FACTORS INFLUENCING CUSTOMER LOYALTY: IMPLICATIONS FOR STRATEGIC CUSTOMER RELATIONSHIP MANAGEMENT AT AIRWAYS

BY

GRANT OCHIENG’ ONYANGO

UNITED STATES INTERNATIONAL UNIVERSITY AFRICA

SUMMER 2014 FACTORS INFLUENCING CUSTOMER LOYALTY: IMPLICATIONS FOR STRATEGIC CUSTOMER RELATIONSHIP MANAGEMENT AT

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 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 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

ii COPYRIGHT Grant Ochieng‟ Onyango. Copyright © 2014.

iii 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 ‟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.

iv 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.

v 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.

vi DEDICATION Dedicated to my wife and children.

vii 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

viii 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

ix 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 ...... 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

x 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

xi 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

xii 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 1 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 2 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. 3

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

4 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; , , , ALS - Aircraft Leasing Services, , Blue Bird Aviation (Kenya), CMC Aviation, Delta Connection (Kenya), , , JetLink Express, Kenya Airways and . 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 5 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.

6 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.

7 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).

8 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).

9 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.

10 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 11 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 12 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.

SATISFACTION DEGREE

III. Surplus I. Excellent High

Mean or Median

IV. Care free II. To be improved Low Low Mean or Median High IMPORTANCE DEGREE

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

13 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).

14 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 15 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 16 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 17 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. 18

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 19 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).

20 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, 21 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

22 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.

Emerging customer service trends

Personalization

Increased switching Openness costs

Advocacy Trust and comfort Customer loyalty Customer analytics Reduced opportunity

to switch Real-time service

Knowledge-based

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

23 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

24 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 25 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.

26 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 27 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 28 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

29 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.

30 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.

31 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).

32 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

33 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.

34 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.

35 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 Distribution Gender of customer Frequency Percent Male 18 60.0 Female 12 40.0 Total 30 100.0

36 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 Distribution Age bracket of customer 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 Distribution Frequency 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

37 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 Distribution Frequency 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 Distribution Did you travel alone or as a group 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 Distribution Class of travel Frequency Percent Business 4 13.3 Economy 26 86.7 Total 30 100.0

38

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 Distribution Number of Trips 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 Distribution international travel 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 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. 39 35.0 30.0 30.0 30.0 23.3 25.0 20.0 16.7 16.7 13.3 13.3

Percent 15.0 10.0 10.0 5.0 - Emirates Ethiopian South Qatar KLM Air British Virgin Airlines Africa Uganda Airways Atlantic Airlines

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.

80.0 63.0 60.0

40.0 Percent 18.5 20.0 7.4 3.7 3.7 3.7 0.0 KQ Emirates Ethiopian South Africa British Virgin Airlines Airlines Airways Atlantic

Figure 4.2 Distribution of Employee Respondents by Gender

40 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 Distribution Gender of employee 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 Distribution Age of employees 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 Distribution Department Frequency Percent Commercial 20 66.7 Flight Operations 3 10.0 Ground Operations 4 13.3 HR 3 10.0 Total 30 100.0 41 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 Distribution Tenure in years 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 Distribution Satisfaction rating 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

42 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).

43 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, 44 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 Very Fairly Less Not important important Important important 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 4.57 63.3% 30.0% 6.7% 0.0% 0.0% fare

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.

45 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, 46 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 Neither Satisfied Extremely dissatisfied 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 Distribution Where reservation was made 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

47 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.

48 Table 4.19 Customer Level of Satisfaction with Reservation services of KQ Stage of Service Mean Very Dissatisfied Neither Satisfied Extremely at Reservations dissatisfied satisfied Waiting time for 3.63 0.0% 6.3% 43.8% 31.3% 18.8% service Courtesy/ 3.82 0.0% 5.9% 29.4% 41.2% 23.5% helpfulness of staff Ability of staff to 3.53 0.0% 23.5% 23.5% 29.4% 23.5% anticipate needs Product 3.82 0.0% 5.9% 29.4% 41.2% 23.5% knowledge of staff Communication 3.65 0.0% 29.4% 11.8% 23.5% 35.3% skills of staff

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 Distribution Check-in 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

49 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 50 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

