MEASURING SERVICE QUALITY USING SERVQUAL MODEL: A CASE STUDY OF E-RETAILING IN IRAN SEYED HOSSEIN SIADAT UNIVERSITI TEKNOLOGI

MALAYSIA

MEASURING SERVICE QUALITY USING SERVQUAL MODEL: A CASE STUDY OF E-RETAILING IN IRAN SEYED HOSSEIN SIADAT A project report submitted in partial fulfillment of the requirements for the award of the degree of Master of Science (Information Technology Management) Faculty of Computer Science and Information System Universiti Teknologi Malaysia JUNE 2008

iii Dedicated to my beloved family

iv ACKNOWLEDGEMENT First and foremost, I would like to express my gratitude to God for His abundant grace that I am able to be what I am today. I also wish to express my sincere appreciation to my supervisor, Associate Professor Dr. Harihodin Selamat, for his intelligent guidance, encouragement and helpful advices during the whole process of thesis writing. My sincere appreciation also goes to all my colleagues and friends who have provided assistance at various occasions. Last but not least, a very special appreciation goes to my beloved parents for their continuous supports, loves and cares.

v ABSTRACT Service quality is a concept that has aroused considerable interest and debate in the research literature because of the difficulties in both defining and measuring it with no overall consensus emerging on either. Customer satisfaction and service quality are often treated together as functions of customers perceptions and expectations and research has shown that high service quality contribute significantly to profitability. Service quality is required to be first measured in order to improve the quality in a service organization. Practitioners and academics are eager on measuring service quality accurately in order to have better understanding of its indispensable antecedent and consequences, and eventually ascertain methods for improving and measuring service quality in search for competitive advantage. The aim of this study is to rank the dimensions of service quality that affect the customers expectation in online purchasing in Iran from the customers perspective. A questionnaire used in this study was published in Cloob.com which is an Iranian virtual society website. The measurements used were based on the widely accepted SERVQUAL model which is the most common method for measuring service quality. A descriptive statistics analysis was used to evaluate the level of service quality of Iranians online shops from the customers perspective. This study also examined the service quality gap by comparing customers expectations and their actual perceptions. The results of the study indicated that all of the service quality factors are important. The Access is fast is the most important factor among the others and respondents are not satisfied with current connection speed although they are fine with extra services. Tangibility was rated as the most important dimension followed by assurance, reliability, responsiveness, and empathy.

vi ABSTRAK Kualiti servis merupakan suatu konsep yang telah menimbulkan minat dan debat di dalam sastera penyelidikan disebabkan oleh kesukaran dalam menerang dan mengukur kualiti servis tanpa sebarang konsensus wujud daripada kedua-duanya. Kepuasan pelanggan dan kualiti servis sering dianggap sebagai andaian serta anggapan pengunna di samping harapan dan ekpektasi pengguna. Kajian dan penyelidikan menunjukkan bahawa kualiti servis yang tinggi menyumbang kepada keuntungan yang ketara. Kualiti servis terlebih dahulu perlu diukur bagi meningkatkan kualiti sesuatu servis di dalam organisasi. Kaji selidik ini dijalankan bagi mengukur dimensi kualiti servis yang mepengaruhi ekpektasi dan harapan pengguna di dalam pembelian atas talian di Iran melalui perspektif pengguna. Soalan kaji selidik telah digunakan di dalam kajian in di mana ia telah diumumkan di Cloob.com yang merupakan laman web komuniti Iran. Ukuran yang digunakan adalah berdasarkan kepada model SERVQUAL yang telah diterima umum sebagai kaedah yang paling kerap dan sesuai digunakan di dalam pengukuran kualiti servis. Analisa statistik yang deskriptif telah dihasilkan untuk menilai tahap kualiti servis di dalam pembelian atas talian komuniti Iran melalui perspektif pengguna. Kajian ini juga menilai jarak kualiti servis dengan membandingkan ekpektasi dan harapan pegguna dengan tanggapan serta anggapan sebenar pengguna. Hasil kajian menunjukkan bahawah semua faktor kualiti servis adalah penting dan perlu diambil kira. Akses yang cepat adalah faktor yang paling penting dibandingkan dengan faktor-faktor kualiti yang lain. Ketepatan dan perasaan yang dilahirkan oleh servis yang diberikan merupakan dimensi yang paling penting diikuti dengan jamina, boleh dipercayai, tindakbalas dan akhir sekali empati.

TABLE OF CONTENT CHAPTER TITLE PAGE TITLE DECLARATION DEDICATION ACKNOWLEDGMENT ABSTRACT ABSTRAK TABLE OF CONTENT LIST OF TABLES LIST OF FIGURES i ii iii iv v vi vii xi xii 1 PROJECT OVERVIEW 1.1 1.2 Introduction Background of Problem 1.2.1 1.2.2 1.2.3 1.2.4 1.2.5 1.3 1.4 1.5 1.6 1.7 E-Commerce Online Retailing Customer Satisfaction Service Quality Problem Discussion 1 1 2 3 3 7 8 10 12 12 13 13 14 Problem Statement Project Objectives Project Scope Importance of Project Chapter Summary

viii 2 LITERATURE REVIEW 2.1 2.2 Introduction Customer Satisfaction 2.2.1 2.2.2 2.2.3 2.3 2.3.1 2.3.2 2.4 2.4.1 2.4.2 2.5 What we need to measure? Techniques for measuring customer satisfaction Virtual organizations and customer satisfaction Definition of service quality Dimensions and determinants of service quality Definitions of E-Service Quality E-service Quality Dimensions 15 15 16 20 22 23 25 28 28 34 34 34 39 40 40 41 42 43 43 44 46 46 47 47 49 50 51 51 51 52 54 55 Service Quality E-Service Quality Conclusions 3 METHODOLOGY 3.1 3.2 3.3

Introduction Research Propose Research Approach 3.3.1 3.3.2 3.4 3.4.1 3.4.2 3.5 3.5.1 3.5.2 3.6 3.7 3.8 Quantitative Research Qualitative Research Survay Pilot Test Selecting the sampling method Overview of the sample Research Strategy Sample Selection Data Collection Data analysis Validity and Reliability 3.8.1 3.8.2 Validity Reliability Customer Satisfaction and Service Quality 3.9 Frame of Reference 3.9.1

ix 3.9.2 Different tools for measuring online service quality 55 3.9.2.1 3.9.2.2 3.9.2.3 3.9.2.4 3.9.2.5 3.9.3 3.9.4 Purchasing 3.10 3.11 4 Project Schedule Chapter Summary SERVQUAL WebQUAL E-SERVQUAL E-SEQUAL E-S-QUAL 56 56 57 57 58 58 59 64 64 66 66 66 67 69 69 75 75 75 79 83 85 86 87 88 88 89 90 91 92 Conceptual Framework SERVQUAL Dimensions in Relation to Online DATA COLLECTION 4.1 4.2 4.3 Introduction Overview of the Sample Quantitative Data Presentation 4.3.1 4.3.2 Sample and Response Rate Descriptive Statistics 5

DATA ANALYSIS AND FINDINGS 5.1 5.2 5.3 5.4 5.5 5.6 5.7 Introduction The Most Important Dimensions of Service Quality Comparing Web Quality Factors between Iranian and American The Most Important Factors of SERVQUAL Implications for Practitioners Implications for Theory Implications for Future Research Customers 6 DISCUSSIONS AND CONCLUSIONS 6.1 6.2 6.3 6.4 6.5 Introduction Achievement Constraints and Challenges Aspirations Chapter Summary

x REFERENCES APPENDICES 93 98

xi LIST OF TABLES TABLE NO. 1.1 2.1 3.1 4.1 4.2 4.3 4.4 4.5 5.1 5.2 5.3 5.4 5.5 TITLE PAGE 5 36 45 72 72 73 73 74 77 78 80 82 Top 40 E-retailers according to their satisfaction score E-Service Quality dimensions and Descriptions Research strategies Satisfaction of the respondents with the equipment they use The use of the web Websites ranked by frequency of visits The top five service quality factors with the highest scores of importance The bottom five service quality factors with the lowest scores of importance The top ten service quality factors with the highest scores of importance The bottom ten service quality factors with lowest scores of importance The top ten with the highest score on importance from Iranian and American perspective The bottom ten with the lowest score on importance from Iranian and American perspective Ranked SERVQUAL factors according to their importance mean 84

xii LIST OF FIGURES FIGURE NO. 1.1 1.2 2.1 2.2 2.3 2.4 2.5 3.1 4.1 4.2 4.3 TITLE PAGE 9 11 16 19 20 21 24 59 70 71 A conceptual model of service quality Dependence between quality, satisfaction and profitability Literature Review Structure Customer satisfaction continues improvement The circle of satisfaction The Principle of pre-study Customer contact - customer focus matrix Relationship between service quality and customer satisfaction based on SERVQUAL Pie chart: number of respondents by gender Bar chart: number of respondents by age Bar chart: number of respondents based on their educations field 71

CHAPTER 1 PROJECT OVERVIEW 1.1 Introduction Service quality is a concept that has aroused considerable interest and debate in the research literature because of the difficulties in both defining it and measuring it with no overall consensus emerging on either. Research has shown that high service quality contribute significantly to profitability. Service quality is about ensuring customers, both internal and external, get what they want. Customer satisfaction is the feeling or attitude of a customer towards a product or service after it has been used. Satisfaction and service quality are often treated together as functions of customers perceptions and expectations. Customer satisfaction is determined by defining customer perceptions of quality, expectations, and preferences. Always there exists an important question: why should service quality be measured? Measurement allows for comparison before and after changes, for the location of quality related problems and for the establishment of clear standards for service delivery. In search of competitive advantage, both practitioners and academics are keen on accurately measuring service quality in order to better

2 understanding its essential antecedent and consequences, and ultimately establish methods for improving and measuring service quality. In this paper we start with the concept of service quality, customer satisfaction and followed by study on different models of measuring service quality while focusing mostly on SERVQUAL approach, which is the most common method for measuring service quality. The purpose of the research is to find the most important service quality dimensions that affect customer satisfaction in online purchasing in Iran. Since SERVQUAL model is founded a comprehensive method, we are going to adopt and deploy it to encompass various aspects of service quality in relation to the online shops in Iran. Besides, a questionnaire has been designed based on literature in order to examine all service quality dimensions in SERVQUAL model. 1.2 Background of Problem The background of the research area is provided in this section. It contains the general idea of e-commerce, online retailing, customer satisfaction and service quality. This section also describes the importance of service quality and its relationship with customer satisfaction. Then, the problem area will be next discussed to provide a deeper understanding about the research area for reader. The problem discussions end with a problem statement, project objectives and project scopes. In the end of this chapter the contribution of this research is also presented.

3 1.2.1 E-Commerce There are many definitions for e-commerce. What Vladimir Zwass in 1996 believed is: "Electronic commerce is the sharing of business information, maintaining business relationships, and conducting business transactions by means of telecommunications networks". Is not very far from what Jelassi in 2005 said: "Electronic commerce, or e-commerce, is more specific than e-business and can be thought of as a subset of it. Electronic commerce deals with the facilitation of transactions and selling of products and services online, i.e. via the Internet or any other telecommunications network" (Tawfik Jelassi & Albrecht Enders, 2005). This was an academic definition for e-commerce, what practitioners believe is: "Ecommerce is often referred to as e-business and it is generally classified into four types: B2B: business-to-business; B2C: business-to-consumer; C2C: Consumer-2Consumer; C2B: consumer-to-business" (Christian N.Madu and Assumpta A. Madu, 2002). According to the Forrester, the research organization (www.forrester.com), the fast growth of e-commerce in the developed countries and the value added which they gain through it; woke up the lagged countries completely and make them revise their marketing and commerce strategies; in order to compete in the world markets. 1.2.2 Online Retailing We are witnessing the fast growth of e-retailers all around the world. Despite of many online visitors, most of them just try to find more information instead of purchasing online. These websites are essential e-CRM (Customer Relationship Management) tools for retailers in order to survive in this competitive market, addvalue services are needed to keep differentiation with the rivals. After emerging of e-commerce many firms start-up their websites to be the

4 pioneers in this field, but during the mid-2000 many bubbles burst. Story of survived companies would lead us to better understanding of their strengths and powers. Larry Freed has provided an Internet Retailers list of top 40 Retailers by sales volume in Table 1.1 which shows whose online revenue was greater in 2004 (Larry Freed, ForeSee Results, Spring 2005). Customers are lifeblood of an organization, so their satisfaction is the top goals of the firms. In table 1.1 top 40 e-retailers are ranked by their satisfaction score.

5 Table 1.1: Top 40 E-retailers according to their satisfaction score

Source: Larry Freed, 2005

6 From table 1.1 it is understood that amazon.com, had the greatest volume of online sales in 2004, dell.com and officedepot.com are in the second and third positions respectively. Companies could not follow constant rules to be successful in online markets. There is not a list of actions that lead companies to more profit or more customer satisfaction. Goods are mostly available with good qualities, prices are very competitive nowadays, so being the best in the market and remaining in that place is not easily possible. Innovative strategies should be taken for customer relationships, web site designing, after sales service and so on to survive in cyber markets. Richard A. Feinberg, and Rajesh Kadam and Leigh Hokama, have provided top 100 online retailers in 2002. Netflix.com considered as the best firm which satisfied its customers more than others while amazon.com gained highest volume revenue in 2004. "Netflix launched its movie rental service in 1999 with the goal of using the DVD format and the Internet to make it easier for people to find and get movies they will enjoy" (Netflix.com, 2005-09-29). What is amazing here is that Netflix.com is not mentioned in top 100 e-retailers in 2002 and suddenly it exceeds amazon.com in customer satisfaction in 2004. This shows how e-markets are competitive and even pioneer companies should be aware of new comers.

