The study examined the effect of innovation on customer satisfaction of selected airlines operators in Lagos State, Nigeria.
The study adopted survey research design. A total 257 copies of questionnaires were administered to respondents albeit 245 was collected and used for analysis. The study employed descriptive technique to analyze the questionnaire and the regression analysis was utilized to test the research hypothesis at 5% significance level.
The study reveals that: Service innovation has significant effect on customers’ loyalty. Technological innovation does have a significant effect on customers’ responsiveness. Process innovation has significant effect on the service quality of airline operators in Nigeria. Management innovation have a significant effect on customers’ retention.
The study concludes that innovation has a significance effect on customer satisfaction of selected airlines operators in Lagos State, Nigeria. The study further recommends that: There is need for management to improve service innovation of airline operators in Nigeria to have an efficient customers’ loyalty. Staffs of airlines companies should be sent to further training and schools for efficient technological innovation. The management of airline companies in Nigeria should always apply the technical knowhow to enhances their service quality.
As society evolves, technological innovations appear to have more compelling influence on man and the social environment; on decision making and, in the way, the social beings communicate with one another, (Leonid, 2017). Innovations have as well weave into the fabric of our social setting. More particularly with respect to the market, technology has an influence on how businesses are managed and operated. Hence, to maintain self-preservation in the market, the emphasis of businesses as well has to shift towards investing in the understanding of how technologies influence human behaviour and how humans interact with technology, (David, 2016).
Throughout the world, the airline industry is a gradually increasing sector of most economy and it has developed swiftly to turn out to be one of the most common means of travel. Specifically, airline industry aids economic development, world trade, tourism and international investment among other numerous benefits. Nevertheless, the significance of this industry isn’t just linked with the combined significance of connectivity, but its contribution to the growth of various businesses which rely on airlines, like hotels businesses, car hire operators, tourism, and many more. At present, customer satisfaction with the service quality offered by airlines has turn to be the most crucial element for success and survival in the airline industry, (Parahoo, & Mohammed, 2015).
1.1. Background to the Study
Customer satisfaction is business word that identifies the product a company supplied to its customers how much satisfying them. In the era of increasing competition each business tries to achieve customer satisfaction in competitive environment which is seen to be key elements for all businesses, (Hunt, 2012). For the best customer satisfaction firm have assured the safety of its customer simply because every customer wants safety. Customer satisfaction has a positive influence the repurchase intention, (Anderson & Sallivam, 2013). Customer always becomes loyal and satisfied to a company that makes the product according to customer requirements. Some companies that are well established bear losses to develop their customer satisfaction and loyalty. According to Bolton (2015), customers who have a long relationship with a company have prior cumulative satisfaction rating and few smaller subsequent perceived losses linked with subsequent service encounter. Innovation brings about customer satisfaction in every industry simply because organization brings innovative changes in its products so as to make customer satisfied and meet their needs. At times customers are very cognizant about the behaviour or attitude of company in relations to their complaints, where or not the company takes their complaints seriously or not. If a company work on customer complaints then customer think company care them which ultimately enhances the customer satisfaction, (ibid).
Customer satisfaction has been explained is a number of way, however the conceptualization, which appears to have achieved the widest acceptance, is that satisfaction is a post-choice evaluative judgment of a specific transaction, (Bastos & Gallego, 2014). Customer satisfaction is the outcome or consequence of a customer’s perception of the value received in a transaction or relationship, where value equals perceived service quality relative to price and customer acquisition costs, (Hallowell, 2016). Satisfaction is the customer’s fulfillment response. It is a judgmental that a product or service quality, or the product or service itself, offers an enjoyable level of consumption related fulfillment (Oliver, 2011). According to Gustafsson (2015) customer satisfaction is seen as the overall evaluation of the performance of an offering to date. Hayes (2016) defined the terms of customer satisfaction and perceptions of quality are labels we use to summarize a set of observable actions related to the product or service. Similarly, Hunt (2012) defines customer satisfaction as a process of assessment rendered that the experience was at least as good as it was supposed to be. More precisely, consumer satisfaction definitions have either emphasized an evaluation process (e.g., Hunt, 2012; Oliver, 2011) or a response to an evaluation process (e.g., Howard & Sheth, 2013; Oliver, 2011; Halstead, Hartman & Schmidt, 2010).
