C0941533

IOSR Journal of Business and Management (IOSR-JBM)
e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 9, Issue 4 (Mar. - Apr. 2013), PP 15-33
www.iosrjournals.org
www.iosrjournals.org 15 | Page
A Case Study on Customer Acquisiton and Retention on the
Airline Service Industry
Dr. Lalita Shukla
(Ph.d) UGC NET Qualifier KRG College, Gwalior, India)
Abstract: This report provides an analysis on customer acquisition and retention on the airline industry. This
research has been done because of the rapid increasing of airline service usage. In today’s time where the
competition is strict, knowing how to acquire and retained customers is very important. Hence, these project
objectives are to find out what are the factors that affect customer’s satisfaction and provide recommendations
for better customers’ acquisition, repetition and recommendation for airline service.
First of all, the airline industry background has been analyzed by Porter’s five forces model. Based on the
analysis, it shows that the power of suppliers and competition between existing firms in airline service industry
is high. While, the threats of substitutes, power of buyer and threats of new entrants are relatively low.
Moreover, in order to help airline companies to survive this strict competition, several important attributes have
been provided to achieve the objectives. This includes Customer acquisition, Customer retention, Customer
Satisfaction and loyalty, Service Recovery and Management and Training.
Next, this project use primary quantitative research method which is distributing survey and use several journal
and books as a secondary research method to support the thesis. The sample size of the survey is 80
respondents. The data will be analyzed using XLD Data analyst. Based on the result, it shows several factors
that affect customer’s satisfaction which lead to acquisition, repetition and recommendations in purchasing
airline service
Keywords: Customer Acquisition, Customer Acquisition, Customer Satisfaction, Airline.
Table of Contents
Abstract ............................................................................................................................................................... 15
List of Figures..................................................................................................................................................... 16
Chapter 1 Introduction ...................................................................................................................................... 16
1.1 Reason for choice of topic............................................................................................................................. 16
1.2 Objectives...................................................................................................................................................... 17
1.3 Outline of Chapters ...................................................................................................................................... 17
Chapter 2 Situation Analysis.............................................................................................................................. 17
2.1 Background of the Industry ......................................................................................................................... 17
2.2 Porter’s Five Forces Analysis ....................................................................................................................... 17
2.2.1 Threats of Substitutes (Low)................................................................................................................ 18
2.2.2 Power of Buyer (Moderate-Low) ......................................................................................................... 18
2.2.3 Power of Supplier (High)..................................................................................................................... 18
2.2.4 Threats of New Entrants (Low)............................................................................................................ 18
2.2.5 Rivalry among existing Firms (High)................................................................................................... 19
Chapter 3 Literature Review ............................................................................................................................. 19
3.1 Customer Acquisition ................................................................................................................................... 19
3.2 Customer retention....................................................................................................................................... 20
3.3 Customer Relationship Management........................................................................................................... 20
3.4 Customer Satisfaction and Loyalty .............................................................................................................. 20
3.5 Service Recovery........................................................................................................................................... 20
3.6 Management and Training of Employees..................................................................................................... 20
3.7 Hypotheses.................................................................................................................................................... 21
Chapter 4 Methodology...................................................................................................................................... 21
4.1 Research Methodology ................................................................................................................................. 21
4.1.1 Primary Research Data ........................................................................................................................ 22
4.1.1.1 Qualitative Research......................................................................................................................... 22
4.1.1.2 Quantitative Research....................................................................................................................... 22
4.1.2 Secondary Research Data .................................................................................................................... 22
4.2 Choice of Research Methodology ................................................................................................................. 23
4.3 Survey Design ............................................................................................................................................... 23

A Case Study On Customer Acquisiton And Retention On The Airline Service Industry
4.4 Pre-Test......................................................................................................................................................... 23
4.5 Sample Size................................................................................................................................................... 23
4.6 Evaluation of the Survey Results.................................................................................................................. 23
4.7 Bias and Limitation of Research Process ..................................................................................................... 23
Chapter 5 Finding and Analysis......................................................................................................................... 23
5.1 Demographics Percentage Analysis.............................................................................................................. 23
5.2 Cross Tabulation between does attractive price attract customers and what is your occupation............... 25
5.3 Cross Tabulation between the accessibility-or- place to gain service with the media or source to gain
and select service. ............................................................................................................................................... 26
5.4 Cross Tabulation between the age group with the importance in keeping customers informed about
the services through various media.................................................................................................................... 27
5.5 Correlation Test Analysis on Compensation/Service Recovery and Quality of service personnel.............. 28
5.6 Multiple Regression Analysis to identify the factors that affecting customers in choosing airlines............ 28
Chapter 6 Conclusion and Recommendations ................................................................................................... 30
6.1 Conclusions................................................................................................................................................... 30
List of References ............................................................................................................................................... 31
Appendix 1.......................................................................................................................................................... 31
List of Figures
Figure 2.1 Page 12
Figure 3.1 Page 20
Figure 4.1 Page 22
Figure 5.1 Page 26
Figure 5.2 Page 27
Figure 5.3 Page 28
Figure 5.4 Page 29
Figure 5.5 Page 30
Figure 5.6 Page 32
Figure 5.7 Page 34
Figure 5.8 Page 35
I. Introduction
1.1 Reason for choice of topic
In today’s time, due to increasing globalization in the world’s economy and the rapid development in
technology, the usage of airline service are increasing. This is supported by The International Air Transport
Association (IATA) which has announced that “the global traffic result for March showing that total passenger
demand rose 7.6% and freight demand climbed at 0.3% compared to same month last year” (IATA, 2012).
Additionally, due to globalization now the nature of the market for airline service is wide. For example, now
Singapore, Korea, Japan, Philippine and Indonesia can provide airline service to each other or other countries
within their region due to globalization. Moreover, the function of airline service today has improved, as besides
it allows people to go to other region, it also provide a goods delivery. These show that the market in airline
industry has great opportunity to grasp.
Furthermore, by the appearance of budget airline service, the number of people that can travel has
tremendously increased as budget airlines provide airline services at shoestring price. This incident affects the
intensity of the competition in the market which highlights the need for company in this industry to be able
acquire and retain their customers effectively in order to stay competitive in the market. In relation with
acquiring and retaining, the need of excellent service personnel is fairly crucial as they are the one who directly
interact with the customers (Palmer, 2011).
With the good opportunity in airline service industry, the author wants to study and analyze rigorously
the Airline service industries in regards to how companies can best acquire and retain their customers in this
fierce competition. This project will be focused more on the airline service in Singapore’s region as the market
for airlines is very wide.

