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Customer Satisfaction Towards Service Quality

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In any business-to-customer (B2C) type ofenvironment, satisfying a customer is the ultimate goal and objective. More often than not, it can be quite an issue. This is perhaps due to the fact that organizations sometimes do not really understand of what actually goes on in a customer's mind. As such, this predicament has provided as a challenging task to most business conglomerates that places strong emphasis on customer relations. Although many researches and studies were conducted on the actual working of the customer's mind, till today it is a still a mystery.

Therefore, this research focused on the measurement of customer satisfaction through delivery of service quality of Service Counter staff of Commercial Banks in Penang, Malaysia. A quantitative research was used to study the relationship between service quality dimensions and customer satisfaction. Assurance has positive relationship but it has no significant effect on customer satisfaction. Reliability has negative relationship but it has no significant effect on customer satisfaction. Tangibles have positive relationship and have significant impact on customer satisfaction. Empathy has positive relationship but it has no significant effect on customer satisfaction. Responsiveness has positive relationship but no significant impact on customer satisfaction. The study highlights implications for marketers in banking industry for improvement in delivery of service quality.


Service organizations play an important role for developing countries like Malaysia. Therefore, it must be good quality and competitive organization in maintaining customer satisfaction and further needs to improve the effectiveness and efficiency of the organization. At the same time, as we all know that the requirements and higher customer expectations, it is different from the past (Rogerio & Zulema, 2002). This is a very great challenge to all sectors.

Banking business is now driven with the introduction of new products / services and processes which are facilitated through ongoing technological advancements. In such a scenario the expectations of customers also shift to a higher platform and is usually perceived against the backdrop of the experiences gained while dealing with competitors. The gap in customer expectations many a times results in complaints and the same can be said to be inevitable, as in any service industry. To retain as also increase customer base it is absolutely essential that the bank instills confidence in its customers through satisfactory explanations and resolution of complaints and at the same time use complaints as a feed back mechanism for bringing about improvement in services.

The banking sector at present has put a benchmark index that determines the performance of Customer Service in the organization. It is also consistent with the requirements of the Bank that all institutions must be able to respond positively to a more competitive among the financial liberalization and technological revolution by offering an innovative range of products that range and improve the quality of customer service on an ongoing basis. (Tan Sri Dato 'Dr Zeti Akhtar Azizi, 2005).

The banking sector also needs quality personnel and competency. Having employees like them to provide high quality products and services is critical to build consumer confidence and good relationship, drive customer satisfaction and enhance the reputation of previous research studies, (Ndubisi & Tam, 2005) has stated 'bind' the customer is as important as when they lose will harm the institution. This will lead to a decline in revenue, increased costs to attract new customers, a bad reputation when the customer is not satisfied the problem will spread to other customers and a decline in employee retention (Colgate & Norris, 2001).


The trend of world markets has changed noticeably from agricultural to service markets (Asian Development Outlook, 2007). All of the service businesses are trying their best to improve their service quality in order to make customers satisfied with their services. Banks now focus more on the quality standards in order to meet the basic needs and expectations of the customers.

Once customers requirements are clearly identified and understood, banks are more likely to anticipate and fulfill their customers needs and wants (Juwaheer & Ross, 2003). In the banking sector, the first place of destination by the customer is at the Customer Service Counter (Customer Service). Here, various questions, problems and complaints filed by customers. At the bank, customer service counter is the most important because this is where the Customer Relations Assistant job set to any direction so that customers, whether customers want to continue the operation of the counter, self-service terminals, counters open accounts, loans or financial adviser or directly to managers to make a complaint.

Service quality was determined as the subjective comparison that customers make between their expectations about a service and the perception of the way the service has been run. Parasuraman (1985) defined service quality as ;a function of the differences between expectation and performance along ten major dimensions.

In later research, Parasuraman (1988) revised and defined the service quality in terms of five dimensions: tangibility, reliability, responsiveness, assurance, and empathy.

In the banking industry, most researchers are interested in maximizing customer Satisfaction. Hernon & Whitwan (2001) defined customer satisfaction as a measure of how the customer perceives service delivery. Liu (2000) stated, for example, that customer satisfaction is a function of service performance relative to the customer expectation. For this reason, it is important to understand how customer expectation is formed in order to identify the factors of service satisfaction.

As Reisig & Chandek (2001) discussed the fact that different customers have different expectations, based on their knowledge of a product or service. This can be implied that a customer may estimate what the service performance will be or may think what the performance ought to be. If the service performance meets or exceeds customers& expectation, the customers will be satisfied. On the other hand, customers are more likely to be dissatisfied if the service performance is less than what they have expected.

A greater number of satisfied customers will make the bank business more successful and more profitable. Previous research explored customer satisfaction

regarding the service quality of all areas in the bank so that the bank can assess the customer perception.

This study identified five factors of service quality by focusing on the Service Counter staff (including Customer Service Counter), and explored the customers expectations and perception levels of these services at Commercial Banks in Penang, Malaysia.

The results of this quantitative assessment of service quality might provide some insights into how customers rate the overall service quality and assessed customers satisfactions at Commercial Banks in Penang, Malaysia.

Customer satisfaction, a business term, is a measure of how products and services

supplied by a company meet or surpass customer expectation. It is seen as a key performance indicator within business and is part of the four perspectives of a Balanced Scorecard. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy.

