An Assessment of Effects of Service Quality on Performance of A Road Transport Company in Nigeria

An Assessment of Effects of Service Quality on Performance of A Road Transport Company in Nigeria

Oyeobu A. J (B.Sc, M.Sc)1, Oyebisi. T. O (B.Sc, M,Sc, Phd)2 Olateju O. I. (B.Sc, M.Sc, Ph.D)3, Sesede . T4

1Lagos State University, Department of Business Administration and Management Technology 2Technology Planning and Development Unit, Obafemi Awolowo University, Ile-Ife, Nigeria 3Lagos State University, Department of Business Administration and Management Technology 4Lagos State University, Department of Business Administration and Management Technology

Abstract-

This study examines the effects of Service Quality on Business Performance of a Road Transport Company in Nigeria. A review of literatures on Service Quality shows that no study has been carried out on its application in the Nigerian Transport sector hence the need for this research. To assess the situation questionnaires were administered to customers of ABC Transport Plc within its Amuwo Odofin Terminal, Lagos. A random and convenient sampling technique was used. The instruments used were questionnaires and personal interview. The questionnaires were developed by generating 30 items after a thorough understanding of conceptualization and operationalisation of service quality. The Data Analysis method used was descriptive and inferential statistics. Our findings in this study show that there is strong positive relationship between tangibles, reliability, empathy and customer satisfaction. However, the effect of assurance on customer satisfaction is very negligible. There is however a negative relationship between responsiveness and customer satisfaction. 99% of total success achieved in customer satisfaction is accounted for by tangibles, reliability and empathy. It was therefore recommended that staff should take time to assure commuters of their services which will lead to customer satisfaction. It is recommended that further study should be carried to measure the effect of responsiveness on customer satisfaction.

General Terms: Total Quality Management, Service Quality, Transportation

Keywords: SERVQUAL, Nigerian Road Transportation industry, Customer Satisfaction

Introduction

1. Background to the Study

   Quality has been a fascinating buzzword in the organizational world for the last few decades of the 20th century. In particular, ever since Edward Deming and Joseph Juran introduced and developed their perspectives of quality, many organizations with their managers and employees have been focusing on this concept of quality.

   One of the reasons quality has gained such prominence is because organizations have gained an understanding of the cost of poor quality. It is now a well known fact that quality affects all aspects of an organization and has serious cost implications. The most ominous effect of poor quality is customer dissatisfaction and consequently lack of patronage.

   Globalisation has also contributed to the emphasis on quality. The concept of globalization has led to the collapse of regional and national trade barriers whereby markets that were previously controlled by monopolist have opened up to competition. In quest for market share, firms have realized that customer satisfaction is key. Companies that cannot devise products and services that continuously satisfy and surpass customer expectation fall by the way side and become extinct. Realizing this, companies have adopted quality as a critical success survival strategy.

2. Nigerian Transportation Sector

   Transportation is an essential part of human activity and in many ways form the basis of all socio-economic interactions. A good transport system is essential to support economic growth and development. Transportation for any country is a vital aspect of the social and economic life; it enhances trade whereby the countrys manufacturing, industrial, tourism and distribution needs are served. Therefore a vibrant, responsive, effective and efficient transport system will enhance Nigerias economic development and strategic roles in the global economy. The evolution of the modern transport system in Nigeria began during the colonial period. The network of rail, water and road that was developed then was built for the exportation of cash crops and importation of mass produced consumption goods. They were planned in the most economic way possible but later proved inadequate. The post colonial period after the attainment of independence brought a re-orientation of goals- transportation became an instrument of unification in the country and an important tool for social and economic development.

