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CHAPTER ONE

INTRODUCTION

1.1 Introduction

Online gaming is one of the most popular entertainments among the citizen in this world no matter what ages they are. Due to the advancement in the technologies, it has brought lots of growth in this industry since early of 2000s. This growth has been developed online game market into the core of the world cultural industry (Sang, Yung, Jae, and Kyoung, 2004). Hsu and Lu (2003) stated that online game service has been a highly profitable e-commerce application in recent years and its market value has increasing markedly as well as number of player growth at the same time.

Now a day, most of the household will owned at least one personal computer (PC) or a laptop and some even more than that due to the cheaper cost to have a computer. Consequently, the demand for computer has been grown rapidly throughout this recent year. The accessibility of internet also is easier with each passing year and the cheaper price to have broadband internet connectivity (Bizymoms.com).

Generally, online game service can be categorized as business-to-consumer or B2C in e-commerce and it is also one the videogame and interactive entertainment industry. A strategic market research and consulting firm which focuses on the interactive entertainment and the emerging video game, online game, interactive entertainment and portable game markets namely, DFC Intelligence has made its forecast for worldwide videogame and interactive entertainment industry each year since year 1995. According to DFC Intelligence forecast on year 2008, the worldwide videogame and interactive entertainment industry revenue to reach USD 57 billion in 2009 with no signs of slowing due to the slumping economies and expensive hardware (Androvich, 2008).

The rapid growth in videogame and interactive entertainment industry has been attracted lots of entrepreneur who would like to enter this profitable industry. Based on the report of DFC, PC was the top platform for games in 2007, with online game revenue alone eclipsing USD 7 billion on year 2006 and not including retail sales. The DFC also stated the total PC game revenue is expected to reach USD 19 billion by year 2013 (Androvich, 2008).

In Malaysia, there were 15 million subscriber of internet and it was 62.8% out of the total population in 2008 (Internet World Stats, 2008). It was more than half of the citizens of Malaysia have used the internet and this has brought a great opportunity to the entrepreneur who would like to join this industry to be one of the online game service providers to share the profit since the number of internet users was increasing each year. It did not showed that the number of the online game subscribers but there is a business opportunity for the entrepreneur to start-up their business through online.

Table 1.1: Internet Usage and Population Growth of Malaysia

Year

No. of Users

Total Population

%

2000

3, 700, 000

24, 645, 600

15.0%

2005

10, 040, 000

26, 500, 699

37.9%

2006

11, 016, 000

28, 294, 120

38.9%

2007

13, 528, 200

28, 294, 120

47.8%

2008

15, 868, 000

25, 274, 133

62.8%

(Source: http://www.internetworldstats.com/asia/my.htm [2009, November 1])

A study showed that customer satisfaction is the immediate factor affecting the consumer retains loyalty (Cronin, Brady, and Hult, 2000). Most of the studies showed that higher levels of customer satisfaction will lead to customer loyalty. “A minor change in satisfaction could lead to a substantial change in loyalty increment” (Bowen and Chen, 2001). However, most of these studies were in offline environment. Wind and Rangasamy (2001) found that online environments offer more opportunities for interactive and personalized marketing. Eventually, these opportunities may influences customer satisfaction and customer loyalty in the online environment if compared to the traditional market or offline environment (Shankar, Smith, and Rangaswamy, 2003).

The main purpose of this study is to identify the factors affects the customer satisfaction towards online game services and which could lead to customer loyalty. It is including the service quality, transaction cost, experience value, and technology acceptance factor. These four antecedents of online game service satisfaction and loyalty will test associations based on the model that has been constructs.

1.2 Background of the Research

In this century, computer might be a need for a person if compared to the olden days where there was a limited growth in technologies. Now, computer seems like a tool which can do everything for you such as searching information, payment, shopping, and so on. This powerful electrical appliance has gain a well response from the citizen of the world. It has many functions can perform through computer and one of the most popular functions of computer is gaming.

In the earlier 2000's, most of the games were played offline since the limited internet connectivity and expensive prices to have an internet connectivity. However, this situation has changed due to the technologies advancements and the industry has achieved economic of scale. To more understand what online games is, it is a must to brief its history.

The very first online gaming activities were introduced in the late of 1960s and early of 1970s. Later, they started gain more popularity within 1970s to 1980s when dial-up Bulletin Boards became popular and the users started playing online game over them. Clyde and Thomas (2008) stated that the development of arcade game in the 1970s, and video and computer games in the 1980s; digital games have become an influential part of popular culture. The bulletin boards provided a multi-user platform which allowed few users to play at the same time. Now, it has been transformed to MMORPG (Massively Multi-Player Online Role-Playing Games) which is popular all around the world presently (Bizymoms.com).

At one time, games were used for educational purpose rather than entertainment (Clyde and Thomas, 2008). However, due to the changed in the perception of game role and the culture, it becomes an entertainment but there is still has some of the game designers and educators used it as educational purposed such as learning typing skills and so on.

In the year of 1990s, due to the growth of internet technologies of Flash and Java, it has led to the increasing usage of the internet and the millions of new websites mushrooming across the World Wide Web. When enter to the millennium year, technological giants such as Sony, Microsoft and Ninetendo came out with advanced gaming consoles has changed the features of online gaming completely (Bizymoms.com). The people all around can play a same game with each other virtually at the same time.

Currently, online gaming industry is growing each year and it has a great expansion in future. The online game service is one of the most competitive industries among the entire industries. The new and the existing online game service provider are delivering their best services to gain more market share to sustain its organization. To penetrate the market, the firm must meet the customer expectation which may lead to customer satisfaction. Eventually, it may bring customer loyalty.

1.3 Research Problem

Customer is the one who contribute the profit to the firm because they are the one who are using the product or services. However, consumers are becoming wisely now a day when they would like to use certain product or services. They will tend to purchase the product only if the product can meet their expectation which might lead to satisfaction. To meet the customer expectation, it is a biggest challenge for the firm.

Other than that, the growth of the online game has brought some a major problem to the service provider which is how to retain the existing online game users and will not shifting to other service provider or loyalty to the current provider (Yang, Wu, Wang, 2009). In order to survive in this competitive industry, many practitioners and academicians in this field have focused on how to improve online services to attract potential buyers as well as the current customers (Jun, Yang, and Kim, 2004).

