulate some formofprogram currency,whichcanbe redeemed
laterforfreerewards.Frequentflyerprograms(FFPs)representloyaltyprogramstypicalof
theairline industry.Consumersaccumulatefrequentflyerpointsforeachpurchasedflight,
with thenumberofpointsawardedusuallyequaling thedistanceof the flight (Lederman,
2007,p.1137).Theseaccumulatedpointscaneventuallyberedeemedforrewards,themost
commonofwhichisafreeflightorafreeupgradewiththegivenairlineoroneofitsalliance
partners (IATA, 2007,p. 73; Lederman, 2007, p.1137; Carlsson&Lfgren, 2006, p.1470).
Duetotheawardschemesnonlineardesign,customershaveevenmoreincentivestostick
tooneparticularairline (Carlsson&Lfgren,2006,p.1470).Furthermore,airlines seek to
make their competitors appearmore expensive by emphasizing the opportunity costs of
forgoneloyaltyrewards(Palmer,2005,p.161).Hence,frequentflyerprogramsconstitutean
importanteconomicswitchingbarrier(Hanlon,2007,p.85;Dowling&Uncles,1997).
Seriousdoubts,however,havebeenraisedaboutthesuccessoffrequentflyerprogramsand
theircontribution to truecustomer loyalty.DowlingandUncles (1997), forexample,claim
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thatcustomersendupassociatingtheirloyaltytoaparticularrewardsprogramratherthan
totheactualairlinebrand.Furthermore,Doganis(2006,p.277)arguesthatfrequentflyers,
who often are highyield passengers, tend to be members of several airlines FFPs.
Accordingly,FFPsrelevance intermsofsecuringcustomer loyaltyforaparticularairline isdiminishing. A recent study conducted by Liu and Yang (2009) analyzed the success of
competing loyaltyprograms intheairline industryandfoundthat loyaltyprogramsdidnot
always leadtobeneficialoutcomes,andthatonlyairlineswithhighmarketsharesenjoyed
salesincreasesonaccountoftheirloyaltyprograms.
3.5 Industryoutlook
Consideringthedownwardtrendinairlineyields,primarilyowingtoairlinederegulationand
liberalization,increasedcompetition,excesscapacity,downgradingactivity,andtheadvance
of lowcost carriers (cf. Mason, 2005, p.19; A.T. Kearney, 2003, p.8), industry experts
predictthatconsolidationactivitiesintheairlinebusinesswillincrease(Doganis,2006,p.20;
A.T.Kearney,2003,p.8).Suchactivitiesmayincludemergersandacquisitionsandwillmost
likelytranslateintostrongairlinesacquiringtheirweakorfailingcompetitors(Doganis,2006,
p.21).Suchascenariowillresultinamarketthatischaracterizedbyasmallnumberofvery
large network carriers (Mason&Alamdari, 2007, p.310). Consolidation, however, is not
predicted to remain limited to network carriers alone. Rather, the trend toward
consolidationwillaffectallsectorsoftheindustry,includinglowcostairlines(Doganis,2006,
p.21; Mason&Alamdari, 2007, p.310). The challenges network carriers face in the
competitionwith lowcost airlines on shorthaul routes have already beenmentioned in
Chapter3.1.Sincethenetworkcarriersbusinessmodelprecludestheachievementofcost
structures similar to thoseof lowcost carriers (e.g.complexhubandspoke system, labor
issues,unions),networkcarriersareexpected to increasinglyshift their focus to longhaul
routeswhichwilldeliversustainableprofitstreams(Mason&Alamdari,2007).Thecurrent
trend among business travelers,who are increasingly becomingpricesensitive, is further
forecasttoleadtotheterminationofbusinessclassserviceonshorthaulroutes,whilemore
leisuretravelerswilltakeadvantageof lowfarestotravelmorefrequentlybothwithinthe
EUandabroad(Mason&Alamdari,2007,p.310).
