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QUALITY PAPER

Service quality evaluation of car rental industry in China

Min Zhang, Yueyue Xie, Lili Huang and Zhen He School of Management and Economics, Tianjin University, Tianjin, China

Abstract

Purpose – Due to the rapid development of automotive industry, China has become the world first in car production and consumption. However, under the pressure of environment pollution, traffic congestion and parking restriction in big cities, the car rental service, as an alternative solution for private car, becomes a new trend. The market is disorganized now. This research aims to use SERVQUAL model to further examine which dimension has great contribution to service quality.

Design/methodology/approach – A service quality evaluation scale for the car rental industry in China is designed based on PZB’s SERVQUAL model. The reliability and exploratory factor analysis methods are adopted to measure the validity and reliability of the scale from the sampled data. At the same time, the relationship between service quality, customer satisfaction and customer loyalty is discussed with the path analysis method.

Findings – The results show that the contribution of empathy to the total service quality ranks the top. At the same time, empathy has a strong impact on customer satisfaction and customer loyalty.

Practical implications – It is very important to attract customers depending on personalized services or service providing mode, that is, the empathy.

Originality/value – As a new mode in China, the car rental market is disorganized and has low service quality. The evaluation scale is designed including five dimensions. The analysis results provide guidance on how to improve their service quality to managers in car rental industry in China.

Keywords Service quality, SERVQUAL model, Car rental industry in China, Customer satisfaction, Customer loyalty

Paper type Case study

1. Introduction With the development of the automotive industry, China has become the world first in car production and consumption, where the quantity of private cars has been in rapid increasing. However, given the road conditions in China, the government will not allow each person to own a car even if more and more people have a driver’s license. This is because there is only limited amount of resource and having too many cars is in conflict with the building of a conservation-oriented society and sustainable development. 200 million is the tolerable limit for the environment in China. Under the pressure of environment pollution, traffic congestion and parking restriction, the car rental service, as an alternative solution for private car, becomes a new trend. In 2010, premier Jiabao Wen outlined that China needs to promote the development of car rental industry and advocate the philosophy of reasonable car consumption.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0265-671X.htm

This research is sponsored by the National Science Foundation of China, Grant No. 70931004, 70802043.

Received 6 November 2012 Revised 14 June 2013 Accepted 14 June 2013

International Journal of Quality & Reliability Management Vol. 31 No. 1, 2014 pp. 82-102 q Emerald Group Publishing Limited 0265-671X DOI 10.1108/IJQRM-11-2012-0146

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The world car rental industry originated in America in the twentieth century. The operation mode is car rental agencies rent automobiles for a contracted period of time to customers for a fee. America has a history of car rental stretching back more than 100 years. In 1908, Ford Motor Company produced the Ford Model T, which was so low in price that it opened travel to the common middle-class American. In 1918, Walter L. Jacobs founded the first car rental company, Rent-A-Ford-Car Company, in Chicago, which grew rapidly from 23 to 565 cars by 1923 and was merged into John D. Hertz later. America car rental industry started to bloom since then, and expanded in operation scale in the 1990s. Today, large-scale car rental companies are distributed all over the world. In Europe and America there are world famous Avis Car Rental, Hertz Car Rental, Budget Rent A Car System, Inc., and Europcar. Taking Hertz Car Rental as an example, it operates from approximately 8,500 locations in 146 countries worldwide.

The car rental industry in China originated in Beijing in 1989. To meet the demand of foreign correspondents and relevant personnel in 1990 Asian Games for convenient and private transportation, the company First Rent A Car was founded in Beijing. Since then the car rental service grew silently in Beijing, Shanghai, Guangzhou, Shenzhen and some large cities granted higher priority of reform and opening-up, and until the year of 2000 the car rental service started to be distributed to many cities in China. As far as we can see, the car rental industry in China has a broad prospect. Many world famous car rental companies such as Avis Car Rental and Hertz Car Rental have entered the China market, more and more people start to Rent A Car, resulting in remarkable increase in business volume especially after restrictions on private car purchase were issued in first-tier cities, and increasingly more enterprises would like to invest to this market. Currently, there is a trend towards scale operation and chain operation in the car rental industry. They provide service in “air plane þ car” and “train þ car” mode by cooperation with finance, insurance, air transport, tourism, hotel, and automotive manufacturing sectors, support car rental and return in different cities, and apply an effective control and membership management system so as to satisfy customer demand to a great extent.

Although the car rental industry has been developing in China for 20 years, it still falls far behind in citizen’s awareness and operation scale compared with Western countries. This has been shown in the following aspects (Sun and Yuan, 2011):

. The industry is centered in first-tier cities. Beijing, Shanghai, Guangzhou, and Shenzhen account for 59 percent of the total market share. The car rental penetration rate in Shanghai and Shenzhen in 2010 reached 1.2 percent, close to the average value 1.3 percent in America over the same period; however, the car rental penetration rate in third-tier cities was merely 0.04 percent.

