FACTORS INFLUENCING CUSTOMER LOYALTY:

IMPLICATIONS FOR STRATEGIC CUSTOMER

RELATIONSHIP MANAGEMENT AT KENYA AIRWAYS

BY

GRANT OCHIENG’ ONYANGO

UNITED STATES INTERNATIONAL UNIVERSITY

AFRICA

SUMMER 2014

FACTORS INFLUENCING CUSTOMER LOYALTY:

IMPLICATIONS FOR STRATEGIC CUSTOMER

RELATIONSHIP MANAGEMENT AT KENYA AIRWAYS

BY

GRANT OCHIENG’ONYANGO

A Project Report Submitted to the Chandaria School of

Business in Partial Fulfilment of the Requirement for the

Degree of Masters in Business Administration (MBA)

UNITED STATES INTERNATIONAL UNIVERSITY

AFRICA

SUMMER 2014

ii

STUDENT’S DECLARATION

I, the undersigned, declare that this is my original work and has not been submitted to any

other college, institution or university other than the United States International

University in Nairobi for academic credit.

Signed: ____________________________ _____ Date: ________________________

Grant Ochieng‟ Onyango (ID No. 615980)

This project has been presented for examination with my approval as the appointed

supervisor.

Signed: ______________________________ Date: ________________________

Dr. Peter N. Kiriri

Signed: ____________________________________ Date: __________________

Dean, Chandaria School of Business

iii

COPYRIGHT

Grant Ochieng‟ Onyango. Copyright © 2014.

iv

ABSTRACT

The general objective of the study was to establish the factors influencing customer

loyalty to Kenya Airways‟ international flights from Kenya by adopting a strategic

customer relationship management view point. The specific objectives were; to

investigate the influence of technical quality on customer loyalty to KQ‟s international

flights from Kenya; to determine the influence of functional quality on customer loyalty

to KQ‟s international flights from Kenya, and; to establish the influence of internal

customer satisfaction on customer loyalty to KQ‟s international flights from Kenya.

The study adopted descriptive research design. The population of interest was the

management and non-management staff of KQ based in Nairobi and corporate customers

of KQ who have used the company‟s international flights from Kenya, both totalling to

460. Stratified sampling technique was used to select the internal customers (employees)

and corporate customers of KQ‟s international flights from Kenya. The sample size was

60 respondents. Data was collected using structured questionnaires. Descriptive statistical

technique of analysis used entailed the determination of the mean and frequency

distribution of the datasets. Inferences were drawn using Spearman‟s Rank Correlation

Coefficient technique. The use of the SPSS was made for this purpose. The data was

presented in tables and figures.

In terms of the influence of technical service quality, customer loyalty to KQ services was

directly influenced by reliability of the airline‟s service; convenience of the schedule

offered by the airline, timeliness of the flight departure, flexibility of the schedule,

security and safety of the airline and cabin comfort.

Regarding the influence of functional quality, respondents were generally satisfied with

reservation services, potentially positively influencing customer loyalty. However,

respondents were neither satisfied nor dissatisfied with check-in services. On the other

hand, respondents were dissatisfied with boarding services, which potentially affected

customer loyalty negatively.

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Concerning internal customer satisfaction, majority of the respondents disagreed: that

there was synergy in the way services were offered internally. They also disagreed that all

staff had undergone mandatory customer loyalty training program; that staff at KQ were

adequately compensated for their contribution to the company; that compensation of

employees at KQ was performance-based or that the company had work-life balance

programs that ensured that staff maintain a happy and healthy personal life while being

successful at work.

The study concluded that all the technical quality dimensions significantly influence

customer loyalty to KQ‟s international flights from Kenya. By order of importance,

reliability of the airline topped the list, followed by timeliness, security, convenience, cost

of air fare, comfort and flexibility. In terms of functional quality, with the exception of

reservation services, all the other dimensions of functional quality potentially negatively

influenced customer loyalty. Low levels of internal customer satisfaction potentially

affected the quality of services offered to external customers thereby negatively

impacting on customer loyalty. Internal service quality was characterized by lack of

motivation, lack of synergy and cooperation between staff and departments, lack of CRM

training, low staff commitment, inadequate compensation of staff, limited upward

mobility opportunities for staff and an absence of work-life balance programs.

The study recommended that KQ should strategically focus on the improving all the

technical quality dimensions of service as they primarily determine the preference of

corporate customers to an airline for international destinations. It should also launch an

investigation into the reasons why it is registering a low satisfaction rating as far as its

functional quality dimensions are concerned. Further, it should invest in improving the

quality of services it offers to its internal customers as this has a direct bearing on the

satisfaction of external customers and therefore, their loyalty. Other case studies should

be undertaken for comparison purposes.

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ACKNOWLEDGEMENT

I would like to thank God Almighty for seeing me through this journey, and making it

possible for me to reach the finish line. It‟s been a great pleasure.

I wish to also acknowledge and thank my Supervisor Dr. Peter N. Kiriri, for his guidance,

wisdom and patience during this project.

I would also like to thank my loving wife and my children, for their support,

understanding and encouragement during my pursuit of this MBA degree.

I would also like to thank my Mom for leading the way in the pursuit of higher education

and for encouraging me to pursue a graduate degree.

Lastly, I wish to acknowledge and thank all those who contributed to this project both

directly and indirectly through filling of questionnaires and providing insights, knowledge

and information where gaps existed.

God Bless You All Abundantly.

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DEDICATION

Dedicated to my wife and children.

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TABLE OF CONTENTS

STUDENT’S DECLARATION ....................................................................................... ii

COPYRIGHT ................................................................................................................... iii

ABSTRACT ...................................................................................................................... iv

ACKNOWLEDGEMENT ............................................................................................... vi

DEDICATION................................................................................................................. vii

TABLE OF CONTENTS .............................................................................................. viii

LIST OF TABLES .............................................................................................................x

LIST OF FIGURES ......................................................................................................... xi

LIST OF ACRONYMS AND ABBREVIATIONS ...................................................... xii

CHAPTER ONE ................................................................................................................1

1.0 INTRODUCTION..................................................................................................1

1.1 Background to the Study ..........................................................................................1

1.2 Problem Statement ...................................................................................................5

1.3 General Objective ....................................................................................................6

1.4 Specific Objectives ..................................................................................................7

1.5 Significance of the Study .........................................................................................7

1.6 Scope of the Study ...................................................................................................8

1.7 Definition of Terms..................................................................................................8

1.8 Chapter Summary ..................................................................................................10

CHAPTER TWO .............................................................................................................11

2.0 LITERATURE REVIEW ...................................................................................11

2.1 Introduction ............................................................................................................11

2.2 The Influence of Technical Quality on Customer Loyalty ....................................11

2.3 The Influence of Functional Quality on Customer Loyalty ...................................20

2.4 The Influence of Internal Customer Satisfaction on Customer Loyalty ................25

2.5 Chapter Summary ..................................................................................................30

CHAPTER THREE .........................................................................................................31

3.0 RESEARCH METHODOLOGY .......................................................................31

3.1 Introduction ............................................................................................................31

3.2 Research Design.....................................................................................................31

3.3 Population and Sampling Design ...........................................................................31

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3.4 Data Collection Methods .......................................................................................33

3.5 Research Procedures ..............................................................................................34

3.6 Data Analysis Methods ..........................................................................................35

3.7 Chapter Summary ..................................................................................................35

CHAPTER FOUR ............................................................................................................36

4.0 RESULTS AND FINDINGS ...............................................................................36

4.1 Introduction ............................................................................................................36

4.2 Demographic Information ......................................................................................36

4.3 The Influence of Technical Quality on Customer Loyalty ....................................42

4.4 The Influence of Functional Quality on Customer Loyalty to KQ ........................47

4.5 The Influence of Internal Customer Satisfaction on Customer Loyalty ................53

4.6 Chapter Summary ..................................................................................................57

CHAPTER FIVE .............................................................................................................58

5.0 DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS ................58

5.1 Introduction ............................................................................................................58

5.2 Summary ................................................................................................................58

5.3 Discussions ............................................................................................................59

5.4 Conclusions ............................................................................................................66

5.5 Recommendations ..................................................................................................67

REFERENCES .................................................................................................................69

APPENDICES ..................................................................................................................75

APPENDIX I: COVER LETTER ......................................................................................75

APPENDIX II: QUESTIONNAIRE TO KQ CUSTOMERS ............................................76

APPENDIX III: QUESTIONNAIRE TO STAFF .............................................................81

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LIST OF TABLES

Table 3.1 Population Distribution ......................................................................................32

Table 3.2 Sample Size Distribution ...................................................................................33

Table 4.1 Distribution of Customer Respondents by Gender ............................................ 36

Table 4.2 Distribution of Customer Respondents by Age ................................................. 37

Table 4.3 Frequency of Patronage of KQ for International Destinations .......................... 37

Table 4.4 Time of Last Flight with KQ for International Travel ....................................... 38

Table 4.5 Travel Pattern ..................................................................................................... 38

Table 4.6 Class of Travel ................................................................................................... 38

Table 4.7 Number of Trips made by Customer in the last 12 Months............................... 39

Table 4.8 Usage of Other Airlines ..................................................................................... 39

Table 4.9 Distribution of Employee Respondents by Gender ........................................... 41

Table 4.10 Distribution of Employee Respondents by Age .............................................. 41

Table 4.11 Distribution of Employee Respondents by Department .................................. 41

Table 4.12 Distribution of Employee Respondents by Tenure .......................................... 42

Table 4.13 Customer Level of Satisfaction with services of KQ ...................................... 42

Table 4.14 Correlation between Technical Quality and Customer Loyalty ...................... 43

Table 4.15 Mean and Frequency Distribution of Importance of Service Dimensions ...... 45

Table 4.16 Main Reason for Travel with Preferred Airline ............................................... 46

Table 4.17 Satisfaction Rating of Physical Qualities......................................................... 47

Table 4.18 Where Reservation was Made ......................................................................... 47

Table 4.19 Customer Level of Satisfaction with Reservation services of KQ .................. 49

Table 4.20 How Customers Checked in for Flight ............................................................ 49

Table 4.21 Satisfaction Rating with Check-In ................................................................... 51

Table 4.22 Satisfaction Rating with Boarding ................................................................... 53

Table 4.23 Staff satisfaction with KQ services .................................................................. 54

Table 4.24 Staff satisfaction with Services Internal Service Dimensions ......................... 56

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LIST OF FIGURES

Figure 2.1 The Importance – Satisfaction Model ..............................................................13

Figure 2.2 Emerging Trends in Customer Service .............................................................13

Figure 4.1 Other Airlines Used by Order of Mostly Mentioned ........................................ 40

Figure 4.2 Distribution of Employee Respondents by Gender .......................................... 40

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LIST OF ACRONYMS AND ABBREVIATIONS

ALS Aircraft Leasing Services

CRM Customer Relationship Management

FSC Full Service Carrier

IMC Integrated Marketing Communication

I-S Importance - Satisfaction

IT Information Technology

KQ Kenya Airways Ltd.

LCC Low Cost Carrier

RATER Reliability, Accessibility, Timeliness, Empathy, Responsiveness

SCRM Strategic Customer Relationship Management

SERVQUAL Service Quality Model

SPSS Statistical Package for the Social Sciences

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CHAPTER ONE

1.0 INTRODUCTION

1.1 Background to the Study

The concept of customer relationship management (CRM), defined as an information

technology-enhanced value process, which aligns business processes with customer

strategies to build loyalty and increase profits over time (Fjermestad and Romano, 2006),

has attracted an explosion of interest from both the industry practitioners and the

academia alike (Payne and Frow, 2005). According to Pride and Ferell (2011), CRM is

about building satisfying exchange relationships between buyers and sellers by gathering

useful data at all customer contact points, be they telephone, fax, internet or personal; and

analyzing that data to better understand customers‟ needs, desires and habits.

CRM is IT-enhanced because it focuses on building and using databases and leveraging

technologies to identify strategies and methods that will maximize the lifetime value of

each desirable customer to the company (Fjermestad and Romano, 2006; Pride and

Ferrell, 2011). Chaturvedi (2009) contends that CRM strategies and the technologies that

enable them make it possible to figure out what customers want and the most profitable

ways to give it to them, a value creation process that is seen as important in an age when

acquiring new customers is about five to ten times the cost of retaining current ones.

The interest in CRM stems from the allied concept of customer service which, according

to Voudouris (2008), is increasingly becoming the key differentiator in the twenty-first

century global economy and more so for service industries since they centre their

operations around it. The author observes that today‟s business faces global competition,

low barriers to entry, high levels of innovation and growing user expectations, compelling

businesses to engender loyalty in their customer base if they are to survive the inevitable

disruptions this dynamic and competitive environment brings.

CRM essentially focuses on using information about customers to create marketing

strategies that develop and sustain desirable long-term customer relationships (Pride and

Ferell, 2011). Payne and Frow (2005) highlighted that a critical aspect of this involves

identifying all strategic processes that takes place between an enterprise and its

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customers. This acknowledgement has inspired scholarly arguments that emphasize the

fusion of CRM with strategic management philosophy, defined as a systematic approach

for managing strategic change which consists of positioning the firm through strategy and

capability planning, real time strategic response through issue management and

systematic management of resistance during implementation (Analoui and Karami, 2003).

The fusion of CRM with strategic management has since been coined as Strategic

Customer Relationship Management (SCRM). Kumar and Reinartz (2012) defined

Strategic CRM as the practice of analyzing and using marketing databases and leveraging

communication technologies to determine corporate practices and methods that maximize

the lifetime value of each customer to the firm. Strategic CRM is considered by

proponents as a superior approach to customer management that emphasizes the

consideration of business strategy first in order to determine how the customer strategy

should be developed and how it should evolve over time (Payne and Frow, 2005). The

authors explain that customer strategy involves examining the existing and potential

customer base and identifying which forms of segmentation are most appropriate.

Chaturvedi (2009) holds the view that a real CRM strategy takes the direction and

financial goals of the business strategy and sets out how the enterprise is going to build

customer loyalty with an enterprise that means that customers stay longer, buy more,

recommend the enterprise to others and are more willing to pay a premium price. The

concept of customer value – the economic value of customer relationship to the firm,

expressed as a contribution margin or net profit – is thus critical to CRM (Kumar and

Reinartz, 2012). This denotes the idea of customer lifetime value (CLV) which is a key

measurement that forecasts a customer‟s lifetime economic contribution based on

continued relationship marketing efforts, calculated, for instance, by taking the sum of the

customer‟s present value contributions to profit margins over a specific time frame (Pride

and Ferell, 2011).

Kumar and Reinartz (2012) observed that at one time, marketing campaigns aimed

mainly to increase customer loyalty to a product or service. This was informed by the

assumption that more loyal customers would engage in more repeat business, develop a

large tolerance to price increases, and therefore be more profitable to the firm. However,

the authors argue that this prediction does not always hold. They opine that a very loyal

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customer may repeatedly call customer service with questions and constantly hunt for the

best price on a product, taking advantage of every rebate and sales offer. Ultimately, this

customer actually costs the company money, rather than providing a source of profits.

Kumar and Reinartz (2012) emphasize that an important part of CRM is identifying the

different types of customers and then developing specific strategies for interacting with

each one. Examples of such strategies include developing better relationships with

profitable customers, locating and enticing new customers who will be profitable and

finding appropriate strategies for unprofitable customers, which could mean terminating

those relationships that cause a company to lose money.

According to Pride and Ferell (2011), the airline industry is a key player in CRM whereas

in some sense, an argument can be made that the airline industry exemplifies the best as

well as the worst of CRM practices. Wilson (2005) considers the airline industry as being

responsible for the transportation of people, goods and posts around the globe, an industry

that is characterized by extreme competition and safety-sensitivity; thus, could benefit

from SCRM. As barriers to entry and exit were high and competitors relatively weak,

until the late 1970s, the level of airline competition was relatively low or non-existent

(Wittmer, Bieger and Mueller, 2011). However, the airline industry has witnessed

tremendous growth in the recent past and continues to grow at an unprecedented pace

(Mukerjee, 2007), becoming highly competitive (Kernchen, 2007); with air-travel

demand underpinned by factors such as high fluctuations, consumer heterogeneity, and

uncertainty about the traveller‟s departure date or even the ultimate destination of the

journey (Cento, 2009). On the other side, Cento (2009) notes that airline supply is limited

by aircraft capacity and has a very perishable nature, that is, the unsold seats cannot be

reused after the flight has departed; making the process of pricing and allocation of

aircraft seats one of the most complex challenge facing the industry.

With the emergence of stiff competition, the various industry players constantly strive to

build up and to maintain a competitive advantage (Wittmer et al. 2011). The cut-throat

competition among the plethora of airlines has resulted in them investing in CRM

initiatives to gain competitive advantage over rivals (Mukerjee, 2007). Wilson (2005)

argues that, as does any service industry, the airline industry faces the challenge of

finding the right strategic balance between providing an efficient service on the one hand

and satisfying individual customer needs on the other.

