ABSTRACT
Marketing
strategy embraces major fundamental components of marketing practice. Despite
this importance, executives in Nigerian Aviation Industry have not been market
driven as they lagged behind in adopting marketing concept and other
promotional efforts in order to increase patronage. Today, only 15 million; 8.6
percent out of 174 million of Nigerian population travelled by air with its
dire consequences of suffering from entropy, performance below capacity,
inability to provide quality services, abysmal profit and lack of adequate
implementation of direct marketing techniques. All these problems necessitated
the need to evaluate the relationship between marketing strategies and business
performance of domestic airlines in Nigerian Aviation Industry.
This
study adopted survey research design. Target population comprised 488 staff of
the selected airline and total enumeration method was adopted. Data was
collected through the use of structured questionnaire titled:”Marketing
Strategies and Business Performance Questionnaire” (MSBPQ) adapted and
validated for the study. The Cronbach’s alpha coefficient for the constructs
ranges between 0.76 and 0.97. The response rate was
83.4%. The data were analyzed using descriptive and inferential (Pearson
Product moment correlation, regression analysis) statistics.
The analysis of the data revealed a moderate
positive and significant relationship between Direct Marketing and Sales Growth
(r= 0.422, p<0.05); Mouth to Mouth Marketing and Market Share (r= 0.270,
p<0.05); and Online Marketing and Profitability (r=0.448, p<0.05). It
also revealed that Traditional Marketing has positive significant effect on
Working Capital (R2=.453, F(1,
406)= 336.370; p<0.05); Transactional Marketing influence
Customer Satisfaction (R2=.309, p<0.05); and Marketing Strategies
have significant effect on business performance (R2=.632, F(5, 402)= 181.336; p<0.05)
The
study concluded that marketing strategies significantly influence business
performance of Airline Operators in Nigeria The study recommended that Airline
Industry should aggressively be market driven by adopting marketing concept;
marketing strategies should be seen as an investment to improve business
performance with a view to meet continuous and changing demand of customers;
airline operators should interact with and respond to internal and external
market factors so as to maintain equitable working balance among the interest
groups.
CHAPTER
ONE
INTRODUCTION
1.1 Background to the Study
In
the aviation industry where air travel business is highly competitive,
marketing activities are inevitably vital to ensure competitive edge and most
airlines are doing just about anything in order to remain relevant and still
meet the ever dynamic needs of the passengers. Studies have shown that for
these airlines to survive the competition in their industry, they need to take
their marketing very seriously (Ibidunni, 2010). The global world of business today
is a very dynamic one, in order to satisfy the changing needs of customers,
organisations must first know their needs and ensure such needs are met with
the services they provide (Smith and Reece, 2012). In the airline industry,
passengers pay higher fares at airports for on-spot purchases where a single
carrier controls a high fraction of traffic. For airlines to survive in today’s
competitive market, it has to treat the marketing drive of its business with
top priority to ensure adequate business performance.
Business
performance has to do with the combination of management and analytic processes
that allow managers of an organisation to achieve pre-determined goals in their
business dealings. It is often set to align with the strategic and operational objectives
of the organisation in question: In doing this, organisations find it easy to
achieve their selected goals for the period (Makhbul, 2011). Measuring business
performance in today’s economic environment is an important issue for
practicing managers. Generally speaking, business performance is the
operational ability to satisfy the desires of the company’s major shareholders,
which is often assessed to measure the accomplishment of such organisation
(Smith and Reece, 2012).
In
today’s business dealings, an organisation’s ability to succeed or fail is
largely a product of how best such organisation can satisfy its customers and
this act places enormous task and responsibility by way of marketing on any
organisation intending to excel at satisfying the customers and clients
(Ibidunni, 2010). It starts with identifying accurately the needs of the
customers/clients and deciding on how best to handle the products and services
in order to satisfy the desires of all prospective buyers and sellers as the case
may be. Some indicators employed in measuring business performance are
profitability, market share, return on investment (ROI), working capital, sales
growth and customer retention (Wood, 2006).