. This industry serves mainly the corporations and high-end customers. Common citizens do not have the habit of renting a car yet.

. According to statistics, there are more than 400 car rental companies registered in China and 40,000 cars for rent by 2012. However, most companies operate in a small scale and with low profits, incapable of defending any market risks or expanding existing market. Of all the car rental companies, 80 percent can only provide less than 50 cars available for rent, 70 percent hire only less than five employees, and 85 percent have less than two locations.

Service quality evaluation

. Medium and large-scale car rental companies, such as Shouqi Car Rental, are centered in Beijing, Shanghai, Guangzhou, and economically developed coastal cities. Nevertheless, all these companies serve only local customers, and a car rental service network covering the whole country is still to be built.

. The market is disorganized because of the absence of scale operation and chain operation and the absence of management institutions. Now the market gets into an embarrassment that service quality varies across the country and overall service level of the industry falls behind.

After examining the characteristics and existing circumstances of China car rental industry, some scholars proposed to establish relevant laws and regulations and apply the scale and network management mode to this industry. Latest research shows that qualitative analysis is widely used, while quantitative analysis of car rental industry in China is in blank. In view of this, this paper attempts to explore a method of evaluating the service quality of China car rental industry on the basis of PZB’s SERVQUAL model to improve the quality of car rental services, enhance the competitiveness of car rental companies, and promote China car rental industry into sound development.

The structure of this paper is as follows. First, previous service quality-related studies are reviewed and car rental industry characteristics are analyzed. Second, detailed items to measure the customer perceived service quality are designed based on the five dimensions (tangibles, reliability, responsiveness, assurance, and empathy) of the SERVQUAL model. Third, the relationship among the five dimensions of service quality, customer satisfaction and loyalty is explored in car rental industry in China. At last, some advice is provided for the managers in Chinese car rental companies to improve service quality and customer satisfaction.

2. Literature review 2.1 Service quality It is difficult to define, measure, or control service quality due to the three features of intangibility, heterogeneity, and inseparability. People have done large amounts of valuable research in service quality and relevant topics in the past 30 years. Grönroos (1984) proposed the concept of customer perceived service quality for the first time, and he believed that service quality was the comparison between the customer expected and perceived service, including technical part (service result) and functional part (service process). In later years, Parasuraman et al. (1985) made further research into the customers’ perceptions of service quality, and presented a gap model in 1985, which defined the service quality as the gap between the expected quality before customer purchase and the perceived process and result quality after purchase. Based on the difference model, the three professors (Parasuraman et al., 1988) provided ten elements affecting service quality, and summarized them into five dimensions in 1988, namely, tangibles, reliability, assurance, responsiveness, and empathy. At the end, the famous SERVQUAL model was formed.

The SERVQUAL model received wide acceptance from scholars and was applied to service quality research in department stores, hotels (Akbaba, 2006; Wilkins et al., 2007), medical and health care institutions, travel agencies (Kaynama and Black, 2000), IT consulting industry (Yoon and Suh, 2004), banks (Sureshchandar et al., 2002), air transport (Frost and Kumar, 2001), electronic retailing (Finn and Charles, 1991;

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Zhou and Lu, 2007), fast food (Yang, 2010), and government departments (Lv et al., 2009). In passenger transportation industry, some researches have studied the use of SERVQUAL model (Caro and Garcia, 2007; Huang, 2009; Barber and Scarcelli, 2010; Liou et al., 2010; Yang et al., 2010; Awasthia et al., 2011; Chou et al., 2011a). In their researches, based on the SERVQUAL model, the scholars made some modification according to sector characteristics, and proposed a new model that is suitable for one sector to evaluate their service quality.

2.2 Customer satisfaction and loyalty Oliver (1980) defined customer satisfaction as the comparison between expectation and experience before and after purchasing, that is the expectation-disconfirmation theory. He believes that customer satisfaction is a relative concept. If a product or service exceeds the customer expectation, the degree of customer satisfaction is high; otherwise, it is low. Cronin and other scholars propose to describe the degree of customer satisfaction as interest, enjoyment, surprise, anger, wise choice, and doing the right thing. Customer satisfaction has been studied in many fields. Ha and Stoel (2012) investigated which dimension among four e-shopping quality factors identified (privacy/security, web site content/functionality, customer service and experiential/ atmospheric) has significant impact on e-shopping satisfaction contributing to e-shopping intention. Lanjananda and Patterson (2009) examined two groups of constructs – dispositional variables as well employee perceptions of service climate to study the determinants of customer-oriented behavior in a health care context. AI-Hawari et al. (2009) investigated the significance of service quality factors on customer retention within the Australian traditional and automated banking contexts.

