The Lufthansa Airlines' Customer Preference Study - Research Paper Example

Business/Conference People target market Table of contents Business/Conference People target market 1 Introduction 2 Overview of the market chosen 3 Justification of choice of customers group 7 Research Methodology 9 Research Question/Objective 9 Sampling Techniques 10 Data Gathering Method 11 Research Limitation 13 Conclusion 14 Bibliography 16 Questionnaire 17 Executive Summary The project begins with a brief description of the aviation industry in the world and their growing prospects. It is seen that the industry has been rapidly growing and demonstrating frequent changes. The Lufthansa Airlines is one of the major airlines in Europe which have been trying to launch a new service for the business travellers at a cheaper price. The situation looks favourable with a large number of business travellers across the world. The growing number of multinational firms across the world has also been increasing which increases the possibilities of business travel. A research methodology has been developed for the purpose of identifying the expectation of these travellers. It is mainly based on qualitative research. The questionnaire has been developed for this purpose. The questions framed mainly focus on the price effectiveness, quality and nature of service that they would offer to the travellers in order to remain competitive in the market. Introduction The airlines industry has been growing at a fast rate. Its importance lies in the fact that it facilitates the economic growth of the nation, trade and commerce, international investments, tourism. In short it has become the focal point of the globalisation occurring across the world. The condition and popularity of business travel has significantly improved over the years. As the number of companies is expanding internationally in terms of investments, production chains, supply and customers, business travel is also growing with the same pace (Kroo, 1999). The present project aims to present a research methodology for Lufthansa Airlines in Germany which is to start a new service offering cheap flight services for the business travellers. Before the development of the research methodology a detailed analysis of the macro and micro environment has been done. This is followed by a SWOT analysis. The research methodology begins with the research aims and objectives. This is followed by the development of the questionnaire which is targeted at the business travellers in Europe. The questions primarily cater to the nature and quality of services that are preferred by the business travellers. The questions framed are primarily aimed to find out how effective it would be to develop the above service and what would be the features included in the service to attract customers. Overview of the market chosen The business aviation sector has been fast growing in Europe and also changing rapidly. The aviation market has also been demonstrating tremendous competition. A number of new business models have been developed in USA. They are being increasingly adopted in the European companies. “In 2005, 6.9% of all instrument flight rules (IFR) flights in Europe were business aviation” (Marsh, 2006, p.6). The business jet flights have particularly grown since 2005 by 8.9%. The regions’ regulation and infrastructural condition are highly complementary for the growth of this industry. The industry’s’ growth prospects and possibilities of generating economic benefits also looks bright in the future (Marsh, 2006, p.6). The following figure demonstrates the increase in the business aviation flights in Europe since 2001. Figure 1: Increase in the business aviation traffic in Europe since 2001 (Source: Marsh, 2006, p.6) The jet flights have significantly improved over the years. Also, a number of new aircrafts have emerged into the market. This has been possible because of the new technology which has eventually reduced the operation costs and manufacturing costs of the companies. The market for the aviation industry also shows great prospects. There are an ample number of high wealth individuals in Europe (Marsh, 2006, p.14). This has been shown the following diagram. Figure 2: Increase in the number of high wealth individuals in Europe (Source: Marsh, 2006, p.14) The business aviation has been seen to increase most significantly in the six states of Europe. This has been shown in the diagram below. Each of these states has been showing more than 100 movements for business purposes each day. “Five of these States have a 5% or larger share of total departures, and they are joined by Switzerland, which has only 2.4% of other departures” (Marsh, 2006, p.18). Figure 3: Concentration of Business Departures in the Six States of Europe (Marsh, 2006, p.18) Figure 4: The Six States showed greater than 100 business movements each day, 2005 (Marsh, 2006, p.18) Going by the above figures, it is apparent that the business travellers would be the most appropriate for tapping by this airlines company. The market conditions are also demonstrating future prospects for the company. Justification of choice of customers group As already mentioned the number of companies establishing their set-ups in foreign countries have grown over the years. This has increased the number of travellers travelling for business purposes. This has been primary reason why the business travellers segment has been chosen by the Lufthansa Airlines. The frequency of such travels has increased and this provides a prospective market for the company to exploit. The number of “high wealth individuals” (Marsh, 2006, p.14) has also been increasing over the years. Very often, these establishments require their personnel to fly to the foreign branches for official purposes. This trend has been showing significant rise in the Information technology sector across the world. Often personnel in the less developed and developing nations want to travel to foreign nations for work purposes. This is because, as they move to a wealthier nation, their salaries are automatically increased according to the currency of the developed nation. Such types of personnel are increasing with the increase in the number of multinational establishments. Thus it would be beneficial for this company to tap this market. As the conditions of wealth of individuals are improving, so are their chances and possibilities of spending on business travel. It can be said the consumer’s wealth and increase in the number of business travels are directly related. According to surveys, travel managers, procurement managers and senior level executives in organisations showed increasing involvement with their organisations’ travel programs in 2008. Researches