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Improving the Service Quality of Bank Alfalah Limited of Pakistan through Customer Satisfaction and Retention


The face of banking has been changed immensely in the past two decades and there is massive competition in the banking sector which has forced the banks to provide excellent service quality for the future success and survival. The banking sector is in a race today, as to see who can offer both the best and the fastest services. This effect can also be seen in Pakistan's banking industry. Pakistan's banking and financial sector is growing and becoming stronger day by day. There is tough competition between the existing domestic and international banks. The existing banks in Pakistan's banking industry are always under threat of new entrants. Due to the increase in the competition in the banking sector, banks nowadays mainly concentrate on the standards of customer services and customer satisfaction to gain competitive advantage.

According to Chiu (1998), Wilson, Zeithaml, Bitner and Gremler (2008) there is a major difference between service quality and satisfaction. Satisfaction is viewed as a broader concept, whereas service quality focuses specifically on the dimensions of service quality. Wilson et al. (2008) further stated that service quality is a focused evaluation that reflects the customer's perception of reliability, assurance, responsiveness, empathy and tangibles. Satisfaction on the other hand is more inclusive; it is influenced by perceptions of service quality. Customers perceive services in terms of the quality of the service and how satisfied they are overall with their experiences. The former further stated that in the recent times financial institutions recognise that they can compete more effectively by distinguishing themselves with respect to service quality and improved customer satisfaction.

Hahn (2004) discussed that the reason of increase in the competition is the deregulation and liberalization in the financial services sector, which has forced to improve banking profitability and banking efficiency all over the world. Hahn (2004) and Berry et al. (1998) proposed that “the old ways of getting and growing business have changed”. The research in the financial institution has shown that to achieve success and satisfying the highly valued customers, the banks need to adopt new techniques. Parasuraman et al. (1988) explained that primary emphasis in academic and managerial efforts has focused on determining what service quality means to customers and developing different strategies to meet the expectations of the customers.

In this study the researcher will be highlighting different strategies and techniques that will help in improving the service quality of Bank Alfalah Limited through customer satisfaction, retention and loyalty. This will help the bank in the future to face the challenges in the highly competitive world.

Research Aims and Objectives:

Palmer and Cole (1995) stated that researchers and academics writers have been focusing on the accurate measurement of service quality, in order to better understand its important antecedents and consequences, and to devise different methods for improving the service quality to gain the competitive edge through customer satisfaction and retention. Lassar et al. (2000) proposed that service quality is commonly noted as a critical factor in building and maintaining relationship with the valued customers. Bolton and Drew (1991) described that the association between service quality and customer satisfaction has great significance. Lewis (1993) proposed that the evaluation of the judgement of service quality is necessary because it has significant influence on bank loyalty.

The primary objective of this research is to improve the service quality of Bank Alfalah Limited through customer satisfaction, customer retention and loyalty. Therefore the focus on questions of my research will be as follows:

• How Bank Alfalah Limited can deliver good service quality for improving customer satisfaction, customer retention and loyalty?
• What are the impacts of service quality and its dimensions on customer satisfaction?

This study aims to determine the impacts of service quality on customer satisfaction and retention. This study will explore the importance of service quality of Bank Alfalah Limited and its relationship with customer satisfaction, customer retention and loyalty. The study will also focus on the different dimensions of service quality in establishing and maintaining a good relationship with the customers.

Literature review:

This chapter explains the relevant literature about service quality and dimensions of service quality and their impact of customer satisfaction, retention and loyalty.

Service Quality:

Chakrabarty, Whitten, and Green (2007) proposed that service quality is defined as “the conformance to customer requirements in delivery of a service”. Parasuraman et al. (1988) defined service quality as “a global judgement or attitude, relating to superiority of the service, whereas satisfaction is related to a specific transaction”. Bitner, Booms and Mohr (1994) defined service quality as “the consumer's overall impression of the relative inferiority/superiority of the organisation and its services”. Wilson et al. (2008) proposed that service quality is a critical element of customer perceptions. Service quality may also be critical in determining customer satisfaction in case of customer service or services offered in combination with a physical product. Wilson et al. (2008) further discussed that services researchers have suggested that consumers judge the quality of service based on their perceptions of the technical outcome provided, the process by which that outcome was delivered, and the quality of the physical surroundings where service is delivered. Parasuraman et al. (1985) proposed that service quality is a gap between customer's expectations of service and their perception of the service experience.

Wilson et al. (2008) mentioned that the dimensions of service quality have been identified by the pioneering research of researchers like Parsu Parasuraman, Valarie Zeithmal and Leonard Berry. Parasuraman et al. (1988) developed the service quality scale i.e. SERVQUAL which is the principal instrument for the measurement of perceptions of the customers perceptions in terms of service quality. The five dimensions of the SERVQUAL scale are given as under:

• The reliability of the service provider
• The assurance provided by the service provider
• The tangibility aspects of the service
• The service provider's empathy with customers
• The responsiveness of the service provider

According to Wilson et al. (2008) the five dimensions of service quality represent how consumers organise information about service quality in their minds. The former further mentioned that on the basis of exploratory and quantitative research, the five dimensions of service quality were relevant for banking, insurance, appliance repair and maintenance, securities brokerage, long distance telephone service, car repairs and others.

Importance of Service Quality in Financial Institutions:

Wilson et al. (2008) proposed that in case of the financial services, service quality is the dominant element in customer's perceptions. Parasuraman, Zeithaml, and Berry (1985) discussed that service quality plays an important role in the service provider companies, firms or organizations because it helps in generating high revenues, helps to reduce costs and increase market shares in a market place. Service quality plays an important role in case of banking, because all the banks offer undifferentiated products and services. It is the service quality that drives the profit performance. Wang et al. (2003) suggested that banks now emphasize on providing high quality service to the customers because it will help them in the future success and survival in todays highly competitive market-place.

Samli and Frohlich (1992) discussed that delivering quality service to customers is a must for success and survival in today's competitive banking environment. The research of Scoterious and Zenios (1998) also revealed that service quality plays an important role in the future success of financial institutions. Al-Hawari (2005) proposed that technology has a great impact in the operations of the banking sector. Wilson et al. (2008) mentioned that technology enables both customers and employees to be more effective in getting and providing service. The technology aspect consists of the ATM machines, internet banking and telephone banking. Technology has made it easier for the customers to make transactions, rather than going to the bank in the operating hours, the customers now can make withdrawls from any linked ATMs at any time. Wilson et al. (2008) further mentioned that through self-service technologies, customers can serve themselves more effectively. The customers via online banking can access their accounts, check balances, make transactions, apply for loans and take care of just about any banking need they might have. All this can be done without the assistance of the bank employees. The main reason why financial institutions are focusing on this, because they want to provide quality service and it will help in satisfying the needs of the customers, which in turn will result in customer loyalty and retention. Wilson et al. (2008) further discussed that the technology can aid frontline employees in providing better service. Customer relationship management and sales support software are examples of the broad categories of technology that can help the employees. Buttle (2009) proposed that banks deal with a large number of individual retail customers. The former further stated that banks want customer relationship management for its analytical capability to help them manage the customer defection rates and to enhance cross-sell performance. Banks also want to win a greater share of customer spend on financial services. The research of Buttle (2009) revealed that data mining techniques can be used to identify which customers are likely to defect and what can be done to win them back.

