Marketing Approaches In Public Transport

Published Date: 02 Nov 2017

Introduction

Overview

The vital idea of marketing is to match the needs and wants of customers (the demand side) to companies’ competences (the supply side) in such a way as to achieve the goals of both parties (McDonald and Dunbar, 2004). Companies usually cannot appeal to all buyers because they are too many and too varied in their needs and wants (Kotler, 2009). To match the demand and the supply sides, at least two strategies are preferred. First, a company must allocate its competences with other companies, forming that system of upstream and downstream linkages that constitutes a supply chain. Secondly, since the demand is not homogeneous, supply chains cannot appeal to all buyers in the same method, which forces suppliers to apply some strategy for market segmentation (McDonald and Dunbar, 2004). In this regard, current marketing practice recommends that organizations first explore the customer needs, then segment customers in groups with similar needs, and finally target them with differentiated products and services (Canever et al., 2007).

In market focus or customer focus, the organization must first determine what is a potential customer demands? Then present the product or service. One of the issues raised in each country's economy is achieving to a sustainable growth in long term. Marketing theory is justified of this principle that customers are using the services and products because they need to them or because they are considered their benefits. Oriented management process encourages businessman towards oriented relationship and developing relationship with others and adding to the advantages and profitability and also improving the product and service in order to create competitive advantage in business (Manafzadeh et al., 2012).

The consumer is central to all activity in the level of marketing theory and practice. It is therefore critical for marketer to understand how a consumer behaves to ensure the successful delivery of their product to the market place and to retain business. Segmentation provides the opportunity for marketer to better understand their core consumer (Hollywood et al., 2007).

In the current marketing, it has been well established that markets and customers who form those markets are not homogeneous in nature. In most cases, it is almost impossible to satisfy all customers in a same market with a single marketing strategy.

Individual needs or benefits sought from a product types and brand have been found to differ in terms of consumer’s individual preferences. Therefore, firms offer a variety of products and brands to different market segments. These firms change from mass marketing towards a target marketing strategy which are serve a specific group of customers that have a similar characteristics and requirements (Park et al., 2011).

The concept of market segmentation is a strategic marketing management tool for resource allocation which seeks to enhance customer satisfaction and improve organizational profitability (Epetimehin, 2011). Market segmentation includes the grouping of customers or prospective customers who have similar responses to a product-market offering. The process of market segmentation includes an understanding of how/why customers buy, how a company can fit its competences with customer needs, and how to develop strategies and marketing programmers’ to satisfy customers profitably (Murphy and Daley, 1994).

Consumption is a worthwhile concept in which, a person consumes because of its need. Consumption has different dimensions so consumer appears in different roles in a consummative society. An economical person is looking for fulfil requirements that received from goods and objects. Economists describe consumer as a person who is searching for usefulness of goods and services; while psychologists conceive motivation and stimulation as an important issue in comparison with objects. Psychologists have done widespread studies for examining behaviour and presented different theories. Purchase of a good is a behaviour which is influenced by internal and personal and environmental factors of the person. Behaviour occurred in pursuit of a need (Hanzaee and Khonsari, 2011).

Market segmentation is a very important construct when predicting consumers’ purchasing behaviour. Segmentation uses the premise a consumer market can be identified and divided into segments-based upon consumers’ characteristics and/or behaviour. Identifying market segments for each product and service has been importance. People believe that benefits from each product consumed and this in turn provides a reason for true market segmentation. Identifiable segments provide a tool for better communication of product benefits with the target market as well as a more complete description of each segment. So segmentation allows marketers to identify themes which may capture the attention of consumers and satisfy their consumers’ needs (Park and Sullivan, 2009).

Marketers rarely satisfy everyone in a market. Therefore, marketers begin with dividing the market into segments. They identify and profile distinct groups of buyers who might prefer or require varying product and service mixes by examining demographic, psychographic, and behavioural differences among buyers (Kotler and Keller, 2009).

Segmentation as a tool is one of the core concepts in marketing. Segmentation becomes importance to mange marketing strategies and programmes within industrial in a successful way. Marketing theory suggests that businesses adapting a market segmentation approach can enhance their organizational performance.

