Distribution Channels in Greek Ferry Services: An Investigation of Customers Preferences and Managers Perceptions

Marika Vasilatou Panos Louvieris School of Management University of Surrey, UK Panos.Louvieris@surrey.ac.uk Abstract
It is widely recognised that distribution in the travel industry has been extremely influenced by technological developments. Nowadays distribution is regarded as one of the most critical managerial decisions, given the intensive competitive market pressures, the increase in consumer power and sophistication and the exposure of new technology capabilities. In this context, the main objectives of this study were to investigate travellers channel choices and to examine the degree of their alignment with managers channel investment decisions in the Greek shipping industry. It was found that value is shifted towards a more electronically intermediated way; however travellers are still reluctant to use electronic channels during booking process. Passenger ferries will have to address the issue of emerging technologies in a proactive way in order to promote their services efficiently, be more competitive and build enduring customer relationships. Keywords: new technologies, travellers preferences, managers perceptions, alignment.

Introduction

In the new digital economy the customer is becoming more independent and involved in the itinerary planning processes (King, 2001). The increase in power of the buyer does not only require changes in the quality and strategy but is totally turning the traditional way business is conducted. In view of the increasing scope and variety of channels available to customers, understanding customers preferences and managers perceptions is a strategic imperative to ensure commercial success (Louvieris et al, 2003). As a result, winning companies would be those that are able to sense and predict consumers needs and preferences and those that are able to deliver relevant, appropriate and timely services to facilitate those needs.

New technologies and consumers

The new tourist emerged out of information communication technologies is experienced, knowledgeable and seek exceptional value for money and time (Buhalis, 2003). As Dussart (2001) suggests the increased availability of information allows for better evaluation of alternatives and making of informed choices. However, buyers generally will not want more information; they want information that is relevant and

useful. The lack of time not always money causes consumers to value enterprises that appear to help them achieve their personal objectives in a world of seemingly endless choice (Pollock, 2003). Given the great amount of information and applications, the supplier with the best-designed information package will gain the competitive advantage (Butler and Peppard, 1998). Customer expectations and experiences are changing rapidly with the adaptation of new technologies, such as mobile phones, wireless applications, and interactive television. Travellers have the opportunity to access information and data anytime, anywhere through their handheld devices. They can consider their mobile phone as personal assistants combining planning, scheduling, ticketing, travel expense, dynamic information and decision support all in a single concept (Oertel et al, as cited in Ghandour, 2002). According to Starkov (2001), custom-tailored travel services can be offered to consumers based on their needs, preferences and lifestyles. The characteristic that provides passenger with significant power is the ability he has to retrieve information about all the alternatives, compare the prices and make informed decisions. Additionally, location based services can be employed, for example, a traveller approaching an island can obtain information about the islands main attraction, history, hotel information and availability. Moreover, travellers have the ability to meet impulse driven demand spontaneously by accessing information the minute they recognise their need (Barnes, 2002). Each new technology presents new challenges including new opportunities for customer-focused companies (Pollock, 2003).The emergence of new technologies enhances the ability of the information provider to proactively target the interested consumer and provide the desired information. As Steinbock (2003) states, business solutions that blend wireless technologies with location based services open an entirely new ways of doing business. Knowing the precise location of a traveller allows companies to design innovative ways to deliver personalized services to customers as well as enhance their own internal business processes. Targeting can take place before during and even after the voyage and enables the meet of supply and demand without the intervention of intermediaries in the procedure. Additionally, mobile Internet enables companies to be prompt and proactive. Wireless communications enable the provision of time sensitive information while the traditional channels do not have the same ability. For instance, passenger ferries can notify passengers for a delay in departure or arrival of a ship. Timely communication can save the customer the trip to the port and help the carrier to avoid the cost of handling many frustrated passengers at ticket counters or at calling centers. Technology, in general, offers flexibility to travel companies, which deal with thousands of customers every day, each with a unique itinerary and set of preferences (IBM, 2001). The use of a more flexible and responsive distribution system, through the use of new technologies is appealing; however, significant difficulties stand between the idea and its implementation. To begin with, members of the traditional channels are likely to feel threatened by the new channels and arrangements because they stand to lose