1.2 Objectives
This research aims to achieve the following objectives:
1. Evaluate the imperatives of Customers Acquisition and Retention
2. To identify what are the factors that affect customers in choosing/acquiring a particular Airline Service
3. To identify what are the factors that made customer satisfy; make repeat purchase and recommend a
particular airline service
4. Lastly is to recommend strategies for company to efficiently and effectively acquire and retain
customers for present and long term.
1.3 Outline of Chapters
Chapter one explains an introduction of the chosen topic, research of the academic objectives for this
project, followed by an outline of chapters of this research.
Chapter two is the setting scenes which cover situation analysis that start with the background of the industry. In
this chapter, porter five forces model (Porter, 1991) will be used to analyze the situation in this airline service
industry.
Chapter three refers to the literature review which is the key theories that the author finds to be related
and necessary to achieve the objectives of this project. These key theories are acquisition, important and
determinant attributes, retention, and service recovery and customers satisfaction which will be discussed in
details.
Chapter four assesses scope of the data and various methodologies that are being used to achieve the
objectives, design of the questionnaire, sources of bias and limitation of research process. All these attributes
will be discussed more comprehensive in this chapter.
Chapter five discusses the findings and analysis of the data gathered from the questionnaire by using the XLD
data analysis. In this part of the chapter, the data will be processed into meaningful data and analyzed by the
researcher.
In the last chapter, the author will conclude the research analysis and provide recommendations on how
airline companies can best acquire and retained their companies and stay competitive.
II. Situation Analysis
2.1 Background of the Industry
The airline service industry is the industry that provides airline travel service. The number of airline
service providers in Singapore is enormous. The airlines that fly to Singapore are the Singapore Airlines, Silk
Air, Air Asia, Lion Air, Lufthansa and many other airlines. Each of airlines has different ways in competing at
the market, like for example there are High quality airline services (i.e. SIA and Lufthansa) and Budget/Value
for money airline services (i.e. Lion Air and Tiger Airways).
As it has been mentioned in the introduction stage, the usage of airlines has increased according to
International Air Transport Association (IATA). However, due to sharp growth in oil and fuel prices which is
vital for airline service it affects the profitability for airline companies (IATA, 2010). Airline service can be
purchased through travel agent, official retail-shop and online-website. However, due to advancement of
technology (internet), customers nowadays prefer to purchase air-ticket through online as it is the most popular
and convenience media.
Furthermore, due to the increasing demand for convenience, speed, quality of service with attractive
price, the competition in this industry is becoming stricter. These demands are stimulate by the changes of
customers lifestyle, needs and expectations for greater experience in traveling. For example, Singapore which is
a country that is famous with its education and medical capability increase the usage of airline service, due to
vital needs like education and medication. With the increasing technology and demands, it affects the
expectations and innovations for the service which lead to increase in expenditures and sales.
2.2 Porter’s Five Forces Analysis
Porter’s Five Forces Analysis (Porter, 1991) is a framework that is used to analyze the competitive
environment within an industry. This model will be used as a guide in examining the five market forces and
their impact on the industry. Hence, airline industry will be able to focus more on their opportunities and
reducing their threats through evaluation of each force.

2.2.1 Threats of Substitutes (Low)
Product that able to represent other product function can be defined as substitute product (Wheelen and
Hunger, 2002). Currently, there are no perfect substitutes for airline service, as airline service has the best range
of destination, time-efficient and convenience. However, the fact that trains and air-transports are substitute is
true, but the threat will only be high if it’s applied in domestic travel. Currently, the threat of substitutes for
airline industry is low. In regards to the threats, Airline Company should keep innovate their service to prevent a
perfect substitute.
2.2.2 Power of Buyer (Moderate-Low)
The power of buyer can be defined as the ability of customers to affect an industry. This view has been
supported in the work of Coulter (2008). The bargaining power of buyer in airline industry is relatively low
because the number of buyers for this service is enormous and keeps increasing (IATA, 2010). Additionally, due
to different specialty of countries, customers tend to go overseas for particular purpose that the destination
country is good at (i.e. Singapore good at Medication), subsequently, going overseas somehow is becoming part
of the lifestyle today. Hence, this can also be seen as the service is essential for particular customers which
further down the bargaining power of buyer. Looking at another factor which is internet, it allows customers to
easily make a comparison through information and price transparency and switch to other airline service.
Overall, the bargaining power of buyer is still moderate to low, so organization can take this opportunity to
provide excellent service and charge premium price.
2.2.3 Power of Supplier (High)
According to Collis and Montgomery (1997), power of supplier can be defined as the ability of
suppliers to affect an industry. The power of suppliers in airline industry is relatively high, as fuel is one of the
important attributes for airline service. This can be seen as the price of jet fuel price has risen 8% from January
while the usage of airline keeps increasing (IATA, 2010). In addition, as the availability of substitute for fuel
has not been found the bargaining power of supplier is still high. However, the availability of jatropha-based-
fuel will soon be available substituting the jet-fuel-based which will reduce the bargaining power of supplier in
the future (Bloomberg Energy Finance, 2012). Moreover, the bargaining power of suppliers in airline industry is
also reduced by the availability of internet. By the use of internet, one can purchase their supplies from suppliers
around the world without any geographical boundaries. Hence, currently the power of supplier in this industry is
high. In this case, airline firms may want to create good and long term relationship with their suppliers to gain
advantages.
2.2.4 Threats of New Entrants (Low)
Threats of new entrants are the effect from possible entrants that affects an industry. According to
Lynch (2009), potential entrants often come to marketplace when the barrier to entry is low and when profit
margins are great. In airline service industry, the barrier is relatively high due to requirements of high capital in
entering the industry (i.e. investment on terminal and airplane). Furthermore, as there are already several strong
players in the industry, it is hard to enter and established at the market because brand identity in airline service