There are some of the factors to achieve customer satisfaction. However, the key factors especially in online game services which are able to make the customer satisfied with the products and services still under study or unknown (Dick, Wellnitz, and Wolf, 2005). If the key factors have been determined, the provider might be able to gain the competitive advantages which trying to meet the customer expectation.

This research is emphasizing the customer satisfaction and loyalty in online game service. Specifically, it is trying to identify the key factors affects online satisfaction and online loyalty in order to guide the online game service provider to improve their service quality to garb more potential customers and retain the existing one.

1.4 Research Objectives

The objectives were formed based on the research problem and there are formulated to achieve the main goal of this study which is to examine the factors of affecting the online game satisfaction and loyalty.

  • To determine service quality has a positive impact towards online game satisfaction.
  • To determine transaction costs has a positive impact towards online game satisfaction.
  • To determine technology acceptance factor has a positive impact towards online game satisfaction.
  • To determine experience value has a positive impact towards online game satisfaction.
  • To determine online game satisfaction would have a positive impact on online game loyalty.
  • To determine service quality, transaction cost, technology acceptance factors, and experience value will affect online game satisfaction and eventually online game loyalty.

1.5 Justification of the Study

This studyis significant for several reasons. First, it can identify the gaps between customer expectation and perception about online game service provider in order to guide them to provide better services. “It is commonly known that there is a positive relationship between customer loyalty and profitability” (Bowen and Chen, 2001). It is correct once the customer is loyal to the company because they will visit the firm after a purchase and some even recommend to their friends. In the online environment, the online satisfaction also grabs much attention from all of the researchers because to meet a customer expectation is the toughest challenges to the company. Also, it brings the profitability and the survival of the company.

Online game service provider should concern about the medium which may influenced the online game satisfaction and online game loyalty. The importance of the study is to keep the online game service improvement in order to achieve the customer satisfaction from time to time. In online environment, the customer can easily compared the alternative than offline customer especially products and service (Shankar et al., 2003).

As in online environment, the user is free to search the information to the product that they demand. As well as online game, there is large amount of online game service provider. Therefore, the user can easily compared the features of the game and service quality that provided by the firm. Once the factor has a positive impact on online satisfaction has been determined, the service provider is able to strengthen their weaknesses in order to sustain its market share.

Besides, the study is providing guidelines for the service provider to develop their future or long-term plan. The importance of the online game satisfaction will give a direction to the service provider to plan for their future such as strategic plan. It also helps the company to gain competitive advantages in this industry. Commonly, most of the studies regarding to customer satisfaction and loyalty were did for offline environment and only limited for online environment. However, consumers still have some same characteristics in making decision when they would like to purchase a product.

As the study has identified the factors affect the customer satisfaction and loyalty, the firms are able to fulfill the users need and wants. This action is trying to meet the customer satisfaction and eventually customer loyalty. Once the customer become loyal, the company may survive in this competitive market.

On the other hand, it is also will benefit the user to gain a better service from the online game service provider once they have responded to what they are percept towards the online game service provider that they currently subscribed. Also, the service provider is able to understand what kind of service quality that the users perceived and expected. It will leads to a win-win situation if both of the parties could perform what they are request and give.

1.6 Definition of Important Terms

There are some important terms in this study: Online satisfaction, online loyalty, service quality, technology acceptance factors, transaction cost, and experiences value.

Online Game Satisfaction

Online game satisfaction is customer satisfaction towards online game service. Oliver (1980) defines customer satisfaction as customer's evaluation of a product or service with regard to their needs and expectations. It is just in virtual environment perspectives.

Online Game Loyalty

Online game loyalty is customer loyalty towards online game service. It can be defined as “a deeply held commitment to rebuy or repatronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behaviuor” (Oliver, 1997).

Service Quality

Parasuraman, et al., (1988) defined service quality as “a global judgement, or attitude, relating to the superiority of the service”, “and explicated it as involving evaluations of the outcomes (i.e., what customer actually receives from services) and process of service act (i.e., the manner in which service is delivered)” (Jain, and Gupta, 2004)

Technology Acceptance Factors

It is also known as technology acceptance model (TAM). Davis (1989) proposed TAM to explain and predict user acceptance of information systems (IS) or information technology (IT). In short, it is explaining “intention to use a technology” (Schepers and Wetzels, 2007).

Transaction Cost

It is a theory “seeks to explain why firms exist and how firm boundaries were determined” (Watjatrakul, 2005).

Experience Value

It refers to “shopping efficiency and making good product performance and functionality” (Wu and Liang, 2009). Wu and Liang (2009) added “its perceptions are based on interaction involving either direct usage or distant appreciation of goods or services”.

MMORPG (Massively Multi-Player Online Role-Playing Games)

It is known as a virtual environment where it allows multiple geographically distributed users interact with each other at the same time (Papargyris and Poulymenakou, 2005). Besides, it is “offering an alternative channel for players to communicate, share experiences, socialize, and eventually from virtual communities” (Chee, Zaphiris, and Mahmood, 2007)

Online Game Service

It is a service provider who provides a server for the online game user to get into the network to interact with each other by playing games.

1.7 Organization of the Report

This study will be constructed into five different chapters and there are:

Chapter 1 is presenting the introduction and a brief overview of the study. The problems of the study, objectives of the study, significance of the study, and the chapter outline of the research are stated in this chapter.

Chapter 2 provides an extensive review of international journals, reports, and articles from online and offline resources. Besides, all the reviews in this chapter are related to the problem of the research that will guide to construct the conceptual foundation and hypothesis of the study.

Chapter 3 is describing the methods used in conducting this study in detail. Besides, it also presents the development of the research framework which proposed the relationship between dependent variables and independent variables. Next, the methodology applied is provided, sampling procedures, hypothesis development, data analysis and measurement.

Chapter 4 presents the findings and data analysis of the research. It analyses and discussed the data collected in the research using the research instrument which has been developed in chapter 3. The hypothesis will be tested and it is also presents the results of statistical analysis used in this study (t-test, ANOVA, and etc.).

Chapter 5 is presenting the conclusion and recommendation. There is also discussion of the study's implications, recommendations, limitations and suggestion for the future research.

CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

Chapter 1 has discussed and highlighted the important issues which related online game service satisfaction and loyalty. All of these issues that mentioned in the chapter 1 are playing an important role for online game service industry in order to understand the expectation of the user and eventually grab more market share. As a result, to more understanding these issues, an examination of literature on related study were carried out. Generally, literature review provides the theoretical basis for the development of the research framework of this study, which will be discuss in the next chapter - Chapter 3. This chapter consists of the following subject areas: (1) Definition of key terms; (2) online game satisfaction; (3) online game loyalty; (4) the factors might affect online satisfaction and loyalty; and (5) summary of literature review.

2.2 Definition of Key Terms

2.2.1 Online Game Service

As technologies have became more advance, people have more rely on the technologies and they even expect technology will do all the things for us. Now, most of the people are prefer online rather than offline when they would like to purchase or acknowledge a transaction. In the olden day around 1980' where the technology has a limited growth, people can only play games in offline environment such as TV and handheld game console (Nintendo).

In the late 1980's computer game was invented and started popular. Currently, computer games have been transformed into MMORPG (Massively Multi-Player Online Role-Playing Games) which is popular all around the world (Bizymoms.com). Besides, the multi-player online role-playing games also known as Net games (Lo, Wang, and Fang, 2005). Generally, net game can be divided into three which is web games, network games, and online games. The below is the definition of this three types of net games.

Table 2.1 Types of Net Games

Types

Definition

Players

Web games

Games which use a website as an interface.

Players must register to play.

Network games

Games which allow multiple players to use their own PCs to interact via Local Area Networks (LANs) or the internet. Also, many of these closely resemble PC games.

Players must purchase and install game software. However, it does not require any fees beyond those for internet connections.

Online games

Games where require players to connect to the service provider and log in to a server.

Player must subscribe to the service provider and select a role to interact with other virtual roles.

Source: Lo, 2008

Online game is requiring player to log in to a server in order to play the games. It is means that the players must have internet connection to connect with the service provider. After the player subscribe to the games, the user has to select a role to interact with the rest of the subscribers. The special characteristic of online game is the user can continue to play their role after they have log out for few days. The player can keep continue playing where they have stopped when they have log out last time with the experiences and assets are remain.

Online game user must install a client program for internet connection and online game providers to attend the online game (Lo, 2008). This program is inexpensive and sometimes even free. However, there are some need additional fees are paid to the Internet Service Provider (ISP) (Lo, 2008). Commonly, the charges of online game is based on the time where the player spent to playing games and usually it is prepaid which pay before they play the games.

Due to the technology advancement and the cheaper price for paying the internet connectivity, consumers are more easily to connect to the internet and playing online game. This golden business opportunity has been attracted lots of firms entered to this industry. Online game service is the company which provides a server for the players in order to play game with others. The company main activities is improve the performance of the online game also maintenance of the server to avoid any shut-down or system down of the server.

There are some features have attracted lots of people subscribe to online game and the number of players is keep increasing each day. The online games allow the player to build the role based on their preference, beliefs, goal, or other factors and most of the time the players play it in a team (Klang, 2004). The features in the online games has play an important role in order to gain more subscriber and also some other factors.

2.3 Online Game Loyalty

In general, loyalty can be defined as faithful. However, in terms of customer loyalty, it is hard to define (Bowen ad Chen, 2001). Dennis (2003) stated that loyalty is the feeling where a customer has about a brand. This could be explained as the customer has a positive perception about the brand and this brand will always come in the first of the mind of this particular consumer if compared to the other firms which have offer the same service or product. Edvarson, Johnson, Gustafsson and Strandvik (2000) define loyalty as a customer's intention to repurchase from the same firm again.

On the other hand, loyalty can be measured in three distinctive approaches and there are behavioural measurements, attitudinal measurements, and composite measurements (Bowen and Chen, 2001). Behavioural measurements can be defined as consistent, repetitious purchase behaviuor as an indicator of loyalty. For example, if the customer is often and repeat visit the same firm and purchase the product from the firm can be said as loyalty under the behavioural measurement.

Next, attitudinal measurements can be defined as used attitudinal data to reflect the emotional and psychological attachment inherent in loyalty. Let's put it in a situation where a consumer holds a favourable attitude toward an online game service provider, but it is not necessary that consumer will subscribe o this service provider. It might be expensive to the consumer but the consumer will recommend it to others since he holds a favourable attitude towards the service provider (Toh, Hu, and Withiam, 1993).

Composite approach is the combination of the first two dimensions and measure loyalty by customer's products preferences, propensity of brand-switching, frequency of purchase, recency of purchase and total amount of purchase (Pritchard and Howard, 1997). This approach is valuable tool to understand customer loyalty in several fields such as retailing, upscale hotels and airlines (Pritchard and Howard, 1997).

Many of the researchers and also in common think that loyalty is generating positive and measurable financial results (Dennis, 2003). In short, there is a positive relationship between loyalty and profit (Bowen and Chen, 2001). When a company is able to retain 5 percent more of its customers, consequently, profits will increase 25 percent to 125 percent (Reichheld and Sasser, 1990). The impact of loyalty has played an important role for the profit of the company.

Based on the reasons mentioned above, online game loyalty (customer loyalty) is the independent variable for this study. On the past studies showed that online customer loyalty is result from customer satisfaction with the e-commerce channel. Also, the online satisfaction has the positive impact on online loyalty is the proved in the context of electronic commerce (Anderson and Srinivasan, 2003; Rodgers, Negash, and Suk, 2005. As proposed by Yang et al. (2009), online loyalty is the final result of their study. For this study, online loyalty is defined as a customer's favaourable attitude and commitment towards online game service provider that results in sustaining in the same service provider which based on the study of Yang et al. (2009). Hence, this study is proposing online loyalty as the dependent variable.

2.4 Online Game Satisfaction

Satisfaction is the “overall customer attitude towards a service provider” (Levesque and McDougall, 1996). Oliver (1980) defined customer satisfaction as customer's evaluations of a product or service based on their needs and expectations. In the other way, it is an emotional customer anticipates and what they receive (Zineldin, 2000). Customer satisfaction could be the big challenges for all the firms and to satisfy the customer expectation is not an easy job because customers are human being who has a complex mind.

