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1.1 Background to the Study
In the aviation industry where air travel business is highly competitive, marketing activities are inevitably vital to ensure competitive edge and most airlines are doing just about anything in order to remain relevant and still meet the ever dynamic needs of the passengers. Studies have shown that for these airlines to survive the competition in their industry, they need to take their marketing very seriously (Ibidunni, 2010). The global world of business today is a very dynamic one, in order to satisfy the changing needs of customers, organisations must first know their needs and ensure such needs are met with the services they provide (Smith and Reece, 2012). In the airline industry, passengers pay higher fares at airports for on-spot purchases where a single carrier controls a high fraction of traffic. For airlines to survive in today’s competitive market, it has to treat the marketing drive of its business with top priority to ensure adequate business performance.
Business performance has to do with the combination of management and analytic processes that allow managers of an organisation to achieve pre-determined goals in their business dealings. It is often set to align with the strategic and operational objectives of the organisation in question: In doing this, organisations find it easy to achieve their selected goals for the period (Makhbul, 2011). Measuring business performance in today’s economic environment is an important issue for practicing managers. Generally speaking, business performance is the operational ability to satisfy the desires of the company’s major shareholders, which is often assessed to measure the accomplishment of such organisation (Smith and Reece, 2012).
In today’s business dealings, an organisation’s ability to succeed or fail is largely a product of how best such organisation can satisfy its customers and this act places enormous task and responsibility by way of marketing on any organisation intending to excel at satisfying the customers and clients (Ibidunni, 2010). It starts with identifying accurately the needs of the customers/clients and deciding on how best to handle the products and services in order to satisfy the desires of all prospective buyers and sellers as the case may be. Some indicators employed in measuring business performance are profitability, market share, return on investment (ROI), working capital, sales growth and customer retention (Wood, 2006).
The primary focus of every airline business is to make profit and this is the primary duty of the marketing manager through its marketing department to formulate and implement policies and plans that will maximize the profit per unit of capital employed in the business (Oyekanmi, 2013). Profitability means a suitable price policy which in itself is influenced by cost and market situation factors. In all endeavors, consumer’s satisfaction must be seriously anticipated right from the onset as posited by (Falk, 2011). Profit is the result a business owner considers necessary to make running the business worthwhile, it is comparable to the next-best amount an organisation could earn doing another job. Apart from profitability, another factor that enhances business activities of firms is market share.
The market share of a business is mainly considered to be the unit or revenue of the market accounted for by such business. When nearly 200 senior marketing managers were surveyed, result shows that 67% affirmed they found the "dollar market share" metric very useful, and 61% saw that the "unit market share" as been very useful (Farris, Neil, Phillip and David, 2010). Market share is often monitored for signs of change in the competitive market, and it frequently drives strategic or tactical action (Farris, Neil, Phillip and David, 2010). This makes market share increment one of the important objectives of a business and it enhances sales growth on a long run.
Sales growth composed of the amount by which the average sales volume of a company's products or services has grown, typically from year to year (Blois and Ramirez, 2012). The sales growth is often measured sequentially. Sequential growth deals with the Comparism of recent performance of an organisation with the period preceding it. For instance, when a monthly report states that an organisation experienced 5% sequential sales growth, it implies that recent sales have increased by 5% since the previous month (Blois and Ramirez, 2012). Also, the sales growth is closely linked to the working capital of such organisation.
Working capital is the financial metrics which represents operating liquidity available to a business (Black, 2015). It is a part of operating capital that is often calculated as current assets minus current liabilities. Working capital should be positive in order to allow firms the ability to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses (Black, 2015). Working capital is often managed with activities such as inventories, accounts receivable and payable, and cash.
In India, the airlines were responsible for a total of 79.5 million passengers on scheduled services, an increase of 1.8 per cent over 2014. Among the largest airline industry's performance, Indian was among the world’s largest domestic markets that had the fastest domestic passenger growth in 2015 (World Air Transport Statistics (WATS), 2015). Meanwhile, airlines in Africa scored lowest in global industry performance rating for year 2015, particularly in the area of domestic passenger growth. A result recently released by The International Air Transport Association (IATA) showed that African airlines had only 2.2 per cent of the entire market share of passengers for the year under review (WATS, 2015).