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3.6 Chaptersummary
The airline industry,whichhistoricallywas statesubsidized todemonstrate and sustain a
countrysstatusandpower,hasundergoneextensivetransitionssincethemid1980s.These
changes were initiated in particular by gradual liberalization and deregulation. The
emergence of lowcost carriers, the increasing power of customers, aswell as a general
economicdownturnappliedpressureonairlinemanagerstorethinktheirbusinessstrategies
yetagain.Forecastspredictthatthenetworkcarriermodelwillonlyremainsustainableon
internationalroutes,whilecontinentalandshorthaulrouteswillincreasinglybedominated
byasmallnumberoflargelowcostcarriersandafewnichecarriers.Withregardtoairline
specificcustomersegments,akeydifferentiatorbetweenbusinessandleisuretravelershas
longbeen thehigherpriceelasticity for leisure travelers (cf.Hanlon,2007,p.35;Dresner,
2006,p.29).However,theintroductionoflowfareticketsbylowcostcarriershasweakened
the direct relationship between economic growth and air travel demand. Especiallywith
respect to network carriers, experts advise airline managers to focus on individual
customers needs, brand distinction, and the differentiation of services (Lufthansa
Consulting,2008,p.9).Onlythoseairlinesthatfindwaystoattractandretaincustomersby
offering a differentiated service concept visvis competitors will succeed to operate
profitable on the grounds of a valuable customer base. The strengthening of customer
loyalty,therefore,isanimportantobjectiveforachievingprofitabilitythroughtheretention
ofvaluablecustomers.
4 Conceptualand theoretical foundation for thedevelopmentof
theairlinecustomerloyaltymodel
Thepreviouschapterfocusedoncurrentchallenges intheairline industryandemphasized
theimportanceofaloyalcustomerbase.Thischaptersetsthetheoreticalframeworkforthe
developmentoftheairlinecustomerloyalty(ACL)model.Introducingcustomerloyaltyasan
effectivemeans for theachievementofacompanysoverallobjectivesofprofitabilityand
differentiation,thischapterfirstdiscussesdifferentnotionsofcustomerloyaltytoestablish
ageneralunderstandingoftheconcept.Second, it isarguedthatthebuildingofcustomer
loyaltyiscloselylinkedtotheestablishmentandmaintenanceofrelationshipsbetweenthe
customer and the firm, i.e., to relationship marketing. Furthermore, considering the
specificities of the service industry, special attention is given to the management of
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customerbrand relationships and the meaning of relational benefits and relationship
quality. The chapter concludes with a synthesis of the theories reviewed and the
identificationofconceptstobeACLmodel.
4.1 Theconceptofcustomerloyalty
This chapterexplainshow customer loyalty can influence a firmsprofitability, introduces
definitionsofcustomerloyaltyasdepictedintheliterature,anddiscussestheprerequisites
for the establishment of true loyalty. It furthermore advocates the consideration of
relationshipmarketingtobetterunderstandthedriversofcustomerloyalty.
4.1.1The
influence
of
customer
loyalty
on
a
firms
profitability
Several authors contend that adirect relationship existsbetween a firms loyal customer
baseanditsprofitability(Reichheld&Sasser,1990;Heskettetal.,2008;Reinartz&Kumar,
2002;Aaker,2002;Knox,1998;Andreassen&Lindestad,1998;Berry,1995).Moreprecisely,
aloyalcustomerbaseimpliesincreasedrevenuesforthefirm(Reichheld,1993,1996;Berry,
1995; Schlesinger & Heskett, 1991). On the one hand, customer loyalty leads to higher
repurchaserates,ontheotherhandloyalcustomersdisplayagreatertendencytopurchase
additional goods, for example through crossselling opportunities. Moreover, customer
loyalty results in ahigherpredictabilityof sales andprofit streams (Aaker, 2002;Clark&
Payne,1994;Reichheld,1996).Typically, loyalcustomersgenerate lowcustomer turnover
(Reichheld&Sasser,1990),andoftenintroducenewcustomerstothefirmthroughwordof
mouthrecommendations(Reichheld,1996;Reichheld&Sasser,1990;Schlesinger&Heskett,
1991;Zeithamletal.,1996). Inaddition,aloyalcustomerbasecan leadtodecreasedcosts
(Reichheld,1993;Berry,1995), since itcosts less toprovideservices to loyalandsatisfied
customers (Reichheld, 1996) and because sales, marketing, and setup costs can be
amortizedoveranextendedperiod, i.e., throughoutthecustomer lifetime(Clark&Payne,
1994). Customer loyalty is furthermore essential, as it represents an important basis for
developingasustainablecompetitiveadvantage(Dick&Basu,1994,p.99)overcompeting
brandsininter andintramarketcompetition.