As a human being, we have different characteristics and different expectation. Some people might expect a basic service from the service provider but some might expect a high service from the service provider. When people would like to defined something which involve human attitude, it is hard to find a common or universal definition. Gerpott, Rams, and Schindler (2001) proposed satisfaction is based on the customer's estimated experience of the extent when the service provider is able to fulfill customers' expectations.

There are some benefits of customer satisfaction and the major benefits of customer satisfaction is stay loyal longer (Zineldin, 2000; Hansemark and Albinsson, 2004). Besides, Hansemark and Albinsson (2004) stated that satisfied customer are relatively less price sensitive, tend to purchase additional products, and they are relatively hard influenced by the competitors. They proposed many company view customer satisfaction as the crucial to a company's survival and must be satisfied those customer all the time as the company has been promised them.

In general, much research no matter in offline environment or online environment, customer satisfaction is not really a new concept and lots of research efforts have been made to understand its antecedents and consequences (Bai, Law, and Wen, 2008). To assess a firm's productivity and its marketing performance, the measures of perceived quality, satisfaction and loyalty was being used (Cortina, Elorz, and Villanueva, 2004).

Besides, the great number of study of customer satisfaction is because it's potential influence on consumer behavioral intention and customer retention (Cronin, Brady, & Hult, 2000; Yang et al., 2009). A study of online retailing stated that satisfied customer tend to have higher usage of service and have stronger repurchase intention (Kim, Jin, and Swiney, 2008). Also, this particular customer will often recommend the product or service to their friends than those who are not satisfied (Zeithaml, Berry, and Parasuraman, 1996; Kim et al., 2008).

Anderson and Srinivasan (2003) have investigated the impact of satisfaction on loyalty in the context of e-commerce. They concluded that online satisfaction has an impact on online loyalty. However, they also stated that the relationship is just moderated both by consumer's individual factors and firm's business factors. However, the relationship between online satisfaction and online loyalty also has been found in numerous studies (Yang et al., 2009; Kim et al., 2008; Anderson and Srinivasan, 2003; Rodgers et al., 2005). Hence, this study is going to propose online satisfaction might have a positive effect on online loyalty.

2.4.1 Online game satisfaction as a mediator

Online game satisfaction will be the mediator between the online game loyalty and its determinants which are service quality, transaction cost, technology acceptance factor, and experience value. As proposed by Yang et al., 2009, service quality, transaction cost, and experience value will influence on online game satisfaction. However, this study is going to propose another antecedent which is technology acceptance factors which based on the studies of Lin and Sun, 2009; Hsu and Lu, 2003. In this model, online game satisfaction is a function of the four antecedents operating in a situation and helps to explain the influence of the antecedents on online game loyalty.

As prior mentioned that online satisfaction has an impact on online loyalty, but, there are some factors might influence online satisfaction before it comes to online loyalty. To achieve the online satisfaction, the online game service providers have to meet the expectation of the consumer in some of the aspects as the four antecedents. Yang et al., 2009 stated that rare research examines the moderating effects of customer satisfaction in an integrated loyalty model and less formally tests that online game satisfaction in the online game service environment. Therefore, in this study, it proposes online game satisfaction as the mediator between the four antecedents and online game loyalty.

The below table is to shows that the selected empirical research on determinants of customer satisfaction and loyalty (online).

Table 2.2: Selected empirical research on determinants of customer satisfaction and loyalty (online)

Independent Variables

Key References

Context

Service Quality (SERVQUAL)

Yang et al., (2009)

Lin and Sun (2009)

Lee and Lin (2005)

Santos (2003)

Online Game Service

Online Shopping

Online Shopping

e-Service Quality

Technology Acceptance Factors

Lin and Sun (2009)

Hsu and Lu (2003)

Online Shopping

Online Game

Transaction Cost

Yang et al., (2009)

Liang and Huang (1998)

Online Game Service

Electronic Markets

Experience Value

Yang et al., (2009)

Online Game Service

2.5 Service Quality or SERVQUAL

Quality is hard to define in universal because it is what an individual says. In this century, consumers are being wisely when they would like consume for a product or services. They are more focus on the quality of the product or services which can satisfy or fulfill their needs. However, they are different perception of the consumers about a product, some sort said it is good to use but they will be certain number of consumer would not think as others. It is hard to measure the quality of a product.

Peters (1999) stated that most of the people said that there is no universal definition for quality and it can be also said as quality is what the customer says it is. As in the real competitive world, it cannot deny that the feedback of the customer is the most effective for the quality improvement because they are the one who are using the product or services. Thus, they are the one who determine the quality of the product. Most of the author believed that the customer is the one who are the sole judge of service quality.

Lehtinen and Lehtinen (1991) suggested that service quality is produced through the interaction between the customers and elements of the service organization. “Service quality is a central issue in services marketing.” (Kueh and Boo, 2007). There are many researcher were interested in service quality but it is generally agreed that service quality is difficult to evaluate as compared to the quality of tangible goods by consumer (Kueh and Boo, 2007). Service involve human attitude and different sales person would have different way to deliver their service. Product is tangible which easy to be measure and detect its quality if compared to services.

Service quality or SERVQUAL was created by Parasuramn, Zeithaml, and Berry (1988) and they measured service quality (SERVQUAL) in ten phases: accessibility, communication, capability, courtesy, trustworthiness, reliability, responsiveness, safety, tangibility, and understanding with customer. Later Parasuraman et al., (1988) reducing SERVQUAL to five dimensions which are tangibility, reliability, responsiveness, assurance, and empathy. The below is the definition of these five dimensions:

Table 2.3 SERVQUAL dimension and its definition

Dimension

Explanation

· Reliability

It is refer to the ability to perform the promised service dependably and accurately.

· Responsiveness

It is the willingness to help customers and to provide prompt service.

· Assurance

It is referring to employees' knowledge and courtesy, and their ability to inspire trust and confidence.

· Empathy

It is the caring, individualized attention given to customers.

· Tangible

It is the appearances of physical facilities, equipment, personnel and written materials.