The
primary focus of every airline business is to make profit and this is the
primary duty of the marketing manager through its marketing department to
formulate and implement policies and plans that will maximize the profit per
unit of capital employed in the business (Oyekanmi, 2013). Profitability means
a suitable price policy which in itself is influenced by cost and market
situation factors. In all endeavors, consumer’s satisfaction must be seriously
anticipated right from the onset as posited by (Falk, 2011). Profit is the
result a business owner considers necessary to make running the business
worthwhile, it is comparable to the next-best amount an organisation could earn
doing another job. Apart from profitability, another factor that enhances
business activities of firms is market share.
The
market share of a business is mainly considered to be the unit or revenue of
the market accounted for by such business. When nearly 200 senior marketing
managers were surveyed, result shows that 67% affirmed they found the
"dollar market share" metric very useful, and 61% saw that the
"unit market share" as been very useful (Farris, Neil, Phillip and
David, 2010). Market share is often monitored for signs of change in the
competitive market, and it frequently drives strategic or tactical action
(Farris, Neil, Phillip and David, 2010). This makes market share increment one
of the important objectives of a business and it enhances sales growth on a
long run.
Sales
growth composed of the amount by which the average sales volume of a company's
products or services has grown, typically from year to year (Blois and Ramirez,
2012). The sales growth is often measured sequentially. Sequential growth deals
with the Comparism of recent performance of an organisation with the period
preceding it. For instance, when a monthly report states that an organisation
experienced 5% sequential sales growth, it implies that recent sales have
increased by 5% since the previous month (Blois and Ramirez, 2012). Also, the
sales growth is closely linked to the working capital of such organisation.
Working
capital is the financial metrics which represents operating liquidity available
to a business (Black, 2015). It is a part of operating capital that is often
calculated as current assets minus current liabilities. Working capital should
be positive in order to allow firms the ability to continue its operations and
that it has sufficient funds to satisfy both maturing short-term debt and
upcoming operational expenses (Black, 2015). Working capital is often managed
with activities such as inventories, accounts receivable and payable, and cash.
In
India, the airlines were responsible for a total of 79.5 million passengers on
scheduled services, an increase of 1.8 per cent over 2014. Among the largest
airline industry's performance, Indian was among the world’s largest domestic
markets that had the fastest domestic passenger growth in 2015 (World Air
Transport Statistics (WATS), 2015). Meanwhile, airlines in Africa scored lowest
in global industry performance rating for year 2015, particularly in the area of
domestic passenger growth. A result recently released by The International Air
Transport Association (IATA) showed that African airlines had only 2.2 per cent
of the entire market share of passengers for the year under review (WATS,
2015).
Zografos,
Andreatta, and Odoni (2013) see the ability of businesses to perform viably as
one of the most important issues in both developed and developing countries.
Air transportation in Nigeria like other African countries was a very important
project that needed urgent establishment during the British colonial rule as
the need to reach out to other Colonies including Nigeria by the British
government became essential. However, that initial desire could not be
sustained over a long period of time due to poor performance in its managerial
roles (Akpoghomeh, 2010). Some of the challenges are increase of flight fares,
flight cancellations, delays, poor-onboard services, poor customer relations,
missing luggage's, huge staff outlay (serving the purpose of its inception) and
poor equipment maintenance and breakdowns (Daramola, 2007).
With
reports of the varying degree of successes and failures recorded by airlines in
Nigeria, it is imperative to attempt to carry out a detail study of the various
marketing strategies being adopted by these airlines in carrying out their
operations with a view to establishing the place of marketing in their business
performances. Previous research indicates that several factors that influence
business performance are professional background of the owners, their
entrepreneurship capabilities and preferences, cultural and religious beliefs,
inadequate marketing strategies, marketing research, as well as the technology
and micro environment (Buttner, 2011; Makhbul, 2011). Marketing is one of the
most important aspectsof any business and airlines are not an exception.