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4.1.2 Definingcustomerloyalty
Customer loyalty and its advantages for the firm have been extensively discussed in
marketingliterature.Theresultisaplethoraofdefinitions.Table2providesanoverviewof
definitionsthatarefrequentlycitedintheliterature.
Author(s) Definition
Cunningham (1956) Single-brand loyalty is the proportion of total purchases representedby the largest single brand used. Dual-brand loyalty is theproportion of total purchases represented by the two largest singlebrands used.
Day (1969) There is more to brand loyalty than just consistent buying of thesame brand attitudes, for instance (p. 29)
Jacoby & Kyner (1973) Brand loyalty is (1) the biased (i.e., nonrandom), (2) behavioralresponse (i.e., purchase), (3) expressed over time, (4) by somedecision-making unit, (5) with respect to one or more alternativebrands out of a set of such brands, and (6) is a function ofpsychological (decision-making, evaluative) processes. (p. 2)
Dick & Basu (1994) Customer loyalty is the strength of the relationship between anindividuals relative attitude and repeat patronage, mediated bysocial norms and situational factors.
Oliver (1999) a deeply held commitment to rebuy or repatronize a preferredproduct/service consistently in the future, thereby causing repetitivesame-brand or same brand-set purchasing, despite situationalinfluences and marketing efforts having the potential to causeswitching behavior (p. 34)
Table2:Overviewofdefinitionsofcustomerloyalty
As the comparison of the different definitions of customer loyalty illustrates, two key
dimensions exist: a behavioral (cf. Cunningham, 1956) and an attitudinal (cf. Day, 1969)
dimension. Both are described below inmore detail and an equal consideration of both
dimensionsisadvocated,iftrueloyaltyistobeachieved.
Behavioralloyaltyreferstothecustomersactualbehaviorofrepurchasingaspecificbrand
withinagivencategoryovertime(e.g.,Day,1969;Chaudhuri&Holbrook,2002).Kumarand
Shah (2004,p.318)describebehavioral loyaltyasloyaltyofacustomerasobserved from
the customers purchase behavior. This explicitly means that the customer repeatedly
choosesthesamebrandwhenheneedsaspecificproductorservice.Thisbehaviormaybea
resultofatruepreferenceforthebrand.However,repeatpurchasesofthesamebrandmay
alsobeattributabletomereconvenience,habit,orbecausethebarrierstochange(i.e.the
switching barriers) are too high.While proponents of the onedimensional construct of
customerloyaltyarguethatattitudeisirrelevantindeterminingloyaltytowardabrandand
consider thedebateon thenotionof true loyaltya wasteof time (Sharpetal.,2002)
opponents claim that behavioral definitions of customer loyalty are inadequate for
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explaininghowandwhycustomersare loyaltoaspecificbrand,andcallforananalysisof
theindividualsdispositionalbasisforrepeatedpurchase(Dick&Basu,1994,p.100). Zins
(2001,p.270) further criticizes that the observationof behavioral loyalty alone does not
leave room todraw any substantiated conclusions about customers future actions.Onlymeasuringbehavioral loyaltyactuallyoverestimates theshareof true loyalty,since itdoes
notaccount for those customerswhobuyabrand simplybecausenootheralternative is
availableorbecauseaparticularbrandisofferingaspecialpromotion(Day,1969).