long- established functions, responsibilities and relationships (Narus and Anderson, 1996). Moving to a multichannel strategy means that customers should be able to choose the channel they want to interact with and should be treated in a consistent manner, regardless of how they access the company (Power, 2000). Ideally, every participant in the distribution channels should provide the same high quality services to every consumer, in practice, such consistency is almost impossible because the channel roles are often overlapping (Narus and Anderson, 1996). Furthermore, handheld and phone devices differ from desktop and laptop computers in several ways, including smaller screen sizes and limited input capabilities. Many handheld devices display only a few lines of text and do not have traditional keyboards. As a result, applications that run well on a wired network may encounter new problems with data availability, processing efficiency when ported to a mobile environment (Tarasewich et al, 2002).

Shipping Industry

In the travel sector, value is increasingly shifting towards the non-intermediated way of purchasing travel services. Travellers want to benefit from mobile services at every stage of their travel experience, from journey planning through travelling to reaching their destination. Therefore, travel companies will have to address the issue of emerging technologies in a timely and proactive way. A timely approach will guarantee that they will have a competitive advantage when the provision of advanced travel services becomes widely available in the market (Koumelis, 2002). Innovative operators, including P&O and Stena Lines in England and Scandinavia, accordingly, are all using eCommerce to improve operations and reach customers. Stena Lines claims that 30% of booking in 2001 came through its seven old web site. Their Marketing and Sales director had predicted that by the end of the year 2002 more than half the companys bookings would be made online (TTG, 2002). Those forward-thinking operators have already established multiple, parallel channels that appeal to different market segments. Customers can use the traditional distribution channel or go online to directly access the companys site, a tour operator or a travel agent. The objective is to use multiple channels to reach customers and enable them to book electronic tickets online through these channels. In Greece passenger ferries play a very important role in tourism development, since they connect the mainland with the islands, however the use of eCommerce in passenger ferries is in embryonic stages. A research conducted by Tsamopoulos (2002), identified that the only 0,8% of the respondents passengers use the Internet as a medium of booking tickets. It should be also noted that generally Internet penetration in Greece is grown in a slower pace when compared with the other countries of the European Union mainly due to low income levels and the low level of telecommunication infrastructures. On the other hand, Greece, has one of the highest mobile penetration rates in the European Union at more than 50% (eMarketer, 2003).

In order to stimulate the usage of Internet and eCommerce the Greek government has deployed a wide range of policies and instruments and have launched many different actions and initiatives. However, the main responsibility for the transition to eEconomy remains to the enterprises, themselves (Deimezi and Buhalis, 2003). The liberalization of the market in 2004 will be a threat for Greek shipping companies since well-equipped foreign companies will enter to the market. Information technologies can help ferry companies to promote their services efficiently and be more competitive. At the same way as much research has been conducted on airlines, this research has focused on ferries; a neglected but important sector of transportation. The research topic is based n the fact that successful companies of the future will be those that are able to predict customers choices and preferences. Taking that into consideration this study aims to investigate travellers channel choices and travel patterns, to investigate managers perceptions about travellers channel preferences and lastly to assess which online facilities Greek shipping companies offer through their websites.

Methodology

Exploratory investigation has proven to be both feasible and compatible with the aim of the study. Due to the nature of the topic, primary and secondary data were included in the research methodology. Secondary data were used to provide an analytical and complete review of the environment in which passenger ferries operate and to reveal the gaps in the body of knowledge. After the identification of critical areas for investigation it was decided that exploratory primary research was needed to set the basis of the study. The primary research took place in Greece and self administered questionnaires were the main method for collecting data. More specifically, a questionnaire was distributed to travellers in order to investigate their preferences and choices. A second questionnaire was distributed to managers aiming at exploring their perceptions about customers preferences and choices as regards distribution channels. Lastly, a web inspection was conducted in order to examine the use of the web by ferry companies. When considering the sampling design within this study the purposive quota sampling was found to be the most appropriate method for investigating travellers perceptions; since the study required responses of special interest minority groups (passengers). On the other hand, the purposive judgment sampling was found to be the most appropriate method for investigating managers perceptions; as it focused on the specific type of people or organizations who could provide the necessary information to answer the research questions and meet the research objectives (Gummesson, 2000).
Table 1: Response rate for each research instrument used.

