2007:047
M A S T E R ' S T H E S I S
Factors Affecting on Iranian Customers´
Acceptance Towards E-Ticketing Provided by Airlines
Shima Dehbashi
Luleå University of Technology Master Thesis, Continuation Courses
Marketing and e-commerce
Department of Business Administration and Social Sciences Division of Industrial marketing and e-commerce
Factors affecting on Iranian customers' acceptance towards E-Ticketing provided
by airlines
Supervisors:
Dr.Nahavandi Dr.Khalifa
Referee:
Prepared by:
Shima Dehbashi
Tarbiat Modares University Faculty of Engineering
Department Industrial Engineering Luleå University of Technology
Department of Business Administration and Social Sciences Division of Industrial Marketing and E-Commerce
Joint MSc PROGRAM IN MARKETING AND ELECTRONIC COMMERCE
2006
Abstract
Using internet as a new channel for providing different services is growing rapidly, but it’s clear that focusing only on technology can’t lead the business to be successful. The key point of success business is still focusing on the customers and using new opportunities of rapid technological changes. Since the anxiety of customers' adoption / rejection of offering old services based on new technology is considerable, understanding what factors are important for customers to adopt these new services is the challenge for researchers and service providers. The objective of this research is to gain better understanding of the factors affecting on e-ticketing adoption of Iranian customers. Since the adoption of e-ticketing can be explained with an intention based model, we developed the model based on Theory of Planned Behavior to explain the effect of different factors on e-ticketing intention. Then the model tested with two surveys. Data collected from 132 passengers indicates that Attitude, Subjective norms and perceived usefulness significantly affect on Iranian customers’ intention to purchase e-ticket and Perceived risk has negative significant effect on intention to use e-ticketing. Also the result provides support for the effect of Trust, Perceived risk and perceived usefulness on attitude toward using e-ticketing.
Data collected from 120 IT professionals show that attitude and perceived usefulness has significantly effect on intention to use e-ticketing and perceived usefulness has effect on IT professionals’ attitude to use e-ticket. The implications are noteworthy for both researchers and practitioners.
Acknowledgement
This master thesis has been written in marketing and electronic commerce program at the Department of Industrial Engineering, Tarbiat Modares University and division of Industrial Marketing and e-commerce, Luleå University of Technology.
First of all I would like to thank my supervisor Dr.Nahavandi of Tarbiat modares university, for her unfailing support , in whole process of writing thesis. Her support encouraged me to find new ways for challenging with problems.
I also would like to thank Dr.Khalifa my supervisor of Luleå University of Technology, who without his guidelines and comments, passing this way could be more difficult.
I would like to express my gratitude to Professor Wynne Chin for providing valuable references for PLS. Appreciations is also due to my MSc colleagues, specially, Firouze Afrouz for discussions and comments and Bahador Jamshidi for helping me in data gathering. And many thanks to my colleagues in Radcom Ltd. for their supports and patience and kind help.
And finally, I would like to thank deeply my dear parents and sister who understood and supported me in the most difficult moments.
--Shima Dehbashi February 2007
Table of Content
Abstract... 2
Acknowledgement ... 3
Table of Content... 4
List of Tables ... 7
List of Figures... 9
Chapter one ... 10
1 Introduction and research problem ... 10
1.1 Introduction... 10
1.2 Background... 12
1.2.1 e-Service ...12
1.2.2 E-ticketing...15
1.3 E-ticket in Iran ... 16
1.4 Factors affecting on airlines’ customers adoption ... 18
1.4.1 Common factors affecting on internet adoption ...18
1.5 Problem discussion ... 21
1.6 Purpose of research ... 22
1.7 Research outline... 22
Chapter Two... 24
2 Literature review ... 24
2.1 E-services and Service ... 25
2.1.1 Service...25
2.1.2 e-Service and business environment...26
2.1.3 Customers and e-Service...31
2.1.4 E-service Orientation ...33
2.1.5 Challenges for e-Service ...34
2.2 Adoption ... 36
2.2.1 Definition ...36
2.2.2 Stages of adoption process...36
2.2.3 Adoption categories ...37
2.2.4 Models...39
2.2.4.1 TRA...40
2.2.4.2 TPB (Theory of planned behavior) ...41
2.2.4.3 TAM (Technology Acceptance Model)...44
2.2.4.4 Triandis Model...45
2.2.5 Comparison of the theories ...46
2.3 E-Services and adoption ... 47
2.3.1 Common factors...47
2.3.2 E-service adoption ...49
2.3.2.1 Risk- related factors ...49
2.3.3 Trust Related Factors ...52
2.4 Airline Industry and using Internet... 53
2.4.1 Effect of Internet on airlines ...54
2.5 Expected Contribution ... 57
2.6 Methodology... 57
2.7 Conclusion ... 58
Chapter three ... 59
3 Research Methodology ... 59
3.1 Research question ... 60
3.2 Research Model ... 60
3.2.1 Conceptual model and hypotheses...60
3.2.2 Description of Hypotheses...60
3.2.2.1 Attitude ...60
3.2.2.2 Subjective norm ...62
3.2.2.3 Perceived Behavioral Control ...62