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The emerging forms of business models in the airline industry are presented in terms of

how the carrier generates revenue, its product offering, value-added services, revenue

sources and target customers (Cento, 2009). A full-service carrier is defined as an airline

company developed from the former state-owned flag carrier, through the market

deregulation process into an airline company with the core business being passenger,

cargo and maintenance service. Every full service carrier has a loyalty program to retain

the most frequent flyers. The general purpose of CRM is to enable carriers to better

manage their customers through the introduction of reliable processes and procedures for

interacting with those customers. The final aim of the CRM is to enhance the passenger‟s

buying and travelling experience in order to personalize the carriers‟ services. In this

perspective, the CRM is an extra tool to differentiate the airline product (Cento, 2009).

Wittmer et al. (2011) observed that airlines that pursue a quality leadership strategy

generally follow a multi-channel distribution strategy to reach various customer

segments. In this context, indirect offline sales play an important role. Hub- and – spoke

networks allow for a more efficient marketing and CRM due to distribution advantages

through agents and an increased attractiveness of the airline‟s frequent flyer programs.

A second business model identified in literature is the low cost carrier (LCC) model,

defined as an airline company designed to have a competitive advantage in terms of costs

over a FSC (Cento, 2009). In order to achieve this advantage, an LCC relies on a

simplified business model as compared to FSC, a model characterized by: passenger air-

service despite the ancillary offers are increasing and becoming part of the LCC core

business. Cento (2009) observes that the LCC sector continues to grow strongly, and as it

does so the business model is refined and adapted. According to Wittmer et al. (2011),

airlines that pursue a cost leadership strategy strive to outperform rivals by producing

their services at a high labour and capital productivity. In this context, standardization is

often considered the main attribute for the success of this strategy – such airlines are

called “low-cost” or “no-frills” carriers. By cutting off most frills, these carriers usually

do not offer free meals, in-flight entertainment and lounges. A single class, high density

seating configuration is employed. Service attributes that are directly connected to the

core of the actual transport service such as punctuality, reliability and offered frequencies,

however, are kept at a high level to attract passengers. For cost-saving reasons, low-cost

5

airlines do not maintain a sophisticated CRM which are linked to frequent flier programs

(Wittmer et al., 2011).

According to Sterling Investment Bank (2009), Kenya‟s airline industry is regulated by

the Kenya Civil Aviation Authority. Their study of the industry showed that the domestic

civil and cargo air transport market is composed of several players that include; 748 Air

Services, African Express Airways, AirKenya Express, ALS - Aircraft Leasing Services,

Astral Aviation, Blue Bird Aviation (Kenya), CMC Aviation, Delta Connection (Kenya),

East African Safari Air, Fly540, JetLink Express, Kenya Airways and Safarilink

Aviation. Competition is increasingly becoming visible in the airline industry. Included in

the competition basket also are international airlines like Qatar Airways, Emirates,

Ethiopian Airlines, British Airways, Etihad, Korean, Rwanda Air and South African

Airways among others.

This research was based on the case of Kenya Airways (KQ) which is Kenya‟s national

flag carrier. The principal activities of the company are international, regional and

domestic carriage of passengers and cargo by air, the provision of ground handling

services and maintenance to other airlines and the handling of import and export cargo. It

operates domestic flights and flies to 53 destinations in Africa, the Middle East, Asia and

Europe. As at 31st March 2011, the group had 31 aircraft, either owned or on operating

leases. These comprised four Boeing 777 wide body jets, six Boeing 767 wide body jets,

fifteen Boeing 737 narrow body jets, and six Embraer regional jets (Kenya Airways,

2011). KQ‟s business model revolves around increasing its number of flight destinations

especially within Africa, higher frequencies to some destinations, taking shorter routes

where possible, implementing tactical cut-backs on some routes, increasing cargo volume

uptake and procuring and using new modern Boeing 787 Dreamliners which have longer

range, more cargo space, greater comfort and lower fuel use. E – Ticketing, a convenient

tool not only to market the airline but also to cut on time and money cost of going through

agents for flight bookings has also been adopted by the company (Sterling Investment

Bank, 2009).

1.2 Problem Statement

Recent statistics suggest that Kenya Airways‟ market dominance and profitability has not

only been declining over the past few years, it has been performing poorly in its market

6

share in terms of international flights from Kenya compared to foreign airlines. Growing

competition in Kenya‟s airline industry has increasingly put pressure on Kenya Airways

market share and passenger yields (Kenya Airways, 2009), factors which require the

company to implement appropriate strategies to enhance growth and profitability. For

instance, KQ group results for the financial year 2008/09 showed that the number of

passengers declined by 2.5% in the East African region and the domestic market share

declined by 1.6% (KQ, 2009). The airline experienced a decline of 1.5% in turnover and

both its capacity and passenger uplift declined by 2% and 3% respectively in the year

2010 (KQ, 2010). The company acknowledges that the main drivers of improved

performance are passenger numbers, better yields and more stringent cost management

(KQ, 2011). This suggests the need to adopt SCRM to optimize revenue, profitability and

customer loyalty.

Kumar and Reinartz (2012) recommended that most companies need to revisit their

business model, not only to reflect on the impact of loyalty programs on their bottom-line,

but also to determine how customer service initiatives add value and ensure future

revenue streams. Given the observation that the airline sector has a reputation of not

being very profitable (Wittmer et al., 2011), this signifies the need for research to

establish the CRM factors underpinning customer loyalty to KQ‟s international flights

from Kenya. However, although the concept of CRM has received much popularity in

theory and practice, there is very little evidence of its adoption from a strategic

perspective. Past studies done on Kenya airways have focused on the effects of market

positioning strategies on KQ performance (Mokaya, Kanyagia and Wagoki, 2013) and the

influence of information and communication technology on the company‟s performance

(Irungu, 2012). Both studies did not explore the reasons for the declining loyalty of

customers to KQ international flights from Kenya. A knowledge gap therefore exists on

factors influencing customer loyalty to the company which affects KQ‟s bottom-line from

a Strategic CRM perspective.

1.3 General Objective

The general objective of the study was to establish the factors influencing customer

loyalty to Kenya Airways‟ international flights from Kenya by adopting a strategic

customer relationship management view point.

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1.4 Specific Objectives

Specifically, the study sought:

1.4.1 To investigate the influence of technical quality on customer loyalty to KQ‟s

international flights from Kenya

1.4.2 To determine the influence of functional quality on customer loyalty to KQ‟s

international flights from Kenya

1.4.3 To establish the influence of internal customer satisfaction on customer loyalty to

KQ‟s international flights from Kenya.

1.5 Significance of the Study

This study would be of relevance to the following potential beneficiaries:

1.5.1 Kenya Airways

The study would help identify the service quality gap and type of image that it holds in

the minds of customers which are associated with the decline in its market share of

international flights from Kenya. This would enable it to appreciate and perhaps approach

customer relationship management from a strategic perspective.

1.5.2 Airline Companies in Kenya

Airline companies that operate in Kenya, be they local or international would find the

study useful in highlighting the dynamics underpinning customer loyalty and preference

to flights leaving Kenya to other international destinations. This would help them in

revising their market strategies to gain competitive advantage in the Kenyan market.

1.5.3 The Regional Airline Industry

The airline industry in general and players in the African region would benefit from this

study because it exposes the factors influencing customer behaviour that are unique to the

African market. This is useful in informing the differentiation and segmentation strategies

adopted by the industry players.

8

1.5.4 The Academia

Members of the academic community wishing to further explore the application of the

concept of Strategic Customer Relationship Management (SCRM) in the airline industry

would find this study useful as a reference point. The study would thus stimulate debate

within the intelligentsia with the hope of development of conceptual frameworks which

industry practitioners would adopt to guide their investment in SCRM for sustainable

competitive advantage.

1.6 Scope of the Study

This study was based on the perspectives of both internal and external customers of KQ

based in Nairobi. The study relied on insights drawn from its employees and corporate

customer segment only. The research was conducted on the month of July 2013. The

main limitation for research was time and this was mitigated by ensuring all staff

questionnaire responses were received by the end of July 2013.

1.7 Definition of Terms

1.7.1 Customer Relationship Management

This refers to an information technology-enhanced value process, which aligns business

processes with customer strategies to build loyalty and increase profits over time

(Fjermestad and Romano, 2006).

1.7.2 Strategic Customer Relationship Management

This is the practice of analyzing and using marketing databases and leveraging

communication technologies to determine corporate practices and methods that maximize

the lifetime value of each customer to the firm (Kumar and Reinartz, 2012).

1.7.3 Customer Loyalty

Customer loyalty refers to a strong emotional attachment to the firm that is manifest in

the customer behaviours like patronizing company‟s services, recommending it, buying

additional products/services, and so forth (Crosby, 2002).

9

1.7.4 Technical Quality

Technical quality is “the outcome of the service experience and is considered the „core‟ of

service quality. It includes: promptness, accurateness and the extent to which the

customer is offered several alternatives and individualized solutions” (Kandampully,

2011, p. 193).

1.7.5 Functional Quality

Functional quality “represents how the service is delivered and pertains to the

interpersonal and relational part of the service process” (Kandampully, 2011, p. 193).

1.7.6 Internal Customer

The term internal customer refers to a co-worker within the same organization, either

working in the same building, in different building or residing in another state or country

(Burton, 2007).

1.7.7 Customer Satisfaction

This is the judgment by a customer that a product or service feature, or the product or

service itself provides a pleasurable level of consumption-related fulfilment, including

levels of under – or over-fulfilment (Hill, Roch and Allen, 2007).

1.7.8 Perceived Quality

Perceived quality is the consumer‟s judgment about a product‟s overall excellence or

superiority (Chen and Tseng, 2010).

1.7.9 Perceived Service Quality

Perceived service quality is based on consumers‟ subjective evaluations on a combination

of products, services, and experiences (Chen and Tseng, 2010).

10

1.7.10 Customer Lifetime Value

Customer lifetime value is a key measurement that forecasts a customer‟s lifetime

economic contribution based on continued relationship marketing efforts, calculated by

taking the sum of the customer‟s present value contributions to profit margins over a

specific time frame (Pride and Ferell, 2011).

1.8 Chapter Summary

This chapter has provided the background of the study which comprised of a discourse on

CRM, SCRM and their role in customer loyalty and business performance. The

background also entailed a review of the emerging trends and developments in the airline

industry. It has also briefly highlighted the airline industry in Kenya before presenting the

background of Kenya Airways. Subsequently, the problem has been stated, along with the

general and specific objectives of the study. The chapter has also discussed the scope and

significance of the study. A definition of terms as used within the context of the study has

been listed.

The next chapter reviews theoretical and empirical literature pertaining to the topic of

study. This will be followed by a chapter on the Research Methodology used in this study

capturing the data collection methods, research procedures and data analysis methods,

after which the results and findings will be shared. The final chapter will then wrap up the

research through discussions, conclusions and recommendations for further research.

11

CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

The main purpose of the study is to establish the factors influencing customer loyalty to

Kenya Airways‟ international flights from Kenya by adopting a strategic customer

relationship management view point. This chapter reviews the various theories, concepts

and studies that exist concerning SCRM and customer loyalty as they relate to the airline

industry. The review is divided into three sections based on the specific objectives. These

are: the influence of core service quality on customer loyalty, the influence of customer

relationship quality on customer loyalty and the influence of internal customer

satisfaction on customer loyalty.

2.2 The Influence of Technical Quality on Customer Loyalty

In the service sector, technical quality is “the outcome of the service experience and is

considered the „core‟ of service quality. It includes: promptness, accurateness and the

extent to which the customer is offered several alternatives and individualized solutions”

(Kandampully, 2011, p. 193). Within the existing CRM discourse, several theories and

models have been used to explain the factors that influence customer loyalty in the

service industry that are relevant to the airline sector. However, two theoretical models

appear to have taken primary importance. These are: the SERVQUAL model and the

Importance-Satisfaction Model. The SERVQUAL model, better known by the acronym

RATER (Schmithausen, 2012) was developed by Parasuraman, Zeithaml and Berry

(1985) and has been adopted by various service providers and researchers as an

instrument for empirical research (Gannage, 2009). It is a technique used for performing a

gap analysis of an organization‟s service quality performance against customer service

quality needs using a scale.

2.2.1 Service Quality Model (SERVQUAL)

In the SERVQUAL scale, Gannage (2009) identified five determinants. These are:

“tangibles”, “reliability”, “responsiveness”, “assurance” and “empathy” as the main items

for measuring service quality. The usefulness of SERVQUAL is that it offers managers a

systematic approach to measuring and managing service quality by emphasizing the

12

importance of understanding customer expectations, and developing internal procedures

that align company processes to customer expectations (Buttle, 2012). However, its major

criticism are that the dimensions of SERVQUAL are unstable, such that when necessary,

it can be adapted or supplemented to fit the characteristics or specific research needs of a

particular company (Green, 2007). Groonroos (2007) somewhat expanded the

SERVQUAL model, classifying the service quality experienced by customers within two

primary dimensions namely: technical quality and functional quality. Schmithausen,

2012, p. 4) identified seven important criteria emphasized by Groonroos (2007) for

service quality. They are: “professionalism and skills, attitudes and behaviour,

accessibility and flexibility, reliability and trustworthiness, service recovery, servicescape

and reputation and credibility”. According to Voudouris (2008), the basics of good

customer service, availability, accessibility and responsiveness, remain at the core of

service delivery. Within the airline industry, the variables in both the SERVQUAL and

RATER models of relevance include: reliability, accessibility, timeliness, flexibility,

security and perceived value.

2.2.2 The Importance- Satisfaction Model (I-S)

According to Chen and Huang (2012), the critical success factors for any business consist

of a limited number of areas in which results, if satisfactory, will ensure the

organization‟s successful competitive performance. The authors argue that being aware of

these factors are of great importance, since it help managers to focus on the most relevant

factors. This draws attention to the Importance-Satisfaction (I-S) model developed by

Yang, Yang and Pai (2009). The I-S model builds from the SERVQUAL model which, as

some authors have pointed out, somewhat neglects the tangible and relational facets of

quality in the service sector and cite the need to obtain a comprehensive and adaptable

structure of quality for different types of services (Herna´ndez, Tur, Peiro´ and Ramos,

2009). In this model, the degree of importance is on the horizontal axis and the level of

satisfaction on the vertical axis. In this two-dimensional mode, the means (or medians) of

the degree of importance and the level of satisfaction are then taken as the central point to

show a vertical line and a horizontal line respectively. The coordinates can then be

divided into four areas as shown in figure 2.1.

In the figure illustration Yang et al. (2009) expounded that the attributes located in the

“Excellent” area are the quality attributes that customers consider important, and the

13

performance of which is also satisfactory. Companies should endeavour to maintain good

performance with respect to these items. Attributes listed in the “To be improved” area

are those considered as important to customers, but in which performances have not

reached customers‟ expectations. Companies should focus on these elements with a view

to making improvements immediately. The “Surplus area” represents attributes which are

not very important to customers, but the customer perceptions rates performance as being

quite satisfactory. Companies can put these quality attributes aside, with less concern. If a

company needs to cut costs, these are the areas in which cuts can be made without any

negative effect on quality performance. Lastly, in the “Care-free area”, customers have

lower satisfaction levels with the quality attributes in this area, but they also feel that

those items are less important. The company therefore does not need to worry about these

items because they have less influence on the quality-evaluation processes.

Figure 2.1 The Importance – Satisfaction Model

Source: Yang, et al. (2009)

Yang, et al. (2009) argues that the I–S model can help firms concentrate their efforts to

improve on the quality attributes that are located in the „to-be-improved‟ area. Although

the I–S model of quality attributes is essentially a simple structure, it can provide much

useful information about a company‟s quality performance. Suppose there are two

attributes A and B, with A being located in the „excellent‟ area, and B being listed in the

„to-be improved‟ area. Customers usually pay more attention to attributes of higher

importance. Because attribute A is more important than attribute B, customers have a

need for a higher satisfaction level with respect to attribute A. However, the satisfaction

High

Mean or Median

Low

III. Surplus I. Excellent

IV. Care free II. To be improved

Low Mean or Median High IMPORTANCE DEGREE

SATISFACTION DEGREE

14

level for A is only a little higher than the satisfaction level for B. It therefore follows that

attribute A is in more urgent need of improvement than attribute B, despite A being

located in the „excellent‟ area and B being located in the „to-be-improved‟ area. Thus, an

analysis of the degree of importance of an attribute versus its satisfaction level can unveil

more valuable information than that provided by a simple model of satisfaction.

According to Andotra (2006), a firm can achieve distinct market advantages by renewing

its emphasis on customer value-creation strategies by delivering superior quality products

and services, improving market intelligence generation, designing customized product

and price. Quality is a major concern in most organization, particularly in light of intense

foreign competition, more demanding customers, and poorer profit performance owing to

reduced market share and higher costs (Pride and Ferell, 2011). Good service quality

means that the customers‟ perceptions of service performance meet or exceed their

expectations of what the service firm should provide (Parikh, 2006). According to Chen

and Tseng (2010), perceived service quality is based on consumers‟ subjective

evaluations on a combination of products, services, and experiences. Perceived quality

has been widely agreed to be a vital element affecting consumer behavior. Wittmer et al.

(2011) argue that airlines that differentiate themselves on the basis of the service level are

able to partially reduce the need to compete on costs and prices. For business passengers,

who are willing to pay more for certain amenities than leisure travellers, a superior

service level is of particular importance.