In Europe, a prevailing issue in customer satisfaction is the difference between customers’ diversity, that is, the ethnic background of a customer. Bunderson and Sutcliffe (2017), claims that many organizations in Europe are found to give more attention to the satisfaction of white customers than the black which has however led to the issue of racism among others in these organizations, thereby having a negative effect on organizational performance and customer satisfaction. However, there are many forms of diversity that can be encountered in organizations, not all of which are related to improving organizational effectiveness, and some of which may be harmful. Many of these forms of diversity have been termed social diversity, (Bunderson & Sutcliffe, 2017). Moorhead (2016) pointed that employee behavior is a field of study that investigates the human behavior within an organization, like the interface between human behavior and the organization. A negative work behavior of employee will have a negative effect on the organizational efficiency due to cultural diversity which will ultimately affects customer satisfaction.
In Asia airline industries, quality of service is significant because providing excellent quality of service to the customer is essential for the continued existence of the sector, (Atilgan, Akinci, & Aksoy, 2016). Quality service in the Asian airline industry plays an important role in customer satisfaction. Therefore, offering better service quality leads to customer satisfaction which results in attracting more customers and increases the business's profit. Although, one prevailing issue is that, as technologies change practically at the speed of light, it’s vital for organizations in the service industry to innovate or be left behind. However, many organizations started their careers and businesses before many of these technologies even existed! Organizations can be vital for integrating new technologies, in particular mobile app development, and cloud computing. Lack of direction is one of the most common organizational issues in Asia which in the end will affect the satisfaction of customers if properly strategies are not put in place, (Maimuna & Rashad, 2015).
In Africa, organizations are faced with lack of poor communication and feedback. There seem to be two extremes in this area: either people do everything in their power to avoid confronting others and holding them accountable or they relish any opportunity to chew people out, belittle them, and crush their spirits. Many organizations in Africa have countless leadership teams which the number-one problem was a lack of honest, constructive, and open dialogue about team members’ practices, styles, skills, or behaviors. Without a culture of openness, feedback, and coaching, organizations will struggle to grow to satisfy its customers. Many organizational teams try to muddle through this somehow enduring the bully or trying to guess what other want and need from them. People often tell others that they fear reprisal or retaliation if they open up, but the reality is that leaders can’t execute on their strategies, lower costs, or effectively launch new processes or services when people fail to communicate with constructive candor, so this is an issue that must be overcome if an organization is aiming to offer quality service to customers, (Sunia, 2014).
According to Aluko (2017), building a solid organization that focuses on customer satisfaction in Nigeria takes hard work and a keen awareness of the culture and environment that exists in a business. Most organization executives are very busy individuals; a lot of things vie for their attention. Market conditions can change fast in business world and demand huge portions of leader’s time. Unfortunately, while they’re busy focusing on the many necessary operational distractions, many managers take their eye off the teamwork ball. This means that communication suffers and leaders get preoccupied and fail to recognize people, celebrate progress, build the talent pipeline, or invest time reviewing processes, practices, and better ways of working across functions. People then become disengaged, create marginalized, and lose focus and commitment in the organization, which in turn affects customer satisfaction and overall organization objectives.
Today the organizations adopting innovation use both internal and external technology resources to empower their businesses. Innovation is a key factor in the success of organizations in a competitive business environment, (Wang, Zhao, Voss, 2016). Innovations start with innovative ideas. As a result, the prime activities of an innovation process should be involved in a systematic approach to access information from various sources (Buijs, 2017). Customers are seen to be the most important source of innovative ideas in the process of a new product. Organizations can take advantage of them. In modern years, the significance of innovation has been on the increase simply because consumers demand various products of producers steadily. Besides, innovation maintains and expands the position of an organization in the market, (Baldassarre, Calabretta, Bocken, & Jaskiewicz, 2017). The dynamism of innovation systems is attained via the evolution of innovation capability and absorptive capacity at the same time, (Elad, Koski, 2016). Additionally, the dynamism of innovation capacity led in the sustainable growth of absorptive capacity because innovative and investment activities increase the ability to emulate success, and resources are used in technological activities, (Trejo, Gutiérrez, & Guzman, 2016; Barasa, Knoben, Vermeulen, Kimuyu, & Kinyanjui, 2017). Innovation influences the business model of an organization and enables the organization gain values from not just its own business, but as well as the businesses of other companies by using key assets, resources or opportunities, (Galloway, Miller, Sahaym, & Arthurs, 2017; Saebi, Foss, 2016). The success of all manufacturing, service, profit, non-profit, public, and private companies is influenced by a number of factors, one of the most important of which is customer satisfaction to achieve business excellence, (Pulles, Schiele, Veldman, & Hüttinger, 2016).