3.2.2.4 Trust ...63
3.2.2.5 Perceived Risk ...65
3.2.2.6 Perceived Usefulness ...66
3.2.2.7 E-ticketing adoption intention...67
3.3 Research purpose ... 69
3.4 Research approach ... 70
3.5 Research strategy ... 71
3.6 Sample selection: research object ... 72
3.6.1 Presentation of chosen research object ...72
3.6.2 Sample selection ...73
3.6.2.1 Sample size ...73
3.6.2.2 Criteria in Customer selection ...74
3.7 Data collection methods... 74
3.7.1 General concepts of data collection methods...74
3.7.2 Questionnaire Design...77
3.8 Data collection issues in pilot study ... 80
3.8.1 Survey Data Collection Procedure...80
3.8.1.1 Web Survey...81
3.8.1.2 Survey #1 ...81
3.8.1.3 Survey #2 ...82
3.8.2 Data presentation and analyzing ...82
3.9 Chapter summary ... 83
Chapter Four... 85
4 Data Analysis... 85
4.1 Survey #1 (Inexperienced Passengers) ... 86
4.1.1 Survey Response...86
4.1.1.1 Survey response rate and missing value ...86
4.1.2 Descriptive Analysis ...87
4.1.3 Model evaluation ...88
4.1.3.1 Measurement (Outer) Model...89
4.1.3.2 Structural (inner) Model ...94
4.1.4 Summary of survey #1 ...102
4.2 Survey #2 ... 105
4.2.1 Survey Response...105
4.2.1.1 Survey response rate and missing value ...105
4.2.2 Descriptive Analysis ...106
4.2.3 Model evaluation ...107
4.2.3.1 Measurement (Outer) Model...107
4.2.3.2 Structural (inner) Model ...111
4.2.4 Summary of survey #2 ...118
Chapter 5 ... 121
5 Discussion and Conclusions ... 121
5.1 Findings ... 121
5.2 Managerial implications ... 124
5.3 Implication for future research ... 126
Reference ... 128
6 Appendix... 134
6.1 Questionnaire ... 134
6.1.1 Persian version ...134
6.1.2 English Version...136
List of Tables
Table 2-1 - Some important word in TRA and TPB (Jillian J Francis, Martin P Eccles
et al. 2004) ...40
Table 2-2 - Perceived risk ...52
Table 2-3 - Impact of Internet technologies on the value of the air transport offering...56
Table 3-1-Attitude indicators...61
Table 3-2-Subjective Norm indicators...62
Table 3-3-Indicators of Perceived Behavioral Control...63
Table 3-4 - Indicators of Trust on brand...64
Table 3-5 - Indicators of Trust on website...65
Table 3-6- Perceived risk indicators ...66
Table 3-7-Perceived consequences indicators ...67
Table 3-8 -overall intention indicators...67
Table 3-9 - constructs' definitions...68
Table 3-10- Research Hypotheses ...69
Table 3-11 -Relevant Situations for different Research strategies (Yin 1994)...71
Table 3-12-Criteria of customer selection ...74
Table 3-13-Advantages of different data collection methods of survey...76
Table 3-14 - Disadvantages of different data collection methods of survey ...77
Table 3-15 - Questionnaire Items ...79
Table 4-1 - sample #1 overview...86
Table 4-2 -Responders’ Demographic results for survey #1 ...88
Table 4-3- Loading, weight for Survey #1...90
Table 4-4-Composite Reliability, AVE and Cronbach Alpha ...91
Table 4-5-Factor Structure Matrix of Loadings and Cross-Loadings...92
Table 4-6-Correlations between latent constructs and square root of AVE ...93
Table 4-7-Measure model for result for fotmatives...94
Table 4-8- (R²) for each endogenous construct...95
Table 4-9-Structural model results...96
Table 4-10 - Summary ...103
Table 4-11 - sample #2 overview...105
Table 4-12 -Responders’ Demographic results for survey #2 ...107
Table 4-13- Loadings and weights for Survey #2...108
Table 4-14-Composite Reliability, AVE and Cronbach Alpha ...109
Table 4-15-Factor Structure Matrix of Loadings and Cross-Loadings...109
Table 4-16-Correlations between latent constructs and square root of AVE ...110
Table 4-17-Measure model for result for fotmatives...111
Table 4-18- (R²) for each endogenous construct ...112
Table 4-19- Proposed hypothesis...113
Table 4-20 – Summary of the result of second survey ...119
List of Figures
Figure 1-1- The Scope of e-Service(Roland T Rust and Kannan 2002)...14
Figure 1-2-e-Readiness (eiu.com)...17
Figure 1-3-Middle east internet usage ...18
Figure 1-4- Research Structure ...23
Figure 2-1 - A paradigm shift from traditional e-commerce to e-service (Rust and Kannan june 2003)...26
Figure 2-2 Transformation to e-Service(Roland T Rust and Kannan 2002) ...28
Figure 2-3 - E-commerce paths to profitability (Rust and Kannan june 2003) ...30
Figure 2-4 - e-Service Orientation(Rust and Kannan june 2003) ...33
Figure 2-5 -Stages of Adoption process(M.Rogers 1995) ...37
Figure 2-6 -Time of Adoption of innovation (Rogers 1983) ...37
Figure 2-7 - Theory of reasoned action(Fishbein and Ajzen 1975)...41
Figure 2-8-Theory of planned behavior and reasoned action(Ajzen and Fishbein) ...43
Figure 2-9 -TAM (Davis 1989)...44
Figure 2-10 - Triandis Model...46
Figure 2-11 - Influencing factors of consumer information search and buying behavior through the internet (Moon 2004)...48
Figure 2-12-e-Ticket penetration in the world (IATA 2006)...54
Figure 3-1 – Research Model...62
Figure 3-2-Research Design ...84
Figure 4-1-Estimated result for proposed model - Survey #1...94
Figure 4-2- The result for proposed model - Survey #1 ...104
Figure 4-3-Estimated result for proposed model - Survey #2...94
Figure 4-4- The result for proposed model - Survey #2 ...104
Chapter one
1 Introduction and research problem
In this chapter, an introduction a background of this research will be presented.