There is no consensus opinion on the concept of customer loyalty. Dick and Basu (1994) believed that customer loyalty is a long-term commitment that customers would like to purchase the products consistently. Oliver (1999) pointed out that customer loyalty is a commitment to re-buy and re-patronize a brand of products and services consistently in the future. Fornell (1992) thought that customer loyalty should be measured from two aspects: whether customers would like to purchase the product or service consistently and whether satisfied customers are willing to pay more for the product or service. Burton et al. (2003) believed that customer loyalty is determined by whether customers’ experience is satisfied. The more customers’ experience is satisfied, the more they are willing to purchase the product or service again.

2.3 Assumption and model Currently, there are increasingly more scholars starting to research the relevance between service quality and customer satisfaction. Some scholars think that the two concepts are similar and can be used alternatively, while others hold the reverse opinion. Ruyter and Lee (Ruyter et al., 1997; Lee et al., 2000) empathized that service quality varies from customer satisfaction because the former is the overall evaluation on a product or service after deep reflection and the latter focuses on the result of a certain transaction. Bitner et al. (1997) thought that customer satisfaction covers more broadly than service quality, and the perceived service quality is just one of the elements affecting customer satisfaction. Dabholkar et al. (2000) proposed to measure service quality and customer satisfaction separately so as to discover more about the

Service quality evaluation

way customers evaluate the service quality. Through empirical analysis, Gilbert (2000) found that customer satisfaction is directly affected by two dimensions of personal service and technical competence. Such relationship between service quality and customer satisfaction was also studied in passenger transportation service (Fellesson and Friman, 2008; Lai and Chen, 2011; Chou et al., 2011b; Huang, 2009; Kuo and Tang, 2011).

Based on these theories, this paper makes the following assumptions about the impact of five service quality dimensions on customer satisfaction in the car rental industry:

H1. Tangibles have a positive effect on customer satisfaction.

H2. Reliability has a positive effect on customer satisfaction.

H3. Responsiveness has a positive effect on customer satisfaction.

H4. Assurance has a positive effect on customer satisfaction.

H5. Empathy has a positive effect on customer satisfaction.

In addition, most scholars believe both service quality and customer satisfaction directly affect customer loyalty. Joseph et al. (2000) pointed out that service quality has a direct impact on customer loyalty after analyzing the data in six sectors including spectator sports, participative sports, entertainment, health care, fast food, and long-distance carrier. During the analysis, they find that except medical care and toll telephone, service quality of the other four sectors has direct impact on customer loyalty. Based on the study on reasons and results of customer satisfaction, Anderson and Sullivan (1993) were of the opinion that customer satisfaction has a positive impact on customers’ re-buying intention, which is a representation of customer loyalty. During the study on electronic commerce, Collier and Bienstock (2006) discovered the customer loyalty subjects to customer satisfaction, which depends on the process quality, result quality, and remedy measures. Therefore, they got the conclusion that process quality and result quality affect customer loyalty in an indirect manner. Gotlieb et al. (1994) believed that customer satisfaction is a medium between service quality and customer loyalty, through which service quality affects customer loyalty. Accordingly, this paper makes the following assumptions:

H6. Tangibles have a positive effect on customer loyalty.

H7. Reliability has a positive effect on customer loyalty.

H8. Responsiveness has a positive effect on customer loyalty.

H9. Assurance has a positive effect on customer loyalty.

H10. Empathy has a positive effect on customer loyalty.

H11. Customer satisfaction has a positive effect on customer loyalty.

Based on the above assumptions, a model is established to show the relationship among the five dimensions of service quality, customer satisfaction, and customer loyalty, as shown in Figure 1.

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3. Research method design 3.1 Design of questionnaires The car rental industry has been developing for more than 20 years in China. Nowadays, car rental companies of a certain operation scale appear in many cities, such as Shouqi Car Rental and Beijing Shenzhou Automobile Serves Ltd in Beijing city, Zhizun Car Rental in Shenzhen city, Avis Car Rental, Hertz Car Rental, and eHi Car Service in Shanghai city. The emerging industry, on one hand, satisfies citizens’ demand for personalized traveling, and on the other hand, provides employment opportunities to people unemployed currently. Car rental services, clearly aimed at the customer demand, include short-term car rental, long-term car rental, car with a driver service, self-driving car rental, business car rental, and point-to-point transfer service. Figures 2 and 3 show the main steps in the process of renting and returning a car. The process involves the profile of car rental companies, valid documents of the customers, business management system, performance and price of the car, delivery of the car, and car insurance.

