research report

NSW Taxi Industry

-

Understanding consumer behaviour and building a

unique selling proposition

MGNT922 - BUSINESS RESEARCH PROJECT

Name: Phuong Nguyen

Student ID: 5961294

Word count: 3,918

Acknowledgement

The research has been conducted under the guidance of Ms. Zeynep Roberts, Coordinator and Lecturer of MGNT922 Business Research Project at Sydney Business School, University of Wollongong. We thank Ms. Roberts for providing knowledge and expertise that substantially assisted this research.

Moreover, we would also like to acknowledge with gratitude the support of all participants. Their insights were of fundamental importance to the understanding of the research problem, and the study would not have been possible without these individuals.

Table of Contents I. Introduction 5 II. Literature review 5 III. Research methodology 11 IV. Analysis and Interpretation 13 V. Conclusion 16 References 18

Executive Summary

The study aims to understand the competitive position and differentiation of the point-to-point transport service market, which is achieved through the understanding of consumer behaviour and attitudes towards services in the category. The report is divided into five main sections, namely introduction of the industry and problem under study, extensive literature review, research methodology, analysis and interpretation, and conclusion.

The introduction provides an introduction of the research and the overview of the NSW Taxi industry with its challenges to overcome. The report then provides a critical review of four relevant literatures linked to the research problem and questions. In this section, Katz's four functional theories of attitudes acts as a guidance for determining the underlying motives of consumer behaviour and attitudes. The second model reviewed is the innovation adoption model, which is directly linked to the creation of the unique selling proposition. The third model assesses the habitual, cognitive and affective decisions included in the consumer decision making process, while the last model mentioned is the three levels of product, which offers the view that a service is composed of factors beyond physical features, but also a complex combination of attributes and benefits.

The study employs both primary and secondary research, which consists of in-depth interview to collect qualitative data from a sample of 5, and survey to gather quantitative data using SurveyMonkey with a sample of 50. Moreover, secondary research retrieves information from online databases such as journal articles and news articles. The research employs samples of adults living in Sydney who use the taxi service at least monthly, with the sample being drawn using non-probability sample design and online sampling due to its ability to reach a wider range of people within a limited timeframe. However, the research has certain limitations such as the assumption of sample knowledge, personal values and research experience, as well as limited access to online databases, time and financial constraints.

I. Introduction

Along with the advancement of technology and the introduction to the digital age, consumer can now enjoy and enhanced experience when using public transport, with the provision of smartphone applications for easier access to services (Hensher 2017, p.86). In addition, the 2016 legislation for Uber services has allowed Uber to lawfully enter the market to provide high quality point-to-point transport services, booked through palm-based technology, as opposed to how the market used to be strictly protected by rigid laws (Hensher 2017, p.87). This has posed significant rivalry for the taxi industry, which puts the industry in the position to take action against these threats to remain profitable and sustainable in the market. In light of the matter, consumer behaviour and attitudes have been chosen as the main theme of the research as it is directly linked to customer loyalty and preferences (Selnes 1993, p.19).

The study aims to understand the behaviour and attitudes consumers have towards the taxi service, as well as measuring the perceptions consumers hold towards the quality of the taxi service, and the values they perceive to receive. From the information collected, the study seeks to determine how the taxi industry can create a unique value proposition to improve customer loyalty and strengthen its positioning in the market. The questions up for discussion include what the perceived core, actual and augmented values customers perceive in the service are; as well as what attitudes/behaviours they have towards the service and what they wish to have when using the service. In addition to a critical review of literature, primary data will be collected from users of the taxi service.

1. The relationship between variables and theoretical frameworks

The study is guided by four theories and models, namely Katz's four functional theories of attitudes, the innovation adoption model, the consumer decision making process model, and the three levels of product model.

The functional theories have been proven to provide an accurate prediction about the conditions in which consumers' attitudes can be affected (Locander & Spivey 1978, p.577). The theories recognise varied motivational patterns that impact on an individual's attitude, they provide a more complete understanding of the nature of consumer's attitude towards the taxi industry and support action plans to improve current situations (Locander & Spivey 1978, p.577). Katz's approach is highly regarded in consumer psychology, which includes four fundamental functions:

· Utilitarian function: learned through experience, utilitarian attitudes are difficult to change through verbal methods. Positive utilitarian attitudes are motivated by pleasant feelings, while negative attitudes are encouraged by unpleasant experience (Locander & Spivey 1978, p.577).

· Ego-defensive function: attitudes are held to protect an individual from internal insecurities and vulnerabilities. These attitudes are used as an adjustment or avoidance method for difficulties, and are most relevant when a consumer is exposed to new changes such as switching a preferred transport service or brand (Locander & Spivey 1978, p.577).