Instrument Questionnaire 1 Questionnaire 2 Web survey checklist

Element Passengers Marketing Managers Websites of ferry companies

Targeted 100 7 7

Achieved 100 6 7

Respons e rate 100% 85,7% 100%

The quantitative data were edited, coded and entered into the Statistical Package for the Social Sciences SPSS version 11.5 for Windows. The main statistics used in the analysis of the two questionnaires were descriptive statistics and inferential statistics. Paired sample t-tests were used to reveal the differences between the perceived current and future importance of distribution channels during information and booking procedure. Additionally, independent t-tests were used to compare the mean score of channel choices for two different groups of variables (e.g. gender). Chisquare tests were used to test if there is a relationship between nominal variables (e.g. age group and advanced booking) (Pallant, 2001). MANOVA (Multivariate analysis of variance) was used to test means differences among groups (e.g. Greeks and foreigners) across several dependent variables simultaneously (channel choices), by using sums of squares and cross- product matrices (Sekaran, 2003).

5. Results and Discussion

The aim of the web inspection was to examine which online facilities Greek shipping companies offer through their websites. An overall picture from the assessed websites was that the majority was at the early stages in terms of the dimensions checked. Most of the websites offered basic information and were characterized by lack of interactivity and personalization. Another important observation was the differences between the layouts and the accuracy of information. Some of them were designed recently and thus present information with up-to date techniques and have explored the potential of the web to act as a strategic distribution channel but some others were completely insufficient. The vast majority of the websites have a rather information provision role since they mainly offer information about routes, prices and act less as booking mechanisms. Therefore, it is needed companies to develop further their online booking process and use all the data entered by customers during reservation for enhancing their customer database. This feature would enable them to receive additional orders as happened with Stena Lines in Sweden, where thirty percent of its bookings came through its website in 2001. Additionally, gathering customer feedback is one of the best ways for building customer relationships; however, it became evident by the web inspection that only a small percentage of websites provides this feature. Another service that would serve the same scope is loyalty schemes which have not yet been exploited by

companies. This service would increase interactivity with the company and could also speed the booking process of loyal customers in a similar way to airlines. The fact that passengers consider Internet as the third most important information source currently and the first one in the future should alarm companies and force them to improve their online presence in order not to become competitive disadvantaged. The need for change becomes even more urgent when one considers that main international markets of the companies are among the top Internet users. Regarding passengers channel preferences the first and more obvious observation from the data analysis is that electronic channels are constantly increasing their importance as information provision channels. The results showed that Interactive Digital Television and the new Mobile Phones with Internet access are swapping roles with the traditional newspaper and telephones, respectively. As far as booking is concerned, the role of electronic channels is becoming more important but still the traditional channels retain the key roles. The prior research demonstrates that although travellers today are online lookers, they are not online bookers.

7
S trategic H P igh otential

CTA

IN T TA B O R GU I TE L M B O IDTV

5 4 3 TX T N W 2 1 2 1

K O ey perational

S upport

4 Current Im portance

Fig. 1: Current and future importance of information search channels from the customer perspective (Significance at p< 0,05)

KEY: CTA: Companys Travel Agency, TA: Travel agent, TEL: telephone, TXT: teletext, INT: Internet, MOB: Mobile phone with Internet access, IDTV: Interactive digital television, GUI: Guidebook, BRO: Brochures.

