Traditionally, the buying and selling of products and services have always occurred either through a face to face transaction, a letter of intent or even a simple phone call where a person places an order and pays upon delivery (Bennett, 2008). Due advances in technology where the scale and scope of the retail industry have come to encompass a global market place, the traditional processes by which this industry has always followed has started to change.
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The internet has brought an unprecedented level of interconnectivity on a global scale through which more and more transactions such as banking and even retail are conducted (Chatterjee & Wang, 2012). Sites such as priceline.com, kayak.com, expedia.com, and numerous other online travel sites have enabled consumers to plan and book their vacation and travel needs all from one site.
This is a growing indication of a shift in consumer preference from buying their wants and needs through traditional travel agencies to picking the convenience of the internet for all their travel needs (Bentley, 2005). As a result, numerous travel companies have shifted various levels of their retail operations to online stores to compete with their rivals and take advantage of this growing trend (Lee & Lehto, 2010).
This trend has not been limited to small scale online retail transactions even airlines themselves have created online self-booking services where consumers can book flights, plan their itineraries and even choose what kind of meal they would get on the flight.
The particular nature of the online travel retailing industry has not been limited to processes limited within the borders of states (in the case of the U.S.) or countries but rather is global phenomenon wherein individuals and businesses can avail of such services from anywhere in the world.
It is due to this trend the numerous travel companies and agencies can reach a much larger consumer base compared to what they were capable of doing before resulting in a larger profit margin for the business (Law, Guillet & Leung, 2010). With this in mind, what this paper will seek to do is examine is how such travel sites impact the behavior of travelers in terms of their willingness to travel or spend based on the ease and convenience in which they can plan and purchase their trips from start to finish (Toh, DeKay & Raven, 2012).
Background of the Study
E-Commerce, an abbreviation of the term electronic commerce, is a way in which business transactions such as the buying and selling of products is conducted over the internet. Due to its widespread proliferation with thousands of users being added to the online browsing population daily, the breadth and depth of the internet are not to be underestimated.
With estimates placing the number of users in the hundreds of millions, companies have started to capitalize on this trend by moving traditional operations such as advertising and retail to online mediums to attract customers to their products.
Advantages of Online Retail for Consumers
When dealing with online retail operations, it must be noted that such methods of selling to customers do not suffer from the regular limitations that affect in-store selling. One aspect of regular retail stores and outlets is that they require employees in the form of cashiers, stock clerks, baggers, store managers and an assortment of other personnel within the store that enables a store to operate and give a customer pleasant shopping experience.
With an online store a company can save money on employee salaries, benefits and bonuses since the entire process have been automated using computers resulting in the potential for a greater product to profit ratio due to the lower costs involved in operations (Toh, Raven & DeKay, 2011). As a result, this amount of cost savings is passed along to customers as well in the form of cheaper airfare and hotel bookings.
Not only that, a website does not close (except for maintenance and upgrades) enabling customers to book a flight or plan a trip on their own time and at their convenience. This translates into a better customer experience that encourages consumer patronage of a website’s service (McDonald, 2007).
Advantages of Online Retail for Businesses
Online retail stores employee skeleton crews of website editors, procurement specialists and online marketers which enable the company to run a website with fewer employees needed yet are able to display their products in a much more efficient and attractive way than in a store and are able reach a much larger market due to online marketing campaigns (Flying from the computer, 2005).
Another problem attached with in-store retail is the fact that utilities such as electricity and rent come into play when taking into account the cost of running such an establishment. With online retailing most of the framework of a site is either run of servers which requires much less electricity than a retail outlet and there is no rent involved (Scott & Orlikowski, 2010).
The only cost involved in such a venture would have to be the cost of the domain name or in the case of rented online capacity the cost of cyberspace which is actually negligible considering the fact that the cost of putting up an online retail today is equivalent to only a quarter of single employees salary in most retail outlets in the U.S.
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Online Social Networking
Another aspect of online travel retailing is the use of social networking as a means for small independent companies or even individuals to tell people about trips and plans that they have made to the people included in their friend’s list. Sites such as Facebook.com, Multiply.com, and Myspace.com have evolved beyond their original concept of a way for friends to stay in contact with one another to a way in which individuals and small retailers can market and sell their products via customers who like and share their travel arrangements (Chong & Ho, 2011).