Source: Parasuramn, Zeithaml, and Berry, 1988

Previously, most of the studies were adopted SERVQUAL in offline environment. Ismail, Haron, Ibrahim, and Isa (2006) stated that SERVQUAL were found relevant for the banking, insurance, appliances repair and maintenance, security, brokerage, long-distance telephone service and automobile repair service industries. The most used SERVQUAL measurement was hospitality. Recently, SERVQUAL has been proposed in online environment. This measurement is used to compare the service expectation of customers with their perceptions of actual performance (Kueh and Boo, 2007).

Due to the popularity of the internet, there are many firms has shift or add internet as their channel to reach to the consumers and one of them is online game service. “In electronic commerce, service quality measures have been applied to assess the quality of search engines and factors associated with website service” (Lin and Sun, 2009). Now a day, many entrepreneurs are more prefer start-up their business through online since internet has gained popularity among the consumer in the world and it is less costly which require little capital to start-up the business. This is why in the recent marketing research has been studied in e-commerce in order to explored consumer's perception of online service quality but unfortunately it still remain unexplored clearly (Lin and Sun 2009).

Rubino (2000) stated that e-commerce service quality has been evaluated as inferior by numerous customers. Since the e-commerce still in growth stage, therefore, many online companies still remain unclear to understand what are the specific services desired by the online customers (Yang, Jun, Peterson, 2004). Lee and Lin (2005) stated that most of the businesses are trying to gain competitive advantages by using e-commerce while they would like interact with the customers. In order to success in e-commerce, the key determinants are not web-site presence and low prices instead it includes the electronic service quality or e-service quality (Yang, 2001; Zeithaml, 2002).

Santos (2003) defined e-service quality as overall customer assessment and judgment of e-service delivery in the virtual marketplace. In the past few years, Yang and Jun (2002); Wolfinbarger and Gilly (2003) has applied e-service quality in their studies. Yang (2001) found that online customers think that high standard e-service quality is mean by which the potential benefits of the internet can be realized. Eventually, online customers expect equal or higher levels of service quality than traditional customers (Lee and Lin, 2005). Santos (2003) stated that product technical features and prices online are much easier to compare via traditional channels and thus e-service quality becomes a key factors for customers.

As this study is based on the Yang et al. (2000) which is online game service proposed that service quality will positively affect online game satisfaction and as a result they found that service quality of online game is the key factor to affect customer satisfaction and follow by transaction cost and experience value. This study is going to proposed service quality which has a positive impact on online satisfaction. It is also will followed the previous study by Yang et al. (2009) where the four dimensions will be tested under service quality and there are: reliability, responsiveness, empathy, and assurance. The reason of tangible did not choose is because it is not reliable in the online context.

2.6 Technology Acceptance Factor

“Websites are essentially a type of information technology” (Lin and Sun, 2009). Company provided a websites for the online consumer is to giving and updating the online consumer information. Now a day, computer seems as a need for each of the person and as well as the internet connectivity. When an online customer can easily consume online, he or she must find that the website is useful and easy to use by them. This can be said as user friendly and it is intention to use IT and IS (Schepers and Wetzels, 2007). Lin and Sun (2009) stated that website useful and easy to use takes into account information search, internet subscription, payment methods and so on.

Technology acceptance factor also known as technology acceptance model (TAM) and it has gained lots of attention of researchers in the information system (IS) field over the past decade (Hsu and Lu, 2003). There were many previous studies attempted to define the factors that determine the acceptance of an information technology correctly (Chow, 1967: Bass, 1969; Taylor and Todd, 1995; Chau and Hu, 2002). Hernadez, Jimenez and Martin (2008) stated that most of the previous researches were based on behavioural theories and constructs empirically tested models which explain individual's sets of action based on their belief and attitudes. There were theory of reasoned action (TRA), technology acceptance model (TAM), theory of planned behaviour (TPB), or innovation diffusion theory (IDT).

TAM was introduced by Davis (1989) and it “seeks to explain and predict user acceptance of IT in the workplace”. In the past decade, researchers have applied TAM to examine the usage of IT and they also have verified that the key determinants of individual technology adoption are the user perceptions usefulness and ease-of-use (Koufaris, 2002; Lin and Lu, 2000; Moon and Kim, 2001). Davis (1989) proposed that TAM to explain and to predict user acceptance of IT. In TAM, there were two predecessors have been identified which are perceived usefulness and perceived ease-of-use (Lee, Kim, Rhee, Trimi, 2006).

Perceived usefulness (PU) can be defined as the degree to which a person believes that using the system will improve his or her job performance whereas perceived ease-of-use (PEOU) can be defined as the degree where a person believes that using the system will be free of effort. Now a day, people are more concern about user friendly and convenience. As a user, they will tend to sustain in a website which is usefulness and ease-of-use for them.

In many studies, they have been proposed and adopted the TAM in their study in e-commerce. Lin and Sun (2009) proposed that shopping website's technology acceptance factors may affect the customer online satisfaction and loyalty. Their research was based on the research of some of the previous study which suggests that customer satisfaction in the online environment is significantly higher than in traditional channels as a result of ease-of-use in acquiring information (Yang, et al., 2009; Hernadez, Jimenez, Martin 2009).

Besides, their research also analyzed that Shih (2004) found that perceived ease-of-use of trading online and perceived usefulness significantly determine individual loyalty towards e-shopping. It also found this model in other research which is in online game and has been tested.

Hsu and Lu (2003) have proposed TAM in online games where it is an extended model with social influences and flow experience. In their research, their main objective is to determine intension to play online game by social influences and flow experience. As a result, they found that perceived usefulness was not always as an important predictor in TAM model. They stated that online game is an entertainment technology and it is different from problem-solving technology. Eventually, perceived usefulness significant effect will decreased. However, it tests for intention to play online games. It might have different view between satisfactions with the intention to play online games.

In the study of Lin and Sun (2009) which related to online shopping, their result was technology acceptance factors can positively influence the online satisfaction and loyalty of customer directly. Even though the study was in online shopping but both online game and online shopping have a common characteristic which is in online environment.

Based on their studies which is in e-commerce have proposed TAM as one of the factors to affect online satisfaction and loyalty and also they have proved that technology acceptance has significant influence online satisfaction and loyalty. Therefore, this research will also proposed technology acceptance factor as one of the factors affects online game satisfaction and loyalty to examine technology acceptance factor will significantly affect online game satisfaction and loyalty.

