CUSTOMER PERCEIVED VALUE AND PATRONAGE OF AIRLINES (A CASE STUDY OF PORT HARCOURT, RIVERS STATE)

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Globally, the airline industry is one of the more intangible industries dealing principally with the provision of services contributing over $12.9 billion in 2006 (Adeola & Adebiyi, 2014). Being global in nature, the recent world economic downturn of 2008 and 2009 period has had a tremendous blow on the industry (Johan, Noor, Bahar, Yan, & Ping, 2014).The airline industry is considered one of the commanding heights of global economy, aiding globalization by facilitating the rate of international economic exchanges among nations (Johan, et al, 2014). The economic circumstance in which the airline industry finds itself has impacted not only on the revenues for the airlines but also on competition for customers. In Nigeria, the airline industry is one of the major pillars of the economy, as just between 8.3 million passengers and over 181,000 tons of freight were transported domestically (Adeola & Adebiyi, 2014).

Customer value in respect of airlines may be considered as the extent to which the passenger receives value for money after the performance of the service. This means that the passenger received quality service at a reasonable or low price, the desired service expectation was achieved and the service received was top class and commensurate with the price paid. The motivation for air passengers to switch loyalty and patronage to competitors is the desire for service excellence and attainment of customer value (Archana & Subha 2012). Despite the intricacies involved in meeting customers' expectations, airlines should endeavour to satisfy such expectations, because their competiveness and sustainability thrive on passenger satisfaction and customer value or value for money received. Patronage is a situation where an individual displays a conscious effort in choosing products and services that will satisfy his or her need (s) through the process of analyzing situations that he thinks would be rewarding and relatively satisfying amidst some challenges faced in the course of fulfilling his own desires. This explains why individuals can exhibit unconditional attachment and affection towards objects or persons (Adiele & Grend, 2016).

In Nigeria, patronage can be viewed or classified from two dimensions: conditional and unconditional patronage. Unconditional patronage is mostly associated with expectations which are not tied to reward for financial exchanges such as preference for issues that are affectively and psychologically oriented, particularly that gives them joy and satisfaction. The conditional patronage is common to goods and services that an individual purposefully or consciously maximizes to address his economic needs. When the expectations are less than the benefits received, quantitatively, the extent of patronage can fluctuate and will thus depend on the alternatives available (Adiele & Grend, 2016). Previous research in the Nigerian aviation sector has shown that airline patronage is heavily dependent on some factors which include fare and flight frequency, convenience, non-stop flight, reliability, easy accessibility to airports by passengers , service quality, perceived airfare fairness, flight availability, passenger disposition towards airline image (Jim- woo park, Rodger and Cheng, 2009; Hart & Rosenbergewill (2009). Analysis of the above identified predictors of airline patronage suggests that they can exert direct or indirect influences. This further depicts interplay of complex variables that determines the airline choice decisions in a given economy.

According to Nigerian Airport Authority (FMA, 2012), from visiting family and friends to shipping high value products, 8.3 million passengers and 181,000 tonnes of freight travelled to, from and within Nigeria; domestically, more than 66,800 flights make over 75 million seats available to passengers, destined to 18 airports as at years 2011 and 2012. The Nigerian aviation sector is one of the highest revenue earners for the country owing to its enormous opportunities. Nigeria, the most populous African nation is endowed with natural, human, material and financial resources which made the country a favorable destination for other nations of the world. This notwithstanding, the Nigerian aviation sector is faced with numerous problems which may have affected the level of patronage observed by Nigerian domestic airline service providers.

Despite all these researches that have been carried out on airline patronage, majority ignored the aspect of customer perceive value (CPV) as a precipitating factor for continual patronage and customer retention. The purpose of this research is to examining the relationship between costumer perceived value and the patronage of airline in Port Harcourt city. To better understand the concept of customer perceived value and patronage of airline, a conceptual review of the two main concepts will be delineated.

1.2 Statement of the Problem

 Service quality in airline industry is relatively more challenging to measure than in other service industries (i.e. financial sector), in which system and work processes consist of distinct but inter-related tasks [Ghazal, Suchita, 2014]. According to Chang and Keller [2002], airline services are executed concurrently and their delivery involves many entities (such as airport authorities), and a host of other third parties (e.g. caterer,security operatives and aviation services providers, etc.). Accordingly, a unified effort is required to coordinate the multiplicities of   processes needed to deliver superior service quality in the airline industry (Chang, Keller, 2002).

A review of literature about perceived service marketing reveals that the direction of causality and relationships among service quality, customer satisfaction and loyalty is an important, unresolved subject matter characterized by inconsistencies and controversies. For instance,Oliver (1993) and Auh and Johnson (2005), have viewed service quality and customer satisfaction as complementary or divergent constructs. Other researchers further established the causal reciprocity of service quality and customer satisfaction, which creates further confusion (Salazar, Paulo, 2004; Wang, Chich-Jen, 2006). Similarly, the claim that customer satisfaction leads to loyalty appears even less convincing (Egan, 2004; Pritchard, Silvestro,2005). Although a number of researchers have examined the relationship among perceived value, service quality, customer satisfaction and loyalty in the airline industry internationally(Faheed, 1998; Saha, Theingi, 2009), to the best of the author’s knowledge no study has yet investigated these relationships in the Nigerian airline industry. Similarly, a large number of existing studies have mainly been inspired by the SERVQUAL framework to analyse customer perceptions of service quality, which has been found to be inadequate in the airline context; hence, the growing debate to enhance its robustness (Gilbert, Wong, 2003;

Jin-Woo, Rodger, Cheng-Lung, 2005; Pakdil, Aydin, 2007).  Surprisingly, in the few works concerning the Nigerian airline industry (Ckiwendu, Ejem, Ezenwa, 2012; Geraldine, Chikwendu, 2013; Olaniyi, Onwuka,Agu, 2014), the researchers paid scant attention to the SERVQUAL model. More importantly, most of these studies used firm as against industry level analysis in their studies.Considering this focus and the expected faster growth rate of air transportation in developing countries [Netjasov, Janic, 2008; Japan Aviation and Development Company-JADC, 2012], it appears that the sector has been given relatively less research attention than it merits.This study seeks to partially address the gap in customer patronage by investigating the interrelationships among service quality, customer satisfaction and loyalty in the Port Harcourt airlines industry. This study focuses on the following specific objectives: investigating the relationship between customer perceived value and patronage in  PORT Harcourt airline industry,  investigating the influence of passenger satisfaction on customer loyalty in the Port Harcourt airline industry, and determining if passenger satisfaction could mediate the relationship between perceived service quality and customer loyalty in the PORT Harcourt airline industry.