looeoo z^^r% Universiti Teknologi MARA Internet Service Quality in Bus Transportation

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1 looeoo z^^r% Universiti Teknologi MARA Internet Service Quality in Bus Transportation Nursyarena Suraya Bt Rahimi Thesis submitted in fulfillment of the requirements for Bachelor of Science (Hons) Business Computing Faculty of Information Technology And Quantitative Sciences April 2005

2 DECLARATION This declaration is to certify that all of the submitted contents of this thesis are original in its stature, excluding those which have been acknowledged specifically in the references. All the work processes involved are from my own endeavor and it has not been taken or done by unknown sources or individuals. I, hereby declare that I am responsible for the content of this thesis as it had been submitted as part of partial fulfillment of BSc. (Hons.) in Business Computing program (CS 224). I authorize the Universiti Teknologi MARA to lend this thesis to other institutions or individual for purpose of scholarly research. April, 2005 NURSYARENA SURAYA RAHIMI

3 ACKNOWLEDGEMENT Someone once told me, gratitude can never be expressed adequately with words just as beauty is appreciated by their sight alone. However, I would like to acknowledge those who have contributed to this research project in a medium that does not speak its worth towards the people that I meant them for. In the name of Allah, the Most Gracious, the Most Merciful. Praise to Allah, the one and only, for giving strength to complete this research. The research presented in this dissertation could not have been conducted without the support, encouragement, and cooperation of many people. First of all, I would like to express my deepest gratitude to my research project supervisor, Puan Fauziah bt Ahmad, who sacrificed her precious time in guiding me with ideas and comments in completing this academic project and always given me a valuable advice, with many exciting new ideas, and encouragement throughout the research. I would like to thank her for giving the opportunity to learn and conduct this research under minimum guidance. I would also like to thank Puan Mardziah bt Hj. Hashim, Academic Project Coordinator for her support and guidance in carrying out this project. Especially, I would like to give my special thanks to my family whose patient love enabled me to complete this work. Last but not least, I would like to thank to all my friends for their help, understanding and moral support.

4 ABSTRACT Service quality is one of the key factors in determining the success or failure of electronic commerce. This study revealed with the identification of consumers' and organizations' perception on Internet Service Quality focusing on bus transportation. First, eleven dimensions of e-service Quality were determined from the previous study. The determinants are reliability (ability to perform the promised service accurately and consistently), security (refers to freedom from danger, risk, or doubt during the service process), efficiency (refers to the speed of downloading, search, and navigation), ease of use (how easy the Web site is for customers to conduct external and internal search in cyberspace), information (presentation and layout of factual information and functions on a Web site), appearance (proper use of colors, graphics, images, and animations), linkage (number and quality of links that a Web site offers), structure and layout (refers to organization and presentation of a Web site's content and information), support (technical help, user guidelines, and personal advice available to customers from a Web site), communication (keeping properly informed and communicating with customers in language they can understand), and incentive (encouragement given by Web providers to customers to browse and use the Web site, including reward for doing so). Second, all the eleven determinants had significant impacts on consumers' perception but only support dimension was not significant for organizations' perception. Third, for demographic profiles of consumers, age and profession field had influenced on the perception level of e-service Quality. Finally, this study discovered a significantly positive relationship between consumers' perception and eleven dimensions of e-service Quality but negative relationship between only for support dimension and organizations' perception. Findings and result from the study can be used as a guidance to perform Internet Retailing which includes e-service Quality dimensions. Ill

5 TABLE OF CONTENTS ACKNOWLEDGEMENT ABSTRACT LIST OF TABLES LIST OF FIGURES Page ii iii vii viii CHAPTER 1 INTRODUCTION Introduction Background of the Study Problem Statement Objectives of the Study Scope of the Study Significance of the Research Research Approach and Methodology Limitations of the Research Overview CHAPTER 2 LITERATURE REVIEW Introduction Internet Retailing Service Quality E-Service Internet Service Quality (E-Service Quality) Bus Transportation Service in Malaysia Online Ticket in Bus Transportation iv