   The road transport sector today constitutes one of the greatest employers of labour in the Nigerian economy. The impact of road transporters can be felt in every aspect of the Nigerian society. Road is the major mode of transportation in Nigeria. Other means of intra urban and inter urban transport system are the use of inland waterways and rail transport which are of course limited to a very few urban centers with peculiar terrain (water) in Nigeria. Studies in the area of urban transportation confirmed that more than 75% of population in cities depended on public transport while 25% depended on private transportation (Ogunbodede 1990)

   Although the first roads in Nigeria were built in the first decade of the 20th century, road transportation did not become generalized until the 1920s. The first road transportation services were by the colonial government and a few private individuals.

   Private sector participation has been very significant in the road transport industry in Nigeria. Today the vast majority of road transport operations belong to the private sector. It accounts for more than 90% of urban and non-urban transport services. The Igbo were believed to be the pioneers of modern transportation business in Nigeria.

   Luxury bus transport business commenced in the early 1970 after the Nigerian civil war. A luxury bus is well air- conditioned with complete television sets and good music to enhance full relaxation which makes passengers journey pleasurable. In Onitsha, luxury bus transportation service was pioneered by P.N. Emerah Motors Transport Services and Late Chief Augustine Ilodibe, the owner of Ekene Dili Chukwu Transport Company. They represent the first generation of transporters of luxury bus transport service. This was followed by the second generation of luxury bus transport service. Some of them include Emenike Motors, Micmerah International Agency, G.U.O Okeke Transport Service, F.G Onyenwe, Dan Dollars, The Young Shall Grow Motors, and ABC Transport Services among others. Luxury buses ply the major urban areas in Nigeria such as Lagos, Ibadan, Onitsha, Aba, Port-Harcourt, Enugu, Jos, Kaduna, Zaria, Kano, etc.

   Although there are many luxury bus companies presently operating in Nigeria but we have chosen ABC Transport Plc as a case study because it is the most organized out of them all and the only transport company quoted on Nigeria Stock Exchange. It is also our belief that conducting the study with ABC will be more convenient and we will have access to relevant secondary data.

3. ABC Transport Plc

   ABC Transport Plc commenced operations in road passenger transport in February 13, 1993 as an off-shoot of

   Rapido Ventures Limited in Owerri with an authorized share capital of N1,000,000. The authorized and paid up share capital have since been increased to N800million. Fashioned with a view to running a modern road transportation system in Nigeria with international standards, the company is ably managed by a team of time- testd professionals with excellent track records in their chosen fields. Supporting the management team is a Board of Directors composed of men of integrity whose diverse backgrounds serve as a rich resources base for the company's policy formulation and overall business perspective. Its services are specifically designed for discerning travelers.

   The company operates within Nigeria and the West Africa region. Its operations in Nigeria is carried out in modern terminals, with comfortable lounges in various cities like Lagos (Jibowu, Oshodi, Amuwo-Odofin) Aba, Owerri, Port Harcourt, Abuja, Enugu, Onitsha, Umuahia, Mbaise, Jos, Kaduna, etc.

   ABC Transport also manages haulage transport for Nestle Water, Beta Glass, Wapco, GZ Industries, in addition it provides tours, charters, petty cash services, third party warehousing. It also runs a budget hotel in Abuja.

   ABC Transport is a diversified Company in terms of ownership and investments. The company went through a successful initial public offer in September 2006, thereby converting the company to a public limited liability company, with over 18,000 shareholders and listing

4. Statement of the Problem

   According to Friman, Edvardsson and Garling (2001) though service quality is an important aspect in public transportation, little research has been done to explore this issue. Even though many research works have been carried

   out in different service industries such as telecommunication, education, restaurants, banking, health care, etc, but limited empirical study has been conducted using the SERVQUAL model to assess service quality in transport sector especially relative to the Nigerian environment. This is the research gap that this paper intends to fill.