Some researchers like Rust and Zahorik (1993) proposed that “service quality as an issue is seriously overrated; service certainly is not as important as mythic proportions it has taken on in the industry trade publications and conferences”. On the other hand Jensen and Markland (1996) argued that as a critical measure of organisational performance, service quality remains at the forefront of both the marketing literature generally, and the services marketing literature specifically. Duncan and Elliot (2002) also mentioned that nowadays financial institutions focus on the customer service quality. Wilson et al. (2008) proposed that in todays market-place there is huge comptetition in the services industry, and it has put an intense pressure on the banks to improve the service quality. Berry et al (1998) proposed that due to competition between the banking sector and increasing requirements of the customers, the banks need to take different steps to gain and sustain economical advantages. It is critical for every bank to improve their service quality, satisfy the needs of their customers, retain the existing customers, and provide better services than their competitors.

Measurement of Service Quality:

Parasuraman, Berry, and Zeithaml (1985) discussed that the “customer satisfaction, service quality, and customer expectations represented one of the first attempts to operationalize satisfaction. They proposed that the ratio of the perceived performance to customer expectations was key to maintaining satisfied customers”. Few years later Parasuraman et al. (1988) published a second related discussion that addressed more specifically on the psychometric aspects of service quality. They proposed a multi-term SERVQUAL scale which is regarded as the first attempt to operationalize the customer satisfaction construct. Fitzsimmons and Fitzsimmons (2006) proposed that SERVQUAL is a survey instrument that measures service quality. It is based on implementing the service quality gap. Fitzsimmons and Fitzsimmons (2006) mentioned that measuring the gap between the expected service and perceived service is a routine customer feedback process and it is being used in the leading service companies. Parasuraman et al. (1988) described that SERVQUAL scale emphasizes on the performance component of the service quality model in which quality is discussed as the disparity between expectations and performance. SERVQUAL consists of 22 items that are categorised into five dimensions. The five dimensions are given as under:

The tangibility aspects of the service; According to Parasuraman et al. (1988) the tangibility aspects assess customer's perception on the basis of the appearance of the physical facilities that includes the equipment being used, workforce and communication resources. The tangibility aspect has the greater effect on customer satisfaction. The customers need the banks to be on easily accessible locations, ATM machines must be on the convenient places, user friendly interface for internet banking and telephone banking, so that all the customers can use these facilities. The customers also expect the ATM network to be linked with other banks ATM cash machines for the free of charge withdrawls. Zeithaml and Bitner (2000) proposed that sometimes companies combine tangibles with another dimension of service quality to create a service quality strategy for the firm. Zeithaml and Bitner (2000) further mentioned that because services are intangible, customers are looking for evidence of service in every dealings they have with an organisation. Therefore there are three main categories of evidence; people, process, and physical evidence. These represent the service and evidence that tangibles the company is offering.

The reliability of the service provider; According to researchers such as Parasuraman et al. (1988), Wilson et al. (2008) and Buttle (2009) the reliability aspect includes customer's perception of the organisations ability to perform the services dependably and accurately. Reliability means that the company delivers on its promises. The promises about delivery, service supervision, problem handling and pricing. Customers want to continue doing business with the companies that keep their promises.

The assurance provided by the service provider; Parasuraman et al. (1988) proposed that the assurance aspect involves the knowledge and courtesy and the ability of the company and the employees of the company to inspire trust and confidence. This dimension is very important for the services that customers perceive as high risk or which they feel uncertain about their ability to evaluate outcomes, for example banking, insurance, medical and legal services.

The responsiveness of the service provider; Parasuraman et al. (1988) stated that the responsiveness aspect depends on the willingness to help the customers and to provide the prompt service. This dimension focuses on the attentiveness and promptness in dealing with customer requests, questions, complaints and problems. It depends on the length of time the customers have to wait for assistance, answer to questions, or attention to problems. The customers expect the staff to be responsive. The staff should be well trained and when needed provide the best customer service.

The service provider's empathy with its customers; Wilson et al. (2008) stated that empathy is defined as “the caring, individualized attention that the firm provides its customers”. Parasuraman et al. (1988) mentioned that the empathy aspect depends on the firm's care and individualised attention towards its customers. The customers expect the employees of the bank to be friendly, responsive and empathetic. On the other hand if the employees of the bank are not friendly, non-responsive and non-empathetic towards customers, it will result in the customer being switching to the competitors.

Lasser et al. (2000) proposed that the SERVQUAL scale and technical/functional quality frame are the two most prevalent and widely accepted scales for measuring service quality. On the other hand some researchers have questioned the universality of the SERVQUAL dimensions across the different types of services. Babakus and Mangold (1989), Bresinger and Lambert (1990), Finn and Lamb (1991), Babakus and Boller (1991), Carman (1990) discussed that it is often necessary to include additional items in certain dimensions because they are particularly important for some service categories.

Buttle (2009) argued that “The SERVQUAL model has been subject to much criticism, but it is still in widespread use in original and customized forms”. Buttle (2009), Cronin and Taylor (1992) proposed that one criticism of the SERVQUAL scale is that customers often do not have clearly formed expectations, and therefore that the disconfirmation approach is inappropriate. Some of the critics of SERVQUAL scale have developed an alternative, perceptions-only, model of service quality that they have dubbed SERVPERF. On the other hand Parasureman et al. (1994) argued that the use of SERVQUAL scale in measuring the gaps between the performance and expectations of the customers in terms of service quality is better than the other scales. SERVQUAL scale is preferred by many researchers but on the other hand some disagree with its validity. The questions raised by the researchers include the use of different scores, lack of validity, its applicability, dimensionality etc.

SERVPERF scale was proposed by Cronin and Taylor (1992). Brady et al. (2002) also agreed with the dominance of SERVPERF as an appropriate process for measuring service quality. Brady et al. (2002) discussed that SERVQUAL is out performed by SERVPERF in terms of consumer perception of service quality and satisfaction. SERVPERF is preferred by many researchers because of its simplicity as compared to SERVQUAL. Cronin and Taylor (1992) further stated that the measurement of the service quality using a performance-minus-expectations, i.e., SERVQUAL scale, is unsuitable and they suggested that a performance-only i.e. SERVPERF scale is a better option. On the other hand Parasuraman et al. (1994) argued that it is appropriate to use the SERVQUAL scale for the measurement of the performance and expectations.

A new scale in the retail banking sector was proposed by Bahia and Nantel (2000). It is known as Bank Service Quality (BSQ) scale. The BSQ scale is the extended form of the model of Parasuraman et al. (1985). The BSQ scale contains 31 items and these items are distributed in six dimensions, given as under:


Tangibles are regarded as the physical evidence of the bank.