The study is intended to identify customer satisfaction and retention is critical for retail banks, and investigates the major determinants of customer satisfaction and future intentions in the retail bank sector. Identifies the determinants which include

service quality dimensions (e.g. getting it right the first time), service features (e.g. competitive interest rates), service problems, service recovery and products used.

Banks are increasingly interested in retaining existing customers while targeting non-customers; measuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace. Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other options the customer may have and other products against which the customer can compare the banks's products.


  • To assess customers expectation and perception level towards service quality of the Service Counter staff of Commercial Banks in Penang, Malaysia; in five dimensions: tangibility, reliability, responsiveness, assurance and empathy (Parasuraman, 1988).
  • To analyze the discrepancy gap between customers expectation and perception towards the service quality of the Service Counter staff of Commercial Banks in Penang, Malaysia.


  • What is the level of customers expectation and perception towards service quality of the Service Counter staff?
  • What is the discrepancy gap between customers expectation and perception towards service quality of the Service Counter staff?


Customer satisfaction relied on customer expectation and customer perception towards 5 service quality dimensions of Service Counters of 10 Commercial Banks in Penang, Malaysia. The sampling group was 60 customers - 6 customers from each bank.

Definition of Terms

Service quality means the difference between the customers expectation of service and their perceived service. In this study, the assessment standards of Zeithaml, Parasuraman & Berry (1990) will be used, which consist of five dimensions: tangibility, reliability, responsiveness, assurance, and empathy.

SERVQUAL is an instrument for measuring service quality, in terms of the discrepancy between customers expectation regarding service offered and the perception of the service received. Respondents are required to answer questions about both their expectation and their perception.

Customer expectation means uncontrollable factors including past experience, personal needs, word of mouth, and external communication about the bank services. Customer perception means customers feelings of pleasure / displeasure or the reaction of the customers in relation to the performance of the bank staff in satisfying / dissatisfying the services.


This study will be as a practical guideline for the bank management to identify weaknessess and rooms for imrovement in their service quality. Customer satisfaction, a business term, is a measure of how products and services supplied

by a company meet or surpass customer expectation. It is seen as a key performance indicator within business and is part of the four perspectives of a Balanced Scorecard.

In a competitive marketplace where banks compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. The study is intended to identify customer satisfaction and retention is critical for retail banks, and investigates the major determinants of customer satisfaction and future intentions in the retail bank sector. Identifies the determinants which include service quality dimensions, service features, service problems, service recovery and products used.

Finds, in particular, that service problems and the bank's service recovery ability have a major impact on customer satisfaction and intentions to switch. This study investigates the relationship between perceived performance, satisfaction and behavioural intention, and the extent to which each is associated with actual performance, customers' attributions for problems, experience and the level of performance which customers think is possible.

Perceived performance and satisfaction are significantly associated with customer standards of the best possible performance, and satisfaction is also associated with the customer's attribution of the' cause of performance problems.

While satisfaction was significantly associated with intention to re-purchase, a significant interaction was found between customer experience and satisfaction.

Banks are increasingly interested in retaining existing customers while targeting non-customers; measuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace. Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service.

The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other options the customer may have and other products against which the customer can compare the organization's products.


Previous researchers have demonstrated the importance of increasing understanding of strategies to resolve customer complaints and more to study the behavior of customers, namely quality of life & sex Ndubisi, 2005. Study customer behavior through the CM model to take the complaint as an opportunity to provide solutions, research studies and the Vos & Huitema, 2008. As the study by Baptista, 2003 in which an organization should attempt to resolve complaints informally, taken orally and should make proper records and the complaint should be resolved as soon as possible so the problem does not persist.

They have also emphasized differences in complaints against the Service Counter and self service terminals & Vihtkari Snellman, 2003, is the notion that the use of self-service terminals in the bank to reduce customer complaints, but rather a circumstance where there is 40 per cent of users are not satisfied with the self-service.

Researchers previously expressed understanding of customer dissatisfaction is the key to successful implementation of TQM and principals as well as the Puga Leal & Pereira, 2002. Researchers say previous satisfaction is waiting to be served a major contributor to quality of service satisfaction Sulek & Hensley, 2007.

Researchers previously expressed satisfaction with the care, satisfaction, trust and satisfaction as a control, each dependent on each other that Beverland, 2005. Previous researchers to state that organizations need to keep employees as customers and keeping customers as employees of Bowers & Martin, 2004.
Researchers found that the quality of a product is dependent on the existing knowledge in the management of the Yang, 2006. Researchers say there is a strong relationship between the dimensions of service quality, performance and customer satisfaction.

Previous studies have identified the benefits that customer retention delivers to an organisation (see Colgate et al., 1996; Reichheld and Sasser, 1990; Storbacka et al., 1994). For example, the longer a customer stays with an organisation the more utility the customer generates (Reichheld and Sasser, 1990). This is an outcome of a number of factors relating to the time the customer spends with the organisation. These include the higher initial costs of introducing and attracting a new customer, increases in both the value and number of purchases, the customer's better understanding of the organisation, and positive word-of-mouth promotion.