With such an option placed on most travel websites at present, people are encouraged to book and take trips through online travel sites since it allows them to show to others that they are about to go on vacation. Such behavior is due to the current propensity for people to share details of their everyday life with friends and family members (Law, 2003).
Due to the current financial recession, consumers/travelers are more reluctant than ever to commit funds to overly expensive outings. As a result, they often look for discounts they can avail of which online travel sites such as priceline.com, kayak.com, and expedia.com can let them see.
The Wide Picture of the Industry and Marketplace
Current industry trends have shown a significant drop in air travel ever since the 2009 recession started.It is actually due to this that average methods of product selling will not work and that there is a definite need to use an alternative method of product promotion to gain a profit. It is to this end that online E-commerce sites provide consumers with a means to reduce the cost of travel while at the same time making it easy and more convenient for them to plan their trips.
This section elaborates on the use of attribution theory and grounded theory as the primary methods of examination utilized by the researcher to check the information gathered during the interviews. These theories were chosen due to their ability to examine the opinions of the interviewees to properly interpret the data and create viable solutions and recommendations.
For example, through attribution theory, the research will be able to correlate the views of the passengers with their current experiences in air travel to properly determine whether travel websites affect a consumer’s perception regarding travel.
Attribution theory centers around the derived assumption of a particular individual/group of people regarding a particular process, product or service based on their experience with it. It is often used as a means of investigating consumer opinions regarding a particular product and to determine the level of satisfaction derived from its use.
By utilizing this particular theory as the framework for this study, the researcher will be able to correlate the opinions of the interviewees regarding their assumptions over what practices currently utilized by travel websites lead to consumer satisfaction and patronage. Utilizing attribution theory, the research will design the research questions in such a way that they delve into the opinions of the passengers to better understand what factors influence their buying behavior at present.
The needed information will be extracted through a carefully designed set of questions whose aim is to determine how a particular passenger’s experience with a travel website affects the way they choose to travel and whether, in their opinion, significant improvements need to be implemented or not.
However, it should be noted that while attribution theory is an excellent means of examining the opinions of interviewees, it is an inadequate framework when it comes to determining the origin of problems in certain cases. Grounded theory, with its emphasis on utilizing a specific framework to guide a researcher during the examination process, can be considered an adequate method of performing the more “in-depth” aspects of the research.
The advantage of utilizing ground theory over other theoretical concepts is that it does not start with an immediate assumption regarding a particular case. Instead, it focuses on the development of an assumption while the research is ongoing through the use of the following framework for examination:
- What is going on?
- What is the main problem within the company for those involved?
- What is currently being done to resolve this issue?
- Are there possible alternatives to the current solution?
This particular technique is especially useful in instances where researchers need to follow a specific framework for examining a problem (as seen in the framework above) and, as such, is useful in helping to conceptualize the data in such a way that logical conclusions can be developed from the research data.
This section aims to provide information on how the study will be conducted and the rationale behind employing the discussed methodologies and techniques towards augmenting the study’s validity. In addition to describing the research design, this section will also elaborate on instrumentation and data collection techniques, validity, data analysis, and pertinent ethical issues that may emerge in the course of undertaking this study.
Merriam (2009) in her book “Qualitative Research: A Guide to Design and Implementation” explains that qualitative research is a type of exploratory research than in that it tries to examine and explain particular aspects of a scenario through an in-depth method of examination. While it applies to numerous disciplines, it is normally applied to instances which attempt to explain human behavior and the varying factors that influence and govern such behaviors into forming what they are at present.
Thus, it can be stated that qualitative research focuses more on exploring various aspects of an issue, developing an understanding of phenomena within an appropriate context and answering questions inherent to the issue being examined. It is based on this that the researcher chose a qualitative approach to be utilized within this study.
Most qualitative studies are either descriptive or experimental. The study will utilize a descriptive correlational approach because the participant will be measured once. Furthermore, it is imperative to note that the study will employ a questionnaire technique for the purpose of collecting participant data from the areas above indicated in the previous paragraph.