7 1.2.3 Customer Satisfaction To understand the importance of customer satisfaction, consider these facts: customers with problems usually don't react and only 4% of them complain; normally a person with problem tells 9 other people about it; while satisfied customers tell 5 other people about their good experiment; keeping a current customer costs about 1/7 of the cost of acquiring a new customer; retaining a current employee costs one tenth of hiring and training a new one. These facts; highlights the crucial role of satisfying customers which brings employee satisfaction; hence, the profit maximization of the company. Therefore, organizations need to understand that to what extend their customers would be satisfy. Customer satisfaction in marketing context has specific meanings: Anders Gustafsson, Michael D. Johnson, & Inger Roos (2005) brought customer satisfaction definition as customer's overall evaluation of the date. This satisfaction has positive influences on retaining customers among different variety of services and products. In service based enterprises; service quality directly affects customer satisfaction. Ingrid Fecikova, (2004) interpreted satisfaction as a feeling which results from a process of evaluating what was received against that expected, the purchase decision itself and/or the fulfillment of needs/want. Satisfaction refers to achieving the things we want. If satisfaction interprets as "not going wrong" the firm should decrease complaint which by its own is not sufficient. In order to satisfy customers, company should improve its services and products. Customers with less expectation are more satisfied: companies by adding innovative features would easily increase customer satisfaction. In contrast, when customers are unaware of improvements but critical of losses in existing quality are less satisfied and expect more. One of the main ingredients of success in the market place is customer satisfaction. Jochen Wirtz (2003) listed the results of customer satisfaction as follows: repeat purchase; loyalty; positive word-of-mouth and increased long term

8 profitability. Therefore, companies should measure their customers' satisfaction to fortify their strengths and improve their weaknesses. 1.2.4 Service Quality A conceptual model of service quality through empirical research developed by Parasuraman et al. (1985). The model highlights the following five service quality gaps: (1) Gap1: Consumer expectations _management perceptions of consumer expectations. (2) Gap 2: Management perceptions of consumer expectations _ service quality specifications actually set. (3) Gap 3: Service quality specifications _ actual service delivery. (4) Gap 4: Actual service delivery _ external communications about service. (5) Gap 5: The final gap is the result of the four other gaps. (J. Cox and B.G. Dale, 2001) Figure 1.1 shows these 5 gaps in the conceptual model of service quality.

9 Figure 1.1: A conceptual model of service quality

Source: Parasuraman et. al., 1985

10 1.2.5 Problem Discussion Although the internet channel increasingly has been used by many online shops; but many online retailers are shut down. In a competitive market place understanding customers needs become crucial. Therefore, companies have moved from a product-centric to a customer-centric position. Customer retention is directly influenced by customer satisfaction. Retention is a major challenge particularly in internet based services, as customers can easily switch from one service provider to another at low cost (Khalifa and Liu, 2003). Considering the high costs of acquiring new customers and the apparently high customer turn over of many online services, it is very important to study the determinants of customer satisfaction (Van Rie, Lijander & Jurriens 2001). Customer satisfaction is the key factor determining how successful the organization will be in customer relationships (Reichheld, 1996); therefore it is very important to measure it. Total quality management (TQM) is based on the idea of customer satisfaction - a management approach of an organization centered on quality, based on the participation of all its members and aiming at long-term success through customer satisfaction and benefits to all members of the organization and to society (ISO 8402). The achievement of true customer satisfaction involves: customer oriented culture; an organization that centers on the customer; employee empowerment; process ownership; team building; and partnering with customers and suppliers. In the other words: improvement of the firms reputation and image; reduction of customer turnover; increased attention to customer needs in TQM planning; reduction of marketing costs and, vice versa, lower transaction costs; reduction of costs related to product/service failures; and, lastly, increased satisfaction among personnel and greater stability of the workforce. (David M. Szymansk, 2000)

11 There are several benefits for quality to be found via market research, particularly in measuring the satisfaction levels of current customers, determining customer needs for product development, and analyzing customer retention and loyalty. To better manage customer satisfaction, firms spend millions on effectively tracking the methods that guarantee customer satisfaction, because the quantitative measurement of customer satisfaction is a great help for comprehensively measuring the effect of product quality on customer behavior. As what Ingrid Fecikova, 2004 illustrates in Figure 1.2; Customer satisfaction as discussed above leads to profitability and service quality is the main factor of it, especially in online trading, so it is clear that service quality indirectly affects the stakeholders benefits. Figure 1.2: Dependence between quality, satisfaction and profitability
Source: Ingrid Fecikova, 2004

For keeping online retailers alive with logical profits; retaining customers must be the foremost aim. Customer satisfaction, as we discussed before, has the most important effect on customer stickiness and in order to narrowing down we focus on service quality as one of the customer satisfactions factors.

12 1.3 Problem Statement Based on the problem background the following research questions have been derived: 1. What are the most important service quality factors in online shopping through Iranian perspective? 2. How to measure service quality in online shopping? 3. What is the satisfaction level of current customers in online shopping in Iran? 4. What are the customers needs in online shopping in Iran? 1.4 Project Objectives There are a few objectives of this project that has been identified which are as the following: 1. To study the importance and impact of service quality and customer satisfaction in online shopping. 2. To find the most important dimensions of service quality that affect customer satisfaction in online shopping in Iran. 3. To measure the satisfaction level of current customer in online shopping in Iran. 4. To determine the customers need in online shopping in Iran.

13 1.5 Project Scope Since the aspects of chosen problem area are many, the researcher has tried to narrow down the focus. The aim of the research is to find the most important service quality dimensions that affect customer satisfaction in online purchasing in Iran. In the literature part, we will introduce theories related to service quality and customer satisfaction in order to give a clear idea about the specific area to the reader and to explain the proper context of the study. The project scopes that have been identified are as follows: 1. Find the most important service quality dimensions that affect customer satisfaction in online shopping in Iran 2. Focus on customer (not provider) and the gap between expected service and perceived service. 3. This research will use the SERVQUAL model for measuring service quality. 4. Conducting survey and questionnaires as data collection methods. 5. The findings of this research are mostly useful for those managers, web designers, etc. who intend to penetrate the Iranian market with least cost, time and energy. 1.6 Importance of Project In the last few years, a significant growth has been noticed in the Internetbased services in the pure Internet businesses as well as the traditional enterprises, which are developing their online services. Considering the high costs of acquiring new customers and the apparently high customer turn over of many online services, it is very important to study the determinants of customer satisfaction. Customer satisfaction is the key factor determining how successful the organization will be in customer relationships; therefore it is very important to measure it. In order to

14 narrowing down the research, we focus on service quality as one of the customer satisfactions factors. The purpose of the research is to rank the service quality factors and to find the most important service quality dimensions that affect customer satisfaction in online purchasing in Iran. The findings of this research are mostly useful to those (managers, web designers, etc.) who intend to penetrate the Iranian market with least cost, time and energy. The results indicate the most important web quality factors through Iranian online shoppers perspective. 1.7 Chapter Summary As a conclusion, in this chapter we explained brief ideas and current issues related to the project. The main propose of this research is to determine the most important dimension of service quality that affect customer satisfaction in online purchasing in Iran. The problem background, project statements, objectives and scopes of the project have been discussed in this chapter. Having the overview about the project statement and problem background, we will focus on literature reviews that related to this research in next chapter. This research is organized as follows: In chapter two theories and previews studies related to the topic will be presented. Methodology is fully brought in chapter three which would be ended by frame of reference that shows the exact road map of the study. Chapter four presents the data which is gathered through the online survey. And last but certainly not least, chapter five is about the data analyzing and will be finished by conclusion and further studies.

CHAPTER 2 LITERATURE REVIEW 2.1 Introduction This chapter will give an overview of literature and models that are related to the research problem presented in the previous chapter. In this chapter we will introduce the concepts of customer satisfaction, service quality, relation between customer satisfaction and service quality, traditional service quality dimensions, online service quality dimensions and service quality model of online retailing in order to give a clear idea about the research area. The essentials that are covered in this topic are shown in Figure 2.1.

16 Literature Review Introduction Customer Satisfaction Service Quality E-Service Quality Figure 2.1: Literature Review Structure 2.2 Customer Satisfaction There are two principal interpretations of satisfaction within the literature of satisfaction as a process and satisfaction as an outcome (Parker and Mathews, 2001). Early concepts of satisfaction research have typically defined satisfaction as a post choice evaluative judgment concerning a specific purchase decision (Oliver, 1980; Churchill and Suprenant, 1992; Bearden and Teel, 1983; Oliver and DeSarbo, 1988). The most widely accepted model, in which satisfaction is a function of disconfirmation, which in turn is a function of both expectations and performance (Oliver, 1997). The disconfirmation paradigm in process theory provides the grounding for the vast majority of satisfaction studies and encompasses four constructs expectations, performance, disconfirmation and satisfaction (Caruana et. al., 2000). This model suggests that the effects of expectations are primarily through disconfirmation, but they also have an effect through perceived performance, as many studies have found a direct effect of perceived performance on satisfaction (Spreng and Page, 2001). Swan and Combs (1976) were among the first to argue that satisfaction is associated with performance that fulfils expectations, while

17 dissatisfaction occurs when performance falls below expectations. In addition, Poisz and Von Grumbkow (1988) view satisfaction as a discrepancy between the observed and the desired. This is consistent with value-percept disparity theory (Westbrook and Reilly, 1983) which was developed in response to the problem that consumers could be satisfied by aspects for which expectations never existed (Yi, 1990). The value-percept theory views satisfaction as an emotional response triggered by a cognitive-evaluative process (Parker and Mathews, 2001). In other words, it is the comparison of the object to ones values rather than an expectation. Customers want a meeting between their values (needs and wants) and the object of their evaluations (Paker and Mathews, 2001). More recently, renewed attention has been focused on the nature of satisfaction emotion, fulfillment and state (Parker and Mathews, 2001). Consequently, recent literature adds to this perspective in two ways. First, although traditional models implicitly assume that customer satisfaction is essentially the result of cognitive processes, new conceptual developments suggest that affective processes may also contribute substantially to the explanation and prediction of consumer satisfaction (Fornell and Wernerfelt, 1987; Westbrook, 1987; Westbrook and Oliver, 1991). Second, satisfaction should be viewed as a judgment based on the cumulative experience made with a certain product or service rather than a transaction-specific phenomenon (Wilton and Nicosia, 1986). There is general agreement that: Satisfaction is a persons feelings of pleasure or disappointment resulting from comparing a products perceived performance (or outcome) in relation to his or her expectations (Kotler, 2003). Based on this review, customer satisfaction is defined as the result of a cognitive and affective evaluation, where some comparison standard is compared to the actually perceived performance. If the perceived performance is less than expected, customers will be dissatisfied. On the other hand, if the perceived performance exceeds expectations, customers will be satisfied. Otherwise, if the perceived expectations are met with performance, customers are in an indifferent or neutral stage. Customer satisfaction is defined as a customers overall evaluation of the performance of an offering to date. This overall satisfaction has a strong positive

18 effect on customer loyalty intentions across a wide range of product and service categories (Gustafsson, 2005). The satisfaction judgment is related to all the experiences made with a certain business concerning its given products, the sales process, and the after- sale service. Whether the customer is satisfied after purchase also depends on the offers performance in relation to the customers expectation. Customers form their expectation from past buying experience, friends and associates advice, and marketers and competitors information and promises (Kotler, 2000). Factors which determine the extent of expectations are: customer needs, total customer value and total customer cost. It is mentioned by researchers who study customer choice that choosing a product or service is only one of the stages customers go through. A purchase decision is influenced by the buyers characteristics. These include cultural, social, personal and psychological factors. In addition to the buyers characteristics, a purchase decision is influenced by the buyers decision process. The typical buying process develops through five stages: 1) new recognition; 2) information search; 3) information evaluation; 4) purchase decision; and 5) post-purchase evaluation (Chaston, 2001). Searching for information is a key stage of a consumers decision-making process and may include a search for both internal and external information. As the perceived risk of a purchase decision increases, consumers search for more information in order to cope with uncertainties about the potential positive or negative consequences (Jihye Park, 2005). Although buyers may skip or reverse some stages, basically they pass sequentially through all five stages in buying a product. Value reflects what customers do in evaluating, obtaining, using and disposing of the product or service. Values can be defined as principles or standards of an individual as a whole. They reflect an individual judgment as to what is valuable or important in life. Customer delivered value is a result of comparison of total customer value with total customer cost.

19 Information about the opinion of the customer regarding a product or service is of essential importance, and can be obtained in several ways, such as customer surveys, phone interviews, and customer panel discussions. It is also important to measure customer orientation continuously (Rampersad, 2001). What the company thinks its customer wants Is not necessarily the same as What the company thinks it has to offer is not necessarily the same as What the company actually offers is not necessarily the same as How the customer experiences this is not necessarily the same as What the customer really wants (Hubert Rampersad, 2001). Mohamed Zairi (2000) developed figure 2.2 which shows in order to have a continuous improvement of customer satisfaction there should be a cycle which starts with listening to voice of customers then analyzing their comments, developing actions and at the end implementing. Figure 2.2 illustrates this cycle: Figure 2.2: Customer satisfaction continues improvement Source: Zairi, 2000

20 To have a thorough satisfaction firstly the good working condition is needed to bring satisfied employees which leads to loyal employees and by preparing all this, good production would be followed which influenced on Customer satisfaction and make them loyal and as mentioned before high profit is about customer retention. Figure 2.3: The circle of satisfaction 2.2.1 What we need to measure? Organizations can understand the satisfaction of their customers through the number of problem calls; the number of complaints by e-mail, phone, etc.; and/or the number of returned products (Werth, 2002).