Considering the deficiency of behavioral loyalty to provide insights into the underlying
motivesandprocessesthat leadtocustomer loyalty,researcherspromotethe inclusionof
attitude,inadditiontobehavior,toadequatelydefinecustomerloyalty.Day(1969,cf.Table
2)wasperhapsthefirsttorecognizeandarticulatethisnecessity(Bandyopadhyay&Martell,
2007,p.37).A customers attitudebasicallyperforms anobject appraisal function.Keller
(2003,p.392)referstobrandattitudeastheoverallevaluationofthebrandintermsofits
quality and the satisfaction it generates. Dick and Basu (1994) assert that the attitude
toward a brand has to bemeasured in relation to other brands that are perceived by
consumersasbeingrelevantinaspecificconsumptioncontext.Onlywhenaparticularbrand
isassociatedwith a strong attitude and is clearlydifferentiated fromotherbrands in the
customersminddoesthegivenbrandexhibitahighrelativeattitudevisvisotherbrands
in theconsumptioncontext. JacobyandChestnut (1978) refer toattitudinal loyaltyas the
consumerspredisposition towardabrandasafunctionofdecisionmakingandevaluative
processes.Basedonastrongpreferenceforthegivenbrandrelativetootherbrandsinthe
category, attitudinal loyalty helps companies build an invisible exit barrier for their
customers,especially innoncontractual situationswhere switching costsandbarriersare
low(Shapiro&Vivian,2000in:Kumar&Shah,2004,p.322).
In consideration of the attitudebehavior relationship, four specific conditions related to
loyalty,asillustratedinFigure2,areidentifiable.Lowattitudinalloyaltycombinedwithlow
behavioralloyaltyindicatesanabsenceofloyalty(cf.Dick&Basu,1994,p.101).Day(1969,
p.30) categorizes those customers as spuriously loyalwho exhibit high repeat purchase
behavior,butlackanyattachmenttothebrandandcaneasilybecapturedbyanotherbrand
offering a better deal. Latent loyalty, in contrast, is reflected by high attitudinal loyalty
combined with low repeat purchase. True loyalty, firms preferred condition, can be
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conceptualizedasanattitudebasedbehavioral loyaltytowardthegivenbrand(seeKimet
al.,2008,pp.99100).
Figure
2:
Loyalty
matrix
8
Ashasbeenarguedabove,thetwodimensionalunderstandingofcustomerloyaltyallowsa
moreprecisemeasurement and analysisof customer loyalty.This view is supportedby a
widespectrumofmarketingresearchers(e.g.Day,1969;Jacoby&Kyner,1973;Dick&Basu,
1994; Oliver, 1999; Jones & Taylor, 2007) and has come to be accepted as the basic
understandingof customer loyalty inmarketing research.Accordingly, customer loyalty is
definedinitstwodimensionalunderstandingas:
repeatedattitudebasedbehavior(Kimetal.,2008,pp.99100)towardabrand,
drivenbyapreferenceforthisspecificbrand(cf.Jacoby&Chestnut,1978)vis
vis competingbrands relevant in thegiven consumption context (Dick&Basu,
1994).
A direct relationship between customer loyalty and relationship marketing has been
proposedbyanumberofauthors.Webster(1994,p.26)claimsthatCustomerloyaltyhas
meaningonlywithin the contextof relationshipmarketing. Similarly,Aaker (2002,p.23)
proposes that one approach for enhancing customer loyalty is the development or
strengthening of customers relationship with the brand, which constitutes the basic
objectiveof relationshipmarketing.Relationshipmarketing thus serves as a concept that
contributestotheunderstandingofthefactorsthatdrivecustomer loyalty.Theconcept is
furtherelaboratedinthenextchapter.
8AdaptedfromDay(1969);DickandBasu(1994).