Marketing
itself is an activity with a defined process used for creating, communicating,
delivering, and exchanging offers that have attached values for customers,
clients, partners, and society at large in exchange for money (American
Marketing Association, 2013). Marketing in business setting entails the process
of exchange which involves two parties, the buyer and seller. During the
process of exchange, value is given up by one party to the other party
receiving something of value as well. That is whyKotler & Connor (2013)
defines marketing as a process by which individuals and groups obtain what they
need and want through creating, offering, and freely exchanging products and
services of value with others. According to American Marketing Association
(AMA) (2013), marketing is a broader concept which entails the process of
planning and executing the conception, pricing, promotion, and distribution of
ideas, goods, and services to create exchanges that satisfy individual and
organisational goals. The ability of marketing managers to ascertain the right
marketing strategy to adopt in the organisation ensures the growth of sales,
share and profitability of any organisation.
Marketing
strategy in itself is the process of adapting the marketing mix elements to
environmental factors (Mavondo, 2000). It evolves as a result of the interplay
of the marketing mix elements and the environmental factors, which impact on
these elements. It functions by determining the nature, strength, direction,
and interaction between marketing mix elements and the environmental factors in
a particular situation (Osuagwu, 2001). The marketing variants like the total
quality management are mostly concerned with satisfying clients’ needs and
wants beneficially. Developing and implementing efficient and effective
marketing strategies which adopts relevant dimensions of the marketing concept
involve the organic tasks of selecting a target market (customers/clients) in
which to operate and developing an efficient and effective marketing ingredient
combination. Marketing thought, with its practice, has been moving speedily
into the service industry (Kotler and Connor, 1997). Literature, partly,
centers on the discussion of whether physical product marketing is similar to,
or different from, the marketing of service and concludes that the differences
between physical product and service might be a matter of emphasis rather than
of nature or kind (Creveling, 2010). Marketing is one of the salient and
important organic functions which help to service organisations to meet their
business challenges and achieve set goals and objectives (Kotler and Connor,
1997).
Marketing
strategy give the avenue whereby organisations make use of their resources to
achieve their set goals and objectives with less stress (Waithaka, Muturi and
Nyabuto, 2014). Marketing strategy deals with the adapting of marketing mix
elements to business environmental forces which involves examination of the
marketing mix elements and the environmental factors (Li, Duan, Edwards and
Kinman, 2010). Part of the functions of marketing strategy is to determine the
nature, strength, direction, and interaction between the marketing mix-elements
and the environmental factors in a particular situation (Jain and Punj, 2014).
To
ensure the survival of an organisation, there must be in place a sound and
robust marketing commitment on the part of sales personnel, when considering
the subtle, unstable and seemingly hostile business environments in which
contemporary airline business organisations operates, it calls for targeted
marketing strategies which could be online, traditional, word of mouth or
direct marketing which are tailored to meet the objective of the organisation.
It becomes an important part of this study to assert that there is virtually no
limit to the types of marketing strategies that a business can adopt. This is
due to the fact that new concepts and designs are being discovered daily, and
the biggest problem that a business owner will face is choosing which one will
best suit his venture, online, offline or traditional, word-of-mouth, or direct
marketing (Akinyele, 2010).
Direct
marketing strategy is often used by several airline operators because they see
it as a powerful tool to attract and keep both old and new customers. It is a
successful way some organisations are using to generate huge sales from
existing and new customers (Edmund, 2011). Airlines, just like other
organizations, make use of direct marketing to provide physical marketing
materials to consumers to communicate information about a product or services
being marketed by the organisation (O'guinn, 2013). Direct marketing is a form
of advertising which allows businesses effectively communicate directly to
customers through several media such as, cell phone, email, website, online
advertisements, database marketing, fliers, catalog distribution, promotional
letters and targeted mail (Ayyadurai, 2013).
Word
of mouth Marketing is seen as the most effective and powerful marketing
strategy any company can employ (Lang and Hyde, 2013). The benefit of this
strategy is that it can instantly turn a consumer into a regular paying
customer. This type of strategy is a by-product of the traditional and online
marketing strategies (Lang and Lawson, 2013). The consumers show satisfaction
through their word of mouth marketing to their friends on what was provided in
exchange for their patronage (Thomas, 2012). Because word of mouth marketing is
placed on the shoulders of satisfied customers who then share this satisfaction
with people who trust them, this trust is then transferred to the business.