need to be good and clear as it is involved with safety (customers will not use unknown airlines as it would be
risky). Therefore, it will force the new entrants to spend extra capital to advertise more to fight the strong
existing player. Overall, the threat of new entrants is low. Hence, seeing this barrier, existing firms may want to
strengthen their branding to further increase the barrier to enter the industry.
2.2.5 Rivalry among existing Firms (High)
Rivalry among existing firms refers to the degree in which firm react to moves from other firms within
an industry (Pearce and Robinson, 2007). Due to the evolving technology like internet, it allows customers to
switch to other company with no more than a click (i.e. moving to other airlines website), this clearly would
make player in the industry to be intense. Moreover, due to needs of high investments (i.e. purchasing aircrafts
and investment on the technology), it creates high barrier to exit the industry, as the aircrafts and technology that
are expensive will be rendered as no-use for other business. While, for company that hire aircrafts for their
airline service also need to spend a lot of capital and usually involved with long-contract agreement and need
long time to achieve break-even point or gain profit. Additionally, by the arrival of budget airlines which offer
value for money airline service it affects the competition in airline industry to become more intense. Overall, the
intensity of rivalry among existing firms is high. Therefore, airline firms may want to keep innovate their
service and cope-up with the advancing technology so they will be able to provide advance and better service
for better position at market.
III. Literature Review
According to the industry analysis in the chapter 2, the competition of airline service sectors is strict.
Hence, in order for company to stay competitive in the industry, it is advisable for company to know certain
strategies. In this literature review, it provides 6 different strategies which are essential to stay competitive.
3.1 Customer Acquisition
According to Kotler and Armstrong (2009), finding the right customers that provides a profitable return
can be defined as customer acquisition. Customer acquisition is necessary for every companies that start
creating a business, expanding their business, products and services, and it is effective in situation where the
switching cost is relatively low and repeat purchases are rare .In acquiring customers it is essential for
organization to choose the right customers to serve before decide how they can best acquire them. This is
particularly important as it is a fact that organization will not be able to serve all customers in every way. Hence,
organizations nowadays decide to segment their customers and focus more on customers that they can acquire,
satisfy best and bring profitability (Jobber, 2010).
After deciding which segment of customers to target, it is necessary for organization to understand the
consumers first. There are three concepts that need to be recognized. Firstly, needs which refer to basic human
requirements, in airline case; this can be in a form of necessity to go overseas by airline service. While, wants
are the alternative form of needs that are molded by culture and individuality, again in airline case, this would be
the desire to have convenience, comfortable and prestigious airline service. Thirdly, wants that are supported by
ability to pay is often called demand. It is critical to understand these three concepts which can be seen in the
work of Burton, Kotler and Keller (2009) because it is difficult to provide service with better value that lead to
successful customer acquisition, if the organization itself does not know what are the customers’ needs and
wants which will not create strong demand.
Next, Market offerings can be defined as the combination of product, service, experience and
information that meet the needs or wants of customers (Lovelock, Patterson and Walker, 2007). Organization
need to be careful in creating market offering as by creating an offering, customers tend to create a form of
expectations in regards to value and satisfaction based on market offering (Kotler, 2000). For example, SIA
offer a great experience and excellent quality level of airline service, customers that hear SIA market offering
tend expect high level of airline service. Hence, if the market offering of SIA does not meet the expectations,
customers tend to be dissatisfied and switch to competitors. However, in SIA scenario, SIA is able to deliver
their service at the promised level which leads to the creation of loyal customers who will share their experience
and recommend the service to others. Next, it is also essential to keep in mind that quality of the service is not
the only decisive factor. This is true as every customer has their own budget (i.e. for those who want value-for-
money service can go for budget airline while those who prefer luxury and prestige will choose SIA). Last but
not least, there has been an observation in the work of (Sellers, 1989; Hanan, 2003) that more than 25% of
airline customers are changing airlines annually which indicates that knowing how to acquire customers are
extremely essential, particularly due to arrival of budget airlines and the development of technology (internet).