Pride and Ferell (2011, p.47) noted that “continuous improvement of an organization‟s

goods and services is built around the notion that quality is free; in contrast, not having

high-quality goods and services can be very expensive, especially in terms of dissatisfied

customers”. Regarding customer relationship management, airlines that focus on a quality

leadership strategy must have a clear understanding of their customers‟ needs and of the

investment and capabilities necessary to meet those (Wittmer et al., 2011). This study

drew from both the SERVQUAL model proposed by Parasuraman et al. (1985) and

expanded by (Gronroos, 2007) and consolidated relevant dimensions of service variables

that influence customer loyalty into technical quality and functional quality as discussed

by (Schmithausen, 2012).

15

In regards to the airline industry, the sub-dimensions of technical quality are discussed

under: airline reliability, convenience, timeliness, flexibility, security, comfort and

perceived value.

2.2.3 Airline Reliability

Reliability is defined as the performance of service dependably and accurately (Zailani,

Din and Wahid, 2006). The challenge for management, given the importance of reliability

in defining service quality, is to close any gap that exists between expectations and

ultimate delivery of service to customers (Stevens and Loudon, 2005). Reliability affects

service credibility which in turn affects the long-term orientation of a customer (Erdem et

al., 2002). Reliability reduces uncertainty in an environment in which consumers feel

vulnerable, since they know that they can rely on the trusted brand (Chaudhuri and

Holbrook, 2001). Literature suggests that reliability, along with the other attributes of

service quality, is gauged differently by different consumer markets. According to Gothan

and Erasmus (2008) consumers in developed countries apparently interpret service

reliability in terms of its consistency, dependability and accuracy, while those in

developing countries rely more on salespeople, have lower quality expectations and are

more tolerant of ineffective services.

Empirical studies suggest that service reliability is integral to an airline‟s success (De

Kluyver, 2010). In a study conducted by Dillingham (2010), it was established that five

out of seven representatives of an airline company in the USA who responded to

interviews noted that the reliability of services was a significant concern, especially

regarding delays, cancellations and route and schedule changes which were

commonplace. This study established that reliability of air services may be even more

important at small airports than larger airports because a cancelled or delayed flight

leaves passengers with no other options.

2.2.4 Airline Convenience

Curtis (2012) observes that customers are nowadays smarter and better informed.

Through internet a customer can find within 10 minutes the cheapest flight between two

destinations. He is thus not very loyal to an airline and does not need a travel agency to

book his flight. In response, Sellers (2007) noted that airline websites have undergone a

revolution and they now represent the crown jewel of an airline‟s reservation system

16

because of low distribution costs and easy accessibility. According to Mukerjee (2007),

the noteworthy aspects of CRM practices undertaken by the airline industry include:

Multichannel customer access- to facilitate customers in gaining easy and convenient

access and the airline offers customers websites, call centres, travel agents, emails among

others. The author also observes that a lot of processes have been automated leading to

lesser time taken to service customers. The initiatives in this regard include: remote

check-in through the internet website or through the customer‟s mobile phone and self

check-in at the airport through automated machines.

Various airlines have set up strategic partnerships with other vendors for facilitating

customer service such as, partnering with petrol pumps to enable customers to book

tickets using their access points (Mukerjee, 2007). In addition, call centres have been set

up to assist customers for booking of tickets and other transactions like rescheduling of

flights and giving information to customers. In the case of business travellers, a study by

Doganis (2001) suggested that the choice of airline is influenced above all by the

convenience of an airline‟s schedules and timings. This is also reflected in an empirical

review by Bansal et al. (2009) whose study showed that customers usually prefer airlines

which are connected to the major cities and also expect the other recreational activities

like in-flight entertainment. Similarly, Mukerjee (2007) observes that airlines have also

tied up with other service providers to offer enhanced value to customers such as hotel to

offer passengers a stay.

2.2.5 Timeliness

According to Voudouris (2008), the immediacy and expectation of much reduced waiting

times, impacts the backend operations and service chains supporting the customer

experience. In the consumer markets, there are many examples of the advent of real time

service. The airline industry is one that has seen significant disruption, with online ticket-

less booking, self-selection of seats and check-in on-line, among others. These have

reduced costs, impacted fares and reduced overall cycle times by removing traffic from

travel agents and call centres, as well as slimming down the airport operations. These

allows customers to experience savings on time, queuing and airline reduced costs. In

competitive marketplace, providing real-time control and immediate resolution of issues

is a key market differentiator through the dramatic reductions in response times

experienced by customers and the cost reductions experienced by business. A study

17

reported by Bansal, Phatak and Jain (2009) showed that effective timing was showing the

highest total variance indicating that this variable was one of the highest contributors in

forming an airline preference. This, as evidenced by the airline industry, can reshape

markets and customer expectations (Voudouris, 2008).

2.2.6 Flexibility

Flexibility is defined simply as the ability to respond to changes in customer orders

(Wisner, Tan and Leong, 2008). Cento (2009) argues that because of the possibility of no-

shows (a passenger who books a seat but does not show up at the departure time) and go-

shows (a passenger who has a valid ticket without a reservation but just shows up at the

departure time), most airlines accept reservations in excess of capacity. This may result in

flights being overbooked and the possibility of refusing seats to ticketed passengers

(denied boarding). When demand exceeds capacity, customers are serviced by other

airlines. The problem is to determine the pricing and the overbooking policy that

maximizes the expected revenue. In the absence of a proper overbooking policy, the

unpredicted no-shows mean that the flights depart with empty seats.

Companies that excel in customer intimacy (segmenting and targeting markets precisely

and tailoring offerings to exactly match the demands of those niches) combine detailed

customer knowledge with operational flexibility so they can respond quickly to almost

any need, from customizing product to fulfilling special requests, consequently

engendering tremendous customer loyalty (De Kluyver, 2010). Cento (2009) observes

that the demand for business travel is concentrated on flights at the start and end of

working days of the week. Business travellers book later than leisure travellers and need

to change travel arrangements at short notice. Some of the segmentation key variables

are: the purpose of travel (business or leisure); the purchase timing (early bookings or

last-minute bookings), and purchase location (country of purchase, internet, travel agent.

2.2.7 Security

The concern for airline security and safety has been linked to demand for airline services.

McEachern (2010) noted that during the days following the attack of the world trade

centre in New York, video of the second plan crashing into the twin towers was shown

again and again, freezing this image in people‟s minds and heightening public concerns

about airline safety. The author notes that these worries, coupled with the airport delays

18

from added security as passengers are to arrive a couple of hours before flights, reduced

the demand of air travel once plans were allowed to fly again. The author for instance

reported that two weeks after the attacks, the airlines were operating only 75 percent of

their flights, and these flights were only 30% full instead of the usual 75 percent full. This

is also reflected in the study by Doganis (2001) which established that safety and

reputation for punctuality are also important to business travellers. Bansal et al. (2009)

established that customers are concerned about safety and securities if they are paying

high prices to the airlines.

2.2.8 Comfort

Mukerjee (2007) also notes that airlines are offering personalization to ensure better CRM

such as enabling customers to make a choice with regard to their preferred in-flight food.

The entertainment system in airlines also offers a wide choice of music and visual

entertainment choices to suit the exact preferences of individual customers. These include

the privilege of choosing the time at which the particular customer would prefer to be

served the meal. Customers requiring special care such as challenged customers needing

wheelchairs or mothers with infants are offered required assistance. Air hostesses have

been known to provide special pillows to mothers travelling with infants. Likewise,

customers can ask for blankets in case the inside temperature becomes too chilly. A range

of newspapers and magazines are available for in-flight reading (Mukerjee, 2007).

2.2.9 Perceived Value

Perceived value is the ratio of perceived benefit to perceived costs (Evans, 2002).

Osarenkhoe (2007) is of the view that is defined in the marketplace. Perceived value

suggests that customers are looking for the right level of quality in relation to the price

they have to pay (Crosby, 2002). McDougall and Levesque (2000) suggests that

customers may be “satisfied” with “what” is delivered (the core service) and “how” it is

delivered (the relational) but may not feel that they are getting their “money‟s worth.” In

a research report by Bansal et al., (2009), it was revealed that the last factor affecting

airline preference was old airlines and reasonable price whose contribution was 1.736. In

terms of refunds and low price, however, respondents gave second highest weight to the

factor as they are more concerned about utility of the money they are paying for the

airlines. This reflects the need for a balance between what the customer considers

importance and what satisfies customers.

19

Some airlines have responded to the question of value by introducing low-cost carriers,

thereby affecting the competitiveness of traditional airlines. Kernchen (2007, p. 11) noted

that during the recent years traditional airlines did not find an efficient answer to counter

the danger of low-cost airlines. The author argues that traditional airlines are dealing with

constant crisis management. They look at the bottom line, downsizing employees as

necessary, cutting every route they can and continuously respond to the board of

directors, rather than to their customers, which suggests that CRM is lacking in these

airlines. However, relationship-building efforts like frequent-flyer programs have been

shown to increase customer value (Pride and Ferell, 2011).Frequent-flyer programs track

individual information about customers, using databases that can help airlines understand

what different customers ant and treat customers differently depending on their flying

habits (Pride and Ferell, 2011).

A study conducted by Chen and Tseng (2010) explored customer-based airline brand

equity based on evidence from Taiwan. Their study established that perceived quality and

brand image, represents a customer‟s evaluations of the purchase experience and the

association related to the brand with the airline‟s tangible and intangible attributes based

upon quality perception. A good service quality perceived by customers leads to a good

image held in their memory related to an airline. Furthermore, the positive influences of

effective perceptions and attitudes toward an airline result in positive outcomes, whether

attitudinal or behavioral. Positive outcomes can form customer loyalty and reflect on their

willingness to repurchase or recommend this airline to others.

Kumar and Reinartz (2012) identified five main factors that drive customers‟ choice of

providers in the airline industry as market coverage, price, schedule, frequent flier

programs, and product attributes. They noted that for many years, the common belief in

the airline industry was that loyal customers were more profitable, so by rewarding

customers based on the miles they flew, the airline could increase their loyalty. But there

were some serious short comings in this approach. By rewarding all passengers equally,

the airline failed to maximize the value for its most profitable customers. Seat class and

fare types were ignored in the reward system. When it realized this flaw, the airline

industry moved away from basing rewards on miles flown. Passengers willing to pay to

upgrade to business or first class thus earn more miles and get rewarded sooner and more

20

often. In contrast, customers who hunt for bargains and purchase deeply discounted

tickets far in advance or at the last minute earn far fewer miles than those who pay the full

fare. This practice makes sense conceptually: bargain-hunting customers tend to be more

loyal to finding a bargain than to a reward card program or a specific airline. By

increasing the rewards granted to passengers who are willing to pay more per seat than

the average passenger, the airlines maximize the benefits for their most profitable

customers while minimizing rewards for bargain hunters.

2.3 The Influence of Functional Quality on Customer Loyalty

The term “functional quality” is defined by Kandampully (2011) as a classification of

service quality dimension that represents how the service is delivered and pertains to the

interpersonal and relational part of the service process. Curtis (2012) argues that service

quality in relationship marketing terms is as much managing the quality of the

relationships as the management of the quality of service. This includes dimensions such

as communication, responsiveness, empathy and intimate knowledge of the customer.

2.3.1 Communication

When defining the communication strategy, the company identifies and defines to whom

the campaign is directed, what the campaign message is and which are the best contact

channels or media to deliver (Kumar and Reinartz, 2012). The campaign strategy will be

more effective if planned in an integrated manner. Integrated marketing communications

is a process that involves the management and organization of the marketing

communication tools (media, message, promotions and channels) in a way that delivers a

clear and consistent message about the company and about the product. The CRM

database system allows the effective use of integrated marketing communications (IMC)

because it stores information about customer and prospect preferences and allows the firm

to focus marketing activities toward specific targets. For example, a lot of routine queries

are answered through Interactive Voice Response Systems which help to cultivate more

fruitful customer relationships owing to enhanced value through co-creation of value

through customers (Mukerjee, 2007). For instance, delays in flights are quickly

communicated to customers to ensure that they are not inconvenienced (Mukerjee, 2007).

21

2.3.2 Responsiveness

According to Holweg (2005), responsiveness denotes the speed with which firms react to

information from the customers and more generally from the overall market. The internal

responsiveness capability of the supplier has a direct impact on the responsiveness of the

customers. Kim and Lee (2002) posit that responsiveness also describes how often a

service provider firm voluntarily provides services like customer inquiries, information

retrieval and navigation speed that are important to its customers. Increased information

and knowledge sharing enables firms to respond quickly to shifts in customer demands

and reduce cycle time by removing some of the obstacles to responsiveness (Rosenzweig,

Roth and Dean, 2003). Empirical literature suggests that collaborative buyer-supplier

relationships may not only be a means to access external resources, but also may

represent strategic resources themselves. Firm-subscriber collaboration will lead to

greater responsiveness because firms work together to provide better and more timely

information; reduce work cycles; and synchronize lead times and capacities to work in a

more coordinated manner (Gadde, Huemer, and Hakansson, 2003).

Meehan and Dawson (2002) noted that managers regard responsiveness as the ability to

concomitantly meet customer needs and be rapid and proactive. They further argue that

customer responsiveness refers to; accurately and insightfully giving customers what they

need, want or knowing when they do not yet know they want. And it is about consistently

doing so more quickly than anyone else and rapidly enough to retain the value of the

decision or idea for the customer. Business actions need to be addressed to the

establishment of a long-lasting and stable relationship with the customers throughout the

whole product life cycle by providing a value-added portfolio of connected services

(Legnani Cavalieri and Ierace, 2008).

2.3.3 Empathy

Empathy is defined by scholars and practitioners in the service sector as the ability to

identify what someone else is thinking or feeling and to respond to that person‟s thoughts

and feelings with an appropriate emotion (Costa, Glinia and Drakou, 2004; Simon, 2011).

In the service industry, empathy refers to employees‟ willingness to provide

individualized attention to customers (Kouthouris, 2005). Empirical studies reviewed by

Costa et al. (2004) suggest that empathy has a motivational influence on human

interactions, which adds quality to the service encounter. According to Chaturvedi (2009,

22

p. 35), “customer experiences when interacting with the enterprise plays a key role in

shaping their perception of the enterprise – the value it provides and the importance it

places on the customer relationship. Good customer experience driver satisfaction, trust

and long-term loyalty. Poor customer experiences have the opposite effect and, because

bad news travels faster than good news, they harm the enterprise‟s ability to create new

relationships with prospects”.

2.3.4 Intimate Knowledge of the Customer

It is imperative that marketers educate themselves about their customers‟ expectations if

they are to satisfy their needs as customer dissatisfaction will only lead to defection (Pride

and Ferell, 2011). CRM strategies are based on the premise that quick, accurate

knowledge about customers empowers organizations to increase the value of current

customers, keep them longer and more effectively acquire new customers (Chaturvedi,

2009). Among other elements, relationship marketing is characterized by its long-term

perspective, high customer commitment and contact, contracts on a time basis, and

orientation on product benefits (Schmid, 2011).

According to Boone and Kurtz (2010), the basic model of CRM is built on four basic

elements: gathering information about customers, analyzing the data collected and using

it to modifying marketing mix to deliver differentiated messages and customized

marketing programs to individual customers; through relationship marketing, monitoring

business interactions with customers and assessing the level of satisfaction or

dissatisfaction with service; calculating the cost of attracting one new customer and

figuring out how much profit that customer will generate during the relationship, seeking

ways to add value to the buyer-seller transaction so the relationship will continue; using

software, use intimate knowledge of customers and customer preference to orient every

part of the organization – including both its internal and external partners – towards

building a unique company differentiation based on strong, unbreakable bond with

customer.

Voudouris (2008) identified six emerging customer service trends changing the way

businesses interact with customers. He argues that these six trends are transforming

markets; changing traditional operating models and helping companies win in the

digitally-enabled world. These are outlined in figure 2.2. In more detail, they are as

23

follows: The growth of customer intimacy and personalization of service treating

customers as individuals not segments; the emergence of the extended and open

enterprise, blurring the boundaries between customers, suppliers and business; the growth

in customer and employee advocacy, customers as well as employee can be a business‟s

best asset in delivering service and loyalty; exploitation of customer analytics to enable

pro-active service, changing the engagement flow from reacting to customer demand to

anticipating them; the increased tempo of service delivery and the move towards real time

service and operations; the deep knowledge-based enterprise leveraging all its

information assets to service increasingly complex needs. According to Voudouris

(2008), the trends impact customer loyalty by enhancing customer perception of brand,

increasing their perceived switching costs and minimizing the opportunity to churn.

Figure 2.2 Emerging Trends in Customer Service

Source: Voudouris (2008, p. 20).