21 It is somehow the measurement of customer dissatisfaction (no satisfaction) and offers a possibility for the elimination of falls, not a possibility for product development and product innovation. Companies should gather and analyze the suitable data, which will provide relevant information to real customer satisfaction. It is important to measure the right things, i.e. what is really important for the customers. There is the possibility of wrong specifications or misinterpretations of what a customer actually wants (Kekale, 2001) (the gap between what companies think customers probably want and what customers really want). Criteria for the measurement of customer satisfaction must be defined by the customer. Many organizations determine the criteria for measurement internally, but suppliers rarely have an accurate understanding of customer priorities (Hill, 1996). It is a problem with measuring the performance dimensions that are not critical drivers of value to the customers (value in the eye of customers, not in the eye of organizations). The solution for this problem, to provide real insight into the market needs, is to filter out irrelevant information and concentrate on the few dimensions that really matter. Figure 2.4: The Principle of pre-study For evaluation of information, which we will achieve by pre-study, we can use the histogram. The histogram shape shows how some questions in the questionnaire were understood by respondents. For example: no-rectangular distribution means misunderstanding a question, etc. After a simple pre-study the

22 companies can find support for their assumptions and simultaneously create a new, more effective, questionnaire. If we have a set of customer demands and expectations we can translate them into technical product features by using, e.g. the QFD methodology. Very important also is determining the specific features, which mean a limited number of critical measures in order to avoid information overload. There are various methods (various approaches) for (to) the measurement of customer satisfaction. 2.2.2 Techniques for measuring customer satisfaction Market research techniques to measure customer satisfaction which are: customer satisfaction survey methodologies; focus groups to study customer satisfaction issues; standardized packages for monitoring customer satisfaction; and various computer software. There are some problems with typical customer satisfaction measurement techniques such as focus groups, survey methodologies and customer satisfaction software. These include: Analytical - concerned with techniques, formal procedures, systems, and so on; behavioral - concerned with the attitudes, beliefs, perceptions, motivation, commitment and resulting behavior of the people involved in the process; and Organizational - concerned with the organizational structure, information flows, management style and corporate culture, i.e. the context in which the process is conducted (Piercy, 1996). (Ingrid Fecikova, 2004)

23 2.2.3 Virtual organizations and customer satisfaction The fast growing Internet technology introduced a new digital economy on a virtual environment. Cox and Dale (2001) define that: E-business or e-enterprise is the term used has shifted to competitiveness along with staff and customer satisfaction in order to achieve long-term success. Surveys and research carried out by a variety of sources (for example, Active Media Research LLC, 2000; PR Newswire, 2000) have shown that the medium of the Internet and the development of e-commerce are progressing extremely fast on a global scale. However, while the Internet acts as a faster and less costly platform for consumers and businesses it has inadvertently increased the importance of customer satisfaction. Caruso (2000) reports that IT and business executives from all industries surveyed in the Information and Business Week survey agree that generating new sources of revenue is not the main goal of deploying e-business applications. In fact, this factor ranked well behind creating or maintaining a competitive edge, improving customer satisfaction, and keeping pace with the competition (Dalton, 1999). Heskett et al. (1994) assert that the importance of customer satisfaction is to achieve good financial performance in services in the physical world, and the same can be said of ecommerce where a customer can be lost if unable to access a Web site or if the experience proves unsatisfactory. It is clear that e-commerce will dramatically change the way business operates with large-scale changes requiring a similarly large-scale focus on the needs of the customer. Ody (2000), emphasize that the main reasons why customers go onto the Internet are to find information or buy a product or service with an emphasis on convenience and speed. Ziff-Davies (2000) maintains that the concept of the Internet has raised customers sensitivity to fast customer service. An overview of virtual organizations is presented by Aboelmaged and Tunca (1999). Figure 2.5 illustrates the customer contact-customer focus matrix for the Internet companies. In Figure 2.5, the Y-axis shows the level of customer contact on the Internet companies. The X-axis, however, shows the level of customer focus. Customer contact level of the Internet companies is highly dependent on the nature of the business. While a bookstore, for instance, has a high customer contact, the

24 content providers could have relatively lower customer contact. Customer focus, on the other hand, crucially depends on strategic decisions. The highest customer satisfaction can be reached, where both the customer contact and the customer focus is high. A company with a high customer contact and focus is likely to be a winner, while in a high to define a business that has a virtual presence or Web site on the Internet either to promote brand awareness or enable-e-commerce. Customer contact environment, if the customer focus is low, then the company is likely to be a loser. The loser causes the highest customer dissatisfaction and is very likely to disappear in a competitive environment. (Nasser Alomaim, Mustafa Zihni Tunca, Mohamed Zairi, 20003) Figure 2.5: Customer contact - customer focus matrix
Source: Nasser Alomaim, Mustafa Zihni Tunca, Mohamed Zairi, 2003

25 2.3 Service Quality Much of the initial work in developing a model to define and assess service quality has been conducted by Parasuraman, Zeithaml, and Berry (1985) (otherwise referred to as PZB). In conceptualizing the basic service quality model PZB (1985) identified ten key determinants of service quality as perceived by the company and: the consumer reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding/knowing the customer and tangibility. They noted that discrepancies existed between the firm's and the customer's perceptions of the service quality delivered. In investigating these discrepancies, PZB (1985) assert that service quality can be assessed by measuring the discrepancies or "gaps" between what the customer expects and what the consumer perceives he receives. Arguing that the magnitude, and direction of this gap, directly affects the service quality that the consumer perceives, PZB (1985) note that customers would have perceptions of high service quality to the extent that their expectations are lower than the perceived service performance. If the converse were true, customers would perceive low service quality. 1. Report the results of a study that examines the usefulness of the SERVPERF scale for assessing customer perceptions of service quality in the uniform rental industry. 2. Assess the reliability of service quality measures as it applies to the uniform rental industry. 3. Identify the dimensions of service quality that are important to customers of uniform rental companies.

26 4. Assess the overall service quality and satisfaction level as perceived by customers of rental companies. PZB (1985) assert that their framework can be used for identifying differences in the quality of goods and services by distinguishing between the properties of a good or service. They note that Nelson (1974) defined "search properties" as properties that can be determined before purchasing (such as credibility and tangibles), and "experience properties" as properties that can be determined only after purchase or consumption. Further, Darby and Karni (1973) defined "credence properties," (such as competence and security) as properties or characteristics that consumers often find extremely difficult to evaluate after their purchase. Therefore, PZB (1985) concluded that consumers typically rely on experience properties when evaluating service quality. Based on their review of the literature, PZB (1985) developed the SERVQUAL scale. The scale was designed to uncover broad areas of good or bad service quality and can be used to show service quality trends over time, especially when used with other service quality techniques. The SERVQUAL scale is based on a difference score between customer expectations of service and their perceptions after receiving the service. Initially PZB (1985) focused on the ten determinants of service quality. However, after two stages of scale purification, they reduced the ten determinants to five dimensions of service quality: tangibles, reliability, responsiveness, assurance, and empathy (PZB 1988). In their discussion, PZB (1988) assert that the SERVQUAL scale deals with perceived quality and looks specifically at service quality, not customer satisfaction. They state that "perceived service quality is a global judgment or attitude concerning the superiority of service whereas satisfaction is related to a specific transaction". They reported that the scale had a reliability rating of .92 and that the five dimensions could be ranked in order of importance: reliability, assurance, tangibles, responsiveness, and empathy.

27 Because of "wording related" high expectation scores and higher than normal standard deviations on several questions, the authors later revised the SERVQUAL scale (PZB 1991). Subsequent research and testing of the SERVQUAL scale, however, has not been supportive of its author's claims. For instance, Carman (1990) notes that while SERVQUAL generally showed good stability, its five dimensions were not always generic. Indeed, the various dimensions can vary depending on the type of service industry surveyed. Carman also calls into question PZB's collection of expectation data after a customer actually uses the service. He claims that this should be done before using the service even though this is rarely practical. Carman states that even when this is done, expectations and perceptions showed little relationship to one another. Teas (1993) questions SERVQUAL'S discriminant validity. He notes that the service quality expectations concept may have serious discriminant validity shortcomings which can cause the "perceptions-minus-expectations" service quality measurement framework to be "a potentially misleading indicator of customer perceptions of service quality". He notes that SERVQUAL's lack of discriminant validity results in a significant part of the variance in its expectations scores being determined by the respondent's "misinterpretations" of the expectation questions. Churchill, Brown and Peter (1993) argue that because the SERVQUAL scales "scores" are really difference scores (perception scores minus expectation scores); problems of reliability, discriminant validity, and variance restrictions exist. They showed that while SERVQUAL had high reliability, a non-difference score rated higher in reliability. Their findings also showed that the scale "failed to achieve discriminant validity from its components", and the distribution of the SERVQUAL scores were non-normal.

28 2.3.1 Definition of service quality Some important definitions of service quality are coming as following: Parasuraman et al., (1985, 1988): Service quality is determined by the differences between customers expectations of services providers performance and their evaluation of the services they received. Asubonteng et al. (1996): Service quality can be defined as the difference between customers expectations for service performance prior to the service encounter and their perceptions of the service received. Gefan (2002): Service quality as the subjective comparison that customers make between the quality of the service that they want to receive and what they actually get. 2.3.2 Dimensions and determinants of service quality Gronroos (1984), Lehtinen and Lehtinen (1982) and Czepiel et al. (1985) have considered the service quality of the service encounter as two different dimensions, one being technical or output quality and the other functional or process quality. These dimensions were assessed according to attitudes and behavior, appearance and personality, service mindedness, accessibility and approachability of customer contact personnel. Czepiel et al. (1985) not only pinpointed the process and outcome quality dimensions but also identified three different dimensions of the service encounter, distinguishing between customer perceptions, provider characteristics and production realities. They suggested that these covered common crucial characteristics in service delivery and that the determinants of satisfaction were therefore similar in each case.

29 For the customer perceptions and production realities, they listed elements which were then judged along a continuum. The customer perceptions included purpose, motivation, result, salience, cost, reversibility, and risk. The production realities related more to elements such as technology, location, content, complexity and duration. These two dimensions can be compared to the customers perception of a Web site and the complexity or speed of the technology involved. The third dimension of provider characteristics relates to the expertise, attitude and demographic attributes of the staff. Edwardsson et al. (1989) expanded further these two types of service quality, and summarized four aspects of quality which affect customers perceptions: (1) Technical quality; (2) Integrative quality; (3) Functional quality; (4) Outcome quality. Technical quality refers to the skills of the personnel and design of the service system. In e-commerce, these two aspects are hidden from view and are not experienced directly and therefore cannot be judged by the customer. Integrative quality is concerned with how the different parts of the service delivery system work together. This is crucial in e-commerce because the customer must have a positive experience online and if relevant a positive experience offline. For example, if a customer buys a product through a companys Web site, then a smooth running system will correctly translate that order and payment, and deliver the product as promised. The third aspect is functional quality which means the manner in which the service is delivered. As for Gronroos (1984) and Lehtinen and Lehtinens (1982) definition of functional quality, the meaning is the same and is relevant to ecommerce in so far as the layout and accessibility of a Web site is concerned, without the direct human contact or physical environment. Outcome quality is when the actual service meets the promised service and the customers needs and expectations. This is true in the case of e-commerce just as much as for businesses in the physical world. If a customer is dissatisfied, he or she is unlikely to visit that shop or buy from the Web site again. The likelihood of non purchase is greater on the

30 Internet due to the ease with which customers can click to a competitors Web site. Even though this type of research had considered the matter of customers perception of quality, it was Parasuraman et al. (1985; 1988) who addressed the issue as to how the customer makes an assessment of service quality. They came up with ten determinants that can be used to measure service: (1) Access (approachability and ease of contact); (2) Communication (informing and listening to customers); (3) Competence (possession of required skills and knowledge to perform the service); (4) Courtesy (demeanour and attitude of contact personnel); (5) Credibility (trustworthiness and honesty); (6) Reliability (consistency of performance and dependability); (7) Responsiveness (timeliness of service and willingness of employees); (8) Security (freedom from danger, risk or doubt); (9) Tangibles (physical evidence of service); (10) understanding/knowing the customer (making an effort to understand the Customers needs) Credibility is an assessment that can be made before using a service and this has the same bearing in e-commerce - generally, a customer will only make a transaction in e-commerce after having had some kind of recommendation from an external source, whether it is through advertising or by word of mouth. Security is of critical importance when making transactions online. Usually, the Web site will indicate that it is a secure Web site so that customers can give, for example, credit card details, without worrying about other people accessing this information. Other determinants such as understanding the customer and access are also relevant to the e-commerce marketplace. A Web site must be available at all times and does not have opening and closing hours like a normal high street bank or shop. To understand the customer, a clever Web site has cookies which recognize repeat customers and do this by asking a new customer to register some kind of user word like an e-mail address which they enter on each occasion that they access the Web site. In this way, customers can be sent information by e-mail or offered purchasing suggestions on re-entering a Web site depending on what they have previously

31 bought. The aim is to meet the customers needs and provide the kind of personalization that a regular customer would get from contact personnel in a BAM environment. Communication is difficult on the Internet because the interaction between the Web site and the customer is often one way, the Web site providing information to the customer. It is only if a Web site offers a telephone number or email address that the customer communicates with the company directly, and in most cases, e-mail queries receive standard e-mail replies that may not respond directly to the query. In a similar way, courtesy and competence can be said to be almost nonexistent during the Web site experience. The customer will generally navigate a Web site if it is easy to use but he or she will not be able to judge what the personnel are like behind this interface or if they have the required skills to perform a service. It is only through the customer service option that this can be assessed and even then, an automatic reply e-mail message is often devoid of human characteristics. Tangibles are for the most part irrelevant for measuring service quality in ecommerce as the customer only interacts with the Web site. Therefore, the customer cannot have opinions about the physical properties used to deliver a service. Most ecommerce companies either have their own warehouses for fulfilling orders for products to be sent out, or ensure suppliers do this directly. The activity may take place far away from where the customer is sitting and so is not applicable. Responsiveness and reliability are, however, applicable because they relate to what the company promises. Reliability could be judged, for example, by the correct product being received by the customer within 48 hours. This is important for any business and relates to the whole interaction between the interface and the back-end processes of fulfillment. Responsiveness as such is slightly more indiscernible, especially whilst directly interacting with the Web site. If the customer has a problem, the customer service option of telephone or e-mail is how to report this and it is here that the companys ability to respond well and at a reasonable speed is judged. This is also relevant if fulfillment is part of the service and the customer has to send back an item or it is late arriving. Parasuraman et al. (1988, 1988) subsequently reduced these ten determinants to five, the following first three being the original ones and the other seven original ones categorized into (4) and (5): (1) Tangibles; (2) Reliability; and (3)

32 Responsiveness; (4) Assurance (knowledge and courtesy of employees); and (5) Empathy (caring, individualized attention the firm provides its customers). These five determinants were used in their SERVQUAL measurement instrument (1988b). Johnston et al. (1990) carried out similar research using empirical data in ten UK service organizations which resulted in 12 determinants, some of which were similar to the ten determinants of Parasuraman et al. (1985): (1) Access; (2) Appearance/aesthetics; (3) Availability; (4) Cleanliness/tidiness; (5) Comfort; (6) Communication; (7) Competence; (8) Courtesy; (9) Friendliness; (10) Reliability; (11) Responsiveness; and (12) Security. Four out of the five new determinants, appearance, cleanliness, comfort and friendliness, refer to service delivery within a physical sense and are therefore not relevant to the Internet experience. The fifth new determinant, availability, is very relevant because it can refer to the availability of a Web site, just as much as to the availability of what service or product the e-business is offering and whether customer service contacts can help. The empirical research carried out by Johnston et al. (1990) was only on management perceptions of service and not from the customers perspective; therefore Johnston and Silvestro (1990) carried out further research taking account of the latter and added five more determinants: (1) Attentiveness/helpfulness; (2) Care; (3) Commitment; (4) Functionality; and (5) Integrity. The first three again refer to the staff performing the service and are therefore unsuited for use as service quality measures over the Internet. However, functionality, which here means serviceability and fitness for purpose, and integrity can be judged by a customer because they refer directly to the Web site. Johnston (1995) added another determinant, flexibility, after carrying out further research on these 17 determinants in retail banking. This was used to describe a willingness and ability on the part of the service worker to amend or alter the nature of the service or product to meet the needs of the customer (Johnston, 1995). In an e-commerce transaction, there is little flexibility because what an e-business

33 offers can be customized to a certain degree but not changed during the course of the service delivery. Gronroos (1990) has also undertaken further research into the determinants of service quality based on his earlier model. He offered six criteria of good perceived service quality: (1) Professionalism and skills; (2) Attitudes and behavior; (3) Accessibility and flexibility; (4) Reliability and trustworthiness; (5) Reputation and credibility; and (6) Recovery. The first five of these are similar to the five determinants of Parasuraman et al. (1988) and therefore merit equivalent arguments put forward above, when applied to the world of e-commerce. The sixth determinant, recovery, has become an important factor in service quality. Lewis (1999) notes that effective service recovery can enhance customer loyalty and provoke increased positive word of mouth communication. Looking at this in terms of a Web site, service failure will most likely be due to the system crashing and could be caused by the company or customer. If there is a consistent problem accessing the Web site or while using it, then a customer should complain but they are more likely to click to another competitors Web site rather than spend time complaining and therefore service recovery becomes immaterial. However, if there is a problem with billing or fulfillment, recovery does become an issue (i.e. to replace a damaged product or an incorrectly delivered product).

