II. AVIATION SECTOR
III. DIFFERENTIATION OF LOW CLASS AND FULL SERVICE AIRLINES
IV. BRIEF OVERVIEW OVER THE COMPANY RYANAIR
V. CUSTOMER SATISFACTION
VI. RY N IR’S CURRENT CUSTOMER CARE SITUATION
A. VALUATION OF CUSTOMERS
B. CONTACT POINTS TO THE CUSTOMER
G. RES PONS IBILITY
J. QUALITY OF CUS TOMER S ERVIC E
2. Complaint handling
4. Overall customer service quality
L. CONTINUAL IMPROVEMENT
M. INTERNAL CUSTOMERS
VIII. ANNEX 1 - PASSENGER CHARTER
IX. ANNEX 2 - FIGURES
X. ANNEX 3 - COMPARISON EMIRATES - RYANAIR
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The purpose of this paper is to show how a low cost airline can implement a customer care system into its organizational structure to increase its customer satisfaction. The current paper observes the customer service of the chosen company, which operates in the aviation business sector. As an example I have chosen Ryanair as a low cost airline. In this paper I will at first address the chosen sector and give a brief overview over its specifications. For this I will also differentiate the low cost airlines from the full service airlines to point out the primary strategic thoughts on how to achieve customer satisfaction. Secondly I will briefly describe the low class airline of choice. In this part I will concentrate on a short overview over the airline s organizational structure and financial standing to later determine whether and if where to impo rt a customer care system or new parts of the system, which are currently missing. Thirdly I will make a step by step analyses of the company’s current customer care system in regards to its impact on the customer satisfaction. For this I will concentrate on the customer care principle s as bespoken in the lectures as well as the customer satisfaction model. I will at last make a conclusion, what the low class airline can do to improve its customer care and how certain elements can be implemented in the company’s organizational structure. Furthermore, current literature can be found online which observes customer satisfaction in the airline industry.
II. Aviation sector
Companies in the aviation sector all face the same challenges. Since the aviation sector is one of the most customer service orientated sectors it is important to have an at least good customer care system. Since the deregulation and liberalization of the airline sector, airline companies face an ongoing competition with margin rates, barely exceeding 3%.1 Another factor for the low margins is the complex set-up of the worship chain, containing the airlines, airports, travel agencies, airplane manufacturers, as well as the ground services, e.g. baggage, security, aircraft handling and fueling. The market is divided in full-service airlines and low-cost airlines, of which the latter make up 25%.2 Because of the current situation airline companies must focus on growth, as their profits come almost entirely from revenue. Also the airlines must increase productivity to stay competitive and increase margins. This can be done by effectively training the personnel on the one hand and by optimizing the technology on the other hand. For example, airline could use tech-enabled engines that notify the pilot and the ground services of malfunctions and needed maintenance-routine while the aircraft is still in the air. By doing this the airlines can reduce the aircrafts “downtime”, and therefore decrease costs and increase customer satisfaction at the same time by assuring punctuality of arrivals and departures. If operational excellence cannot be achieved to gain market share, in other words if airlines cannot compete, they should try to partner strategically. One way is to join forces in terms of route sharing or to become member of an alliance. Another way is to partner more narrowly, e.g. with ground services to reduce costs and gain synergistic effects. The third recommendation for the aviation sector would be to further analyze the customer.3 This can be achieved by offering loyalty programs, which at the same time collect data from the customer on the return rate, the amount of money spent and the continuity of flights. Also airline companies can invest in analytic systems. By this the airlines can offer targeted offerings to the customer and gain revenue to increase the market share. The following part will give an overview over the differentiation of the aviation sector.