Subsequently research problem and disposition of the research structure are reported.
1.1 Introduction
A recent reports show in 20th century, the basis of economic successfulness is introduction of self service which affected all area of our lives. (Butler Group
www.iwks.com) Technology-based-self-service as a part of e-service now play important role in changing the way that firms, manufacturers and customers interact.
In fact Traditional e-commerce is giving way to a new paradigm known as “e- service.” This emerging paradigm represents a coherent point of view that challenges many of the traditional assumptions about how to use the online environment to raise profits(Rust and Lemon Spring 2001). This idea is mainly based on expanding revenues through increasing the value of service and building profitable customer relationships and don’t focus totally on reducing costs through automation and increased efficiency. This suggests an outward-looking view of e-commerce (focusing on understanding the customer) to complement the inward-looking view (focusing on technology and systems)(Rust and Kannan june 2003).
One of the most rapidly growth services which has been provided in internet is what we call it travel related services (Such as online ticketing or e-ticket). Online airline ticket sales reached approximately $14.2 billion in 2002 (Foss, 2003). Travel business on the internet accounts for about 15 percent of overall travel sales; about one half of that is spent on airline ticket sales. Compared to e-retail sales, which accounts for only 1.5 percent of all retail sales (US Census Bureau, 2003), the growth of internet airline services has proved astounding. A survey of 1,501 people from March 2000 to 2001 (Pew 2002) shows that the share of internet users who had purchased travel services had grown from 34 to 42 percent. The researches for other countries such as Canada shows that Canadian Internet users are using the Internet to research travel, but they are not so quick to make online travel purchases, according to a survey of Canadian Internet users who had traveled in 2004 or were planning to travel in 2005 by TNS. Findings suggest that online Canadians are more likely to use the Internet in their planning and more likely to find this stage important. Six in ten online Canadians (59%) say the Internet is very or extremely important for making travel plans, which is up from only one in three (34%) in 2002 (TNS 2006). Travel market report for Korea shows that travel and other reservation services marked the largest growth with 43.3% to record 751 billion won in 2004 . (EyeForTravel, April 2005). Since 2000 Internet travel bookings have increased 300% according to the Bundesverband Informationswirtschaft, Telekommunikation und neue Medien (BITKOM) as well as the Verband Internet Reisevertrieb (VIR). 17% of all Germans have used the Internet to book their hotels, flights and theatre tickets. They further
predict that in the year 2015 50% of all Germans will book online. 38% go online to research information. (de.internet.com, July 2006) Although the growth of internet based airline reservation services has been rapid, internet sales have generally experienced slow growth because of barriers related to the customers’ adoption of these online services.
On the other hand, airline industry is facing with the IATA (international air transportation association) deadline about 100% e-ticket at the end of 2007. It means that not only airlines must be ready for this new concept but also customers have to accept this new technology with all its advantage and disadvantages. When airlines shift from paper-based ticket to e-ticket, customers’ acceptance will become important for both sides. Airlines try to offer services through electronic infrastructures, especially through the web, to decrease their costs, expand revenue, creating reliable database of customers for future customer relationship management plans. The expectable result is that all customers will accept new service and will use because of advantages for both sides, what won’t occur for all cases.
Finding the factors affecting on customers’ adoption is possible and will be beneficial for airlines to work on customers priorities to increasing e-services’
adoption and for customers to be more satisfy about using new e-service.
1.2 Background
In this section e-service, e-ticketing and e-ticketing in Iran, and e-ticketing adoption will be reviewed.
1.2.1 e-Service
Era of e-service can be defined by ending of traditional e-commerce which was based on e-tailing and e-retailing and many successful e-tailers such as Amazon.com has been highest-profit pioneer of web-space. These businesses, as goods marketers, don’t take advantage of true strengths and breakthrough innovation of the Internet. Such businesses are nothing more than catalog sellers in electronic clothing. Unfortunately , because good sellers dominate the web , people (wrongly) think of e-service as no more than access to goods and order fulfillment (Rust and Lemon Spring 2001). Although these elements are important for e-tailers, they do not
represent the true nature of e-service, but the current state of e-distribution.(Alsop 1998; Rust and Lemon Spring 2001)
Much of what has been written to date about e-service focuses on traditional customer service-call center response, weekly e-mail discount reminders, speed of response, order-status updates, site effectiveness. And because of the nature of e- service which is new concept there is no agreement about its definition. (Rust and Kannan 2002) defined e-Service as a provision of service over electronic networks such as the Internet. This notion includes services provided by a typical service organization as well as the services provided by goods manufacturers where the quality of customer care plays an important role.(Rust and Kannan june 2003).
(Rowley 2005) defined: e-Service is deeds, efforts or performances whose delivery is mediated by information technology (including the Web, information kiosks and mobile devices). Such e-service includes the service element of e-tailing, customer support and service, and service delivery. According to the de Reuter e- Service is an interactive, content-centered and Internet-based customer service, driven by the customer and integrated with related organizational customer support processes and technologies with the goal of strengthening the customer-service provider relationship (Reuter, Wetzel et al.)
These Ideas were acceptable for traditional e-commerce too and it’s only coverage part of e-service, Rust believes that E-service is more than order fulfillment, more than responsiveness to inquiries, e-mail, and status requests. The true nature of e-Service is providing consumers with a superior experience with respect to the interactive flow of information(Rust and Lemon 2001),negotiation interaction , promotion flows, title exchanges and product/service flows(Roland T Rust and Kannan 2002) in down stream and upstream channel. In downstream channel , e- Service is about CRM and e-CRM, customer care, one-to-one marketing and so on and in upstream channel it is about just in time inventory , e-procurement, supply chain management. The important thing about e-Service in upstream channel is the way that e-Service provider look at it. In fact e-Service in upstream will provide all necessary requisites need for providing better Services for downstream channel.