Zografos, Andreatta, and Odoni (2013) see the ability of businesses to perform viably as one of the most important issues in both developed and developing countries. Air transportation in Nigeria like other African countries was a very important project that needed urgent establishment during the British colonial rule as the need to reach out to other Colonies including Nigeria by the British government became essential. However, that initial desire could not be sustained over a long period of time due to poor performance in its managerial roles (Akpoghomeh, 2010). Some of the challenges are increase of flight fares, flight cancellations, delays, poor-onboard services, poor customer relations, missing luggage's, huge staff outlay (serving the purpose of its inception) and poor equipment maintenance and breakdowns (Daramola, 2007).
With reports of the varying degree of successes and failures recorded by airlines in Nigeria, it is imperative to attempt to carry out a detail study of the various marketing strategies being adopted by these airlines in carrying out their operations with a view to establishing the place of marketing in their business performances. Previous research indicates that several factors that influence business performance are professional background of the owners, their entrepreneurship capabilities and preferences, cultural and religious beliefs, inadequate marketing strategies, marketing research, as well as the technology and micro environment (Buttner, 2011; Makhbul, 2011). Marketing is one of the most important aspectsof any business and airlines are not an exception.
Marketing itself is an activity with a defined process used for creating, communicating, delivering, and exchanging offers that have attached values for customers, clients, partners, and society at large in exchange for money (American Marketing Association, 2013). Marketing in business setting entails the process of exchange which involves two parties, the buyer and seller. During the process of exchange, value is given up by one party to the other party receiving something of value as well. That is whyKotler & Connor (2013) defines marketing as a process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others. According to American Marketing Association (AMA) (2013), marketing is a broader concept which entails the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organisational goals. The ability of marketing managers to ascertain the right marketing strategy to adopt in the organisation ensures the growth of sales, share and profitability of any organisation.
Marketing strategy in itself is the process of adapting the marketing mix elements to environmental factors (Mavondo, 2000). It evolves as a result of the interplay of the marketing mix elements and the environmental factors, which impact on these elements. It functions by determining the nature, strength, direction, and interaction between marketing mix elements and the environmental factors in a particular situation (Osuagwu, 2001). The marketing variants like the total quality management are mostly concerned with satisfying clients’ needs and wants beneficially. Developing and implementing efficient and effective marketing strategies which adopts relevant dimensions of the marketing concept involve the organic tasks of selecting a target market (customers/clients) in which to operate and developing an efficient and effective marketing ingredient combination. Marketing thought, with its practice, has been moving speedily into the service industry (Kotler and Connor, 1997). Literature, partly, centers on the discussion of whether physical product marketing is similar to, or different from, the marketing of service and concludes that the differences between physical product and service might be a matter of emphasis rather than of nature or kind (Creveling, 2010). Marketing is one of the salient and important organic functions which help to service organisations to meet their business challenges and achieve set goals and objectives (Kotler and Connor, 1997).
Marketing strategy give the avenue whereby organisations make use of their resources to achieve their set goals and objectives with less stress (Waithaka, Muturi and Nyabuto, 2014). Marketing strategy deals with the adapting of marketing mix elements to business environmental forces which involves examination of the marketing mix elements and the environmental factors (Li, Duan, Edwards and Kinman, 2010). Part of the functions of marketing strategy is to determine the nature, strength, direction, and interaction between the marketing mix-elements and the environmental factors in a particular situation (Jain and Punj, 2014).
To ensure the survival of an organisation, there must be in place a sound and robust marketing commitment on the part of sales personnel, when considering the subtle, unstable and seemingly hostile business environments in which contemporary airline business organisations operates, it calls for targeted marketing strategies which could be online, traditional, word of mouth or direct marketing which are tailored to meet the objective of the organisation. It becomes an important part of this study to assert that there is virtually no limit to the types of marketing strategies that a business can adopt. This is due to the fact that new concepts and designs are being discovered daily, and the biggest problem that a business owner will face is choosing which one will best suit his venture, online, offline or traditional, word-of-mouth, or direct marketing (Akinyele, 2010).
Direct marketing strategy is often used by several airline operators because they see it as a powerful tool to attract and keep both old and new customers. It is a successful way some organisations are using to generate huge sales from existing and new customers (Edmund, 2011). Airlines, just like other organizations, make use of direct marketing to provide physical marketing materials to consumers to communicate information about a product or services being marketed by the organisation (O'guinn, 2013). Direct marketing is a form of advertising which allows businesses effectively communicate directly to customers through several media such as, cell phone, email, website, online advertisements, database marketing, fliers, catalog distribution, promotional letters and targeted mail (Ayyadurai, 2013).