also demonstrated that 58% of the respondents said their budget for travelling would increase substantially over the next few years (Hospitality Net, 2010). The trend shows that there were a vast majority of customers who would be available in the market for this airline. Thus taking this venture showed prospects for future success. Most importantly, the European market has been demonstrating increase in the number of business trips than most continents. This has been shown in the results of recent surveys. There was an increase in outbound trips in Europe by about 5% between 2000 and 2001. The number of holiday travels has increased even more sharply by 6% while the business trips have increased by 3%. However, travelling for the purpose of visiting friends and relatives has shown a decline during the period. The short haul destinations have shown a steady rise since 2001. These have been the primary factors for tapping the class of business travellers in Europe (European Travel Commission, 2001). Research Methodology Before launching the new airline service specifically for the business travellers, Lufthansa must identify what will be the response of its target customer group. This can be done with help of a primary research specifically for the business travellers in Europe. In the below given section, whole of the research process has been discussed in full details. This framework will guide to conduct the primary research in a controlled and predefined manner. Research Question/Objective This primary research will be conducted on the target customer group (business travellers) to analyse requirement of a new airline service specifically for them. Therefore, the research question is as follows: “Whether a low cost airline service specifically for the business travellers launched in Europe by Lufthansa will be successful or not”. Sampling Techniques This research is mainly targeted towards the business class that frequently needs to travel. As compared to other airline travellers, this specific class has its unique requirements. Therefore, while conducting the primary research, this traveller class is considered as the population for the research. Once the population is being identified, the second vital task is finalising the sampling technique. Sampling has been defined as the procedure of selecting small number of elements from the population for drawing conclusion about the whole population (Neelankavil, 2007, p.240). A proper selection of the sample is quite essential for drawing correct information about the population. Hence, considering the size and the nature of the population, one should finalise the sampling technique to be used. In the given primary research, the population size is quite large but it can be considered as a homogeneous population. Therefore, random sampling is more appropriate to be applied. In random sampling each unit in the population will have equally probability of getting selected (Burt, Barber & Rigby, 2009, p.263). For selection of the sample from the population (business travel), company can either use its data base to get the list of passengers and from there the business travellers can be segregated. However, this will result in more biased sample because the company is selecting only those travellers which have already used its airline services. Just to prove ones loyalty towards Lufthansa, the respondents may provide biased information. This will adversely affect the quality of data collected and thus the information derived from the research may not be the correct enough. Therefore, it is quite essential that unbiased data should be collected. Another option is to visit different airports and with the assistance of these airport authorities the business travellers should be identified. Choice of the travellers should be on random basis so that people of different gender, belonging to different earning groups and in different professions get a faire change to participate in the primary research. This will be a more fair mode of data collection and thus the information gathered will be possible unbiased. Again, it must also be noticed that the respondents are willing to participate in the research and give unbiased information. It will be recommended not to disclose the main cause of the primary research to the participants. Data Gathering Method Once the sample is selected, an appropriate data gathering method should be use to collect required data. Later on, this data will be used to analyse and find answer for the research question. Before collecting the data it is essential to determine which type of data will be more appropriate for the selected research objective. In the given research, the research objective is to analyse customer’s view point towards the airline services they often use, the factors they take into account while selecting a specific airline and whether they appreciate a new airline service by Lufthansa specifically for business travellers. Therefore, a qualitative research will be conducted to gather required data. Generally, the quantitative research suffers with some disadvantages, as for example the sample size in qualitative research is comparatively low; it is time consuming and often suffers with biasness (VanderStoep & Johnston, 2009, p.7). Therefore, to overcome the drawbacks of the qualitative research, a mix approach will be used. This will allow conducting an analytical research even with quantitative data. To collect the data, a semi structured questionnaire will be used. As compared to other data collection techniques used in qualitative research, a questionnaire is more scientific and organised. Even the participants feel more comfortable when the researcher use a questionnaire for data collection. While developing the questionnaire, majority of the questions will be closed ended where the participant has to select only a single option provided along with the questions. As answering to these questions requires comparatively less time, the participant does not hesitate to fill the questionnaire. To minimise the possibility of biasness, the questions will be formulated in a simple language with minimum use of jargons (technical terms). Therefore, the respondent will easily get the inner meaning of the question and the possibility of wrong answer selection will be less. Initially some questions should be targeted to gather some personal information regarding the participant. This information reflects the demographic profile of the participants. Other technical questions will used to understand the factors that are taken under consideration by the respondents when they select a specific airline. Some questions will be for analysing the brand loyalty among the target customers towards