The scope of e-service is all domains of business such as B2B, B2C, G2P and any others but it’s also an intra-organizational context which subsumes intra- organizational interaction. Figure 1-1 shows the scope of e-service.
Figure 1-1- The Scope of e-Service (Roland T Rust and Kannan 2002)
The concept of e-service has been used in the last three years to describe
“revenue-generating, efficiency- increasing assets in the Net” (Hewlett- Packard) to
“information and Web services” (IBM and Scient). Our view of e-service is much broader than the concepts of IT services, Web services, or infrastructure services.
While e-service includes all these services, it also encompasses the service product, service environment and service delivery that comprise any business model, whether it belongs to a goods manufacturer or a pure service provider (Roland T Rust and Kannan 2002). This new idea can be used in different industries, for example Using e- service in airline industry as a e-ticket (using internet) or self check-in (using ATM) changed the airline industry and behavior of consumers.
1.2.2 E-ticketing
An electronic ticket (E-ticket) is “simply a record of a reservation made using a valid credit card number stored in the computer database of the airline company”
(McCuhbrey 1999). This reliable, useable, efficient service provided by airlines to make the process of booking and purchasing ticket easier. While internet is one sale and distribution channel, the e-ticket purchase can be done by phone or at a ticket office and the document scan be mailed, sent by fax or email, or picked up at a ticketing location.
The use of internet or other technologies such as using call centers will affect on airline and customers. Using paperless ticket will be cost effective for airline, create new market for airline sales, new channel for delivering service, reducing human recourse in sales force, increasing the reliability of transaction and as an important point e-ticket change the image of the company. At the same time, combination of benefits of internet and consequences of purchasing ticket directly from airline will give many opportunities to the customers such as 24 hours available service in any geographical location which liberates customers and airlines branches from being restricted in special place, the ability of comparison different airlines’
services and prices, information symmetry and reducing time loss in queues to received paper-based ticket.
First e-ticketing introduced by an American airline named ValuJet in August 1993. E-tickets have been widely accepted in US. with a usage rate over 70% for the domestic flight (McCuhbrey 1999). Many other airlines in the world such Delta, KLM, Northwest airline, Icelander airline have the experience of providing e-ticket in the world. As a first Asian country, Malaysia Airlines developed its own e-ticket solution called MASET in June of 1997, deploying it on a limited scale within Malaysia and on flights to Singapore. (Airlines international 2005). In fact based on IATA report after 10 years of first Asian e-ticketing service, e-ticketing has not penetrated enough in Asian nations, especially middle-eastern. (IATA 2006)
Although the e-ticketing is growing fast, but only 10% of total number of tickets in world are sold online. IATA has developed programs in order to increase the penetration of e-ticketing in the world.
1.3 E-ticket in Iran
A country's "e-readiness" is a measure of its e-business environment, a collection of factors that indicate how amenable a market is to Internet-based opportunities. This factor consists of all Internet enabler workings such as technology infrastructure, favorable policy, business and social environments of a country.
Looking at current e-readiness ranking (2004) published by eiu.com, (figure1- 2) show our situation between the world's 60 largest economies. Although Iran is not in a good position, but suitable activities have been done in order to penetrate e- commerce in Iran and also increase e-readiness in our society.
Internet penetration as a first condition of developing e-business has e good situation in Iran (www.internworldstats.com). Statistics shows that Iran has the highest level of using internet in Middle Eastern country since 2000 (Figure1-3)
In recent years, supporting IT plans by Government of Iran and private sections bring about new era for Iranians with new services such as Internet banking provided by banks, e-cards for online shopping from Iranian online shops which directly affect on arranging suitable infrastructure for other Iranian industries to use internet as a new distribution channel.
Mainly, private banks (Saman Bank and Parsian Bank) have started their online services for persons who want to purchase online by using “Internet purchasing card”. Many Iranian companies accept these cards for purchasing online.
In travel related industries there are two main companies who established their website for e-booking and e-ticketing. The pioneer of this field is Raja Company who sells its trains ticket online since 2004.
Figure 1-2-e-Readiness (eiu.com)
Figure 1-3-Middle east internet usage
Another company who uses internet for selling tickets is IranAir airline. This company first introduced e-booking system in a way that people could visit Iranair website (Iranair.com) and reserve a ticket. Now new service is available for domestic flights for Tehran, Mashhad and Kish Island. With this new service passengers with buying Saman Bank prepaid card, not only can book a ticket, but also they could buy it and receive a digital reference number.
Unfortunately Iran air is the only e-ticket provider in our country and it means without any competitors they will advance so slowly. This advancement will also affect by e-banking adoption and e-ticketing adoption in Iran too. It’s important to try to use experience of other countries and localize it for Iranian companies and customers.
1.4 Factors affecting on airlines’ customers adoption
1.4.1 Common factors affecting on internet adoption
Adoption of e-services which has been offered by manufacturers or service providers is not easy. In fact adoption of e-services is based on the rate of customer internet adoption instead of traditional channels which is mainly based on customer personal characteristics, website properties and service properties. It means that basic factors which affect on e-service adoption will be the same as internet adoption and
also e-commerce adoption which focuses on the customers’ willingness to use internet instead of traditional channels in order to purchase a product, searching for information and using a service.
(Sohn and Ahn 1999) showed that consumers’ knowledge affects their adoption of e-commerce.(Liang and Huang 1998) Found that customers experience as an important factors in online purchasing. (Kim and Kwon 1999) contended that a consumer whose lifestyle is more progressive and assertive in leisure activities uses the internet more frequently and searches information through the internet more often.