The reliability aspect involves the ability of the bank to provide the service accurately and without any errors.


This access aspect can be regarded to the speed of the service delivery of the bank.


The price is the measure of the cost that a customer pays for the service delivery.

Effectiveness and Assurance:

Effectiveness and assurance is regarded as the efficiency of the staff to provide the service, and the knowledge, courtesy and friendly behaviour of the staff towards the customers.

Service Portfolio:

The service portfolio consists of the range, consistency and innovative products of the bank.

In case of SERVQUAL scale the price and service portfolio items are missing, but on the other hand BSQ scale included these items, it is the main difference between these two scales.

Researchers such as Newman (2001), Zhou (2004), Sureshchandar et al. (2002) proposed that “the continuous rise in the use of SERVQUAL scale has been arguably attributed to practical usefulness in diagnostic analysis for improving service quality, especially when it is applied in international setting”. Buttle (2009) proposed that SERVQUAL has great importance because it offers a systematic approach to measuring and managing service quality. The former further stated that SERVQUAL emphasizes the importance of understanding customer expectations and of developing internal procedures that align company processes to customer expectations. Fitzsimmons and Fitzsimmons (2006) suggested that SERVQUAL can be used by the management to examine if any unit has poor service quality, it can be determined by a low score; if so, the management can pay attention to correcting the source of customer's poor perceptions. They further stated that SERVQUAL can be used in marketing studies in comparison with the services offered by the competitor's again determine the dimensions of superior or inadequate service quality.
In this study the researcher will be using SERVQUAL scale for the measurement of service quality. Using the SERVQUAL scale the researcher will be analysing the five dimensions of the service quality and the impact of dimensions of service quality on customer statisfaction and retention of the customers of Bank Alfalah Ltd.

Significance of Customer Satisfaction and Retention:

According to Gustafsson, Johnson, and Roos (2005) customer satisfaction is defined as “a customer's overall evaluation of the performance of an offering to date”. Oliver (1997) defined customer satisfaction as “satisfaction is the consumer's fulfilment response. It is a judgement that a product or service feature, or product or service itself, provides a pleasureable level of consumption-related fulfilment”. Oliver (1997) further stated that satisfaction is the customer's perception of a product or service in relation to whether the product or service fulfilled the needs, wants and expectations of the customer. Reichheld (2004) proposed that “an improvement in the customer satisfaction rate has direct and indirect effects on company revenue. The direct effect is customer retentions rate's effect on number of customers possessed by the company. The indirect effect is customer retention rate's effect on average customer tenure, and average customer tenure's effect on yearly spending of the average customer”. Reichheld (2004) suggested that customer satisfaction is considered to be an important aspect in any business. It is vital because it helps in customer loyalty, and loyal customers are the ones which buy the product or service repeatedly. Reichheld (2004) further mentioned that nowadays companies, firms or organizations are working hard to satisfy the needs, wants, expectations and aspirations of the customers. Satisfied customers tell others about the company and this helps in getting new customers.

Buttle (2009) found out that Dawkins and Reichheld (1990) discussed that “Customer retention is the number of customers doing business with a firm at the end of a financial year, expressed as percentage of those who were active customers at the beginning of the year”. Buttle (2009) further mentioned that companies generate better results when they manage their customer base in order to identify, acquire, satisfy and retain profitable customers. Good quality services help to enhance customer satisfaction, it also helps attracting new customers through word of mouth, helps increasing the productivity, increases market share and profitability, minimises the risk of losing customers. In order to achieve the desired business results good customer relationship is the key.

Ahmad and Buttle (2001) proposed that customer retention can also be defined as “The maintenance of continuous trading relationships with customers over long term. Customer retention is the mirror image of customer defection or churn. High retention is equivalent to low defection”. Buttle (2009) further suggested that managing customer retention and tenure intelligently generates two key benefits for companies; reduced marketing costs and better customer insight. The former argued that customer retention rate should not be measured in one year it rather depends on the customer repurchase cycle.

Wang et al (2003) discussed that happy customers are important to success in any firm, organisation or a company. If the desires, expectations of the customers are fulfilled, it means that there will be an increase in the market-share and will result in generating high revenues. Reichheld (2004) proposed that when there is customer loyalty the customer retention is high and the business results tend to follow. On the other hand the customer retention rate decreases if the desires of the customers are not fulfilled and satisfied and eventually the competitors will get the advantage. In order to retain the customers a company, firm or an organisation needs to identify the vulnerable customers. Wilson et al. (2008) proposed that getting new customers is expensive, the process involves advertising, promotion and sales costs as well as start-up operating expenses. The longer a customer remains with the company, the more profitable the relationship is for the organisation. Wilson et al. (2008) mentioned that customers who are satisfied with the services offered by an organisation are likely to increase the amount of money they spend with the company. If a customer is satisfied by the bank's current account services, then it is likely that he will open a savings account with the same bank and use the bank's loan services as well.

Impacts of service quality on customer satisfaction:

Oliver (1980) was the first researcher to carry out a research on how to measure the customer satisfaction. Whereas the research of Parasuraman et al. (1985) was the first effort to measure the service quality. Oliver (1980) and Parasuraman et al. (1985) emphasized on the improvement of the standards of services to fulfil the expectations/inspirations of the customers. The research of Taylor and Baker (1994) revealed the significance of service quality and customer satisfaction. Spreng and Mackoy (1996) proposed that service quality has great impact on customer satisfaction. Zeithaml and Bitner (1996) mentioned that companies today are aware of the fact that they can compete more effectively by distinguishing themselves with respect to service quality and enhanced customer satisfaction.

Newman (2001) proposed that “the increasing competition, technology, social and cultural factors are the chief drivers of service quality initiatives”. The former further explained that in order to achieve the excellence in the terms of customer service, service quality has great significance on customer satisfaction and retention and loyalty. Palmer and Cole (1995) proposed that to gain a competitive edge in services industry service quality is the core element that helps in satisfying the needs of the customers. The research of Parasuraman et al. (1985) revealed the importance of service quality and the dimensions of service quality and its impact on customer satisfaction. Rust et al. (1995) and Jamal and Nasser (2002) proposed that service quality has great impact on customer satisfaction, retention and market share. This means that there is a relationship between service quality, customer satisfaction and retention. Zhou (2004), Rust and Oliver (1994) proposed that “a dimension specific analysis of the relationship between service quality and satisfaction is likely to provide more diagnostic value for improvement of service quality”. Parasurman, Zeithaml and Berry (1994) reported that customer satisfaction is likely to accomplish a greater level of statistical significance when both service quality and customer satisfaction have a considerable effect on repurchase intentions. Due to the competition in the banking sector all the banks are trying to improve the quality of products and services to satisfy the needs of the customers in order to retain their existing customers for the future benefits.