Future Importance

S trategic

H P igh otential

7 6

CA T T A IN T T EL M B O ID V T FAX

5 4 3 2

K O ey perational

S upport

1 7 6 5 4 C urrent Im portance 3 2 1

Fig 2: Current and Future importance of channels during booking process (Significance at p< 0,05)

The figures 1&2 show the current and future customer channel benefits portfolio (Louvieris et al) based on passengers perceptions during information search and booking process. The value of the X and Y axes represent the current and future importance of each channel respectively and are categorized into four groups, namely Key Operational, Strategic, High Potential and Support. The framework is divided by a diagonal line which has a 5% margin either side known as the confidence interval. Those channels that are within the confidence interval had no significant changes in their values from current to future importance. Those channels that are situated on the diagonal line signify that their value has remained the same. Those channels that are situated outside the confidence interval indicate that had significant changes in their values. Additionally, the data analysis has illustrated that there is a significant difference in the way Greeks and nonGreeks perceive channel importance. Greeks prefer to search and book their travel arrangements through travel agencies while foreigners prefer to use Internet, especially during information search. Apparently this happens because Greek population is reluctant to abandon traditional marketplaces and finds it easier to pass by a travel agency and ask for travel details. Moreover, they might believe that they can find lower prices and achieve better deals in the high street shops. On the other hand, foreigners, who are not familiar with the country, they browse the Internet in order to find more information, compare prices and find alternatives. This observation about the differences between Greeks and foreigners suggests that the marketing mix to target these two groups of people should be different since they use different channels for information provision. However, findings in respect to the preferred channels during booking showed that both Greeks and foreigners trust traditional channels during booking process. This trust that passengers show to traditional channels indicates that although e- channels play key role in customers

Future Importance

channel benefits portfolio during information search, they have not yet gained the full acceptance of the public during purchasing. Furthermore, the results as regards the perceived importance of channels when considering the age of respondents; showed that young passengers perceive electronic channels as more important than the others age groups. This suggests that companies should be aware that the next generations are in a large extent technology- literate and use their electronic devices as part of their everyday life. On the other hand, older people stated that currently and in the future trust the traditional travel agents. It is therefore, very important companies to understand that the e-channels are mainly exploited and appreciated by younger generations and it would be difficult for elder travellers to change their preferences. The investigation of differences between males and females, with respect to the perceived importance of channels, showed that in general males are more familiar with new technologies since they perceived IDTV and mobile phones with internet access as more important than females did. It can be assumed that electronic devices belong to toys for boys category and this observation holds implications for both targeting and marketing segmentation. With reference to passengers travel patterns, chi- square test revealed that a large percentage of passengers purchase their tickets the day of the departure although they have decided to travel many days earlier. The fact that they choose last minute purchasing shows that their decision making is impulse driven. Additionally, this fact restrains consumer loyalty because often they have to adapt to whatever is available. Therefore, it is needed companies to find ways to approach these customers. One solution which is consistent with that behaviour would be the use of information communication technologies. For instance, through wireless communication, companies can directly target a traveller approaching the port. The ultimate goal of companies should be the decrease of time between problem recognition and actual purchase. This is especially true when one considers the level of uncertainty companies feel when the majority of the tickets are sold just before embarkation.

S te ic tra g

7
H h P te tia ig o n l

IN T CA T M B O TA TE L B O R GI U N W TX T
K y O e tio a e p ra n l Spo u p rt

6 5 ID TV 4 3 2 1

4 C urrent Im porta nce

Fig. 3: Current and future importance of information search channels according to managers perceptions (Significance at p< 0,05)

The results of this study indicate that managers consider that direct selling and traditional travel agencies are currently the most important channels, however electronic channels; Internet, IDTV and Mobile phones are constantly increasing their role in the distribution strategy of companies. Even now they consider the Internet as the third most significant channel for information search and the first in the future. It is also worthwhile to note that managers stated that in the future information search using mobiles phones will be the third most important channel, after Internet and companys travel agency, and have considered it of equal importance to the traditional travel agency. This statement highlights the power and the penetration that echannels are going to have. It was also noticed that managers want to reduce the role of traditional travel agencies. This fact would enable them to lower their break even point and gain profits earlier. If they increase the sales of their own travel agencies they would avoid the commission paid to agencies and would have better control of their sales taking into account and the impulse nature of purchasing. The channel benefits portfolio analysis showed a difference as regards the hierarchy and the magnitude of the channels; while managers perceive that IDTV belongs to high potential distribution channels during future search and booking, passengers consider IDTV a supportive channel. The reasons behind that is probably the low level of IDTV penetration in Greece. Therefore, it is recommended companies to invest more conservatively in that channel and wait until there is a critical mass of customers owning IDTV in the market place. The combined analysis of the questionnaires distributed to travellers and to managers showed that there are not many significant differences between passengers preferences and managers perceptions at 5% significance level and in general the degree of alignment of channel portfolios between the two types of respondents found to be satisfactory.