(Limayem, Khalifa et al. 2003) added personal innovativeness as another personal characteristic in order to online shopping.(Yang and Cho 1999) examined the impact of consumers’ need for cognition, and search objectives on consumer information search through the internet.
Another group of factors that seems to be important for adoption is website related factors. The KNP Report on the Internet User (Research 1999) published by IMResearch showed that user satisfaction with the website is decided by information quantity, design, transmission speed, user-friendliness of search structure, and update pace. It suggests that website characteristics are likely to influence consumer
information search through the internet.
Besides there are several academic studies working on perceived risk.
According to Koller (Koller 1988), the degree of importance of the situation determines the potential effect of risk. Customers unwillingness toward to complete online Consumers have shown reluctance to complete online transactions (Hoffman, Novak et al. 1999), primarily due to risk concerns. Therefore, perceived risk is posited as a prominent barrier of consumer acceptance of e-Services in an e-commerce environment. Consumer perceptions of risks inherent in product adoption and usage have been studied for many years (Bauer and Cox 1967; Dowling and Staelin 1994).
This immense literature on perceived risk however has not been applied to the relatively new e-services context in an attempt to better predict evaluation and adoption.
Recent research explores the issue of perceived risk in the context of the unfairness of price (Wirtz, Kimes et al. 2003) . They found perceived unfairness of
pricing generates perceptions of financial risk. Other researchers (Kolsaker, Kelley et al. 2004) found that perceptions of risk and convenience are strongly associated with a reluctant to purchase airline services online . Also the authenticity of the company or product is not under question; therefore, it is likely that risk assessments of the medium rather than the product are under evaluation. Of course this research shows that cultural factors are important to using e-ticket too.
(F.Cunningham, H.Gerlach et al. 2005) found perceived risk is present at each stage of the consumer buying process. Their findings show the introduction of financial risk and the continued significance of performance risk at purchase stage.
Previous analyses of risk types suggest that financial risk is the most important contributor to perceived risk. However, performance risk seems more important in the case of internet airline reservation services.
Although sometimes factors affecting on risk are the same as trust with negative affect on customer adoption, but there are different researches worked in trust as independent factors affecting on customer to use an online store(Lee, J.Kim et al. 2000; Ceaparu, Demner et al. 2002) as a part of third step of adoption .Some of these factors found by J.Lee et al shows that comprehensive information about products, values shared with other customers and divers means of communication can effectively increase trust, which in turn can increase customers loyalty(Lee, J.Kim et al. 2000). These factors will be important even for post-purchase adoption or at the first stages of adoption for customers who receive information about launching new service or product and step of interest which customer try to find more information about .
Moreover Eggers research (Egger 1999; Egger and Groot 2000) shows that trustworthiness often depends on strength of brand name which is its reputation , customer awareness of firm’s privacy policy which ensure him/her about what firm is going to do with private information. Also there are factors that affect customer’s judgments about trustworthiness such as website certificates provided by third parties or legal framework that support transaction in the website. (Cheksin 1999) found six fundamental forms for communicating trust are: brand, navigation, fulfillment, presentation, up-to-date technology and seals of approval. And also there is a research
which (Ceaparu, Demner et al. 2002) shows that there are three important features for customers in order to trust a website which are customer service (Contact number available, clearly state return policy, possibility of returning a purchase at the nearby store) , testimonial and security feature representation such as text and graphic.
Based on (McIvor, O’Reilly et al. 2003) research, it’s possible to find important factors which affect on customers in order to use airlines’ website for buying e-ticket . These factors can be clustered as bellow:
o Real-time decision-making mechanisms (Reduction of information asymmetry helps customer to make a decision)
o Up-to-date information for customers (All the websites evaluated contained up-to date information on flights, schedules, promotions and complementary services. This will help the customer to make a best decision by comparison different website. Also this way is better than old brochure which airlines provide in order to provide information for their customers)
o Reductions in customers’ search and transaction costs (On-line buyers benefit from better selection in terms of choice (of airlines, flights, schedules, destinations, levels of service and complementary services); speed (time, convenience of access capabilities on the Internet);and reduced transaction costs (monetary, effort, mistakes))(McIvor, O’Reilly et al. 2003)
o Bundling products and services
o Offering additional services not directly related to the core travel offering o Receiving low(er) prices/discounted fares
o Customizing offerings to suit individual customer needs
o New transaction structures play integral role in lowering transaction costs for customers
1.5 Problem discussion
E-services as interactive software received via internet are considered as a new revenue stream and creating efficiency (Featherman et al 2002) Examples of e- services include integrated trip planning, on-line banking and financial portfolio
management. Many companies are adopting Internet-based e-services for conducting business transactions and sharing information with their consumers and business partners (Torre and Moxon 2001). Each service has particular characteristics based on its industry and consumers who use the service. On the other hand when a company wants to use new channel for providing service, such as internet, ATM must be aware of the rate of acceptance of the new service in new channel, because it directly affects on the perceived revenue of new channel.
In a case of e-service consumers not only must accept new service, but also they should be satisfied with using new channel. Previous studies shows many different factors directly affecting on rejecting e-services such as perceived risk (Featherman et al 2003) which related to the media that service is provided by means of it. There are many other factors affecting on adoption/ rejection an e-service that related to the persons abilities and perceptions which help us to predict their behavior in a case of facing with new phenomena. (Aizen 1975) On the other hand there many other researches work on e-ticket and online reservation in particular industry which in our case is airlines.( LAW et al 2000) (Lawrence 2005) focused on companies point of view not passengers. Now we are interested in working on Iranians e-service adoption which consists of studying Iranians personality and characteristics and their ability to use internet, their perceived usefulness of using e-service provided by airlines, level of trust and their uncertainties when want to use e-ticketing.
