Using neural networks to understand service risk in the holiday product

Moutinho, L., Mitchell, V., Davies, F. and Vassos, V. (1999) Using neural networks to understand service risk in the holiday product. Journal of Business Research, 46(2), pp. 167-180.

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Despite being one of the most symbolic, important, involving, costly, exciting, uncertain and complicated decisions most consumers make each year, holiday purchasing has received relatively little academic treatment in the service marketing literature. By extending and refining previous work, this study examines the usefulness of perceived risk theory to understand consumers' behaviour in one of the most common holiday experiences, the package holiday. Unlike other studies, this research undertakes a more detailed assessment of the risks involved, as well as examining how consumers reduce those risks. Forty-three risky attributes and fifteen risk reducers were identified and a neural network analysis uncovered a relationship between risk and risk reduction which involved functional, financial and hotel dominated risks, whilst the relationship between risk and purchase intention was mediated by trust in the tour operator and anxiety. The paper explores the nature of the risk in the holiday product and discusses how perceived risk can be measured and used by travel marketers in further research. In 1993, an estimated 500 million international tourist arrivals were recorded, and tourism is predicted to grow faster than other sections of the world's economy throughout the decade (EIU, 1994). The increasing importance of travel and tourism to the economies of most countries, especially in the Third World, means that it is a relevant area for business research. However, consumers' growing interest in tourism and holidays and the emotional, time, financial, physical, and mental importance of holidays is not reflected in the amount known about consumers' travel choice behaviors. The limited amount of travel choice research has examined the effect of values Pitts and Woodside 1986 and Madrigal and Kahle 1994, romanticism and wanderlust (Holbrook and Olney, 1995), decision-making facilitators (Seoho and Crompton, 1992), consumer innovativeness (Flynn and Goldsmith, 1993), benefits sought (Gitelson and Kerstetter, 1990), levels of consumer awareness and distinction preferences (Woodside and Carr, 1988), and motivational determinants (Yuan and McDonald, 1990). Another set of studies has focused on more managerial issues; for example, purchase methods and systems (Gilbert, 1990), the role of food service (Sheldon and Fox, 1988), expectations of travel agencies (Kendall and Booms, 1989), and preferred information sources (Raitz and Dakhil, 1989). Because the outcomes of a holiday choice decision can only be known in the future, the consumer is forced to deal with uncertainty, and, to the extent that the consumer realizes that he or she may not attain all of his or her holiday buying goals, risk is perceived. Perceived risk theory has been used as one fruitful avenue of travel research, Roehl and Fesenmaier 1992, Moutinho 1987, Hales and Shams 1991 and Yavas 1987 because of the high involvement, social visibility, limited experience, high cost, choice complexity, and purchase infrequency associated with holidays. The theory has intuitive appeal and is more powerful at explaining consumers' behavior, because consumers are more often motivated to avoid negative experiences rather than to maximize utility. The theory offers insights into choice avoidance behavior that can be used to explore the various complex concerns of consumers and can play a major role in facilitating how travel marketers and retailers see the world through their customers' eyes. However, previous research has failed to capture the complexity of risk in the holiday product service, as suggested by a multiattribute approach. This approach to risk measurement has seldom been taken before, nor has there been any examination of the risk-reducing strategies consumers use, despite these having direct marketing management implications in understanding customers and in designing marketing and communication mixes. This research extends and refines previous perceived risk work by using context-specific measures and examining the relationship between risk perceptions, purchase intentions and risk reduction. There are several reasons why the risk–risk-reduction relationship is worth investigating. First, knowledge of the nature of any relationship between risk and risk-reduction might be used to develop an expanded model of perceived risk relevant to services in which the elements and relationships could be more completely specified. Second, because the relationship can be modeled, considerable potential savings could be made in the amount of data needed to be collected in future. Third, knowledge of a risk-reliever model could be used to assist the development of marketing strategies for new products of which the consumer has little or no knowledge. The research attempts to show why and how perceived risk theory can be used to understand consumers' behavior in the context of a complicated service offering and to highlight the practical marketing management actions that can result from such research. The first section explores some of the reasons why holiday purchasing is risky and helps to justify the use of a perceived risk approach. We have focused on international package holidays, because they represent a substantial and growing market that has not been studied before now.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Moutinho, Professor Luiz
Authors: Moutinho, L., Mitchell, V., Davies, F., and Vassos, V.
College/School:College of Social Sciences > Adam Smith Business School > Management
Journal Name:Journal of Business Research
Published Online:10 September 1999

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