34 2.4 E-Service Quality In this part, understanding of e-service quality will be gained both from definitions of e-service quality and e-service quality dimensions. 2.4.1 Definitions of E-Service Quality According to Zeithaml, et al. (2000), e-service quality is comprehended both from pre-and post- Web site service perspectives. It can be understood as the evaluation of the efficiency and effectiveness of online shopping, purchasing, and delivery products and serves. Similarly, Santos (2003) defined e-SQ as overall customer evaluations and judgments of excellence e-service delivery in the virtual marketplace. 2.4.2 E-service Quality Dimensions A majority of studies view the dimensioned of e-service quality as antecedents of e-satisfaction. (Dina et al. 2004). High standard e-service quality is the means by which the potential benefits of the Internet can be realized (Yang et al., 2001). Drawing upon the traditional service quality scale, Zeithaml et al. (2000) have developed e-service quality dimensions for measuring e-service quality. In a series of focus group interviews, they have identified eleven dimensions of online service quality: access, ease of navigation, efficiency, flexibility, reliability, personalization, security/privacy, responsiveness, trust/assurance, site aesthetics, and price knowledge. In their research, they found the core dimensions of regular service

35 quality like efficiency, fulfillment, reliability and privacy were the same as online. At the same time, they stated that responsiveness, compensation and real time access to help as core dimensions of service recovery for online services. In addition, they noted that empathy was less important online unless there were service problems happened. Wolfinbarger and Gilly (2002), through focus group interviews and an online survey, reduced the scale of online service quality into four key dimensions: Web site design, reliability, privacy/security, and customer service. In their research they suggested that the most basic building of outstanding online service quality is reliability and web site design including good functionality in time savings, easy transactions, good selection, in-depth information and the right level of personalization. Yang et al. (2004) have uncovered six key online service quality dimensionsreliability, access, ease of use, attentiveness, security, and credibility-employed by Internet purchasers to evaluate e-retailers service quality. Furthermore, they suggested that if online retailers want to achieve high level of customers perceived service quality, four dimensions should be more focused on: reliability, attentiveness, ease of use and access. Table 2.1 shows different description of each dimension.

36 Table 2.1: E-Service Quality dimensions and Descriptions E-Service Quality Dimensions Description Reliability It is included correctness of order fulfillment, prompt delivery, and billing accuracy It is included individualized attention, personal thank-you notes Attentiveness from online retailers and availability of a message area for customer questions or comments. It is related to easy-to-remember URL address, wellEase of use organized, well structured, and easy-to-follow catalogues, site navigability, and concise and understandable contents, terms and conditions. It is included the list of the companys street and e-mail Access address, phone and fax number, accessibility of service representatives, availability of chat room, bulletin board and other communication channels. Security It is included security of personal information and minimal online purchase risks. Credibility It refers to the business history of online retailers, special rewards or discounts, and referral banners on other Web site.

37 Yang and Fang (2004) have noted that traditional service quality dimensions, such as competence, courtesy, cleanliness, comfort and friendliness, are not relevant to online retailing; whereas other factors, such as reliability, responsiveness, assurance, and access, are critical to both traditional service quality and e-service quality. Similarly, Jun et al. (2004) compared traditional with online service quality dimensions and found that four of five traditional service quality dimensions stated by Parasuraman et al. (1988) were also considered important online. They are listed as: reliability, responsiveness, assurance and empathy. Moreover, Yang et al. (2000) identified six key dimensions e.g., reliability, responsiveness, competence, eases of use, security and product portfolio. Madu (2002) proposed the following 15 dimensions of online service quality: performance, features, structure, aesthetics, reliability, storage capacity, serviceability, security and system integrity, trust, responsiveness, service, differentiation and customization, Web store policies, reputation, assurance and empathy. According to Dina et al. (2004), five dimensions are commonly used: ease of use, web site design, customization, responsiveness and assurance. In order to clarify the detailed determinants of e-service quality, Lee and Lin (2005) proposed website design, reliability, responsiveness, trust and personalization as e-service quality dimensions. According to their research, trust is the most significant determinant to overall service quality and customer satisfaction, then reliability and responsiveness. The less one is website design. To their surprise, personalization is the least significant. Based on the focus interviews and the insights of previous research, Santos (2003) develop a conceptual model of e-service quality. This model proposed that eservice quality consists of incubative and active dimensions, and each dimension composed by five or six determinants. Active dimensions are: Reliability, Efficiency, Support, Communication, Security and Incentive. Incubative dimensions are: ease of use, appearance, linkage, structure & layout and content.

38 Before the launching of a Web site, the incubative dimension needs to be considered and to ensure that: the Web site is easy to use, search and navigate; it has an appealing appearance to its target customers; links are set up and maintained, and the broken links are avoided; the site has a well-organized structure and layout; and there is an attractive presentation of factual contents. When a Web site has been established, the active dimension needs to be maintained throughout the entire period of active e-commerce on the Web site. The determinants of active dimensions are: reliability efficiency; support; communications; security; incentive. All determinants listed above are presented in descending order of importance from high importance to low importance. According to Santos (2003), the Conceptual Model of e-Service Quality can be of assistance to all companies that engage e-commerce, or plan to do so. The model can assist companies to understand e-service quality and to gain customer satisfaction, therefore, profitability.

39 2.5 Conclusions This chapter is done with some literature review from some resources such as internet, books, white papers, conferences and journal. We briefly discussed on literature reviews according to the previous works from several researchers that applied certain approaches, methods, framework or techniques that are related Measuring service quality and SERVQUAL model. .

CHAPTER 3 RESEARCH METHODOLOGY 3.1 Introduction This chapter presents brief description of the research methodology used for the project. This includes the purpose of the research, research approach, research strategy, sample selection methods, data collection methods and data analysis methods. At the end of this methodology part validity and reliability issues will be discussed to follow the quality standards of the research. Then frame of reference which brings a thorough road map of study is provided next.

41 3.2 Research Propose Early in any research study, one faces the task of selecting the specific design to use. A number of different design approaches exist but, unfortunately, no simple classification system defines all the various that must be considered (Cooper & Schindler, 2003). Research can be classified in terms of their purpose. Accordingly, Saunders, Lewis & Thornhil (2003) mentioned that they are most often classified exploratory, descriptive or explanatory while Cooper and Schindler (2003) categorized in descriptive and causal. This way the essential difference between descriptive and causal studies lies in their objectives. If the research is concerned with finding out who, what, where, when, or how much, then the study is descriptive. In a causal study, we try to explain relationships among variables. Exploratory research is useful when the research questions are vague or when there is little theory available to guide predictions. At times, research may find it impossible to formulate a basic statement of the research problem. Exploratory research is used to develop a better understanding (Hair, Babin, Money & Samoel 2003). Exploratory studies are a valuable means of finding out what is happening, to seek new insight, to ask questions and to assess phenomena in a new light. It is particularly useful if researcher wish to clarify the understanding of a problem. There are three principle ways of conducting exploratory research: a search of the literature, talking to experts in the subject, conducting focus group interviews (Saunders, Lewis & Thornhill 2003) In contrast to exploratory studies more formalized studies are typically structures with clearly stated hypotheses or investigative questions. Formal studies serve a variety of research objectives: - Descriptions of phenomena or characteristics associated with subject population (the who, what, when, where, and how of a topic). - Estimates of the proportions of a population that have these characteristics.

42 - Discovery of associations among different variables (Cooper & Schindler, 2003). Generally things are described by providing measure of an event or activity. For example, which brands are most preferred? What advertisements are most effective? These are the questions that can be answered by descriptive research. Descriptive research designs are usually structured and specifically designed to measure the characteristics described in a research question. Hypotheses, derived from the theory, usually serve to guide the process and provide a list of what needs to measured (Hair, Babin, Money & Samouel 2003). The object of descriptive research is to portray an accurate profile of persons, events of situations. It is necessary to have a clear picture of the phenomena on which researcher wish to collect data prior to the collection of the data (Saundrers, Lewis & Thornhill 2003). Studies that establish causal relationships between variables may be termed explanatory studies. The emphasis here is on studying a situation or a problem in order to explain the relationship between variables (Saunders, Lewis & thornhill 2003). Explanatory studies are designed to test whether one event causes another (Hair, Babin, Money & Samouel 2003). The purpose of the research is descriptive. The data has been collected through questionnaire, is aimed to understand the most important factors of service quality. 3.3 Research Approach The knowledge claims, the strategies and the method all contribute to a research approach that tends to be more quantitative, qualitative or mixed (Creswell 2003).

43 3.3.1 Quantitative Research Quantitative approach is one in which the investigator primarily uses post positivist claims for developing knowledge (i.e. cause and effect thinking, reduction to specific variables and hypotheses and questions, use of instrument and observation, and the test of theories), employs strategies of inquiry such as experiments and surveys and collects data on predetermined instruments that yield statistical data (Creswell 2003). Quantitative research is frequently referred to as hypothesis-testing research. Characteristically, studies begin with statements of theory from which research hypotheses are derived. Then an experimental design is established in which the variables in question (the dependent variables) are measured while controlling for the effects of selected independent variables. Subject included in the study are selected at random is desirable to reduce error and to cancel bias. The sample of subjects is drawn to reflect the population (Newman & Benz 1998). The procedures are deductive in nature, contributing to the scientific knowledge base by theory testing. This is the nature of quantitative methodology. Because true experimental designs require tightly controlled conditions, the richness and depth of measuring for participant may be sacrificed. As a validity concern, this may be a limitation of quantitative designs (Newman & Benz 1998) 3.3.2 Qualitative Research Qualitative research is multi method in focus, involving an interpretive, naturalistic approach to its subject matter. This means that qualitative researchers study things in their natural settings, attempting to make sense of, or interpret, phenomena in terms of the meanings people bring to them (Newman & Benz 1998).

44 Qualitative approach is one in which the inquirer often makes knowledge claims based primarily on constructivists perspectives (i.e., the multiple meaning of individual experiences, meaning socially and historically constructed, with an intent of developing a theory or pattern) or advocacy/participatory perspectives (i.e., political, issue-oriented, collaborative or change oriented) or both. It also uses strategies of inquiry such as narratives, phenomenology, ethnography, grounded theory studies or case studies. The researcher collects open-ended, emerging data with the primary intent of developing themes from the data (Creswell 2003). Since the purpose is to understand the most important dimensions of service quality from the Iranian customers perspective, quantitative research is found to be more appropriate for this study. 3.4 Research Strategy Research strategy will be a general plan of how researcher will go about answering the research questions that has been set by researcher. It will contain clear objectives, derived from research questions specify the sources from which researcher intend to collect data and consider the constraints that researcher will inevitably have such as access to data, time, location and money, ethical issues (Thornhill et. al., 2003). Based on the conditions 1) form of research question 2) requires control over behavioral events and 3) focus on contemporary events five research strategies were identified in social science. These are: experiments, surveys, archival analysis, histories and case studies (see table 3.1).

45 Table 3.1: Research strategies Form of research question How, Why Who, What, Survey Where, How many, How much No Yes Requires control over behavioral event? Yes Focuses on contemporary events? Yes Strategy Experiment Who, What, Archival analyses Where, How many, How much History Case Study
Source: Yin, 1994, p.6

No Yes/No How, Why How, Why No No No Yes Most important condition for selecting research strategy is to identify the type of research question being asked. Who, What, Where, How and Why are the categorization scheme for the types of research questions. Two possibilities need to investigate by asking the What question. First, some types of what questions are justifiable for conducting an exploratory study and the goal is to develop pertinent hypotheses and propositions for further inquiry. Any of the five research strategies can be used in that situation- exploratory survey, exploratory experiment, or an exploratory case study. The second type of what question is actually form a how many or how much line of inquiry and the outcomes from a particular situation. The survey or archival analysis is more favorable than other strategies. If the researcher needs to know the how question, the better strategy will be doing history or a case study.

46 Since question in this study is based on what question and this what question is actually form a how many and investigator has no control over the actual behavioral events, Survey is found to be a more appropriate approach in order to gain a better understanding of the research area. Survey is more appropriate for quantitative study. 3.4.1 Survay The survey strategy is popular and common strategy in business research that is usually associated with the deductive approach. Survey allows the collection of large amount of data from a sizeable population in a highly economical way. Questionnaire, structured observation and structures interviews are often falls into this strategy (Thornhill et. al., 2003). In this study a survey has been done using a questionnaire. 3.4.2 Pilot Test A pilot test is conducted to detect weaknesses in design and instrumentation and to provide proxy data for selection of a probability sample. It should, therefore, draw subjects from the target population and simulate the procedures and protocols that have been designated for data collection (Cooper and Schindler, 2003).