2.7 Transaction Cost

Williamson (1985) defined transaction is a process where a product or service is being transferred across a technologically separable interface. Generally in traditional economic theory that information is symmetric in the market and the transaction can be executed without cost but it is just an assumption (Teo and Yu, 2005). In this real world, markets are often inefficient. Teo and Yu (2005) added that it is because when a consumer would like to complete a transaction, his or her must search for information and monitor the transaction process in order to make sure a desire deal.

Actually, the first person who proposed transaction cost theory was Coase (1937) and later Oliver Williamson (1987) extend the model and proposed a completely theory of transaction cost. It is because in the olden day, economist thought that transaction will run perfectly in market mechanism and there were no transaction cost (Yang et al., 2009). This theory is trying to explain why a transaction subject favours a particular form of transaction over others.

Transaction cost theory comes from the three dimensions to characterize any kind of transaction and there are: frequency; uncertainty; and assets specificity.

2.7.1 Assets Specificity

It is referring to the lack of ease with which the human capital or employees, physical assets, and facilities specifically tied to the manufacturing of an item which can be used by alternative users or put to alternatives uses (Teo and Yu, 2005; Williamson, 1987). Watjatrakul (2005) defined assets specificity as the transferability of the assets which support a transaction.

Yang et al. (2009) stated that a specialized investment that cannot be redeployed to alternative uses or by alternative users expected at a loss productive value. There are four types of assets specificity which determined by Williamson (1987):

  • Site specificity: It is observed when firms and plants are located in close proximity in order to minimize transportation and inventories. Since these assets are immobile, the setup or relocation costs are high.
  • Physical assets specificity: It refers to plant, machinery, and technology that are specific to a transaction.
  • Human asset specificity: When employees require substantial training and “learn by doing”, the cost of autonomous contracting over an employment relation increases, making common ownership of successful stages more desirable.
  • Dedicated asset specificity: It involves making investments in dedicated assets on the behalf of a particular buyer.

Source: Adopted from Yang et al. (2009)

2.7.2. Uncertainty

Generally, uncertainty has two forms and there are behavioural uncertainty and environmental uncertainty (Watjatrakul, 2005; Williamson, 1985; Slater and Spencer, 2000). Williamson (1985) stated that behavioural uncertainty is where the exchange partner can use their own guile to create hidden costs by performing inefficiently and ineffectively. However, environmental uncertainty is an organization's ability to predict future outcomes (Klein, Frazier, and Roth, 1990).

2.7.3 Frequency

According to Watjatrakul (2005) refer frequency as occasional and recurrent transaction. He also stated that most of the researchers have failed to prove frequency has a relationship with a choice of governance structure. Yang et al. (2009) stated that frequency decided that the investment cost can be covered while transaction attribute of assets specificity. According to Williamson (1985), frequency is one of the most critical dimensions for describing a transaction. In many online shopping studies, transaction has been adopted and this is because buying frequency has play an important role and it has influence on consumer's perceived transaction cost and their willingness to purchase goods through online (Teo and Yu, 2005).

Transaction cost is most proposed or tested in online shopping (Chircu and Mahajan, 2006; Lin and Sun, 2009; Teo and Yu, 2005). As in retail field, transaction cost has an association with the customer value. Customer value defined as the trade-off between quality and benefits that the customer received and psychic transaction cost that the customer incurs by evaluating, obtaining and consume the product (Woodruff, 1997; Kotler, 1997). In order to grab more market share, retailer can lowering transaction cost such as fees, time or inconvenience by increase customer value (Chircu and Mahajan, 2006).

In this modern day, consumers are more prefer conveniences and cost savings especially in e-commerce. Consumer believes that if a company is using technology to support the customer activities, it can improved customer service and cost saving for them. Liang and Huang (1998) stated that high e-commerce transaction cost will negatively affect intention to use online shopping whereas Devaraj, Fan, and Kohli (2002) stated that low transaction cost will increasing the satisfaction towards channel transaction (online) and they will tend to purchase product in online shopping. Thus, offering low customer transaction cost is able to create customer value will lead to customer satisfaction and eventually increase firm performance and gain competitive advantages (Chircu and Mahajan, 2006)

As prior mentioned that transaction cost it include fees or price and time efficiency, therefore, in this research, it is going to propose transaction cost as one of the factors affect towards online game satisfaction and loyalty. This proposed is based on the study of Yang et al. (2009) which they found that transaction cost is the second factor which might affect online game satisfaction and loyalty. In short, there are two dimensions of transaction cost as follow by Yang et al. (2009): Price savings and time efficiency.

As a conclusion, price savings is trying to measure of online or conventional store transaction efficiency whereas time efficiency is trying to measure the interaction cost between seller and buyer (Yang et al., 2009).

2.8 Experience Value

In an online shopping environment, marketers are offering a web which typically trying to provide convenience and safe online environment. Also, it is trying to meet the online consumer goals and expectation (Bridges and Florsheim, 2007). When come to service, experience is one the important factor that affects customer satisfaction. In modern studies, value has defined as derived from using a product or service (Wu and Liang, 2009). However, consumer value has been defined as an “interactive relativistic preference experience”, where it is trying to stress the transaction between product and user from which value is being derived (Holbrook, 1999).

Generally, experience value can be divided into two: Utilitarian Value and Hedonic Value. Both of these values were more studied in online and offline shopping area.

2.8.1 Utilitarian Value

According to Babin, Darden, and Griffin (1994) defined utilitarian value as the shopper may find value while the shopping is complete successfully to get everything done. Besides, utilitarian consumer behaviuor has been described as task-related, and rational (Batra and Ahtola, 1991).

When consumer tends to shopping, they must be a purposed on why they wanted to shop and they might have a plan on what should they do on the shopping activities. They must find usefulness while the shopping and if they can get everything done on shopping, therefore, it may said that the shopping has gave the utilitarian value to this particular consumer. In short, utilitarian value is when the person has accomplished his need of shopping and this may often include product is purchased where they need for and efficient manner (Yang et al., 2009).