5. Research Questions

   The following research questions would be answered in the course of this study

   1. What is the structure and operation of ABC Transport Plc?

   2. What are the effects of the application of SERVQUAL on the performance of the company?

   3. What are the strategies to be adopted for improved service delivery?

6. Objective of the Study

   The main objectives of the study are to determine the effect of service quality on the performance of the Nigerian Luxury Bus transport sub-sector. The specific objectives of the study are to:-

   1. examine the structure and operation of the company;

   2. appraise the application of SERVQUAL model on the company performance; and

   3. proffer strategies for improved service delivery by the company

Literature Review

1. Theoretical Framework

   The concept of Quality is an offshoot of Management Science which is a contemporary extension of Scientific Management which was developed by Frederick Taylor. Scientific Management and Management Science use quantitative approach to raise organizational efficiency. Frederick Winslow Taylor introduced the concept of scientific management with emphasis on work output, labour efficiency and introduction of work study. This was followed by the era of quality control (1930-1950) when the principal focus was replacing inspection with more informative process control systems which aimed at reducing variation in outputs and delivering more consistency by focusing on inputs. Next was the total quality management (TQM) era which emphasized organizational quality driven by management.

2. Service Quality

A service is an activity or series of activities of more or less intangible nature. It normally, but necessarily, takes place in interactions between customers and service employees and/or physical resources or goods and /or systems of the service provider (Shahin, 2006). According to Douglas & Connor, (2003, p.166), Parasuraman et al., (1985, p.42), and Ladhari, (2008, p.172), the intangible elements of a service (inseparability, heterogeneity and perishability) are the critical determinants influencing service quality perceived by a consumer. This means that a service must be well defined by the provider in terms of its characteristics in order to understand how service quality

is perceived by consumers. According to Johns, (1999, p.954), a service could mean an industry, a performance, an output, an offering or a process and it is defined differently in various service industries. The differences in service industries are based on the characteristics of service which include; heterogeneity, perishability and Inseparability.

Service industries are playing an increasingly important role in the economy of many nations. In todays world of global competition, rendering quality service is a key for success, and many experts concur that the most powerful competitive trend currently shaping marketing and business strategy is service quality. Since the 1980s service quality has been linked with increased profitability, and it is seen as providing an important competitive advantage by generating repeat sales, positive word-of-mouth feedback, customer loyalty and competitive product differentiation. As Zeithaml and Bitner (1996, p. 76) point out: . . . the issue of highest priority today involves understanding the impact of service quality on profit and other financial outcomes of the organisation.

Service quality has since emerged as a pervasive strategic force and a key strategic issue on managements agenda. It is no surprise that practitioners and academics alike are keen on accurately measuring service quality in order to better to understand its essential antecedents and consequences, and ultimately, establish methods for improving quality to achieve competitive advantage and build customer loyalty. The pressures driving successful organisations toward top quality services make the measurement of service quality and its subsequent management of utmost importance. Interest in the measurement of service quality is thus understandably high. However, the problem inherent in the implementation of such a strategy has been compounded by the elusive nature of service quality construct, rendering it extremely difficult to define and measure. This means that service providers must try to determine the level of intangibility of services and try to include tangible elements that could aid understanding of expectation from the consumers perspective (Beamish & Ashford, 2007, p.240). Heterogeneity means that difference which comes in at the level of delivery of service due to the difference in human behaviour of those offering services and the consumer. Example occurs when salesperson offers assistance to one customer at the counter, that same person cannot offer exactly the same thing to the next customer because of differences in behaviours. This is why it is difficult to determine the quality and level of service provided since consumers and service providers are different, the same consumer could act differently with the same service provider (Beamish & Ashford, 2007, p.241). Service quality is an approach to manage business processes in order to ensure full satisfaction of the

customers which will help to increase competitiveness and effectiveness of the industry. Quality in service is very important especially for the growth and development of service sector business enterprises (Powell, 1995).

Parasuraman et. al (1985) and Zeithaml et., al (1990) noted that the key strategy for the success and survival of any business institution is the delivery of quality services to customers. The quality of services offered will determine customer satisfaction and attitudinal loyalty (Ravichandran et al. 2010)

Service quality is a comparison of expectations with performance. A business with high service quality will meet customer needs whilst remaining economically competitive. Improved service quality may increase economic competitiveness. This aim may be achieved by understanding and improving operational processes; identifying problems quickly and systematically, etablishing valid and reliable service performance measures and measuring customer satisfaction and other performance outcomes.