Customer satisfaction has been said one of the most widely used study in marketing. The previous research has tries to identify a number of variables of customer satisfaction. Because satisfaction is basically a psychological state, care

should be taken in the effort of quantitative measurement, although a large quantity of research in this area has recently been developed. Work done by Berry (Bart Allen) and Brodeur between 1990 and 1998 defined ten 'Quality Values' which influence satisfaction behavior, further expanded by Berry in 2002 and known as the ten domains of satisfaction. These ten domains of satisfaction include: Quality, Value, Timeliness, Efficiency, Ease of Access, Environment, Inter-departmental Teamwork, Front line Service Behaviors, Commitment to the Customer and Innovation.

These factors are emphasized for continuous improvement and organizational change measurement and are most often utilized to develop the architecture for satisfaction measurement as an integrated model. Work done by Parasuraman, Zeithaml and Berry (Leonard L) between 1985 and 1988 provides the basis for the measurement of customer satisfaction with a service by using the gap between the customer's expectation of performance and their perceived experience of performance.

This provides the measurer with a satisfaction "gap" which is objective and quantitative in nature. Work done by Cronin and Taylor propose the "confirmation/disconfirmation" theory of combining the "gap" described by Parasuraman, Zeithaml and Berry as two different measures (perception and expectation of performance) into a single measurement of performance according

to expectation. According to Garbrand, customer satisfaction equals perception of performance divided by expectation of performance.

The usual measures of customer satisfaction involve a study with a set of statements using a Likert scale. The customer is asked to evaluate each statement and in term of their perception and expectation of performance of the organization being measured. Based on their responses, customers can be categorized into one of three groups: Promoters, Passives, and Detractors.

In the net promoter framework, Promoters are viewed as valuable assets that drive profitable growth because of their repeat/increased purchases, longevity and referrals, while Detractors are seen as liabilities that destroy profitable growth because of their complaints, reduced purchases/defection and negative word-of-mouth. Companies calculate their Net Promoter Score by subtracting their % Detractors from their % Promoters.

The Kano model is a theory of product development and customer satisfaction developed in the 1980's by Professor Noriaki Kano that classifies customer preferences into five categories: Attractive, One-Dimensional, Must-Be, Indifferent, Reverse.

The Kano model offers some insight into the product attributes which are perceived to be important to customers. Kano also produced a methodology for mapping consumer responses to questionnaires onto his model.

SERVQUAL or RATER is a service-quality framework that has been incorporated into customer-satisfaction surveys (e.g., the revised Norwegian Customer Satisfaction Barometer) to indicate the gap between customer expectations and experience.

J.D. Power and Associates provides another measure of customer satisfaction, known for its top-box approach and automotive industry rankings. J.D. Power and Associates' marketing research consists primarily of consumer surveys and is publicly known for the value of its product awards.

One of the newest and most innovative customer satisfaction measurement methodologies is called Gustometria. Gustometria is real time measurement of customer and employee satisfaction. Customers are invited to answer a short survey by touching the "gustometer" screen with their fingers. The responses are collected immediately by the Gustometria servers which tabulate the results in real time. Management can then log into their private website and use the sophisticated business intelligence reports which are built in to the Gustometria system.

The rewards to firms that establish a loyal customer base have been well documented (Armstrong and Symonds, 1991; Heskett, 1994; Reichheld and Sasser, 1990). In general, increased loyalty leads to lower costs of servicing the firm's customers, reduced marketing expenditures, increased business from the existing customer base and greater profits. These rewards are particularly true in the retail banking sector.

By increasing loyalty, a retail bank:

  • reduces its servicing costs (i.e. accounts do not have to be opened or closed, and credit ratings do not have to be established;
  • gains knowledge of the financial affairs and needs of its customers (thereby allowing effective and efficient targeting); and
  • has an opportunity to cross-sell existing and new products and services. In one case, a retail bank that increased its customer retention rates by 5 per cent increased its profits by 85 per cent (Reichheld and Sasser, 1990). Improving customer satisfaction, and thereby retention rates, can come from a variety of activities available to the firm.

The existing evidence suggests that major gains in customer satisfaction are likely to come from improvements in:

  • Service quality;
  • Service features; and
  • Customer complaint handling.

Not surprisingly, there are strong linkages between service quality dimensions (e.g.

courteous service providers) and overall customer satisfaction (Anderson and Sullivan, 1993). However, there has been considerable debate as to the basic dimensions of service quality (see Brown et al., 1993 and Cronin and Taylor, 1992, for reviews), the measurement of these dimensions (Brown et al., 1993; Parasuraman et al., 1993; Smith, 1995; Teas, 1993), and the components of customer satisfaction (Hausknecht, 1990; Yi, 1990). Surprisingly, little empirical research has examined the importance of service quality dimensions in determining customer satisfaction.



Independent Variables

Dependent Variable


Some empirical studies of service satisfaction suggest that “the human interaction component of service delivery is essential to the determination of satisfaction and dissatisfaction” (Bitner, 1990). According to Anderson and Sullivan (1993), when consumers' perceived service quality performance falls short of their expectation, they become dissatisfied. Lewis and Spyrakopoulos (2001), in their research conducted on UK retail banking, categorized the causes of dissatisfaction in banking sector into five groups i.e.

1) Banking Procedures:

  • Bureaucracy and slow banking, and
  • Failure to keep customers fully aware of their banking situation.

2) Mistakes (i.e. wrong statement)

3) Employee behavior and training:

  • Employees ignorant of certain banking procedures and
  • Employees unwilling or slow to help the customer

4) Functional or technical failures:

  • Long and/or unorganized queues
  • ATM's out of order
  • Limited network or branches
  • Incomprehensible statements of accounts, terms of loans, conversions etc.