1.6 Purpose of research
Based on the reasoned above, the purpose of this study is working and understanding dimensions influence on Iranians decision to adopt / reject an e-service and specially the e-ticketing as only e-service provided by airlines in Iran.
1.7 Research outline
This study is divided to five chapters, the content of first chapter has already presented, and now the outline of the study will be illustrated in figure 1-4. Chapter two provides overview of related topics and studies (i.e. previous researches in e- service and e-ticketing) Chapter three describes research methodology has been used in this research. Chapter four provides information about the result of analyzing data
which has been gathered from different samples explained in chapter three. Chapter five conclude this paper by discussion about the finding, implications for researchers and implications, providing suggestion for future researches and explaining limitations of current study.
Figure 1-4- Research Structure
Chapter Two
2 Literature review
This chapter provides a review of the literature necessary to build the theoretical foundation for this research.
2.1 E-services and Service
2.1.1 Service
Without understanding service and its role in economic changes, it’s not possible to fully appreciate the importance of e-service.
A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.(Kotler 2003) Advancing technology has resulted in a shift, in advanced economies, from goods to service. Consider any key growth indicator—new jobs created, new businesses created, growth in Gross Domestic Product. In every case, service has been the major source of growth(Shugan 1993) By growing services, manufacturers find it suitable way to differentiate their products. In fact, for many goods producers, service is becoming a key revenue (Kotler 2003). There are four main characteristics for service :
Intangibility
Services are intangible. Unlike physical products, they cannot be seen, tasted, felt, heard, or smelled before they are bought. The person who is getting a face lift cannot see the exact results before the purchase, just as the patient in the psychiatrist’s office cannot know the exact outcome before treatment. To reduce uncertainty, buyers will look for signs or evidence of the service quality.
They will draw inferences about quality from the place, people, equipment, communication material, symbols, and price that they see.
Inseparability
Services are typically produced and consumed simultaneously, unlike physical goods, which are manufactured, put into inventory, distributed through resellers, and consumed later.
Variability
Because services depend on who provides them and when and where they are provided, they are highly variable.
Perishability
Services cannot be stored; once an airplane takes off or a movie starts, any unsold seats cannot be held for future sale. Perishability is not a problem when demand for a service is steady, but fluctuating demand can cause problems. (Kotler 2003)
The service revolution has increasingly been an information revolution, because information service is the highest growth area in service. Information service is that aspect of service in concept of information service. By its very nature, the Internet is a network that permits the interchange of information. The purest commercial utilization of the special characteristics of this environment is interactive information service, with consumer wants and needs going in one direction, and highly customized information going in the other direction. This interactive information service is the critical backbone of the new e-economy, and is critical to understanding the role of e-service in this new domain.(Rust and Lemon 2001)
2.1.2 e-Service and business environment
In era of e-service defining new element will be necessary; figure 2 will show some of the element of new paradigm shift.
Figure 2-1 - A paradigm shift from traditional e-commerce to e-service (Rust and Kannan june 2003)
From Service to e-Service
Weather a company is a manufacture or service provider, intangible components of it’s offering play a pivotal role in winning and maintaining a satisfied customers(Roland T Rust and Kannan 2002) . In order to show the importance of this statement figure 3 shows that a company is broken down to four main components:
o Physical product o Service product o Service environment
o Service delivery(R.T. Rust and Oliver 1994)
By using Internet as a alternative marketing channel, many service components have been transferred to the e-service (e.g. e-learning, online shopping, etc.) ,It’s possible that many businesses operate in both the traditional channel and e- channel, and thus have traditional service components alongside e-Service components. Also Technology advancement, as a factor which accelerates this new paradigm shift, affect on transformation to e-Service in three ways which affect on cost and efficiency :
o Transformation of the Physical Product (Form Product to Service) o Creation of Service Intermediation
o Creating of New Market
Figure 2-2 Transformation to e-Service(Roland T Rust and Kannan 2002)
Transformation of the Physical Product
The advance of electronic networks and channels a means of distribution has had a significant impact on digital and information based products.(Rust and Kannan 2002) Now , some physical product can be replaced by services offered by service providers or new concepts(answering machine, books, tickets).This transformation has significant implications for building customer relationships and exploring new opportunities and market , specially in domain of network-based, digital, and information-based product.(Roland T Rust and Kannan 2002) As the nature of market offerings changes from the physical product to the service product, the structure of markets changes to accommodate intermediaries who are service providers. We argue that organizations across many industries will have to embrace such transformation to remain competitive. This is especially true of firms in the information products realm.
Software producers such as Microsoft are viewing software as a service to which customers can subscribe.
The contracts for software purchase are looking very similar to service contracts. The music recording industry is being forced to offer subscription-based
music service over the e-channel in reaction to peer-to-peer media sharing, transforming their product offering to a service offering. But this necessity is not limited to information products. Grocery chains are looking to use loyalty cards and electronic purchase tracking to use service as a differentiator to ease price competition. Focused one-to-one promotion and marketing efforts based on information gathered using these cards allow the grocery chains to develop relationships with their customers. They provide value to customers through focused information provision, reduced search time, increased convenience, and a perception of control in their transactions, as much as music subscribers could one day derive in their Internet transactions with music service providers. They sell a grocery service with value derived from service components rather than commodity-like products. In transforming product to service, organizations are forced to be customer-centric. A one-time transaction becomes a longer-term relationship providing opportunities for focused selling of products/services that increase customers’ value. Firms must understand the customer better as the focus changes from brand equity to customer equity. (Roland T Rust and Kannan 2002)
Creation of Service Intermediaries
The transformation of physical product to service products has also led to creation of service intermediaries(Roland T Rust and Kannan 2002) The rapid development of technologies and their complexity, made it very difficult for firms (producers) to be service providers for their products. It means that firms need to outsource their technology-based services, including e-Services- to outsourcers. This outsourcing made service providers stronger and capable.