Service quality is an achievement in customer service, it reflects at each service encounter. Customers form service expectations from past experiences, word-of-mouth and advertisement. In general customers compare perceived service with expected service in which if the former falls short of the latter the customers are disappointed. Service quality can be related to service potential (for example, workers qualifications) service process for example, the quickness of service and service result (customer satisfaction).

According to Parasuraman, Zecthaml and Berry (1985) there are ten determinants that may influence the appearance of a gap between service expectation and service perception, namely:-

Competence: the possession of the required skills and knowledge to perform the service. For example, there may be competence in the knowledge and skill of contact personnel, knowledge and skill of operational support personnel and research capabilities of the organization.

Courtesy: the consideration for the customers property and a clean and neat appearance of contact personnel, manifesting as politeness, respect and friendliness.

Credibility: is the factor such as trustworthiness, belief and honesty. It involves having the customers best interest at prime position. It may be influenced by company name, company reputation and the personal characteristics of the contact personnel.

Security: Is the customer feeling free from danger, risk or doubt including physical safety, financial security and confidentiality.

Access: Is approachability and ease of contact, for example, convenient office operation hours and locations.

Communication: Means both informing customers in a language they are able to understand and also listening to customers. A company may need to adjust its language for the varying needs of its customers. Include explanation of the service and its cost, the relationship between services and costs and assurances as to the way any problems are effectively managed.

Knowing the customer: means making an effort to understand the customers individual needs, providing individualized attention, recognizing the customer when they arrive and so on. This in turn helps in delighting the customers i.e rising above the expectations of the customers.

Tangible: are the physical evidence of the service. For instance, the appearance of the physical facility, tools and equipment used to provide the service. The appearance of personnel and communication materials and the presence of other customers in the service facility.

Reliability: Is the ability to perform the promised services in a dependable and accurate manner. The service is performed correctly on the first occasion.

Responsiveness: Is the readiness and willingness of employees to help customers in providing prompt timely services. For example setting up appointments quickly

1.4 Customer Satisfaction

According to Fornell(1992) a key motivation for the growing emphasis on customer satisfaction is that high customer satisfaction lead to a stronger competitive position resulting in higher market share and profit. Deng et al (2009) posits that the ability of a service provider to create a high degree of satisfaction is crucial for product differentiation and developing strong relationship with customers. The service a brand offer and the price it charges actually determine the level of satisfaction among its customer than any other measure (Turel et al 2006). For this reasons Gustafsson, Johnson and Ross (2005) suggests a firm should concentrate on improving service quality and charge appropriate fair price in order to satisfy their customer which would ultimately help the firm to retain its customers.

1. Conceptual Framework

   1. SERVQUAL:

      The SERVQUAL model was made of ten dimensions of service quality when created; tangibles, reliability, responsiveness, communication, credibility, security, competence, courtesy, understanding the customer, and access, Parasuraman et al., (1985, p.47-48) but later on these dimensions were reduced to five because some dimensions were overlapping.

      According to the study carried out by Ladhari, (2009), it is recommended that the SERVQUAL model is a good scale to use when measuring service quality in various specific industries but that it is appropriate to choose the most important dimensions of this model that fit to that particular service being measured in order to assure reliable and valid results. In this regard, we will use this model because it takes into account customers expectation of a service as well as perceptions of the service which is best way to measure service quality in service sector (Shahin, 2005, p.3).

      Buttle, (1996, p.8) makes mentions of several researchers that have used the SERVQUAL model in various industries (retailing, restaurants, banking, telecommunication industry, airline catering, local government, hotels, hospitals, and education). He further suggests that service quality has become an important topic because of its apparent relationship to costs, profitability, customer satisfaction, customer retention and positive word of mouth and it is widely considered as a driver of corporate marketing and financial performance.