5) Action or omission of the bank that are against the sense of fair trade.

Yanamandram and White (2004), in their research mentioned nine factors as main reasons ofdissatisfaction. These are lack of branch locations, high interest rates on loans etc, low interest rates on savings, long waiting periods, number of accounts fees, high account fees, poor counter fees, poor counter service, e-banking confusing, poor telephone banking service and others.

Furthermore Johnston (1995), in his research demonstrated that, for personal customer of banks, the main sources of satisfaction are attentiveness, responsiveness, care and friendliness whereas the main sources of dissatisfaction are lack of integrity, reliability, responsiveness, availability and functionality. Further he argued that, all the reasons of dissatisfaction are not necessarily the other face

of the sources of satisfaction though responsiveness is key component in providing satisfaction and the lack of it is a major source of dissatisfaction.

Gronroos, C. (1984), cited in Panther and Farquhar (2004), argued service industry is much prone to entail greater dissatisfaction than products because both technical and functional aspects have an impact on consumer evaluation of the services. In financial services, self-service technologies (SSTs) become more wining tool to deal with

customers resulting in customer dissatisfaction. To illustrate banks have adopted internet banking as service delivery tool, with a view to providing better and lowering costs, and sometimes new services to their customers.

Further, they explained that presently as a regular practice banks start offering self-service technologies without having carefully studied what the true outcomes will be when customers interact with technology without a human component in the service encounter. SSTs interact with customer in a pre-designed way, rather than understanding individual customer's need.

Bitner (1990), found several satisfactions and dissatisfaction drivers applying criticalincident techniques. They identified key actions such as employee response to customer needs and requests, failure of service recovery action, lack of prompt and spontaneous employee actions result in both satisfaction and dissatisfaction.

Day and Bodur (1977) argued in their research that in most cases dissatisfaction is directly linked with quality of suppliers performance. In their research most frequently mentioned reason for dissatisfaction was, “The service was rendered in a careless, unprofessional manner.”

Some researchers observe dissatisfaction drivers are determined at the time when customers directly interact with a service. Some aspects of a service may not be persuasive for customer satisfaction but can lead to strong dissatisfaction when they are under performed. On the other hand, some aspects of service lead to satisfaction if delivered properly, but may not necessarily emerge dissatisfaction if absent (Srijumpa , 2007).

Furthermore, Bolfing (1989), argued that “Heterogeneity and intangible nature of services itself frequently produced situation in which customers needs are misjudged or mishandled resulting in customers' dissatisfaction”. That is the nature of services itself is also a source of dissatisfaction.


Gummesson (1999), finds three different options that a customer can choose between when he or she feels dissatisfied with something that involves their present supplier where the first one is to exit - the customers leave for a competitor, or stop buying the goods or services temporarily or permanently.

This option is also pointed out by Brandt (2003), who states that if a customer is not satisfied with the product or the salesperson, he or she simply does not purchase from the company again. The second choice is called voice - the customers speak their mind and demand correction, and the third option is loyalty - the customers remain loyal for lack of alternative suppliers or prohibitive switching costs, inertia, ideological reasons and others, at least within limits.

All these options are used by customers according to Gummesson, who continues that the feeling behind them, however, is largely a black box to suppliers. Recovery is more than settling a claim, it is the restoration and strengthening of a long-term relationship and the course of action must be constructive, not just a mechanical

routine. If the recovery is successful, continues Gummesson (1999) strengthened by Brandt (2003), then a well resolved customer complaint can create a solid relationship, sometimes better than before the incident. Another aspect that can be turned into something positive according to Arnerup and Edvardsson (1992) is that although many companies consider a customer complaint as something negative, they should instead use it as a possibility to learn more about the customers needs, improve the conditions to satisfy them and strengthen the relationship with them.

Nyer (2000) states that customers who were encouraged to complain reported great increase in satisfaction. The author continues that the indirect benefits occurs

when an unhappy customer complains, which leads the employee to respond in a way that makes the customer less dissatisfied in the future, and therefore benefits the company as well.

Research has shown that excellent complaint management and service recovery can significantly influence customer satisfaction (Johnston, 2001). Furthermore the majority of highly satisfying experiences were the result of something that went wrong and the organization making the effort to compensate the customer: “The recovery of failures can provide a major opportunity for organizations to create very satisfied customers”.

The critical issue is that it is not necessarily the failure itself that leads to customer dissatisfaction; many customers accept that things can go wrong; instead, it is more likely to be the organizations response (or lack of response) to a failure that causes satisfaction or dissatisfaction (Johnston, 2001). Kahn (1995, p. 97) has similar opinions, when emphasizing that it is beneficial to companies to encourage their customer to perform complaints when they are upset or dissatisfied, since these customers can become even more loyal and satisfied customers in the future.

Halstead and Page (reported in Johnston, 2001) also find that complaint handling processes shows a clear relationship with loyalty and repurchases intentions.

Furthermore, customers who have been successfully recovered not only remain loyal, but can become advocates for the organization, and as such be a source of referral business because word of mouth can be very persuasive in terms of influencing customers to use an organization and its services claims Spreng et al (reviewed in Johnston, 2001). Brandt (2003) follows the same track, describing that customers who experiences a good service recovery will spread more goodwill

than even your otherwise best loyal customers do.

