Research Topic: Critically analyze the impact of price promotion strategies on consumer’s perceived value in the UK travel industry
1.1 Background of the study
Among the fastest-growing industries in the world, the travel and tourism industry is one of them (Sharpley, 2016). According to Evans, Campbell and George (2013), people over the world spend about 10% of their total earnings on traveling and visiting places. A study by Beaver (2015) disclosed that the world travel and tourism industry creates employment within 2.4 seconds and gained nearly £3 trillion every year. However, because of the fastest industry, many new entrants are entering the UK travel and tourist industry that are increasing competition in the market. Therefore, the marketers in the UK travel industry are looking for more effective marketing and promotional strategies than ever before to attract their target and potential and ensure the travelers perceived values (Sharpley, 2016). The other study by Kotler et al. (2015) stated that price and promotional strategies have come under deep consideration of marketers in the UK travel industry because of growing competition in the market.
Sharpley (2016) said marketers in the travel industry are now applying several promotional strategies, whereas price promotional strategy is now widely used by the marketers in the UK travel industry to attract their target customers and gain consumer perceived values. Kotler et al. (2015) defined the promotional strategy as the marketing strategy that emphasizes on promotional mix and choice of the target market for influencing buying behavior of customers. Palmer (2016) defined the promotional strategy as the discounts as well as advertising offered by marketers to promote their products and services towards their potential and target customers. Bradely (2016) stated that promotional strategy is used to gain consumer perceived values and influence customer buying behavior and decision. Therefore, promotional strategies play a significant role in the travel industry of the UK to gain consumer perceived values. The term “consumer perceived value” is defined by several experts in different ways. Kokemuller (2016) defined customer perceived value as the measurement of understanding customer satisfaction about a particular brand and its products and services. Kotler et al. (2015) said marketers need to understand customer value propositions to reach customer perceived values.
Palmer (2016) said value proposition refers to the price-related benefits offered for any particular product and service by the marketers to their customers. Kotler et al. (2015) suggested the marketers do market research on a regular basis for understanding the changing perceived value of customers, whereas as research instruments customer surveys, test markets, focus, and experimental market research tools can be applied. Johnson et al. (2015) suggested the marketers apply effective promotional strategies to achieve customer-perceived values. This is because ineffective promotional strategies negatively affect brand loyalty, brand preference and perceptions. Kotler et al. (2015) said it is essential for marketers to understand consumer perceived values to meet their changing demands. Therefore, it is now an issue in the travel industry of the UK to understand the effectiveness of promotional strategy on the customer perceived values.
1.2 Research rationale
The travel and tourism industry is the fastest-growing sector in the UK in terms of economy and employment since 2010. The study done by VisitBritain (2013) shows the estimated worth of the tourism industry in the UK is over £257 billion by 2025. This industry only contributed £126.9 billion in UK GDP and 9.6% of total UK jobs in 2013. In addition, this sector predicts 3.8% growth by 2025 which would be faster than the overall UK economy. Inbound tourism is also the fastest growing sector in the UK, whereas the international visitors forecast to grow by more than 6%. The total value of inbound tourism forecast to grow from £21 billion in 2013 to over 57% billion by 2025. Only in 2016, over 37.6 million international visitors came to the UK and spent more than £22.5 billion. UK ranked eighth in the UNWTO international tourism arrivals league and sixth in the international tourism earnings league in 2015, where the other world-famous long haul destinations are the USA, France, China, Spain, Thailand, Turkey, Germany, and Italy. In 2016, UK attracted the highest number of visitors (39% of total visitors) from the top three markets-Germany, France and the USA, whereas only London attracted 53% of inbound visitors and the rest of England, Wales and Scotland attracted 47% of international visitors.
The UK Civil Aviation Authority (2012) stated that EasyJet dominated the UK trouble industry by gaining 43% of the total market share. It offered 85% of its total seat capacity and carried over 4751 million travelers in 2012. The British Airway has been the second-largest airline among the travelers that gained 30% of market share and carried 32.97 million passengers offering 78.3% of its total seats in 2012. The rest airline industry has been fragmented by smaller competitors including Flybe (6.3% of total market share), Virgin Atlantic (4.8% of total market share), Monarch (4.1% of total market share), and Jet2 (3.7% of total market share).
However, UK is one of the most expensive travel and tourism destinations in the world. According to the World Economic Forum (2013), UK ranked 138th out of 140 countries in terms of price competitiveness. In addition, because of the falsest growing industry, many new entrants are entering within the UK travel and tourism industry that is increasing competition in the market. Thus, promotional strategies (mainly price promotion strategy) come under deep consideration of marketers in the UK travel and tourism industry (CISION, 2014). Kotler, Bowen and Maken (2016) said products and service pricing in the UK travel and tourism industry depends on a number of other issues including government regulation (such as VAT issue), seasonality, choice of geographical location and destinations, and customer needs and expectation. Therefore, marketers in the UK travel industry face challenges to develop effective promotional strategies to attract their target and potential customers. Michael (2014) said price-related promotional strategies contribute a lot in fixing product and service prices in the UK travel and tourism industry. This is because the price promotional strategy is designed for short-time basis but provides a greater outcome in revenue, market share, customer retention, and business profitability (Cook and Marqua, 2013). In addition, Kotler et al. (2015) said the price-related promotional strategy is essential to attract price-sensitive customers. CISION (2014) stated that many travelers are price-sensitive. Thus, it is essential for marketers in the UK travel industry to understand which and how price promotion strategy should be effective to gain consumer perceived values and their changing needs and expectations.
1.3 Research aims and objectives
The main of this study is to critically evaluate the promotional strategies (mainly price promotional strategy) that contribute to gaining customer perceived values in the UK travel and tourism industry. Then, the study evaluates which and how promotional strategy affects the performance of the UK travel and tourism industry. Finally, based on the finding of this study, recommendations are provided for the UK travel and tourism industry so that they can apply effective promotional strategies to achieve travelers’ perceived values………………………