In terms of building the dimensions for quality evaluation of the car rental industry, the integrity of the SERVQUAL model is maintained containing all the five dimensions tangibles, responsiveness, reliability, assurance, and empathy. Based on the industry characteristics, after visiting some senior managers and their customers, referring to relevant documents and experts advices, 34 items corresponding to the five dimensions above are designed in this paper (Table I).

Figure 1. The relationship model of five dimensions of service

quality, customer satisfaction and customer

loyalty

Assurance

Responsiveness

Reliability

Empathy

Tangibles

Customer satisfaction

Customer loyalty

Service quality evaluation

Figure 2. Process of renting a car

Customer

Common Customer

Business reception Choose a car model

and determine the price.

Select a car, test driving, sign the contract,

and make a payment.

Leave the car rental

site.

The customer presents

valid documents.

Document verification

VIP customer

Business management system

Figure 3. Process of returning a car

Customer

End of the

process

Inspection on the car

Check on total mileage,

fuel consumption, and violation

record

Fill in the delivery list and sign it.

Calculate the fees.

Get the deposit

refunded and make

a payment.

The company refunds the deposit on traffic violation a month later after confirming no violation record ever made.

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As for customer satisfaction and loyalty, we design the scale and items on a theoretical basis of that designed by Westbrook and Oliver (1991) and Olorunniwo et al. (2006) and with the industry characteristics considered, as shown in Table II.

3.2 Collection of samples The questionnaire, targeting those people having car rental experiences, was delivered by half to acquaintances by email and the other half to customers of car rental companies in Beijing and Tianjin. The two cities are chosen because Beijing is China’s capital, a developed and densely populated city, where large-scale car rental companies prevail, and Tianjin is an emerging city in the development of service industry. We believe that samples collected here can represent China car rental industry to a certain

Dimension Item

Tangibles 1. The company is easily accessible with convenient traffic condition 2. The employees are well dressed and appear neat 3. The company’s environment is clean 4. Appearance and performance of the cars are in a good condition 5. The cars for rental are of various models 6. Both renting and returning a car go through simple formalities 7. Multiple insurances such as accident insurance, burglary insurance, car damage

insurance, and third party liability insurance are provided Reliability 8. The company operates with modern facilities and management system

9. The service price is reasonable 10. All necessary tools and documents are available 11. The company records the service information correctly 12. The standard for accepting a returned car is consistent between customers 13. Customers can return the car in a different city

Responsiveness 14. The company can immediately provide the car required by customers 15. The company has earned a good reputation 16. It is easy to renew a car rental contract 17. The company provides convenient reservation channels including telephone,

visiting, or online help 18. The company quickly responds to reservation demand of customers 19. The employees give a timely and accurate answer to customer’s questions 20. Customers can search wanted information at the company web site

Assurance 21. The employees present themselves in a friendly, enthusiastic manner 22. The employees can interpret clearly the clauses in the contract 23. Customers feel safe during the transaction 24. The employees are polite 25. The employees have high service capability 26. The employees can receive support from the company to provide better service

Empathy 27. The company addresses customer complaints in an efficient way 28. The company provides fast repairs to the rented car when faults occur 29. The employees communicate clearly and effectively with customers 30. The company delivers personal service to the customers 31. The employees can grasp customers’ demand for car rental service accurately 32. The company holds frequent and attractive promotional activities 33. The company can provide on-site rescue 34. The company apologizes and makes compensation for the inconveniency to the

customers

Table I. Service quality items of the car rental industry

Service quality evaluation

extent. During the investigation, we handed 181 questionnaires out, and collected 117 questionnaires, of which 111 are valid and six are invalid because of incompleteness or the way against the requirements. The response rate of questionnaires is 64.64 percent. The questionnaire is designed with the five-point Likert-type (1 – strongly disagree to 5 – strongly agree).

As shown in the descriptive statistics, the ratio between male and female respondents is 60 to 51 that is reasonable, and the age of 78 respondents ranges from 21 to 30 accounting for 70.3 percent of all the respondents. As for the times of renting a car, 29 respondents select twice or three times, and 40 respondents select more than three times, and the two account for 62.2 percent of total respondents. As for the purpose of renting a car, 57 respondents select the option of travel, and 37 respondents select the option of business, which shows that most people Rent A Car for travel or business.

4. Data analysis and model test This paper makes reliability analysis, factor analysis, and path analysis on the sample data with SPSS 19.0 and AMOS 7.0.

4.1 Reliability analysis The reliability is a factor that reflects the truthfulness of the object of investigation, and indicates that the investigation results are consistent and stable. There are multiple methods of measuring the reliability such as test-retest reliability, split-half reliability, and Cronbach’s a, of which Cronbach’s a has wide applications and is the mostly used method by now in calculating the reliability of Likert scale. Therefore, in this paper Cronbach’s a is used to evaluate the reliability of the scale of car rental service quality. The results of reliability analysis are shown in Table III.