Today in Europe, innovation is facing new challenges. Its own dynamism has produced a world that requires in many ways a rethinking of innovation itself, (Goh, 2016). In the corporate sector, the determinants of innovation performance have changed in a globalized knowledge-based economy, partly due to recent developments in information and communication technologies. Globalization itself is a product of innovation. The application of constantly improved technologies to the massive means of transport and communication has produced an unprecedented level of global connectivity, of global awareness. Economies are becoming more interdependent, while cultures are becoming more permeable, transparent and stronger through an intensified exchange of goods, services, ideas, values, experts, problems and solutions, (ibid).
In Africa, countries spend very little on technology and innovation. In the report of John O. Mugabe on the state of technology and innovation in 19 African countries including South Africa and Ghana but excluding Nigeria, he noted that, national systems of innovation of most African countries are relatively weak, although the report observed on a positive note that, commendable efforts are being made, and more needs to be done to make possible the Africa continent to seize the grand opportunities that exist at the moment, (Adeoti, Odekunle, & Adeyinka, 2017).
Mugabe and many other African scientists believe that the time has come for Africa to leapfrog its economy and resolve some of its challenges through technology and innovation. However, this can only happen if Africa first resolves its weak technology and innovation infrastructures. Africa is exposed to a wide range of technological opportunities to address its human development challenges. Technologies such as information and communication technologies, biotechnology and nanotechnology can be harnessed and applied to increase the production of food, fight diseases like malaria, tuberculosis and HIV/AIDS, and increase economic competitiveness of the continent, (Adeoti, Odekunle, & Adeyinka, 2017). However, Africa’s ability to tap the opportunities is undermined by relatively weak national innovation systems. Most African countries lack the requisite scientific and technological capabilities to effectively engage in the application of science, technology and innovation for development.
In Nigeria, Onwualu (2017) identified some of the challenges of technology and innovation practice in Nigeria to include, Inadequate research orientation, non-availability of Information on commercializable inventions and R&D results, poor technological entrepreneurial culture, inadequate infrastructure, inadequate motivation for the commercialization of inventions/research results, inadequate patent education and ineffective enforcement of intellectual property rights, absence of effective linkage between research organizations and industry and preference for foreign technology. These identified weaknesses and constraints has motivated the Nigeria government through the Ministry of Science and Technology to develop a more concise, robust and workable Science, Technology and Innovation policy which is projected to act in response to the dictates of globalization, changing business environment and new/emerging technologies and thus provide for effective funding of R&D, (Onwualu, 2017).
An increasing body of literature has examined customer retention; for the intention of increasing the value of an organization’s customer base, an organization needs to have knowledge of which customer it should target, when and how it should contact those customers, amount of resources to be allocated and these scarce resources are divided for a number of acquisition and retention activities, (Bhatnagar, Maryott, & Bejou, 2010). Customer retention has an influence on customer equity. The retention of customer serves as an incremental tool for customer equity. Analysis of customer retention process can enhance customer equity, (Thomas, 2011). Customer retention relies on cost, customer experience and product or service quality. Complaint management is linked elated to retention of customers. Complaint management seems to be valuable mean for customer retention simply because it improves customer's expected utility gained from purchase. Superior customer retention happens when the process of the complaints handling is documented, (Ang & Buttle, 2013). Recent evidence recommends that relationship marketing tools like customer service, personalization, brand community, and loyalty or rewards programs are positively linked with customer retention. Relationship marketing activities facilitate organizations to build up significant relationship with their customers. Customer prioritization’s impact on customer retention is conditional on the time-span of the association, (Mathur & Kumar, 2013).
According to several researchers like Kumar and Shah, (2010), Back and Parks, (2013), and Dean, (2017), there are two types of loyalty which are given as; behavioral and attitudinal loyalty. The behavioral aspects of the customer loyalty were characterized in relations to repurchase intentions, word-of-mouth communication, and recommendations of the organization, (Nadiri, Hussain, Ekiz, Erdogan, 2011; Karatepe and Ekiz, 2013). Liu-Thompkins, Williams, and Tam, (2010) defined attitudinal loyalty as a favorable assessment that is held with adequate strength and stability to encourage a repeatedly favorable response towards a product/brand or a store. According to Kumar and Shah (2010), consumer loyalty seems to be based on a collection of factors which are; the first is trust, a customer must be able to trust the vendor or product they encounter; second, the transaction or relationship must have a positive perceived value greater than that supplied by competitors; and finally, if marketers build on the first two factors, they may be able to develop a level of positive customer emotional attachment. That emotional response may be commitment to their brands that is resistant to change, (Pitta, Franzak, & Fowler, 2011). Today, every industry offers a variety of loyalty schemes aiming at differentiating one competitor from the other, (Butscher, 2010). Every time a customer buys, he progresses through a buying cycle, (Griffin, 2012). A first time buyer goes through five steps which are to;
- become aware of the product;
- makes an initial investment;
- post purchase evaluation;
- decision to repurchase; and
Ganiyu, Uche, Elizabeth (2015), customer loyalty can seem elusive and magical to those trying to obtain it. But, there are a lot of good reasons for businesses to pursue customer loyalty as a strategic objective. Customers are expensive to acquire; keeping them loyal allows an organization to amortize acquisition costs. Loyal customers are often keen to pay premium prices. For instance, some of the important attitudes and behaviors expected of a loyal customer are; possibility to recommend company products and services to others; possibility to continue buying the company products and services, at minimum, at the same level, possibility of buying other products and services the company offer, believing that company products and services are superior to other competitors, not actively seeking other service providers, providing the company with opportunities to correct issues or problems and not using these as a source for compromising the relationship, (ibid).