3.2 Customer retention
According to Thompson (2004), customer retention is about increasing the sales by endlessly satisfy
and serve the customers so they will keep coming back. In order to ensure the customer retention to be
successful, the quality of the service needs to be able to satisfy or go beyond the customer expectations
(Zikmund, McLEOD and Gilbert, 2002). Moreover, this view has also been supported in the work of Storbacka
and Lehtinen (2001), which said that considering what are the customers’ needs for today is not enough. It is
also vital to identify or predict the customers future needs.
Customer retention can be done in many ways, like for example by the use of customers’ loyalty
program (i.e. KrisFlyer program from Singapore airlines which allows customers to redeem free travel in
accordance to the mileages that the customers have spent). Another way to retained customers is by keep
providing satisfying service or providing the service that beyond the customer expectations to maintain trust and
satisfaction of the customers. Additionally, by opening an open feedback from customers to ensure that the
company is providing the service that is still relevant and needed with the customers. Customer retention has
been argued by Reichheld (1996), that it is less costly compared to customer acquisition, as customers that are
satisfied and believe in certain services tend to increase the switching cost in terms of trust and convenience.
3.3 Customer Relationship Management
A remarkable technique that involves creating relationship that gives win-win situation for both
customers and company can be defined as Customer Relationship Management (Baran, Galka and Strunk,
2008). Customer relationship management involves compiling and analyzing the vast amounts of data of
customers which will provide greater insight of the customers’ behavior. This will allow a company to treat
different customers with different actions accordingly which allow the company to act more efficiently and
effectively while retaining their customers. This technique is crucial in retaining customers, as without the
existence of knowledge in regards of customers, it is difficult to understand, anticipate and adapt with the
customer needs and wants.
3.4 Customer Satisfaction and Loyalty
It has been stated in the work of Timm (2011), that a basic sense of caring, concern and competence
plays an important role in building customer satisfaction. Customer that are satisfied with a service tend to be
loyal and involved with repeat purchases that lead to mouth-to-mouth promotion which will increase the
company profitability (Hill et al, 2007). Next, according to Timm (2011), customer satisfaction occurred
whenever the customers feel that the price that they pay for certain service is beneficial or worthy. One of the
best ways for company to provide satisfaction for customers is by working closely with the customers to ensure
the service meet their needs and wants (Lovelock, et al., 2005). This is necessary in order to ensure the service
to stay relevant and needed by the target customers and not result in defect customers. For example, tiger airway
which is a budget airline stays closely with their target market which is the price conscious customers by keep
offering value-for-money airline service.
Next, different customers perceived value from a service subjectively. Therefore, it is essential for company to
identify and assess the value perception of key people that are involved in purchasing process (Hollensen,
2003). For example, by using a multiple-person approach which often provide more reliable results rather than
single-person studies.
3.5 Service Recovery
Service recovery is an extra service that is used to compensate customers due to service failure,
converting a defect and existing customers into loyal customers (Cheng, 2000). The fact that services nowadays
are still often performed by human, the existence of service failure due to human-error is undeniable. This
indicates the importance of service recovery so that the customers that feel dissatisfied because of service failure
will feel better. By doing this, customers will feel compensated and delighted which may lead to better
promotion for the company. This view has been supported in the work of Cheng (2000). Without service
recovery, the unsatisfied customers tend to label the company as no-good which will end up as defect customers
and may lead to bad mouth-to-mouth promotion (Zemke and Bell, 2000). Last but not least, company that able
to set the service recovery at the right place will ensure that improvement of the image and the name of the
company that lead to an increase in profitability.
3.6 Management and Training of Employees
As it has been mentioned above, an excellent service that provides satisfaction is essential. However,
without the existence of employees that has the ability to perform such service, a great service is just a fantasy
(Byars and Rue, 2003). This indicates the importance of choosing the right people to do the job and train them,
so they will become company assets instead of liabilities (Slosson, 1999). By providing quality training, it will

influence the overall motivation and efforts of the employees toward work which will further increase the
quality of the service. Management in here refers to company ability to assign the skills that are necessary for
each of the employees that have different roles (i.e. the stewardess need to be enhancing with the
communication skills and empowered while the technician may be enhance with the evolving technology
knowledge). Next, there are two types of feedbacks which are the feedback with hope for the company to
improve and feedback that involve with dissatisfaction and irritated feeling. The problem lies in the second type
of feedback where customers tend to be thinking and acting emotionally. Hence, it is necessary for the
employees (frontline employee) to be able to manage this emotional customer in the right way. JetBlue airlines
offer a great example which one of the steward gone berserk and yell at the passengers as the passengers
accidentally hit the steward head when taking the luggage (Candiotti, Batchelor and Solomon, 2010). This event
occurs possibly due to lack of emotional training, which indicates the essential of training. Moreover, this view
is also supported by Jobber and Lancaster (2003), in their studies on learning organizational which revealed that
in order for company to survive in the competitive marketplace training is required.
In conclusion, the theories above are crucial in achieving the research objectives. The theories
explained about how to acquire and retained customers effectively and efficiently. In order to realize the
acquisition and retention, several requirements/knowledge are necessary like for example, understanding
customer needs, wants, demand, market offering, customer relationship management, understand how to provide
satisfaction and loyalty to customers, understanding the service recovery, training and management. Each of the
theories plays their own important roles that support the achievement of successful customer acquisition and
retention.
3.7 Hypotheses
The various hypothesis tested in the next chapter are shown in the figure 3.1.
IV. Methodology
4.1 Research Methodology
Generally, there are two types of data which are the primary and secondary data. The primary data is
the data that are specifically gathered for the project at hand (Zikmund, 2003). The primary data can be divided
in two categories which are the qualitative and quantitative data. Next, secondary data refer to the data that have
been gathered or used previously for project other than the one at hand (Sharma, 2009). In doing research
methodology, it is essential for the researcher to ensure that the result of this research to be valid and as accurate
as possible. Therefore, the author will provide techniques to acquire the data, choice in acquiring the data and
state several pros and limitations of the chosen research technique.