Soderlund (1999), claims that even though a customer has shown dissatisfaction and directed complaints towards the company, he or she does not necessarily has to be “lost” to the company, a pleasing reaction and action can turn the annoyance to satisfaction. In many cases, a good recovery can turn upset customers into even more loyal customers and strengthen relationships. Customer retention has been shown to have a direct impact on revenue and profitability states Loveman (reported in Johnston, 2001).

Loyal customers tend to buy more, and are willing to pay premium prices, and the company needs to spend less money on marketing activities, all of which increase revenue and profitability according to Johnston (2001). Companies need to understand that even though it is possible to retain dissatisfied customers, it can be difficult since not all customer complain to the company, out of 25 per cent dissatisfied customer, only 5 per cent finds making the effort of complaining worth.

While according to Kotler (2003) and out of these 5 per cent, half of the customers report a satisfactory resolution.

On average, continues the author, a dissatisfied customer gripes to 11 other persons whereas the satisfied customer only tells three other people, this is also commented by Soderlund, (1997) who finds that satisfied persons tells six other

people, but dissatisfied customers gripes to 11 other persons. These reasons obviously mean that it is of high importance for companies to take care of customer complaints, but also since almost all displeased (95 per cent) will do business with the firm again if the complaint is handled quickly and in a satisfying way

(Kotler, 2003). Still, according to Brandt (2003) a common mistake that managers do is that they do not believe that it is worth time or effort to convert dissatisfied customers into satisfied customers.


Brandt (2003) claims that companies do not think that service recovery can conclude in a significant financial payoff, or that the quality of customer support processes throughout the organization can reduce the need and cost of service recovery. Dolinsky (1994) focuses on the fact that complaints offer a unique opportunity to correct problems, provide constructive ideas, and improve product and services in order to create competitive advantages.

One way of creating a competitive advantage is to strive for a functional two-way process of communication which is according to Assael (1995, pp. 649-650) a characteristic of a problem-solving approach to selling. Assael means that it requires an understanding of customer needs and an attempt to fulfill these needs through a two-way communication, which he emphasize since he finds that one-way communication is frequently used, even though companies claim to act more customer-oriented, since they have shifted from an ordertaking and a canned sales approach to a more of a problem solving approach.

Blomqvist and Haeger (1993) find three main reasons why companies should listen

to and communicate with their customers: to improve existing services, find possibilities how to develop new services and to strengthen customer relations. The authors states that service companies should learn more about how the quality of the service is perceived, how large companies with many customers should handle and store customer information, the purpose of customer communication and what kind of loyalty and profits there are to expect to the company.

Customer to company communication is crucial since it provides knowledge about

flaws and mistakes made by the company, and how these issues can be improved. This is something that Brandt (2003) agrees with; customer complaints and service recovery can be used in order to improve the overall service quality, and therewith function as an economically advantage between the company and its competitors.

There is however another type of possible communication that companies should be aware of; the absence of communication which is extremely alarming and perceived by customers as negative communication according to Grönroos, reviewed in Blomquist (1993).

Learning from communication is crucial to companies, another example of how companiescan learn from earlier mistakes can be to follow up and analyze lost customers, in order to understand the cause and processes where the crucial

question might be: “is the customer pushed away by company actions (or inactions?) or being pulled away by competitors?” states Engel (1993).

If they are being pushed away by internal factors as inadequate handling of complaints or a defective product, useful information is embedded in order to learn for future comings. The authors further state that if the customer is attracted to other competitors, market overhaul might be needed. According to Kahn (1995) companies can ask for help from their customers when it comes to improving different processes within the company, for example service, and reward those customers. By locating dissatisfied customers, encourage them to make complaints, handling those complaints and on a continual basis measure customer dis/satisfaction future flaws can be redirected according to Blomquist (1993).


The methodology employed in obtaining information about customer satisfaction in banking via a survey conducted at a sample of the general consumer population. The survey questionnaire is design and distributed to target respondent randomly. Targeted respondents are the general public who doing transaction at the Service Counter of the selected Commercial Banks.

In order for the research to produce a realistic outcome, the collation of data has to be distributed over a large population. Thus, the survey questionnaires are designed to apply to a heterogeneous population, where targeted respondents come from the general open public (from difference genders, races, age groups, marital status, education backgrounds, designations and professionalisms). Owing to the fact that different levels of the society have different expectations and needs, therefore, the idea of choosing respondents from different backgrounds will most certainly generate a more reliable outcome towards Service Quality by retail banks.

The survey questionnaires were conducted via face to face interviews plus through other avenues such as email and fax, so as to ensure that the survey encompasses a broader geographical area.

Several ways could be followed to carry out research. A research design is a set of advance decision that makes up the master plan specifying the methods and procedures for collecting and analyzing the needed information (Burns and Bush, 2006). According to Ghauri and Gronhauge (2005), there are three types of research design available while conducting a research: Exploratory, Descriptive and Casual.

The research question and research purpose of our thesis indicates the demand of both exploratory and descriptive design, but we followed basically exploratory research method.

An exploratory research is a research method which is conducted to explore or search through a problem or situation to provide insights and understanding. It could be used to formulate a problem or define a problem more precisely, or to identify alternative courses of action or to develop hypothesis or to isolate key variables and their relationship or to gain insight to develop an approach to the problem or to established priorities for further research (Malhorta K. N, 2004).