Customer Loyalty:

Many researchers have worked on customer loyalty. Buttle (2009) discussed that customer loyalty is defined and measured by two main approaches, first is based on the behaviour of the customer, second is based on the attitude of the customers. Behaviour loyalty can be measured by the purchasing behaviour of the customer. Attitudinal loyalty can be measured in terms of the attitudes of the customers, which includes the beliefs and feelings of the customer in purchasing a product or service. Wilson et al. (2008) proposed that customer loyalty can be viewed as the way customers feel or the way they act. Customers are loyal as long as they continue to use a good or service.

Reichheld (2004) proposed that it is becoming extremely difficult and costly in getting new customers in today's highly competitive market-place. Therefore a company needs to work on satisfying the needs of the customers. Loyal customers are more profitable on the long run, it costs less to serve them. Loyal customers recommend others to a good company, they will also pay a premium to continue business with a company rather than switching to a competitor that they are not familiar with. Buttle (2009) proposed that nowadays customers want efficiency and professionalism from their services provider. The efficiency and professionalism is achieved through training and skills of the staff/employees of a firm, organisation or a company. Buttle (2009) further mentioned that quick response to a customer query or problem results in satisfied customers. Good customer service and service quality by the service provider results in building up good relationship with the customers. Buttle (2009) suggested that improve customer retention rate in the early years of the relationship. This will help in producing large number of customers to generate higher profits in the later years. Many researchers like Buttle (2009), Wilson et al. (2008) and Wang et al. (2003) proposed that another important aspect is the customers complaint handling; a positive view of customer complaints accepts that customers who complain are giving the company a chance to win them back and retain their future value. Complaints provide information that can help the company to identify, and correct root causes of the problems. A successful complaints handling process enables companies to capture customer complaints before customers start spreading negative word of mouth or take the business elsewhere. Zeithaml and Bitner (2000) proposed that complaint solicitation is an important factor. It provides help to the firms in collection and documentation of customer complaints, the firms can use that information to identify dissatisfied customers, correct the individual problems where possible, and identify common service failure options.

Wilson et al. (2008) proposed that customers will remain loyal to a firm when they receive greater value relative to what they expect from competing firms. When firms deliver consistent quality services from the customer's point of view, clearly the customer benefits and has an incentive to stay in relationship. Wilson et al. (2008) discussed that most customers would prefer not to change service providers, particularly when there is a considerable amount of investment in the relationship. The costs of switching are relatively high in terms of monetary costs of transferring business and the associated psychological and time-related costs. Wilson et al. (2008) further stated that financial institutions across the world have realised that instead of considering the short term profits, they need to look at the long term profits and growth of the company on the basis of their ability to attract the new customers and retain their existing customers. Good customer service is the best way for any bank to ensure the high levels of customer loyalty.


Al-Hawari, (2005) discussed that the service quality has a great effect on any bank's success. Zeithaml et al. (1996) and Reichheld (2004) proposed that service quality has received much attention by the researchers as it is linked with the performance of a bank, service quality is also related with the customer satisfaction and retention. The study of some researchers such as (Al-Hawari, 2005; Nguyen and Leblanc, 1988; Rawanweera and Neely, 2003; Wilson et al., 2008; Buttle, 2009) revealed that service quality in terms of the automated banking services has a great deal of importance due to their influence on profitability, customer retention, attractiveness, positive word-of-mouth, and maximum competitive advantage.

Caruana (2002) proposed that the organisations are working hard on making good relationship with the customers and retaining their existing customers rather than getting new customers. The most important aspect in terms of the market share is the customer satisfaction and retention. Rawanweera and Neely (2003) proposed that service quality has a great effect on retaining the customers. Wilson et al. (2008) proposed that customer satisfaction with a product or service is influenced significantly by the customer's evaluation of product or services. The research of Bloemer et al. (2001) revealed that in banking services both customer satisfaction and customer's perceptions of the service quality were important factors of customer retention and loyalty. Rust and Zahorik (1993), Parasuraman et al. (1988) proposed that the profitability aspect can be assumed by the quality of services because it is the quality that is a key to satisfied customers, and satisfied customers are the ones that purchase the product or services repeatedly.

In this study the main focus will be on the service quality and impact of service quality on customer satisfaction, retention and loyalty.

Organisation under study:
Bank Alfalah Limited Profile:

Bank Alfalah Limited was incorporated on June 21st 1992 as a public company limited under the companies ordinance 1984. On the November 1st 1997 the bank commenced its banking operations. The head office is in located in Karachi, Pakistan. (Bank Alfalah Limited 2009).

Bank Alfalah Limited has been strengthened by the banking of Abu Dhabi Group and a team of competent professionals having a lot of experience in local and international financial institutions. Board of directors and management lays strong emphasis on enhancing the ability of the bank to offer latest services to the customers and the bank has invested in revolutionary technology to have an extensive range of products and services. Bank Alfalah Limited has correspondent relationships and agency arrangements with leading local and international banks. Bank Alfalah Limited is engaged in commercial banking and related services and is undertaking all types of local and international business.

It is mentioned on the website of Bank Alfalah Limited that “PACRA, a premier rating agency of the country, has rated the bank ‘AA' (double A), Entity Rating for long term and A1+ (A one plus) for the short term”. The ratings indicate that there is a very low expectation of the credit risk, also there is a strong capacity for the timely repayment of financial commitments in long term and by the highest capacity for timely repayment in the short term.

The bank has rapidly progressed and expanded the branch networks and deposit base, and is finding new ways to success. As of 31st December 2008 the bank is operating through 282 branches, including 48 Islamic branches and 7 foreign branches. Bank Alfalah Ltd has a huge network of shared online ATMs covering all the major cities in Pakistan. Bank Alfalah Ltd has expanded its business beyond local boundaries in the international arena and has opened branches in countries like Afghanistan, Bangladesh and Bahrain and is planning to grow further around the world.

Bank Alfalah's Islamic banking division was founded in year 2003. Bank Alfalah offers Shariah complaint products through a network of 48 branches, and is increasing the number of branches with the passage of time. According to the annual financial reports and website of Bank Alfalah Ltd that by the end of year 2003 the bank reflected a modest capital base of Rs 100 million and deposits totalling Rs 113.7 million in the Islamic banking sector. By the end of the year 2004 the bank's equity had risen more than four times to Rs 569 million and the deposit size had grown from Rs 113.7 million to Rs 7,229 million. Financial results have shown that the bank has been doing quite good business in the Islamic banking sector. There is a lot of potential in the Islamic banking sector as it is currently less than 3% of the banking sector in Pakistan.

Objective of studying the organisation:

The basic purpose/objective of studying the organisation is to gain the knowledge and experience of the policies and practices of Bank Alfalah Ltd about service quality and the impacts of service quality on customer satisfaction and retention.