6 CHAPTER 3 RESEARCH APPROACH AND METHODOLOGY Introduction Research Model Hypotheses Formulation Sampling Design Method of Data Collection Primary Data [a] Questionnaire 3.4. l[b] Interview [c] Direct Involvement Secondary Data Sample Size Data Analysis Conclusion CHAPTER 4 DATA ANALYSIS AN Introduction Consumers' Perception on Internet S< ce Quality Section A : Demographic Profiles Section B : Perception on Internet Service Quality [a] Cronbach's Alpha Test [b] Correlation Coeficient Test [c] T-Test of Independent [d] ANOVATest 36

7 4.2 Organizations' Perception on Internet Service Quality Section A : Demographic Profiles Section B : Perception on Internet Service Quality [a] Cronbach's Alpha Test [b] Correlation Coefficient Test 41 CHAPTER 5 CONCLUSION AND RECOMMENDATIONS 5.0 Introduction Discussion and Conclusion Recommendations Further Research 48 REFERENCES 49 APPENDIX A : QUESTIONNAIRE FOR CONSUMER 52 APPENDIX B : QUESTIONNAIRE FOR ORGANIZATION 53 APPENDIX C: LETTER 54 APPENDIX D: SPSS 55 VI

8 LIST OF TABLES Table No Page Table4.1 Respondents'profile for consumer 30 Table 4.2 Cronbach's Alpha Test of reliability for consumers' perception 32 Table 4.3 Correlation Coefficient Test of consumers' perception on Internet Service Quality 34 Table 4.4 T-Testfor gender and status of consumers 36 Table 4.5 Reclassification of demographic profiles 37 Table 4.6 One-Way ANOVA Test for demographic characteristics of consumers 38 Table 4.7 Respondents' profile for organization 39 Table 4.8 Cronbach's Alpha test of reliability for organizations' perception 41 Table 4.9 Correlation Coefficient Test of organizations' perception on Internet Service Quality 42 Table 4.10 Summary of Correlation Coefficient Test of consumers' and organizations' perception 41 Vll

9 LIST OF FIGURES Figure No Page Figure 2.1 Comparison between customers evaluation of service quality and customers satisfaction 11 Figure 2.2 Customer assessment of service quality 12 Figure 2.3 A model of e-service quality 18 Figure 3.1 Research model of Internet Service Quality for consumers perception 22 Figure 3.2 Research model of Internet Service Quality for organizations perception 23 Vlll

10 CHAPTER ONE INTRODUCTION 1.0 Introduction E-business or e-enterprise is the term used to define a business that has a virtual presence or Web site on the Internet either to promote brand awareness or enable e-commerce (Cox and Dale, 2001). E-commerce has significantly transformed the way organizations do business. It has rapidly grown from an alternative method for reaching new consumers to full-featured way of serving needs of many operations and people associated with an organization (Carter, 2002). Electronic commerce refers generally to all forms of transactions relating to commercial activities, including both organizations and individuals, that are based on the processing and transmission of digitized data. As e-commerce spread all over the world, many companies are attempting to establish a competitive edge by interacting with their consumers over the Web. The most experienced and successful companies using the Web are beginning to realize that the key determinants of success or failure are not merely Web presence or low price but instead center on delivering electronic service quality (e-sq) (Zeithaml, 2002). The key element to business achievement is quality (Cox and Dale, 2001). Without the quality management approach that guarantees quality from its systems, staff and suppliers, a business will not be able to deliver the appropriate level of service quality to satisfy its consumers (Cox and Dale, 2001).

