Table of Contents
CHAPTER 2: LITERATURE REVIEW
In this particular research, chapter two is intended to provide detailed review of the literature that encompasses the concept of high and low rating of airline services. In addition, this chapter aimed at identifying the factors affecting on customer’s satisfaction and expectation, particularly in the airline industry of Taiwan. Moreover, in this chapter, the researcher determined to evaluate the relationship between rating and customer’s expectation, perceived performance, and satisfaction. Additionally, the chapter intended to identify the strategies that can be adopted by the managers for increasing the quality of airline services in order to increase the customers’ retention and attraction.
After examining the research background and forming the research aim and objectives in the previous chapter, this chapter aimed at demonstrating the theoretical framework in which different theories were included in order to support the concept of low and high rating of airline services. Further, the underlying influences of rating on customers’ expectation, perceived performance, and satisfaction are further being considered. As the chapter completes, the conceptual framework has also been discussed in order to evaluate the relationship between identified independent and dependent variables of the study. In this chapter, the researcher has used past conducted studies and information through internet sources, along with public and private libraries in order to review relevant literature and past conducted studies.
Difference between High and Low Rating of Airline Services
According to a study conducted by Evans et al. (2012), airline industry is important for the global market as except airline transportation several industries like tourism and leisure industry would suffer and worldwide business activities and transactions would become harder or impossible to conduct.High rating of airline services means that airline services include complete network of airline services with best and finest quality and airline can use different business models in order to make the industry high or low rated (Belobaba et al. 2015). Low rating of airline services on the other hand usually includes low-cost airlines services with medium or lowest quality of services.
Moreover, Diaconu (2012:342) stated that airline industry has been classified into two types including full service network of carrier and low cost transporter. Full service network carrier usually provides high quality services and usually ranked at the high rated airline service provider. In the support of this statement, Goedeking (2010) stated that full service network carriers are airlines that provide complete services with differentiation strategy, emphasising spoke and hub networks, frequent flight programmes, and primary airports. Complete network carriers usually belong to a strategic alliance like Star Alliance in order to increase the number of customers and expand their network.
As stated by Tolpa(2012), full service network carriers are mostly highly rated airline service provider as they provides a wide range of on-board and pre-flight services such as connecting flights, and services for different classes in order to enhance number of customers and attraction of customersIn the words of Bölke (2014), highly rated airline company often provides comfortable and luxury services to their customers by charging high fares and offering wider range of travelling destinations.
Graham (2013:66)stated that lower rated airline companies could be regarded as low cost airline on the basis of their charging cost and provided services. Low cost airlines often have low budget as they have fixed priced on tickets and charging low fares for their services and provide less comfort to their customers and charge extra for providing complementary services like allocation of seats, boarding, and food priority. As mentioned in the study conducted by Liou et al (2011:1381), all these factors play essential role in making those airlines lower rated. Lower rated airlines are low cost carriers are competing on the basis of low price and use smaller and secondary airports, providingminimum services and have low seating capacity in the aircraft(Pearson 2016). Although, lower rated airline company’s charges low fares for their services, customers usually prefer highly rated airlines over lower rated airlines as they perceived that highly rated airlines provides all necessary and comfortable services to their customers.
As stated by Gnanlet and Yayla-Kullu (2013), full service carrier typically provides customers on board entertainment, beverages, meals, and comfort including pillows and blankets in the price of ticket do not provide comfort and on board entertainment and services to their customers. In lower rated airlines, frills does not matter that makes the customers dissatisfied and they perceived that full service carrier or highly rated airlines will provide satisfactory and comfortable services to them.
Factors affecting Customer’s Expectation and Satisfaction in the Airline Industry
In the present study, different variable and factors have been identified that can affect the customer’s expectation and satisfaction in the Airline Industry. As stated byBogicevic et al.(2013:3), price, quality of service, reputation, aircraft safety, and word-of mouth are the most influencing factors that can affect the customer’s expectation and satisfaction and make the airline company high or low rated. On the basis of findings of this study, the researcher is determined to examine the impact of these factors on customer’s expectation and satisfaction.
Impact of price on customer’s expectation and satisfaction
Kim and Lee (2011:235) stated that successful and effective airline companies have a differential and competitive advantage in the overall reputation of the company and serves it as a quality to their passengers or customers. High rated companies are usually charge premium and high prices for their services and it has been found price can influence the customer’s expectation and satisfaction as customer expected and perceived high quality and performance in return of paying high prices for any particular product or service.