One reason for the widespread acceptance of segmentation approach is the belief that organizations can not normally serve all of the customers in a market. Segmentation helps to homogenize market heterogeneity and allow for improved organizational performance by targeting specific segments of the market. Customers who have been aggregated according to similar buying needs and behaviour will tend to demonstrate a more homogeneous response to marketing programmes (Dibb et al., 2002).

Delivering superior service quality is a requirement for success and survival in today’s competitive business environment. Service quality has become a critical factor in enabling firms to achieve a differential advantage over their competitors, and it also makes a significant contribution to profitability and productivity. Moreover, service quality has become a core concept in a competitive corporate strategy; service quality can be used as segmentation variables (Perez et al., 2007).

Customer expectations have received the most treatment in the customer satisfaction and service quality literatures. These expectations influence customer-perceived service quality, which is considered to be key factor to obtain a competitive advantage and secure customer loyalty. Expectation based segmentation represents a powerful marketing tool for managers because it brings knowledge of customer identifications, and this can be source of better customer service. This type of segmentation provides a service firms a mechanism to tailor their actions to the segment chosen as targets, concentrate on the factors which most influence customers’ satisfaction (Martin et al., 2000).

In service quality literature, expectations have been present right from the start in various models as standards for comparing judgements of quality. Regarding expectations, Parasuraman, Zeithamal and Berry (1985) state that service quality judgements depend on how consumers perceive real service performance in the context of what they are expecting. Expectation have proved to be valid subjective segmentation criteria for observing heterogeneity in market such as university students for example (Fuentes et al., 2007), and professional services (Webster, 1989).

A target market strategy is widely viewed as accumulated to developing an effective business strategy. The concept of market segmentation is often cited as a key to establishing a target market strategy. Once the target market strategy is determined, marketing and technical managers develop detailed marketing mix aimed at facilitating the desired strategy (Simkin, 2008).

1.2 Marketing Approaches in Public Transport

Public transport nowadays takes very important place in people daily life, especially in cities. With the changing attitude of modern societies on lifestyle, values and services, public transport must take into account the importance of peoples’ life in cities: most citizens live in cities and most economic activity takes place in those areas. Public transport provides access to essential services like education, health and employment. It is a catalyst for attracting economic regeneration to deprived areas and maintains the prosperous ones as well.

Today marketing of public transport offers many well known solutions, such as advertising, distribution, promotion, branding, advertising, and others. All these solutions derive from the application of the ‘conventional’ marketing science that is based on the concepts of marketing mix, segmentation, targeting, positioning and others (Suminaite and Fragidis, 2011).

Public transport systems need to become more market oriented and have competitive advantages, as they tend to be viewed as service products. Along with the trend of the privatization of public transport ser-vices over the past decade, the financial performance of private service providers has been a key concern (Lai and Chen, 2011).

Transportation have performed very decisive roles from very early accelerating the sharing of economic and development benefit of connecting spatial regions. Railway has been proved as a potential sector for drawing economic and development benefits for various countries (Rahman, 2009).

1.3 Quality and Customer Satisfaction

It is commonly accepted that a product is considered as a quality product when it is consistent with certain standards and with the needs of the customers. The concept of quality is quite difficult to apply in services. However, the satisfaction of the customer will be when they get what they want, whenever they want, and as they want. Customers when they buy services have already drawn up the expected image of the service. The gap between the expected and received services is the basic reason for the customer dissatisfaction.

In general, services should contain: accessibility, communication, politeness, reliability, punctuality, correspondence, and safety. Also, services have intangible nature in that it is difficult to measure the output of a service business and to specify and measure objectively the quality offered. The contact between the customer and the service provider is very likely and the customer is a participant in the service process (Panagiota et al., 2008).

According to Panagiota et al., (2008) the charateristics of transport service:

-Cannot be stored to face changes in demand.

-Service can not be exchange as in a product.

-It is difficult to audit the quality of service before the final sale.

-Delivering of the product cannot always be guaranteed.

-Usually the service can only be produced in batches as opposed to single units.

-In the case of passenger transport the service is usually personalized.