According to Chaturvedi (2009), past efforts to re-engineer processes were primarily

driven by the desire to improve the efficiency of an enterprise and reduce costs. The

beneficiary was the enterprise, not its customers. The rise in relationship management has

Personalization

Openness

Advocacy

Customer analytics

Real-time service

Knowledge-based

Increased switching

costs

Trust and comfort

Reduced opportunity

to switch

Customer

loyalty

Emerging customer

service trends

24

led to a focus on reworking key processes that touch the customer and asking customers

which processes matter to them. Enterprises frequently do not realize that their

functionally fragmented processes often mean that the customer has a poor experience

and receives less than the expected value. Successful re-engineering should create

processes that not only meet customers‟ expectations, but also support the customer value

proposition, provides competitive differentiation and contribute to the desired customer

experience. Pride and Ferell (2011) posit that the most basic application of this idea is the

80/20 rule: 80 percent of business profits come from 20 percent of customers. The goal is

to assess the worth of individual customers and thus estimate their lifetime value to the

company. The concept of customer lifetime value may include not only an individual‟s

propensity to engage in purchases but also his or her strong word-of-mouth

communication about the company‟s products. Kumar and Reinartz (2012) recommend

that most companies need to revisit their business model, not only to reflect on the impact

of loyalty programs on their bottom-line, but also to determine how customer service

initiatives add value and ensure future revenue streams.

Pride and Ferell (2011) argued that CRM technologies help marketers to identify specific

customers, establish interactive dialogues with them and learn about their needs, and

combine this information with their purchase histories to customer products to meet those

needs. The ability to identify individual customers allows marketers to shift their focus

from targeting groups of similar customers to increasing their share of an individual

customer‟s purchases. Thus, the emphasis changes from share of market to share of

customer. The authors are of the view that focusing on share of customer requires

recognizing that all customers have different needs and that not all customers weigh the

value of a company equally. CRM technologies thus help marketers analyse individual

customers‟ purchases and identify the most profitable and loyal customers.

Mukerjee (2007) maintains that customers are not homogenous in travel behaviour and in

willingness-to-pay, thus carriers segment the demand and differentiate their product to

fulfil the demand. Cento (2009) points out that segmentation and loyalty schemes are

offered to ensure proper focus on valuable customers with greater lifetime values, airlines

resort to segmentation. Privileges are offered according to the worth of the customer and

they ensure better customer retention

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2.4 The Influence of Internal Customer Satisfaction on Customer Loyalty

The term internal customer refers to a co-worker within the same organization, either

working in the same building, in different building or residing in another state or country

(Burton, 2007). Internal relationships are as important as external relationships

(Osarenkhoe, 2007). This is exemplified in the understanding that CRM is founded on the

bedrock that people buy the service that is provided by other people and that effectiveness

and efficiency of this process depends on relationships (Curtis, 2012). The author argues

that companies do not have relationships; people in companies do business and have

relationships with other people in other companies. It is therefore ultimate that the success

or failure of a quality program is due to the efforts of the organization‟s employees (Pride

and Ferell, 2011).

According to Pride and Ferrell (2011), for implementation of CRM to succeed, the needs

of internal customers must be met. If internal customers are not satisfied, it is likely that

external customers will not be satisfied either. Thus, in addition to targeting marketing

activities at external customers, a company uses internal marketing to attract, motivate,

and retain qualified internal customers by designing internal products (jobs) that satisfy

the wants and needs of internal customers. Pride and Ferell, (2011) further postulate that

internal marketing is a management philosophy that coordinates internal exchanges

between the organization and its employees to achieve successful external exchanges

between the organization and its customers. Generally, internal marketing refers to the

managerial actions necessary to make all members of the organization understand and

accept their respective roles in implementing the marketing strategy. This means that all

internal customers, from the president of the company down to the hourly workers on the

shop floor must understand the roles they play in carrying out their jobs and

implementing marketing strategy.

Holweg (2005) established that the internal responsiveness capability of the service

provider has a direct impact on the responsiveness of the customers. Therefore, for

effective service delivery, relationships must be good not only between the front-line staff

and the customer, but also with all the internal stakeholders in the organization supporting

the front-line staff (Curtis, 2012). Curtis (2012) opines that if management states one

thing in the mission statement and does not deliver to its own internal stakeholders, it

should be no surprise that the organization fails. To avoid such failures, the employees of

26

the organization who are essentially the internal customers must all be brought on board.

To that end, Berndt (2004) suggests that it is essential that employees be motivated and

satisfied. The focus is on the motivation that the people have, as well as the motivation to

provide the expected level of service. If the motivation of the employees is not adequate,

it will affect the level of service offered, which in turn, will impact on the satisfaction

experienced by the customers, hence affecting customer loyalty (Curtis, 2012).

Osarenkhoe‟s (2007) study showed that implementing sustainable CRM strategy requires

the endorsement by and commitment from top management, systematic cross-functional

communication, and mandatory customer loyalty training programmes for all employees.

Crosby (2002) holds that part of the leadership team‟s responsibility is to define and build

the organizational competencies that will allow the customer relationship strategy to take

root. This means taking steps to ensure the organization has the knowledge, skills,

resources, measures, tools, management processes and systems to make customer

relationship a reality. Crosby (2002) argues that perhaps the most important first step is

for the leadership team to become customer experts themselves. Armed with this

knowledge, the group will be in a better position to identify and close critical competency

gaps that could become barriers to success. CRM can fail when a limited number of

employees are committed to the initiative; thus, employee engagement is an essential

issue in CRM implementation (Chen and Tseng, 2010). This study considers the internal

customer satisfaction variables related to customer loyalty in the airline industry in terms

of: internal communication, human resource training, compensation, career advancement

and work-life balance.

2.4.1 Internal Communication

Evans (2002) posits that achieving performance gains starts with people throughout the

organization having a shared understanding of concepts, with the organization collecting

the appropriate quantitative information and then constructing analyses and models which

key members of the organization accept as a true reflection of customer perceptions and

market situations. Berndt (2004) holds that employees need to be customer aware in the

activities that they carry out. This, he implies, invites inter-functional coordination and

integration leading to cooperation between all the functions identified. No function can

operate in isolation, and the success of the entire programme requires that every function

needs the others to operate efficiently.

27

Crosby (2002) suggests that models and frameworks of SCRM that depicts how the

various pieces of customer data fit together in a system of cause and effect should be

created and communicated within the organization. The entire package – the brand –

should convey organizational values that can motivate employees to become more

committed to the company and to go “above and beyond” for the customers. Stevens and

Loudon (2005) suggest that specification of policies and tasks of service delivery must be

developed based on knowledge of customer expectations communicated to employees

and that, employees see that their job performance will be based in part or in whole on

meeting those specifications. Crosby (2002) adds that the brand also communicates norms

that can help guide employee behaviour. The role of employees as volunteers and

community leaders is stressed in company advertising and goes a long way toward

defining the character of the brand to customers. Simultaneously, employees are given a

reason to be proud of their association with the company and to maintain or increase their

own volunteerism effort.

2.4.2 Human Resource Training

Beiske (2007) opines that superior CRM strategy is characterized by issues such as quick

and efficient adoption to customers‟ needs, employing well-trained, helpful and polite

staff at all levels of the organization and living a general customer-oriented business

strategy. At a minimum, training is needed to give employees the information and skills

necessary to perform their jobs (Carsen, 2005). Training benefits employers in a variety

of ways including: providing employees with the job skills and knowledge necessary to

perform tasks, improving employee productivity and efficiency, increasing employee

morale, development and commitment to lifelong learning, all of which are critical

success factors linked to the achievement of customer loyalty (Cole, 2004; D‟Annunzio-

Green 2004).

The need for training draws from the observation that employees are easily overwhelmed

and may be misled by the data and need training so that they may acquire the skills

necessary to help turn the data into true customer insight (Crosby, 2002). The author

contends that there have been instances of employees avoiding CRM because they find it

too confusing, lack confidence in the direction it provides or fail to see its relevance. Part

of the problem identified by Crosby (2002) is that front-line employees often do not

understand their roles as relationship managers. They have heard it is important to be

28

polite to customers, to listen to them and be empathetic. But nobody has said “you are a

relationship manager and this is what it entails.” When managers understand how

customers evaluate their services and the consequences of these evaluations on

satisfaction and future intentions, they can better allocate resources to increase loyalty to

the firm (McDougall and Levesque, 2000).

2.4.3 Compensation

Employee compensation refers to all forms of pay going to employees and arising from

their employment (Dessler, 2008). It is the total reward package offered by an

organization to its employees and it encompasses all payments, both monetary and non-

monetary, tangible and intangible, physical and psychological – that an organization

provides its employees in exchange for the work they perform (Caruth and Handlogten,

2001). Dessler (2008) argues that the compensation plan should further the firm‟s

strategic aims, thus; management should produce an aligned reward strategy. The

employer‟s basic task here is to create a bundle of rewards; a total reward package aimed

at eliciting the employee behaviours the firm needs to support and achieve its competitive

strategy. To realize this, some of the questions Dessler (2008) recommends to be

answered include: what are the employee behaviours or actions necessary to successfully

implement the CRM strategy? How well do our current compensation programs match

these requirements? Employees need to be equitably remunerated, both competitively

within their regional market as well as internally, for their contributions to the

organization‟s success (Mathiason, 2008). Managers should however take notice that

money for those earning lower wages might be considered more important than for those

earning higher pay (Marchington and Wilkinson, 2000).

Adequate compensation increases employees‟ perceived organizational support. Fuller,

Hester, Barnett, Frey and Relyea (2006) found out that perceived organizational support

produces in people a feeling of obligation to care about the organization‟s well being and

put forth effort that helps the organization achieve its goals. Individuals may discharge

this feeling of obligation through increased commitment to the organization. Perceived

organizational support is therefore an employee‟s evaluation of the extent to which the

organization hold him or her in high regards, in other words, does the organization care

about my well being and value my contribution? To the extent that status fulfils the needs

for self esteem, affiliation and approval, employees not only feel an obligation to the

29

organization but also develop a sense of unity with the organization.

2.4.4 Career Advancement

In a study conducted by Stein (2007), the item that universally scored the lowest in

workplace happiness was to do with career advancement as almost half (45%) of the

employees surveyed felt that there was no opportunity for career advancement in their

organization. Smart airlines will develop career growth strategies that involve meaningful

opportunities for lateral movement to keep employees loyal to the establishment and

motivated to succeed (Smith and Mazin, 2011). A good career path program is one that

benefits both employers and employees, where there is some synergy between what the

employee wants from his career and what the employer can offer in light of specific

organizational needs. In the event that upward mobility is limited, Stein (2007) suggests

that such organizations can restructure positions, add more responsibilities and increase

compensation because of limited opportunities in order to keep employees satisfied and

serve with enthusiasm.

2.4.5 Work-Life Balance

Poelmans (2005) defined work-life balance as a state in which staff can maintain a happy

and healthy personal life while being successful at work, which gives them a sense of

personal fulfilment. Cohen (2010) argued that work-life balance manifest in the

congruence of different roles each of us choose to perform in our lives, blending in with

our work role in a way which energizes us to do and be all that we want. It shows that

work-life balance is achieved when there is harmony between five aspects of life namely:

our work, our personal lives, our family, our friends and the community in which we live.

Many organizations adopt family-friendly practices in order to help employees achieve

work-life balance. According to Isik, Zeytinoglu, Cooke and Mann (2007), employer

offered family support programs can be initiated and introduced in the workplace only if

the employer decides to provide these benefits to employees. Employers that have family-

friendly initiatives appreciate that family responsibilities will have an impact on

employees‟ working lives and is prepared to accommodate these responsibilities wherever

possible. According to Daft and Marcic (2010), employer initiated programs that enable

employees to have a balance between their personal life and work are a critical part of

30

many organization‟s CRM strategies. Such initiatives typically include flexible working

options such as flexible hours, telework, part time, term-time and job-sharing, as well as

childcare and eldercare facilities, information or financial support pertaining to the non-

work sphere of life, and various onsite services (Ariane, 2009).

2.5 Chapter Summary

This chapter has presented a comprehensive review of literature pertinent to the

realization of customer loyalty from a strategic customer relationship management

perspective. It has critically discussed the theoretical framework and concepts

underpinning customer loyalty such as SERVQUAL and Importance-Satisfaction models.

The chapter has then discussed the various service quality dimensions, situating the

dimensions within two overarching classifications namely, technical quality and

functional quality. A discourse on the various variables underpinning the nexus between

internal customer satisfaction and the achievement of customer loyalty has also been

discussed. In the next chapter, the research methodology that was used in the study is

discussed.

31

CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

The general objective of the study is to establish the factors influencing customer loyalty

to Kenya Airways‟ international flights from Kenya by adopting a strategic customer

relationship management view point. This chapter describes the research methodology

which was used. The chapter explains the choice of research design, population and

sampling design, data collection methods, research procedures and data analysis methods.

3. 2 Research Design

The study adopted descriptive research design. According to Gravetter and Forzano

(2011), descriptive research design involves measuring a set of variables as they exist

naturally. Matthews and Kostelis (2011) add that this research design attempts to answer

immediate questions about a current state of affairs. In this study, customer loyalty,

measured by the frequency of patronage of KQ international flights from Kenya was the

dependent variable. On the other hand, the independent variables included: technical

quality of KQ services, functional quality (customer relationship quality) and internal

customer satisfaction.

3.3 Population and Sampling Design

3.3.1 Population

The population is the object of the research and consists among others, of individuals,

groups, organizations, human products and events or the conditions to which they were

exposed (Fox and Bayat, 2007). For the purpose of this study, the population of interest

was the management staff of KQ based in Nairobi and corporate customers of KQ who

have used the company‟s international flights from Kenya, both totalling to 460. Table

3.1 shows the population distribution.

32

Table 3.1 Population Distribution

Strata Population Percent

KQ corporate clients 110 23.9

KQ managers 350 76.1

Total 460 100

Source: Kenya Airways (2013)

3.3.2 Sampling Design

3.3.2.1 Sampling Frame

Saunders, Lewis and Thornhill (2009) define a sampling frame as the complete list of all

the cases in the population from which a probability sample is drawn. Denscombe (2003)

emphasizes that a good sampling frame should be relevant – meaning that: it should

contain things directly linked to the research topic; be complete by covering all relevant

items; and be precise and up to date. Therefore, the sampling frame was drawn from the

list of employees from the human resource office in Nairobi whereas the list of corporate

customers was obtained from the customer database in the commercial department.

3.3.2.2 Sampling Technique

Probability sampling technique was used. Probability samples aim to achieve

representativeness, which is the degree to which the sample accurately represents the

entire population (Teddlie and Yu, 2007). The probability technique used was stratified

sampling technique, to select the internal customers (employees) and corporate customers

of KQ‟s international flights from Kenya. A stratified sample is one in which every

member of the population has equal chance of being selected in relation to their

proportion within the total population (Denscombe, 2003). This is achieved by adding

some boundaries to the process of selection and applying the principles of randomness

within these boundaries. It is thus a mixture of random selection and selection on the

basis of specific identity or purpose. The significant advantage of stratified sampling over

pure random sampling is that the researcher can assert some control over the selection of

the sample in order to guarantee that crucial people or crucial factors are covered by it,

and in proportion to the way they exist in the wider population (Denscombe, 2003).

33

3.3.2.3 Sampling Size

A sample size is a small section of subjects drawn from the larger population (Saunders et

al., 2009).The question of an adequate size depends on a number of factors connected to

the research which need to be borne in mind and weighed up by the researcher in the

process of arriving at the sample (Denscombe, 2003). According to Fox and Bayat

(2007), the choice of sample size is regulated by four parameters: the level of certainty of

the collected data to be representative of the total population, the accuracy required as the

basis for the estimates made for the sample, the type of analysis that will be used as many

statistical techniques have a minimum threshold of data cases for every variable and the

size of the total population from which the sample will be drawn. No matter the

population size, in small scale social research studies, a minimum sample size of 30

respondents is considered adequate for a quantitative research study (Denscombe, 2003;

Saunders et al., 2009). Therefore, this study was based on a sample size of 30 KQ staff

and 30 corporate customers located in Nairobi, thus a total of 60 respondents. The sample

elements targeted among the corporate clients were the individual customers who have

used KQ services from these companies. Table 3.2 shows the sample size distribution

Table 3.2 Sample Size Distribution

Strata Population Sample size Percent

KQ corporate clients 110 30 27.3

KQ managers 350 30 8.6

Total 460 60 13.0

3.4 Data Collection Methods

Primary data was collected using a structured questionnaire as the data collection

instrument. De Vaus (2002) views a questionnaire as the data collection method whereby

each individual is asked to respond to the same set of questions in a predetermined order.

This was used because of the ease of responding to questions as respondents are provided

with a list of answer options from which they can exercise choice. For the purpose of this

research, two different questionnaires were used to obtain data from the respondents. One

questionnaire was administered to KQ staff whereas the other was issued to KQ

customers. Both questionnaires comprise of four sections. The first section sought general

data about the respondents and their experiences with KQ services. The rest of the

34

sections were classified according to the specific objectives. It begun with questions

related to technical quality dimensions such as reliability, accessibility, comfort, security

and perceived service value. The next section comprised of dimensions classified under

functional quality, including responsiveness, empathy, courtesy, communication and

intimate knowledge of the customers. The last section was made up of questions testing

the level of internal customer satisfaction which encompasses variables such as internal

communication, human resource training, compensation, work-life balance and career

development.

The questions were constructed using Likert‟s 5 Point Scale. According to Stangor

(2010), it consists of a series of items that show agreement or disagreement with the issue

to be measured, each with a set of responses on which the respondents express their

opinions. Each item is a stand-alone statement that expresses an opinion about a subject

(McNabb, 2008). The author postulates that Likert scales aim to measure the extent of a

respondent‟s agreement with each item on a five-point scale from very dissatisfied to

extremely satisfied, with the items assigned values from 1 through to 5 in that order.