· Value-expressive function: assists an individual in aligning choices with personal values and self perception. The function helps a consumer associate positive attitudes with attributes that match their values (Locander & Spivey 1978, p.577).

· Knowledge function: refer to the need to understand one's surrounding environment. This function stems from a person's tendency to economise cognitive efforts by stereotyping to simplify reality. Thus, a consumer may group cognitive elements to define and respond to a stimuli, which also has implications in attitude change (Locander & Spivey 1978, p.577).

The second model used in this research is the innovation adoption model. As the study looks to determine how the taxi industry can create a unique selling proposition, the model is of high relevance. Innovation is linked to the uniqueness of the service, and consumers' inclination towards uniqueness can be seen as a chase for difference (Seng & Ping 2016, p.773). Different consumers possess different readiness to adopt a new service, which is illustrated in the innovation adoption model.

Figure 1. Innovation adoption model

Determining the needs and wants of consumers and creating a unique selling proposition can increase loyalty for a service, which increases demand and create purchase intention (Seng & Ping 2016, p.773), which leads to the decision making process (figure 2).

Figure 2. The decision making process

The decision making process involves habitual, cognitive, and affective decisions. Cognitive decision making is involved when consumers weigh the benefits and disadvantages of each choice and come to a final decision, whereas affective decision making concerns emotional responses to the service, which means when consumers have positive emotions towards the service, they are more likely to have good feelings towards the service. However, it is also important to note that in some instances, consumers may avoid and skip steps in the decision making process as they become disabled with too many choices (Huber et al. 2010). Consumer attitude in this case becomes relevant, as their behaviour can become more hybrid, and price and value for money become a determinant factor as their attitudes are largely based on trust and perceived benefits (Michelli 2008). Nevertheless, attitude is self-motivated since it can change if the consumer's circumstances change. Moreover, perception plays an important role in consumer experience. This means that once expected satisfaction is met, and the quality of the service is satisfactory, consumers will be positively influenced (Graham 2015). The model is highly relevant when it comes to assessing current attitudes and behaviour of consumers, as well as determining what consumers wish to experience when using the service, which are parts of the research problem.

Figure 3. The three levels of a product (Crane 2001, p.363)

2. Industry overview

As the peak body of the NSW Taxi Industry, the NSW Taxi Council represents taxi networks, operators, and owners, which advocated for better conditions for NSW taxi drivers (NSW Taxi 2018). The industry provides employment for more than 38,000 people across the region, which consists of 4,000 license owners, in excess of 200 networks, 6,000 operators, and more than 28,000 taxi drivers (NSW Taxi 2018). The industry's extensive network has been a significant contributor to the public transport system of NSW, meeting demands for consumers as a 24/7 door through door transport service across the state, through which people and destinations are connected for various purposes, including business, education, daily errands, and tourism. The industry prides itself on its ability to provide transport services even for the most disadvantaged in the community, which remains in operation even when other forms of public transport are not at the usual level of accessibility (NSW Taxi 2018). Moreover, beyond the taxi industry's contribution to the public transport network and the job market in the state, it also generates significant revenue for the economy, with an average of $1.15 billion generated each year through the sales of licenses and stamp duty, indirect taxes, and authorisation fees (NSW Taxi 2018). Moreover, the Sydney taxi service is one of the leading taxi services in the world, with remarkable efforts being made to continuously improve services through extensive training for current and new drivers, newer cabs, and advanced technology to ensure convenience for its consumers (NSW Taxi 2018).

Along with the development of technology, consumer experience can now be greatly enhanced through better access to services that are tailored to individual needs and preferences (Hensher 2017, p.86). Furthermore, the "Uberisation" of public transport and the 2016 legislation of Uber services have enabled Uber to legally enter an otherwise strictly protected market, where high quality point-to-point transport services can now be requested instantly via palm-based technology and are becoming increasingly popular (Hensher 2017, p.87). Thus, technology has assisted Uber in creating an efficient method of mobility that is available to everyone with different service level and pricing conditions (Hensher 2017, p.87). With the same number of service points, both Uber and taxi have to encounter difficulties in scalability, since there has been a big shift from private car and bus to booked point-to-point services (Mulley et.al. 2018, p.3). Furthermore, society has been transitioning towards a lifestyle where dependence on private vehicles is not as popular, which gives way for "mobility as a service" (MaaS) such as Uber and taxi to thrive (Hensher 2017, p. 86). This means that younger generations are less appealed by the idea of owning private cars compared to those from previous generations, thus MaaS can now become a feasible and convenient solution to provide services to people who do not wish to, or cannot, drive a car (Mulley et.al. 2018, p.4).