47 3.5 Sample Selection The basic idea of sampling is that by selecting some of the elements in a population, researcher may draw conclusions about the entire population. There are several compelling reasons for sampling, including: lower cost, greater accuracy of result, greater speed of data collection and availability of population selection (Cooper & Schindler 2003). 3.5.1 Selecting the sampling method Selection of the sampling method to use in a study depends on a number of related theoretical and practical issues. These include considering the nature of the study, the objectives of the study and the time and budget available. Traditional sampling method can be divided into two categories: probability and non- probability sampling (Samuel et. al., 2003). Probability sampling is most commonly associated with survey-based research where researcher needs to make inferences from the sample about a population to answer the research questions or to meet research objectives (Saunders et. al., 2003). In probability sampling, sampling elements are selected randomly and the probability of being selected is determined ahead of time by the researcher. If done properly, probability sampling ensures that the sample is representative (Hair et. al., 2003) Non-probability sampling provides a range of alternative techniques based on researcher subjective judgment (Saunders et. al., 2003). In non-probability sampling the selection of elements for the sample is not necessarily made with the aim of being

48 statistically representative of the population. Rather the researcher uses the subjective methods such as personal experience, convenience, expert judgment and so on to select the elements in the sample. As a result the probability of any element of the population being chosen is not known (Samuel et. al. 2003). According to Samuel et. al., 2003 most non-probability sampling methods are: Convenience sampling Convenience sampling involves select sample members who can provide required information and who are more available to participate in the study. Convenience samples enable the researcher to complete a large number of interviews cost effectively and quickly but they suffer from selection bias because of difference of target population (Hair et. al., 2003). Judgment sampling Researchers judgment is used to select sample element and it involves for a specific purpose. Group of people who have knowledge about particular problem they can be selected as sample element. Sometimes it referred as a purposive sample because it involves a specific purpose. Judgment sampling is more convenience and low cost involvement. (Hair et. al., 2003) Quota sampling Objective of quota sampling is to have proportional representation of the strata of the target population for the total sample and the certain characteristics describe the dimensions of the population (Cooper & Schindler 2003). In quota sampling the researcher defines the strata of the target population, determines the total size and set a quota for the sample elements from each stratum. The findings from the sampling cannot be generalized because of the choice of elements is not done using a probability sampling methods (Samouel et. al. 2003).

49 Purpose of this research is to classify the service quality dimensions in online shopping from the Iranian shoppers. For the study sample has been selected from the cloob.com members; because this group has more experience of e-commerce and online shopping than the rest of people in Iran. Sample was selected by using judgment because some criteria were followed during the sample selection: Sample should be more familiar with using Internet; Sample should have experience of using Online purchasing; The questionnaire was divided into three parts in order to let responders more time to concentrate on each question. 3.5.2 Overview of the sample Cloob.com is a virtual Iranian society website that people can have their profiles, web logs, list of friends, photo album, clubs, sending & receiving messages, online shopping, sending SMS, online advertising and etc. Cloob.com has 88309 active members, and 20968 more has been invited and there are 6508 clubs in this site. Its members are all aware of e-commerce, as they could rent a flat or buy a car from this website. Main purpose of this study is to understand the most important dimensions of service quality in online shopping sector from the Iranian perspective. Based on the objectives of the study the sample should be familiar with using Internet and also it should have experience of using online purchasing. Based on the facilities which cloob.com provides its 88309 members; it is obvious that its members are all familiar with using Internet and e-commerce. So, the members of Cloob.com were seemed to be the best sample for this study.

50 3.6 Data Collection There are two major approaches to gathering information about a situation, person, problem or phenomenon. Sometimes, information required is already available and only need to be extracted. However there are times when the information must be collected. Based upon these broad approaches to information gathering data are categorized as: Secondary data and Primary data. Secondary data are collected from secondary sources such as governments, publications, personal records, census (Ranjit Kumar 1996) and primary data are collected through: observation, interviews and/or questionnaires (Hair et. al., 2003). According to Creswell (2003) data collection procedure in qualitative research involve four basic types: Observations, Interviews, documents and audio-visual materials. In this study quantitative survey is used as data collection method. Since the aim of the study is classifying service quality dimensions in online purchasing from the customers point of view, the main focus thus is customer. A questionnaire was prepared to get idea about the customers experiences in online shopping. The questionnaire divided into two parts and published on www.cloob.com; which is an Iranian online club. A survey is a procedure used to collect primary data from individuals. Data can range from beliefs, opinions, attitudes and lifestyles to general background information on individuals such as gender, age, education and income as well as company characteristics like revenue and number of employees. Surveys are used when the research involves collecting information from a large sample of individuals (Samuel et. al., 2003). The questionnaire was developed based on research question and frame of reference. The logical structure of questionnaire followed the order of service quality dimension in the frame of reference. For understanding the importance and satisfaction of each service quality dimension a 5-scale was used (1=very unsatisfied, 3= neutral, 5= very satisfied). Once came up with the first draft of questionnaire, ten questionnaires were handed out to the students of UTM and they were asked whether the questions made

51 sense to them and were they easy to understand. After refining questions, the wellimproved questionnaire was developed. 3.7 Data analysis After collecting all the data the process of analysis begins. To summarize and rearrange the data several interrelated procedure are performed during the data analysis stage (Zikmund 2000). For quantitative data analysis, statistical tools of Microsoft excel and SPSS are used for data input and analysis. The statistics results were presented by graphical form with detailed description. 3.8 Validity and Reliability In order to reduce the possibility of getting the answer wrong, attention need to be paid to two particular on research design: reliability and validity (Saunders et. al., 2003). 3.8.1 Validity Validity is concerned with whether the findings are really about what they appear to be about (Saunders et. al., 2003). Validity defined as the extent to which

52 data collection method or methods accurately measure what they were intended to measure (Saunders et. al., 2003). Cooper & Schindler (2003) believe that validity refers to the extent to which a test measures what we actually wish to measure. There are two major forms: external and internal validity. The external validity of research findings refers to the datas ability to be generalized across persons, settings, and times. Internal validity is the ability of a research instrument to measure what is purposed to measure (Cooper & Schindler, 2003). Numbers of different steps were taken to ensure the validity of the study: Data was collected from the reliable sources, from respondents who are more experienced to using online shopping; Survey question were made based on literature review and frame of reference to ensure the validity of the result; Questionnaire has been pre-tested by the responded before starting the survey. Questionnaire was tested by at least ten persons; Data has been collected through two weeks, within this short period of time no major event has been changed with the related topic. 3.8.2 Reliability According to Saunders et. al., 2003, reliability refers to the degree to which data collection method or methods will yield consistent findings, similar observations would be made or conclusions reached by other researchers or there is transparency in how sense was made from the raw data. Cooper & Schindler (2003) have defined reliability as many things to many people, but in most contexts the notion of consistency emerges. A measure is reliable to the degree that it supplies consistent results. Reliability is a necessary contributor to validity but is not a sufficient condition for validity.

53 Reliability can be accessed by the following questions (Easterby-Smith et al., 2002: p.53): (1) Will the measures yield the same results on other occasions? (2) Will similar observation be reached by other observers? (3) Is there transparency in how sense was made from the raw data? SPSS software offers Reliability Analysis Statistics: Reliability analysis allows you to study the properties of measurement scales and the items that make them up. The Reliability Analysis procedure calculates a number of commonly used measures of scale reliability and also provides information about the relationships between individual items in the scale. Intraclass correlation coefficients can be used to compute interrater reliability estimates. Statistics: Descriptive for each variable and for the scale, summary statistics across items, inter-item correlations and covariances, reliability estimates, ANOVA table, intraclass correlation coefficients, Hotelling's T2, and Tukey's test of additivity. The following models of reliability are available: Alpha (Cronbach). This is a model of internal consistency, based on the average inter-item correlation. Split-half. This model splits the scale into two parts and examines the correlation between the parts. Guttman. This model computes Guttman's lower bounds for true reliability. Parallel. This model assumes that all items have equal variances and equal error variances across replications. Strict parallel. This model makes the assumptions of the parallel model and also assumes equal means across items.

54 Numbers of different steps were taken to ensure the reliability of the study: Questionnaire was divided into three parts in order that responders could concentrate more on each question; The theories that have been selected for the study was clearly described and research question has been formulated based on the previous theory. Data has been collected based on the frame of reference that was drawn from the discussed theories. The objective is to make sure that if another investigator will follow the same procedures and used the same questionnaires objects, the same conclusions would be made. Alpha Cronbach test has also been taken for the 50 items (service quality factors) and it shows the result was 0.960 which is more than .8 and confirmed the reliability of the questions. 3.9 Frame of Reference This part will provide the conceptual framework based on literature review. This section will explain the key factors, variables and relationships among theories or models and provide theoretical overview. The conceptualization helps to answer the studys research question. This conceptual framework will also guide the data collection of this study. Main purpose of this study is to rank service quality dimensions from Iranian online shoppers perspective. Based on the objectives of the study the research question focus on what are the most important service quality dimensions which affect customers satisfaction in online purchasing in Iran.

55 3.9.1 Customer Satisfaction and Service Quality Service quality and customer satisfaction are inarguably the two core concepts that are at the crux of the marketing theory and practice (Spreng and Mackoy, 1996). In todays world of intense competition, the key to sustainable competitive advantage lies in delivering high quality service that will in turn result in satisfied customers (Shemwell et al., 1998). The prominence of these two concepts is further manifested by the cornucopia of theoretical and empirical studies on the topic that have emanated over the past few years. Therefore, there is not even an iota of doubt concerning the importance of service quality and customer satisfaction as the ultimate goals of service providers. (G.S. Sureshchandar, Chandrasekharan Rajendran R.N. Anantharaman, 2002) A basic agreement emanating from the wide range of literature on service quality and customer satisfaction is that service quality and customer satisfaction are conceptually distinct but closely related constructs (Parasuraman et al., 1994; Dabholkar, 1995; Shemwell et al., 1998). 3.9.2 Different tools for measuring online service quality Based on literature review Im taking the online service quality dimensions identified by different authors; to understand the most important dimensions from the Iranian online customers. Different tools for measuring Service Quality are followed:

56 3.9.2.1 SERVQUAL By the use of SERVQUAL scale it is possible to compare customers expectations and their perceptions of actual performance (Parasuraman and Zeithaml, 1990). This scale has been developed for the service sector and has five generic dimensions or factors: (1) Tangibles: Physical facilities, equipment and appearance of personnel; (2) Reliability: Ability to perform the promised service dependably and accurately; (3) Responsiveness: Willingness to help customers and provide prompt service; (4) Assurance (including competence, courtesy, credibility and security): Knowledge and courtesy of employees and their ability to inspire trust and confidence; (5) Empathy (including access, communication, understanding the customer): Caring and individualized attention that the firm provides its customers. 3.9.2.2 WebQUAL WebQUAL (Barnes et al, 2001) is an on-line questionnaire which is applied to assess customers perceptions of the quality of Web sites. The questionnaire is completed by customers and the qualitative customer assessments are converted into quantitative metrics that are useful for management decision-making. WebQUAL allows comparisons to be made between E-Commerce environments in the same domain, or for the same E-Commerce environment over time. WebQUAL has been iteratively developed through its application to a number of domains, from university Web sites, through to auction sites, book store Web sites, and even Wireless Application Protocol (WAP) sites on mobile phones. One of the major influences in its development has been the communications theory and, therefore, WebQUAL is particularly suited for assessing the information quality of information-intensive ECommerce environments. The WebQUAL instrument is being iteratively refined by applying and adapting it to a variety of E-Commerce domains.

57 3.9.2.3 E-SERVQUAL E-SERVQUAL (Zeithaml et al, 2002) is a conceptual model of service quality for E-Tailing environments. It is based on the traditional (off-line) service quality framework called SERVQUAL (Parasuraman, et al. 1994) and has been derived from an exploratory research involving focus groups and two phases of empirical data collection and analysis. This process produced seven service quality characteristics: efficiency, reliability, fulfillment, privacy, responsiveness, compensation, and contact. These characteristics represent the criteria customers use to evaluate on-line services. For example the characteristic responsiveness has the criteria: ability to get answers to questions, quick delivery and updates on status of order. E-SERVQUAL can be used as a framework by marketing managers to assess the service quality of E-Tailing environments. 3.9.2.4 E-SEQUAL E-SEQUAL (Dawson et al., 2003), is a service quality framework that is empirically grounded and integrates e-CRM and HCI strategies for the effective design and development of E-Tailing environments. E-SEQUAL can provide guidance to E-Businesses regarding integration of front- and back-end business processes, and across different customer touch points such as phone, fax, e-mail, and so on. It can be applied as an evaluation instrument to guide Web designers, marketing professionals, developers and usability professionals to come up with requirements for integrating customers expectations of service quality, value and usability into the design of E-Tailing environments.

58 3.9.2.5 E-S-QUAL E-S-QUAL (Parasuraman A., Zeithaml, Valarie A, Malhotra, Arvind; 2005) is for measuring the service quality delivered by Web sites on which customers shop online. Two stages of empirical data collection revealed that two different scales were necessary for capturing electronic service quality. The basic E-S-QUAL scale developed is a 22-item scale of four dimensions: efficiency, fulfillment, system availability, and privacy. The second scale, E-RecS-QUAL, is salient only to customers who had non-routine encounters with the sites and contains ii items in three dimensions: responsiveness, compensation, and contact. Both scales demonstrate good psychometric properties based on findings from a variety of reliability and validity tests and build on the research conducted on the topic. 3.9.3 Conceptual Framework Based on the narrow down scope of literature review above, the relationship between service quality and customer satisfaction can be shown in figure 3.1. The five Service quality dimensions have been selected from the SERVQUAL. In the SERVQUAL instrument, 50 statements measure the performance across these five dimensions. For each statement, the expectation and the experience of a customer are determined. There is some criticism on the long-term stability of the results of the SERVQUAL scale (Lam and Woo, 1997) and on the general applicability of the five dimensions (Buttle, 1996; Crosby and LeMay, 1998). Although alternative models have been proposed for the measurement of service quality, the SERVQUAL scale has been widely used by academics and practitioners to measure service quality. Therefore, this model has been used as a point of reference in this Thesis.

59 Tangibles Reliability Service quality dimensions (SERVQUAL) Customer Satisfaction in Online Purchasing Responsiveness Assurance Empathy Figure 3.1: Relationship between service quality and customer satisfaction based on SERVQUAL 3.9.4 SERVQUAL Dimensions in Relation to Online Purchasing Tangibles Examples of the tangibles factor are has up-to-date equipment, physical facilities are visually appealing and materials are visually appealing. These aspects might be even more important in e-business as there is no face-to-face contact between the customer and an employee. The visual aspects of the equipment (i.e. the Web site) are the only visual contact between a customer and an organization. Therefore, the need to have well functioning and good-looking Web sites is paramount. There are a great number of customers who abandon their shopping carts on the Internet because they get frustrated with the technology or the design and lay out of the Web site interface (Hager and Elliot, 2001).