11 Nowadays many transportation service companies such as airline, train, bus and cruise began to deliver service of online ticketing on the Web. Many of these companies are involved in online retailing. Online retailing (also known as B2C, or Business-to-Consumer e-commerce) is basically a Web-enabled interface between companies and their target consumers for selling products and services on the Web, with the facility of online payment. Many companies have found that setting up a Web site is relatively easy, however, it is the fulfillment of orders offline that is problematic, because systems are not sufficiently efficient to seamlessly pass on the order information and complete the order without error and/or delay (Cox and Dale, 2001). Buying ticket from web is one of the widely available services offered in Internet. 1.1 Background of the Study Service quality is the key determinant for successful e-commerce. Service quality in online environments has become recognized as an important factor in determining the success or failure of electronic commerce (Yang, 2001).Santos (2003) was proposed that e-service quality has incubative and active dimensions for increasing hit rates, stickiness, and consumer retention. The purpose of the study is to determine consumers' and organizations' perception on the Internet service quality. This study used the eleven dimensions of perception proposed by Santos (2003); reliability, security, efficiency, ease of use, information, appearance, linkage, structure and layout, support, communication and incentive to explore the reliability of each dimension with the respondents' perception. Definitely most of the retailers want to gain more profit, whilst the consumers demand for better service offered by the company in all aspects. This research will find out which area of Internet Service Quality dimensions match with both of these groups perception.

12 1.2 Problem Statement Creating business over the Internet seems relatively easy to some companies. However to ensureflawlessintegration of processing between consumers and the business is not merely an easy task handle. If an online company is to be successful, all aspects of its service must be closely integrated in terms of systems, networks, procurement, shipping and consumer support. Companies must also prepare themselves for the volume of users accessing their Web site, as well as having the capacity to handle this all the way up the supply chain (Cox and Dale, 2001). In Malaysia, Internet retailing is still new in business area. Not all Malaysians are exposed to the online transaction over the Internet and most often, they are still hesitate to make online purchasing due to problems associated with security, reliability, threat of fraud, and etc. Information search and purchasing on the Internet also require a level of computer literacy not required in a traditional retail space. Without this level of technical literacy, consumers can become frustrated and purchases maybe aborted (Long and McMellon, 2004). In case of buying bus ticket, peoples are more likely to use brick-andmortar rather than click-and-mortar. Additionally, many of the bus transportation Web sites are only displayed information such as time schedule and seat available. Only a few Web sites are offered an online ticket purchasing. The organizations of bus transportation should have a strategy in implementing an online service trough website. If the Web site is not easy to navigate, a consumer will probably never return to use it again. Therefore, it is necessary for the organization to understand what criteria influence consumers buying online and what are consumers' expectation and perception of the online transactions.

13 1.3 Objectivesof the Study The objectives of the study are: 1. To identify consumers' perception on the internet service quality of bus transportation. 2. To identify organizations' perception on the internet service quality provided by their company. 1.4 Scope of the Study There were two groups of respondents; consumer and organization. Targeted consumers were people around Klang Valley who have used bus transportation services. The other targeted respondents for this study were organizations of bus transportation that have expanded their operations via electronic commerce. The research focused on the companies of bus transportation around Klang Valley because many of the organizations which provided this service are located here and it is also the targeted area with the highest population. 1.5 Significance of the Research The significant of this study are: 1) To know how consumers perceived online bus ticketing 2) To know how organizations perceived the importance of online service in their industry 3) To know whether both consumers and organizations have same rate on Internet Service Quality in bus transportation. Any contrast between perception of consumers and organizations, shows that

14 Internet Service Quality provided by the company is either below or above the standard quality. The results from this research were important to make any improvement to any areas that need to be look into. It also as a guidance to bus organization to increase their service quality in internet retailing area. 1.6 Research Approach and Methodology In order to obtain the necessary data, a set of questionnaire was developed for this study. In this study, primary and secondary data were used. Questionnaire, interview and direct involvement were included in primary data. The questionnaires were distributed using convenience sampling to peoples who had experience of using bus online or not. The questionnaires also distributed to bus transportation companies that implemented online ticketing in their business. A total of 150 questionnaires were collected within a month. The interview was held with person in-charge in the bus organization. The useful information for this study also gathered from journals, articles, books and websites which are secondary data. 1.7 Limitations of the Research There were several factors were considered as limitations of research which may affect the results andfindings.most of these constraints were cropped up during data collection and data analysis. The limitations were:

15 1) Limited online bus ticketing companies Only a few of bus companies have implemented online ticketing. The data gathered from small numbers of organizations may not be reliable and accurate for result and finding. 2) Difficulty in locating the targeted consumers Respondents could not be easily retrieved from the online. It was very difficult to get respondents and very lucky for the researcher if get an online consumers. 3) Time constraint Duration given to complete this research is very limited. To locate and obtain targeted respondents was very time consuming and need much effort. 1.8 Overview This study seeks to obtain information on consumers' and organizations' perception of bus transportation on Internet Service Quality. Based on Santos (2003) e-service quality eleven dimensions, this research continued with those dimensions in order to get overall view of quality in Internet retailing. This chapter gives an overview of the study, the research objectives and the scope of the study. In Chapter 2, some studies and researches on Internet service quality were discussed. The research methodology was explained in Chapter 3. In Chapter 4, the analysis and findings from data gathered were discussed. The conclusion and summary offindingswere clarified in Chapter 5.

16 CHAPTER TWO LITERATURE REVIEW 2.0 Introduction Since the Internet was opened to commercial usage, it has grown dramatically as it demonstrated potential for businesses to reach consumers. Retailers, publishers, and entertainment providers are flocking to the Internet and experimenting with ways to create applications that will capture the imagination of millions of users worldwide. More consumers are using the Internet to retrieve news information, handle many forms of shopping, and engage in a wide variety of virtual experiences such as museum tours and concerts. E-business or e-enterprise is the term used to define a business that has a virtual presence or Web site on the Internet either to promote brand awareness or enable e-commerce (Cox and Dale, 2001). According to Cox and Dale (2001), if an online company is to be successful, all aspects of its service must be closely integrated in terms of system, networks, procurement, shipping, and customer support. Zeithaml (2002) has emphasized the most experienced and successful companies using the Web are begirming realize that the key determinants of success or failure are not merely Web presence or low price but instead center on delivering electronic service quality (e-sq). As e-commerce proliferates all over the world, transportation companies are attempting to establish a competitive edge by interacting with their customers over the Web. The Web has made an impressive foray into the transportation services business such as airline, train, cruise, and bus tickets. Thus, to expand

17 loyal customer base and improve profitability, it is crucial for online retailers to understand in depth what online customers perceive to be the key dimensions of service quality (Jun et al., 2004). 2.1 Internet Retailing Internet retailing (also known as B2C, or Business-to-Consumer e-commerce) is basically a Web-enabled interface between a company and their target consumer for selling products and services on the Web, with the facility of online payment. Retailing consists of the final activities and steps needed to place a product in the hands of the consumer or to provide services to the consumer. Any firm that sells a product or provides a service to the final consumer is performing the retailing fiinction. Regardless of whether the firm sells to consumer in a store, through the mail, over the telephone, through the Internet, door to door, or a through a vending machine, the firm is involved in retailing.(dunne and Lusch, 2005). Retailing is expected to change with the rapid development of new online sales and distribution channels that literally can be used from anywhere and anytime. These developments should impact retailing as much as the advent of strip malls, catalog retailing, and TV-based home shopping. Almost every retailer is reevaluating every aspect of its operation from customer service to advertising, merchandising to store design, and logistics to order fulfillment. Furthermore, reacting to the pressure of retailers, suppliers are assessing technology-based solutions to drive down costs and become more efficient producers of goods. Online channels such as online services and the Web are also impacting traditional retail business models. One of the dramatic changes e-retailing is creating a shift in power between retailers and consumers. Traditionally, the