According to Porter's five forces model, with higher threat of entry supported by changes in regulations, along with increased buyer power since there are multiple choices in the market, higher threat of substitute and weakened supplier power with intense rivalry from Uber, the taxi industry is exposed to multiple threats that require the industry to take action. The research aims to address these threats and understand the industry's position and differentiation in the MaaS service market by understanding consumer attitudes and behaviour towards the taxi industry, the values consumers perceive to gain from the services, and the attributes they wish to obtain that can be used to improve current services.

Although multiple studies have been done in order to better understand the current situation of the MaaS market, Mulley et.al. (2018)'s study has edged out as it has given insight into the benefits that consumers expect from MaaS, such as the taxi service. The benefits include the functionality of the vehicle and availability of services service (Mulley et.al. 2018, p.3). The author has also suggested that unexpected benefits can be provided via servitisation, where the creation of service bundles can create a unique value proposition; as well as data sharing where consumer needs are to be used to improve the taxi service (Mulley et.al. 2018, p.3).

1. Research problem and questions

Understand customer behaviour and attitudes, and measure the perception customers have towards the taxi service quality and value. Determine how the taxi industry can build a unique selling proposition to improve customer loyalty and positioning in the market.

1. What are the consumer perceived core values of the service?

2. What are the consumer perceived actual values of the service?

3. What are the consumer perceived augmented values of the service?

4. What are the behaviours/attitudes of consumers of the service?

5. What values do consumers wish to have when using the taxi service?

2. Methodology

The study seeks to collect data from both primary and secondary sources to better understand the relationship between the values consumers perceive in the taxi service, their behaviour and attitudes towards the service, the values they wish to obtain, and their purchase intention. A secondary research approach will be conducted, with information retrieved from journal articles and news articles to obtain reliable, critical peer-reviewed as well as up-to-date information regarding the research topic. This will be conducted via online-based databases to source different views on the subject matter, and acts as a cost and time efficient method to collect data to be analysed for the interpretation of results, where samples are much larger and data is longitudinal compared to primary research methods.

Moreover, primary research will be performed to get an updated review on consumer behaviour and investigate their opinions towards the subject of the study, which will be done via in-depth interviews to collect qualitative data. The qualitative data collected from in-depth interview will act as a guide for developing survey questions, as well as providing insight based on which the study will be further constructed. The method aims to address consumer past and current experience, as well as what they look for in the future of the taxi industry.

Quantitative data is to be collected through survey, developed and shared via SurveyMonkey. This method allows to study to gain an overview of the link between perceived value and consumer desired attribute and loyalty, derived from a relatively larger audience compared to the in-depth interview method. The survey consists of questions relevant to the research problem with fixed alternative, in which some questions allow multiple options to be chosen, while others only allow one most accurate answer. The objective of this survey is to identify patterns in consumer behaviour and attitudes, which then will be measured to draw conclusions. This method enables the process to be quicker, as multiple responses can be gathered at the same point of time.

The study uses both exploratory and conclusive research, out of which exploratory research conducted using in-depth interview and secondary analysis offers insights and understanding of the research problem. The research process of this method is relatively less structured, with a research sample of 5 people for descriptive and relational research. Moreover, conclusive research design will be employed to assess the relationship of variables with the use of survey, with items of the survey clearly defined to draw conclusive results.

In the research process, research ethics rules will be implemented to ensure confidentiality and consent. There is an age restriction, as only individuals aged 18 or older will be considered for the participation in the research. Moreover, people who are cognitively impaired and are not able to consent will not be considered for the study. To ensure participants of the research have the desired demographical and behavioural characteristics for the study, screening questions will be utilised. Samples of the research consist of adults living in the city of Sydney, Australia who use taxi services at least once a month. A sample of 5 people is needed for the in-depth interview, while a sample of 50 people will be engaged in responding to survey questions. The sample design method includes non-probability, with convenience sampling to be utilised as a cost and time efficient mean for the study. To gain participation for the online survey, online sampling is used as it has the capability to reach a much wider audience within a short time period.

3. Limitations

The research has three main assumptions, namely epistemological, ontological and axiological assumptions, which means it is unable to assess the knowledge, research experience, and personal values of research participants that can impact on the result of the study. Another limitation of the research is that there are restrictions to access of online databases, therefore

some literature and/or previous studies that have been done regarding topics relevant to the research problem are not to be included in the demonstration of study results. Moreover, the chosen samples may not represent the entire population of people living in NSW, and the study is limited by time and financial constraints.

The chosen sample range from 18 to 45 in age, with the median age being 25, and the average age being 26 in years, which is demonstrated in figure 4. Most respondents range between 20 and 32 years of age, with a smaller number of respondents falling under 20 or over 32 years old. This diversity in age offers a wider and more complete view of the target market. Moreover, there is a balanced ratio of males and females, with 50% of respondents being male and 50% being female, which represents that there is an equal share of consumers in both genders.