Word of mouth Marketing is seen as the most effective and powerful marketing strategy any company can employ (Lang and Hyde, 2013). The benefit of this strategy is that it can instantly turn a consumer into a regular paying customer. This type of strategy is a by-product of the traditional and online marketing strategies (Lang and Lawson, 2013). The consumers show satisfaction through their word of mouth marketing to their friends on what was provided in exchange for their patronage (Thomas, 2012). Because word of mouth marketing is placed on the shoulders of satisfied customers who then share this satisfaction with people who trust them, this trust is then transferred to the business.
Another marketing strategy examined in the course of the study is traditional marketing which also known as offline in marketing. In the past, traditional marketing used to be the only main focus for advertisers then, but now, it is no longer the same. This type of marketing strategy is seen in two groups namely; print, and collectively, electronics (Armstrong and Overton, 2010). It is still highly effective, relevant and consistently produces good results. Also, online marketing is another strategy which is seen as the newest and sometime perceived by many businesses as the most powerful, as it has opened diverse types of marketing strategies that have completely changed the face of marketing (Rappaport, 2009). While using online marketing, a business owner or marketing manager can find numerous methods to explore a new business idea. Some of these ideas include affiliate marketing, article marketing, social networking, and blogging. Affiliate marketing can take a similar form as print based traditional marketing by placing banner advertisements on websites, but can reach so many more people. Chekitan and Don (2013) posit that article marketing and blogging on the other hand allows for two strategies at the same time. They can both be used to promote any product or services directly, or can be used for driving traffic (customers) to a website for the same purpose. Rappaport (2009) observed that social networking is the online version of word of mouth marketing and has the ability to "personally touch" a huge number of people instantly with basically the touch of a button (mouse).
Marketing strategy development, planning and implementation process involves a lot, such as, managerial experience, it has a high level of uncertainty, it requires intensive business knowledge, with a broad strategic information needed for success, rigorous process involving decision making by organisational managers, placing emphasis on its unique strengths to ensure better customer value over a long period of time (Jain and Punj, 2014). It is somehow difficult for businesses to constantly realize efficient and effective marketing strategy (Li, Duan, Edwards and Kinman, 2010). This could be associated with unstable business environmental factors, which will then stand as a difficult task for organisational marketing strategists to decide which strategy is best suitable for achieving the set goal for the year. McDonald (2012) was of the opinion that many factors prevent organisational managers from designing and implementing efficient and effective marketing strategies. The fact is that environmental factors were seen as major issues drastically affecting the efficiency and effectiveness of managers in strategic marketing issues (McDonald, 2012). The marketing strategies of airline operators in Nigerian companies are expected to be adaptable to these environmental factors in order to achieve set business performance goals and objective in a long run, though it seems to have witnessed some form of corporate performance over the years which can be attributed to their district level of market share and more needs to be done on the adoption of effective marketing strategies to improve business performance.
1.2 Statement of the Problem
Air transport in Nigeria has been growing in relation to the Gross National Product (GNP) as it accounts for a large part of transport expenditure in the economy (Oyekanmi, 2013). The share of freight movement on a tonne per kilometer is small compared to other modes; airlines carry high value, perishable goods and provide emergency services that make them an important part of the total transport system. Its transport system helps to improve quality of life by broadening people’s leisure and cultural experiences with a wider choice of holiday destinations around the world and an affordable means to visit distant friends and relatives.
Effective direct marketing strategy has been classified as one of the fundamental key for the growth of any business organisation because no business can survive without the marketing or sales of its products or services. Extensive marketing has been recognized as the important factor for the sales growth of any business and not just funding or capital should be consider as the growth of a business (Waithaka, Mutiri and Nyabuto, 2014). For an enterprise to survive, it is very crucial to have effective sales strategies that will win over its competitors in the industry but most of the customers are cautious about the abuse of direct marketing and are always worried that they may become victims of fraud (Yen, Chen and Chen, 2008). Traditionally, executives in Nigeria aviation industries have not been market driven, they have lagged behind in accepting the marketing concept and have generally been slow in adopting promotional methods, product strategy and other marketing techniques (Uhuegho, Olaniyi and Nwokocha, 2014).