Dimension Item

Customer satisfaction 1. Customers are satisfied with the service 2. Customers think this company was a right choice 3. Customers were pleased with the service this company provided

Customer loyalty 4. Customers would like to recommend the company to others 5. Customers felt positive about the company 6. Customers regard the company as the No. 1 car rental service provider

Table II. Items of customer satisfaction and loyalty

Dimension Number of items Cronbach’s a

Tangibles 7 0.837 Reliability 6 0.841 Responsiveness 7 0.895 Assurance 6 0.910 Empathy 8 0.897 General 34 0.966

Table III. Dimensional and general reliability

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The higher the value of a is, the greater degree the investigation results are converged to, and the higher reliability the questionnaire has. From Table III, it can be seen that both dimensional and general reliability are more than 0.8, higher than the minimum critical value 0.7, which means the preliminary scale of service quality has a relatively high reliability.

There is a scale if item deleted option on the reliability analysis interface. If you click it, the following content is generated: scale mean and variance if item deleted, corrected item-to-total correlation, squared multiple correlation coefficient, and Cronbach’s a if item deleted (Guenzi and Pelloni, 2004). Wherein corrected item-to-total and a if item deleted are useful to screen the items in the questionnaire. PZB pointed out that an item should be deleted when it has little relevance to its dimension that means it has a low correlation coefficient or varies greatly from other items in the same dimension. The changes to reliability if one item is deleted from the scale are shown in Table IV.

From Table IV, it can be seen that the a does not rise much if an item is deleted from the four dimensions of tangibles, reliability, responsiveness, and assurance, but it does rise from 0.437 to 0.908 if the item 32 is deleted, which indicates this item has a relatively weak relationship to its respective (empathy) whose reliability is raised after this item is deleted. Therefore, we delete this item. Both the dimensional and general reliability increase with the deletion of this item, the reliability of empathy increased to 0.908 and the general reliability to 0.967. Then, there are 33 items in the service quality evaluation scale of the car rental industry.

4.2 Factor analysis After the reliability analysis, exploratory factor analysis was employed to identify the dimensionality of the car rental industry service quality by using the SPSS 19.0. Through analysis, we find the KMO is 0.919 and Bartlett’s test of sphericity is 0.000, which indicate that sample data is suitable for factor analysis. The factor loading of each item is shown in Table V.

A principal component factor analysis with Varimax rotation was performed and five factors were extracted. As a result, 68.150 percent of the variance might have been explained. After analyzing the factor loadings in Table V, it is found that the item distribution is not totally consistent with that assumed in Table I. There are 25 items distributed same as that in Table I. While items 4-7, 11, 20, and 22 are distributed at a different dimension, and item 29 is distributed at two factors. This means the preliminary dimension structure of the car rental service quality scale requires adjustment. According to the opinion of Hair and other scholars, the items having a low factor loading (less than 0.5) and those having high factor loadings on more than one factor should be deleted. We check Table V against this standard, find that item 29 has a high factor loading at two factors (factors 2 and 4) and the factor loading of items 6, 23, and 26 is less than 0.5, so we delete the four items from the scale. In this case, the factor analysis are employed again, and 68.830 percent the variance might have been explained (please see model 2). We delete the unqualified item 4 and make factor analysis again until all items are qualified. The results of every factor analysis are shown in Table VI.

Totally, we have made eight times of factor analysis, deleted 11 items, reserved 22 items, and obtained the dimension structure for car rental industry according to the results of model 8 (Table VII). Wherein, there are six items in the empathy dimension after items 29 and 32 are deleted (during the reliability analysis); only item 20 is deleted from the responsiveness dimension; there are three items, namely items 1-3, reserved in

Service quality evaluation

Item Corrected item-to-total a if item deleted

Tangibles 1. The company is easily accessible with convenient

traffic condition 0.498 0.829 2. The employees dress and present themselves

decently 0.692 0.798 3. The service environment is clean 0.670 0.802 4. Appearance and performance of the cars are in a

good condition 0.573 0.817 5. The cars for rental are of various models 0.486 0.830 6. Both renting and returning a car go through

simple formalities 0.588 0.815 7. Multiple insurances such as accident

insurance, burglary insurance, car damage insurance, and third party liability insurance are provided 0.615 0.810