18 retailers' control over pricing information provided them the upper hand in most transactions. The information dissemination capabilities of the Internet are making consumers better informed and thus increasing their power when transacting and negotiating with retailers. E-retailing or Internet retailing is adding a new competitive dimension to retailing. However, e-retailers must worry that many consumers will use the Internet for research, then buy the product in regular store. With online retailing, constraints of time and space disappear. There is no bricks and mortar storefront to worry about, no critical locations. This new way of retailing can severely affect companies that have invested in expansion and adding capacity. Clearly the Internet is playing an important promotional role for retailers. A key aspect of the Internet is in its ability to provide information to customers. The communication elements in advertising, sales promotion, and public relations are all strategic options a firm can use when communicating with its various publics. For example, a firm may wish to provide online customers with sample of its advertising on its Website. Or, a firm may wish to use sales promotions, such as online coupons. A retailer also can use its Website to share specific information on its good works through press releases or bylined articles. Other uses include advising investors of financial policies and/or explaining firm's position on a social issue. In essence, the Internet provides a platform for a retailer to employ a relatively low cost integrated marketing communications mix, thus increasing shareholder value by enhancing the retailer's image through providing customers with a variety of highly specialized information.

19 2.2 Service Quality Services are the results that customers want, which can be obtained by the interactive processes between customers and service providers (Harvey, 1998). According to Parasuraman et al. (1985), there are four fundamental ways by which service differs from goods in terms of how they are produced, consumed, and evaluated. First, service is tangibility. Second, it involves the concept of inseparability. Third, heterogeneity of the variation inconsistency from one service transaction to the next, and the final is perish ability. Kotler and Armstrong (1991) defined services as an activity that can be offered among different parties which is essentially intangible and does not involve in the ownership of anything. They further argued that production does not necessarily need to be tied to a physical product but it can be either people based or equipment based. Quality in service often occurs during service delivery, usually in an interaction between the customer and the service provider. Service quality is viewed as a unique construct from customer satisfaction. Service quality is by nature a subjective concept, which means that understanding how the customer thinks about service quality is essential to effective management. Parasuraman et al. (1985), service quality is the amount of congruence between customers' expectations and perception of the actual service. The expectation that the consumer bring to the service affect their evaluation of its quality. Service quality means understanding the customers' needs and identifying ways to meet or exceed them. It is sometimes equated with customer satisfaction, or the difference between customer's perception and expectations of a service transaction. 10

20 It is generally agreed that comparing "predicted service" to "perceived service" develops customer satisfaction evaluations (see Figure 2.1). That desired service is an ideal expectation that reflects what customers actually want, compared with predicted service expectation to perceived service receive results in a measure of perceived service superiority. In contrast, adequate service is a minimum tolerable expectation and reflects the level of service the customer is willing to accept. Comparing service with perceived service produces a measure of perceived service adequacy. Expected service Perceived service superiority Desired service Service quality measures Perceived service adequacy Adequate service Perceived service Predicted service ik Figure 2.1: Comparison between customer evaluation of service quality and customer satisfaction Parasuraman et al. (1990) found that service quality has been defined as the discrepancy between customers' expectation and perception, word-of-mouth communications. They have also identified ten general dimensions that represent the evaluation criteria customers use to assess service quality (see Figure 2.2). Most of the criteria are closely related to the role of employee performance. Their study also reveals that in Delivering Service Quality, there are five general dimensions that influence customers' assessment when judging a company's service and service quality. The five dimensions are: 11

21 (1) Tangible ~ appearance of physical facilities, equipment, personnel, and communication material. (2) Reliability - ability to perform the promised service dependably and accurately. (3) Responsiveness - Willingness to help customers and provide prompt service. (4) Assurance - Knowledge and courtesy of employee and their ability to convey trust and confidence. (5) Empathy - Caring, individualized attention the firm provides its customers. Dimensions of service quality: Past experience Word of mouth Personal needs External communication Tangible Reliability Responsiveness Competence Courtesy Credibility Security Access Communication Understanding Expected service Perceived service Perceived service quality Figure 2.2 : Customer assessment of service quality Bitner et al. (1990) observe that the majority of the scale items used to measure these dimensions are related to the human interaction aspect of service delivery. 12