Over the years the airlines industry in Nigeria have been unable to grow, expand and be strong enough to attract more Nigerians to travel by air, and this has contributed to excess capacity (or performance below capacity) that leads to huge economic losses in terms of potential turnover of air travelers not captured as passengers by the airlines (Bankole, 2015). According to Asiegbu, Igwe, and Akekue-Alex (2012), many airlines have suffered entropy (such as oriented, Barnax, Concorde, ADC, Sossoliso airlines) and unable to provide the required service quality, some of these airlines experienced low patronage and abysmal profit margin; and eventually collapsed. The competitive nature of aviation industries in Nigeria today is posing serious problems to various airline companies due to the operations of Nigeria aviation industries in the volatile environments (Olujide, 2003; Aremu, 2006). These problems have been attributed to the lack of adequate implementation of direct marketing techniques.
Satisfied consumers will pass positive information to others while dissatisfied consumers will pass negative information about the products or services (Tucker, 2011; Vermeulen and Seegers, 2009; Jalilvand, Samiei, Dini, and Manzari, 2012, Dennis, Merrilees, Jayawardhena and Wright, 2009). Mouth to mouth marketing communications is a major indicator to the success of a marketing strategy for an organisation. For an organisation to successfully market its products or services, such organisation must communicate with its customers or target market (Louise van Scheers and Prinsloo, 2014). However, mouth to mouth marketing might be counterproductive. On the one hand, it has been seen as an influential marketing tool that might improve firm’s market share and profitability (Arndt, 2009; Sheth,2000 and Guillermo, 2011); On the other hand, when the message about the firms’ services or product is negative, it may cause worst damage to the organisational objective of controlling the market, this has been seen to have greatly affected the airline industry (Richins, 1983; Hogan, Lemon and Libai, 2002; Guillermo, 2011).
Since the early 1990s, the delivery of a high level of service quality by airline companies became a marketing requisite as the competitive pressures continued to increase. Most airlines began to offer various incentives, such as the frequent flyer programmes in an effort to build and maintain the loyalty of customers (Miller, 2015). Thus, in order to remain competitive, service providers must render quality service to their customers. However, Ott (1993), in his extensive study of frequent fliers, showed that despite the airlines attempts to differentiate their services, consumers did not perceive any difference between one carrier and another, whereas Ostrowski, O’Brien, and Gordon (1993) noted that when all airline companies had comparable fares and matching frequent flyer programmes, companies with better perceived services drew customers from other carriers. Oghojafor and Alaneme (2014) added that Nigerian aviation industry is fraught with poor customer service and compensation for wronged and deserving customers. It has been observed that there is a need for more competition in the industry to give customers a wider range of choices in case their chosen carrier disappoints in any way (Udoh, 2013). In terms of customer satisfaction with the way the airlines handle the comfort of their passengers, there is little to reflect the Category one (CAT one) certification. In view of the challenge, much attention has been given to the role of mouth-to-mouth marketing. The lack of mouth-to-mouth marketing strategy negatively affects market share of the airline service providers in Nigeria (Udo, 2013). Bassey and Anyadighibe (2014) further explained that airline companies have not enjoyed the power of mouth-mouth marketing. Hence, the needs to further investigate how best effective marketing like mouth-to-mouth marketing could be used to enhance their business performance.
It is obvious that online marketing and its relevance in tourism industry, manufacturing industry, banking industry etc have engrossed the attention of many authors in developed, emerging and developing nations. Many scholars have examined the relationship between online marketing and business performance and yet general conclusion on the effect of online marketing on business performance are yet to be reached. Past studies present conflicting findings as some found a positive effect between the two (Sunny, Kim and Jeong, 2004; Ulhas, 2007; Salwani, Marthandan, Norzaidi and Chong, 2009 and among others) and some found no effect (Kirvijavi and Saarinen, 1995; Powell and Dent-Micallef, 1997; Lo and Darma, 2000; Singh and Pandey, 2008; Shin, 2006; Matikiti and Afolabi, 2012 and among others). This indicates that the effect of online marketing on business performance is still debatable.
The aviation industry has not been left behind in adopting e-marketing, as it is evident from numerous airline firms that have established their presence on the Internet. However, it is not yet clear whether the spread and utilization of Internet marketing has improved the profitability of the airlines firms in Nigeria (IATA, 2007).