3.5 Research Procedures

The research process entailed obtaining permission from the researcher‟s university and

KQ management to use the company as a case study. Buchanan and Bryman (2007) argue

that permission has to be sought first from a senior management gatekeeper before

organizational researchers approach respondents with requests to participate in their

studies. The authors note that these „gate keepers‟ may often refer such requests to other

senior colleagues and in some instances to a management committee or board. Even after

that, the individual respondents can still refuse to collaborate despite that cascade of

management concessions. This cascade of concessions has implications on the research. It

can delay the commencement of data collection and permission may be subject to the

topics to be investigated, the questions that can be asked and the timing and manner in

which data collection is allowed to unfold (Buchanan and Bryman, 2007; Saunders et al.

2009). Therefore, the researcher obtained an introductory letter from the university which

is hoped to facilitate the speedy acceptance by the intended respondents and their

respective organizations.

35

The questionnaire was then pilot-tested in order to ascertain the suitability of the research

tool. The purpose of pilot-testing the instrument is to ensure that items in the instruments

are stated clearly and have the same meaning to all respondents (Mugenda and Mugenda,

2003). The findings from the pilot-test were used to judge whether the instrument was

robust and would help achieve the study objectives. Once necessary modifications were

done, the questionnaire was administered through email to the individual respondents in

the sample. This was followed by phone-call follow-ups in order to encourage

respondents to fill the questionnaires and also to use the opportunity to clarify any further

concerns regarding the instrument or the research. This exercise took two weeks to

complete.

3.6 Data Analysis Methods

Data analysis is simply the process of organizing and summarizing a mass of raw data

into meaningful form (Healey, 2011). Quantitative techniques were used for this purpose.

This entails the generation of data that are numerical, or transforming what is observed,

reported or recorded into quantifiable units (Denscombe, 2003). Specifically, descriptive

statistical techniques and correlation were used as the analytical techniques in this

research. The descriptive statistical technique entailed the determination of the mean and

frequency distribution of the datasets. Relationships between the variables were

determined using Spearman‟s Rank Correlation Coefficient technique. The use of the

Statistical Package for the Social Sciences (SPSS) was made for this purpose. The data

was then presented in tables and figures.

3.7 Chapter Summary

This chapter has described and justified the research methodology to be used for the

research. The chapter has explained the research design, the sampling design including

population, sampling technique, sampling frame and sample size. The chapter has also

defined the data collection method and detailed the research procedures. Lastly, it has

considered the data analysis techniques used. Once the data is collected, the next chapter

presents the analysis of the study findings. Subsequently, the findings are discussed in

chapter five and conclusions and recommendations drawn.

36

CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

In this chapter, the results and findings of the study are presented. The chapter begins by

presenting a descriptive analysis of the general information from the respondents. The

rest of the chapter is thematically organized according to the specific objectives. The first

section presents the findings on the influence of technical quality on customer loyalty to

KQ‟s international flights from Kenya. The second section analyzes the influence of

functional quality on customer loyalty to KQ‟s international flights from Kenya. The third

section presents the findings on the influence of internal customer satisfaction on

customer loyalty to KQ‟s international flights from Kenya. A summary of the major

findings is made at the end of the chapter.

4.2 Demographic Information

The demographic data sought from the respondents included customer‟s gender, age,

frequency of international flight, date of last flight, travel patterns and trends such as

class of travel, number of trips and airline used for international travel. This section also

analyzes the employee respondent‟s demographics such as gender, age, department and

tenure.

4.2.1 Gender of Customer Respondent

The distribution of responding customers of KQ by gender is shown in table 4.1. The

table shows that male respondents accounted for 60% of the sample whereas females

were 40%. Therefore, majority of the respondents were male. However, an observation of

the proportions suggests that both genders were adequately represented in the study.

Table 4.1 Distribution of Customer Respondents by Gender

Gender of customer

Distribution

Frequency Percent

Male 18 60.0

Female 12 40.0

Total 30 100.0

37

4.2.2 Age of Customer Respondent

The distribution of responding customers of KQ in terms of age bracket is given in table

4.2. The table shows that respondents in the age group of 40 to 49 years were the majority

(36.7%) followed by those aged between 30-39 years (30.0%). The table also shows that

on the one hand, respondents aged 18-29 accounted for 23.3% of the sample whereas on

the other hand, there were respondents in the age group of 50 years and over.

Table 4.2 Distribution of Customer Respondents by Age

Age bracket of customer

Distribution

Frequency Percent

18-29 years 7 23.3

30-39 years 9 30.0

40-49 years 11 36.7

50+ years 3 10.0

Total 30 100.0

4.2.3 Patronage of KQ for International Destinations

Respondents were asked to indicate how frequent they flew with KQ for international

destinations. Table 4.3 shows that 73.3% of the respondents flew with KQ monthly and

6.7% did so weekly. However, 16.7% of the respondents flew with KQ for international

flights after about 3 months whereas 3.3% patronized the flight after more than 6 months.

Therefore, majority of the responding customers flew with KQ for international

destinations monthly.

Table 4.3 Frequency of Patronage of KQ for International Destinations

Frequency

Distribution

Frequency Percent

After more than 6 months 1 3.3

After about 3 months 5 16.7

Monthly 22 73.3

Weekly 2 6.7

Total 30 100.0

4.2.4 Time of Last Flight with KQ

The study sought to establish the last time respondent flew with KQ for international

travel. Table 4.4 shows that 33.3% of the respondents did so in the last one week and

23.3% flew with KQ in the last one month. Twenty percent (20.0%) of the respondents

used KQ for international flight in the last six months and 16.7% did so in the last one

38

year. However, there were 6.7% of the respondents who said it has been more than a year

since they last flew with KQ for international destinations. Therefore, majority (56.6%) of

the respondents used KQ for international travel at least in the last one month.

Table 4.4 Time of Last Flight with KQ for International Travel

Frequency

Distribution

Frequency Percent

In the last one week 10 33.3

In the last one month 7 23.3

In the last six months 6 20.0

In the last one year 5 16.7

It has been more than a year 2 6.7

Total 30 100.0

4.2.5 Travel Pattern

The study sought to determine whether the respondent travelled alone or as a group. Sixty

percent (60%) of the respondents travelled alone; 30% travelled with friends and

colleagues and 10% travelled with family. Therefore, majority of the respondents

travelled alone.

Table 4.5 Travel Pattern

Did you travel alone or as a group

Distribution

Frequency Percent

Alone 18 60.0

With friends and colleagues 9 30.0

With family 3 10.0

Total 30 100.0

4.2.6 Class of Travel

Respondents were asked to indicate whether they travelled in business class or economy

class. Table 4.6 shows that 86.7% of the respondents travelled in the economy class and

only 13.3% used business class. Therefore, majority of the respondents travelled in the

economy class.

Table 4.6 Class of Travel

Class of travel

Distribution

Frequency Percent

Business 4 13.3

Economy 26 86.7

Total 30 100.0

39

4.2.7 Number of Trips

The study sought to establish the number of trips made by responding customers in the

last 12 months. Table 4.7 shows that 60% of the respondents made between 3 to 6 trips.

This was followed by 26.7% of the respondents who made between 7 to 12 trips and

lastly, 13.3% of the respondents who made more than 12 trips in the last twelve months.

Therefore, majority of the respondents made between 3 to 6 trips in the last twelve

months.

Table 4.7 Number of Trips made by Customer in the last 12 Months

Number of Trips

Distribution

Frequency Percent

Less than 3 trips 0 0

3 to 6 trips 18 60.0

7 to 12 trips 8 26.7

More than 12 trips 4 13.3

Total 30 100.0

4.2.8 Usage of Other Airlines

The study sought to establish whether respondents used any other airline for international

travel. Table 4.8 shows that 86.7% of the respondents said yes whereas 13.3% said no.

therefore, majority of the respondents used other airlines for international travel.

Table 4.8 Usage of Other Airlines

Do you use any other airline for

international travel

Distribution

Frequency Percent

Yes 26 86.7

No 4 13.3

Total 30 100.0

4.2.9 Other Airlines Used

Respondents were asked to specify the other airlines they used for international flights.

The airlines are ranked by order of most frequency mentioned as shown in figure 4.1. The

figure shows that Emirates and Ethiopian Airlines were used by 30% of the respondents,

followed by 23.3% of the respondents who also used South Africa Airlines. Qatar and

KLM followed next in terms of usage according to 16.7% of the respondents, followed by

Air Uganda and British Airways (13.3%). The figure shows that 10% of the respondents

also did fly with Virgin Atlantic.

40

30.0 30.0

23.3

16.7 16.713.3 13.3

10.0

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Emirates Ethiopian

Airlines

South

Africa

Airlines

Qatar KLM Air

Uganda

British

Airways

Virgin

Atlantic

Per

cent

Figure 4.1 Other Airlines Used by Order of Mostly Mentioned

4.2.10 Preferred Airline

The study sought to determine the airline most preferred by respondents. The results are

shown in figure 4.2. The figure shows 63% of the respondents mostly preferred KQ for

international flights. However, 18.5% of the respondents preferred Emirates whereas

7.4% preferred Ethiopian Airlines. Other airlines such as South Africa Airlines, British

Airways and Virgin Atlantic all trailed in terms of preference at 3.7%. Therefore,

majority of the respondents preferred flying with KQ.

63.0

18.5

7.43.7 3.7 3.7

0.0

20.0

40.0

60.0

80.0

KQ Emirates Ethiopian

Airlines

South Africa

Airlines

British

Airways

Virgin

Atlantic

Perc

en

t

Figure 4.2 Distribution of Employee Respondents by Gender

41

4.2.11 Gender of Employees

The distribution of KQ employees included in the sample is shown in table 4.9. The table

shows that 53.3% of the respondents were female and 46.7% of the respondents were

male. Therefore, both genders were adequately represented in the study.

Table 4.9 Distribution of Employee Respondents by Gender

Gender of employee

Distribution

Frequency Percent

Male 14 46.7

Female 16 53.3

Total 30 100.0

4.2.12 Age of Employees

The respondents were asked to indicate their age. Table 4.10 shows that majority of the

respondents (56.7%) were aged between 30 to 39 followed by those in the age group of

40 to 49 years at 26.7%. Respondents aged 50 years and above were 13.3% whereas those

aged between 18 to 29 years accounted for 3.3% of the respondents.

Table 4.10 Distribution of Employee Respondents by Age

Age of employees

Distribution

Frequency Percent

18-29 years 1 3.3

30-39 years 17 56.7

40-49 years 8 26.7

50 + years 4 13.3

Total 30 100.0

4.2.13 Department Worked

The study sought to determine which department the employee worked in KQ. Table 4.11

shows that 66.7% of the respondents worked in the commercial department; 10% were

flight operators whereas; 13% of the respondents worked in grounds whereas 10% of the

respondents were drawn from the HR department.

Table 4.11 Distribution of Employee Respondents by Department

Department

Distribution

Frequency Percent

Commercial 20 66.7

Flight Operations 3 10.0

Ground Operations 4 13.3

HR 3 10.0

Total 30 100.0

42

4.2.14 Tenure of Employees

The study sought to determine how long employee respondents had worked with KQ.

Table 4.12 shows that 36.7% of the respondents had worked with KQ for 6-10 years,

whereas 33.3% of the respondents had worked in the company for more than 10 years.

However, those who had worked for less than 3 years constituted 16.7% of the

respondents while 13.3% had worked with the company for between 3 to 5 years.

Table 4.12 Distribution of Employee Respondents by Tenure

Tenure in years

Distribution

Frequency Percent

Less than 3 years 5 16.7

3 to 5 years 4 13.3

6 to 10 years 11 36.7

More than 10 years 10 33.3

Total 30 100.0

4.3 The Influence of Technical Quality on Customer Loyalty

This section analyzes the influence of technical quality on customer loyalty to KQ‟s

international flights from Kenya. The technical quality dimensions analyzed include:

reliability, convenience, timeliness, flexibility, security and comfort.

4.3.1 Overall Level of Satisfaction with KQ Services

The respondents were asked to rate their overall level of satisfaction with services offered

by KQ. The results are tabulated in table 4.13. The table shows that 46.7% and 10% of

the respondents indicated that they were dissatisfied and very dissatisfied, respectively.

Ten percent (10%) of the respondents were neither satisfied nor dissatisfied, whereas only

33.3% of the respondents indicated that they were satisfied with KQ services. Therefore,

majority (56.7%) of the respondents were dissatisfied with KQ flight services.

Table 4.13 Customer Level of Satisfaction with services of KQ

Satisfaction rating

Distribution

Frequency Percent

Very dissatisfied 3 10.0

Dissatisfied 14 46.7

Neither 3 10.0

Satisfied 10 33.3

Very satisfied 0 0.0

Total 30 100.0

43

4.3.2 Relationship between Technical Quality Dimensions and Customer Loyalty

Spearman‟s rank correlation coefficient was run to determine the relationship between

technical quality dimensions and customer loyalty to KQ. The results are shown in table

4.14. The table shows that customer loyalty to KQ services was directly related to

reliability (r=.395, p<.05); convenience (r=.298, p<.05), timeliness (r=.623, p<.01),

flexibility (r=.431, p<.05), security (r=.399, p<.05) and comfort (r=.415, p<.05). The

table however shows that customer loyalty was inversely correlated to cost of air fare (r=-

.364, p<.05). The correlation results suggest that technical quality of KQ‟s international

flight services influenced customer loyalty.

Table 4.14 Correlation between Technical Quality and Customer Loyalty

Spearman's rho 1

1

Loyalty

Correlation Coefficient 1.000

Sig. (2-tailed) .

N 30

2

Reliability

Correlation Coefficient .395(*)

Sig. (2-tailed) .013

N 30

3

Convenience

Correlation Coefficient .298(*)

Sig. (2-tailed) .050

N 30

4

Timeliness

Correlation Coefficient .623(**)

Sig. (2-tailed) .000

N 30

5

Flexibility

Correlation Coefficient .431(*)

Sig. (2-tailed) .017

N 30

6

Security

Correlation Coefficient .399(*)

Sig. (2-tailed) .029

N 30

7

Comfort

Correlation Coefficient .415(*)

Sig. (2-tailed) .023

N 30

8

Cost of air fare

Correlation Coefficient -.364(*)

Sig. (2-tailed) .048

N 30

** Correlation is significant at the 0.01 level (2-tailed).

* Correlation is significant at the 0.05 level (2-tailed).

44

4.3.3 Importance of Technical Quality Dimensions

The study sought to determine the importance that KQ‟s international flight customers

placed on various dimensions of technical quality of its services. Table 4.15 presents the

mean and frequency distribution of the respondents‟ views. The table shows that 83.3%

of the respondents considered flight reliability extremely important and 16.7% of the

respondents said this service dimension was very important. On a scale of 1 to 5, a high

mean of 4.83 was established, implying that reliability of flight was extremely important.

The table also shows that convenience of flight was extremely important according to

63.3% of the respondents and very important according to 33.3% of the respondents.

Some 3.3% of the respondents said convenience was fairly important. A mean score of

4.6 on a scale of 1 to 5 was established, suggesting that convenience was extremely

important to the customers.

Similarly, table 4.15 shows that timeliness of flight was extremely important to 76.7% of

the respondents and very important to 23.3% of the respondents. This yielded a mean

score of 4.77 which indicates that on aggregate, timeliness was an extremely important

dimension of service to the patrons. The table further shows that flexibility was extremely

important and very important to 53.3% and 30% of the respondents, respectively.

However, some 16.7% of the respondents indicated that flexibility was fairly important to

them. The mean score for this service dimension was 4.37 which indicate that flexibility

was very important consideration to the customers.

Table 4.5 also shows that 83.3% of the respondents considered security extremely

important and 10% said security was very important. However, there were 6.7% of the

respondents who considered security a fairly important aspect of service to them. The

mean score was 4.77 which indicate that security was extremely important. In terms of

comfort, 56.7% of the respondents indicated that comfort was extremely important to

them and 33.3% said comfort was very important. However, 6.7% and 3.3% of the

respondents considered their comfort fairly important and less important, respectively. A

mean value of 4.43 was established, which showed that in overall, comfort was a very

important aspect of technical quality of flight services. Respondents were also asked to

rate the importance of cost of air fare. As table 4.15 shows, 63.3% of the respondents

considered cost extremely important and 30.0% held that cost of air fare was very

important. However, there were 6.7% of the respondents who said that cost was to them,

45

fairly important. This returned a mean value of 4.57 which implies that matter of cost of

air fare was extremely important to the customers.

Table 4.15 Mean and Frequency Distribution of Importance of Service Dimensions

Mean Extremely

important

Very

important

Fairly

Important

Less

important

Not

important

Reliability 4.83 83.3% 16.7% 0.0% 0.0% 0.0%

Convenience 4.60 63.3% 33.3% 3.3% 0.0% 0.0%

Timeliness 4.77 76.7% 23.3% 0.0% 0.0% 0.0%

Flexibility 4.37 53.3% 30.0% 16.7% 0.0% 0.0%

Security 4.77 83.3% 10.0% 6.7% 0.0% 0.0%

Comfort 4.43 56.7% 33.3% 6.7% 3.3% 0.0%

Cost of air

fare

4.57 63.3% 30.0% 6.7% 0.0% 0.0%

4.3.4 Reason for Travel with Preferred Airline

Respondents were asked to list the main reasons that influenced their choice of airline.

