Reference no: EM133237185

James Andersen was the CEO of a famous legacy carrier associated with a European country. After retiring from the airline, he was invited to take up the role the CEO of an up-and-coming budget airline based out of Singapore, Air Mojo. Given his significant contacts and experience, James managed to expand the number of destinations to 25 from 10 a year ago. He increased the number of aircrafts from 5 to 10 through leasing. His experience in the no-frills travel product was limited when he joined but managed to learn the fundamentals within a short period. Following is a discussion he had with his marketing manager; Ram Nadesan.

James:

Ram, I think we need to now work on customer loyalty to increase repeat use among those who fly Mojo.

Ram:

Our understanding is that most look at the price and decide...there is no loyalty in the budget airline business.

James:

You may be right if you compare with a legacy career like Singapore Airlines or Qantas. But still, loyalty is an essential factor when it comes to our bundled deals such as hotel, travel, accommodation packages.

Ram:

James, we believe the price, availability of flights in the route and seats will determine the purchase. However, much we want, they will not be loyal to us.

James:

We have to work on the brand loyalty Ram, from my experience, it will pay off in the long run.

Ram:

True, building the brand is essential but should we spend too much money on building loyalty? I don't know. From my experience, when a customer does not have any other option, they will take a ticket...loyalty seems a fickle concept in this business don't you think so?

James:

I feel cabin service, services at the check-in counter, quality of food, cleanliness of the aircraft, etc. will drive customers to fly Mojo again. We need to focus on these aspects to build loyalty so that when they have other options, even if we are bit higher in price, they will select us.

Ram:

James, don't you think you are thinking like a legacy airline CEO? Yes Singapore and Qantas promise good service but we promise cheaper prices. I feel things like connectivity, layover time between connecting flights, cheap airport transfer fees, budget hotel deals, etc. will increase repeat purchase.

James:

What you say may be common sense, but we cannot get this wrong based on a hunch...we have to be sure.

Ram:

Agree with you. For example, whether we should have an elaborate loyalty reward program or should we focus on giving lower prices always using that money is the question.

James:

You are questioning whether this concept of customer loyalty is relevant in this industry. Ram, I hear your sales background in your assumptions, guess that a bit biased thinking.

Ram:

Hmm, to put it bluntly, maybe yes James

James:

I suggest you develop a robust research method to figure out whether there is such a thing called customer loyalty in this industry.

Ram:

I know just the guy for this...after all loyalty can be many things to many people.

Q1. What is your view? Does loyalty matter in the budget airline industry?

Q2. How can we find this out? Guide Ram on how to design their research.