60 The visual aspects of Web sites are also judged differently by the people of different age. While young people may be attracted by flashy graphics, sounds and a high-speed interface, older people do not want blinking texts that are hard to read or animations that distract from the use of the Web site (Houtman, 2002). Although a number of Web sites offer users the opportunity to customize the Web site to their needs, this customization process is mostly aimed at the content of the Web site and not at the graphics, animations and sounds. Reliability Some of the aspects in the reliability factor have to do with doing what is promised and doing it at the promised time. Although many organizations seem to think that the major reason why customers shop via the Internet is because of the low prices, this does not always need to be the case. Some organizations found out the hard way that there are also a lot of customers shopping via the Internet because of convenience considerations (Riseley and Schehr, 2000). If customers cannot trust an organization to do what they ask, those customers will be dissatisfied. Price line, for example, ran into big problems by the end of 2000 because of its focus on the lowest prices. People could buy a plane ticket at a very low price, but because of possible inconvenient flying times there was a big risk for customers. This resulted in dissatisfied-customers who were happy to trade off Price lines discounts for the convenience of a competitor (Riseley and Schehr, 2000).

61 Responsiveness One of the aspects in the responsiveness factor is gives prompt service. The amount of time it takes to download a Web page appears to be of great importance to the users of the Internet. Research in 1999 found that fewer than 10 percent of users leave a Web site if page response time is kept below 7 s. However, when it rises above 8 s, 30 percent of users leave. When delays exceed 12 s, a staggering 70 percent of users leave a Web site (Cox and Dale, 2001, 2002). It can be assumed that people expect Web sites to be even quicker than in 1999 because of the technological advances. Thus, it is very important for organizations to have a Web site that is quick, but on the other hand users expect Web sites to be visually appealing. As the number and size of animations, pictures and sounds increase to make a Web page more visually appealing, the time it takes to download that Web page will also increase, which is judged negatively by users. Hence, there is a trade-off between the looks of a Web site and the speed of that site. Organizations will have to try to find the right balance between good looks and speed. The trade-off between looks and speed is complicated by companies demand that their Web sites convey the corporate image (Manning et al., 1998). The design department of a company wants Web pages to be easily recognizable as belonging to that company. In their view, Web pages have to display company and product logos as well as other graphics that underscore the corporate identity. These graphics add to the overall size of Web pages and thereby increase the download time for Internet users. It is questionable whether users are willing to accept slower pages in return for more logos and graphics that do not improve the functionality of the Web site (although they might improve the visual appeal).

62 Assurance One of the aspects in the assurance factor is knowledge to answer questions. Customers expect to find everything they want on a Web site. In a bricks and mortar store, people feel comfortable with a limited inventory. On the Internet, people are not satisfied if they cannot find everything they want. Web shops need to have great depth of inventory and rich and relevant product information (Dayal et al., 2002). Two other aspects in the assurance factor are employees can be trusted and feel safe in your transactions with employees. First, there is the risk for users to share personal information with an organization they do not know. Research on this topic (Statistical Research Inc., 2001) shows that at least 50 percent of users are very concerned about: misuse of credit card information given over the Internet; selling or sharing of personal information by Web site owners; and cookies that track customers Internet activity. Second, the same research shows that two-thirds of active Web users typically abandon a site that requests personal information and one in five has entered false information to gain access to a Web site. Aspects in the assurance factor that could be very important in e-business are (Daughtrey, 2001): Availability of a formal privacy and confidentiality policy on a Web site; secured access to a Web site (that customers are prompted to acknowledge); general reputation of supplier; certifications or guarantees of assurance; and reports of experiences of other customers. The first aspect in this list is also acknowledged by the International Organization for Standardization in Geneva. The Code of Practice for Information Security Management (ISO/IEC 17799:2000) provides a basis for establishing and maintaining the means of handling sensitive data (Daughtrey, 2001). Certifications and guarantees of assurance are also important in e-business. More and more organizations are trying to obtain certification by an objective, consensus-based standard, just as they did earlier with quality management standards (Daughtrey, 2001). These organizations are becoming aware of the advantages of such certification in relation to customers trust in these organizations.

63 Empathy In the dimension of empathy there are several aspects that are usually not found on a Web site. Because of the fact that there is no human interaction, Web sites normally do not offer personal attention. To achieve this, a number of Web sites have a design that can be personalized by the users of these sites, so people can have their own version of the Web site. This kind of Web site design is aimed at giving users the experience of getting personal attention. The idea is that the more a Web site is tailored to a particular customers needs, the more likely that customer will return again and again (The Economist, 2001). The most advanced technologies in this area aim to create a face-to-virtual-face interaction. A friendly looking face of a virtual assistant on your screen is supposed to make customers feel more comfortable. With the use of artificial intelligence, the virtual assistant can suggest products or services that might be of interest to a customer based on previous purchases and on reactions to the questions of the virtual assistant. The latter possibility of asking users of a Web site questions via a virtual assistant will enable companies to tailor their offerings to the wishes of the user to prevent customer dissatisfaction. The only purpose of all these technological gadgets is to add one of the Webs key missing ingredients: warmth (The Economist, 2001).

64 3.10 Project Schedule Project planning is very important to make sure that the research activities of this project are on following the schedule. The Gantt chart in Appendix A shows the work planning for this research. Project plan scheduled all the activities that will be done to conduct the project. The first phase in the work planning includes planning, problem identification, literature review and research methodology which is done during the second semester of session 2007/2008 in Master Project I. Second phase continues after the first phase to develop information to achieve the identified objectives. Master Project II covers empirical data representation, data analysis, conclusion and final report documentation. 3.11 Chapter Summary In this chapter, we had identified the guide lines and procedures that will be applying in this project. Project methodology leads the work throughout the life cycle of a project. This chapter discussed various aspects of the study related to the research methodology including the research approach, research strategy, data collection processes and data analysis techniques. Since the purpose of this research is to understand the most important dimensions of service quality from the Iranian customers perspective, quantitative research is found to be more appropriate for this study. Moreover, a survey method has been done using a questionnaire in order to gain a better understanding of the research area. The questionnaire was developed based on research questions and frame of reference. For the study sample has been selected from the cloob.com members; because this group has more experience of e-commerce and online

65 shopping than the rest of people in Iran. Sample was selected by using judgment because some criteria were followed during the sample selection. For quantitative data analysis, statistical tools of Microsoft excel and SPSS are used for data input and analysis. The statistics results were presented by graphical form with detailed description. Numbers of different steps were taken to ensure the reliability and validity of the study. Project schedule has also been designed using Gantt chart to be a guide in this project in order to ensure the research is done in a systematic and effective manner.

CHAPTER 4 DATA COLLECTION 4.1 Introduction This chapter will present data that has been collected through quantitative survey. At first we give an overview of the website which uploaded the questionnaires that means the sample population and after that the data will be presented according to the research questions and the variables identified in the frame of reference. 4.2 Overview of the Sample Cloob.com is a virtual Iranian society website that people can have their profiles, web logs, list of friends, photo album, clubs, sending & receiving messages, online shopping, sending SMS, online advertising and etc. Cloob.com has 88309 active members, and 20968 more has been invited and there are 6508 clubs in this site (based on August 24, 2005 reports). Its members are all aware of e-commerce, as

67 they could rent a flat or buy a car from this website. Main purpose of this study is to understand the most important dimensions of service quality in online shopping sector from the Iranian perspective. Based on the objectives of the study the sample should be familiar with using Internet and also it should have experience of using online purchasing. Based on the facilities which cloob.com provides its 88309 members; it is obvious that its members are all familiar with using Internet and e-commerce. So, the members of Cloob.com were seemed to be the best sample for this study. 4.3 Quantitative Data Presentation Online survey has been conducted based on the structured questionnaire. The questionnaire has been developed based on the variables that were identified in the frame of reference. The purpose of the questionnaire survey was to develop empirical evidence on the quality factors of Web sites that are important to people who are familiar with the Internet and frequent Internet users. The questionnaire used in the study is comprised of four parts. Part A contains demographic profile of respondents including gender, age group, marital status, education and many more. Part D consists of expectations and perceptions of respondents based on a five-point scale ranging from strongly unsatisfied=1 to strongly satisfied=5 to measure the 50 items of service quality dimensions. The survey comprised the following questions: Personal information (gender, age, education); Respondents use of Internet (equipment, frequency of use); Specific web sites that are visited by respondents (a predefined list of 6 categories of web sites);

68 Aspects of web quality (a predefined list of 50 aspects). The core of the questionnaire consists of the list of aspects of Web quality. For every aspect we ask the respondent to indicate the importance of that aspect and at the same time we ask for their satisfaction with that aspect. The structure of the questions is based on the SERVQUAL scale (Zeithaml et al., 1990). The aspects have been defined according to the categories of the model developed by Cox and Dale (2001, 2002) and are as follows: clarity of purpose; design; communication; reliability; service and frequently asked questions; accessibility and speed; product or service choice; order confirmation; product purchase; user recognition; extra service; and Frequent buyer incentives. For each of these categories a number of aspects have been defined in the questionnaire. The questionnaire has been discussed with experts in the field of e-commerce and a pilot study has been conducted amongst a small number of students. This lead to an improved questionnaire which has been used for the research presented in this work. I divided questionnaire into 4 parts in order to have better results. The first part has 14 questions and was about the respondents personal information. The other

69 three questionnaires were about different aspects of service quality based on SERVQUAL. 4.3.1 Sample and Response Rate All the cloob.com members had access to the questionnaires (approximately 88,000) a link and a brief introduction about the study were provided on their personal page. For the first part of questionnaire; responses were received from 730 persons. After three days the second part was uploaded and 550 responded, then for the third part 207 and the forth part 255 responses were received. The number of responses from online survey was rather low (approximately 0.829 percent of the number of members), however, acceptable for this type of survey. 4.3.2 Descriptive Statistics We were trying to give weight through Iranian Internet users perspective, as was mentioned before our sample expected to be Internet frequent user and familiar with electronic commerce. The demographic statistics are provided within figures 4.1, 4.2, and 4.3 which describe gender, education, and age respectively. Pie chart in figure 4.1 shows that more than half of responders were male. About 730 had replied the questionnaires out of which only 245 were female. Please find table 4.1 in appendix C which provides clear statistics.

70 Gender
Missing, 3, 0% Female, 245, 34% Female Male Missing Male, 482, 66%

Figure 4.1: Pie chart; number of respondents by gender. Bar chart in figure 4.2 illustrates respondents fields of study in seven given categories plus others option. About 56 percent of respondents were engineer that is 408 persons and approximately 28.5 percent of them chose others. Managers were 4.8% of repliers stand in third position and 3.8% were accountants. As it is showed in figure 4.2 the fifth category was medicine (2.6%) next group with 2.3 percent was marketing specialists. The number of persons in the field of Social science was very close to marketing (1.2%). Only 1% was active in law. It is obvious that most of our sample was technical people and very small number of it was specialist in law.

71 Field of Education
Others Management Field of Education Marketing Accounting Law Social Science Medicine Engineering 0 100 200 300 400 500 Frequency

Figure 4.2: Bar chart; number of respondents based on their educations field. The majority of sample was 31 to 35 years old, figure 4.3 shows about 260 persons were more than 35 years old. In spite of Iran being a young country, it is a surprise that a very small numbers of respondents (12 persons) were from the age group of less than 21 years old. Age
Missing >36 31-35 Age 26-30 21-25 <21 0 100 200 Frequency 300 400

Figure 4.3: Bar chart; number of respondents by age.

72 Table 4.1 shows the respondents use of the Internet in terms of the quality of their own equipment. They are absolutely satisfied with their PCs (Personal computers) and also feel fine about printing over the web but dissatisfied with connection speed and downloading from the web. Overall the respondents are rather satisfied with their hardware but it seems they have problem with the Internet Service providers (ISP) and/or telephone lines. Table 4.1: Satisfaction of the respondents with the equipment they use Equipment PC Printing from the Web Connection Speed Downloading from the Web Mean 4.098 3.426 2.920 2.865 Note: On a five point scale from very dissatisfied to very satisfied Table 4.2 has summarized the frequencies of respondents Internet visits. They visit the Internet on an average 15 times per week, and approximately spend an hour per visit. So, it is clear that they are frequent users of Internet. Table 4.2: The use of the web The use of the web Easy to find relevant information Easy to use web page links Easy to find the desired web site Time spent on one site Time on the web per Internet visit Number of Internet visits per week Mean 3.538 3.812 3.632 17.589 min 58.797 min ~ 15 visits Note: If not indicated otherwise, on a five point scale from very difficult to very easy

73 It is interesting to note that the types of Web sites that are used most often by respondents are: search engines and the web sites that are less frequently used are: Secondhand shops (see table 4.3). Table 4.3: Websites ranked by frequency of visits Website Search Engines Music Stores E-shops Book Stores Movie Stores Secondhand Products Mean 3.906 2.527 2.433 2.118 1.972 1.567 Note: On a five point scale from never to once a day or more Table 4.4 shows top five and table 4.5 shows the bottom five of the importance (expectations) and the satisfaction (experiences) related to the service quality factors of the web sites. Service quality factors have been ranked by their importance score. Table 4.4: The top five service quality factors with the highest scores of importance Service Quality Factors Access is fast Information is found with a minimum of clicks 24 x 7 x 365 user accessibility Brand image is important Finding your way on the web site is easy Importance mean 4.294 4.186 4.156 4.105 4.104 Satisfaction mean 3.648 3.651 3.980 3.840 3.635

74 Table 4.5: The bottom five service quality factors with the lowest scores of importance Service Quality Factors A customer platform is provided for exchange of ideas Web sites that focus on brand awareness have a store locator The user is invited into a frequent buyer program Links are provided to pages on related products and services The user can make a purchase without web site registration Importance mean 3.558 3.506 3.482 3.469 3.338 Satisfaction mean 3.817 3.652 3.714 3.648 3.600 Comparing the importance scores in different rows, it is understood that all the service quality factors are important and have very tiny differences with each other which is a proof to their tight solidarity. Respecting Iranian society and technical facilities for Internet users it was expected that top service quality factors based on their importances scores weighted for basic factors such as speed of connection, safekeeping strategies, etc. which are available in table 4.4 and is an absolute proof to our expectation. A complete analysis of these tables could be found in the next chapter.