III. Differentiation of low class and full service airlines
This segment makes a first alignment of the two types of business models, airline companies have chosen from, by comparison between low class airlines and full service airlines in regards to the implementation of a customer care system. It is therefore necessary to make a differentiation between the two business models. Especially because of the partly very high customer expectations to the provided services and the overall dense competition4 in the aviation sector, airlines are expected to deliver only the best-in-class service to the customer in every regard. The below table shows a brief overview over the main differences of the two business models: according to Holloway, 2008; O’Connell/Williams, 2005 Full service airlines today have implemented this view into their core business model. They concentrate primarily on the quality of the service. Service quality can be described as the consumer’s judgement about the overall superiority of a service or product.5 They can, as a result, offer best in class service with no exception for a certain fare. The fair is usually higher than the fare of its low class competitors and seeks to attract middle and high class customers. Today, while most airlines are customer focused, a few stay product centric.6 The trend towards a new customer centric approach is widely understood as a critical to compete in the aviatio n sector and influences almost all elements including organizational structure, business processes, talent and technologies.7 Nevertheless many airlines focus on the business model of simply providing service at a very low fare. By doing this, low class airlines can usually undercut their full service competitors and attract low and middle class customers, for example all-inclus i ve and domestic travelers. These airlines focus primarily on the price of the service, then on the overall quality. The price is defined as what customers actually pay in exchange for the benefits for a product or service.8 Although both business models follow a different approach to attracting customers, it would be fatal to assume that either can disregard the primary factors of the other model. In his study on customer satisfaction in the airline industry, Suhartanto shows that both the service quality on the one hand, as well as the price for services on the other hand are closely linked with the customer satisfaction in both low cost airlines and full service airlines.9 This means that either business model needs to pay further attention to the service and the price of the quality and that it cannot simply ignore one factor.
IV. Brief overview over the company Ryanair
The following description of the company is taken from the annual report 2016. Ryanair Holdings was incorporated in 1996 as a holding company for Ryanair Limited. The latter operates an ultra-low fare, scheduled-passenger airline serving short-haul, point-to-point routes mainly in Europe. In the early 1990s Ryanair Limited began to introduce a low-fares operating model in Europe under a new management team. As of June 2016, Ryanair had a principal fleet of over 350 Boeing 737-800 aircraft and offered over 2,000 scheduled short-haul flights per day serving approximately 200 airports largely throughout Europe.
The company recorded a profit on ordinary activities after taxation of EUR 1,559.1 million in the 2016 fiscal year, as compared to a profit on ordinary activities after taxation of EUR 866.7 million in the 2015 fiscal year. This increase of approximately 80% was primarily attributab le to an increase in revenues. The low cost airline today has an average booked passenger fare of EUR 46.67 per passenger in the 2016 fiscal year. The company’s current organizatio na l structure is the following: http://www.theofficialboard.de/organigramm/ryanair
V. Customer satisfaction
Customer satisfaction is the overall opinion of a customer on a company.10 The rather broad specter of factors that influence customer satisfaction, especially in the airline sector, are being described in the following. The most important goal for airlines to stay competitive is, as shown above, increasing customer satisfaction. This can be achieved by increasing service quality and product quality, or by decreasing prices, e.g. flight fares, baggage, etc. Product quality in the below graphic can be altered as perceived quality. By this not only the actual - objective - product quality is influencing the customer satisfaction level, but the subjective quality, the customers perceives. The same accounts for service quality. As each factor on his own can influence customer satisfaction, the effect increases by optimizing two or more factors.
Situational factors and personal factors, as external influences, cannot be changed to a certain level. The following model gives a brief overview over the customer care system:
Abbildung in dieser Leseprobe nicht enthalten
Most important for the airline industry is, as mentioned above, the service quality and the flight rates. One could assume that also the product quality matters, since for example the interior of the airplanes or the airplanes itself are tangible goods. However, these factors must be rated as service quality brought to the passenger in terms of comfort or the overall impression and account as the “hard product”11. The service quality as the “soft product”12, according to the below shown model, can be measured by setting the expected service in relation the perceived service. While for the perceived service the above described applies, the expected service relies on past experience with either the particular servant or others in the same sector, personal needs of the customer and word of mouth, e.g. recommendations of relatives and friends, but also travel agencies, advertisement, etc. If the perceived service equals the expected service, the expectations are met. Logically, if it exceeds the perceived service, the expectations are exceeded. The perceived service then can be measured according to the “RATER”13 model, as shown in the further analysis. In case of Ryanair, since the airline has a very bad reputation, it can be assumed that the perceived service will most likely exceed the expected service. This will finally lead to an increase of customer satisfaction. Although this might be the case, it does not give detail about the customer care system as a company-wide system, that links to more than just the service part of the company, but also to the price paid for the service.
The price, as the second factor for customer satisfaction, is in the aviation sector mostly the flight rates. But also the costs for baggage, on-flight meals or additional services have to be taken into account. Ryanair currently offers the overall lowest mere flight rates. This at least accounts to the European market. By achieving this, the company is ahead of its competitors and has an advantage in terms of customer satisfaction. While for most full service airlines the higher prices are justified by the broad service specter and therefore in many cases offer a better price/service ratio, for many domestic or low cost travelers the service provided by full-service airlines may not be of interest. The price/service ratio cannot be taken into account then.