Mission Statement:

The mission of Bank Alfalah Ltd is “To be the premiere organisation locally and internationally that provides the complete range of financial services to all segments under one roof. To develop and deliver the most innovative products, manage customer experience, deliver quality services that contributes to brand strength, establishes a competitive advantage and enhances profitability, thus providing value to the stakeholders of the bank”. (Bank Alfalah Limited 2009)

Organisational Structure:

Bank Alfalah Ltd's present organisational structure was implemented in 1997, since then minor adjustments have been made to cater the requirements of the business. The number of board of directors is seven. The board of directors of Bank Alfalah Ltd also includes the chairman of the bank. Board of directors is responsible for making the corporate strategy of the bank. Due to its mature banking like National Bank of Pakistan, the bank has progressed and emerged as one of the foremost financial institution in the country.

There are eleven divisions in the head office in Karachi, Pakistan. These divisions are made on the basis of the business areas. A team of highly qualified and competent professional having experience in local and international financial institutions is working hard to achieve the goals set by the board of directors. The different business areas/divisions are:

• Corporate & Investment Banking
• Branch Banking & SME
• Priority Banking & Wealth Management
• International Business
• Treasury
• Consumer Finance
• Information Technology
• Human Resource & Quality Assurance
• Training & Development
• Risk Management
• Commercial Banking
(Bank Alfalah Limited 2009).

The bank is providing premiere services at an affordable cost to its customers. Bank Alfalah Ltd offers a wide range of products and services such as:

• Branch Banking:

Branch banking involves deposits, lockers, foreign trade, remittances Hilal/ debit cards etc.

• Consumer Banking:

Consumer banking consists of home loans, auto/vehicle loans, credit cards etc.

• Electronic Banking:

Electronic banking involves telephone banking, ATMs etc.

• Corporate Banking:

Corporate banking involves lease finance, trade finance, structured finance, SME, agricultural finance etc.

• Treasury & Investment:

Treasury and investment include Nostro account, money gram, home remittances, money market, forex market etc.

• Islamic Banking:

Islamic banking involves Alfalah musharaka homes, Marhaba finance, Alfalah car ijarah etc.
(Bank Alfalah Limited 2009)

Competitors in Pakistan:

Pakistan's banking sector has developed quiet a lot in the past two decades. The reasons for the development in the Pakistan's banking sector are quiet obvious. More and more multinational banks having diverse experience of banking and customers around the world are entering Pakistan's banking sector. Pakistan has a well-developed banking system. This banking system consists of a wide variety of financial institutions ranging from central banks to commercial banks to specialised agencies to provide the special requirements of specific sectors.

In Pakistan there are three main types of competitors of Bank Alfalah Ltd.

• Nationalised commercial banks
• Privatised banks
• Foreign banks

The nationalised commercial banks consist of Habib Bank Ltd, United Bank Ltd, National bank Ltd and First Woman Bank Ltd. Private banks include banks like Askari Bank Ltd, Prime Commercial Bank Ltd, Bank of Punjab, Bank Al Habib Ltd etc. Bank Alfalah Ltd as compared to the other new banks in the country has more branches, deposits, advances and investments. Bank Alfalah Ltd has maintained its position quite well between these banks, due to good quality services provided by the bank. Although the competition has become very tough due to new entrants like Barclays Bank, Royal Bank of Scotland, HSBC, ABN Amro Bank, Standard Chartered Bank, American Express, CITI Bank etc. The top level management of Bank Alfalah Ltd is paying great attention on the organisational analysis of its competitor's i.e. the banks that are listed on the stock exchange of Pakistan. The top level management has also devised different strategies for improving the customer services due to tough competition from its competitors. The management is also focusing on increasing the number of branches and number of employees. The management believes in developing the potential of the employees. There are training and development centres at Karachi and Lahore. It is obligatory for each staff member to attend a two day training course in a calendar year.

Research Methods:

In this chapter, the many different types of research approaches used to collect and analyse the data are discussed.

General Overview:

According to Hussey and Hussey (1997) there is no consensus in the literature about the definition of research. However, from the many different definitions of research there seems to be an agreement that:

• Research is a process of enquiry and investigation
• It is systematic and methodical
• Research increases knowledge and helps to solve problems

The purpose of research is to:

• Review and synthesise existing knowledge
• Investigate some existing situation or problem
• Provide solutions to a problem
• Explore and analyse more general issues
• To construct or create a new procedure or system
• To explain a new phenomenon
• To generate knowledge
• A combination of the above

(Hussey and Hussey, 1997)

Ghauri and Gronhaug (2002) proposed that research is essential for understanding even basic everyday phenomena that needs to be handled by individuals and organisations. Lancaster (2005) suggested that research provides a key basis for developing knowledge. Ghauri and Gronhaug (2002) narrated that (Revans, 1971; Gill and Johnson, 1991) suggested that the first objective in research is to collect relevant information. The information that is collected now needs to be analysed and put into a structure which helps to achieve a purpose or initiate different actions. The process of deciding what to do, collecting information and deriving a conclusion or decision in a systematic procedure is useful for the cumulative knowledge as well as the personal development of the researcher.

According to Ghauri and Gronhaug (2002) the purpose of research is to work systematically and learn to critically analyse issues or matters before believing in them or acting upon them.

The purpose of my study is to determine the significance of service quality and its dimensions on customer satisfaction, retention and loyalty in Bank Alfalah Limited of Pakistan, and how to improve the standards of service quality in order to satisfy the needs, wants and expectations of the customers, as customer satisfaction is the main factor that helps in retaining the customers.

Different types of Research:

Hussey and Hussey (1997) proposed that the many different types of research can be classified according to:

• The purpose of the research - the reason why are you conducting it
• The process of the research - the way in which data will be collected and analysed
• The logic of the research - whether the researcher is moving from the general to specific or from specific to general
• The outcome of the research - whether the researcher is trying to solve a particular problem or is making a general contribution to the existing knowledge.

Table 1. Classification of main types of research
Type of research Basis of classification
Exploratory, descriptive, analytical or predictive research

Quantitative or qualitative research

Deductive or inductive research

Applied or basic research Purpose of the research

Process of the research

Logic of the research

Outcome of the research

Source: Hussey and Hussey (1997).

Exploratory research:

According to Hussey and Hussey (1997) exploratory research is only conducted into a research problem when there are very less or no earlier studies to which the researcher can refer for the information about that particular issue or problem. They further stated that the aim of this type of research is to look for patterns, ideas or hypotheses, rather than testing or confirming a hypothesis.

Descriptive Research:

Hussey and Hussey (1997) proposed that descriptive research is a research which describes phenomena as they exist. Ghauri and Gronhaug (1995) suggested that in descriptive research the problem is structured and well understood.

Predictive Research:

According to Hussey and Hussey (1997) predictive research aims to generalise from the analysis by predicting certain phenomena on the basis of hypothesised, general relationships.

Applied and basic research:

Hussey and Hussey (1997) proposed that a standard classification of research divides projects into either applied or basic research. They further mentioned that basic research is sometimes referred to as fundamental or pure research. According to Hussey and Hussey (1997) applied research is a research which has been designed to apply its findings to solving a specific, existing problem.