The level of satisfaction can thus be influenced by the marketing mix elements of expectations and actual performance, which are all the marketing mix elements. However most important is this comparison of expectations and performance, which can best be influenced by promotion efforts of the company to influence the expected performance (Thamrin, 2012).Also the price is important in determining the level of satisfaction because the relative price paid determines the zone of tolerance of consumers. The settlement of complaints (after-sale service) is one of the augmented product (service) elements and can be mostly influenced by the personnel of the company (Pessers, 2007).

Based on general observation about the railway services in Egypt, the passengers are dissatisfied because there was the gap between the expected and received services. Also general public opinions indicate that Egyptian railroad doesn’t provide good services. The services are highly subsidies; the economic performance is poor, and the rate of accident is high. The railway accidents represented 30-40% of total accidents (Helmy and Menshawy, 2010).

According to Egyptian National Railway (ENR) statistics, number of railway passengers decreased from 435.6 million in 2005/06 to 247.5 million in 2009/10. Total number has decreased by more than 40% in only last 4 years. The rate of change is about minus 13% Per annum (ENR, 2011).

To provide good services and the passengers become satisfied, the identification of customer needs in order to serve and build the value of customer segments is a major challenge that marketers encounter. In order to achieve the needs of their customers more successfully and reach them in the most effective and efficient way, service companies should identify groups of customers that have homogeneous characteristics and behaviours and try to reach the needs and desires of the segment members.

Pressers (2007) demonstrated when passenger transport companies adopt marketing strategies which are more related to the desire of the customer, the customer in turn will benefit from it too. They will get a better service, because it is adjusted to their personal desires. The increase of satisfaction and the increase in number of consumers in passenger transport is an issue of national importance. It is an important issue for the government of a country because it is a part of a countries infrastructure and often seen as an indicator of the economic level of a country.

For railway companies, customers’ needs should be the starting point of the services. So using segmentation criteria allowing to know whether the service meets the customers’ requirements. By understanding theses needs, can develop different segment according to their characteristics (Hagen, 2009).

Railway transport which plays an extremely important role to meet people's demand for travel is an important component of the Passenger System. In recent years, the railway passenger transport markets are facing competition from highway and air transport. In order to gain a competitive edge in the competition, railway transport must improve their passenger service quality and need to identify segments (Liu and Guan, 2009).

Competitiveness of markets, collapse of business innovation and development in the field of products, borders, economic globalization and finally the increase of services and exploration and evaluation of customers' level of expectations and needs increased the attention and importance toward customer needs and wants.

Consumer needs, such as functional, emotional, and social needs have received considerable attention in recent years. However, research on these interrelationships has been somewhat limited in railway services.

To survive in competitive services market, the operators need to determine who the target customers are, what motives them and why they pay for the service. This process is called market segmentation, which companies are able to understand their loyal customers and concentrate their limited resources into them. Although there are many studies covering critical variables for market segmentation in different services, until now only few papers focus on public transportation systems, especially on the train (Tao, 2008).

The purpose of the market segmentation analysis in this study is to identify groups of travellers having similar needs and preferences for the attributes of rail service, so as to assist in the development of service and marketing plans. The aim of this study is to measure the preferences of different categories of users towards need of railway services, and to determine the salient preferences of different segments in the market. These segments include socio-economic, travel behavior, and marketing mix.

1.4 Importance of the Study

The importance of the current research problem can be viewed from two perspectives: the academic point of view and from the marketers/ practitioners stand point of view.

1.4.1 The Academic Importance

The segmentation research has been conducted in many sectors like banking, freight services, web shoppers, university student, mobiles phone market, hospitality and shopping this studies used many segmentation approach to profile segments such as benefits sought, demographic characteristics, lifestyle, service quality dimensions, purchase behavior and behavior profiles (McDougall and Levesque, 1994; Matear and Gray, 1995; Bhatnagar and Ghose, 2004; Park and Sullivan, 2009; Kimiloglu et al., 2010). Many amount of research have been conducted segmentation in public transport services but in developed countries and also used different approach to cluster the markets such as; passenger characteristics, behavior, lifestyle, service quality, preference and habits (Bamford et al., 1987; Pas and Huber, 1992; Lupas and Moisey, 2001; Krizek and El- Geneidy, 2007; Tao, 2008; Hagen 2009; Mahmoud et al., 2012). On the other hand, limited numbers of studies uncovering characteristics and segmentation criteria of Egyptian railway passengers, so this will help academic to better understand the factors that affect the expectation of railway service. Measuring the preferences of different segments of the market, and the level of variation within each segment is essential for developing market oriented policies and for rationalizing resource allocation. Therefore, there is a need to explore needs and preferences of Egyptian railway passengers to profile different segments, so the following study will provide a useful contribution to the literature and provide useful insights for further research in the field.

