What Are Financial Institutions Commerce Essay

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Financial institutions are a service setting that most consumers are likely to use on a frequent basis. Because of their knowledge and experience, consumers should be able to evaluate financial institutions (particularly banks) in terms of both expectations and perceptions of service quality. The key to service quality research is that managers must share a common understanding with their internal customers of what represents service quality to external customers. Only then, can the managers design programs that meet and exceed external customers' wants. It is essential that these managers have valid and reliable quality dimensions and an effective measurement approach.

The conceptual definition of customer service quality developed by Parasuraman et al. (1988) is adhered to, namely: Perceived service quality is a global judgment, or attitude, relating to superiority of the service, whereas satisfaction is related to a specific transaction.

The relationship between service quality and satisfaction

The subject of continued (and considerable) debate in the marketing literature, the distinction and association between service quality and customer satisfaction remains at the forefront of many academic- and practitioner-oriented research endeavors (Anderson & Fornell, 1994; Brown and Swartz, 1989; Spreng and Mackoy, 1996). Many studies of consumer satisfaction have been conducted in service settings (Fornell 1992), and, generally, researchers agree that the two constructs are conceptually distinct (Bitner, 1990; Boulding et al., 1993). Although an extensive review of this disputation is neither the aim nor the intention of the current research, we do wish to establish a basis for the present contention that service quality influences, among other things, levels of customer satisfaction (Oliver, 1993). That is, we maintain the position that service quality - as determined by its various components - is a partial determinant of satisfaction (Parasuraman et al., 1985, 1988).

There exist numerous empirical works to support the quality/satisfaction causal order. In an effort to be parsimonious, however, we limit our discussion to two recent and highly relevant studies. First, in a study mentioned earlier, Cronin and Taylor (1992) tested, among other things, the casual relationship between service quality and customer satisfaction. In their article, Cronin and Taylor note that marketing researchers are not in agreement in terms of the causal order of these constructs, and suggest that empirical justification is necessary to determine the true nature of this relationship. The authors report ultimately that, according to their analyses, perceived service quality leads to satisfaction (as opposed to the reverse).

In a more recent study also addressing the relationship between service quality and satisfaction, Spreng and Mackoy (1996) tested a model developed by Oliver (1993). Oliver's model integrates the two constructs, and suggests, among other things, that perceived service quality is an antecedent to satisfaction. Spreng and Mackoy's results indicate that, as predicted, service quality leads to satisfaction.

Although the direction of the quality/satisfaction relationship (i.e. quality leads to satisfaction) is fairly well understood for services, the question of whether or not (and how) this relationship varies depending on particular settings and/or situations is not

Development of Conceptual Framework

The conceptual framework in this research is the study on the satisfaction of the customer on banking services. The quality of services is measured by use five dimension namely tangible, responsiveness, assurance, accessibility and reliability. These perspectives were transformed to be a questionnaire to measure the quality of services of banking in Selangor.

Diagram

Hypotheses

In this study, we adopted a deductive process in developing hypotheses. The model was developed before the hypotheses were formulated. The data was then collected during the field work. Based on the feedback received, hypotheses were tested in order to determine the relationships among factors. There was the probability that this study might undertake an inductive approach by referring to the data and feedback from respondents. New hypotheses might be formulated that might add new knowledge and help theory building in these service climate and service quality areas. The relationships will be discussed and the reason these relationships can be expected. Therefore, the research hypotheses are as listed concerning the type of analysis involving parametric and non-parametric tests with regard to the problem, the importance of the research and the research questions.

Based on the two perspectives of service quality noted, as well as the relationship between service quality and customer satisfaction, the primary goal of the present research is to compare and contrast empirically the SERVQUAL models. Specifically, we wish to compare the various dimensions of the two service quality models and their effects on satisfaction. By testing the two perspectives in a single empirical (and largely exploratory) study, we hope to gain a better understanding of how the models perform when applied to a common setting, and the relative strengths and weaknesses of each model within this context. Thus, the first basic (or null) hypothesis for the study is that the various dimensions of service quality - per the SERVQUAL - are approximately equivalent in their ability to predict customer satisfaction. Given that the two conceptualizations are each considered generally to be comprehensive and robust measures of service quality, and have never been compared directly in an empirical study, there exists no compelling rationale to suggest otherwise.