Deductive and inductive research:

Lancaster (2005) suggested that deductive research deals with the theories or hypothesis and then tests out these theories or hypothesis through empirical observation. Lancaster (2005) explained that it is essentially a set of techniques that can be applied to theories in the real world in order to test their validity. Hussey and Hussey (1997) proposed that deductive research involves a conceptual and theoretical structure developed and tested by empirical observation; thus particular instances are deduced from general instances.

Lancaster (2005) proposed that inductive research essentially reverses the process found in deductive research. Lancaster (2005) further stated that in case of inductive research the researcher develops hypothesis and theories with a view to explaining empirical observations of the real world, and these empirical observations are based on the personal experience.

Qualitative and Quantitative research:

Hussey and Hussey (1997) proposed that quantitative approach is objective in nature and concentrated on measuring phenomena. Hussey and Hussey (1997) further mentioned that a quantitative approach involves collecting and analysing of numerical data and applying statistical results, on the other hand a qualitative approach is subjective in nature and involves examining and reflecting on perceptions in order to gain an understanding of social and human activities.

According to Bryman and Bell (2007) quantitative research can be constructed as a research strategy that emphasizes on the quantification aspect in the collection and analysing of data, on the other hand qualitative research can be referred to as a research strategy that emphasizes on the words rather than quantification in the collection of the data analysis. Bryman and Bell (2007) suggested that it is believed that the quantitative researchers use measurement but qualitative researchers do not. Bryman and Bell (2007) further mentioned that the quantitative and qualitative research can be taken to form the clusters of research strategy.

Easterby-Smith, Thorpe and Lowe (2002) proposed that “qualitative methods might concentrate on exploring in much greater depth the nature and origins of people's viewpoints”. Easterby-Smith, Thorpe and Lowe (2002) suggested that much attention has been given in the past to describing, coding and counting events, often at the expense of understanding why things are happening. This resulted in the predominance of the quantitative research methods.

Ghauri and Gronhaug (2002) mentioned that qualitative research is a mixture of the rational, explorative and intuitive, and depends on the skills and experience of the researcher in the collection and analysis of data. Ghauri and Gronhaug (2002) further stated that according to (van Maanen, 1983; Strauss and Corbin, 1990) “in doing qualitative research the skills that are needed are thinking abstractly, stepping back and critically analysing situations, recognising and avoiding biases, obtaining valid and reliable information, having theoretical and social sensitivity and the ability to keep analytical distance and using the past experience at the same time, and having a shrewd sense of observation and interaction”.

Ghauri and Gronhaug (2002) also mentioned that according to (Becker, 1970; Miles and Huberman, 1994; Strauss and Corbin, 1990) there are three major components of qualitative research, given as follows:

• Data
• Interpretive or analytical procedure
• Report

Zeithaml and Bitner (2000) discussed that qualitative research gives the managers of the company a good perspective and sensitivity to significantly understand the data and initiating improvement efforts. Whereas the quantitative research is important in assessing and improving the service delivery designs. Quantitative research gives the managers of the company the data from which they can make broad inferences about customer groups. They further stated that these studies are vital for quantifying customer satisfaction, the importance of service attributes, the extent of service quality gaps, and perceptions of value.

Ghauri and Gronhaug (2002) found that (Glasser and Strauss, 1967; Weiss, 1968; van Maanen, 1983; Light, 1979; Eisenhardt, 1989) proposed that using predetermined instruments may not suit a particular situation, because these methods cut reality into discrete pieces that are combined into statistical clusters.
Ghauri and Gronhaug (1995) proposed that quantitative methods allow us to accept or reject the hypotheses in a logical and consistent manner. Ghauri and Gronhaug (2002) further stated that the main difference between qualitative and quantitative research is not quality but procedure, also the difference is in the overall form and on the emphasis and objectives of the study. Ghauri and Gronhaug (2002) mentioned that although many researchers emphasize on one or the other, quantitative and qualitative methods can be combined and used in the same study. Lancaster (2005) mentioned that Cronbach (1975) suggested that “quantitative as opposed to qualitative is not a dichotomy, and the researcher may often combine both qualitative and quantitative analysis of the same data so as to develop a richer understanding of a phenomenon or issue through the data collected, while at that same time being able to use a combination of techniques to check data for aspects such as representativeness, reliability and validity”. Zeithaml and Bitner (2000) proposed that both type of research are important and should be included in service marketing research. In this study the researcher will be using both qualitative and quantitative methods of research in the collection and analysis of the data to answer the questions to get the desired results.

Data Collection:

According to Lancaster (2005) every research project will involve some type of data collection. Lancaster (2005) further discussed that the data collection must be well planned and managed, systematically managing and planning the data requires an understanding of different types of data combined with different approaches or methods or specific techniques of collection of data.

Lancaster (2005) discussed that Graziano and Rawlin (2004) highlighted the importance of data in research methods suggesting that in a research process effective data collection is pivotal. This means that data provides the basis for identifying and investigating the problems in a research.

Lancaster (2005) mentioned that Saunders et al. (2003) suggested that one of the most fundamental distinctions between types or categories of data is that of primary versus secondary data. Hussey and Hussey (1997) also proposed that there are two main sources of data, primary and secondary data. Lancaster (2005) proposed that the primary data is sometimes collected through techniques involving experimentation, interviewing, observations and surveys (questionnaires). Lancaster (2005) stated that secondary data is the information that already exists in some form or other but which was not collected primarily. Hussey and Hussey (1997) also suggested that secondary data is the data which already exists in the form of books, documents and films. Ghauri and Gronhaug (2002) mentioned that Churchill (1999: 215) proposed that “Do not bypass secondary data. Begin with secondary data, and only when the secondary data are exhausted or show diminishing returns, proceed to primary data”. This means that secondary data sometimes provide enough information to identify and investigate the problem and answer the research questions. In my study a questionnaire has been designed for the collection of primary data in order to know and understand the views/opinions of the customer of Bank Alfalah Limited of Pakistan.


According to Easterby-Smith, Thorpe and Lowe (2002) questionnaires are widely used in business studies for the collection of data. Ghauri and Gronhaug (2002) also proposed that surveys and questionnaires are among the most popular data collection methods. Hussey and Hussey (1997) discussed that questionnaires are associated with both positivistic and phenomenological methodologies. The main purpose of the questionnaire is to find out the thinking and feelings of the participants of a selected group. Easterby-Smith, Thorpe and Lowe (2002) proposed that the main decisions to be made in designing a questionnaire should relate to the type of questions included and the overall format of the questionnaire.

Hussey and Hussey (1997) proposed that a positivistic approach involves closed questions on the other hand a phenomenological approach suggests open-ended questions. Easterby-Smith, Thorpe and Lowe (2002) mentioned that the strength of closed questions is that they can be completed and analysed quickly, the weakness is that the data obtained may be very superficial, on the other hand open questions allow the possibility of asking deeper questions obtaining unanticipated perspectives on an issue, but the corresponding weakness is that analysis and completion can be difficult and time consuming.