When the term innovation is used, it simply means creation of something new by an organization that satisfies its customers’ and increase the market share. Since the aim of innovation is to bring something new or unique that your rivals do not have and caused positive and good experience of customer towards the provider company. According to Pan and Zinkhan (2016), the innovation used for strategic orientation toward customer satisfaction, loyalty, and to gain market potential that enhance or boost the market share of the company. Therefore, the innovation can be new product or new concept that has derived from systematic research and new ideas. It is as well defined as commercialization of creation. The innovation also described as a process of converting the invention or idea into a product that customer buys and provides financial benefits to its providers. The idea that is to be converted into an innovative product or service must have the quality to satisfy some specific needs of the customers, (ibid).
1.2. Statement of the Problems
The loyalty of customers or passengers is what the management of airlines seek, and retaining customers mean lesser costs as against the cost of attracting new customers, especially in a time of economic hardship leading to a low demand for air transportation and increasingly competitive markets. Undoubtedly, one of the most vital elements that have significant influence on loyalty formation is creating a good flight experience (quality of service). The inherent characteristics of airline services have lent themselves to a relationship marketing tactic, however, several customer-related approaches of airlines center on customer loyalty initiatives which enhance short-term sales instead of placing focus on long-term quality relationships between the airline operators and air travellers (Bejou & Palmer, 2017). Consequently, for airline operators to balance their short-term and long-term business aims, they must develop strategies to deliver their services more satisfactorily than their competitors (Nadiri, Hussain, Ekiz, and Erdogan, 2008; Rahim, 2016).
An outstanding service experience, without doubt will improve customer satisfaction, builds positive emotions and customer loyalty towards the service provider. Rahim (2016) noted that perceived service quality of domestic airline operators in Nigeria has generally been considered to be poor; as a result, the level of passengers’ or customers’ satisfaction and loyalty is low. However, to a dissatisfied air passengers’, the only available alternative is to switch to another airline as refund is not possible once the flight trip has been accomplished. The instant result of this situation is negative word of mouth communication from customers that experience bad flight experience and this will ultimately lead to a devastating effect such as loss of revenue, customer’s complaints, and many more.
It is on this backdrop that, we will examine the following problems emanating from above are;
- What are the strategies being employed by the airline operators in providing quality service experience to passengers?
- How effective are these strategies in enhancing customer satisfaction towards achieving the expected result?
- What are the contributions of these strategies in achieving organizational goals?
- What are the factors militating against the success of these strategies?
1.3. Research Objectives
The main aim of this study is an attempt to assess the effect of innovation on customer satisfaction of selected airlines operators in Lagos State, Nigeria. The specific objectives will be to;
- examine the influence of service innovation by the management of airline operators in Nigeria improve customers’ loyalty
- investigate the effect of technological innovation on customers’ responsiveness
- determine how process innovation by the management of airline operators in Nigeria enhances their service quality
- assess the contribution of management innovation on customer retention.
1.4. Research Questions
Research questions are those interrogative statements that arise often from the course of study, they can be defined as research objectives stated in interrogative form. Research questions are meant to generate possible answers to different aspects of the research problem and they should be clearly stated such that they act as guides in identification, collection and analysis of relevant data. In order to achieve the purpose of this research study, the study will attempt to provide answers to the following research questions in order to arrive at a logical conclusion.
- To what extent is the service innovation by the management of airline operators in Nigeria to improve customers’ loyalty?
- How does the use of technological innovation enhance the customers’ responsiveness?
- To what extent is the influence of process innovation by the management of airline operators in Nigeria enhances their service quality?
- How does the management innovation affect customer retention?
1.5. Research Hypotheses
In order to do justice to this research work, the following hypotheses are formulated to act as guides for the findings.