The reasons are ranked in order of frequency as shown in table 4.16. The table shows that

three main reasons influenced respondents‟ airline preference. These were: by rank order,

safety (63.3%), convenient schedule (56.7%) and reputation (46.7%).

Four other reasons followed as important influencers to the preference of the airline.

These were: previous experience (33.3%), punctuality (33.3%), low price (33.3%) and

only flight available 30%. Other reasons with relatively significant influence on customer

preference were: value for money (26.7%), national airline (23.3%) and frequent flier

programme (23.3%). The table suggests that quality of in-flight services (16.7%),

baggage offering (13.3%), recommendation (13.3%), promotion (10%) and inclusive

package (3.3%) trailed as reasons for travel with preferred agent. Neither advertising nor

corporate travel policy was a reason for travel with preferred airline.

46

Table 4.16: Main Reason for Travel with Preferred Airline

Main reason for travel Percent

Safety 63.3

Convenient Schedule 56.7

Reputation 46.7

Previous experience 33.3

Punctuality 33.3

Low price 33.3

Only flight available 30.0

Value for money 26.7

National airline 23.3

Frequent Flier Program 23.3

Quality of in-flight services 16.7

Baggage offering 13.3

Recommendation 13.3

Promotion 10.0

Didn't choose/Don't know 10.0

Inclusive package 3.3

Advertising 0.0

Corporate travel policy 0.0

4.3.5 Satisfaction with Physical Qualities of Flight

Respondents were asked to rate their level of satisfaction with various physical features of

KQ flights. Table 4.17 shows that 30% and 26.7% of the respondents were dissatisfied

and very dissatisfied, respectively, with seat comfort. On the other hand, 30% of the

respondents were satisfied whereas 13.3% were neither satisfied nor dissatisfied. On

aggregate, majority (56.7%) of the respondents were dissatisfied with seat comfort. The

mean score on a scale of 1 to 5 was 3.47, indicating that on average; respondents were

dissatisfied with seat comfort.

Table 4.17 also shows that 33.3% of the respondents were dissatisfied with seat recline

and 30% of the respondents were very dissatisfied. Twenty percent (20%) of the

respondents were neither satisfied nor dissatisfied whereas only 16.7% of the respondents

were satisfied with seat recline. A mean score of 3.27 was established. Therefore,

majority (63.3%) of the respondents were not satisfied with seat recline.

Respondents were also asked to rate their satisfaction levels with sleeping comfort. Table

4.17 shows that 40.7% of the respondents were dissatisfied and 33.3% were very

dissatisfied. However, 22.2% of the respondents were neither satisfied nor dissatisfied,

47

whereas 3.7% of the respondents were satisfied. A low mean score of 2.83 was

established, indicating that the majority (78.0%) of the respondents were generally

dissatisfied. In terms of leg room, 41.4% of the respondents were dissatisfied and a

further 13.3% were very dissatisfied. However, 27.6% of the respondents were neither

satisfied nor dissatisfied, while 17.2% of the respondents were satisfied. In sum, majority

(54.7%) of the respondents were dissatisfied with the amount of legroom in KQ‟s

international flights.

Table 4.17 Satisfaction Rating of Physical Qualities

Feature Mean Very

dissatisfied

Dissatisfied Neither Satisfied

Extremely

Satisfied

Seat Comfort 3.47 26.7% 30.0% 13.3% 30.0% 0.0%

Seat recline 3.27 30.0% 33.3% 20.0% 16.7% 0.0%

Sleeping Comfort 2.83 33.3% 40.7% 22.2% 3.7% 0.0%

Legroom 3.48 13.3% 41.4% 27.6% 17.2% 0.0%

4.4 The Influence of Functional Quality on Customer Loyalty to KQ

In this section, aspects of functional quality that affect customer loyalty to KQ such as

reservation services, check-in services and boarding services.

4.4.1 Place of Reservation

Respondents were asked to specify where they made their reservation. Table 4.13 shows

that 40% of the reservations were made at Kenya Airway‟s office and 22.5% of the

reservations were made through the company‟s website. The table shows that travel

agents made 32.5% of the reservations whereas 5% of the reservations were made

through another airline. Therefore, majority of the reservations were made through KQ‟s

office.

Table 4.18 Where Reservation was Made

Where reservation was made

Distribution

Frequency Percent

Kenya Airways office 12 40.0

Travel agent 10 32.5

Another airline 2 5.0

KQ Website 7 22.5

Total 30 100.0

48

4.4.2 Rating of Reservation Services of KQ

Respondents were asked to rate their level of satisfaction with various dimensions of

reservation services they received. Table 4.19 shows that 31.3% and 18.8% of the

respondents were satisfied and extremely satisfied, respectively, with waiting time for

services. However, 43.6% of the respondents were neither satisfied nor dissatisfied

whereas 6.3% of the respondents were dissatisfied. The mean score, on a scale of 1 to 5

was 3.63, suggesting that on aggregate, majority (50.1%) of the respondents were

satisfied with waiting time for reservation services.

In terms of courtesy and helpfulness of staff, 41.2% of the respondents were satisfied and

23.5% were extremely satisfied. Nevertheless, there were 29.4% of the respondents who

were neither satisfied nor dissatisfied and some 5.9% of the respondents who were

dissatisfied. The mean score was 3.82, which implies that the majority (63.7%) of the

respondents were satisfied with the courtesy and helpfulness of staff. The study also

sought customer satisfaction rating of the ability of staff to anticipate customer needs. As

table 4.19 shows, 29.4% of the respondents were satisfied and 23.5% were extremely

satisfied. However, 23.5% of the respondents were neither satisfied nor dissatisfied while

another 23.5% of the respondents were dissatisfied. The mean score was 3.53 which

implies that majority (52.9%) of the respondents were generally satisfied with staff‟s

ability to anticipate needs of customers.

The study further sought to establish how respondents rated their level of satisfaction with

product knowledge of staff. Table 4.19 shows that 41.2% of the respondents were

satisfied and 23.5% were very satisfied. However, 29.4% of the respondents were neutral

while 5.9% of the respondents were dissatisfied with product knowledge of staff. A high

mean of 3.82 on a scale of 1 to 5 was computed. This suggests that the majority (64.7%)

of the respondents were satisfied with staff‟s product knowledge. Respondents‟ rating of

communication skills of staff was also sought and the table shows that 23.3% and 35.3%

of the respondents were satisfied and extremely satisfied. However, some 11.8% of the

respondents were neither satisfied nor dissatisfied while 29.4% of the respondents were

dissatisfied. The mean score yielded was 3.65 which suggest that majority (58.8%) of the

respondents were generally satisfied.

49

Table 4.19 Customer Level of Satisfaction with Reservation services of KQ

Stage of Service

at Reservations

Mean Very

dissatisfied

Dissatisfied Neither

Satisfied Extremely

satisfied

Waiting time for

service

3.63 0.0% 6.3% 43.8% 31.3% 18.8%

Courtesy/

helpfulness of

staff

3.82 0.0% 5.9% 29.4% 41.2% 23.5%

Ability of staff to

anticipate needs

3.53 0.0% 23.5% 23.5% 29.4% 23.5%

Product

knowledge of

staff

3.82 0.0% 5.9% 29.4% 41.2% 23.5%

Communication

skills of staff

3.65 0.0% 29.4% 11.8% 23.5% 35.3%

4.4.3 Check-In by Customers

The study sought to determine how customers checked in for their flight. Table 4.20

shows that 50% of the respondents checked in online whereas the other 50% checked in

over the counter.

Table 4.20 How Customers Checked in for Flight

Check-in

Distribution

Frequency Percent

Online 15 50.0

Check-in counter 15 50.0

Total 30 100.0

4.4.4 Rating of Check-In Services

Respondents were asked to rate their level of satisfaction with various aspects of check-in

services as depicted in table 4.21. The table shows that 55.2% of the respondents were

satisfied and 6.9% were extremely satisfied with ease of finding appropriate check-in

area. Thirty one percent (31.0%) of the respondents were neither satisfied nor dissatisfied

whereas 3.4% of the respondents either did not use or did not take notice. The mean score

on a scale of 1 to 5 was 3.52, which implies that respondents were on aggregate (62.1%)

satisfied with ease of finding appropriate check-in area.

Respondents were asked to rate the appearance of check-in counter. Table 4.21 shows

that 51.7% and 3.4% of the respondents were satisfied and extremely satisfied

respectively, with the appearance of check-in area. However, 13.8% of the respondents

50

were neither satisfied nor dissatisfied; 17.2% of the respondents were dissatisfied and

10.3% were very dissatisfied. Therefore, majority (55.1%) of the respondents were

satisfied.

Regarding waiting time at the check-in counter, 31% of the respondents were satisfied

and 10.3% were extremely satisfied. However, 24.1% of the respondents expressed

neither satisfaction nor dissatisfaction. On the other hand, 6.9% and 24.1% of the

respondents were dissatisfied and extremely dissatisfied, respectively. Some 3.4% of the

respondents either did not notice or did not use the service. The mean score of 2.86

suggest that respondents were not satisfied with the waiting time at the check-in counter.

The study sought to establish respondents‟ level of satisfaction with the efficiency of

check-in staff. Table 4.21 shows that 35.7% of the respondents were satisfied and 10.7%

were extremely satisfied. However, another 10.7% of the respondents were neither

satisfied nor dissatisfied. Twenty five (25.0%) of the respondents were dissatisfied and

14.3% were very dissatisfied. The mean score was 2.86, implying that respondents were

generally not satisfied with efficiency of check-in counter staff.

Table 4.21 also shows that 44.8% and 13.8% of the respondents were satisfied and

extremely satisfied, respectively, with the courtesy/ helpfulness of check-in staff.

Nevertheless, 10.3% of the respondents were neither satisfied nor dissatisfied whereas

13.8% of the respondents were dissatisfied and another 13.8% were very dissatisfied with

this aspect of service. A mean score of 2.93 was recorded, suggesting that respondents

were generally dissatisfied with the courtesy/helpfulness of check-in staff.

In terms of communication skills of check-in staff, table 4.21 shows that 41.4% and

13.8% of the respondents were satisfied and extremely satisfied, respectively.

Nonetheless, there were 13.8% of the respondents who were neither satisfied no

dissatisfied. On the other hand, 10.3% of the respondents were dissatisfied and 17.2%

were very dissatisfied. On aggregate, majority (58.6%) of the respondents were satisfied

with the communication skills of check-in counter staff.

Regarding attitude of check-in staff, 30% and 20% of the respondents were very

dissatisfied and dissatisfied, respectively. Ten percent (10%) of the respondents were

51

neither satisfied nor dissatisfied whereas 33.3% of the respondents expressed satisfaction

and 6.7% expressed extreme satisfaction. Therefore, majority (50%) of the respondents

were dissatisfied with the attitude of check-in staff.

Table 4.21 Satisfaction Rating with Check-In

Mea

n

Did

n't

use

/noti

ce

Ver

y

dis

sati

sfie

d

Dis

sati

sfie

d

Nei

ther

Sati

sfie

d

Extr

emel

y

Sati

sfie

d

Ease of finding

appropriate check-in

area

3.52 3.4% 3.4% 0.0% 31.0% 55.2% 6.9%

Appearance of check-in

counter

3.10 3.4% 10.3% 17.2% 13.8% 51.7% 3.4%

Waiting time at the

check in counter

2.86 3.4% 24.1% 6.9% 24.1% 31.0% 10.3%

Efficiency of check-in

counter staff

2.93 3.6% 14.3% 25.0% 10.7% 35.7% 10.7%

Courtesy/ helpfulness of

check-in staff

3.21 3.4% 13.8% 13.8% 10.3% 44.8% 13.8%

Communication skills of

check-in staff

3.21 3.4% 17.2% 10.3% 13.8% 41.4% 13.8%

Attitude of check-in

staff

3.14 0.0% 30.0% 20.0% 10.0% 33.3% 6.7%

4.4.5 Rating of Boarding Services

The study sought to determine how respondents rated their level of satisfaction with

boarding services. Table 4.22 shows that 41.2% of the respondents were satisfied and

23.5% extremely satisfied with the courtesy/ helpfulness of boarding gate staff. However,

there were 29.4% of the respondents who were neither satisfied nor dissatisfied whereas

5.9% of the respondents were dissatisfied. On a scale of 1 to 5, the mean score was 3.67,

meaning that averagely, majority (63.7%) of the respondents were satisfied with the

courtesy of boarding gate staff.

In terms of rating of communication skills of boarding gate staff, 40% and 10% of the

respondents were satisfied and extremely satisfied, respectively. However, 13.3% of the

respondents were neither satisfied nor dissatisfied. Thirty percent (30%) of the

respondents were very dissatisfied and 6.7% were dissatisfied. Therefore, majority (50%)

of the respondents were satisfied with the communication skills of boarding gate staff. In

52

terms of their attitude, 36.7% of the respondents were satisfied and 10% were extremely

satisfied. On the other hand, 33.3% of the respondents were very dissatisfied and 13.3%

were also dissatisfied. Some 6.7% of the respondents were neither satisfied nor

dissatisfied. A mean score of 2.77 was established, implying that respondents were

generally dissatisfied with the attitudes of boarding staff.

Respondents were asked to rate their level of satisfaction with information regarding the

boarding process. Forty percent (40%) of the respondents were satisfied and 6.7% were

extremely satisfied. Ten percent (10%) of the respondents were neither satisfied nor

dissatisfied, while 16.7% and 26.7% of the respondents were dissatisfied and very

dissatisfied, respectively. The mean score was 2.83, implying that on average, majority of

the respondents were dissatisfied with information regarding the boarding process.

Similarly, 23.3% and 10% of the respondents were satisfied and extremely satisfied,

respectively, with clarity of boarding announcements at gate. However, 26.7% of the

respondents were neither satisfied nor dissatisfied; another 26.7% of the respondents were

dissatisfied while 13.3% were very dissatisfied. A mean value of 2.90 was established,

indicating that respondents were generally dissatisfied with the clarity of boarding

announcements at gate.

In terms of efficiency of aircraft boarding, 26.7% and 13.3% of the respondents were

satisfied and extremely satisfied, respectively. On the other hand, 36.7% of the

respondents were very dissatisfied and another 16.7% of the respondents were

dissatisfied. Some 6.7% of the respondents expressed neither satisfaction nor

dissatisfaction. The mean score on a scale of 1 to 5 was 2.63 which implies that majority

(54.4%) of the respondents were dissatisfied with efficiency of aircraft boarding.

Table 4.22 also shows that 50% of the respondents were very dissatisfied and another

30% were dissatisfied with punctuality of flight departure. However, 3.3% of the

respondents were neither satisfied nor dissatisfied whereas 16.7% of the respondents were

satisfied. The mean score on a scale of 1 to 5 was 1.87, suggesting that majority (80%) of

the respondents were dissatisfied with punctuality of flight departure.

Respondents were asked to rate their level of satisfaction with information given prior to

boarding if flight was delayed. Table 4.22 shows that 63.3% of the respondents were

53

dissatisfied and 6.7% were very dissatisfied. Ten percent (10%) of the respondents were

neither satisfied nor dissatisfied whereas 3.3% and 16.7% of the respondents were

satisfied and extremely satisfied, respectively. A mean score of 1.60 was established,

indicating that majority (70%) of the respondents were not satisfied with information

given prior to boarding if flight was delayed.

Table 4.22 Satisfaction Rating with Boarding

Mea

n

Did

n't

use

/

noti

ce

Ver

y

Dis

sati

sfie

d

Dis

sati

sfie

d

Nei

ther

Sati

sfie

d

Extr

emel

y

Sati

sfie

d

Courtesy/ helpfulness of

boarding gate staff

3.67 0.0% 0.0% 5.9% 29.4% 41.2% 23.5%

Communication skills of

boarding gate staff

2.93 0.0% 30.0% 6.7% 13.3% 40.0% 10.0%

Attitude of boarding gate

staff

2.77 0.0% 33.3% 13.3% 6.7% 36.7% 10.0%

Information regarding the

boarding process

2.83 0.0% 26.7% 16.7% 10.0% 40.0% 6.7%

Clarity of boarding

announcements at gate

2.90 0.0% 13.3% 26.7% 26.7% 23.3% 10.0%

Efficiency of aircraft

boarding

2.63 0.0% 36.7% 16.7% 6.7% 26.7% 13.3%

Punctuality of flight

departure

1.87 0.0% 50.0% 30.0% 3.3% 16.7% 0.0%

Information given prior to

boarding if flight was

delayed

1.60 6.7% 63.3% 10.0% 3.3% 16.7% 0.0%

4.5 The Influence of Internal Customer Satisfaction on Customer Loyalty

In this section, an analysis of the satisfaction levels of staff with services they received

internally is presented. The variables examined are: motivation, synergy, training,

departmental cooperation, organizational commitment, employee compensation, upward

mobility and work-life balance at KQ.