A questionnaire technique is used when the researcher is principally interested in descriptive, explanatory or exploratory appraisal, as is the case in this study. The justification for choosing a questionnaire based approach for this particular study is grounded on the fact that the participant will have the ability to respond to the researcher’s questions more directly and thus provide more information.
An analysis of related literature will be used to compare the study findings with research on various strategies utilized by the travel industry. Such analysis is important in identifying the actual constructs that determine efficient analysis because “it goes beyond a mere description of variables in a situation to an understanding of the relationships among factors of interest.”
Data collection for this study will be pretty straightforward; it involves utilizing a questionnaire to gather the opinions of up to 200 respondents to determine whether the convenience and cost savings they get from online travel sites results in a willingness to travel more.
Did you use an online travel website to book your flight?
Is booking through a travel website easier and more convenient for you as compared to going to a travel agency?
Are you willing to go on more trips if the method of booking is easier?
In your opinion, has the use of an online travel website affected your traveling behavior in any way?
The research subjects that will be used for this paper will consist of various individuals that will be recruited at the local international airport. Before the start of this research paper, the researcher will ask the permission of the airport administrators to conduct the study. Two hundred individuals will be recruited with no distinction being made between what type of passenger they are (i.e., business class, first class, economy, etc.).
All participants will be given a consent form encompassing what the study entails as well as assuring them that all responses will be kept strictly confidential and will observe proper research ethics in terms of ensuring that the data will not be leaked to the general public. Once the research subject has consented to be part of the survey, they will be given the questionnaire for them to
The primary method of data analysis in the case of this study involves an individual review. The individual review will primarily be the researcher examining the collected response data from the passengers that were interviewed and comparing it to the data obtained from the literature review. The researcher will then review these main themes and use this information to assist in establishing the key findings of the study. This method of data analysis is appropriate for a qualitative design.
The results of the study showed that a majority of the passengers that were interviewed at the local airport did indeed use online travel websites to book and plan their trips. They stated that it was the lower prices and more convenient offerings of these sites that resulted in them patronizing online travel sites over local travel agencies.
It should also be noted that when asked whether these online sites impacted their travel behavior, the travelers revealed that due to the overall convenience and accessibility of such methods of booking and travel, they were encouraged to travel more and book through the site. This was because booking at a travel agency was considered as long and tedious while doing so through a website was fast and convenient.
SWOT Analysis Based on Study Results
The results of the study have revealed the following regarding online travel websites.
The strength of online travel websites lies in the fact that they are a cheaper and more convenient method for travelers to book and manage their travel itineraries. To better understand how such a concept integrates itself into business planning and marketing the four fundamental concepts of consumer choice must be taken into consideration namely: rational behavior, preferences, budget constraints and prices (Sharkey, 2007).
The concept of rational behavior assumes that all consumers are rational individuals who try to use their earned income to derive the greatest amount of satisfaction/ utility. In other words, consumers try to get the most out of their income through rational buying behavior which results in a maximization of total utility from the products or services used (Hsieh, Tzu-yin & Yung-kun, 2010).
In the case of this paper, this comes in the form of clients choosing online travel websites instead of physical travel agencies based on their perception that they would get the most value from patronizing that company (i.e., through cost and time savings). This rational behavior is based on the fact that consumers will act in an economically competent manner in that they will not spend too much money on irrational purchases or services.
The concept of rational behavior assumes all consumers engage in rational buying behaviors which becomes the basis for any future analysis of consumer patronage towards a particular type of product or utility (Parsons, 2011). For the travel industry, this means that customers have a certain “limit” to the amount they are willing to pay on airline tickets on a particular travel package based on the rates that the company has allotted for them (Guadalupe-Fajardo, 2003).
Since online travel websites can give better prices in a more convenient manner to be purchased, it is not surprising that customers would patronize this particular type of service.
It must also be noted that the concept of preferences is based on the fact that each consumer has his/her personal preference towards a particular service or product that is currently available in the market from which they can derive the greatest amount of total utility/ satisfaction (Online battle, 2011).
