Loyalty Programmes in the South African Airline Industry
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LOYALTY PROGRAMMES IN THE SOUTH AFRICAN AIRLINE INDUSTRY AYANDA MANUNGA Submitted in partial fulfilment of the requirements for the MASTER’S DEGREE IN BUSINESS ADMINISTRATION in the FACULTY OF BUSINESS AND ECONOMIC SCIENCES of the NELSON MANDELA UNIVERSITY Supervisor: Professor Margaret Cullen 14 December 2018 I. DECLARATION I, the undersigned, hereby declare that: • The work contained in this treatise is my own original work; • This treatise was not submitted in full or partial fulfilment to any other recognised university for any other degree; • This treatise is being submitted in partial fulfilment of the requirements for the degree of Masters in Business Administration; and • All sources used or referred to have been documented and recognised. 14 December 2018 Ayanda Manunga Date i II. ACKNOWLEDGEMENTS I am eternally grateful to the people who have been part of my journey in completing this Treatise and the Master of Business Administration. To my Heavenly Father, The Almighty who has given me strength and the will to go through this wonderful journey. To my supervisor, Professor Margaret Cullen, words cannot describe how grateful I am to you for being part of this journey. Your advice, guidance and commitment were invaluable and truly appreciated. Dr Venter, thank you for your assistance with the statistical analysis. To my mother, Xoliswa Roji, thank you for your love, support and encouragement. Thank you for being my strength and my number one supporter. To my siblings, Felicia Manunga and Tando Manunga, thank you for your encouragement and support. To my partner, Bafana Malunga, you have been my voice of reason and my soundboard. Your guidance and unwavering support has kept me going. To my employer, for the financial assistance and other resources. To my MBA syndicate group, Gauteng 17.3 for the teamwork and support. ii III. ABSTRACT While there has been substantial research on Loyalty Programmes in the last two decades, little has been done in the South African Airline Industry. This study uses the Social exchange theory, Relationship marketing theory and Commitment-trust theory to provide an understanding of the factors, which influence loyalty programmes in the South African Airline Industry. The methodology used involved a self-administrated on-line questionnaire from the sample, which comprised of 1090 respondents. From the total respondents, 172 belonged to one or more Airline Loyalty Programmes. This study focused on the latter. An email containing a Universal Resource Link (URL) to the survey was sent to the Nelson Mandela University Business School‟s Marketing Department to distribute to current first-year MBA students, who also had to circulate the survey to at least ten other people. A proposed conceptual model was compiled and tested using exploratory factor analysis. The result of the study confirmed that the measurement instrument is in order and that attitude and behaviour are strong determinants of the loyalty programme. Communication, flexibility, general assessment, rewards personal, rewards tangible, rewards monetary and trust are factors that influence the loyalty programme, which are driven by the attitude of the participant in the programme. On the other hand, communication, flexibility, general assessment, rewards personalisation, purchase behaviour and trust are factors that influence the loyalty programme, which are driven by the behaviour of the participant in the programme. This study concludes with managerial recommendations that will enable managers to identify factors which influence loyalty programmes in the South African Airline Industry. This will enable managers to make informed decisions when formulating and implementing successful programmes. Some of the recommendations call for a review and repositioning of the value proposition for the existing loyalty programmes. It is also recommended that loyalty programmes are value-based in order to convert loyalty programme customers to loyal customers. In addition, majority of the loyalty programme customers call for loyalty programmes that offer programmes that non- iii expiry points with personalised service offering. The organisations that offer loyalty programmes in the Airline Industry also need to design clear communication strategies that will provide a holistic and targeted approach to customer engagement. Key Words: loyalty programmes, customer commitment, customer satisfaction, customer trust, loyalty programmes, purchase behaviour, communication, personalisation, flexibility, trust, rewards and method of participation. iv TABLE OF CONTENTS I. DECLARATION ................................................................................................. i II. ACKNOWLEDGEMENTS .................................................................................. ii III. ABSTRACT ...................................................................................................... iii IV. LIST OF FIGURES ........................................................................................... ix V. LIST OF TABLES ............................................................................................. x 1. CHAPTER 1 - LITERATURE REVIEW ................................................................ 1 1.1. Introduction ................................................................................................... 1 1.2. Problem statement ........................................................................................ 3 1.3. Research questions ...................................................................................... 4 1.4. Research objectives ...................................................................................... 4 1.5. Research delimitation .................................................................................... 6 1.6. Research significance ................................................................................... 6 1.7. Research methodology ................................................................................. 7 1.7.1. Research approach ................................................................................ 7 1.7.2. Literature review ..................................................................................... 8 1.7.3. Data collection ........................................................................................ 8 1.8. Ethical clearance ........................................................................................... 8 1.9. Report structure ............................................................................................ 8 1.9.1. CHAPTER 1: INTRODUCTION AND PROBLEM STATEMENT ........... 9 1.9.2. CHAPTER 2: LITERATURE REVIEW ................................................... 9 1.9.3. CHAPTER 3: RESEARCH DESIGN AND METHODOLOGY ................ 9 1.9.4. CHAPTER 4: RESULTS AND ANALYSIS ............................................. 9 1.9.5. CHAPTER 5: FINDINGS, CONCLUSION AND RECOMMENDATION . 9 1.10. Summary ................................................................................................. 10 2. CHAPTER 2 LITERATURE REVIEW .............................................................. 11 2.1. Introduction ................................................................................................. 11 2.2. The origin of the loyalty programme concept .............................................. 12 2.2.1. Customer loyalty programmes .............................................................. 13 2.2.2. Structure of loyalty programmes ........................................................... 14 2.2.3. Benefits of loyalty programmes ............................................................ 14 v 2.2.4. Challenges related to loyalty programmes ............................................ 16 2.3. Theoretical grounding ................................................................................. 17 2.3.1. Social exchange theory ........................................................................ 17 2.3.2. Relationship marketing theory .............................................................. 18 2.3.3. Commitment-trust theory ...................................................................... 19 2.4. Definition of terms ....................................................................................... 20 2.4.1. Customer loyalty ................................................................................... 20 2.5. Loyalty programmes in the Airline Industry ................................................. 21 2.5.1. Global perspective ................................................................................ 22 2.5.2. South African context ........................................................................... 23 2.6. Components of loyalty programmes ............................................................ 25 2.6.1. Purchase Behaviour ............................................................................. 28 2.6.2. Trust ..................................................................................................... 29 2.6.3. Communication ..................................................................................... 30 2.6.4. Personalisation ..................................................................................... 31 2.6.5. Flexibility ............................................................................................... 32 2.6.6. Rewards ..............................................................................................