Hussey and Hussey (1997) proposed that the question design is concerned with the type of questions, their wording, the reliability and validity of the responses. Ghauri and Gronhaug (2002) also suggested that the precise wording of the questions is crucial in achieving maximum validity of information/data collected through asking questions. Ghauri and Gronhaug (2002) proposed that the length of the questionnaire is important. The respondent gets tired or loses interest in answering the questions if the questionnaire is too long. Hussey and Hussey (1997) also suggested that the researcher needs to keep the questionnaire as short as possible, but must include all the questions that are required to cover the purposes of the research. Hussey and Hussey (1997) further mentioned that the researcher needs to keep the questions as simple as possible, also only include relevant questions.

Main decisions when using questionnaires:
• Sample size
• Type of questions
• Wording of the questions and how to ensure that they are intelligible and unambiguous
• Design of the questionnaire, including any instructions
• Wording of any accompanying letter
• Method of distribution are return of completed questionnaires
• Tests for validity and reliability and when they should be applied
• Methods for collating and analysing the data collected
• Any action to be taken if the questionnaires are not returned

The main types of questionnaire approaches are given as under:
• By post
• By telephone
• Face-to-face
• Group distribution
• Individual distribution

Saunders et al. (2003) proposed that the researcher needs to be absolutely clear before designing a questionnaire; the researcher needs to know what he wants to learn and what he wants to obtain. The researcher also needs to think ahead about how he is going to collate the collected data. If the researcher finds it difficult to collate the information gathered in a quantitative or qualitative way then there is no point of designing a questionnaire.

As many researchers such as Hussey and Hussey (1997), Easterby-Smith, Thorpe and Lowe (2002) suggested that questions should be open-ended or closed-ended, here in this research both types of questions have been used while designing the questionnaire. The reason why both types are included is that the respondent can give personal opinions or personal response in his or her own words.

Data Presentation and Analysis:

Lancaster (2005) proposed that analysing the data is the process of turning data into information. The information is the data which is in a form that can be used for explanation or decision making. The former proposed that there are four key roles for analysis; these involve distillation, classification, identification and communication. Here in this study the data will be presented by using such methods that are easy to follow. The questionnaire design is very clear and contains all the important questions that are required for the purpose of this research. The data will be presented in such a way that it will help to organize and summarize the results.

Reliability and Validity of the data:

According to Hussey and Hussey (1997) the reliability aspect is concerned with the findings of the research. The findings can be said to be reliable if other researchers repeated the research and obtained the same results. Bryman and Bell (2007) suggested that “reliability refers to the consistency of a measure of a concept”. Bryman and Bell (2007) further proposed that reliability is the degree to which two or more observers of the same behaviour agree in terms of their coding.

Hussey and Hussey (1997) mentioned that validity aspect is concerned with the extent to which the research findings accurately represent what is happening in a particular situation. In other words whether the data collected is a true picture of what is being studied. Bryman and Bell (2007) proposed that “validity refers to the issue of whether or not an indicator (or set of indicators) that is devised to gauge a concept really measures that concept”.

Hussey and Hussey (1997) proposed that the researcher needs to keep in mind that the responses to the questions may turn out to be highly reliable, but the results will be worthless if the research questions do not measure what the research intended to measure; this means that the validity is low. It is important for the researcher that questions asked correspond with the explanation the researcher gives to the respondents regarding the purpose of the study.

Ethical Consideration:

Ethical consideration has much importance and great impact at every stage of research. Easterby-Smith, Thorpe and Jackson (2008) narrated that Bryman and Bell (2007) suggested that the main issues involved in this respect are:

• Ensuring that no harm comes to participants
• Respecting the dignity of the research participants
• Ensuring a fully informed consent of research participants
• Protecting the privacy of research subjects
• Ensuring the confidentiality of research data
• Protecting the anonymity of individuals or organisations
• Avoiding deception about the nature or aims of the research
• Declaration of affiliations, funding sources, and conflicts of interest
• Honesty and transparency in communicating about the research
• Avoidance of misleading, or false reporting of research findings


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Bank Alfalah Limited [online] (cited 1st September 2009). Available from:


In this chapter the recommendations and conclusion of the research as well as the issues for future improvements are discussed.


According to the research of the researchers such as Cronin and Taylor (1992), Palmer and Cole (1995), Spreng and Mackoy (1996), Taylor and Baker (1994), Najjar and Bishu (2006), Woodside et al. (1989) service quality and its core dimensions have great impact on customer satisfaction. The five dimensional approach of service quality is the preferred approach to determine the service quality of the bank and its competitors in the region. The first factor of the five dimensional approach of service quality is reliability. Reliability factor of the service quality is associated with delivering the service as promised. The customers pay much concern that whether the bank will provide a friendly and secure banking atmosphere or not. It is the responsibility of the Bank Alfalah Ltd to provide as much information as possible to the customer about its policies. The top level management of Bank Alfalah needs to be aware of the customers' expectations of reliability. The employees of the Bank Alfalah Ltd need to deliver consistent and efficient services to the customers, also the bank needs to ensure that the things are done right at the first time this will help the bank in customer satisfaction and retention.

The second dimension of service quality is assurance. The assurance factor involves the knowledge, professionalism and skills of the employees in terms of serving their customers, also issues such as confidentiality and prompt responses. The bank needs to give special training to the staff, because well trained staff will serve the customers properly and professionally, this will help in increasing the confidence of the customers as well as the confidence of the staff and will help the bank for the continuity of the business in the future, thus will help in the customer retention and loyalty. The reputation of the bank depends on the employees, because it's the employees with whom the customers interact. The employees of the bank need to build the trust and confidence in the customer by delivering consistent quality services, courteous attitude and dealing with their problems professionally and on time. Knowledgeable and well trained staff gives a good impression of the bank to its customers.

The next dimension of service quality is the tangibles. The tangibles factor of service quality is related with the physical facilities of the bank. Employee appearance and dress are important aspects of the tangibles as well. The bank needs to pay much attention to automation and innovations factors. Bank Alfalah Ltd is expanding the network of branches, therefore good locations of the branches will help in making the customers happy. The bank needs to make sure that the ATMs are on safe locations. The bank statement of the bank should be clear and readable. Bank Alfalah Ltd is investing in revolutionary technology this will help in satisfaction of the customers and will build the confidence of the employees. The bank needs to make sure that the website is attractive, user friendly and contains up to date information. Bank Alfalah Ltd needs to work on the online banking. They haven't introduced the online banking as yet. The responses gathered from the questionnaire most of the respondents suggested that the online banking facility should be provided to them.

Empathy is another important factor of service quality. The customers of Bank Alfalah Ltd are happy with the operating hours of the bank. The bank needs to emphasize on building a good relationship with the corporate as well as individual customers. The bank should employee more staff to facilitate the customers, also divide the workload of employees by hiring new staff and giving relaxation to the existing staff as they work for long hours. The bank should also hire greeters like its competitors in order to satisfy the needs and expectations of the customers. By paying attention to customers, listen to their problems and delivering what customers need will help the bank to improve the performance in the empathy factor of the service quality.