Figure 4. The age disparity of respondents

Uber has proven to be the preferred method of MaaS, with 20% of respondents referring to it as the preferred method of transport, only 10% short from the percentage of those who prefer driving a private car (figure 5). The next mode of transport to come on the list is taxi, with 18% of respondents claiming to use it as the preferred method. The method of booking most respondents report preferring is mobile application, with 56% choosing this option, as opposed to phone, online booking, and hailing with 20%, 5% and 19% of responses respectively (figure 6).

Figure 5. Preferred mode of transport

Figure 6. Preferred method of booking

When it comes to which attributes consumers wish to receive from the taxi service, safety comes first on the list with 40% of respondents agreeing that it is a crucial factor to consider. Convenience is the next attribute that consumers factor into their decisions, while reliability and availability of service are also amongst the most highly regarded factors (Figure 7). Moreover, when it comes to benchmarking these needs against what consumers perceive of the taxi service, these is a disparity between what consumers perceive they can get from the service and what they wish to have. Consumers still perceive the taxi service to be highly convenient, while safety is not as highly regarded as only 20% of respondents perceive taxi to be a safe service. While 23% perceive the cost of using taxi as appropriate for its values, the availability falls short in meeting expectations with only 18% perceive it to be satisfactory (figure 8).

Figure 7. Values that consumers wish to have when using the service

Figure 8. Consumer perceptions towards attributes of the taxi service

In terms of consumer satisfaction with the taxi mobile application, the majority of respondents rate the app 4 or 3/5, with 1 being the least satisfied and 5 being the most. The main reasons for this, according to data collected from in-depth interviews, are due to glitches and bugs in the app, as well as the limitations of app features (figure 9).

Figure 9. Consumer satisfaction with the taxi mobile application

When asked what are the benefits they perceived in the taxi service, 3 out of 5 people regard convenience as the actual product, with statements such as "It is a convenient way for me to get places", "I do not need to find a parking", and "I like it when someone just shows up and drives me to wherever I want". The core product perceived is a point to point transport service, and the augmented products perceived are payment method and complaint handling. Participants report perceiving taxi as less technology-advanced and affordable compared to Uber, however 4 out of 5 participants agree that "I do not want to trade good services for lower prices". All 5 participants claim to be willing to change their mind if being convinced by a friend or family member, and 3 people report considering online reviews of the service. 4 participants state that they are willing to embrace new changes and innovations, including a new unique selling proposition.

The research has concluded that technology has improved the taxi hire experience, with mobile application being the preferred choice of booking a MaaS service. There is a general tendency in consumers to embrace change and innovation, however consumers perceive the taxi service to be less technologically-advanced and affordable. The affordability of the service does not prove to be a significant issue, as consumers report not being willing to exchange cost for lesser quality. Moreover, it is important to note that consumer attitude can be affected by influence groups, thus word of mouth can be an effective and inexpensive method of marketing to be used for the taxi industry. From the information gathered, it is suggested that the taxi industry can use safety as a unique selling proposition, which can then be delivered to consumers via marketing activities such as creating an integrated marketing campaign with safety as the main theme. The campaign may include online advertisements, YouTube videos, and posters targeted at the industry's target market. Figure 10 demonstrates an example of a poster that can be used in the campaign to introduce the taxi industry's unique selling proposition, however efforts can go above and beyond the example to assist with the success of the campaign.

Figure 10. Example of poster for marketing activities. Adapted from Shutter Stock (2010)

Moreover, improvements can be made to current taxi applications, with changes such as fixing bugs and introducing new features, including the option to scan a taxi's license plate to obtain information about the driver and the route the consumer will be travelling, as well as sending said information to a third account for increased perceived safety. An additional method the industry can utilise is word-of-mouth, which can incorporate technology in the form of in-app referrals as a cheap and easy way to encourage potential and past users of the service to make the switch to taxi.

Apart from providing insights on which the aforementioned suggestions are based, the study can also provide a foundation for future studies of the subject matter. To further explore the topic, other social, economic and cultural factors can be considered when it comes to understanding consumer behaviour and attitudes towards the taxi industry, as well as elaborating factors that impact consumer turnover. From this, a model that guide the understanding of consumer behaviour can be developed. Moreover, due to the dynamic consumer behaviour, longitudinal studies can be performed to better understand consumer behaviour towards taxi services.

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NSW Taxi 2018, Overview, NSW Taxi 2018, viewed 13 September 2018, <https://www.nswtaxi.org.au/about/overview>.

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Preferred mode of transport

Private car Uber Taxi Train Walking Lightrail Other 0.3 0.2 0.18 0.15 0.08 0.05 0.04

Preferred mehod of booking

Online booking Mobile app Phone Hailing 0.05 0.56000000000000005 0.2 0.19

Consumer needs

Customer perception towards attributes of taxi

Satisfaction with mobile app

Phuong Nguyen - 5961294