Lufthansa. Other questions will be general and will assist to understand whether a low cost airline service will be successful in attracting the local business class that often travel through airlines. The questionnaire will also have some open ended question where the participants will have the freedom to express his/her view point. However, the number of such open questions will be quite less. The information gather by these open ended questions will be useful by the company to introduce some changes in the service model designed specifically for business traveller class. The questionnaire will be distributed among the participants in the pre-decided data collection destination. Before distributing the questionnaire it should be asked that whether the respondents have the required time to fill the questionnaire. If they do not have the time to fill the questionnaire, they should not be pressurised. Once the respondents are over with filling the questionnaire, it should be dropped in collection box. Because of the time constrain, a sample size of approximately 200 respondents will be enough. Once the data collection process gets over, the data will be analysed to determine the findings. Research Limitation Because of the time and man power constrain, a comparatively small sample size will be used. Therefore, the selected sample may not reflect true characteristic of the whole population. Being the qualitative research the possibility of biasness does exist. There may be a case that the respondent is not a native English speaker and fail to interpret the correct meaning of the question. In such a situation, the respondent may provide some wrong information that will hamper the quality of collected data. However, using of a questionnaire in a single language is one of the major limitations of this research. The quality of the research could be improved if some more qualitative data collection techniques can be used. As for example, one to one interview, survey, chat show and so on. These methods are comparative time consuming and required large number of participants to collect data. These techniques provide more in-depth information regarding the customers’ view point towards the airline services and their unique requirements. Apart from these limitations; it can be assumed that this primary research will be successful in achieving the required research objective. Conclusion It is apparent from the study that the aviation industry has been growing fast and demonstrating frequent changes. The most significant improvement has been seen in the growth of business travellers not only in Europe but all across the world. This has been possible primarily because of the reason of globalisation. Globalisation triggered the process of firms’ establishing themselves in foreign nations. This has been done to reduce cost effectiveness as many of the developing nations have a low labour cost. They also have a great supply of labour. The Lufthansa Airlines have tried to exploit this situation by trying to launch a flight package at a cheaper rate. That is why it has tried to make a market research for the purpose. This research primarily comprises of a qualitative technique to identify what the business travellers are looking for while travelling. The questionnaire framed has been mainly targeted towards this business class. The main concerns of this company is to know what would be the suitable price for offering the service, the features which would be included in the services and the quality of service that they would be expecting. Reference Burt, J. E., Barber, G. M. & Rigby, D. L. 2009. Elementary statistics for geographers. Guilford Press. European Travel Commission. 2001. Europe's Travel & Tourism Industry expected to recover from second half of 2002. [Online]. Available at: http://www.etc-corporate.org/modules.php?name=Content&pa=showpage&pid=127. [Accessed on January 27, 2011]. Hospitality Net. 2010. Industry News. [Online]. Available at: http://www.hospitalitynet.org/news/4033589.search?query=increase%20in%20business%20travel%20site%3aorg. [Accessed on January 27, 2011]. Kroo, I. 1999. The Airline Industry. [Online]. Available at: http://adg.stanford.edu/aa241/intro/airlineindustry.html. [Accessed on January 27, 2011]. Marsh, D. 2006. Getting to the Point: Business Aviation in Europe. [Pdf]. Available at: http://www.eurocontrol.int/statfor/gallery/content/public/analysis/Business%20Aviation%20Study%20Doc176%20v1.0%20FINAL.pdf. [Accessed on January 27, 2011]. Neelankavil, J. P. 2007. International business research. M.E. Sharpe. VanderStoep, S. W. & Johnston, D. D. 2009. Research methods for everyday life: blending qualitative and quantitative approaches. John Wiley and Sons. Bibliography Doganis, R. 2006. The airline business. Routledge. Gross, S. & Schröder, A. 2007. Handbook of low cost airlines: strategies, business processes and market environment. Erich Schmidt Verlag GmbH &. Kotler, P. 1972. Marketing – Management. Pearson Education. Pleul, A. 2008. How to Survive the Skies Over Europe - European Lowcost Carriers. GRIN Verlag. Questionnaire 1. Gender Male Female Others 2. Marital status Married Unmarried Divorced 3. Age 18-25 years 25-30 31-35 36 and above 4. Income Group SGD 25,000 and below SGD 25,001-35,000 SGD 35,001-45,000 SGD 45,000-55,000 SGD 55,000 and above 5. How frequently do you avail airlines services? More than once in a week One in a week Once in a month Once in 6 months Once in a year 6. Which factors do you consider important before selecting the airline service? Price Trip duration Frequency of Service Value added services Safety 7. Which airlines do you avail most for your business travels? Lufthansa Southwest Airlines EasyJet British Airways Ryanair 8. Which class do you prefer while travelling? Economic Class Executive Class 9. Which type would you prefer more? A premium airline located at primary airports A low cost airline located at secondary airports 10. Do you think the prevailing services offered by Lufthansa are attractive enough for the business class? Yes No 11. Have you used the services offered by Lufthansa? Yes No 12. If yes, rate it. Excellent Good Moderate Poor 13. For which attributes, would you use the services of Lufthansa again and again? Cost effectiveness Quality of Service Value added services Network coverage 14. Would you recommend Lufthansa to launch an airline service specifically for the business travellers? Yes No 15. What specific characteristic quality does an airline service should possess to fulfil growing number of business travellers in Europe? 16. What suggestion will you give to Lufthansa to incorporate in the prevailing airline services so that it appears attractive to the business traverse? Read More