The participants of this study consisted of 60 customers of 10 Commercial Banks in Penang, Malaysia - 6 customers from each bank. The researcher selected the respondents by randomly sampling method.

The selected Commercial Banks are as following:

  1. Affin Bank Berhad
  2. Alliance Bank Berhad
  3. AmBank Berhad
  4. CIMB Bank Berhad
  5. EON Bank Berhad
  6. Hong Leong Bank Berhad
  7. Malayan Banking Berhad (Maybank)
  8. Public Bank Berhad
  9. RHB Bank Berhad
  10. Muamalat Bank Berhad


For an easy understanding and reading, the questionnaire is designed into two parts. The first part of the questionnaire is taking consideration in the demographic factor of the respondents. The questions are designed with multiple choice selections for convenience.

The second part of the questionnaire is required the respondent to rate the expectations and perceptions towards service quality of Service Counter staffof the bank into a five pre-defined level scale - 5 = highest, 4 = high, 3 = moderate, 2 = low and 1 = lowest.

The answer of the questionnaire is solely based on the respondents` experience and personal opinion, there are no exact answers.


All data collected are fed into the Statistical Package for the Social Sciences (SPSS) and Microsoft Excel for analysis. It is imperative that all information collated is strictly for this research purpose only. Likewise, all information and the identity of the respondent are strictly confidential and will not to be disclosed to any party in any manner.



The SERVQUAL approach has been applied in service and retailing organizations

(Parasuraman, 1988; Parasuraman, 1991). Service quality is a function of prepurchase customers, expectation, perceived process quality, and perceived output quality.

Parasuraman (1988) define service quality as the gap between customers,expectation of service and their perception of the service experience. Based on Parasuraman (1988) conceptualization of service quality, the original SERVQUAL instrument included 22 items. The data on the 22 attributes were grouped into five dimensions: tangibles, reliability, responsiveness, assurance, and empathy.

Numerous studies have attempted to apply the SERVQUAL. This is because it has a generic service application and is a practical approach to the area. This instrument has been made to measure service quality in a variety of services such as hospitals (Babakus & Glynn 1992), hotels (Saleh & Rylan, 1991), travel and tourism (Fick & Ritchie, 1991), a telephone company, two insurance companies and two banks (Parasuraman, 1991).

In this study, the researcher uses SERVQUAL approach as an instrument to explore customers expectations and perceptions levels of service quality towards the front office staff at the hotel.


Previously, Parasuraman (1985) identify ten determinants for measuring service quality which are tangibility, reliability, responsiveness, communication, access,

competence, courtesy, credibility, security, and understanding/knowledge of customers.

Later these ten dimensions were further purified and developed into five dimensions i.e. tangibility, reliability, responsiveness, assurance and empathy to measure service quality, SERVQUAL (Parasuraman, 1988).

These five dimensions identified as follows:

(1) Tangibility

The physical evidence of Service Counter staff is including a personality and appearance of personnel, tools, and equipment used to provide the service.

(2) Reliability

The ability involves to perform the promised service dependably and accurately. It includes ‘Doing it right the first time', which is one of the most important service

components for customers. Reliability also extends to provide services when promised and maintain error-free records.

(3) Responsiveness

The Service Counter staff are willing to help customers and provide prompt service to customers such as quick service, professionalism in handling and recovering from mistakes. It has been said that ‘Today luxury is time'. Consequently, service providers, ability to provide services in a timely manner is a critical component of service quality for many customers.

(4) Assurance

Assurance refers to the knowledge and courtesy of employees and their ability to

convey trust and confidence including competence, courtesy, credibility and security.

A. Competence means possession of the required skills and knowledge to perform the services. It involves knowledge and skill of the contact personnel, knowledge and skill of operational support personnel, research capability of the organization.

B. Courtesy involves politeness, respect, consideration, and friendliness of contact personnel.

C. Credibility involves trust worthiness, believability, honesty; it involves having

the customer's best interest at heart. Contributing to credibility is company

reputation, personal characteristics of the contact personnel. The degree of hard sell involved in interaction with the customer.

D. Security refers to the freedom from danger, risk or doubt. It involves physical

safety, financial security and confidentiality.

(5) Empathy

Empathy refers to the provision of caring and individualized attention to customers

including access, communication and understanding the customers.

A. Access involves approach, ability and ease of contact. It means the service is easily accessible by telephone, waiting time to receive service is not extensive, hours of operation are convenient and location of service facility is convenient.

B. Communication means keeping customers informed in language they can

understand. It means listening to customers, adjusting its language for different consumers and speaking simply and plainly with a novice. It also involves explaining the service itself, explaining how much the service will cost, and assuring the customer that a problem will be handled.

C. Understanding the customers means making the effort to understand the

customer,s need. It includes learning the customer,s specific requirements,

providing individualized attention, recognizing the regular custom.

It is clear from the above results that customers like to be given enough individualized attention and treated with care. It thus allows the customers to easily

approach and spell out their needs regarding the service being provided. The importance of empathy may be the root of the statement. If one looks at who is winning, it tends to be banks that see the customer as an individual.

In conclusion, SERVQUAL instrument is an invaluable tool for organizations to better understand what customers value and how well their current organizations are meeting the needs and expectations of customers. SERVQUAL provides a benchmark based on customer opinions of an excellent company.