4.5.1 Internal Customer Satisfaction with KQ Services

The employee respondents were asked to rate their level of satisfaction with the services

they received at KQ overall. Table 4.23 shows that 50% of the respondents were satisfied

while 23.3% of the respondents were neither satisfied nor dissatisfied. On the other hand,

23.3% of the respondents were dissatisfied and a further 3.3% of the respondents were

54

very dissatisfied. Therefore, majority of the responding staff were satisfied with the

services they received.

Table 4.23 Staff satisfaction with KQ services

Internal customer satisfaction

Distribution

Frequency Percent

Very dissatisfied 1 3.3

Dissatisfied 7 23.3

Neither 7 23.3

Satisfied 15 50.0

Very satisfied 0 0.0

Total 30 100.0

4.5.2 Internal Customer Satisfaction with KQ Service Dimensions

The study sought to determine whether generally, staffs at KQ were satisfied and

motivated to offer the best service to its customers. Table 4.24 shows that 30% of the

respondents disagreed and 6.7% strongly disagreed. Neutral respondents were 33.3%

whereas 26.7% and 3.3% of the respondents agreed and strongly agreed, respectively.

The mean score was 2.9 on a scale of 1 to 5, which implies that generally, staffs at KQ

were not satisfied or motivated to offer the best service to its customers. This potentially

affected the quality of service delivery with negative implications on customer loyalty.

The opinions of respondents were sought as to whether there was synergy in the way

services were offered in internally. Forty percent (40%) of the respondents disagreed and

10% strongly disagreed. However, 40% of the respondents were neutral whereas 10% of

the respondents agreed. The mean score was 2.50, which means that on aggregate,

majority (50%) of the respondents disagreed that there was synergy in the way services

were offered internally. It can be inferred that this affects the quality of services offered,

thereby impacting negatively on customer loyalty.

The study sought to determine whether all staff have undergone mandatory customer

loyalty training program. According to table 4.24, 56.7% and 16.7% of the respondents

disagreed and strongly disagreed respectively. Ten percent (10%) of the respondents were

neutral; another 10% of the respondents agreed and a further 6.7% strongly agreed. A low

55

mean score of 2.33 was computed, indicating that majority (73.4%) of the respondents

disagreed that all staff had undergone mandatory customer loyalty training program.

Respondents were also asked whether there was cooperation between the various

departments. Thirty percent (30%) of the respondents disagreed and 6.7% strongly

disagreed. However, 36.7% of the respondents were neutral whereas 26.7% of the

respondents agreed. The mean score was 2.83 which suggest that generally, respondents

disagreed that there was cooperation between the various departments. This implies that

service delivery was potentially affected negatively, which could affect customer loyalty.

The question sought the views of respondents as to whether employees demonstrated

commitment to go the extra mile for customers. Forty percent (40%) of the respondents

agreed. However, 36.7% of the respondents were neutral whereas 20% and 3.3% of the

respondents disagreed and strongly disagreed, respectively. The mean score was 3.13,

indicating that respondents were noncommittal as to whether employees demonstrated

commitment to go the extra mile for customers.

The views of the respondents were sought as to whether employees were adequately

compensated for their contribution to the company. Table 4.24 shows that 33.3% and

20% of the respondents disagreed and strongly disagreed, respectively. However, 36.7%

of the respondents were neutral while 10% of the respondents disagreed. A mean rating of

2.37 was computed, meaning that majority (53.3%) of the respondents disagreed that

employees at KQ were adequately compensated for their contribution to the company.

This potentially affected the quality of services delivered to customers, thereby negatively

impacting on customer loyalty.

In terms of whether compensation of employees was performance based, 37.9% and

24.1% of the respondents disagreed and strongly disagreed, respectively. Nevertheless,

20.7% of the respondents were neutral whereas 13.8% of the respondents agreed and

3.4% of the respondents strongly agreed. The mean score was 2.35 which suggests that

majority (62.0%) of the respondents generally disagreed that compensation of employees

at KQ was performance-based. This potentially reflected on the level of service quality

offered to customers, with potential negative implications on customer loyalty.

56

The opinion of respondents was sought as to whether KQ provided opportunities for

upward mobility. Thirty percent (30%) of the respondents disagreed and 10% strongly

disagreed. Forty percent (40%) of the respondents were neutral while only 20% of the

respondents agreed. A mean score of 2.7 was established. This implies that respondents

did not agree that KQ provided opportunities for upward mobility of its staff.

The study also sought to determine whether KQ had work-life balance programs that

ensured that staff maintained a happy and healthy personal life while being successful at

work. Fifty percent (50%) of the respondents disagreed and a further 13.3% of the

respondents strongly disagreed. On the other hand, 20% of the respondents agreed

whereas 16.7% of the respondents were neutral. The mean score was 2.43, which implies

that majority (63.3%) of respondents generally disagreed that the company had work-life

balance programs that ensured that staff maintain a happy and healthy personal life while

being successful at work.. This could affect the level of service delivery, potentially

affecting customer loyalty to KQ services.

Table 4.24 Staff satisfaction with Services Internal Service Dimensions

Mea

n

Str

on

gly

dis

ag

ree

Dis

ag

ree

Neu

tra

l

Ag

ree

Str

on

gly

ag

ree

Generally, staff at KQ are satisfied and

motivated to offer the best service to its

customers

2.90 6.7% 30.0% 33.3% 26.7% 3.3%

There is a synergy in the way services are

offered in internally

2.50 10.0% 40.0% 40.0% 10.0% 0.0%

All staff have undergone mandatory

customer loyalty training program

2.33 16.7% 56.7% 10.0% 10.0% 6.7%

There is cooperation between the various

departments

2.83 6.7% 30.0% 36.7% 26.7% 0.0%

Employees demonstrate commitment to

go the extra mile for customers

3.13 3.3% 20.0% 36.7% 40.0% 0.0%

Employees are adequately compensated

for their contribution to the company

2.37 20.0% 33.3% 36.7% 10.0% 0.0%

Compensation of employees at KQ is

performance-based

2.35 24.1% 37.9% 20.7% 13.8% 3.4%

KQ provides opportunities for upward

mobility to its staff

2.70 10.0% 30.0% 40.0% 20.0% 0.0%

KQ has work-life balance programs that

ensures that staff maintain a happy and

healthy personal life while being

successful at work

2.43 13.3% 50.0% 16.7% 20.0% 0.0%

57

4.6 Chapter Summary

Major findings in the chapter indicate that 63% of the respondents mostly preferred KQ

for international flights. However, majority (56.7%) of the respondents were dissatisfied

with KQ flight services. In terms of the effect of technical service quality, customer

loyalty to KQ services was directly related to reliability (r=.395, p<.05); convenience

(r=.298, p<.05), timeliness (r=.623, p<.01), flexibility (r=.431, p<.05), security (r=.399,

p<.05) and comfort (r=.415, p<.05). However, customer loyalty was inversely correlated

to cost of air fare (r=-.364, p<.05). All the technical quality dimensions were either very

important or extremely important to the respondents. In terms of importance, reliability

scored the highest mean (M=4.83), followed by timeliness (M=4.77), security (M=4.77),

convenience (M=4.60), cost of air fare (M=4.57), comfort (M=4.43) and flexibility

(M=4.37).

Regarding the effect of functional quality, respondents were satisfied with reservation

services, scoring an overall mean of 3.69, potentially positively influencing customer

loyalty. However, respondents were neither satisfied nor dissatisfied with check-in

services (M=3.14). On the other hand, respondents were dissatisfied with boarding

services (M=2.65), which potentially affected customer loyalty negatively.

Concerning internal customer satisfaction, majority of the respondents disagreed: that

there was synergy in the way services were offered internally (50%); that all staff had

undergone mandatory customer loyalty training program (73.4%); that KQ were

adequately compensated for their contribution to the company (53.3%); that

compensation of employees at KQ was performance-based (62.0%) or that of respondents

generally disagreed that the company had work-life balance programs that ensured that

staff maintain a happy and healthy personal life while being successful at work.(63.3%).

The next chapter discusses the findings, draws conclusions and makes recommendations.

58

CHAPTER FIVE

5.0 DISCUSSIONS, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

The previous chapter presented and analyzed the findings of the study. In this chapter, the

findings are discussed, conclusions drawn and recommendations made. The chapter

begins with a summary of the study. The discussion then proceeds based on the three

research objectives. Afterwards, conclusions are drawn based on the discussions. Lastly,

recommendations for further improvements as well as implications of the study for future

research are considered.

5.2 Summary

The general objective of the study was to establish the factors influencing customer

loyalty to Kenya Airways‟ international flights from Kenya by adopting a strategic

customer relationship management view point. The specific objectives were: to

investigate the influence of technical quality on customer loyalty to KQ‟s international

flights from Kenya; to determine the influence of functional quality on customer loyalty

to KQ‟s international flights from Kenya, and; to establish the influence of internal

customer satisfaction on customer loyalty to KQ‟s international flights from Kenya.

The study adopted descriptive research design. The population of interest was the

management and non-management staff of KQ based in Nairobi and corporate customers

of KQ who have used the company‟s international flights from Kenya, both being a total

of 460. Stratified sampling technique was used to select the internal customers

(employees) and corporate customers of KQ‟s international flights from Kenya. The

sample size was 60 respondents. Data was collected using a structured questionnaire.

Descriptive statistical technique of analysis used entailed the determination of the mean

and frequency distribution of the datasets. Inferences were drawn using Spearman‟s Rank

Correlation Coefficient technique. The use of the SPSS was incorporated for this purpose.

The data was presented in tables and figures.

In terms of the effect of technical service quality, customer loyalty to KQ services was

directly related to reliability of the airline; convenience offered by the airline‟s schedule,

59

timeliness of the flights, flexibility of the product and schedule, security of the airline and

cabin comfort which encompassed seat comfort, legroom and recline along with in-flight

entertainment. However, customer loyalty was inversely correlated to cost of air fare. All

the technical quality dimensions were either very important or extremely important to the

respondents. In terms of importance, reliability scored the highest mean, followed by

timeliness, security, convenience, cost of air fare, comfort and flexibility, in that order.

Regarding the effect of functional quality, respondents were satisfied with reservation

services, potentially positively influencing customer loyalty. However, respondents were

neither satisfied nor dissatisfied with check-in services. On the other hand, respondents

were dissatisfied with boarding services, which potentially affected customer loyalty

negatively.

Concerning internal customer satisfaction, majority of the respondents disagreed: that

there was synergy in the way services were offered internally between various

departments in KQ. Majority of respondents also concurred that all staff had not

undergone mandatory customer loyalty training program. The respondents further

disagreed that KQ staff were adequately compensated for their contribution to the

company and also that compensation of employees at KQ was performance-based. They

also disagreed that the company had work-life balance programs that ensured that staff

maintained a happy and healthy personal life while being successful at work.

5.3 Discussions

5.3.1 The Influence of Technical Quality on Customer Loyalty

The study findings showed that majority of the respondents were dissatisfied with KQ

flight services. Interestingly though, majority of the respondents mostly preferred KQ for

international flights. This is a contradiction that may be explained by three other findings.

Firstly, in terms of reasons for preference, a third of the respondents indicated that it was

the only flight available. This suggests that a significant proportion of respondents did not

have much of a choice over which international airline to use. This reason may contribute

to the surprisingly high preference to KQ over competing airlines like Qatar and

Emirates. The other reason could be because the comparative reputation that KQ has had

as an international airline in the region could still held despite growing competition. In

60

this study, the findings showed that reputation of the airline was a significant factor of

influencing patronage of a particular international airline. For instance, it is noteworthy

that KQ flies to 53 destinations in Africa, the Middle East, Asia and Europe, with

competition recently becoming visible from airlines like Qatar Airways, Emirates,

Ethiopian Airlines and South African Airways.

However, the contradiction could further be due to resistance to change, compounded by

the fact that it was a national flag carrier as this reason alone was a significant source of

influence to a fifth of the respondents. The customers therefore potentially developed a

tolerance for unsatisfactory service quality. This is consistent with the observation made

by Gothan and Erasmus (2008) who noted that consumers in developing countries have

lower quality expectations and are more tolerant of ineffective services. This is especially

explained by the fact that majority of the respondents were dissatisfied with nearly all

physical quality of KQ‟s international flight such as seat comfort, seat recline, sleeping

comfort and amount of legroom. However, this seemingly questionable state of technical

quality, combined with emerging competition, perhaps explains KQ‟s declining market

dominance and the poor performance in its market share in terms of international flights

from Kenya. The results therefore is consistent with the argument put forward by Pride

and Ferell (2011) that not having high-quality goods and services can be very expensive,

especially in terms of dissatisfied customers.

Correlation results showed that customer loyalty to KQ services was directly related to

the airline‟s reliability. This agrees with Erdem et al. (2002) who noted that reliability

affects service credibility which in turn affects the long-term orientation of a customer. In

this case, the more the airline is perceived to be reliable, the more loyal the customers

become. In this study, the findings showed that almost all of the respondents considered

flight reliability extremely important and with a few of the respondents saying this service

dimension was very important. Thus, this technical quality dimension is situated in the

second quadrant of Yang, et al.‟s (2009) importance-satisfaction model as the findings of

this study imply that suggest that reliability was important to customers but performance

had not reached customer expectations, thus needs to be improved. The results agree with

a previous study undertaken by Dillingham (2010) which found that reliability of services

was a significant concern, especially regarding delays, cancellations and route and

schedule changes which were commonplace.

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The findings showed that customer loyalty was directly related to the aspect of

convenience, implying that the more convenient the airline service was perceived to be,

the more loyalty the customers demonstrated through more frequent flights to

international destinations using the national flag carrier. In this study two-thirds of the

respondents considered convenience extremely important. The results agree with the

claim by Doganis (2001) who suggested that the choice of airline was influenced above

all by the convenience of an airline‟s schedules and timings. This is equally depicted in

the findings which ranked convenient schedule only second to safety in terms of the main

reasons for respondents‟ choice of preferred airline. Thus, this service dimension also lies

in the second quadrant of the importance-satisfaction model developed by Yang et al.

(2009).

The study established that there was a statistically significant positive correlation between

customer loyalty and airline timeliness. This service dimension had the highest

correlation coefficient, suggesting that airline timelines was strongly related to customer

loyalty. This was confirmed by the descriptive statistics which showed that timeliness of

flight was extremely important to three quarters of the respondents and very important to

the remainder of the respondents. The findings therefore are consistent with those of a

study reported by Bansal et al. (2009) which showed that effective timing was one of the

highest contributors in forming an airline preference. In this study, punctuality was

among the top five reasons out of eighteen that respondents cited for their preference of

an airline. Further findings revealed that airline flexibility was also statistically correlated

to customer loyalty. In other words; the more flexible the airline service was, the more

loyal were the customers. This agrees with the point put across by De Kluyver (2010) that

companies that excel in operational flexibility so they can respond quickly to almost any

need, from customizing product to fulfilling special requests, consequently engendering

tremendous customer loyalty.

Similarly, the findings showed that security and safety of the customer was positively

correlated to customer loyalty. This is further depicted in the findings which showed that

over three quarters of the respondents considered security extremely important and a tenth

said security was very important. The results are in agreement with the findings of a study

by Doganis (2001) which established that safety, among others, was also important to

62

travellers. In this study, safety was the number one reason that influenced respondents‟

preference to a particular airline for international destinations, being nominated by two-

thirds of the respondents. In Kenya, this was not surprising because of the heightened

insecurity noted in recent times as a result of global terrorism.

As was expected, customer loyalty was inversely correlated to cost of air fare, suggesting

that price of KQ‟s international flight services influenced customer loyalty. The finding

agrees with that of Bansal et al., (2009) which revealed that the last factor affecting

airline preference was reasonable price whose contribution was 1.736. In this study, two-

thirds of the respondents considered cost extremely important and a third held that cost of

air fare was very important to their choice of airline. This potentially corresponds to

Kernchen‟s (2007) observation that some airlines have responded to the question of value

by introducing low-cost carriers, thereby affecting the competitiveness of traditional

airlines. This potentially confirms the study assumption and resonates well with the need

for a SCRM approach to airline management. It was noted in this study that low price

influenced a significant proportion of the respondents regarding their airline preference,

coming top ahead of fourteen other reasons including frequent flier programs and national

airline. This agrees with Kumar and Reinartz (2012) who listed price among the five main

factors that drive customers‟ choice of providers in the airline industry.

5.3.2 The Influence of Functional Quality on Customer Loyalty to KQ

The study showed that the highest number of the reservations was made through KQ‟s

office. This was an interesting, suggesting that reservations through the office rather than

online channels remained the predominant option of booking for flights by the customers.

This goes contrary to the claim by Sellers (2007) that airline websites now represent the

crown jewel of an airline‟s reservation system. In this study, reservations through the

company‟s website accounted for only a fifth of the bookings, trailing behind the share of

reservations made by travel agents which accounted for a third of the bookings. One

reason that may explain this surprising outcome is the very fact that data was collected

from KQ‟s corporate customers who are conventionally characterized by distinctive buyer

behaviour patterns. In this study, it was noted that while the majority of the patrons

travelled alone, a significant proportion of the respondents travelled with friends and

colleagues. This suggests that corporate customers perhaps did group bookings or more

63

than one ticket per booking, whose process and terms of service required that transactions

be undertaken through the KQ offices.