True loyalty
Spurious loyalty No loyalty
Latent loyalty
High Low
Low
High
Behavioral loyalty
Attitudinalloyalty
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4.1.3 Customerloyaltythroughrelationshipmarketing
The term relationshipmarketingwas initiallymentionedbyBerry in1983 in the service
marketing literature (Bitner, 1995, p.246; HennigThurau et al., 2002, p.230). It can be
definedas:
theattraction,maintenance,andenhancementofcustomer relationships (Berry
1983in:Berry,1995,p.236)thatshouldgenerateprofitandfulfilltheobjectives
ofallpartiesinvolved(Grnroos1994,p.9).
Relationshipmarketingis,therefore,astrategicorientationthatfocusesonretainingexisting
customers(Sheth&Parvatiyar,2002,p.4;Zeithaml&Bitner,2003,p.157;Grnroos,2007,
p.43)andenhancing their loyalty (Berry,2002,p.71).While theemphasis isoncustomer
retention, new customer acquisition is also critical for a companys longterm economic
success and cannot be achieved by exclusively focusing on existing customers (Hennig
Thurau et al., 2002, p.232). However, attracting new customers is considered an
intermediatestepinthemarketingprocess(Berry,1995,p.237)ratherthanagoalinitself.
Theunderlyingobjective istoattractthosecustomerswhodemonstrate thepotentialand
likelihoodofestablishinga loyalrelationshipwiththecompany inthelongrun(Zeithaml&
Bitner,2003,p.158).Acompanysprimaryobjective in termsof relationshipmarketing is,
consequently,tocreatecustomerloyaltyandtoestablishaprofitablelongtermrelationship
(Ravald&Grnroos,1996,p19).9Forcustomers, themain reasons forbecoming involved
andstayinginarelationshipwithacompanyareriskreductionandsimplificationofchoice
(DallOlmo Riley& de Chernatony, p.138). Relationship customers knowwhat to expect
fromtheirbrandand,therefore,donothavetospendtimedecidingwhichbrandtochoose.
Arelationshipdevelopsthroughaseriesofencountersbetweenacustomerandacompany
(Bitner,1995,p.248;Coulter&Ligas,2004,p.483;Grnroos,2007,p.8).Suchencounters
arecharacterizedby interactivebehaviorsataspecificpoint in time involvingbothparties
(Bitner, 1992; Lovelock, 1983 in: Coulter & Ligas, 2004, p.483; Czepiel, 1990). Fournier
(1998,p.346)summarizestheseaspectsofrelationshipsinherdefinition:
9 HennigThurauetal.(2002,p.230)describecustomerloyaltyasanimportantrelationshipmarketingoutcome.
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Relationships are constituted of a series of repeated exchanges between two
partiesknowntoeachother:theyevolveinresponsetotheseinteractionsandto
fluctuationsinthecontextualenvironment.
During each encounter (moment of truth [Bitner, 1995, p.248];moment of interaction
[Coulter&Ligas,2004,p.483]),customershavethepossibilityoftestingthefirmsabilityto
fulfill its promises. For the firm, each encounterprovides an opportunity to increase the
customersoverallsatisfactionandwillingness tocontinuedoingbusinesswith the firm in
thefuture(i.e.tobuildarelationshipandtherebystrengthencustomerloyalty).
Several authors (e.g. Grnroos, 2007; Berry, 2000; Czepiel, 1990) argue that the
establishmentandmaintenanceofcustomerrelationshipsandtheachievementofcustomer
loyalty (e.g.Gremler& Brown, 1999; Bloemer et al., 1999) are especially important and
applicable inservice industries. Inthefollowingchapter,thisaspect,aswellasthespecific
roleoftheservicebrandintheformationofrelationshipswithcustomers,isexplained.
4.2 Customer loyalty through relationshipsbetween customersand airline
brands
The previous chapter touched upon the relevance of customer loyalty and relationship
marketingintheservicecontext.Now,acloserlookistakenatthenatureofservicesandthe
specificities that need to be considered in terms ofmarketing services, especially in the
airlinemarket. Inaddition,theservicebrand is introducedasan importantrelationalasset
thatcanfurtherfostercustomerloyaltybyactingasalegitimatepartnerintherelationship
withthecustomer.