After the questionnaires were collected, the researcher explored the level of customers expectation and perception towards service quality of the Service Counter staff in five areas: tangibility, reliability, responsiveness, assurance, and empathy. The frequencies and percentages are used for calculating and analyzing the data to the personal data.


H1: Assurance has positive relationship with customer satisfaction.

H2: Reliability has positive relationship with customer satisfaction.

H3: Tangibles has positive relationship with customer satisfaction.

H4: Empathy has positive relationship with customer satisfaction.

H5: Responsiveness has positive relationship with customer satisfaction.


Cronbach's Alpha reading indicating that internal consistency reliability for the Tangible variable measure is consider good (Cronbach's Alpha > 0.7). The implementation of multiple regressions is to learn more about the relationship between several independent or predictor variables and a dependent or criterion variable. For example, according to census data whether responsiveness, empathy, reliability, assurance and tangibles act as a subjective rating of appeal in the Service Counter of Commercial Banks in Penang.

Once this information has been compiled it would be interesting to see whether and how these measures relate to customer satisfaction in the Service Counter of Commercial Banks in Penang. Personnel professionals customarily use multiple regression procedures to determine equitable compensation.

The result in Table 2 shows that the combination of Assurance, Reliability, Tangibles, Empathy and Responsiveness together contributed to 62.1% effect on

Customer Satisfaction. The R2 for the overall study on the five dimensions, namely Assurance, Reliability, Tangibles, Empathy and Responsiveness, suggests that there is a strong effect of these five independent variables on Customer

Satisfaction. The F value (36.404) changes are significant which implies that the model is fit and robust.



Scale Mean if Item Deleted

Scale Variance if Item Deleted

Corrected Item - Total Correlation

Cronbach's Alpha if Item Deleted


























Customer Satisfaction






Model Summary


Change Statistic



R Square

Adjusted R Square

Std. Error of the Estimate

R Square Change

F Change



Sig. F Change











a. Predictors: (Constant), responsiveness_1, reliability_1, tangible_1, assurance_1, empathy_1

b. Dependent Variable: customer_satisfaction_1 c. p<0.01




Unstandardize Coefficients

Standardize Coefficients



Model 1


Std. Error






































a. Dependent Variable: customer_satisfaction_1

b. p<0.01

From the above table, concluded that the Assurance, Reliability, Empathy and Responsiveness have no significant effect on Customer Satisfaction. Only Tangibles have significant effect on Customer Satisfaction. (p-value < 0.01)


Personal data Number of respondents Percentage



Male 26 43%

Female 34 57%



Below 25 years old 10 17%

25-35 years old 26 43%

36-45 years old 7 12%

46-55 years old 14 23%

Over 55 years old 3 5%



Government officer 2 3%

Employee 32 54%

Owner / Private business 14 23%

Student 12 20%

Other 0 0%


The SERVQUAL gap is calculated between the mean score of expectation and perception. The findings of the study showed the difference between expectation and perception as shown in the table below.


Attributes Customers Customers SERVQUAL

Expectation Perception Gap


Pair 1) Tangibility 3.92 4.45 0.53

Pair 2) Reliability 3.93 4.30 0.37

Pair 3) Responsiveness 3.98 4.33 0.35

Pair 4) Assurance 4.05 4.37 0.32

Pair 5) Empathy 4.02 4.28 0.26

Overall mean score 3.98 4.35 0.37

Table 4 demonstrates the gap between customers expectation and perception. The

study shows that the overall level of perception of all dimensions was higher than level of expectation. This positive gap indicates that customers are satisfied with the services.

Tangibility was the most important dimension with the highest positive gap (0.53). The study revealed that physical evidence such as uniforms, appearance and behavior of Service Counter staff yield customer satisfaction. Similarly, Ramchurrun (2008) suggested that customers attached importance to the dimension of tangibility because services are intangible. Hence, customers place great importance on the appearance neatness of the staff.

In summary, the results showed a positive gap between perception and expectation. Tangibility was determined to be the most important dimension. The Service Counter staff also understood and exceeded customers expectation of service quality in all dimensions.



Customers Suggestions Number of Respondents Percentage


Compliments 57 95%

Complaints 3 5%

Total 60 100%

Table 5 shows that the majority of customers (95%) complimented the bank services. Customers reported that the Service Counter staff were very nice and provided a quick and smooth service. On the other hand, only 5% of respondents made complaints that the staff should improve their English skill and should have more knowledge about the banking products.

In conclusion, the result showed a positive gap between customers expectation and perception towards service quality of Service Counter staff. Customers perception level was higher than their expectation. It is obvious that most customers felt satisfied with the service quality of the Service Counter staff of Commercial Banks in Penang, Malaysia.



Service businesses have been growing rapidly in recent decades, while customer demand for high quality service is increasing. To remain competitive, each Commercial Banks needs to analyze customers expectation and perception towards the service quality of its Service Counter staff.

In this research, the SERVQUAL instrument, dveloped by Parasuraman (1985), has been applied in designing the questionnaire by using five dimensions of service quality: tangibility, reliability, responsiveness, assurance, and empathy.

The results revealed that the assurance dimension raised the highest level of expectation, whereas the tangibility dimension fulfilled the highest level of perception.