In terms of customers‟ evaluation of reservation services, the study found that half of the

respondents were satisfied with waiting time for reservation services and the staff‟s

ability to anticipate needs of customers; while two thirds were satisfied with courtesy and

helpfulness of reservations staff; along with staff‟s product knowledge. These statistics

imply that satisfaction with reservation services potentially positively influenced the

loyalty of the respondents to KQ services. Collectively, the findings correspond with the

definitive meaning of responsiveness aspect of functional quality consistent with previous

empirical results by Gadde et al. (2003) which concluded that greater responsiveness will

lead to firms work together to provide better and more timely information; reduce work

cycles; and synchronize lead times and capacities to work in a more coordinated manner.

Interestingly, the study established that half of the respondents checked in online whereas

the other half checked in over the counter. In view of earlier discussion, the results agree

more with Sellers (2007) who noted that airline websites play an important role in an

airline‟s reservation system, considering that on-line check-in services represent part of

that system. That both over-the counter and online check-in manifested with equal

measure depict elements of CRM systems as discussed by Mukerjee (2007) because it

characterize multichannel customer access to facilitate customers in gaining easy and

convenient access through remote check-in via internet website or through the customer‟s

mobile phone and self check-in at the airport through automated machines as well as over

the counter. This is reinforced by the results which showed that two-thirds of the

respondents were satisfied with ease of finding appropriate check-in area, which

potentially positively influence their loyalty to the airline‟s services.

The study however found that other aspects of check-in services recorded a low

satisfaction rating as indicated by the mean scores. These aspects included waiting time at

the check-in counter, efficiency of check-in counter staff, courtesy and helpfulness of

check-in staff. The results suggest that the respondents were dissatisfied with check-in

services, which potentially negatively influenced customer loyalty. Consistent with CRM

literature (Chartuvedi, 2009), customer experiences when interacting with the enterprise

plays a key role in shaping their perception of the enterprise – the value it provides and

64

the importance it places on the customer relationship. Good customer experience driver

satisfaction, trust and long-term loyalty whereas poor customer experiences have the

opposite effect. For instance, the findings also showed that while majority of the

respondents were satisfied with the courtesy of boarding gate staff, most of the other

aspects of boarding services scored a low rating. These include the attitudes of boarding

staff, information regarding the boarding process, clarity of boarding announcements at

gate, efficiency of aircraft boarding, punctuality of flight departure and information given

prior to boarding if a flight was delayed. What these results imply is that customer loyalty

was potentially impacted on negatively by increasing opportunity to switch as rightly

conceptualized by Voudouris (2008).

5.3.3 The Influence of Internal Customer Satisfaction on Customer Loyalty

Employees are internal customers whose level of satisfaction impacts on the

organization‟s bottom-line. This study however found that internal customer satisfaction

rating scored very lowly implying that staff members at KQ were not satisfied or

motivated to offer the best service to its customers. This potentially affected the quality of

service delivery with negative implications on customer loyalty. This is consistent with

CRM literature (Pride and Ferrell, 2011) which contends that if internal customers are not

satisfied, it is likely that external customers will not be satisfied either. By proxy, this

reflection on external customer satisfaction potentially affects the level of customer

loyalty of airline patrons. This linkage between internal customer satisfaction and external

customer loyalty is logical, and agrees with the views of Curtis (2012) who maintained

that if the motivation of the employees is not adequate, it will affect the level of service

offered, which in turn, will impact on the satisfaction experienced by the customers,

hence affecting customer loyalty.

Associated with staff motivation is the finding which showed that majority of the

respondents disagreed that there was synergy in the way services were offered internally.

It can be inferred that this affects the quality of services offered, thereby impacting

negatively on customer loyalty. As hitherto established, KQ‟s airline patrons were

generally dissatisfied with most aspects of the technical as well as functional quality

which have a direct correlation with their loyalty to the airline as measured by the number

of trips made through the airline. This agrees with the findings of Holweg (2005) which

established that the internal responsiveness capability of the service provider has a direct

65

impact on the responsiveness of the customers. In this case, the lack of synergy in service

delivery internally is a depiction of low internal responsiveness. These results therefore

support the perspective of Berndt (2004) who held that internal responsiveness invites

inter-functional coordination and integration leading to cooperation between all the

functions.

The study recorded a low mean regarding CRM training, with majority of the respondents

disagreeing that all staff had undergone mandatory customer loyalty training program. In

the wake of the foregoing finding, these results are not surprising as they suggest

agreement with the findings of Osarenkhoe‟s (2007) study which showed that

implementing sustainable CRM strategy requires, among others mandatory customer

loyalty training programmes for all employees. It is logical to infer that synergy between

the departments is difficult to achieve without a CRM training strategy in place. This

apparent lack of synergy is further depicted in the findings which showed that

respondents disagreed that there was cooperation between the various departments. This

implies that service delivery was potentially affected negatively, which could affect

customer loyalty.

CRM literature suggests that CRM strategy can fail when a limited number of employees

are committed to the initiative, which makes employee engagement an essential issue in

CRM implementation (Chen and Tseng, 2010). However, the study findings revealed that

majority of the respondents disagreed that employees at KQ were adequately

compensated for their contribution to the company. This potentially affected their level of

engagement and by extension, the quality of services delivered to customers, thereby

negatively impacting on customer loyalty. The question of employee engagement at KQ

is further reduced by the fact that respondents did not agree that KQ provided

opportunities for upward mobility of its staff. Thus, the quality of service offered to

external customers could be affected. This argument concurs with the findings of a study

by Stein (2007) which established that the item that universally scored the lowest in

workplace happiness was to do with career advancement. Given that majority of the

responding staff had served at the company for more than five years, it was possible that a

lack of upward mobility could cause disillusionment that affect their level of satisfaction

and commitment to service, thereby potentially affecting customer loyalty to KQ services

negatively.

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5.4 Conclusions

5.4.1 The Influence of Technical Quality on Customer Loyalty

All the technical quality dimensions significantly influence customer loyalty to KQ‟s

international flights from Kenya. By order of importance, reliability of the airline topped

the list, followed by timeliness, security, convenience, cost of air fare, comfort and

flexibility. These were potentially moderated by five related factors namely, airline

safety, convenient schedule, reputation of the airline previous flight experience,

punctuality, ticket price and flight availability on the international destination. Aspects of

physical qualities with potential negative implications on customer loyalty included seat

comfort, seat recline, sleeping comfort and legroom.

5.4.2 The Influence of Functional Quality on Customer Loyalty

In terms of functional quality, with the exception of reservation services, all the other

dimensions of functional quality potentially negatively influenced customer loyalty. KQ

registered a high satisfaction rating in terms of waiting time for reservation service,

courtesy of reservations staff, responsiveness, and knowledge as well as communication

skills of reservation staff. However, both check-in and boarding services potentially

played a negative role on the level of loyalty of customers to KQ‟s international flights

from Kenya. Customers were dissatisfied with waiting time at the check-in counter,

efficiency of check-in staff, responsiveness and attitude of check-in staff. Similarly,

customers expressed general dissatisfaction with information communication, punctuality

and efficiency of aircraft boarding services.

5.4.3 The Influence of Internal Customer Satisfaction on Customer Loyalty

Low levels of internal customer satisfaction potentially affected the quality of services

offered to external customers thereby negatively impacting on customer loyalty. Internal

service quality was characterized by lack of motivation, lack of synergy and cooperation

between staff and departments, lack of CRM training, low staff commitment, inadequate

compensation of staff, limited upward mobility opportunities for staff and an absence of

work-life balance programs that ensures that staff maintain a happy and healthy personal life

while being successful at work.

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5.5 Recommendations

5.5.1 Recommendations for Improvement

5.5.1.1 The Influence of Technical Quality on Customer Loyalty

KQ should strategically focus on improving all the technical quality dimensions of

service, as they primarily determine the preference of corporate customers to an airline

for international destinations. This means investing in continuous quality improvements

regarding airline reliability, timeliness, security, convenience, comfort and flexibility.

These should be used as a demonstration of value for money to the corporate customers.

The ultimate objective that KQ could achieve with this is to profitably defend its

reputation and market dominance in the region as well as increase its demand on the

destinations where it is the only carrier operating.

5.5.1.2 The Influence of Functional Quality on Customer Loyalty

KQ should launch an investigation into the reasons why it is registering a low satisfaction

rating as far as its functional quality dimensions are concerned. The investigation should

be geared towards resolving the people issues at the company, especially with regards to

check-in and boarding. It could investigate, for instance, why it is getting its reservations

aspect of functional quality right to help discover the causes of service quality gaps in

check-in services and boarding services.

5.5.1.3 The Influence of Internal Customer Satisfaction on Customer Loyalty

KQ should invest in improving the quality of services it offers to its internal customers as

this has a direct bearing on the satisfaction of external customers and therefore, their

loyalty. Improving internal service quality means, among others, adequately

compensating staff for their contribution to the organization, engaging staff into

mandatory CRM training and coming up with work-life balance programs that ensures that

staff maintain a happy and healthy personal life while being successful at work.

5.5.2 Recommendations for Further Studies

This study established that corporate customers made reservations through KQ office

despite availability of online platforms. Therefore, research should be undertaken to

establish the economic added value of investment in such online platforms by comparing

68

these patterns with the individual buyer behaviour patterns. In addition, this research was

based on a relatively small sample due to resource constraints. Therefore, while the

findings of the study adequately provided some pointers to the factors influencing

customer loyalty to KQ‟s international flights from Kenya, another study that uses a

larger sample size could be used to validate or refute the results of this study. Thirdly, this

research being a case study of KQ means that generalization of the study findings to the

entire airline industry should be done with caution. Therefore, other case studies should

be undertaken for comparison purposes.

69

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Quality on Business Performance. Hawaii: AHICB.

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APPENDICES

APPENDIX I: COVER LETTER

UNITED STATES INTERNATIONAL UNIVERSITY

June 26, 2013

Dear Respondent,

RE: FACTORS INFLUENCING CUSTOMER LOYALTY TO KQ

INTERNATIONAL FLIGHTS FROM KENYA

My names are Grant Ochieng‟, a postgraduate student pursuing an MBA degree at the

United States International University. I am writing to request your participation in this

research titled; “Factors Influencing Customer Loyalty to Kenya Airways’ International

Flights from Kenya: Implications for Strategic Customer Relationship Management”. The

findings of the study are intended to help KQ improve on the way it manages its

relationship to its customers in order to enhance value to all stakeholders. Your

participation in this study is anonymous, and as such, the confidentiality of the

information you will provide is guaranteed. As such, your name or identity, or the identity

of the company will not appear anywhere in the report. You are kindly requested to fill

the attached questionnaire as completely and as accurately as possible.

Yours sincerely,

Grant Ochieng‟

Phone + 254 737 737 399

United States International University

76

APPENDIX II: QUESTIONNAIRE TO KQ CUSTOMERS

Dear Respondent,

This questionnaire is made up of four sections which will take a few moments of your

time. Using your most recent experience of KQ services, kindly tick in the appropriate

box or fill in your responses on the blanks provided.

SECTION A: GENERAL DATA

1. Gender? Male

Female

2. Age bracket?

18 – 29

30 – 39

40- 49

50 +

3. How frequent do you fly with KQ for international destinations?

Weekly

Monthly

After about 3 months

After about 6 months

Yearly

Other (please specify) _____________________________

4. When did you last fly with KQ for international travel?

In the last one week

In the last one month

In the last six month

In the last one year

It has been more than a year

5. Did you travel alone or as a group?

Alone

With friends/colleagues

With family

6. Please indicate your class of travel?

Business

Economy

77

7. On average, how many trips have you made by plane in the last 12 months?

(Outbound and in-bound to be counted as one trip) _______________

8. Do you use any other airline for international travel?

Yes

No

9. If yes to Q4 above, please list the other airline(s) that you use?

_________________________________________________________

_________________________________________________________

_________________________________________________________

10. Which airline do usually prefer/frequently use?

_________________________________________________________

11. How satisfied would you say you are with the services of KQ overall?

Very Dissatisfied

Dissatisfied

Neither

Satisfied

Extremely Satisfied

SECTION B: THE INFLUENCE OF TECHNICAL QUALITY ON CUSTOMER

LOYALTY

In the following section, please rate the level of importance you attach to the following

service elements [please tick ()]

Extremely

important

Very

important

Fairly

Important

Less

important

Not

important

Reliability

Convenience

Timeliness

Flexibility

Security

Comfort

Cost of air fare

78

12. What are your 3 main reasons for choosing to travel with your most preferred

airline in Q10 above?

Main Reason for travel Yes No Main reason for travel Yes No

Previous experience Frequent flyer program

Reputation Value for money

National Airline Only flight available

Part of an inclusive

package/ tour package

Quality of in-flight

service

Advertising Baggage offering

Convenient Schedule Offered lowest price

Promotion Recommendation

Punctuality Corporate travel policy

Safety Did not choose/ Don't

know

8. Please rate Kenya Airways on the following elements of Comfort:

Didn't

use/

notice

Very

dissatisfied

Dissatisfied Neither Satisfied

Extremely

Satisfied

Seat Comfort

Seat recline

Sleeping

Comfort

Amount of

Legroom

Comments/ suggestions on Kenya Airways

Comfort.________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

79

SECTION B: THE INFLUENCE OF FUNCTIONAL QUALITY ON CUSTOMER

LOYALTY

13. How did you make your ticket reservation?

Where Reservation was made

Kenya Airways office

Travel agent

Another airline

Kenya Airways website

Other website

14. Please rate Kenya Airways Reservations on the following Reservations

elements

(For direct Kenya Airways Office reservations, not through travel agents)

Stage of Service at

Reservations

Very

dissatisfied

Dissatisfied Neither

Satisfied Extremely

satisfied

Waiting time for service

Courtesy/ helpfulness of

staff

Ability of staff to

anticipate needs

Product knowledge of

staff

Communication skills of

staff

Comments/ suggestions on Kenya Airways Reservation

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

15. How did you check-in for this flight?

Online

Check-in counter

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16. Please rate Kenya Airways on the following Check-in elements:

Did

n't

use

/noti

ce

Ver

y

dis

sati

sfie

d

Dis

sati

sfie

d

Nei

ther

Sati

sfie

d

Extr

emel

y

Sati

sfie

d

Ease of finding appropriate check-in area

Appearance of check-in counter

Waiting time at the check in counter

Efficiency of check-in counter staff

Courtesy/ helpfulness of check-in staff

Communication skills of check-in staff

Attitude of check-in staff

17. Please rate Kenya Airways on the following Boarding & Departure elements:

Did

n't

use

/

noti

ce

Ver

y

Dis

sati

sfie

d

Dis

sati

sfie

d

Nei

ther

Sati

sfie

d

Extr

emel

y

Sati

sfie

d

Courtesy/ helpfulness of boarding gate staff

Communication skills of boarding gate staff

Attitude of boarding gate staff

Information regarding the boarding process

Clarity of boarding announcements at gate

Efficiency of aircraft boarding

Punctuality of flight departure

Information given prior to boarding if flight

was delayed

Comments/ suggestions on Boarding & Departure

________________________________________________________________________

________________________________________________________________________

______________________________________________________________________

THANK YOU FOR YOUR TIME AND COOPERATION

81

APPENDIX III: QUESTIONNAIRE TO STAFF

Dear Respondent,

This questionnaire is made up of two short sections which will take a few moments of

your time. Please kindly tick in the appropriate box or fill in your responses on the blanks

provided.

SECTION A: GENERAL DATA

1. Gender? Male

Female

2. Age bracket?

18 – 29

30 – 39

40- 49

50 +

3. Department: ______________________________________________________

4. How long have you worked with KQ? _________ Years

5. Please indicate your cadre?

Management staff

General staff

6. How satisfied would you say you are with the services of KQ to customers?

Very Dissatisfied

Dissatisfied

Neither

Satisfied

Extremely Satisfied

7. How satisfied would you say you are with the services you receive internally?

Very Dissatisfied

Dissatisfied

Neither

Satisfied

Extremely Satisfied

82

Using your most recent experience at KQ, please indicate whether you agree or disagree

with the following statements concerning internal customer satisfaction.

Str

on

gly

dis

agre

e

Dis

agre

e

Neu

tral

Agre

e

Str

on

gly

agre

e

8. Generally, staff at KQ are satisfied and motivated to offer

the best service to its customers

9. There is a synergy in the way services are offered

in internally

10. All staff have undergone mandatory customer

loyalty training program

11. There is cooperation between the various

departments

12. Employees demonstrate commitment to go the

extra mile for customers

13. Employees are adequately compensated for their

contribution to the company

14. Compensation of employees at KQ is

performance-based

15. KQ provides opportunities for upward mobility to

its staff

16. KQ has work-life balance programs that ensures

that staff maintain a happy and healthy personal life

while being successful at work

17. If you answered “disagree/strongly disagree” in any of the statements above,

please explain your answer?

____________________________________________________________________

____________________________________________________________________

____________________________________________________________________

____________________________________________________________________

____________________________________________________________________

____________________________________________________________________

18. Any further comments or suggestions regarding how customer loyalty can be

improved at KQ?

____________________________________________________________________

____________________________________________________________________

____________________________________________________________________

____________________________________________________________________

____________________________________________________________________

THANK YOU FOR YOUR TIME AND COOPERATION