Another
marketing strategy examined in the course of the study is traditional marketing
which also known as offline in marketing. In the past, traditional marketing
used to be the only main focus for advertisers then, but now, it is no longer
the same. This type of marketing strategy is seen in two groups namely; print,
and collectively, electronics (Armstrong and Overton, 2010). It is still highly
effective, relevant and consistently produces good results. Also, online
marketing is another strategy which is seen as the newest and sometime
perceived by many businesses as the most powerful, as it has opened diverse
types of marketing strategies that have completely changed the face of
marketing (Rappaport, 2009). While using online marketing, a business owner or
marketing manager can find numerous methods to explore a new business idea.
Some of these ideas include affiliate marketing, article marketing, social
networking, and blogging. Affiliate marketing can take a similar form as print
based traditional marketing by placing banner advertisements on websites, but
can reach so many more people. Chekitan and Don (2013) posit that article
marketing and blogging on the other hand allows for two strategies at the same
time. They can both be used to promote any product or services directly, or can
be used for driving traffic (customers) to a website for the same purpose.
Rappaport (2009) observed that social networking is the online version of word
of mouth marketing and has the ability to "personally touch" a huge
number of people instantly with basically the touch of a button (mouse).
Marketing
strategy development, planning and implementation process involves a lot, such
as, managerial experience, it has a high level of uncertainty, it requires
intensive business knowledge, with a broad strategic information needed for
success, rigorous process involving decision making by organisational managers,
placing emphasis on its unique strengths to ensure better customer value over a
long period of time (Jain and Punj, 2014). It is somehow difficult for
businesses to constantly realize efficient and effective marketing strategy
(Li, Duan, Edwards and Kinman, 2010). This could be associated with unstable
business environmental factors, which will then stand as a difficult task for
organisational marketing strategists to decide which strategy is best suitable
for achieving the set goal for the year. McDonald (2012) was of the opinion
that many factors prevent organisational managers from designing and
implementing efficient and effective marketing strategies. The fact is that
environmental factors were seen as major issues drastically affecting the efficiency
and effectiveness of managers in strategic marketing issues (McDonald, 2012).
The marketing strategies of airline operators in Nigerian companies are
expected to be adaptable to these environmental factors in order to achieve set
business performance goals and objective in a long run, though it seems to have
witnessed some form of corporate performance over the years which can be
attributed to their district level of market share and more needs to be done on
the adoption of effective marketing strategies to improve business performance.
1.2 Statement of the Problem
Air transport in Nigeria has been
growing in relation to the Gross National Product (GNP) as it accounts for a
large part of transport expenditure in the economy (Oyekanmi, 2013). The share
of freight movement on a tonne per kilometer is small compared to other modes;
airlines carry high value, perishable goods and provide emergency services that
make them an important part of the total transport system. Its transport system
helps to improve quality of life by broadening people’s leisure and cultural
experiences with a wider choice of holiday destinations around the world and an
affordable means to visit distant friends and relatives.
Effective direct
marketing strategy has been classified as one of the fundamental key for the
growth of any business organisation because no business can survive without the
marketing or sales of its products or services. Extensive marketing has been
recognized as the important factor for the sales growth of any business and not
just funding or capital should be consider as the growth of a business
(Waithaka, Mutiri and Nyabuto, 2014). For an enterprise to survive, it is very
crucial to have effective sales strategies that will win over its competitors
in the industry but most of the customers are cautious about the abuse of
direct marketing and are always worried that they may become victims of fraud
(Yen, Chen and Chen, 2008). Traditionally, executives in Nigeria aviation
industries have not been market driven, they have lagged behind in accepting
the marketing concept and have generally been slow in adopting promotional
methods, product strategy and other marketing techniques (Uhuegho, Olaniyi and Nwokocha, 2014)........
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