The hypotheses to be tested in this study are given below as:

Tangibles and its impact on customer satisfaction

Past literatures in the services industry suggest that there is a significant positive relationship between tangibles and customer satisfaction (Beh, 2008; Vong, 2007; Rose et al. 2005; and Mostafa, 2005). Tangibles are the appearance of physical facilities, equipment, personnel and communication materials used (Zeithaml et.al., 1990). Therefore, customers in the banking industry would look for tangible physical evidence such as tidiness of service package including the service environment, technology used by banking environment such as CCTV. Thus, the following hypothesis is developed for the purpose of testing later:

H1: The tangibles have positive influence on customer satisfaction.

Responsiveness and its impact on customer satisfaction

Previous literature in the banking industry suggest that responsiveness has significant positive impact on customer satisfaction (Beh, 2008; Vong, 2007; Wisniewski and Wisniewski, 2005; Lim and Tang 2000). Responsiveness includes helpfulness, friendliness, warmth, willingness, and openness (Zeithaml et.at., 1990). Therefore, customers in the banking industry would look for speed in resolving problems, speed in handling complaints, sensitivity of staff to customer needs, speed in reacting to requests for assistance and staffs go beyond what is required to provide prompt services. Thus, the following hypothesis is developed for the purpose of testing later:

H2: Responsiveness has significant positive effect on customer satisfaction

. Assurance and its impact on customer satisfaction

Recent studies in service quality have pointed out that assurance or security has strong positive connections with customer satisfaction (Vong, 2007; and Andaleeb and Conway, 2006; Nadiri and Hussain, 2005). Assurance is the level of customer's sense of security with regards to physical, financial and confidential aspects and the ability to inspire trust and confidence in the customers (Zeithaml et.at., 1990). Therefore, customers in the banking industry would seek freedom from theft, precautions taken to prevent mishaps, accessibility of security personnel and confidentiality of personal data of customers from the service provider. Thus, the following hypothesis is developed for the purpose of testing:

H3: Security has significant positive influence on customer satisfaction

Accessibility and its impact on customer satisfaction

Past studies in service quality have suggested that accessibility has significant positive relationship with customer satisfaction (Vong, 2007; and Mostafa, 2005; and Nadiri & Hussain, 2005). Accessibility is the availability of access to the banking system. Therefore, customers in the banking industry would look for availability of sufficient number of open teller, sufficient number of ATM, channeling of calls to the right person and availability to a senior staff when encountering a problem from the service provider. Thus, the following hypothesis is developed for the purpose of testing:

H4: Accessibility has significant positive impact on customer satisfaction

Reliability and its impact on customer satisfaction

Previous literatures in the banking industry suggest that reliability has significant positive impact on customer satisfaction (Beh, 2008; Vong, 2007; Wisniewski and Wisniewski, 2005; and Rose et al., 2004). Reliability is the ability to perform the proposed service dependably and accurately. This includes such qualities as dependability, consistency, accuracy, and "right first time" (Zeithaml et.al., 1990). Therefore, customers in the banking industry would look for accurate delivery of services the first time, accurate of slip account; ATM is error-free when there is festive season, punctuality of staff and delivery of promised services. Thus, the following hypothesis is developed for the purpose of testing later:

H5: Reliability has significant positive impact on customer satisfaction.

Measurement of Variables - Dependent variable: Customer Satisfaction

Customer satisfaction was measured by the following dimensions:

I am happy with the interaction between staff and customer during the services. I will continue with the bank service and take it as my primary bank. I am satisfied with staff skills in answering questions clearly and completely, I am satisfied with the bank services. Overall, I am happy with the bank services and will recommend to my friends.

Independent variables: Dimensions of Service Quality

Service quality was measured by the following dimensions:

Tangibles - Tidiness of the environment, Appropriateness of Staff's attire, Technology used in banking system, maintenance of physical comfort of the services.

Responsiveness - Speed in resolving problems, Speed in handling complaints, Staff sensitivity to customers' needs, Speed in reacting to requests for assistance and Staff go beyond what is required to provide prompt service.

Security - Freedom from theft, Freedom from danger or fear, Precautions taken to prevent mishaps, Accessibility of security personnel and Confidentiality of customers' personal data.

Accessibility - Availability of number of open teller, Provide easy-to-read and understandable statement, Channeling of calls to the right person and Availability of senior staff when encountering a problem.