2.8.2 Hedonic Value

Keng, Huang, and Zheng (2007) has been analyzed how experiential value affect behavioural intention in shopping mall industry and this include efficiency value, aesthetics value, excellence value, and playfulness value. They found out that efficiency value reflects the utilitarian aspects of shopping. However, in a study of restaurant customer shows that experience or hedonic value has an effect on customer satisfaction. Actually, experience value perception is depends on the interaction of direct usage or distant appreciation of products and services and this interaction is basically provide the bases for the preferences of the individual involved (Mathwick, Malhotra, and Rigdon, 2002).

In the study of Bridges and Florsheim (2008) found that “online buying may be increased by providing website characteristics that serve utilitarian goals rather than offering hedonic value” and this result was consistent with Wolfinbarger and Gilliy (2001) where they studied on online consumers were more prefer to purchase when “they can find selection they want, make transaction easily, and have it delivered in a timely fashion”.

Based on the study of Yang et al. (2009), this research is going to propose experience value as one of the factors that affect online game satisfaction and loyalty even though their result was stated that experience value did not contribute much in the online game satisfaction and loyalty.

2.9 Summary of Literature Review

This chapter is presented the extensive review of literature and established the key factors of affect online game satisfaction and loyalty. Besides, this chapter also described the conceptual foundation of this research. As online game has become one of the highly profitable industries in e-commerce in this recent year (Hsu and Lu, 2003). Therefore, it has grabbed much attention for marketers to study on this field in order to make the online game more profitable in the e-commerce.

First, this chapter is beginning with the definition of key term which is online game service. Online game can be classified as the multi-player online role-playing games (MMORPG) also known as Net games. An online game is where the player must connect to a server and they have to log in order to interact with other players. The server is provided by the online game service provider and they will charge some subscription fees to the player. However, they are some of them are free.

Next, the chapter is follow by defined the dependent variables which is the online satisfaction and loyalty. Online satisfaction is the online service provider has met the expectation of the user whereas online loyalty is the user will keep staying at the same service provider. In this study, online satisfaction will be proposed as mediator between the factors and online loyalty as follow the study of Yang et al. (2009).

Furthermore, the keys factors affect online game satisfaction and loyalty has been defined and there are: Service quality (SEVRQUAL), technology acceptance factors, transaction cost, and experience value. Service quality has been tested in both offline and online environment. Most of the studies have found that service quality is significantly influence the satisfaction and the study of Yang et al. (2009) have found that service quality has the highest positive impact on online game satisfaction and loyalty and follow by transaction cost and experience value. Service quality will have four dimensions which are reliability, responsiveness, empathy, and assurance. Transaction cost is including two dimensions and there are: price saving and time efficiency. Experience value also has two dimensions: Utilitarian value and hedonic value.

Moreover, this chapter also proposed one new variable which adopted from online shopping (Lin and Sun, 2009) which also have a common characteristic - online. It is reasonable that this study should include technology acceptance because their study found that online satisfaction and loyalty could be affected by technology acceptance factors.

Based on the entire factors, the hypothesis will be posited in order to obtain the result and eventually to compare with the previous study.

CHAPTER 3

RESEARCH METHODOLOGY

3.1 Overview

In chapter 2, the review of literature on the subject indicates that there are some factors have been identified which might be affected the online game satisfaction and loyalty. The factors are: Service quality (SERVQUAL), technology acceptance factor, transaction cost, and experience value. All of the factors were proposed based on the study of Yang et al. (2009) except technology acceptance factor. Technology acceptance factor was proposed based on the study of Lin and Sun (2009).

Generally, this chapter is going to presents in detail the methods used in conducting the research and it includes development of research framework and hypothesis, sampling plan, and some others method of conducting this study. All of the factors stated above will be tested and the result will much contribute in this study. Furthermore, the current study is aim to integrate all these variables in order to be tested within a single framework. Also, it is to investigate their possibility in the association with online game satisfaction and loyalty.

3.2 Theoretical Framework

As prior mentioned, the factors affect online game satisfaction and loyalty has been identified. Therefore, a research framework was developed in order to guide the current study. Generally, the framework is divided into three parts: independent variables, moderating variables, and dependent variables.

Independent variables are consists of Service Quality (SERVQUAL), technology acceptance factors, transaction cost, and experience value. In Service Quality (SERVQUAL), there are four dimensions: reliability, responsiveness, assurance, and empathy have been determined in order to test the effect on those dimensions. Technology acceptance factors also consist of two dimension which is perceived usefulness (PU) and perceived-ease-of-use (PEOU).

Furthermore, transaction cost has also consists two dimensions and there are price savings and time efficiency. It is follow by the experience value which included two dimensions: hedonic value and utilitarian value. However, dependent variable will be online game satisfaction and loyalty.

As mentioned earlier, this study was based on the study of Yang et al. (2009) namely, “An empirical analysis of online game service satisfaction and loyalty”. Therefore, the research framework will be adopted from this particular study. However, there was one factor which adopted from online shopping (Lin and Sun, 2009) namely, technology acceptance factors.

In the study of Yang et al. (2009), they found out the three antecedents that they proposed have significant and positively affected on online game service satisfaction and eventually online loyalty. SERVQUAL is the key factor to affect customer satisfaction and follow by transaction cost and experience value.

For technology acceptance factors, the authors found that technology acceptance factors will positively influence customer e-satisfaction and e-loyalty directly. The context of this study is online shopping but online game and online shopping is sharing a one common characteristic which is e-commerce. It is reasonable that technology acceptance factors as one the factor.

Based on the study of Yang et al. (2009), they also would like to propose technology acceptance factor as one the antecedents of online satisfaction and loyalty. However, they stated that in many empirical studies found that although the dimension of PU found strong correlation with acceptance but PEOU was weak. Therefore, they replaced technology acceptance factors to experience value.

Based on the results, thus, the proposed research framework is constructed and presented in figure 3.1.

3.3 Hypothesis Development

Based on the literature review and conceptual framework formed above, five specific hypotheses are developed within these components of the overall framework.

Yang et al. (2009) found that service quality, transaction cost, and experience value will positively affect online game satisfaction. Besides, they found that service quality as the key factors. Hence, the null hypothesis as below:

H1 - Service Quality will positively affect online game satisfaction

H2 - Transaction cost will positively affect online game satisfaction.