A study carried out by Uhuegho, Olaniyi and Nwokocha (2014) revealed that most airlines operators in Nigeria are facing financial exigencies as a result of inability to locate target customers and secure passengers’ loyalty, the global trade trends, consumer protection and passenger rights, lack of online marketing amongst others. All these have impacted negatively on the nature of airline operations and their profitability. The study further showed that the Nigerian aviation industry was heavily indebted because of losses caused by low fares, high interest rates, and rising fuel costs. In 2010 alone, Nigerian airlines owed a combined $59.5 million to Federal Airport Authority of Nigeria (FAAN) as at when the Central Bank of Nigeria (CBN) announced a $1.2 billion bail-out for domestic carriers. In 2011, the airlines owed $66.7 million (10 billion naira) to Nigerian aviation agencies. Of the 150 active Nigerian airlines in 2001, the number declined to 19 in 2011 and 8 in 2016 mainly due to financial mismanagement and airline failures to meet industry policies. It is apparent that Nigerian airline firms are adopting online marketing but it is not yet clear whether the spread and utilization of online marketing has improved the profitability of airline firms in the Nigeria aviation industry.
Marketing is the connection between the satisfaction of the need of a society and its industrial activities which then support a firm to survive within its competitive environment. The airline industry is considered to be of strategic importance in every nation and it requires appropriate positioning to ensure its sustainability. Across the world, for instance, over 2.1 billion passengers travelled by air in 2006 (IATA, 2007). In Africa, the airlines generated 6.7 million jobs and contributed US$67.8 billion to the GDP (Air Transport Action Group, 2010). The Nigerian aviation industry is confronted by myriad of challenges in terms of traditional marketing which have threatened the day to day working capital and sales revenue of the firms. The airline industry in Nigeria has been having some traditional marketing challenges in the light of upsurge in competition and the dynamics in the global and local business environments (Air Transport Action Group, 2010). According to Adeniran, Egwuonwu and Egwuonwu (2015), most of the airlines in Nigeria do not have clearly stated positioning statements to differentiate their market offerings, and attract customers. This situation has resulted in high working capital and rates of airlines’ insolvency. Also, Nthiga (2008) noted that most firms do not use marketing to improve their organisational working capital. In the context of working capital it has been pragmatic that the difference of current assets and liabilities, organisational savings, and lack of legal structure are the major indicators to determine working capital of an organisationon the significant impact of traditional marketing in improving the day to day sales revenue of the organisation. Based on these problems, it is important to establish the relationship that exist between traditional marketing, transactional marketing, marketing strategies and selected performance indices of airline firms in Nigerian aviation industry
Based on the foregoing, the present study examined marketing strategies and business performance of selected airlines in Nigerian Aviation Industry.
1.3 Objective of the Study
The general objective of the study was to examine the relationship between marketing strategies and business performance of the selected airlines in Nigerian Aviation Industry. The specific objectives are to:
- determine the relationship between direct marketing and sales growth of selected airlines in Nigerian Aviation Industry;
- examine the relationship between mouth-to-mouth marketing and market share of the selected airlines in Nigerian Aviation Industry;
- assess the influence of online marketing on the profitability of the selected airlines in Nigerian Aviation Industry;
- aascertain the effect of traditional marketing on working capital of the selected airlines in Nigerian Aviation Industry;
- examine the influence of transaction marketing on customers’ satisfaction of the selected airline firms in Nigerian aviation industry and
- evaluate the influence of marketing strategies and business performance of the selected airline firms in Nigerian aviation industry;
1.4 Research Questions
To guide the conduct of this research the following questions were raised:
- What is the relationship between direct marketing and sales growth of the selected airlines in Nigerian Aviation Industry?
- What is the relationship between mouth-to-mouth marketing and market share of the selected airlines in Nigerian Aviation Industry?
- How does online marketing influence the profitability of the selected airlines in Nigerian Aviation Industry?
- In what way will traditional marketing affect working capital of the selected airlines in Nigerian Aviation Industry?
- What influence does transaction marketing have on customers’ satisfaction of the selected airline firms in Nigerian aviation industry?
- How do marketing strategies influence business performance of the selected airline firms in Nigerian aviation industry?
The following hypotheses were propounded and tested at 0.05 level significant:
H01: There is no significant relationship between direct marketing and sales growth of the selected airlines in Nigerian Aviation Industry.
H02: There is no significant relationship between mouth-to-mouth marketing and market share of the selected airlines in Nigerian Aviation Industry.