Ho: Service innovation has no significant effect on customers’ loyalty
Ho: Technological innovation does not have a significant effect on customers’ responsiveness
Ho: Process innovation has no significant effect on the service quality of airline operators in Nigeria
Ho: Management innovation does not have a significant effect on customers’ retention.
1.6. Significance of the Study
The study deals with innovation and customer satisfaction of selected airline operators using Air Peace, Arik and Dana Air in Lagos State. It is hoped that, this study will help the management of the airlines to focus on innovation factors that have major influence on not only organization’s performance but as well as customers’ satisfaction. So, this study has key implications, as it will help airline operators in Nigeria to practice and implement innovation where necessary so as to improve their customers’ satisfaction. It is also hoped that the result of this study will be helpful for top management of the airlines to make appropriate decisions as regard to the kind of innovation that will enhance the quality of services rendered to customers. Furthermore, the result of this study will serve as an aid for future research on the area.
1.7. Scope of the Study
The study focused on the effect of innovation on customer satisfaction of selected airlines in Lagos State, Nigeria. The study is restrained to some sub-variables which are service innovation, technological innovation, process innovation, management innovation, customer loyalty, customer responsiveness, service quality and customer retention. In order to make the research manageable, the geographical representation of the study was limited to Air Peace, Dana Air and Arik, Lagos State, Nigeria.
1.8. Operationalization of Research variables
The dependent variable is customer satisfaction (Y), represented by customer loyalty (CL), customer responsiveness (CR), service quality (SQ), and customer retention (CRT). On the other hand, innovation (X) the independent variable is represented by service innovation (SI), technological innovation (TI), process innovation (PI), and management innovation (MI).
Y= f (y1, y2, y3)
Y= Customer Satisfaction (CS).
y1= Customer Loyalty (CL)
y2= Customer Responsiveness (CR)
y3= Service Quality (SQ)
y4= Customer Retention (CRT)
X= f ( x1, x2, x3)
X= Innovation (INN).
x1= Service Innovation (SINN).
x2= Technological Innovation (TINN)
x3= Process Innovation (PINN)
x4= Management Innovation (MINN)
The three specific objectives are operationally expressed as:
Customer Loyalty and Service Innovation
y1= f (x1)
y1= b0 + b1x1 + u
Customer Responsiveness and Technological Innovation
y2= f (x2)
y2= b0 + b1x2 + u
Service Quality and Process Innovation
y3= f (x3)
y3= b0 + b1x3 + u
Customer Retention and Management Innovation
Y4= f (x4)
Y4= b0 + b1x4 + u
1.9. Organization of the Study
This study will be divided into five chapters.
Chapter one, which is the introduction will include the problem statement where the problems of the study that prompted the researcher will be stated. Objectives intended to be achieved in carrying out this research work will also be listed here; the research questions and hypotheses will as well be specified in the chapter. Answers to these questions will be provided at the end of the research work. Other sections of the chapter will include; scope of the study, significance of the study, organization of the study, and definition of terms.
Chapter two, which is the literature review, examines the existing literatures on innovation and customer satisfaction. The chapter will include conceptualization, definitions, theories and empirical review.
Chapter three, this section includes; the introduction, research design, population of study, method of data collection, validity and reliability, sample and sampling techniques, and method of data analysis.
Chapter four is the presentation of data analysis. It includes the presentation of data, analysis and testing the hypothesis.
Chapter five, which is the summary, conclusion and recommendation. This will be the final chapter and will summarize the findings of the research, drawn conclusions from these findings and proffer recommendations to staff and management of airline operators in Nigeria.
1.10. Definition of Terms
Innovation: is the formation of an idea as well as the adoption and execution of new ideas in processes, products and services
Service Innovation: is a service product or service process that is based on some technology or systematic method.
Process Innovation: is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.
Technological Innovation: is the process where an organization or group of individuals working outside a structured organization embarks in a journey where the importance of technology as a source of innovation has been identified as a critical success factor for increased market competitiveness.
Management Innovation: is anything that substantially alters the way in which the work of management is carried out, or significantly modifies customary organizational forms, and, by so doing, advances organizational goals.
Customer Satisfaction: is regarded as one of the most important factors influencing the formation of a customer’s future intentions of purchase
Customer Loyalty: is the result of consistently positive emotional experience, physical attribute based satisfaction and perceived value of am experience, which includes the product or services.
Customer Retention: refers to the activities and actions organizations and companies take to lessen the number of customer defections.
Service Quality: refers to a customer’s comparison of service expectations as it relates to a company’s performance.