22 In the electronic delivery of retail services, it differs in many ways from the traditional "brick and mortar" store. Without this human interaction component in the electronic delivery of services, consumers must either evaluate these dimensions differently or rely upon different dimensions Service quality is important on the Web, since acquiring customers is expensive. In order to make profits, online firms need loyal customers who will make multiple purchases over time (Reichheld and Schefter, 2000). 2.3 E-Service E-service can be defined as the role of service in cyberspace. Saanen et al. (1999) defined e-service as the electronic provision of a service to customers. Madlberger and Kotzab (2001) suggest that the definition of e-business, and thereby e-service, is a complex issue. They base their eventual definition on business transactions and define "electronic commerce as electronic business via public or private networks including electronic publishing, electronic banking, and electronic retailing". They go on to further refine this by suggesting that there are two separate aspects to electronic business, as with the non-electronic business world, namely business-to-business and business to consumer. E-service has become an integral part of service delivery in more and more service industries, and as a result, electronic self-service has become part of many consumers' everyday lives. There are several reasons for the implementation of the e-service function. One has been termed the "service multiplier effect" which refers to the fact that any e-business presence creates a demand for pre- and after-sales service activities. Hewlett Packard, for instance, is rapidly transforming their after-sales business into a profit-generating e-service business unit (McCarthy, 1999). 13

23 Furthermore, the implementation of e-services extends the range of options for customers and the use of an enhanced service portfolio may improve the value of a relationship with a particular company for the customer (Alsop, 1999). Finally, e-service applications may considerably decrease the cost of service and allow for service differentiation and segmentation in service contracts (i.e. one segment of customers may be offered self-service only, while another is entitled to selfservice as well as live interaction and support). Delivering value-added, interactive services to customers on-line, in real time, in a shared community of users seems increasingly important for gaining a competitive edge in the electronic marketplace by strengthening relationships with key (e-) constituencies. E-services range from the electronic provision of traditional services (services with an "e" in front), such as investing and airline ticketing, to intelligent interactivity in post-sales product support. As innovations in electronic service abound and the technological solutions for deploying e-services are advancing rapidly, little is known about the way in which customers will welcome this new e-business function. Nevertheless, customer adoption is arguably a critical factor in realizing the potential of e-service marketing and creating market space. As Forrest and Mizerski (1996, p. 18) state: "There is little beyond relatively primitive click stream market research to substantiate a demand for interactive services." The concept of service seems to be inextricably linked to e-business. A self-service kind of marketplace environment has already been developed successfully in which people can help themselves in finding information and to buy a product (Earle, 1999). This self-service environment has been directed primarily to the push of sales or e-commerce. The number of queries made through the Internet and sent asking for information and support on purchased products is expanding rapidly. This suggests that more and more customers are looking for company access and customer support through the 14

24 Internet and . In addition to the provision of peripheral service such as customer support, an increasing number of service providers are using electronic ways of distributing their core services. As an extension of the do-it-yourself trend, customers are now increasingly demanding do-it-for- me services, supplementing as well as cannibalizing on existing service delivery formats. Consequently, banks, airlines, car rental companies, management consulting companies and educational institutions are increasingly opting for on-line service delivery to meet e-customer demand (Forrest and Mizerski, 1996). A recurring theme in these conceptualizations of e-service is integration, the seamless incorporation of technology and customer-oriented functions within the firm. 2.4 Internet Service Quality (E-Service Quality) Developed from Internet marketing and the traditional service-quality literature, the concept of internet service quality in e-commerce ("e-service quality") can be defined as the consumers' overall evaluation and judgment of the excellence and quality of e-service offerings in the virtual marketplace (Santos, 2003). In contrast to their evaluation of traditional service offerings, customers are less likely to evaluate each sub-process in detail during a single visit to a Web site; rather they are likely to perceive the service as an overall process and outcome (van Kiel e/al., 2001). Research on consumer evaluations of online services is still in its early stages (van Riel et a\., 2001) and insights into the differences between evaluations of service offerings on the Internet versus the physical marketplace are still needed (Gronroos et a\., 2000). Zeithaml et al. (2002) uncovered 11 dimensions of e-service quality which were similar to those found in their previous research on service quality in the pre-intemet age including reliability, responsiveness, access, assurance/trust. 15