4.2.1 Theservice
dominant
logic
of
marketing
in
the
airline
industry
AccordingtoGrnroos(2006,p.323),servicescanbedefinedas:
processes that consist of a set of activities which takeplace in interactions
between a customer and [] the service provider [], which aim at solving
customersproblems.
Services exhibit two distinctive characteristics. First, services have a processual nature
(Grnroos,2007,p.330;2006,p.319;Vargo&Lusch,2008a,p.258),thatis,servicesemerge
in processes and are directly influenced by the further evolvement of these processes.
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Second, customers are involved in the production of the given service through their
interactionwiththeserviceprovider.Consequently,theyparticipateascoproducersinthe
productionprocessandinfluencethenatureoftheservicethatisproducedandconsumed.
Likewise, they determine the actual value of the service experience (Grnroos, 2006,pp.326327),i.e.,whethertheirexpectationsweremet.
Accordingtotheabovestateddefinitionofservices,airlinescanclearlybedefinedasservice
providers: (1) passenger airline travel can be understood as a process that is directly
influencedbythefurtherevolvementof thisprocess(e.g.rebookingafterflightdelays)(2)
passengers consume their travelexperiencewhile it isbeingproduced.Furthermore, the
notionofairlinesofferingaserviceiswidelyacceptedinthemarketingandairlineliterature
(e.g.Andersonetal.,2008;Oyewole&Choudhury,2006).Hence,thefollowing theoretical
discussionon relationshipsbetween customersandairlinesneeds to take the specificities
thatapplytotheconceptofservicemarketingintoconsideration.
Traditionally,themarketingprocesshasfocusedontheexchangeofgoodsinwhichvalueis
embedded and distributed through transactions (Grnroos, 2006, p.323). The service
centered approach, in contrast, places the provision of services rather than the
manufacturedgoodatthecenterofattention(cf.Vargo&Lusch,2004,p.1;2008a,p.254).
ThisshiftinperspectiveisillustratedinFigure3.
Figure 3: The exchange versus the relationship
perspectiveinthemarketingprocess10
10Ownillustrationadaptedfrom:ShethandParvatiyar(1995a,p.412);Grnroos(2007,p.27).
Process
(intangibl e resources)
Valuecreation
Outcome
(tangi ble resources)
Valuedistribution
Relationship
perspective
Exchange
perspective
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The servicecentered perspective on marketing, therefore, focuses on value cocreation
through the interaction between the customer and the service provider (cf. Prahalad &
Ramaswamy,2004,p.6;Wikstrm,1996),withtheroleofthecustomertransformingfrom
one inwhichhe represents a recipientof a service toone inwhichhe coproduces thatservice (Vargo&Lusch,2004,p.7).Thecustomer thusbecomesanevenmoresignificant
driving force in the cocreationprocess (Rajahet al.,2008,p.367;Andersonetal.,2008,
p.366).Theserviceprovider,incontrast,increasinglyadoptsasupportfunctionbycreating
anddevelopingtheresources,means,orcompetencethatthecustomerrequires(Vargo&
Lusch, 2004; Grnroos, 2006, p.324; Rajah et al., 2008, p.367). Value is created when
services are used or consumed by the customer. That is, value is the outcome of the
subjective, personalized consumption experience characterized by the customers active
involvement in itsdesign,delivery,andcreation (Shethetal.,2000 in:Rajahetal.,2008,
p.367).
As Anderson et al. (2008; see also: Gummesson, 2008, p.16) point out, differences in
customer characteristics inevitably lead todifferences inwhat customers value.Resulting
fromtheirresearchaboutthemoderatingeffectsofairlinepassengercharacteristicsonthe
relationship between service components and overall service satisfaction, the authors
conclude that, in linewithVargoandLuschs (2008b,p.9)premise thatvalue isuniquely
and phenomenologically determined by the customer, it is important to consider
customersvaryingdemographicandsituationalcharacteristics.