4.1.1 Primary Research Data
One of the best reasons to use primary data is that this data is closely relevant with the research’s
objectives. This is because the data is specifically searched solely for the objectives which mean the time;
problems and market-situation are fresh (relevant with the project at hand). However, it is also important to take
note that primary research also provides drawbacks which are more time-consuming and more costly. As it has
been mentioned above that there are two types of primary research which are qualitative and quantitative
research.
4.1.1.1 Qualitative Research
Qualitative research can be defined as a research that addresses the marketing objectives without
depending on numerical measurement (Zikmund and Babin, 2009). Qualitative research is very appropriate
when the research focus on a depth understanding of motivation. This is because qualitative research allows the
researcher to see the emotion and hear the language used by the respondents. According to Szwarc (2005), this
type of research usually shapes in a form of observational research, in-depth interview, camera journals and
behavior mapping.
4.1.1.2 Quantitative Research
Quantitative research is a research that depends on numerical measurement and generalizing it across
the group of people (Zikmund and Babin, 2009). It is necessary for the researcher to have big sample for this
type of research in order to reduce the chance of having errors. Quantitative research is most appropriate when
the objectives of the research involve a managerial action standard. Quantitative research is usually shapes in a
form of consumer panels, consumers’ surveys, syndicated surveys, omnibus surveys and tracking (Szwarc,
2005). For further comparison please refer to figure 4.1.
4.1.2 Secondary Research Data
Secondary research data is a research that uses an existing data that have been used or existed before
(Hubbard, 2010). Some of the sources for secondary data are the books, journal, company records and news
articles. The availability of the data and efficiency in terms of time are the major reasons for most authors use
the secondary data. Additionally, this approach is also less expensive compared to primary data research which
involves in interviewing or delivering surveys. Furthermore, through this technique the researcher can bring in
different perspective from different people and analyse it to further understand the data. However, the drawback
of using such data is that the data are often irrelevant to the objectives (i.e. outdated and not timely data) as the
data is not gathered specifically for the project at hand. Not to mentioned that, as it allows the researcher to
bring different perspective from different source/people it may also result in a conflict between data (Berman
and Evans, 2010).

4.2 Choice of Research Methodology
A primary quantitative research and secondary data are selected by the author because it is essential to
use both in order to wholly solve the problems (Kotler and Keller, 2012). The primary research is carried out by
delivering survey questionnaire physically and online to get respondents. The questions asked are closed-ended
questions; this is done in order to minimize the probability of having error response. Furthermore, a secondary
data research is also carried out; this research source is from journal, books and article to further support the
research. Lastly, once the data has been collected, the XLD Software will be used to analyze and interpret the
validity of the hypothesis tests.
4.3 Survey Design
The survey is designed in a simple way and structured manner to reduce the chances of ambiguity so
that the respondents can understand and answer the questions with ease.
There are total of 12 questions in the survey which divided into four sections. The first section is about the
demographic questions, which aim to identify whether these factors are affecting the choice of customers for
airline service. The next section objective is to identify what are the things that customers look and take it as
important in airline service. The third section aim to identify the source or media that customer uses in finding
airline service. The last section aim to identify; what are the factors that make customers to be attracted with the
service, the probability of doing repeat purchases and recommend the service to others. Please refer to appendix
1.
4.4 Pre-Test
Before the questionnaire was officially distributed, a pre-test on 3 respondents has been done. This is to
check whether there was ambiguity and problems with the questions. By doing this, it allows the researcher to
adjust the questions accordingly before a full scale distribution was done.
4.5 Sample Size
A sample size of 80 has been chosen, targeting respondents from 21 years old and above. The
questionnaires are targeted to friends, relatives, ex-colleagues and random respondents. Each of the respondents
has different backgrounds which provide different answers with more accuracy in the results.
4.6 Evaluation of the Survey Results
After all data has been collected from primary quantitative survey and secondary data (books, journal
and article), afterwards Microsoft Excel XL Data analysis will be used to gather and test the validity of the
hypotheses in the next chapter. Several tests such as cross tabulation, correlation and multiple regressions will
be carried out.
4.7 Bias and Limitation of Research Process
The first limitation for this research is the small number of sample size of 80 which raise the standard
deviation. This is due to limited time and cost which prevent the author to gain a bigger sample size for the
survey. Furthermore, as the author has no control on how the respondents interpret the questionnaire and
answer, it may lead to inaccurate result or misinterpretation. Last but not least, the distribution of the
questionnaire is not distributed equally in terms of demographic group which may create a biased result.
V. Finding and Analysis
In this chapter, the data that have been gathered will be tabulated and analyze with the use of Microsoft
Excel XL Data Analyst to achieve the objective research.
5.1 Demographics Percentage Analysis
These analyses display the response from demographic questionnaire. The total numbers of
respondents are 80. Please refer to Figure 5.1 for Age Group; Occupation to Figure 5.2; and Monthly income
level to Figure 5.3.

Figure 5.1 Demographics Percentage Analysis - Age
In terms of age, the figure above indicates that the questionnaire catch all the range of age with the majority of
21-30 years old group.
Figure 5.2 Demographics Percentage Analysis - Occupation
55%28%
16%
1%
What is your age group?
21-30 years old
31-40 years old
41-50 years old
51-60 years old
Category Frequency Percent
21-30 years old 44 55.0%
31-40 years old 22 27.5%
41-50 years old 13 16.3%
51-60 years old 1 1.3%
Total 80 100.0%
14%
32%
3%
50%
1%
What is your occupation?
Professionals
executives
sales/administrative
students
others

From the figure 5.2, it can be seen that the majority of the respondents belong to students (50%), Executives
(32.5%), Professionals (13.8%). While, Sales/Administrative and others are at 3% and 1% respectively.
Figure 5.3 Demographics Percentage Analysis – Monthly Income Level
From figure 5.3, it shows that the only category that has small respondent is “more-than $9000 category”, while
the others categories are spread thoroughly.
5.2 Cross Tabulation between does attractive price attract customers and what is your occupation.
Cross tabulation is a statistical measurement technique to analyze a relationship between two variables
(Proctor, 2005) .This test was conducted to identify whether there is a relationship or not between the age group
and the choice of media source in choosing airline.
What is your occupation?
Professionals 11 13.8%
executives 26 32.5%
sales/administrative 2 2.5%
students 40 50.0%
others 1 1.3%
Total 80 100.0%
46%
35%
18%
1%
What is your Monthly Income Level?
$1000-$2999
$3000-$4999
$5000-$6
more than $9000
what is your monthly income level?
$1000-$2999 37 46.3%
$3000-$4999 28 35.0%
$5000-$6 14 17.5%
more than $9000 1 1.3%
Total 80 100.0%