Reliability 8. The company operates with modern facilities and

management system 0.700 0.801 9. The service price is reasonable 0.585 0.822

10. All necessary tools and documents are available 0.703 0.798

11. The company records the service information correctly 0.548 0.829

12. The standard for accepting a returned car is consistent between customers 0.651 0.813

13. Customers can return the car in a different city 0.622 0.829 Responsiveness 14. The company can immediately provide the car

required by customers 0.686 0.881 15. The company has earned a good reputation 0.700 0.880 16. It is easy to renew a car rental contract 0.579 0.892 17. The company provides convenient reservation

channels including telephone, visiting, or online help 0.729 0.877

18. The company quickly responds to reservation demand of customers 0.812 0.867

19. The employees give a timely and accurate answer to customer’s questions 0.728 0.876

20. Customers can search wanted information at the company web site 0.666 0.884

Assurance 21. The employees present themselves in a friendly,

enthusiastic manner 0.776 0.890 22. The employees can interpret clearly the clauses in

the contract 0.718 0.899 23. Customers feel safe during the transaction 0.746 0.894 24. The employees are polite 0.763 0.892 25. The employees have high service capability 0.770 0.891 26. The employees can receive support from the

company to provide better service 0.729 0.896

(continued )

Table IV. Changes to reliability if some item is deleted

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the tangibles dimension; the factor loading of item 5 is larger in the reliability than in tangibles dimension, so it is transferred to the reliability dimension, when there are five items in the reliability dimension; there are two items, namely items 24 and 25, reserved in the assurance dimension after four items are deleted. Until now, all items meet the requirements by Hair (1998), which means the new dimension structure is reasonable and valid. The first column of Table VII lists the reliability of each dimension, and it can be seen that all of them are relatively of a large value, which proves the good reliability of model 8 again.

The final service quality evaluation scale is shown in Table VIII with the average value for each item and dimension. The average value of item 13 (the company quickly responds to reservation demand of customers) is 4.11 and is the largest among all the items. Thus, the car rental companies achieve better performance in the reservation responsiveness than in the other aspects, which may be due to the application of mature and effective information technology in car rental industry. Many companies have fast and convenient reservation means to satisfy their customers. On the other hand, the average value of item 17 (the company addresses customer complaints in an efficient way) is only 3.20 and is the lowest. It is necessary to improve the customer complaint efficiency for car rental companies in China.

The average value of the responsiveness dimension is 4.02 and is the highest among these five dimensions. However, the average value of empathy is just 3.39 and the lowest. As shown by Table VII, the contribution of empathy to the total service quality ranks the top. Thus, the car rental companies should pay more attention on empathy to gain their competiveness. We will discuss empathy more detailed in Section 5.

4.3 Hypothesis testing As mentioned previously, this study aims to investigate the nature of the relationships between the five service quality dimensions and customer satisfaction, loyalty. In this study, path analysis (Figure 1) is employed by using AMOS 7.0. Path analysis is one form of structural equation modeling (SEM) that allows empirical estimation of the

Item Corrected item-to-total a if item deleted

Empathy 27. The company addresses customer complaints in

an efficient way 0.771 0.876 28. The company provides fast repairs to the rented

car when faults occur 0.659 0.886 29. The employees communicate clearly and

effectively with customers 0.698 0.884 30. The company delivers personalized service to

the customers 0.761 0.877 31. The employees can grasp customers’ demand for

car rental service accurately 0.632 0.889 32. The company holds frequent and attractive

promotional activities 0.437 0.908 33. The company can provide on-site rescue 0.739 0.879 34. The company apologizes and makes

compensation for the inconveniency to the customers 0.786 0.874 Table IV.

Service quality evaluation

Loading Item 1 2 3 4 5

18 0.736 0.22 0.187 0.226 0.222 14 0.727 0.293 0.232 0.052 0.225 15 0.623 0.174 0.245 0.277 0.358 17 0.611 0.044 0.295 0.33 0.268 11 0.589 0.011 0.314 0.454 0.049 22 0.575 0.46 20.072 0.471 0.196 19 0.539 0.434 0.124 0.409 0.253 16 0.534 0.254 0.396 0.064 0.05

4 0.506 0.335 0.394 0.221 0.003 28 0.187 0.78 0.119 0.122 20.009 34 0.219 0.725 0.175 0.204 0.371 33 0.145 0.703 0.257 0.23 0.195 30 0.075 0.7 0.254 0.264 0.109 27 0.409 0.692 0.128 0.126 0.273 31 0.421 0.52 0.354 0.178 20.041

9 20.02 0.394 0.662 0.215 0.025 5 0.304 20.014 0.652 0.232 20.01

12 0.171 0.323 0.642 0.218 0.133 20 0.395 0.087 0.611 0.11 0.309

8 0.196 0.154 0.597 0.371 0.369 7 0.49 0.197 0.563 0.161 0.145

13 0.295 0.309 0.555 20.054 0.325 10 0.495 0.168 0.519 0.095 0.448

6 0.437 0.284 0.478 0.013 0.274 25 0.249 0.274 0.283 0.754 0.124 24 0.25 0.329 0.222 0.649 0.229 29 0.247 0.53 0.213 0.584 0.22 21 0.171 0.498 0.177 0.527 0.427 23 0.409 0.324 0.158 0.48 0.358 26 0.184 0.417 0.205 0.478 0.447