      Various studies that focused on a link between satisfaction and quality argued for different views in terms of relationship. Some think that quality leads to satisfaction, McDougall & Levesque, (1996, 2000); Negi, (2009) and others support that satisfaction leads to quality (Cronin & Taylor, 1992). Some researcher propose that quality and satisfaction are determined by the same attributes like Parasurman et al., (1988, p.16) tried to relate customer satisfaction to service quality since what SERVQUAL model struggles to measure is attitude. They see customer satisfaction as transaction specific, meaning consumers get satisfied with a specific aspect of service while perceived service quality is a global judgement or attitude to a service. Customer satisfaction is based on the level of service quality delivered by the service providers (Saravanan & Rao, 2007, p.436) which is determined by the consumers cumulative experiences at all of the points of contact with company (Cicerone et al., 2009, p.28). This shows that there is some link between service quality and customer satisfaction which highlights the importance of customer satisfaction when defining quality (Wicks &

      Roethlein, 2009 p.83). These studies all confirm a relationship between service quality and customer satisfaction but according to (Asubonteng et al., 1996, p.66) there is no agreement on the exact kind of relationship between the two constructs and points of out that most researchers agree that service quality and customer satisfaction have attributes that are measurable. This is why we shall use the SERVQUAL instrument with its dimensions to measure these concepts (service quality and customer satisfaction) and for the fact that service quality leads to customer satisfaction according to Negi (2009), we will make that assumption in our research in order to measure customer satisfaction.

      SERVQUAL represents service quality as the discrepancy between a customer's expectations for a service offering and the customer's perceptions of the service received, requiring respondents to answer questions about both their expectations and their perceptions Parasuraman et al., (1988). The use of perceived as opposed to actual service received makes the SERVQUAL measure an attitude measure that is related to, but not the same as, satisfaction (Parasuraman et. al., 1988). The difference between expectations and perceptions is called the gap which is the determinant of customers perception of service quality. Parasuraman et al., (1988), later developed the SERVQUAL model which is a scale developed to asess customer perceptions of service quality in service and retail businesses. The scale decomposes the notion of service quality into five constructs as follows: Tangibles, Reliability, Responsiveness, Assurance and empathy. It bases on capturing the gap between customers expectations and experience which could be negative or positive if the expectation is higher than experience or expectation is less than or equal to experience respectively.

      The SERVPERF model developed by Cronin & Taylor, (1992), was derived from the SERVQUAL model by dropping the expectations and measuring service quality perceptions just by evaluating the customers the overall feeling towards the service. In their study, they identified four important equations:

      SERVQUAL =Performance Expectations SERVPERF= performance

      Implicitly the SERVPERF model assesses customers experience based on the same attributes as the SERVQUAL and conforms more closely on the implications of satisfaction and attitude literature, Cronin et al., (1992 p.64).

      Later, Teas, (1993, p.23) developed the evaluated performance model (EP) in order to overcome some of the problems associated with the gap in conceptualization of

      service quality (Grönroos, 1984; Parasuraman et al., 1985, 1988). This model measures the gap between perceived performance and the ideal amount of a feature not customers expectation. He argues that an examination indicates that the P-E (perception expectation) framework is of questionable validity because of conceptual and definitional problems involving the conceptual definition of expectations, theoretical justification of the expectations component of the P-E framework, and measurement validity of the expectation. He then revised expectation measures specified in the published service quality literature to ideal amounts of the service attributes (Teas, 1993, p.18).