1st
Hypothesis Testing
H0: There is no significant association between attractive pricing and what is your occupation (if p>0.05).
H1: There is significant association between attractive pricing and what is your occupation (if p<0.05).
Decision: Accept H0
As it can be seen from the figure 5.4, the Sig figure is 0.16 which is higher than 0.05 which indicates
that no matter what job it is (professionals to students or others) majority chose agree and strongly agree that
attractive pricing are attention-grabbing. One of the best explanations for this is that every customer tends to be
very delighted and interested for a service whenever they receive extra benefit which can be in form of discount
and promotion. Hence, it is essential for airline companies to take note that promotion is one of the key factors
in grasping the customers at marketplace.
5.3 Cross Tabulation between the accessibility-or- place to gain service with the media or source to gain
and select service.
Figure 5.4
Crosstabulation Analysis (No table indicates an error in your data)
CROSSTABS VARIABLES ANALYZED
does an attractive price is important?
With... What is your occupation?
Observed Frequencies
Professionals executives sales/administrativestudents others Grand Total Statistical Values
neutral 3 6 0 2 0 11 Chi Sq df Sig
important 7 16 2 23 1 49 11.91 8 0.16
very important 1 4 0 15 0 20
Grand Total 11 26 2 40 1 80
There is NO significant association between these two variables.
(95% level of confidence)
Figure 5.5
does the accessibility or place to gain service is important?
With... what media or source did you often use in searching for airline?
internet newspapaer television relatives Grand Total Statistical Values
trivial 10 0 0 0 10 Chi Sq df Sig
neutral 25 2 0 2 29 63.58 9 0.00
important 4 13 1 15 33
very important 0 0 1 7 8
Grand Total 39 15 2 24 80
There IS a significant association between these two variables.
Column Percents
internet newspapaer television relatives Grand Total
trivial 26% 0% 0% 0% 13%
neutral 64% 13% 0% 8% 36%
important 10% 87% 50% 63% 41%
very important 0% 0% 50% 29% 10%
Grand Total 100% 100% 100% 100% 100%
Row Percents
internet newspapaer television relatives Grand Total
trivial 100% 0% 0% 0% 100%
neutral 86% 7% 0% 7% 100%
important 12% 39% 3% 45% 100%
very important 0% 0% 13% 88% 100%
Grand Total 49% 19% 3% 30% 100%

2nd
Hypothesis Testing
H0: There is no significant association between the accessibility or place to gain service with the media or
source to gain and select service (if p>0.05).
H1: There is significant association between the accessibility or place to gain service with the media or source to
gain and select service (if p<0.05).
Decision: Accept H1
As figure 5.5 has shown that the Sig number is at 0.00 which is lower than 0.05, this indicates that
there is a relationship between the accessibility or place to gain service with the media or source to gain and
select service. Discussing on internet, which most of the respondents choose trivial and neutral. It is most likely
because the customers itself are ordering their airline ticket through internet which allow them to get air-ticket
without going to travel agent or airline store. On the other hand, customers that often gain information and select
airline service from relatives, television and newspaper believes that the accessibility of a store is very important
as they need to go to the physical store itself to purchase the air-ticket.
5.4 Cross Tabulation between the age group with the importance in keeping customers informed about
the services through various media.
3rd
Hypothesis Testing
H0: There is no significant association between age group with the importance in keeping customers informed
about the services through various media (if p>0.05).
H1: There is significant association between age group with the importance in keeping customers informed
about the services through various media (if p<0.05).
Figure 5.6
With... does keeping customers informed through catalogues, monthly newsletter,advertisement etc are important?
trivial neutral important very importantGrand Total Statistical Values
21-30 years old 2 11 24 7 44 Chi Sq df Sig
31-40 years old 0 13 9 0 22 26.31 9 0.00
41-50 years old 2 8 3 0 13
51-60 years old 0 0 0 1 1
Grand Total 4 32 36 8 80
There IS a significant association between these two variables.
Column Percents
trivial neutral important very importantGrand Total
21-30 years old 50% 34% 67% 88% 55%
31-40 years old 0% 41% 25% 0% 28%
41-50 years old 50% 25% 8% 0% 16%
51-60 years old 0% 0% 0% 13% 1%
Grand Total 100% 100% 100% 100% 100%
RowPercents
trivial neutral important very importantGrand Total
21-30 years old 5% 25% 55% 16% 100%
31-40 years old 0% 59% 41% 0% 100%
41-50 years old 15% 62% 23% 0% 100%
51-60 years old 0% 0% 0% 100% 100%
Grand Total 5% 40% 45% 10% 100%