This study focused further on the gap between customers expectation and their perception of front office service quality. The results showed that the overall mean score of perception was higher than expectation in all dimensions, yielding a positive SERVQUAL gap. Hence, customers were satisfied with all dimensions of service quality.

In this study, the findings showed that most respondents identified tangibility as the

most important factor in determining satisfaction. Moreover, their perception of service exceeded their expectation.

Furthermore, the primary objective of this study was to identify the drivers of customer satisfaction in retail banking. Overall, both core and relational performance were important drivers.

Features such as convenience also contributed to customer satisfaction, as did competitive interest rates and skilled employees. The results also show that a service problem which is not resolved has a substantial impact on the customer's attitude towards the service provider. These results confirm the importance of problem recovery in maintaining customer satisfaction (Hart, 1990).

However, the results do not support the contention that satisfactory problem recovery leads to heightened customer satisfaction or closer “bonding” of the customer to the provider. At best, satisfactory problem revival leads to the same level of customer satisfaction as if a problem had not occurred.

Further research is needed to determine if, and when, satisfactory problem recovery leads to “delighted” customers. Positive attitudes towards a retail bank are driven by service quality components, such as the employee-customer relationship, as well as other features/benefits of the service.

Managers also need to be aware that customer satisfaction is based on service quality and other aspects of the service offering such as convenience and service specific factors (e.g. competitive interest rates). Managers should probably consider the value or contribution to customer satisfaction of each dimension of the total service offering and allocate resources accordingly.

Regarding customer complaints, managers should attempt to “get things right the first time”. When customers complain, satisfactory problem recovery maintains satisfaction, but switching intentions increase. Unsatisfactory problem recovery leads to dramatic declines in customer satisfaction and increases in switching intentions. The results are in very much accordance to the findings of Shahid (2000).


This study had the following implications:

  1. Empathy was shown to be the weakest dimension of satisfaction. Therefore, bank management should arrange special courses to improve effective communication.
  2. Tangibility was shown to be the strongest dimension of satisfaction. Therefore, bank management should maintain the attributes of tangible service quality at the bank.
  3. Human Resource management should arrange in-house training program to

improve the main work of Service Counter staff and to promote them in their careers.


Some limitations are found in this study as follows:

  1. The respondents in this study included limitation 60 customers at 10 Commercial Banks in Penang. If the subjects were drawn more than 60 respondents, the result would be more generalized.
  2. This study only focused on measuring customer satisfaction with Service Counter service quality. Other departments (e.g. Hire Purchase, Loans, Credit Recovery etc) are essential departments that were not included in the scope of the present research.
  3. This study also does not separate the population sample into separate geographical locations. For instance, a person who lives in a remote place (runs a more simple life) may have a different expectation and perception towards customer services offered by banks, owing to the different culture, level of education and some other demographic factors.


Further study should be undertaken to apply the results of this study. First, research could be broadened to include other Commercial banks in other states in Malaysia. Second, it would be valuable to conduct further research concerning customers attitudes towards the quality of other specific banking service such as Hire Purchase, Credit Cards, Personal Loans, Commercial Loans, Islamic Banking, Internet Banking, Banking Instruments etc . Further research in these areas would contribute to overall improvement of service standards of Commercial Banks in Malaysia.


A. Assurance

Based on the finding, Assurance has positive relationship with Customer Satisfaction, but without significant effect. Assurance is mean of being safe, the responses state that the customers do not feel assurance is being important as part of the service quality that should be included. There are two possibilities; firstly the customers feel that the retail banks have provided enough safety and confidence in their service.

Most customers started to take it as granted that there is no safety problem in dealing with any banks. In this manner, that retail banks should improve the security concern to the public, many cases had reported that security breach in the internet banking and phone banking, and most of the time is due to the customers' carelessness and recklessness. Secondly, the customers have given up since all the retail banks are not able to provide the level of safety expected.

The customers are hopeless. In this manner, the retail banks should improve the

assurance in their services. This is a way to retain the customers, and even it can become a selling point to a particular bank if they can provide a better security compare to others.

B. Reliability

Reliability is about the accuracy and timeliness in the service provided. Responses to this research, Reliability does not have any significant impact on customer satisfaction. This may be caused by the growth of the phone banking and internet banking.

Customers do not concern about the reliability level in customer service since they have an alternative to turn into. With the rapid growth in the internet technology, many banks have setup their internet banking portal, and the banks have spend great afford, such as TV advertisement, free gift, lucky draws and many other

ways, to encourage their customers use the internet banking. Retail banks are able to reduce the operation cost by not extending the business hours and reduce staffs, since the Internet banking is operating 24 hours a day without supervision.

A part from that, machines have been used to replace banks staffs as well to help customers in cash withdraw, cash credit, cheque, credit cards, bank book update, credit transfer and many other services. Now, customers have higher demand in

the machine reliability rather than human reliability when dealing with banks.

C. Tangibles

Tangibles encompass the appearance of the company representatives, facilities, materials, and equipment. This research shows that it has positive correlation and high significant with customer service. The retail banks operating hours had been reduce down to five days per week, people had found difficult going to banks for settling their manner. As a result, machines are used to help the banks to provide

faster and better services to their customers. Internet banking is spread all over nationwide like wild fire, it promise 24/7 non-stop service, customers are able to settle many manners without leaving their home or office, including pay bills, check account balance, inter-bank transferred and loan installment and others.<

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