Consumers are inherently aware of how much in the way of marginal utility they can derive from successive use/consumption of a particular product or service (Griffiths, 2012). It must be noted though that the amount of marginal and total utility derived from a particular product or service differs based on each consumer group since they all have individual tastes, preferences, and ideologies.
In the case of the travel industry, this comes in the form of various fare packages that the companies offer passengers. Sometimes travel agencies can provide complete travel packages that online websites cannot and can provide a greater level of human interaction (Michels, 2002).
Based on the study results it was seen that some passengers preferred travel agencies due to the “human factor” that online websites lacked. Another factor that should be taken into consideration is the fact that online travel websites are easily created resulting in a lot of competitors easily being able to access the market which can potentially erode the market share of any successful site.
Under the concept of budget constraints, each consumer is assumed to have a fixed and finite income due to the limited amount of work in exchange for income each consumer is capable of achieving. In this case, it is assumed that there is unlimited demand for goods and services; however, this is offset by a limited income (Muñoz-Leiva et al., 2012).
For the travel industry, this takes the form of having specific types of ticket packages available that take into account varying income levels instead of having fixed price packages that neglect to take into account a person’s level of income before a particular payment plan is set (i.e. promo fares, low cost carriers, etc.).
Since travel websites are able to edit and advertise various kinds of discounts and promotions for fairs and hotels as they appear, this presents itself as an excellent opportunity for consumers as well as for the business since it results in a cheaper way of traveling and taking a vacation as well as increasing consumer patronage (Wen, 2012).
Finally, the concept of prices assumes that each consumer is part of the total demand in the market. Due to the limited amount of income each consumer is capable of achieving they must choose to obtain the best combination of goods that maximizes their total utility while at the same time remaining within a certain price range.
In this study, the point of view of the consumer, namely consumer preference, plays an important role in determining whether the total utility of the consumer knowing that the travel website they are under has beneficial practices (i.e., good customer service, widespread loyalty packages, online service, etc.) actually contributes to consumer patronage of that particular business (Chih et al., 2012).
It must be noted that while the concept of consumer preference plays an important role in the choice of a particular product or service, the fact remains that the remaining concepts of rational behavior, budget constraint and price also play roles that can override them.
Should a consumer be presented with the same service with both being within budget constraints and prices, the choice is usually left up to consumer preference (Websites: less is more, 2009). On the other hand, if a choice is beyond budget constraints, price level and is considered to be an irrational choice preference is no longer included in the decision-making process (Mueller, 2011).
Thus, in terms of understanding consumer behavior, preference should not be considered the sole deciding factor in understanding consumer behavior rather a combination of rational behavior, preference, budget constraints, and price must always be taken into consideration to understand how consumer behavior towards a particular product or service works.
If another travel website can offer better services and lower prices for the same type of vacation or travel experience, it is likely that consumers would go for that site rather than the one they are currently patronizing (Venkateshwara Rao & Smith, 2006).
Necessary Changes in the Online Travel Industry
One aspect to take into consideration is the fact that at times certain products become a “tough sell” as a direct result of consumer objections to the product itself. One case where this is evident is changing consumer attitudes in the U.S. towards the use of gas guzzling SUVs.
From 1995 to the early 21st century SUVs were considered almost the vehicle of choice for a large percentage of families and consumers within the U.S. however due to increasing gas prices the demand for SUVs has severely plummeted resulting in a significant deterioration the market base for current SUV dealers.
Professor Stephen Hoch of the Wharton School of Business explains that in such cases what is needed is to “frame an offer to get rid of the objection.” This means to create a buying situation where the consumer observes the perks of buying a particular product and neglects to take into account the possible negative implications of the sale. In the case of online travel sites, this comes in the form of constantly updating and changing their selling strategies to match the needs of consumers.
Overall, this paper has shown that online travel websites do indeed have an impact on consumer behavior wherein they encourage them to fly on more trips and take a more active interest in their itineraries. However, it should also be noted that despite increased consumer interest, the fact remains that the online travel industry is far to easily penetrated by competitors which results in a considerable level of competition resulting in lower profit ratios for current online travel websites.
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