Mean Didn't use /notice Very dissatisfied Dissatisfied Neither Satisfied Extremely Satisfied Ease of finding 3.52 3.4% 3.4% 0.0% 31.0% 55.2% 6.9% appropriate check-in area Appearance of check-in 3.10 3.4% 10.3% 17.2% 13.8% 51.7% 3.4% counter Waiting time at the 2.86 3.4% 24.1% 6.9% 24.1% 31.0% 10.3% check in counter Efficiency of check-in 2.93 3.6% 14.3% 25.0% 10.7% 35.7% 10.7% counter staff Courtesy/ helpfulness of 3.21 3.4% 13.8% 13.8% 10.3% 44.8% 13.8% check-in staff Communication skills of 3.21 3.4% 17.2% 10.3% 13.8% 41.4% 13.8% check-in staff Attitude of check-in 3.14 0.0% 30.0% 20.0% 10.0% 33.3% 6.7% staff

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

51 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 52 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

Mean Didn'tuse/ notice Very Dissatisfied Dissatisfied Neither Satisfied Extremely Satisfied Courtesy/ helpfulness of 3.67 0.0% 0.0% 5.9% 29.4% 41.2% 23.5% boarding gate staff Communication skills of 2.93 0.0% 30.0% 6.7% 13.3% 40.0% 10.0% boarding gate staff Attitude of boarding gate 2.77 0.0% 33.3% 13.3% 6.7% 36.7% 10.0% staff Information regarding the 2.83 0.0% 26.7% 16.7% 10.0% 40.0% 6.7% boarding process Clarity of boarding 2.90 0.0% 13.3% 26.7% 26.7% 23.3% 10.0% announcements at gate Efficiency of aircraft 2.63 0.0% 36.7% 16.7% 6.7% 26.7% 13.3% boarding Punctuality of flight 1.87 0.0% 50.0% 30.0% 3.3% 16.7% 0.0% departure Information given prior to 1.60 6.7% 63.3% 10.0% 3.3% 16.7% 0.0% boarding if flight was delayed

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 53 very dissatisfied. Therefore, majority of the responding staff were satisfied with the services they received.

Table 4.23 Staff satisfaction with KQ services Distribution Internal customer satisfaction 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

54 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.

55 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

Mean Strongly disagree Disagree Neutral Agree Strongly agree Generally, staff at KQ are satisfied and 2.90 6.7% 30.0% 33.3% 26.7% 3.3% motivated to offer the best service to its customers There is a synergy in the way services are 2.50 10.0% 40.0% 40.0% 10.0% 0.0% offered in internally All staff have undergone mandatory 2.33 16.7% 56.7% 10.0% 10.0% 6.7% customer loyalty training program There is cooperation between the various 2.83 6.7% 30.0% 36.7% 26.7% 0.0% departments Employees demonstrate commitment to 3.13 3.3% 20.0% 36.7% 40.0% 0.0% go the extra mile for customers Employees are adequately compensated 2.37 20.0% 33.3% 36.7% 10.0% 0.0% for their contribution to the company Compensation of employees at KQ is 2.35 24.1% 37.9% 20.7% 13.8% 3.4% performance-based KQ provides opportunities for upward 2.70 10.0% 30.0% 40.0% 20.0% 0.0% mobility to its staff KQ has work-life balance programs that 2.43 13.3% 50.0% 16.7% 20.0% 0.0% ensures that staff maintain a happy and healthy personal life while being successful at work

56 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.

57 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,

58 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

59 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. 60

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 61 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

62 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 63 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 64 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. 65

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.

66 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

67 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.

68 REFERENCES

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74 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

75 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  76 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 Very Fairly Less Not important important Important important important Reliability Convenience Timeliness Flexibility Security Comfort Cost of air fare

77 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 Quality of in-flight package/ tour package 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 Very Dissatisfied Neither Satisfied Extremely use/ dissatisfied Satisfied notice Seat Comfort Seat recline Sleeping Comfort Amount of Legroom

Comments/ suggestions on Kenya Airways Comfort.______

78 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 Very Dissatisfied Neither Satisfied Extremely Reservations dissatisfied 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 

79

16. Please rate Kenya Airways on the following Check-in elements:

Didn't use /notice Very dissatisfied Dissatisfied Neither Satisfied Extremely Satisfied 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:

issatisfied

Didn'tuse/ notice Very D Dissatisfied Neither Satisfied Extremely Satisfied 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

80 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 

81 Using your most recent experience at KQ, please indicate whether you agree or disagree with the following statements concerning internal customer satisfaction.

Strongly Strongly disagree Disagree Neutral Agree Strongly agree 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

82