Another important factor of service quality is responsiveness. The bank needs to make sure that the employees are always willing to help and solve the problems of the customers. Customer complaints should be handled properly, professionally and efficiently. The bank should also develop an effective approach to promptly respond to the customer requests. The transactions and the database must be secure for building the confidence and trust of the customers. The bank should emphasize on the customers leaving the bank and switching to another. The bank must get the feedback from the customer on the closure of their account. In order to quickly respond to the customer problems or issues the bank needs to improve the channels of communication. Good customer service will also help in retaining the valued customers.
Although customer satisfaction is the main factor that drives customer retention, Bank Alfalah Ltd needs to find new ways of satisfying the needs, expectations or wants of the customers. Good quality services also help to build up a good relationship with the customer and result in customer retention and loyalty. The bank has to improve the standard of getting the feedback i.e. complaints, comments and suggestions of the customers in order to respond to their problems, issues efficiently and effectively. The technology division of the Bank Alfalah needs to work on the improvement of customer service standards and products range by focusing on the new and emerging e-commerce and internet related technologies. The Bank also needs to focus on the online banking. The electronic department of the bank also needs to improve the call centres, data mining and data warehousing projects, and enhancement of the ATM network to the international standards. The business development department of Bank Alfalah Ltd also needs to adopt different strategies to improve consumer services in response to tough competition from the competitors regarding products and services such as credit cards, visa card, Alfalah hilal card, Visa electron international debit card etc. The Marketing department of the bank needs to increase the press coverage and advertising in both print and electronic media.


Due to the recent developments in the new product development and innovation in the banking industry has raised the need for many banks to consider the strategies for improving the service quality in order to satisfy the needs, expectations or inspirations of their valued customers. Customer satisfaction performs an important mediating role between service quality, customer loyalty and customer retention. Therefore the top level management of Bank Alfalah Ltd should primarily focus on customer satisfaction for which service quality is an important antecedent. It is essential for the bank to use its internal marketing practices, in order to train and develop the front line employees. This will help the employees of the bank who have to communicate with the customers to have a good understanding of the importance of their appearance and behaviour in providing good customer service.

Bank Alfalah Ltd as compared to its peers is in a better position to deal with any unfavourable market trend. The main objective of Bank Alfalah is to improve the corporate image of the bank, expand the network of branches in order to penetrate the market and to improve the service quality and customer service by focusing on the high levels of technology. The top level management of the bank is formulating new strategies and is constantly working on introducing new products and services to cope with the current demands of the customers. The top level management is focusing attention on enhancing the service quality practices to accomplish the objectives. The findings of the research suggest that by improving the standards of service quality, customer satisfaction can be achieved which will help in customer loyalty and enhance profitability. The findings also suggest that satisfied customers are more likely to stay with the bank and recommend it to others.

The findings of this research have to be interpreted taking into consideration few limitations. One limitation of this research is that it was conducted only in Karachi, an urban area of Pakistan. Second, data collection was only limited to the branches of Karachi. Therefore the findings cannot be generalised for all the customers of Bank Alfalah Ltd.


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Results, Analysis and Findings:

In this chapter the very different types of responses collected from the customers of Bank Alfalah Ltd and the data collected on the basis of the dimensions of service quality. The results of the responses and analysis of the data has been shown in tables and graphs.


The questionnaire was designed according to the five dimensions of service quality in order to know the view points of the customers of Bank Alfalah Ltd about the standards of service quality of the bank. The questionnaire was also designed to determine the impacts of service quality on customer satisfaction, retention and loyalty. The questionnaire contained 15 questions about different dimensions of service quality, 3 questions were included to get the suggestions/comments from the customers of the bank. Open-ended and closed questions were used in the questionnaire in order to get the comments/suggestions from the customers of Bank Alfalah Ltd. After the approval of the regional head the questionnaire was distributed amongst different branches of Bank Alfalah Ltd.

Dimensions of Service Quality:

The research is conducted on the basis of five dimensions of service quality. These dimensions consist of reliability, assurance, tangibles, empathy and responsiveness.


Ability to perform the promised service dependably and accurately


Knowledge and courtesy of employees and their ability to convey trust and confidence.


Appearance of the physical facilities, equipment, personnel and communication materials.


Provision of caring, individualized attention to customers.


Willingness to help customers and provide prompt service.

Adopted from:

Buttle, F. (2009, pp. 203)

The questions/statements used in the questionnaire for measuring the dimensions of service quality and its impact on customer satisfaction, retention and loyalty of Bank Alfalah Ltd are provided. Some of the questions were taken from the previous researches conducted by other researchers for determining the service quality and the impact of service quality and its dimensions on customer satisfaction, retention and loyalty. These questions/statements are given as under:

Gender Male..... Female

1. The employees of the bank are always available for assistance and help when needed.
2. The employees of the bank are well trained and professional.
3. The employees of the bank are neat, clean and courteous.
4. The bank has convenient operating hours.
5. The bank fulfils the demands/expectations of the customers.
6. The bank statement is clear and readable.
7. The physical facilities of the bank are visually appealing.
8. The employees of the bank try to provide prompt services.
9. I am happy and satisfied with the services provided by the bank.
10. The ATM machines are on the safe locations, working properly, and have a user friendly interface.
11. The bank is concerned about the security of the transactions.
12. The Website is informative, attractive and has up to date information.
13. The bank performs services accurately.
14. The information and the transactions are secure.
15. The bank provides consistent quality services.
16. Would you recommend the bank to other people?
17. Would you like to continue doing business with the bank in the future?
18. Are you happy with the services provided by the bank?
19. What type of changes would you like to see?
20. In your opinion what can be done to improve the service quality of the bank?

Adopted from: Kassim and Souiden (2007), Duncan and Elliot (2002), Dimitriades (2006), Jamal and Nasser (2002), Al-Hawari (2005), Hauser and Paul (2006), Parasurman et al. (1985).


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Dimitriades, Z.S. (2006) ‘Customer Satisfaction, loyalty and commitment in service organisations', some evidence from Greece, 29,12,pp.782-800.

Hauser, R. and Paul, R. (2006) ‘Is service quality and culture' an empirical investigation, Journal of computer Information Systems,pp.15-24.

Jamal, A. and Nasser, K. (2002), ‘Customer satisfaction and retail banking: an assessment of some of the key antecedents of customer satisfaction in retail banking', International Journal of Bank Marketing, 20,4,pp.146-160.

Kassim, N.M., and Souiden, N. (2007), ‘Customer retention measurement in the UAE banking sector,' Journal of Financial Services Marketing,11,3,pp.217-228.

Parasuraman, A., Berry, L.L. and Zeithaml, V.A. (1985) ‘A conceptual model of service quality and its implications for future research', Journal of Marketing, 49(4), pp.41-50.