From cost reduction to revenue expansion
Profitability is based on revenue expansion more than cost reduction, with revenues driven by enhanced service and higher levels of customer satisfaction (Figure 2-3)
Figure 2-3 - E-commerce paths to profitability (Rust and Kannan june 2003)
Improved customer satisfaction and also retention, will increase the revenue and it means that by using advance technology and offering services which are important for customer, it’s possible to have more profit without reducing cost.
From Brand Equity to Customer Equity
The concept of customer equity, unifies customer value management, brand management, and relationship/retention management, it's the basis for a new strategic framework from which to build more powerful, customer-centered marketing programs that are financially accountable and measurable.
Quantitatively speaking, a firm's customer equity is the total of the discounted lifetime value of all of its customers which is there are three main driver for it:
o Value equity o Brand equity
o Retention (Relationship) equity (Rust and Lemon Spring 2001)
Value equity is defined as the customer's objective assessment of the utility of a brand, based on the perceptions of what firm offered. Using e-Service within Value equity ,affects on quality sub drivers which are result of element of quality in customer service, such as response time to email inquiries, customization of product ,etc.
Brand equity is defined as the customer's subjective and intangible assessment of the brand, above and value equity. E-service capabilities in this field affect on customer's attitude toward using a brand for example because of using secure
channels for placing an order in the website or having clear strategies about customers' privacy which is important factors for e-customers(Ceaparu, Demner et al.) And also successful e-Service have potential to create significant word-of-the mouth for a firm's website(Rust and Lemon Spring 2001)
Relationship equity is defined as the tendency of the customer to stick with the brand, over and above the value and brand. This relationship helps the company to learn about individual customer or customer segment expectations, needs and demands, and thereby increasing their likelihood of contribution the relationship with firm.
Each of the strategies noted above can be utilized to engage the consumer in distinct forms of interaction and dialog with the firm. Objective value is created for the consumer through Value Equity, the customer's subjective value of the firm's offerings is enhanced through Brand Equity, and the customer's bond with the firm is strengthened through Relationship Equity. The cumulative effect grows the firm's overall Customer Equity.(Rust and Lemon Spring 2001)
2.1.3 Customers and e-Service
The historic development in the service economy and the ongoing emergence of the e-economy have been accompanied by shifts in consumer expectations in three specific areas:
o The importance of the buying experience, o The importance of control
o The role of personalization(Rust and Lemon Spring 2001)
The Buying Experience
Pine and Gilmore suggest that providing a unique buying experience is the key to winning the hearts and minds of consumers in the new millennium (Pine and Gilmore 1999).In fact when a customer has a good or bad experience about offered service or product, he/she is on the first step of becoming a loyal customer. Their work indicates that consumers value the experience of a good or service more than its actual tangible value—in fact, the experience becomes a key element of the overall
"product" being purchased and consumed. Other researchers have begun to examine
the consumer's experience via the Web with the flow construct, suggesting that it is possible to measure the extent and intensity of the consumer's experience on the Web (Novak, Hoffman et al. 2000). The importance of experience to the consumer underscore the importance of getting e-service right.
Customer Control
New advances in technology have made it possible for customers to take greater control of the purchase and consumption experience than ever before. The customer has always had the power to choose to purchase or not. Now, however, not only do customers choose whether or not to purchase the product,they choose the channel through which to acquire the product, the channel through which the product will be delivered, the extent of personalization of the product, and the extent to which they would like to be involved in or responsible for the development or delivery of the product. This shift toward greater consumer control leads to higher consumer expectations of ease and convenience throughout the entire purchase, consumption, and post-purchase sales-support process. These expectations continue to escalate.
Consumers may have forgiven unresponsiveness to e-mail queries a few years ago, but now it is as critical as responding to an incoming phone call (Roth 2000).
Personalization
Finally, the new technologies that together represent the e-experience for consumers have created exciting opportunities for the personalization of communications, product offerings, delivery options, and post-purchase support.
Customers' expectations of personalization will escalate with the continued enhancement of technological capabilities. However, it is not sufficient just to utilize past purchase patterns to develop customized interfaces for customers. Solutions such as collaborative filtering will not be sufficient, because they are not personalized enough. Customers expect to be truly "known" by the firm. Consider the underlying assumptions in collaborative filtering. Collaborative filtering assumes that the customer's needs are static and can be matched with an exemplar customer with similar static needs. Why will this not be sufficient? If a customer has different needs in different situations, then the assumptions of collaborative filtering will not hold.
The approach will be ineffective and may even lead to confused, disgruntled consumers. Consider the consumer who purchases a size 4 blouse (for her daughter)
and a size 12 shirt for herself. This individual should not be "averaged" to predict future purchases of size 8.
