Relationships Among Service Quality, Image, Customer Satisfaction and Loyalty in a Hong Kong Franchised Bus Company

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Relationships among Service Quality, Image, Customer Satisfaction and Loyalty in a Hong Kong Franchised Bus Company Iris M. H. Yeung*
Abstract
Market share of franchised buses in Hong Kong decreases since 2004 irrespective of increase in service quality as reported by Tang and Lo (2010). This paper investigates how service quality, image, satisfaction and loyalty are related to gain insight on the decreasing market share problem based on data collected from passengers of a franchised bus company in Hong Kong in 2004. The structural equation modelling results support the hypothesis that (1) service quality affects satisfaction and image directly, (2) image affects overall satisfaction and loyalty directly, and (3) overall satisfaction affects loyalty directly. However, the results do not support the hypothesis that service quality affects loyalty directly. Service quality has only indirect effect on loyalty through image and overall satisfaction. So even though the service quality may be increasing, the indirect effect of service quality on loyalty is not adequate to increase market share.

Keywords: image, loyalty, public transport, satisfaction, service quality, structural equation model. Field of Study: Customer Service and Customer Relations

Introduction
In Hong Kong, public transport is the dominant transport mode, accounting for approximately 90% of daily passenger journeys over the past 10 years (Transport Department (1999, 2003)). Public transport comprises railways, franchised buses, public light buses, taxi service, non-franchised bus services for residents, ferries, railway feeder buses, and peak tramways. Among these modes, railways and franchised buses play an important role, carrying over seven million passenger journeys per day, or approximately 70% of the total public transport patronage (Transport Department (1995–2010)). Market share of franchised buses is generally higher than that of railways. In 2002, market share of franchised buses peaked at 39.8%, whereas market share of railways at the time was a mere 32.3%. However, with the opening of new rails, market shares of franchised buses and railways were 32.4% and 38.8% respectively in 2010. Other than competition from other modes, franchised buses compete with each other as well for the operating right of new bus routes. Moreover, the franchise can be terminated based on poor performance. Thus, service quality is essential to maintain market share and increase profitability under fierce competition. Iris M. H. Yeung , Department of Management Sciences, City University of Hong Kong, Kowloon Tong, Kowloon,Hong Kong, Tel.: + 852-3442-8566; Fax: + 852-3442-0189, E-mail address: msiris@cityu.edu.hk (I.M.H. Yeung)

Yeung
In fact, quality of services for both railways and franchised buses has continuously improved over the past years. Using Mass Transit Railway (MTR) and Kowloon Motor Bus Limited (KMB) as references, Tang and Lo (2010) commented that the quality of rail and bus service provision improved from 1984 to 2004, particularly in terms of service supply and based on technical measures such as vehicle-kilometre per capita and real fare increase rate. However, market share of franchised buses, including KMB, started to drop since 2004 irrespective of increase in service quality as reported by Tang and Lo (2010). As passengers decide on which transport mode to take, this paper investigates how service quality, image, satisfaction and loyalty are related in order to gain insight into decreasing market share problem from passengers‟ perspective. In line with Tang and Lo‟s study, the analysis is based on a data set collected from passengers in 2004. Further, among all the franchised bus operators in Hong Kong, KMB has the longest history and is currently the largest, occupying approximately 70% of the franchised bus share in Hong Kong. Thus, KMB‟s quality of service affects many people in Hong Kong; it is of interest to a large share of the...
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