Abbildung in dieser Leseprobe nicht enthalten
VI. Ryanair’s current customer care situation
It is safe to say that Ryanair today has integrated a customer care system. However, given the ratings of each airlines customer service14, the quality of Ryanair’s customer service cannot compete with those of the company’s many competitors. In the following section the current situation of Ryanair’s customer care system will be shown for every core principle of customer care according to the model be spoken in class.
A. Valuation of customers
First Ryanair needs to determine what it’s most valuable customers are. Each company in any business sector has several ways of determining the valuation of different customers. The following factors, though different in weight, apply:
- The amount of money spent by its customers for the provided services; The frequency of travelling;
- The profit made by from one or more bookings of each customer;
- The amount of money spent before and after the flight per customer;
- The quickness of payment for the provided services of each customer;
- Whether the customer will recommend the services of the company and therefore brings additional customers in the future; as well as
- All other non-financial services brought to the customer.
The targeted customers of Ryanair are lower and middleclass singles and families who travel domestic or abroad. Also lower and middleclass business travelers are targeted by the lower fares. The upper middle and the entire upper class is left unattended. These customers cannot be targeted by lower fares, but by higher service and they generally chose full service airline s instead of low class airlines. To win these customers the airline needs to improve service radically and offer programs for business travelers, such as first class seats or bonus programs, e.g. frequent flyer programs. Current detailed statistics of returning passengers to Ryanair or the amount spent per flight are not published. The company also does not offer a bonus program to build and maintain the loyalty15 of its customers. This could be an effective tool to keep customers by having them return to the company and, as mentioned above identify the customer’s needs. Once Ryanair has internally evaluated all statistics, the company can try to build its customer care system around the most valuable customers. In this paper it can be assumed that the company’s most valuable customers are the already targeted group of all- inclusive and domestic travelers.
B. Contact points to the customer
Once the company has determined its most valuable customers it can determine the contact points to the customer in order to identify areas to improve the service. All companies active in the aviation sector share a very close link to the customer, due to the service they provide. The customers important for the profitability of the airlines are mostly private consumers. Several contact points can be located in many areas, such as online and offline booking, ticketing,
1 See Clayton/Hills, 2015 Aviation trends, available at: http://www.strategyand.pwc.com/perspectives/2015-aviation-trends (last visitied on 13.10.2016).
4 See IATA, IATA Economics, available at: http://www.iata.org/publications/economics/Pages/index.aspx (last visited on 05.10.2016); Focus Online, Verluste und erbitterte KonkurrenzBrutaler Wettbewerb: Der Preiskampf ruiniert die Luftfahrtbranche, available at: http://www.focus.de/finanzen/boerse/aktien/verluste-und-erbitterte- konkurrenz-brutaler-wettbewerb-der-preiskampf-ruiniert-die-luftfahrtbranche_id_4568974.html (last visited on 05.10.2016); PwC, Airlines müssen näher an die Kunden, available at: http://www.pwc.de/de/transport-und-logistik/airlines-muessen-naeher-an-die-kunden.html (last visited on 05.10.2016).
5 Zeithaml/Bitner/Gremler, Services marketing: Integratingcustomer focus across the firm
6 PwC, op cit.
8 Lovelock/Wirtz, Services marketing - people, technology, strategy.
9 Suhartanto/Noor, Customer satisfaction in the Airline Industry: The Role of Service Quality and Price, 2012.
10 Levesque/McDougall, “Determinants of customer satisfaction in retail banking”, International Journal of Bank Marketing Situational factors and personal factors, as external influences, cannot be changed to a certain
11 Clayton/Hills, op cit.
13 Parasuraman/Zeithaml/Berry, SERVQUAL: A Multiple-Item Scale for Measuring Consumer Perception of Service Quality, in: Journal of Retailing, Vol. 64, Nr. 1, 1988, S. 12 - 40. The price, as the second factor for customer satisfaction, is in the aviation sector mostly the
14 Stiftung Warentest, Billigflieger: Zehn Airlines im Test, available at: https://www.test.de/Billigflieger-Zehn-Airlines-im-Test-1758245-0/ (last visited on 09.10.2016).
15 see Miller, “Rewards for the Best Customers: Loyalty Programs Increase as Marketers try to Build Relationships”
- Quote paper
- Rouven Wohlbrück (Author), 2016, Customer Care Systems of Low Cost Airlines. An Analysis of Ryanair, Munich, GRIN Verlag, https://www.grin.com/document/352182