H03: Online marketing has no significant influence on the profitability of the selected airlines in Nigerian Aviation Industry.
H04: Traditional marketing has no significant effect on working capital of the selected airlines in Nigerian Aviation Industry.
H05: Transaction marketing does not significantly influence customers’ satisfaction of the selected airline firms in Nigerian aviation industry.
H06: Marketing strategies do not significantly influence business performance of the selected airline firms in Nigerian aviation industry.
Rationale for Hypotheses
H01: There is no significant relationship between direct marketing and sales growth of the domestic airlines in the development of Nigerian Aviation Industry.
Direct marketing is a form of advertising which allows businesses and nonprofit organisations to communicate directly to customers through a variety of media including cell phonetext messaging, email, websites, online adverts, database marketing, fliers, catalog distribution, promotional letters and targeted television, newspaper and magazine advertisements as well as outdoor advertising. Among practitioners, it is also known as direct response. Direct marketing is attractive to many marketers because its positive results can be measured directly. While many marketers recognize the financial benefits of increasing targeted awareness, some direct marketing efforts using particular media have been criticized for generating poor quality leads, either due to poor message strategy or because of poorly compiled demographic databases. Through conducting an empirical research, Gustafsson (2006) confirm that direct marketing has a significant positive effect on patronage of airline service firms in China and is essential for the successful delivery of customer services.
Chang and Yeh (2012) found that direct marketing is necessary for evaluating airlines’ services. By collecting surveys from inbound air passengers at Macao International Airport, Chan, Wang, Li, Liu, and Lam (2014) have employed the SERVQUAL model in completing a comparative study of different competitive advantages between traditional and low-cost airlines. Their findings clearly show that different marketing and service delivery strategies should be applied by different airlines (traditional vs. low-cost) in order for them to respectively and satisfactorily meet their different service quality dimensional needs of customers. Lázaro (2016) asserts that airlines that have introduced direct marketing can offer products and services calibrated to passengers’ needs. Norm (2011) found out that direct marketing has greater implication on sales growth and it is a sales channel through which customers are offered products and services. Bellman, Potter, Hassard, Robinson and Varan (2011) agree that direct marketing is a promotional tool for generating notoriety and a positive brand image.
However, authors such as MMA (2011) and García (2012) did not find positive relationship between direct marketing and sales revenue. They found that some direct marketing tools could not contribute value to user management, information, and resolution in an automatic and interactive manner. Costa, Barragáns and Rey (2012) do not see direct marketing as a sales outlet, where distribution is the entrance door that allows for the sale of business products and services. In the light of these previous findings, this study hypothesize that there is no significant relationship between direct marketing and sales growth of selected airlines in Nigerian Aviation Industry.
H02: There is no significant relationship between mouth-to-mouth marketing and market share of thedomestic airlines in Nigerian Aviation Industry
Passengers essentially need information about an airline company and its services to choose it. They always collect information from the mass media including television, radio, internet, etc. Although the mentioned resources provide valuable information, passengers prefer to receive a huge part of their information from informal resources such as their relatives, their friends, their acquaintances and other people (Silverman, 2001). Since they are not interested people, they are more noticed by the passengers. It must be mentioned that the formation of positive words of mouth about a service company can be due to different factors and will also have remarkable outcomes. In an environment where there has been a reduction in consumer’s trust as well as a decrease in television, radio and outdoor advertising, word of mouth offers a way to obtain a significant competitive advantage (International Word of Mouth Marketing Conference, 2005).
Recent studies in the field of different service industries have proved positive and negative effects of words of mouth on purchasing the services provided by service companies in different industries. Most airlines began to offer various incentives, such as the frequent flyer programmes, in an effort to build and maintain the loyalty of customers (Miller, 2015). Yasvari, Ghassemi, and Rahrovy (2012) assert that word of mouth is more important in final stages of the purchase process, because it assures the consumer. Alire (2007) in a study empirically found out that 90% of people trust the products or services confirmed by one of the family members, friends or colleagues, because they are not sure of any benefit. A study by Bughin, Doogan, and Vetvik (2010) suggest that word of mouth is the primary factor behind 20 to 50% of all purchasing decisions and generates more than twice the sales of paid advertising.