CHAPTER 5 DATA ANALYSIS AND FINDINGS 5.1 Introduction Collected quantitative data has been presented in the previous chapter. Chapter 5 brings the analyzed data according to the research question which tries to rank the service quality dimensions based on Iranian online shoppers perspective. The ranked service quality factors between Iranian online shoppers (target population) are compared with the American students (a research was done by Iwaarden & Wiele, 2003). Finally, we have the conclusion and a discussion about possible areas that further research could be conducted. 5.2 The Most Important Dimensions of Service Quality Iranian customers were assumed to be in need of basic facilities, infrastructures, of electronic commerce through out the previous chapter. Now let us see what statistics say:

76 In table 5.1 the importance (expectations) and satisfaction (experiences) are summarized based on predefined aspects related to the quality of web sites. The top ten aspects seem to relate the basic infrastructure of e-commerce. Responders believe that the most important aspect of service quality must be fast Access, as they were asked about their PC satisfaction in table 4.2 (Satisfaction mean is: 4.098) they are pretty satisfy with their own systems, the main problem is the telecommunication system in Iran. Broad Band is not available for everybody. Although Iran provides the cheapest Internet service in the world (Based on Payam Radio news on September 1, 2005); but the quality of service (QoS) is poor and not acceptable. The second important factor (Information is found with a minimum of clicks) is again related to the first problem. After having difficulties to access the Internet the user wishes to get the needed information as fast as possible without disturbing irrelevant information. It also refers to the design of the website; customers do not want complicated pages which they should spend lots of time to get simple information. The third factor is 24 x 7 x 365 user accessibility which shows how it is bothering to go on a website to buy a CD and they ask you to come another day because today is weekend and their service is not available now!! It is a must that users have accessibility to the site at any time he or she wishes, 24 hours in any day. The forth factor is Brand image customers want to be sure about what is behind websites. Customers who buy a product on the Internet, would like that the web sites and the organizations behind them to be trustworthy. The next important web quality is design of web sites according to find our way on it which must be easy; the privacy and security policies must be available for users; i.e. customers must be aware of to what extend they have privacy and security. Responders strongly believe that a website also should provide well programmed search options, direct instructions and a standard navigator bar.

77 Table 5.1: The top ten service quality factors with the highest scores of importance Service quality factors Access is fast Information is found with a minimum of clicks 24 x 7 x 365 user accessibility Brand image is important Finding your way on the web site is easy The privacy policy is accessible The security policy is accessible There are well programmed search options Instructions are directly available A standard navigation bar, a home button and back/forward buttons are available on every page Importance mean 4.294 4.186 4.156 4.105 4.104 4.073 4.035 3.979 3.968 3.957 Satisfaction mean 3.648 3.651 3.980 3.840 3.635 3.566 3.392 3.718 3.677 3.902 Delta S-I -0.65 -0.54 -0.18 -0.26 -0.47 -0.51 -0.64 -0.26 -0.29 -0.06 The bottom ten aspects seem to relate to extra services such as A customer platform is provided for exchange of ideas or Web site animations are meaningful and information such as Tax and/or other charges are clearly detailed or An email address for queries and complaints is provided. Apparently respondents do not find these extras very important in their use of the Internet. It seems that Customer Relationship Management; some how, does not play a big role in attracting customers and make them stick to websites by this time. They mostly care about speed of connection and safekeeping and safety of their visits and shopping. The gaps between experiences and expectations (satisfaction minus importance) (see table 5.2) are widest for the aspects that respondents perceive as most important. The aspect with the largest gap is access is fast (satisfaction score 3.648 and importance score 4.294). In the top ten aspects there are no aspects with a positive delta, meaning that for every aspect the experience is less than expected. In

the bottom ten aspects there are seven aspects with a (very small) positive delta: An

78 email address for queries and complaints is provided, Different payment options are stated clearly, The home page features options for new and registered users, A customer platform is provided for exchange of ideas , Web sites that focus on brand awareness have a store locator, The user is invited into a frequent buyer program, Links are provided to pages on related products and services, The user can make a purchase without web site registration. Respondents are quiet satisfied with these features of the web sites. Table 5.2: The bottom ten service quality factors with lowest scores of importance Service quality factors Web site animations are meaningful It is easy to print from the web An email address for queries complaints is provided Different payment options are stated clearly The home pages features options for new and registered users A customer platform is provided for exchange of ideas Web sites that focus on brand awareness have a store locator The user is invited into a frequent buyer program Links are provided to pages on related products and services The user can make a purchase without web site registration Importance mean 3.632 3.606 3.605 3.579 3.559 3.558 3.506 3.482 3.469 3.338 Satisfaction mean 3.513 3.497 3.760 3.704 3.574 3.817 3.652 3.714 3.648 3.600 Delta S-I -0.12 -0.11 0.15 0.13 0.01 0.26 0.15 0.23 0.18 0.26 In conclusion, respondents believe that all the aspects of web quality are important (Importance mean starts from 3.338) but the Access is fast is the most

important factor among the others and they are not satisfied with current connection

79 speed but feel pretty fine with extra services. 5.3 Comparing Web Quality Factors between Iranian and American Customers People in different countries have different cultures, attitudes, believes, etc. These varieties also affect their online purchasing. Here The top ten highest and the ten bottom lowest web quality scores of importance for the American perspective are compared with the Iranian perspective (based on the research on 293 American students that has been done by Iwaarden and Wiele, 2002). Table 5.3 illustrates the top ten highest scores of importance from the eyes of Iranian and American users. It as is showed with grey color only three aspects are common between them (Fast access, Finding your way on the web site is easy and There are well programmed search options). That means both groups strongly expect web sites to provide fast access, easy navigating design and well functioning search options. Although the telecommunication systems in U.S.A are totally different and much advanced than Iranian systems we can see here that access must be fast and people do not want to spend their times for opening pages searching and struggling for what they want.

80 Table 5.3: The top ten with the highest score on importance from Iranian and American perspective No 1 2 Iranian Perspective Access is fast Information is found with a minimum of clicks 24 x 7 x 365 user accessibility American Perspective Finding your way on the web site is easy Access is fast A complete overview of the order 3 is presented before final purchase decision 4 5 6 7 Brand image is important Finding your way on the web site is easy The privacy policy is accessible The security policy is accessible There are well programmed search options Instructions are directly available A standard navigation bar, a home 10 button and back/forward buttons are available on every page Tax and/or other charges are clearly detailed The registration process is simple Access to anticipated delivery times is available at all times All relevant order confirmation details sent by email Order cancellation and returns details are confirmed within three days Order-tracking details are available until delivery There are well programmed search options 33* 37* 40* 23* 20* 38* 19* Rate* 5* 1* 8 9 8* Note: * The factors rate which is given by Iranian online shoppers. Lets see the American perspective factors states in which position of

Iranians list: the two first factors as are shown in table 5.3 are placed in 5th and 1st Persian list respectively. A complete overview of the order is presented before final purchase decision placed in 19th; Tax and/or other charges are clearly detailed is

81 in 40th; The registration process is simple hold the 23rd place; Access to anticipated delivery times is available at all times is in place 20th; All relevant order confirmation details sent by e-mail is in 38th; Order cancellation and returns details are confirmed within three days holds 37th; Order-tracking details are available until delivery is in 33rd; and There are well programmed search options is the 8th factor through Iranians perspective. In overall, only three factors are selected in top ten through both groups and the rest of factors are in 19th to 40th position of Iranians list (the right column of table 5.3 shows the positions of Americans perspective factors). In table 5.4 the bottom ten with lowest scores of importance are provided. As the grey color says there are four common aspects that they both less care about websites: Web site animations are meaningful, A customer platform is provided for exchange of ideas, The user is invited into a frequent buyer program and Links are provided to pages on related products and services. These extra services may have the first attraction but customers give them last priority among the other web quality factors. For instance, many web designers believe that meaningful animations bring spirit to a web site but as we have figured out by statistics customers do not really expect this feature. A frequent buyer program is set up by many managers and they suppose that online buyers are impresses by these services; however, our studies have proved that, compared with after services, customers do not pay much attention to these services.

82 Table 5.4: The bottom ten with the lowest score on importance from Iranian and American perspective No 41 42 43 44 45 46 47 48 49 50 Iranian Perspective Web site animations are meaningful It is easy to print from the web An email address for queries complaints is provided Different payment options are stated clearly The home pages features options for new and registered users exchange of ideas Web sites that focus on brand awareness have a store locator The user is invited into a frequent buyer program Links are provided to pages on related products and services The user can make a purchase without web site registration American Perspective Searches on related sites are provided The privacy policy is accessible The security policy is accessible The web sites contains company details Scrolling through pages and text is kept to a minimum related products and services Web site animations are meaningful A customer platform is provided for exchange of ideas The user is invited into a frequent buyer program Brand image is important Rate* 35* 6* 7* 25* 29* 49* 41* 46* 48* 4* A customer platform is provided for Links are provided to pages on Note: * The factors rate which is given by Iranian online shoppers. What is interesting here is that three aspects which are: The security policy is accessible, The privacy policy is accessible and Brand image is important

available in the top ten column of Iranian perspective and also in bottom ten column of American perspective. It shows Iranian responders need to know more about the security of their visits and shopping. Brand image give buyers a kind of guarantee for what they deal, from this point of view we understand that how much Iranian cares about the safety aspects while American shoppers show very less attention to these policies.

83 In Iran people face many problems when they buy or sell something, one of the reasons is that the policies, instructions and laws are not very clear for both sides. Again in online shopping Iranian afraid of same problem, they seek for guarantees, clear security policies in order to reduce their risks of purchasing. 5.4 The Most Important Factors of SERVQUAL Jos Van Iwaardenm and Ton Van der Wiele, 2003 clustered the aspects of service quality and showed how they compatible with five factors of the SERVQUAL. The importance mean was brought in order to find each SERVQUAL dimension an importance mean and in table 5.5 illustrates the ranked SERVQUAL factors based on their importance scores. Tangible is recognized as the most important factor; therefore, a well functioning and good-looking web site is paramount. Assurance is the second one. Responders want a website to have a formal privacy, confidentiality policy, secure access and certifications or guarantees of assurance. Looking at tables 5.3 and 5.4 we come to this conclusion that Iranians are more concerned about security than the Americans. Also Iranian online shoppers ask organizations to honor their promises such as on time delivery and after sale services. In other words they ask for reliability of the company. Responsiveness is the next thing they do care about; how websites give prompt services. Online shoppers expect good responses when they contact web sites through e-mail or phone call. And after all of the other web quality factors they want is personal attention which Empathy refers to. Customization has the last priority among the other aspects

84 through Iranian online shoppers. Table 5.5: Ranked SERVQUAL factors according to their importance mean Ranking 1st 2nd 3rd 4th 5th SERVQUAL factors Tangibles Assurance Reliability Responsiveness Empathy Importance mean 4.00617 3.81200 3.76427 3.75300 3.67750 What should be noticed here is the very little difference between importance scores of SERVQUAL factors. Respondents expect a web site to provide all of the web quality factors (the last factor has 3.67750 score) but above all a web site should function properly.

85 5.5 Implications for Practitioners Customers have access to almost unlimited information about what they want to buy with variety of products available for them by the emergence of Internet and Web technology. Hence, it is not easy for break-and-mortar or online retailers to gain and sustain competitive advantages based only on a cost strategy in retailing market. Rather, defining customers needs and preferences, and their related quality dimensions have increasingly become a key driving force in enhancing customers satisfaction and attract more customers. Identification and ranking of customers expectations of the online retailer services provide a frame of reference for ranking customers preferences of service quality. This study ranked fifty factors of service quality based on Iranians perspective. Obviously, in order to maintain a high level of overall service quality, online retailers should pay attention to all these dimensions brought in this study. A proof for this claim is the importance scores mean that starts with 3.338, given by responders, that is even the last factor is seen important. However, to strengthen competitiveness in the extremely competitive market, given limited organizational resources, it is recommended that online retailers should focus on the main five key dimensions, reliability; tangibles; empathy; assurance; and responsiveness, in order to achieve high level of service quality and customer satisfaction simultaneously. More specifically, the following implications are recommended to online retailers: First and foremost, speed of access to the web site may be the critical determinant of the success of the online retailers. Since the access to the Internet is not so fast in Iran, online visitors prefer to connect to those websites which could be opened easier and faster. Therefore, to satisfy the customers, online retailers should build websites without huge flashes, graphics, and images which may increase the size of page and take more seconds to appear. Besides, the structure of the website plays a big role here, as the number of clicks for achieving the desired information depends on the design of the website. Hence, it is important for managers to consider

86 the different ways of reaching specific information on the website. Second, 24 hours user accessibility factor indicate that websites are expected to be available all the time and all the days of the week. Managers should insist on reputation of website and try to avoid the non responding situations. If anything happened that made the website down for a while; relevant information about the problem and the time it would be backed should be provided. Third, assurance dimension implies that customers should be aware of privacy limits and security policies. Managers should allocate specific space for introducing protection and privacy policies that are accessible for customers and give a thorough understanding about the way website is kept secure. 5.6 Implications for Theory The main purpose of the study is to rank the online service quality dimensions through Iranian customers perspective in online retailing sector and aim to describe how different environments could affect preferences of service quality factors. Theoretically this study extends the knowledge body of service quality and customer satisfaction by enriching the Iranians preferences in online retailing sector, and based on existing theories, this study tested five key service quality dimensions in online retailing context. More specifically, concerning research question one the majority of the findings for this study supported the existing literature. The new findings were discovered from quantitative empirical data. Online service quality dimensions ranked through Iranians perspective and compared with Americans. It also increased and enhanced understanding about relative importance service quality dimensions.

87 5.7 Implications for Future Research With the development of e-commerce and web technology, some areas which are not covered in this study are interesting and need to be explored. In addition, the limitation and shortcoming of this study also provide implications for future research. Future research could add extensions to this study. This research needs further analysis. While this research yields a number of very interesting results, we believe that there are a number of things that should be done to confirm our results as well as to expand our hypotheses. Firstly, with the number of Internet users now over one billion, a small group of online users in Tehran is not enough. Hence, research with larger samples that pose the same or similar questions would be appropriate. Secondly, various languages, religions, cultures and a host of other factors may be important to user's impression of the quality of a web site. At the end, in this competitive market, service quality is one of the key elements which bring value added for companies. Online retailers are focusing on making their websites more appealing in order to increase their stickiness. Practitioners need to understand the factors that make people to visit a website; spend some time and make them purchase online. Researchers all around the world are talking about "loyal customers": they spread the good word-of-mouth, not to shift to competitor easily, spend more money and are cheaper to attract. Practitioners should be aware of all factors which are affecting the behavior of their customers. Respecting this critical issue for e-business, we believe more studies are needed to fulfill our e-world with superior facilities and make life easier and better.

CHAPTER 6 DISCUSSION AND CONCLUSION 6.1 Introduction Discussion and Conclusion is the last chapter in this Master Project report. Literature review, research methodology, data collection and data analysis have been presented in the previous chapters. The main focus of this project is to understand the most important dimensions of service quality that affect customer satisfaction in online purchasing in Iran. Achievement of project 1 and 2 will also be discussed in this chapter. The problem and constraint that are faced during the progress of the project will also be discussed and concluded in this chapter.