The circumstance that individual customers appreciation of different service factors
diverges considerably constitutes a major challenge for airlines, considering that they
interactwithcustomersfromverydiversenationalandculturalbackgrounds.Thenatureof
airlinesservicechain,inwhichprocessescanbroadlybedividedintopreflight,inflight,and
postflight activities, further complicates the building of personal relationships between
serviceemployeesandthecustomer.Thisisduetothechangingcontactpersonsfromone
activity to the next. In such an environment, the service brand should be considered an
essentialrelationshippartner.Thisargumentisbroughtforwardinthefollowingchapter.
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4.2.2 Theservicebrandasarelationshippartner
While branding has long been a central issue in the marketing of physical products,
awarenessoftheimportanceofcreatingservicebrandshasonlyevolvedinthelast20years
(Grnroos, 2007, p.329). Today, however, it is widely recognized that branding plays afundamental role and signifies a principal success driver for service organizations and
representsacornerstoneforservicemarketing(Berry,2000,p.128).
Ambler and Styles (1997, pp.222223) define a brand as the promise of the bundlesof
attributes that someonebuysand thatprovides satisfaction.Accordingly,Berry (2000,p.
129) describes a service brand as a promise of future satisfaction, a blend ofwhat the
companysaysthebrandis,whatotherssay,andhowthecompanyperformstheserviceall
fromthecustomerspointofview.Theservicebrandsinherentsignificanceisderivedfrom
services specificnature.As services areproducedonlyonce the interactionbetween the
customer and the service provider is initiated, services are difficult to appraise prior to
consumption. Here, the service brand, i.e., the image resulting from accumulated
experiences as perceived by the customer, can reduce customers perceived monetary,
social,andsafetyrisks.Theservicebrandsubsumesawidespectrumofdimensionstocreate
acomprehensiveimageinthecustomersminds.
11
In the brands conceptualization as a risk reducer, simplifier of choice, and guarantor of
quality, DallOlmo Riley and de Chernatony (2000, p.138) identify similarities with the
conceptualizationofrelationshipmarketing.Consequently,theauthorsclaimthatthebrand
isa relationshipbuilder inthattheservicebrand isaholisticprocessbeginningwiththe
relationshipbetweenthefirmanditsstaffandcomingaliveduringtheinteractionbetween
the staff and customers (p.138).Brodieet al. (2006,p.375) support thispropositionby
identifyingtheservicebrandasarelationalasset.
A theoretical foundation of customerbrand relationships has been laid by Fourniers
relationship theory. Fournier (1998, p.344) contends that a brand is legitimized as a
relationship partner when it is animated, humanized, or to some degree personalized.
Anthropomorphizationreferstotheprocessofprojectinghumanqualitiesandpersonalities
onto brands (Patterson & OMalley, 2006), which facilitates their interaction with the
11ForthecreationoftheACLmodel,thesedifferentdimensionsarereferredtoasbrandperformancecharacteristics.
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immaterialworld(Fournier,1998,p.345).The legitimizationofthebrandasarelationship
partner can furtherbe achieved through interactive anddirectmarketing communication
activities, which can be construed as behaviors performed by the brand acting in its
relationshiprole (Fournier,1998,p.345).Similarstudiesconducted in theservicedomainby Sweeney and Chew (2000), have verified Fourniers assertion of the brand as a
relationshippartnerthatisespeciallyrelevantforservicebrands.
The consideration of the brand as a relationship partner and the contribution of this
relationship to customer loyalty are of great relevance for the airline industry. Changing
travelenvironmentsandchangingpersonalcontactsprevent thedevelopmentofpersonal
relationshipswith theairline.Here, thebranddepictsaconstantand familiar relationship
partnerforthecustomer.Eachencounter,ormomentofinteractionwiththeairline,addsto
how the customer perceives the airline brands image and reinforces the brand and the
relationshipthecustomerhaswithit.Whileasinglecontactbetweenthecustomerandthe
airlinemay not constitute a relationship per se, each contact contributes to the overall
relationshipbetweenthecustomerandtheairlinebrand.Thisnotionfurtheremphasizesthe
decisiverelevanceofeachcustomerairlineinteraction.