      Brady & Cronin, (2001), proposed a multidimensional and hierarchical construct, in which service quality is explained by three primary dimensions; interaction quality, physical environment quality and outcome quality. Each of these dimensions consists of three corresponding sub- dimensions. Interaction quality made up of attitude, behavior and expertise; physical environment quality consisting of ambient conditions, design and social factors while the outcome quality consists of waiting time, tangibles and valence. According to these authors, hierarchical and multidimensional model improves the understanding of three basic issues about service quality:

      1. What defines service quality perceptions;

      2. How service quality perceptions are formed; and

      3. How important it is where the service experience takes place and this framework can help

         In this study SERVQUAL was used to measure service quality by using the five constructs of assurance, tangibles,

         responsiveness, empathy, reliability to determine customer satisfaction.

2. Research Methodology

   The population of the study is the number of passengers that patronize ABC Transport Plc which is estimated to be about 2,000 per day. A total of 200 passengers were used as sample. These were passengers at Amuwo Odofin Terminus of the company. A random and convenient sampling technique was used. The instruments used were questionnaires and personal interviews. The questionnaires were developed by generating 30 items after a thorough understanding of conceptualization and operationlisation of service quality. The SERVQUAL developed by Parasuraman et al (1988) was adopted to prepare the initial instrument. The first part of the questionnaire had 5 items relating to tangibles, the second part had 5 items relating to reliability, the third part had 5 items relating to responsiveness, the fourth part had five items relating to assurance, and the fifth part had five items relating to empathy while the sixth part had 5 items relating to customer satisfaction. All the close ended question were designed to generate responses on a four point Likert scale to measure expectation and perception of service quality indicated as 1-strongly disagree, 2-Disagree, 3-Agree, 4- Strongly agree. The four point scale was adopted in order to reduce the time of response and hence make respondents more comfortable. Majorly the SERVQUAL model is tested and enhanced in the United States and several other countries of the world. The personal interview involved discussion with some Managers of the company. The Data Analysis method used were descriptive and inferential statistics

3. Data Presentation and Analysis of Result

TABLE1: Model Summary: Tangibles And Customer Satisfaction

a. Predictors: (Constant), TANGIBLES

Interpretation: 19% of the total success recorded in customer satisfaction is accounted for in Tangibles. It means that tangibles could lead to customer satisfaction

TABLE2: Model Summary Reliability And Customer Satisfaction

a. Predictors: (Constant), RELIABILITY

Interpretation

65% of the total success recorded in customer satisfaction is accounted for in reliability. It shows that reliability has strong effect on customer satisfaction

TABLE 3: Model Summary Responsiveness And Customer Satisfaction

Correlations

Interpretation

Responsiveness and customer satisfaction = (-44%), it shows there is a negative relationship between responsiveness and customer satisfaction.

TABLE4: Model Summary Emphathy And Customer Satisfaction

Correlations

Interpretation

Empathy and customer satisfaction = (40%), this shows there is a mild relationship between empathy and customer satisfaction.

TABLE 5: Model Summarry Assurance And Customer Satisfaction

Model Summary

a. Predictors: (Constant), ASSURANCE

Interpretation

2% of the total success recorded in customer satisfaction is accounted for in Assurance. It shows that assurance does not have an effect on customer satisfaction.

TABLE6: Model Summary Emphathy, Reliability, Tangibles And Customer Satisfactio

Model Summary

1. Predictors: (Constant), EMPHATHY, RELIABILITY, TANGIBLES

   Interpretation

   99% of the total success recorded in customer satisfaction is accounted for in tangibles, reliability and empathy.

   Discussion of Findings

   Our findings in this study show that there is strong positive relationship between tangibles, reliability, empathy and customer satisfaction. However, the effect of assurance on customer satisfaction is very negligible. There is however a negative relationship between responsiveness and customer satisfaction.

   99% of total success achieved in customer satisfaction is accounted for by tangibles, reliability and empathy.

   Conclusion and Recommendation

   The customers of ABC Transport Plc are satisfied mainly because its services are reliable, staff show empathy for commuters and there are tangibles. Based on the above it is recommended that staff should take time to assure commuters of their services which will lead to customer satisfaction. It is recommended that further study should be carried to measure the effect of responsiveness on customer satisfaction.

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