89 6.2 Achievement This study ranked the five service quality dimensions from the Iranian customers perspective in online retailing sector. Customers perceptions are very important especially in the service sector such as the online purchasing and ecommerce since there is high customer involvement in the delivery of the service itself. Theoretically this study extends the knowledge body of service quality and customer satisfaction by enriching the Iranians preferences in online retailing sector and based on existing theories. We ranked fifty factors of service quality based on Iranians perspectives. Obviously, in order to maintain a high level of overall service quality, online retailers should pay attention to all these dimensions brought in this study. A proof for this claim is the importance scores mean that starts with 3.338, given by respondents, that is even the last factor is just as important. However, to strengthen competitiveness in the extremely competitive market, given limited organizational resources, it is recommended that online retailers should focus on the main five key dimensions, reliability, tangibles, empathy, assurance, and responsiveness in order to achieve high level of service quality and customer satisfaction simultaneously.

90 6.3 Constraints and Challenges There were some constrains and challenges that had been faced during the early phase of this research project especially when conducting the research process and literature review. Service quality is a concept that has aroused considerable interest and debate in the research literature because of the difficulties in both defining it and measuring it with no overall consensus emerging on either. In this research study the limited time to do more in depth research and study is another challenge to gather the complete information and understanding for this study area. Better result will be achieved if the project period is lengthened. With the development of e-commerce and web technology, some areas which are not covered in this study are interesting and need to be explored. In addition, the limitation and shortcoming of this study also provide implications for future research. Future research could add extensions to this study. This research needs further analysis. While this research yields a number of very interesting results, we believe that there are a number of things that should be done to confirm our results as well as to expand our hypotheses. Firstly, with the number of Internet users now over one billion, a small group of online users in Tehran is not enough. Hence, research with larger samples that pose the same or similar questions would be appropriate. Secondly, various languages, religions, cultures and a host of other factors may be important to user's impression of the quality of a web site. At the end, in this competitive market, service quality is one of the key elements which bring value added for companies. Online retailers are focusing on making their websites more appealing in order to increase their stickiness. Practitioners need to understand the factors that make people to visit a website; spend some time and make them purchase online. Researchers all around the world are talking about "loyal customers": they spread the good word-of-mouth, not to shift to

91 competitor easily, spend more money and are cheaper to attract. Practitioners should be aware of all factors which are affecting the behavior of their customers. Respecting this critical issue for e-business, we believe more studies are needed to fulfill our e-world with superior facilities and make life easier and better. 6.4 Recommendations Although there are challenges and constraints being faced during early phase of this research project, the literature review about the project and initial finding to develop the project has been done successfully. More specifically, the following implications are recommended to online retailers. First and foremost, speed of access of the web site may be the critical determinant of the success of the online retailers. Since the access to the Internet is not so fast in Iran, online visitors prefer to connect to those websites which could be loaded easier and faster. Therefore, to satisfy the customers, online retailers should build websites without huge files of graphics, and images which may increase the size of the loading page and take more time to be fully loaded. Besides, the structure of the website plays a big role as the number of clicks in achieving the desired information depends on the design of the website. Hence, it is important for web designer and developers to consider many different ways of providing information on the website. Secondly, 24 hours user accessibility factor indicates that websites are expected to be available all the time and all the days of the week. Business owners must ensure that the system is up all the time and keep the downtime as the minimum as possible. Should there be any downtime occur, customers are expected to be informed and updated with regards to the problem and the estimation of time when the system will be back to normal.

92 Last but not least, assurance dimension implies that customers should be aware of the privacy limits and security policies. Online Retailers should make their policies known and clearly understood by customers besides giving assurance that customers information are fully secured. 6.5 Chapter Summary In conclusion, all intended tasks in Project 1 & 2 has been completed successfully. In Project II, we did the data collection and data analysis. All the constraints and challenges that are faced during project 1 hopefully resolved. The purpose of the research is to rank the service quality factors and to find the most important service quality dimensions that affect customer satisfaction in online purchasing in Iran. The findings of this research are mostly useful to those (managers, web designers, etc.) who intend to penetrate the Iranian market with least cost, time and energy. The results indicate the most important web quality factors through Iranian online shoppers perspective.

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98 APPENDIX A GANTT CHART PROJECT 1, 2

99 GANTT CHART PROJECT 1

100 GANTT CHART PROJECT 2

101 APPENDIX B QUESTIONNAIRE FOR REPONDENTS This survey is design to measure service quality in online shopping in Iran. Please take a few minutes to give your most thoughtful answers. Your participation is greatly appreciated and all responses will be kept confidential. There are no right and wrong answers. All we are interested in is your opinion on quality of services in online purchasing in Iran.

102 Part A: Personal Information 1. Please indicate your field of study [tick four boxes maximum]? Engineering Marketing Social Science Low 2. Please indicate your age?
< 21 21-25 26-30

Medical Management Accounting Other

31-35 > 35

3. Please indicate your gender? Male Female 4. Please indicate the extent to which you visit the following web sites? Never day Book stores Music stores Movies stores Secondhand Products Search engines E-shops Once a year Once a month Once a week Once a or more

103

very dissatisfied neutral very satisfies

5. How satisfied are you with the pc you use? 6. How satisfied are you with the connection speed? 7. How satisfied are you with the ability of your printer to print directly from the web? 8. How satisfied are you with the ability to download from the web to your own pc or discs? 9. How easy is it to find the desired web site? 10. How easy is it to use web page links? 11. How easy is it to find relevant information? 12. On average per internet visit what time do you spend on a specific web site? [Minutes] <1 1-5 26-15 16-30 >30 13. On average per internet visit what time do you stay on the web? [Minutes] <15 15-30 31-60 61-120 >120 14. On average per week what is the number of internet visits? <2 2-5 6-10 11-20 >20

104 Part B: Please indicate on a five point scale the extent to which you find the following statements important by circling a number in the first column and also indicate on a five point scale the extent to which you satisfied or dissatisfied with the following statements. Expectations: 1 = Not important Perceptions: 1 = Very dissatisfied 3 = Neutral 5 = Very satisfied 3 = Neutral 5 = Very important Expectations How important is this item to you 1 Clarity of purpose 1. The purpose is clear 2. Finding your way on the web site is easy. 3. Instructions are directly available Design 4. The number and type of links are meaningful 5. Navigation is consistent and standardized 2 3 4 5 1 Perceptions Level of satisfaction with this item 2 3 4 5

105 6. A standard navigation bar, a home button and back/forward button are available on every page 7. Opening of new screen is kept to a minimum 8. It is easy to print from the web 9. Information is found with a minimum of click 10. There are well programmed search option 11. Forms to enter personal details are self explanatory Communication 12. Scrolling through pages and text is kept to a minimum 13. Colors, pictures and images are consistent, relevant and clear 14. Web sites animations are meaningful Assurance 15. The security policy is accessible 16. The privacy policy is accessible 17. The web sites contains company details 18. External validation of trustworthiness is important 19. Brand images is important Service and Frequently Asked Questions 20. An email address for queries and complaints is provided 21. Queries or complaints are resolved within 24 hours

106 22. User feedback is sought to measure customer satisfaction 23. Information is provided to Frequently Asked Questions and answers 24. The Frequently Asked Questions and answers contain links that take the user to the relevant page Accessibility and speed 25. 24*7*365 user accessibility 26. Page availability information is given on entry 27. Access is fast 28. Graphics and animations do not detract from use Product or service choice 29. Full product or service characteristics are available 30. Full detail of product or service pricing are available 31. Required stock information is available throughout the buying process Order confirmation 32. Tax and/or other charges are clearly detailed 33. Terms and conditions of sales are accessible 34. Access to anticipated delivery times is available at all times Product purchase 35. The user can make a purchase without web site registration

107 36. Different payment options are stated clearly 37. A complete overview of the order is presented before final purchase decision 38. All relevant order confirmation details are sent by email within 24 hours 39. Order tracking details are available until delivery 40. Order cancellation and return details are confirm within three days User recognition 41. The registration process is simple 42. Registration process details are retained 43. The home page features options for new and registered users Extra service 44. A customer platform is provided for exchange of ideas 45. Links are provided to pages on related products and services 46. Search on related sites are provided (e.g. a hotel/flight search on travel sites) 47. The user can customized the web sites and the information is retained (e.g. seat and meal preferences on travel sites) 48. Web sites that focus on brand awareness have a store locator

108 Frequent buyer incentives 49. The user is invited into a frequent buyer program 50. The web site offers free shipping and handling within a set of rules

109 APPENDIX C TABLES Table1: Number of respondents by gender Frequency Male Female Missing Total 245 482 3 730 Percentage 33.6 66.0 0.4 100 Table2: Number of respondents by field of education Frequency Engineering Medicine Social Science Law Accounting Marketing Management Others Total 408 19 9 7 28 17 35 207 730 Percentage 55.9 2.6 1.2 1.0 3.8 2.3 4.8 28.4 100

110 Table3: Number of respondents by age Frequency <21 21-25 26-30 31-35 >36 Missing Total 12 30 92 334 260 2 730 Percentage 1.6 4.1 12.6 45.8 35.6 99.7 100.0 Table4: Service quality factors with the scores of importance and satisfaction mean Service quality factors 1. Access is fast 2. Information is found with a minimum of clicks 3. 24 x 7 x 365 user accessibility 4. Brand image is important 5. Finding your way on the web site is easy 6. The privacy policy is accessible 7. The security policy is accessible 8. There are well programmed search options 9. Instructions are directly available 10. A standard navigation bar, a home button and back/forward buttons are available on every page 11. The user can customize the web site and the information is retained (e.g. seat and meat preferences) 12. Colors, pictures and images are consistent, relevant and clear 13. Navigation is consistent and standardized 3.950 3.919 3.812 3.616 -0.14 -0.30 3.956 3.858 -0.10 Importance mean 4.294 4.186 4.156 4.105 4.104 4.073 4.035 3.979

3.968 3.957 Satisfaction mean 3.648 3.651 3.980 3.840 3.635 3.566 3.392 3.718 3.677 3.902 Delta S-I -0.65 -0.54 -0.18 -0.26 -0.47 -0.51 -0.64 -0.26 -0.29 -0.06

111 14. Graphics and animations do not detract from use 15. Full details of product or service pricing are available 16. Opening of new screens is kept to a minimum 17. The web site offers free shipping and handling within a set of rules 18. Terms and conditions of sales are accessible 19. A complete overview of the order is presented before final purchase decision 20. Access to anticipated delivery times is available at all times 21. Queries or complaints are resolved within 24 hours 22. User feedback is sought to measure customer satisfaction 23. The registration process is simple 24. Page availability information is given on entry 25. The web sites contain company details 26. Information is provided to Frequently Asked Questions and answers 27. The Frequently Asked Questions and answers contain links that take the user to the relevant page(s) 28. The number and type of links are meaningful 29. Scrolling through pages and text is kept to a minimum 30. The purpose is clear 31. Full product or service characteristics are available 32. Registration process details are retained 3.756 3.733 3.728 3.723 3.721 3.541 3.633 3.937 3.689 3.888 -0.21 -0.10 0.21 -0.03 0.17 3.758 3.773 0.02 3.913 3.890 3.881 3.875 3.865 3.853 3.831 3.824 3.813 3.811 3.789 3.778

3.765 3.807 3.767 3.689 3.841 3.591 3.822 3.75 3.682 3.550 3.827 3.784 3.594 3.660 -0.11 -0.12 -0.19 -0.03 -0.27 -0.03 -0.08 -0.14 -0.26 0.02 -0.01 -0.18 -0.10

112 33. Order tracking details are available until delivery 34. Required stock information is available throughout the buying process 35. Searches on related sites are provided (e.g. a flight/hotel search on travel sites) 36. External validation of trustworthiness is important 37. Order cancellation and return details are confirmed within three days 38. All relevant order confirmation details are sent by e-mail within 24 hours 39. Forms to enter personal details are self explanatory 40. Tax and/or other charges are clearly detailed 41.Web site animations are meaningful 42. It is easy to print from the web 43. An email address for queries complaints is provided 44. Different payment options are stated clearly 45. The home pages features options for new and registered users 46. A customer platform is provided for exchange of ideas 47. Web sites that focus on brand awareness have a store locator 48. The user is invited into a frequent buyer program 49. Links are provided to pages on related products and services 50. The user can make a purchase without web site registration 3.691 3.688 3.678 3.676 3.674 3.673 3.667 3.646 3.632 3.606 3.605 3.579 3.559 3.558 3.506 3.482 3.469 3.338 3.9 3.619 3.780 3.571 3.727 3.851 3.658 3.541 3.513 3.497 3.760 3.704 3.574

3.817 3.652 3.714 3.648 3.600 0.21 -0.07 0.10 -0.10 0.05 0.18 -0.01 -0.10 -0.12 -0.11 0.15 0.13 0.01 0.26 0.15 0.23 0.18 0.26

113 Table5: Importance of SERVQUAL Dimensions SERVQUAL Dimensions Reliability A complete overview of the order is presented before final purchase decision Tax and/or other charges are clearly detailed Different payment options are stated clearly All relevant order confirmation details are sent by e-mail within 24 hours Access to anticipated delivery times is available at all times Terms and conditions of sales are accessible Order tracking details are available until delivery Order cancellation and return details are confirmed within three days Full details of product or service pricing are available The registration process is simple Full product or service characteristics are available Registration process details are retained The web site offers free shipping and handling within a set of rules Access is fast The user can make a purchase without web site registration Tangibles Finding your way on the web site is easy Information is found with a minimum of clicks Navigation is consistent and standardized There are well programmed search options Instructions are directly available Opening of new screens is kept to a minimum Empathy Links are provided to pages on related products and services Searches on related sites are provided (e.g. a flight/hotel search on travel sites) A standard navigation bar, a home button and back/forward buttons are available on every page Importance Mean 3.76427 3.853 3.646 3.579 3.673 3.831 3.865 3.691 3.674 3.890 3.811 3.723 3.721 3.875 4.294 3.338 4.00617 4.104 4.186 3.919 3.979 3.968 3.881 3.67750 3.469 3.678 3.957

114 It is easy to print from the web Assurance The security policy is accessible The privacy policy is accessible External validation of trustworthiness is important The web sites contain company details Brand image is important Page availability information is given on entry The user is invited into a frequent buyer program A customer platform is provided for exchange of ideas Responsiveness The Frequently Asked Questions and answers contain links that take the user to the relevant page(s) Information is provided to Frequently Asked Questions and answers Queries or complaints are resolved within 24 hours User feedback is sought to measure customer satisfaction An email address for queries complaints is provided 3.606 3.81200 4.035 4.073 3.676 3.778 4.105 3.789 3.482 3.558 3.75300 3.758 3.765 3.824 3.813 3.605