Whether the relationshipbetweencustomersandbrands is strongand leads to customer
loyaltyinthelongrundependsontheattractivenessoftherelationshipfromthecustomers
point of view. This, in turn, is influenced by the benefits the customer enjoys from the
relationshipwith thegivenbrand.These socalled relationalbenefitsareexplained in the
nextchapter.
4.2.3 Relationalbenefitsasabasisofairlinecustomerloyalty
Accordingtotherelationshipapproach,longtermrelationshipsonlyexistifboththeservice
providerandthecustomerbenefitfromtherelationship(HennigThurauetal.,2002,p.231;
Gwinneretal.,1998,p.101;MarzoNavarroetal.,2004).While theprimaryadvantageof
customerbrand relationships for the firm is customer loyalty and the consequences
resulting from it (cf.Chapter 4.1.1), relationalbenefits refer to those that customers are
likelytoreceiveasaresultofhavingcultivatedalongtermrelationshipwithaservicebrand
(Guteketal.,1999;Gwinneretal.,1998;Reynolds&Beatty,1999;HennigThurau,2002;
Zeithaml&Bitner,2003).Relationalbenefitsrefertobenefitsthatgobeyondthe inherent
advantages provided by the actual service. Those perceived by the customer have been
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identifiedasadrivingforceforconsumerstoengageinlongtermrelationshipswithservice
providers and are positively associatedwith satisfaction,wordofmouth communication,
andrepeatedpurchases(Reynolds&Beatty,1999).
Empiricalresearchconductedonthetypesofrelationalbenefitscustomersgainfromlong
termrelationshipswithaspecificserviceproviderputforthdifferentperspectivesonhowto
categorizerelationalbenefits.First,basedonastudyanalyzingdifferentservice industries,
Gwinneretal.(1998)classifiedrelationalbenefitsintothreedifferentcategories.According
totheauthors,confidencebenefitsrefertotheperceptionofcomfortorfeelingsofsecurity,
reduced anxiety, and trust in the service provider. Social benefits include feelings of
understanding, familiarity, and even friendship between the customer and service
employees. Special treatment benefits include economic and customization benefits that
onlyrelationshipcustomersenjoy(incontrasttononrelationalcustomers),suchasspecial
treatment(Gwinneretal.,1998;HennigThurauetal.,2002;Chang&Chen,2007).Alongall
service industries studied, Gwinner et al. (1998) concluded that confidence benefits
representthemostimportantbenefits,ifcustomersaretoremaininlongtermrelationships
withaspecificserviceprovider,followedbysocialbenefitsandspecialtreatmentbenefits,
respectively. In an exploratory study of the retail industry, Beatty et al. (1996; see also:
Reynolds & Beatty, 1999) identified two categories of relational benefits: social and
functional benefits. While functional benefits, according to Reynolds and Beatty (1999,
p.13), compriseGwinneret al.s (1998) confidence and special treatmentbenefits, social
benefitsrefertothespecificbenefitsthatresultfromthe interactionwiththesalesperson.
These twocategoriesof relationalbenefitshavealsobeenproposedbyotherauthors (cf.
Adelmanetal.,1994;Berry,1995;Bitner,1995;Dwyeretal.,1987;Gwinneretal.,1998in:
Reynolds&Beatty,1999,p.13). Inastudy investigating theeffectof relationshipbenefits
for companies in businesstobusiness settings, Sweeney andWebb (2007) differentiated
betweensocial,psychological,andfunctionalbenefits.
Here,inaccordancewiththefindingspresentedabove,threetypesofrelationalbenefitsare
proposed to be relevant: social, psychological, and functional benefits. They will be
describedinthefollowingsection.
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