H3 - Experience value will positively affect online game satisfaction.

Lin and Sun (2009) found that technology acceptance factors will positively influence customer e-satisfaction and e-loyalty directly. Even though the study is in online shopping but it share a common characteristics which is in online environment. Thus, the null hypothesis as below:

H4 - Technology acceptance factors will positively affect online game satisfaction.

Many of the studies found that online satisfaction will positively influence online loyalty (Yang et al., 2009; Lin and Sun, 2009; Deveraj et al., 2002). They have identified satisfaction of a product or service offered is a key determinant for loyalty. Therefore, the null hypothesis has been developed as below:

H5 - Online game satisfaction will have a positive impact on online game loyalty.

As proposed by Yang et al. (2009) that online game satisfaction will mediate the effects of the antecedents, and on the online game loyalty. They found that online game satisfaction will mediate on online game loyalty. Hence, the null hypothesis as below:

H6 - Online game satisfaction will mediate the effects of the antecedents (the four possible factors) on online game loyalty.

3.4 Sampling Plan

This study will gather primary data by using the set of questionnaire. Generally, sampling design method is selecting people or item from a population for a survey and it is include random, stratified, systematic, convenience, and self-selecting (Malhotra, 2009). Specifically, the study is using convenience sample which is one type of non-probability sample as for selection of respondents.

The reason of convenience sample has been chosen is easily access to the respondents. Therefore, two hundred online game users were selected within Malaysia specifically in Melaka. Most of them are undergraduates who are currently pursuing business and administration course in Multimedia University (Melaka Campus). Besides, there are some of them in employment. At the same time, this group of respondents is mostly from generation y or millennial because they are born in technology advancement period and they are tech-savvy consumers.

3.5 Data Collection Method

Sources of data for this study were using both primary and secondary data. Generally, primary data is more significant that secondary data which generated in other researches. This is because most of the secondary data were generated in other countries instead of Malaysia and it might relatively less reliable to use as the primary data.

Primary data will be collected by using a set of questionnaire which distributed to the respondents who are online game users directly and also through e-mail. The targeted respondents will be focused in Melaka and also the study will focus those respondents who are at age 16 to 25 years old. To ensure the data is reliable enough, all the respondents will be ensured are online game users before they proceed to answer the questionnaire.

Next, secondary data are consists of journals, article, and other periodicals collected from online database. Most of the journals were obtained from Science Direct and Emerald Online Database of Multimedia University (MMU) libraries or Siti Hasmah Digital Library.

3.6 Questionnaire Development

In general, questionnaire-based survey is consists of two types: cross-sectional design and longitudinal design (Malhotra, 2009). Due to the limitation of the time, cross-sectional design will be selected and it is one time collection. Also, the cross-sectional design that this study did might valuable and reliable.

The survey instrument used by this research is the set of questionnaire. The reason of questionnaire is being used is because it is a standard form of response, reducing biasness, and allowing easier way for analysis. In order to develop a good questionnaire, there are some practices found by Czaja and Blair (1996); Salant and Dillman (1994):

  • Limit instrument to six pages.
  • Introduce the study with a simple and clear explanation of purpose.
  • Provide simple instructions.
  • Space the categories so that it is easy for the respondent.
  • Use common wording and simple English found in daily use.

The questionnaire is consists of two sections. The first section is asking the respondent's demographic data such as age, occupation, and etc. This section is using nominal scale and the respondents just need to tick the box which fit their identity.

The second sections were designed to draw the information on respondents' perceived about the online game satisfaction and loyalty. Based on the review of literature review in chapter 2, twenty eight questions were generated in order to test the hypotheses. In this section, interval scale was used where the item in the survey asked the respondents. It is to indicate the level of agreement of each factor using a five-point Likert-scale. As a result, higher levels indicated the higher levels of importance and agreements towards those factors. The example of the format is shown as below:

  • 1 Strongly Disagree
  • 2 Disagree
  • 3 Moderate
  • 4 Agree
  • 5 Strongly agree

3.7 Data Analysis and Measurement

Data analysis will be focused on the following chapter and this study will going to apply some method in order to analyze the data from the respondents. The data collected from the questionnaire were then analyzed using descriptive analysis, reliability analysis, and hypothesis testing which is test for association. Pearson correlation will be selected to test for association.

Zikmund (2000) stated that descriptive analysis is used to transform raw data into a form that will make then easy to understand and interpret. Furthermore, first form of analysis in analyzing data is describing responses. In order to describe the participants in this study, Histogram, Bar chart, and cross tabulation will be used for the descriptive statistic.

Reliability will be continued after the descriptive statistic. As defined by McMillan and Schumancher (1993) and Patten (2002), reliability is using for the consistency of measurement, the extent to which the results are similar over different forms of the same instrument or occasions of data collection. It is concerns the dependability, consistency, accuracy, predictability and stability of a measuring instrument (Kerlinger, 1986).

However, poor reliability can be result of various sources such as contestable instrument items, researcher bias, respondent bias and unreliable subjects. For reliability, the Cronbach's alpha will be used. Cronbach's alpha is the most common form of internal consistency reliability coefficient. In order to ensure it is reliable, alpha should be at least or higher than 0.70 to retain an item in an “adequate” scale (Cronbach, 2004).

Next, all of the hypotheses are test for association, Pearson correlation will be used. Lane (2007) defined Pearson correlation is the correlation between two variables reflects the degree to which the variables are related. Pearson correlation reflects the degree of linear relationship between two variables. It ranges from positive one (+1) to negative one (-1). A correlation of +1 means that there is a perfect positive linear relationship between variables whereas correlation of -1 means that there is a perfect negative linear relationship between variables (Lane, 2007). Besides, multiple linear regressions will be used for predicting the variance in an interval dependent which based on linear combination of interval, dichotomous, or dummy independent variables (Kahane, 2001; Milies and Mark, 2001). In addition, it is eminently suited for analyzing collective and separate effects of two or more independent variables on a dependent variable (Pedhazur, 1997).

In conclusion, all of the data collected from the survey will be analyzed by using Statistical Package for Social Science System or also known as SPSS. This software is able to extract and analyze the data according to the need of the user. Therefore, it is has been chosen to obtain the result of the study.

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