Impact of Service Quality and aircraft safety on customer’s expectation and satisfaction
According to Siddiqi (2011:12), service quality can be evaluated though a wide range of service quality dimensions. Freathy and O’Connell (2012:397) suggest that fare, estimated travel time, aircraft configuration and timelessness can influence the overall satisfaction. Other scholars also indicate that price, airline safety, on-time performance, food and beverage quality, comfort of seat, seat cleanliness, the fluency of check-in process, the convenience of transit, the processing of luggage, in-flight service and handling of passenger complaints can all be the standard for evaluating service quality in the airline industry. Baker (2013:67) specifically investigated passengers who had flown with EVA Air, China Airlines and Cathay Pacific Airlines, and found that the most influential factors of service quality included flight safety, cabin comfort and cleanliness and staff friendliness. Thanasupsin et al. (2010:35) also suggested that flight reservation service, check-in service performance, staff efficiency, cabin seat comfort etc. are factors that can influence economy class passengers’ attitude towards service quality.
Kassim and Asiah Abdullah (2010: 351) stated that quality of services is most influencing factor that can influence the customers’ expectations and satisfaction. Quality of services can anticipated to be the way in which consumers are served in the organisation that could be poor or good. In the support of this argument, ALEKSIEVA (2011) stated that services provided by the airline companies with the finest and best quality are the essential way to make difference between customer perception and expectation of service. Customers feel satisfied and perceived that airline companies that highly rated would provide quality services and their expectations are quite high towards the high rated airline companies as compared to low rated airline companies.
Impact of Reputation on customer’s expectation and satisfaction
In the words of Saeidi et al. (2015:341), reputation of the airline companies is also a major factor that can influence the customers’ expectations and satisfaction. High rated airline companies are highly reputed companies; hence the customer expects and perceives high service quality and performance from that highly rated companies. On the other hand, low rated companies are less reputed and recognised as compared to the high rated companies and customers perceived that lower rated companies would not provide comfort and quality in their services, hence their expectation are low towards the lower rated companies. In contrast, customer’s expectations are high towards the high rated companies.
Impact of Word-of-mouth, post-purchase experience on customer’s expectation and satisfaction
On the basis of study conducted by Romani et al. (2012: 55), there is a wide range of factors that can influence customer expectations, including previous purchase experience, word-of-mouth, product or service instruction, advertising, and personal needs. The expectation and satisfaction of customers can also be influenced by the factor of word-of mouth. If customers perceive positive word-of-mouth for any particular airline company then their expectations would increase for that particular company and perceives that this would provide satisfactory service and performance to them.
According to the concept introduced by Chen and Chen (2010:29), perceived performance of airline companies can be assessed by the actual performance of the offered service in terms of attributes of particular services in airline industry, while the satisfaction of customers can be evaluated by the overall experience of services experienced by the customers. The satisfaction of customers therefore influenced by a range of factors, including staff behaviour, social interactions, experience-specific personal factors. Udo et al. (2010:481) stated that the two factors are likely to be positively associated, however not likely to have direct influence on customers’ satisfaction. For instance, high quality of services in an airline could not essentiallybe resulted into high satisfaction if there are adverse emotions and feelings associated with the on-board experience of the flight. It showed that quality of services provided by the airline companies have significant influence of customer’s satisfaction and expectation.
Relationship between Rating and Customer’s Expectation, Perceived Performance, and Satisfaction
According to the study conducted by Oliver (2014), customers’ satisfaction in airline industry has become critically and essentially important as competition in this industry has become enhanced and quality of services in the airline industry has received more attention nowadays. In spite of the efforts that airline companies has made towards the differentiation of their services, a broad survey conducted by Baker (2013:67) demonstrated that customers has perceived distinction of services and quality of services between high rated airlines companies and low rated airline companies.
Erdil and Yıldız (2011:1232) introduced empirical study for the notion that perceived quality of services and performance led to the customers’ higher expectancy and satisfaction and discussed rating has significant relationship with customers’ expectation, satisfaction, and perceived performance. According to Kärnä (2014), customers perceives high performance from the high rated companies and their expectations are high that may lead to the satisfaction or dissatisfaction.