Decision: Accept H1
The author accepts H1 because the Sig level is at 0.00 which is lower than 0.05. This indicates that
there is significant relationship between these two variables. According to figure 5.6, keeping customers
informed through various media is essential for customers from 21-50 age groups. However, it can be seen that
as the group age goes up from 21-50, the importance of keeping customers informed through various media is
becoming less and less. This is because young customers tend to check e-mail, newsletter and advertisement
when they are looking for airline service. Whereas, the upper age group tend to rely more on their relatives to
gain information about service airline which make informing them from various media for service is inefficient
and ineffective.
5.5 Correlation Test Analysis on Compensation/Service Recovery and Quality of service personnel.
Correlation test analysis can be defined as a measurement that determines the relationships of two or
more variables (Burns and Bush, 2005).
4th
Hypothesis Testing
H0: There is no significant association between Compensation and Quality of service personnel (if p>0.05).
H1: There is significant association between Compensation and Quality of service personnel (if p<0.05).
Decision: Accept H1
The author chooses to accept H1 because the Sig figure is 0.00 which is lower than 0.05. This depict
that there is a relationship between compensation and quality of service personnel. One of the possible
explanations for this is that compensation often requires for the customers to directly involve with service
personnel. Hence, the quality of service personnel in delivering the service recovery depends on the quality of
the personnel. This indicates the important for airline companies to ensure that their workers need be equipped
with certain skills to ensure the quality of the compensation/service recovery.
5.6 Multiple Regression Analysis to identify the factors that affecting customers in choosing airlines
Multiple Regressions can be defined as a method to determine the relationship of a dependent variable
with independent variables (Churchill and Brown, 2007).
Figure 5.7
Correlation Analysis Results
Statistical Values
does compensation from airline
service for unexpected thing
(problems) is meaningful and
essential? Correlation Sample Size Significant?* Strength t df Sig
does a friendly, knowledgeable,
eager to serve, helpful,pro-
avtive and well-groomed
employees is important? 0.46 80 Yes Weak 4.6 78 0.00
*Yes=significantly different from
zero at 95% level of confidence.
Error means no variance or some
other data error.

The formula is for calculating satisfaction that lead to recommendation is
Y (satisfaction that lead to recommendation) = a + B1 (X1) + B2 (X2) + B3 (X3) + B4 (X4) + B5 (X5)
Y (satisfaction that lead to recommendation) = 0.85+(0.22)( X1)+(0.25)( X2)+(0.39)( X3)+(-0.23)( X4)+(0.15)(
X5)
Legend
Variables: X1 = Flight Schedules (Punctuality)
X2 = Quality of Service Personnel
X3 = Airlines Reputation
X4 = Airlines Strong Brand Image
X5 = Modern Level of Service
5th
Hypothesis Testing
H0: There is no significant association on Customer Satisfaction that lead to recommendation by any variables
(if p>0.05).
H1: There is significant association on Customer Satisfaction that lead to recommendation by one or more
variables (if p<0.05).
Decision: Accept H1
Based on Figure 5.7, all the variables shows that the Sig figure is lower than 0.05 which means there is a
significant association on Customer Satisfaction that lead to recommendation by one or more variables.
Furthermore, The Rsq (Adjusted R-Square) value is 0.62. This indicates that 62% change in Customer
Satisfaction that lead to recommendation is due to variables above in the Figure 5.7. Below each of the variables
will be discussed more in details.
X1: Flight Schedules (Punctuality)
X1 is the third factor that influence the customer satisfaction that lead to recommendation with a coefficient of
0.22. Based on the test result, the punctuality of the flight schedules has a positive coefficient which means it
affects the chance of satisfied customer to recommend the airline service. By offering a punctual airline service,
customers will have a pleasant trip which will lead to customer satisfaction and recommendation. Punctual
airline service is critical for all customers, as having sudden changes in flight schedules often affects the
customers which may create problems for them that lead to dissatisfaction and bad mouth-to-mouth promotion.
X2: Quality of Service Personnel
According to the result, the quality of service personnel is essential in affecting the chance of satisfied customer
to recommend the airline service. The quality of service for a service company is a vital point, which indicates
the need for excellent and quality personnel to do high level of service is critical. By using an excellent quality
of personnel, even a normal level of service can become a great service which will lead to more customer
satisfaction; allow them to patronize for the service and recommend the service to others, hence increase the
profitability of the company.
X3: Airlines Reputation
Figure 5.8
Trimmed Regression Analysis Results (Backward Stepwise) Statistical values
Dependent Variable Total Cases 80 F dfReg dfTot Sig Rsq SErrY
if the attributes from the previous
question from behaviour 1,2,3,4 are
fullfilled and results in satisfaction
will you recommend this airline? 23.8 5 74 0.00 0.62 0.35
Independent Variable(s) Coefficient Standardized Significant?* t Sig
does having a flight schedule right
on time important? 0.22 0.23 Yes 2.8 0.01
does a friendly, knowledgeable,
eager to serve, helpful,pro-avtive and
well-groomed employees is
important? 0.25 0.26 Yes 2.7 0.01
is the reputation of the company or
airlines are important? 0.39 0.44 Yes 4.9 0.00
does strong brand image and
internationnal well known brands
important? -0.23 -0.29 Yes -4.0 0.00
are modern & trendy service that
meet perosnal preferencen and need
important? 0.15 0.17 Yes 2.2 0.03
Intercept 0.85 No 1.7 0.08
*95% level of confidence