1.4.2 Importance for Marketers

Market segmentation is clearly a marketing strategy. It allows the marketing manager to divide total demand into relatively homogeneous segments identified by some common characteristics. These characteristics are relevant in explaining and predicting the response of consumers, in a given segment. Once a segment has been identified which achieve the requirements of measurability, accessibility, substantiality and actionability, it is possible to develop a product or service to meet the needs of the segment. A marketing mix can help to reach the segment identified efficiently and economically (Tynan and Drayton, 1987).

Understanding passengers’ requirements after experiencing the public transit services and their associated influential factors is also an essential task. This information can help public transit managers and marketers design effective strategies to meet passengers’ needs, satisfy each segment and thus retain existing passengers as well as attract new ones from other modes.

Segmentation represents a powerful marketing tool for managers because it brings information of consumer identification, and this can be the source of better customer service. Segmentation provides a mechanism for services firms to tailor their actions to the segments chosen as targets, focus on the factors which most influence customer satisfaction and making the customers feel that their desires are being understood.

Research Problem

Defining the customer is a debatable point for surface transportation practices. Focused segmentation practices emerging in data collection efforts are essential to determining the customer. Transportation is affected by human behavior through its policy makers and voters. Segmentation based upon customer behavior may prove more valuable to understanding customer satisfaction than strictly using professional judgment (Smith, 2010). Therefore, it is useful to identify proper segments for Egyptian market of passenger railway service based on the discovered segmentation schema; the researcher can recommend the useful marketing mix.

1.6 Research Objectives

Identifying and understanding the needs and motives of railway passengers’.

Identify segments of railway passengers based on their needs.

Developing a railway marketing mix based on passenger needs.

1.7 Methodology

1.7.1 Research Questions:

The current research will investigate three questions.

What are the current needs of railway passengers in Egypt?

How can we segment railway passengers based on identified needs?

What are the different marketing mixes that can be developed to satisfy consumer needs?

1.7.2 Research Hypotheses:

H1: There is a significant difference exists between each segment and demographical factors.

H1a: There is a significant difference exists between each segment and gender.

H1b: There is a significant difference exists between each segment and occupation.

H1c: There is a significant difference exists between each segment and age.

H1d: There is a significant difference exists between each segment and income.

H1e: There is a significant difference exists between each segment and education.

H2: There is a significant difference exists between each segment and behavioural factors.

H2a: There is a significant difference exists between each segment and frequency to take train.

H2b: There is a significant difference exists between each segment and ticket type.

H2c: There is a significant difference exists between each segment and trip purpose.

H3: There is a significant difference exists between each segment and passenger needs.

H3a: There is a significant difference exists between each segment and functional needs.

H3b: There is a significant difference exists between each segment and emotional needs.

H3c: There is a significant difference exists between each segment and social needs.

H4: There is a significant difference exists between each segment and market mix design.

1.8 Plan of the Study

Chapter two: this chapter reviews railroad market in Egypt, the basic characteristics of rail transport, the demand and supply of rail transport, the cost structure of railways companies, the market of railways, marketing in railway sector and the railway marketing plan.

Chapter three: This chapter reviews the literature related to the subject under study, starting with the segmentation concept, then the theory of segmentation, segmentation approaches, the stages of market segmentation, segmentation models, types of needs, and segmentation methods followed by a review of previous researches done on segmentation as well as reviewing previous studies related to transportation industry.

Chapter four: This chapter outlines the design of the research. The research problem and the relative importance of the research problem from both academics and practitioner standpoints are outlined and the research questions. Sampling, data collection and analytical methods for both the qualitative and quantitative phases are discussed.

Chapter five: In chapter five, the findings of the study are discussed and compared to findings of past literature. The findings are also analyzed from academics and practitioners viewpoints, managerial implications and contribution to practice and theory

Chapter six: in chapter six, the conclusion and recommendations for further research and research limitation are proposed.