Cronin and Taylor (2012) found empirical support for the idea that mouth-to-mouth marketing led to increased market share and argued that service quality was actually an antecedent of market share. O‘Neill, Palmer, and Charters (2012) conducted a study about airlines services in Australia and found that when the belief leaders returned back to their country, they talked about their experiences and their verbal recommendations led to the increase in the sale of local airline services. Conducting a study in the US, Litvin, Blose, and Laird (2011) found that choosing airline by tourists was affected by verbal recommendations of the belief leaders and interestingly, a number of these choices were affected by the formal media. Brown, Barry, Dacin, and Gunst (2015) in their empirical study on word of mouth facets in restaurants confirmed that there is a strong relationship between word of mouth and customer’s loyalty. The researchers found out that positive word of mouth was directly correlated to customer’s repeated purchase which transformed into higher market share. They also discovered that the effect of positive or negative word of mouth on market share differed substantially from industry to industry.
Mackinsey group in 2009 reported that in the airline industry, the pass on rates for the key positive and negative word of mouth can reduce a firm’s market share by 20%, all other things being equal. Heriyati and Siek (2011) study showed that market share of low cost carriers did not significantly improve after receiving information through WOM channel because passengers find it difficult to make a decision about choices of services or when they are about to travel. From these arguments and findings, it is hypothesize that there is no significant relationship between mouth-to-mouth marketing and market share of selected airlines in Nigerian Aviation Industry.
H03: Online marketing has no significant influence on the profitability of the selected airlines in Nigerian Aviation Industry
According to Lerrthaitrakul and Panjakajornsak (2014), the aviation industries play a significant role in generating new marketing and business across the world. In order to survive in the modern marketplace, air-travel businesses need to give consumers what they want, which is low prices and a wide choice. Online marketing affords them a way to do that. Through the online platform, Airlines enhance their relationship with their passengers who will book directly with the airline rather than through travel agents. In addition, airlines increase their revenues through sales of optional services such as baggage, seat assignments and also ancillary services such as car-hire, hotels and insurance. Online marketing enables airlines to offer more services to customers, more channels to deliver their business, more intelligence to understand their business, greater efficiency and lower cost. De Alarcon, Molina, and Feliz (2005) in a study found that the actual cost per transaction goes down considerably with online marketing as opposed to traditional marketing.
Stroehle (2008) revealed that the application of online marketing in the airline industry is influential on the improvement of the effectiveness of marketing activities. Eid (2011) studied the use of online marketing in business management and concluded that the use of online marketing mechanisms is effective on market share and profitability of the companies. Jawabreh, Allahham, Alrjoub, and Ahmad (2012) explored the impact of Information Technology on Profitability of Airlines Industry on Royal Jordanian Airlines. The data were collected from the financial statements of Royal Jordanian Airlines and analyzed by using financial and statistical tools. From this study, it showed that some ratios showed good results and the airline still had the opportunity to improve effectively its financial performance and long term and short term solvency in future.
However, some studies have found no relationship between online marketing and firm’s profitability (Ozituran & Roney, 2003; Shin, 2006). Wen (2009) pointed out that the Internet had negative impacts on the industry, namely online pricing transparency, price competition and a decrease in customer loyalty. Xiang, Wang, O’Leary and Fesenmaier (2015) found that there has been no significant change from 2007 to 2012 in the percentage of American travellers who used the Internet as a source of information for trip planning. This situation clearly indicates that some people regard the Internet as having barriers that are difficult for them to overcome (Minghetti & Buhalis, 2010). On the other hand, people prefer to use a travel agent for a variety of reasons. The most recent figures of the Travel Weekly’s Consumer Trends (Tunney, 2014: C10) indicate that 45% of travellers have used a travel agent to book a trip with a large proportion of these travelers stating that they use a travel agent because they were looking for expert advice. The figure of 45% clearly indicates the relevance of travel agents in the travel and tourism today. Pan and Fesenmaier (2006) revealed that travel-related websites are not as user-friendly as they could be. Stoltz (2009) argue that users often get frustrated when trying to book online, even CEOs of online travel portal companies. In the light of these previous findings, this study proposes that online marketing has no significant influence on the profitability of selected airlines in Nigerian Aviation Industry.
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10. THE IMPACT OF TRANSPORTATION AND LOGISTICS ON THE PROFITABILITY OF LISTED BEVERAGES MANUFACTURING FIRMS» CHAPTER ONE Introduction 1.1 Background to the Study Transportation usually represents the most important element in logistics cost for most firms. Fr...Continue Reading »