1 0.257 0.05 0.064 0.101 0.823 2 0.184 0.226 0.281 0.441 0.64 3 0.143 0.355 0.228 0.31 0.621

Table V. Factor loadings of each item

Analysis process Item

Unqualified item

Cumulative percent of variance (%)

Number of qualified items

Model 1 Delete item 32 6, 23, 26, 29 68.150 29 Model 2 Delete items 6, 23, 26, and 29 4 68.830 28 Model 3 Delete item 4 7, 21 69.465 26 Model 4 Delete items 7 and 21 11 69.531 25 Model 5 Delete item 11 10 70.066 24 Model 6 Delete item 10 22 70.085 23 Model 7 Delete item 22 20 70.025 22 Model 8 Delete item 20 – 70.514 22

Table VI. Exploratory factor analysis process

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strength of each causal relationship. At the same time, based on the path coefficient between latent and endogenous variables, hypothesis test is verified. The hypothesis testing results are shown in Figure 4. From Figure 4, it can be seen that the five hypotheses of H4, H6, H7, H9, and H10 are not supported, wherein both customer satisfaction and loyalty are affected by responsiveness and not affected by assurance. There is a path coefficient 0.71 between customer satisfaction and loyalty, indicating strong impact of customer satisfaction on customer loyalty, which is consistent with most research conclusions (Disney, 1999; Guenzi and Pelloni, 2004; Bodet, 2008).

It can be shown from Figure 4 that the largest path coefficient value exists between empathy and customer satisfaction, indicating that empathy has a strong impact on customer satisfaction. Various service quality dimensions were discussed in different contexts of passenger transportation services. Paulley et al. (2006) studied the influence of fares, quality of service, income, and car ownership on public transport in the Great Britain. Several factors influencing the choice of transport are studied in Portugal (Beirao and Cabral, 2007). Fellesson and Friman (2008) identified that four dimensions of safety/security, system, comfort and staff behavior are the most important dimensions in major European cities. Fares, frequency and in-vehicle time are taken as the main attributes of urban bus services in Europe, North America, and Australia (Currie and Wallis, 2008). A quality measurement scale specific to dia-a-ride service is proposed and surveyed in one Canadian city (Paquette et al., 2011). Timetable regulation leads to a more effective Urban Public Transport system in terms of accessibility in Turkey (Gulhan et al., 2013). The process of selling tickets is considered

Dimension and a Item 1 2 3 4 5 Variance explained

(%)

Empathy (a ¼ 0.895) 28 0.792 0.204 20.004 0.132 0.071 48.119 30 0.741 0.055 0.171 0.188 0.301 34 0.717 0.246 0.386 0.188 0.085 33 0.712 0.192 0.19 0.187 0.259 27 0.698 0.393 0.302 0.136 0.007 31 0.521 0.443 0 0.346 0.181

Responsiveness (a ¼ 0.884) 18 0.228 0.808 0.205 0.08 0.239 7.311 14 0.293 0.721 0.254 0.177 0.005 17 0.067 0.653 0.302 0.176 0.353 15 0.196 0.61 0.409 0.193 0.186 16 0.267 0.586 0.018 0.322 0.098 19 0.462 0.571 0.3 0.093 0.28

Tangibles (a ¼ 0.833) 1 0.051 0.29 0.809 0.002 0.047 5.799 2 0.253 0.209 0.723 0.255 0.318 3 0.362 0.139 0.711 0.207 0.196

Reliability (a ¼ 0.803) 9 0.351 0.031 0.1 0.768 0.099 5.186 13 0.232 0.407 0.303 0.654 20.179 5 20.054 0.398 0.01 0.591 0.34

12 0.352 0.183 0.168 0.547 0.316 8 0.15 0.249 0.439 0.521 0.376

Assurance (a ¼ 0.836) 25 0.335 0.262 0.235 0.217 0.704 4.099 24 0.351 0.326 0.264 0.143 0.657

Table VII. Factor analysis results

and dimension reliability of model 8

Service quality evaluation

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3. 23

Table VIII. Service quality items of the car rental industry in China

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as the most critical items in road transportation of passengers in Brazil (Freitas, 2013). Reliability is one of the most frequently addressed attribute through implementations of BRT, an integrated public transportation system with extended services and rail substitutes of bus services in Sweden (Redman et al., 2013). The people of Calgary value reliability and convenience over ride comfort in Canada (Habib et al., 2011). Timeliness and price acceptability are most critical factors in port service quality of Korea (Lee et al., 2013). Level of access to Taiwan’s High-Speed Rail (THSR) stations and personal space on Korea Train eXpress (KTX) trains are the top-priority quality indicators (Chou et al., 2011b). For airline service quality in Taiwan, the important dimensions are responsiveness (Huang, 2009), cabin service criteria (Liou et al., 2010), reliability and the safety-related service items (Chou et al., 2011a), respectively.