Yee et al. (2010:109)argued that the emergence of low rated or low cost airline companies has raised the concern that how the customers are satisfied with services they provided. In this study, it has also been examined that high rating of airline companies led the customers’ towards high satisfaction and customers perceived high performance from that companies and ultimately leads to the satisfaction. It means that rating of airline companies is significantly associated with the customers’ expectation, perceived performance and satisfaction.
According to Meng et al. (2011:19), pre-purchase expectations and perceived performance can influence post-purchase satisfaction. The outcome of consumer satisfaction is affected by whether the disconfirmation is positive or negative, and is determined by the pre-purchase expectations coupled with perceived performance. Scholars believe that consumer evaluation is based on the comparison between expectations and perceived performance. That is, if perceived performance outperforms the pre-purchase expectations, the positive disconfirmation leads to satisfaction. However, if the pre-purchase expectations are higher than perceived performance, the negative disconfirmation leads to dissatisfaction.
Tam (2011:205) indicated that satisfaction depends on the degree of pleasure or disappointment, which is based on the perceived performance and expectations of the product or service. To put it in other words, satisfaction is a post-purchase reaction related to the disconfirmation (positive or negative) and the disconfirmation is influenced by the initial expectations. Kim (2012:219) also believed that consumers built up a standard to evaluate the perceived performance based on previous purchase experience, and compare pre-purchase expectations and perceived performance to conclude whether the disconfirmation is positive or negative.
According to the study conducted by Monroe (2012), word-of-mouth, quality of services, on-time arrival, pre-flight and on-board experience, baggage experience are the factors that makes the airlines distinctive and competitive within the competitive marketplace of airline industry. Rating of airline companies are depended on these factors and have significant relationship with the customer’s expectations and satisfaction. For example, positive word-of-mouth makes the company high-rated and customers perceive that high rated companies would performance efficiently and they would provide services with the quality as they expected. It means that once the expectation of customers have satisfied then the customers feel satisfaction and want to avail the services again in spite of paying high fares for the services.
In the support of this argument, Basfirinci and Mitra (2015:239) stated that higher rating leads to higher expectations. As mentioned in the study, it is safe to draw a conclusion that rating can influence the expectation, and expectations can influence perceived performance, and perceived performance can influence customer satisfaction.
In this particular researcher, following theories or models has been used by the researcher in order tosupport the concept that rating has either significant or no relationship with the customer’s expectation, perceived performance, and satisfaction.
Performance model is an essential model that played important role in founding theoretical framework for analysing the customer’s behaviour and perception. The main evaluations of the performance model are that perceptions of customers regarding performance of particular product or service, and the customers’ expectations about that performance, have positive impact on customer satisfaction (Loïc et al. 2010:226). In this model, performance is regarded as the perceived level of customers regarding quality of product or service is strongly related to the charges they pay.
According to Ernst et al. (2011:290), performance model has found that perceived value or performance has significant relationship with the satisfaction and follow the notion that the greater the ability of product or service to provide that the customers want or desire, related to the cost or price incurred, the customers would be more satisfied with that product or service they experienced. Moreover, performance models also revealed that expectations have direct impact on satisfaction. The expectations of customers contain significant information as to how a particular product or service has performed in the past, along with how it will perform in the future. If any particular product or service effectively fulfils the customers’ expectation, then the customers are likely to be satisfied with that product or service.
Disconfirmation model or theory is a cognitive model which seeks to illustrate post-adaptation or post-purchase satisfaction or pleasure as a function of perceived performance and expectations, and disconfirmation of opinions.According to this model, an individual’s thinking might be changed because of perceived dissonance. This when an individual realizes that the actual performance is different from expectations, an individual feels displeased. Moreover, this feeling of displeasure leads to a change in an individual’s thinking about cognition, and this is termed disagreement. This model explains that disagreement between expectations and actual perceived experience leads to an unpleasant psychological state. Based on cognitive dissonance theory, expectation disconfirmation theory posits that satisfaction is based on the degree of realising an individual’s expectations (Hsu and Wu 2011:1). Once the expectations are achieved, the individual is satisfied; however, if the expectations are not achieved, it leads to dissatisfaction. Moreover, disconfirmation model suggests that the level to which perceived performance exceeds customers’ expectations can increase the level of customers’ satisfaction. However, the level of performance below the expectation can decrease the degree of customers’ satisfaction.
As mentioned in the literature review rating has direct relationship with customers’ expectation, perceived performance, and satisfaction. However, there are also some other factors of rating that affect customers’ expectation, perceived performance, and satisfaction are demonstrated in the figure below:
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