Based on the test result, the reputation of airlines has the biggest influence on the customer’s satisfaction that
lead to recommendation with a staggering 44%. Reputation is an intangible asset that only can be built through
delivering excellent service with stability for a long period of time. This means that customers tend to choose an
airline service based on reputation as it offers better possibility of having satisfaction compared to unknown
airlines which are dangerous or may lead to dissatisfaction. And of course, the tendency for customers to
recommend is high when customers are satisfied with the service which indicates building a great reputation for
Airline Company is another vital point.
X4: Airline Strong Brand Image
According to the test result, airline strong brand image has a negative coefficient. This may refer to the
possibility that strong brand image is not a strong determinant factor for customers in resulting customers
satisfaction and recommendation. Furthermore, this may be due to different perceived value for different
customers (i.e. customers value for money will value good-pricing with normal quality of service compared to
expensive-pricing with excellent quality of service). Hence, it is necessary to do a further research for this
relationship in order to study further in regards to the impact of strong brand image.
X5: Modern Level of Service
Modern service also has an impact to customers’ satisfaction that lead to recommendation with coefficient of
0.15. The modern service here may refer to the fact service need to cope up with the changes that happen in the
market place. Like for example, as the technology advance so quickly, it is necessary for airline companies to
apply the latest technology to provide better service for customers that lead to satisfaction and recommendation.
In this case, improving the check-in process and providing entertainment or facilities like games, movies and in-
flight calling will attract different customers with different needs. Overall, it is necessary and important for
airline companies to cope up with the changes in the marketplace to be able to provide satisfaction to customers.
VI. Conclusion and Recommendations
6.1 Conclusions
This research has allowed the author to understand the customers’ mindset and preference when they
are considering airlines. There are several important factors that have been identified which need to be
highlighted in grasping and retaining the customers.
Firstly, in regards to the analysis on the attractive pricing affect customers differently according to their
occupation. There is no relationship within these two variables which means every customers love attractive
price despite having different occupations. Hence, it is essential for airline companies to ensure that they have
the best pricing strategies to grasp the customers.
Moving on to the next finding which proves there is a relationship between the accessibility/place to
gain service with the media or source that are used in searching airlines. This highlight the needs for airline
companies to provide great accessibilities for customers both physically (store) and Online media service. This
is necessary and essential as different type of media that customers use have different impact on the needs of
accessibilities/place to gain service.
In addition, it is also essential for airline companies to know that informing customers about airline
service need to be differentiated. Informing younger customers through various media may be effective and
efficient as they are aware of it, while for older customers; relying mouth-to-mouth promotion is more efficient
and effective, as they are rarely using media like newsletter, email and other media.
Furthermore, according to correlation analysis, the essence of the quality of service personnel affects
the service recovery/compensation result. This highlights the needs for airline companies to train their workers
so that they will be able to deliver the service recovery that can lead to better satisfaction and recommendations.
Moreover, in regards to factors that affecting customer’s satisfaction that leads to recommendation, attributes
like punctuality, quality of service personnel, reputation, strong brand image and modern service plays an
important role in achieving customer’s satisfaction and recommendation. This indicates the need for companies
to be able to provide great service with consistency to provide punctuality and establish reputation for long term;
able to cope-up with the changes/development in the marketplace in order to create a strong brand image and
ensure that the service that they offer are realized by enhancing the quality of service personnel that perform and
support the service.
In Conclusion, it is essential to focus on all the aspects above in order to be able to acquire and retained
customers which lead to recommendations thus, increasing the overall profitability for the companies for the
present and in the long term.

References
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Appendix 1
Questionnaire
Dear respondent, firstly I would like to thank you for taking your time to fill the questionnaire. This
questionnaire is to study and comprehend more in regards to customers’ acquisition and retention in airline
service industry. All the information will be kept confidential and used for strictly academic purposes only.
Please mark () in the appropriate box for your answer, unless otherwise stated.
A. Demographics
1. What is your Age Group?
21 - 30 years old
31 - 40 years old
41 – 50 years old
51 – 60 years old
2. What is your Occupation?
Professionals
Executives

Sales / Administrative
Technical
Retiree
Students
Others ___________
3. What is your monthly income level?
$1,000 - $2,999
$3,000 - $4,999
$5,000 - $6,999
$7,000 – $8,999
More than $9,000
B. Customer Expectation
1. Firstly, rank the airline services brand in terms of preference with a scale of 1= Least Preferred to
5=Most Preferred.
Brands 1 2 3 4 5
Singapore Airlines
Lufthansa
Jet Star
Tiger Airways
Others__________
2. How often do you patronize with the most preferred airline service above?
At least once in the past 6 months
At least once in the past 3 months
At least once in the past 1 month
Frequently
3. Next, rank the factors below that are important in selecting airline service from a scale of 1 to 5.
1 2 3 4 5
Category Rating
V
Trivial
Trivial Neutral
Importan
t
V
Importan
t
Products – Excellent quality and service
Products – modern & trendy services that
meets my personal preference and needs
Brand image – convey strong upmarket image
and are internationally well known brands
Price – attractively priced
Packaging – attractive , elegant and designed
very comforting
Reputation of company - well-known,
established
Place – stores are conveniently located / great
accessibility
Promotion – keeping customers informed
through catalogues, monthly newsletter and
advertisements,
Customer service – various modes of
payments, attentive to specific requests, less
waiting time.

Employees – friendly, knowledgeable, eager to
serve, helpful, proactive & well-groomed
Service Experience – warm, relaxing,
satisfying each time I use the service
Loyalty programme – attractive rewards
programme for loyal customers.
Punctuality – provide on time flight schedule
4. What media or source did you often use in searching for airline service?
Internet
Newspaper
Television
Friends, Family, Relatives Etc.
Others ___________________
Please circle the appropriate answers for question number five to nine.
5. Does using prestigious and well-known airline made you feel more safe and comfortable?
1 2 3 4 5
Strongly Disagree Strongly Agree
6. Next, do an attractive pricing of airline service attract you?
1 2 3 4 5
Strongly Disagree Strongly Agree
7. Will you come back for the same airline service because of great experience and excellent quality of
service?
1 2 3 4 5
Very Unlikely Very Likely
8. Subsequently, does compensation from airline service when unanticipated thing (i.e. Delay flight
Schedule, Error check-in etc.) happen is meaningful and essential to you?
1 2 3 4 5
No Meaning Very meaningful
9. Lastly, if the attributes from question number 5, 6, 7 and 8 are fulfilled and results in satisfaction will
you recommend this particular airline service to the others?
1 2 3 4 5
Very Unlikely Very Likely
Herewith, I would like to thank you and appreciate for your cooperation. Your feedback is
important to the completion and success of this study.

C0941533

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