In summary, reliability, tangibles and responsiveness are the most important dimensions in these studies. Our study on the service quality of car rental services in China has also found those factors important. However, empathy is the most important factor that affects the service quality of car rental services in China. The car rental companies in China have similar size and infrastructure facilities. To create a unique image and attract customers, these companies rely on unique service modes and personalized business models to identify with their target customers, which makes empathy the most important service quality factor in our study.

5. Implications A service quality evaluation scale of car rental industry in China is proposed based on the traditional SERVQUAL model. The relationship between dimensions of car rental service quality, customer satisfaction, and customer loyalty is also verified with the use of factor analysis and hypothesis testing. The findings have both theoretical and managerial implications.

First, the proposed scale provides a theoretical framework of service quality improvement for the managers in the car rental industry in China. The perceived value

Figure 4. Relationships model of

dimensions of service quality, customer

satisfaction and customer loyalty

Tangibles

Responsiveness

Reliability

Empathy

Assurance Customer loyalty

Customer satisfaction

0.18

0.23

0.20

0.16

0.71

0.2 8

Service quality evaluation

of each item reported by their customers indicates the strength and weaknesses in service quality evaluation items and dimensions. A higher score means that the company does better on this item, and vice versa. For example, the perceived value of item 21 (the company can provide on-site rescue) in the empathy dimension is only 3.2 and is the lowest among all the items after analyzing the survey of Shenzhou company’s customers. Based on that finding, this company should focus on improving their on-site rescue capability. On the other hand, the average value of item 17 (the company quickly responds to reservation demand of customers) of company Shenzhou is the highest among all the surveyed car rental companies, which shows that this company does the best on this item. Thus, the managers should focus more on other aspects that need much improvement. In addition, the managers of competitive car rental companies can learn that the success of Shenzhou is due to their quick responsiveness to reservation demand of customers.

Second, the contribution of each dimension to the whole service quality is empathy, responsiveness, tangibles, reliability and assurance in the order of their importance as shown in Table VII. Empathy ranks the top among the five dimensions. However, it is shown from Table VIII that the average value of empathy is the lowest. The finding provides guidance to car rental companies in how to improve their service quality. They should pay more emphasis on empathy dimension and take some active measures. The items of empathy dimension include understanding customer demands, offering quick and timely solution of customer problems, and providing personalized service such as on-site rescue. All of these items require the companies to bring forth new ideas of car rental modes from the view of customers with their special brand culture and corporate image. Thus, managers in such car rental companies should focus on their personalized services on the basis of service standardization.

Lastly, customer satisfaction has a strong positive impact on customer loyalty, indicating that service quality indirectly affects customer loyalty through affecting customer satisfaction. In conclusion, managers in car rental companies should provide high service quality to improve customer satisfaction. The more customers are satisfied, the more loyal they are to the company. The customers will likely purchase the product or service repeatedly and recommend it to their acquaintances. This creates good word of mouth, bringing new customers and increasing performance and profits, from which we can see the importance of service quality. Therefore, besides enhancing hardware in vehicles and electronics, car rental companies should give an emphasis to developing intangibles in company brand and culture and development of personalized services, establishing customer-oriented marketing strategies, and improving the service quality.

6. Conclusions Based on five dimensions of the SERVQUAL model, a preliminary service quality evaluation scale for the car rental industry in China is designed. Then the dimensions and reliability of the scale are verified. At last a reasonable service quality evaluation scale consisting of five dimensions and 22 items is constructed. Such research provides both an effective method of service quality evaluation for the car rental industry in China and a theoretical framework of service quality improvement for the managers in this industry. On one hand, companies receive instructions in how to enhance their service quality from the service quality components. On the other hand, managers in car rental companies should invest more to empathy, because the five dimensions are sequenced as

IJQRM 31,1

empathy, responsiveness, tangibles, reliability, and assurance by contribution to overall service quality according to the factor analysis results (Table VII).

During analysis of the relationship among service quality, customer satisfaction, and customer loyalty, it is found that tangibles, reliability, responsiveness, and empathy have a strong impact on customer satisfaction, only responsiveness has a direct impacts on customer loyalty, while assurance impacts neither customer satisfaction nor loyalty, and customer satisfaction has a strong impact on customer loyalty. The research results in this paper provide guidance to car rental companies in how to evaluate and improve their service quality. They should put emphasis on empathy to customers, such as understanding customer demands, offering timely help to customers to solve any problems they encounter and provide personalized services. At the same time, their customer satisfaction and loyalty can be increased.

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