Future Importance

7 6 5 4 3 2 1 0
an ra y's ve T A l ag B e ro nt ch te ure le s p h n on ew e s pa p er te le te xt tr .g u id e In te rn et ID T V M o b ile T

m p

Travellers

Managers

Fig. 4: Alignment between passengers and managers during current information search (Significance at p< 0,05)
7 6 5 4 3 2 1 0
T A ag B e ro n ch t te ure le s p h n ew on e s pa p te er le te xt tr .g u id e In te rn et ID T V M o b ile y' s C o m p T an

ra ve l

Travellers

Managers

Fig.5: Alignment between passengers and managers during future information search (Significance at p< 0,05)

However, there were found to be statistically significant differences in the traditional printable material of information provision such as brochures, travel guides and newspapers. As a result, companies should transfer funds from newspaper advertisement to the production of printable material such as guidebooks and brochures, which have larger effect to the public. Future surveys might investigate to what extent companies actually use this channel portfolio. The fact that they are aware of the customers preferences does not necessarily imply that they actually have the optimal channel mix. Several limitations were identified throughout the completion of the study. These limitations form directions for future research and point to theoretical implications. First of all the data were collecting from companies that have more than two vessels

in their fleet and travel in Greek domestic sea line since all the smaller do not use any electronic channels. Additionally, this study was not statistical stratified as regards age groups since it was noticed an under presentation of travellers aged less than twenty five years old and of travellers more than fifty years old. Attention should be focused even more on the cost of each channel used.

Conclusion

The data analysis confirmed that travellers nowadays use a variety of channels that are easy accessed in order to satisfy their needs. In the shipping industry, value is slowly but surely moving towards a more electronically intermediated way of making travel arrangements. As a result, a number of new opportunities appear for shipping industries through the use of wireless technologies since passengers prefer the channel of convenience whatever that channel might be. The data survey also verified the centrality of understanding consumers motivations and behaviour patterns in order for companies to segment consumers better and make effective marketing decisions. This study revealed that consumers perceive electronic channels mostly as sources of convenience, up-to date information rather than a means to book travel service. In this way, the assumption that travellers are online lookers but not bookers was verified. However, the investigation of future intentions showed that electronic channels are going to increase their importance. On the other hand, Greek shipping companies as the survey has shown are generally aware of the passengers preferences and have already started to invest on new technologies. Nevertheless, the variations that exist in their online presence necessitate the delivery of value-added, interactive services online in real time in order to gain competitive advantage and strengthen relationships with customers. The methodology used which allows the simultaneous investigation of supply and demand provides useful insights and solutions for the shipping industry. By understanding customer usage of channels and building strategies that reflect customers needs and preferences, companies can serve their target markets, improve their efficiency and maintain long-term prosperity. Additionally this type of dual investigation indicates which channel investments should be the most promising and successful. It is therefore advisable for shipping companies to fully integrate all the channels they use in order to take the customer from problem recognition to actual purchasing faster than their competitors. The further investment in electronic channels is regarded as necessary and in this way government should be a strong motivator by providing the required pecuniary support. Moreover, companies should take into account the different channel preferences that exist between different passenger groups and apply the appropriate marketing techniques. The challenge is to develop the optimal channel mix that maximizes consumer satisfaction and convenience so that ferry companies can remain competitive and prosperous within a global transport industry.

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