2.1.4 E-service Orientation
E-service is a customer-centric concept, and thus, the strategic and tactical components of an e-service orientation focus on increasing value defined at the customer level. At the strategic level, an e-service orientation calls for moving the emphasis from products and transactions to service and relationships, and building customer equity. These are supported at the tactical level by personalization and customization, self-service strategies, privacy and security risk management, and e- service measurement.(Roland T Rust and Kannan 2003)
Figure 2-4 - e-Service Orientation(Rust and Kannan june 2003)
2.1.5 Challenges for e-Service
E-service orientation calls for designs of systems and processes that minimize the feeling of discomfort with technology in general and the degree of insecurity regarding electronic transactions. In an electronic environment the consumer’s need for control and protection of privacy is quite intense. This implies organizations should resist using the customer information they have to take advantage of customers through indiscriminate cross-selling and up-selling; focus instead on providing value to customers. Security and privacy concerns have a critical impact on the consumer’s perceived control in online situations, which in turn determines the consumer’s perceived e-service quality. In the era of e-service, a firm effectively managing these concerns builds the trust of its customers and contributes to their lifetime value. The desire for privacy also makes viable a market for the maintenance of e-privacy—itself an e-service.
The risk associated with e-commerce and also e-Service classified in the following categories:
o Business practices o Information protection
o Transaction integrity (Ceaparu, Demner et al. 2002)
Business practices refer to whether a company will carry out its orders for products and services as it claims and whether there are product guarantees.
Information protections refer to the website(company) willingness to protect customer private information. Transaction integrity means that the company has a history of processing transactions accurately, completely and appropriately billing its customers.The first type of risk which has mentioned above might be possible to reduce by setting appropriate strategies by firm. But in as much as the e-service orientation rests on the benefits derived from personalization and customization, it also requires that customer privacy and security risks be effectively minimized.(Rust and Kannan june 2003)
E-channels lack the human touch to build the relationship with the customers, but with e-Service, offline channels have been replaced by e-channels. It's important to understand that the successful e-Service strategy, mainly, is based on accurate information provided by customers who are likely to provide information when they are not identified.(Labs 1999) or the customers who provides accurate information when they are using reputed firms website(Frels and Kannan 2001). This concern is defined as a "Privacy Risk" formally is a consumer's concern about misusing his/her private information by the firm. Another challenge that e-Service faced with is
"Security Risk" which is refer to consumer's concern that an unknown third party will obtain the consumer's personal or financial information without his/her knowledge while he/she is transacting business online or the third party will disrupt his/her transaction online(Frels and Kannan 2001).If these factors are not properly managed , they influence not only the acceptance of e-service by customers, but also the design of e-service by firms.
2.2 Adoption
2.2.1 Definition
When new product or service is offered by a company, it is necessary to convince customer to buy new product or service. Motivating customers by manufactures or service providers is complicated process which part of it is based on customer characteristics and behaviors. This mental process through -which an individual passes from first hearing about an innovation to, final adoption is called Adoption Process.(Kotler 1999) (Adoption is an individual’s decision to become a regular user of a product.(Kotler 2003)) .
2.2.2 Stages of adoption process
An Innovation is any good, service or idea that Is perceived by someone as new (Kotler 2003) If an Idea didn’t spread through customers , it won’t be accepted.
Rogers (M.Rogers 1995) defined innovation diffusion process as the spread of a new idea from it’s source of invention or creation to it’s ultimate users or adopters. In order to adopt new product or service, customers go through five steps of Adoption process which listed as bellow:
1. Awareness. The consumer becomes aware of the new product, but lacks information about it.
2. Interest. The consumer seeks information about the new product.
3. Evaluation. The consumer considers whether trying the new product makes sense.
4. Trial. The consumer tries the new product on a small scale to improve his or her estimate of its value.
5. Adoption. The consumer decides to make full and regular use of the new product.(Kotler 1999)
If companies want customers to consent their new services or products, they have to work on strategies helping customers to go through these steps. Fiure 2-5 shows adoption steps:
Figure 2-5 -Stages of Adoption process(M.Rogers 1995)
2.2.3 Adoption categories
The time element of the diffusion process allows us to generate diffusion curves and to classify adopters into categories. Because individuals in a social system do not adopt an innovation at the same time, innovativeness is the degree to which an individual is relatively earlier or later in adopting new ideas than other members of a social system(M.Rogers 1995).
People differ in their attitude to use new product or service, some people are always consumption pioneer and customers that we call them early adopters. Some people are not interested to use services before majority of people accept using the product. Figure 2-6 shows the adopter categorization on the basis of Relative Time of Adoption of Innovation.
Figure 2-6 -Time of Adoption of innovation (Rogers 1983)
Figure shows that diffusion of innovation follows a normal-bell shaped curve when we draw the adoption over time. After slow start which has been began with innovators and people who are always enjoy using new products and services ,an increasing number adopt new Idea and number reach the peak and at the end small part of society who are not interested in adopting to new Idea remain. Bases on this curve we can categorize adopters:
o Innovators are technology enthusiast and enjoy tinkering with new product.
They are always member of Alpha and beta test group and report early weakness. In fact they are the gate way of new idea to the other part of society.
If we look at this network of interpersonal , innovators are starting point of information exchange. Prerequisites for being an innovators are having knowledge in order to use new technology , substantial financial resources in order to deal with possible loss from an unprofitable innovation
o Early adopters are visionaries who search for new technologies that might give them a dramatic competitive advantages. This group of people are powerful enough to buy a product or use a service with high price. They adopt new Idea before average number of people. This group decrease uncertainty about new Idea by adopting it.
o Early majority pragmatist who adopt the new technology when it’s benefit are proven and a lot of adoption has already taken place
o Late majority are conservatives who are risk averse, technology shy and price sensitive. This group accepts new ideas after the average number of system, and they need to be sure that uncertainties have been removed and there is no risk in adopting new Idea.
o Laggards are skeptics who resist the innovation until they find that the status quo is no longer defensible. They are the last group of society that adopt to the innovation