Reliability- Accurate delivery of Services the first time, error-free slip bank statement, punctuality of trainers and delivery of promised services.

METHODOLOGY

Measures used

The major goal of this study was to identify the drivers of customer satisfaction in retail banking. To begin, an inventory of service quality items was identified. Prior research on SERVQUAL (Carman, 1990; Cronin and Taylor, 1992; Parasuraman et al., 1988, 1991a) provided items to measure the core and relational dimensions of service quality. In addition, five items were selected to measure the SERVQUAL dimension, another potential driver of customer satisfaction.

Also, the bank marketing literature provided items on service features ( LeBlanc and Nguygen, 1988; Lewis, 1991; Teas and Wong, 1991). These items might be considered as enabling features, related to convenience and accessibility that contribute to service quality by making the service easier or more comfortable for the customer. Enabling features include convenience, as measured by branch locations and automatic teller machines, the clarity of bank statements and communications, range of services and accessibility as defined by the bank's internal and external physical layout. The common aspect of these items is that they enable customers to conduct their business with the service provider more readily and easily. Consequently, these items may contribute to the overall value of a customer's experience with the service provider.

In total, 5 items were selected to measure service quality and service features, which are tangible, responsiveness, assurance, accessibility, and reliability. Respondents were asked to identify their main financial institution and then to evaluate this institution on the 5 items. All items were measured on five-point Likert scales from 1 (Very satisfied) to 5 (Very Dissatisfied).

Information on financial services used (e.g. loans, savings accounts) was obtained (17 services) as well as the number of banks respondents dealt with. This information formed the basis for the situational measures.

The questionnaire was pre-tested and, based on the debriefing of the pre-test respondents (n = 20), minor changes were made to improve the clarity and visual layout of the questionnaire.

Data collection

The data were gathered majority from UM Student who been a customer of banking industry. Also randomly from person do their business in bank. The demographic profile of the sample was compared with the population characteristics of the city where the study was undertaken. Comparisons were made on gender, age, education, status, working sector. No significant differences were found on working sector. ??? -need to update- Significant differences were found on gender (sample was 60 per cent female; community was 50 per cent), home ownership (sample had 82 per cent home ownership; community had 62 per cent), age (sample under-represented in 20-39 age groups, over-represented in 40-49 age group), and education (sample under-represented in less than high school, over-represented in post-high school education).

Component

The questionnaire for service climate consisted of 39 items; all employed Likert-type items. This part of the questionnaire focused on five main variables: tangible, responsiveness, assurance, accessibility, reliability. The need to measure quality service as the dependent variable is critical in order to evaluate if the service delivery that is currently being utilized is actually effective. Some of the items used were adapted to suit the environment and culture of the population in Malaysia being studied so related issues could be examined. Respondents rated the items in the questionnaire on a five point Likert-scale from 1 (Very satisfied) to 5 (Very Dissatisfied).

The Five Dimension Quality:

Component

Element

Tangible

Convenience location

Appearance of building

Availability of service facilities

Neat and tidiness

Décor

Comfortable environment

Equipment and instrument

Physical safety

Convenient banking hours

Responsiveness

Prompt customer services

Willingness to serve

Caring

Long queue

Concern if there is a mistake

Willing to discuss problem

Well-trained staff

Assurance

Fairness

Security

Professional Appearance

Confidentiality

Accessibility

Waiting time

Sufficient number of open teller

Sufficient number of ATM

Provide understandable statement

Ease of membership

Ease of communication via email or phone

Reliability

Needs or expectation

Error made by bank, prompt fix is given

Service at the time

Whether bank tell when services will be performed

ATM is good and reliable

Problem with ATM during festive seasons

Printing accuracy on slip

Perform service right at a first time

Perform service accurately

During the sampling survey, we received 100 questionnaires that were answered completely. Quota Sampling was used to select the sampling. Chi-square test and coefficient of correlation test were used to analyze the data. The result was brought to create Multiple Regression model to test the hypothesis.

Likert-scale Table

Likert-scale items

Example

"Very Satisfied" to "Very Dissatisfied"

How satisfied are you when the physical comforts of the services are provided in the bank?

"Strongly Disagree" to "Strongly Agree"

Providing high quality services to our customers should be the number one priority of my organization.

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