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Impact of Service Quality on Customer Satisfaction

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Published: Wed, 11 Oct 2017

“A Case Study from Pakistani Banking Sector”

  • M. Yasir Javed

Introduction

Banking sector play an important role in the economy of any country. In Pakistan financial Institutions are the back bone of the economy.

Pakistan has an enormous banking sector which is controlled by the State Bank of Pakistan. SPB is the Central Bank of Pakistan. Total 53 Banks are serving Pakistan. Out of which five banks are classified as Public banks (F Women Bank, National Bank of Pakistan, Sindh Bank, Bank of Khyber, and Bank of Punjab) Four Particular Banks (Industrial Development Bank, SME Bank, Punjab Provincial Cooperative Bank and ZaraiTaraqiati Bank) and all of these banks are Limited Banks.

Seventeen Banks are classified as Private Bank (Habib Bank limited, Allied Bank Limited, United Bank Limited, Muslim Commercial Bank, Alflah Bank Limited, Habib Metropolitan Bank, Faysal Bank Limited, Js Bank, NIB Bank limited, Askari Bank Limited, Samba Bank Limited, Meezan Bank Limited, Soneri Bank Limited, Bank Al Habib, Standard Charted Bank, Silk Bank Limited, Summit Bank Limited) Five Islamic Banks are also operating in Pakistan( Burj Bank PK, AlBarka Bank PK, BankIslami, Meezan Bank PK, Dubai Islamic BANK). Six Foreign Banks, Eight Micro finance Banks and Eight Development Finance institutions are also working in Pakistan.

Now a day all the banks are facing high competition because customer expectations about banking services are increased day by day. In this research, researcher tries to investigate the factors that affect the customer satisfaction regarding bank service quality. Banking sector gain much importance in the economy of Pakistan. It plays a central role in the financial growth of economy. Banks have to fulfill demands of its customers regarding its service quality because all the banks wish to retain its customer. For customer retention banks are working with technological advancement. ATMS Debit Cards Credit Cards Mobile Phone Banking are the examples of technological advancement.

The Interest of bank in their customer is mainly determined by the recognition that high quality services are related to customer satisfaction and commitment, more inclination to other, reduction in criticism and increase customer withholding (Buteele, 1996).

Customer complaints are concerned with customer satisfaction. If customer complaints are less then it means that customers are more satisfied (lee, 2009).

Service quality is the success factor of every organization. Service Quality can be described in different ways in different situation.

Definition of service quality holds that this is the result of comparison that customers make between their expectations about a service and their perception of the way the service has been performed (Lehtinen&Lehtinen ,1982; Lewis & Booms, 1983, Gronroos, 1984,Parasuraman et al., 1985; 1988; Caruana, 2002). Service quality is defined as the degree of discrepancy between customer normative expectations for service and their perception of service performance (Parasuraman et al., 1985). The furterh development of service quality as “the overall evaluation of a specific service firm that results from comparing that firms performance with the customers general expectations of how firms in that industry should perform(Parasuraman et al., 1988)

Objectives

The objective of the study is to investigate the Impact of Bank Customer Quality on Customer Satisfaction in Pakistani Banking sector. The ultimate aim of the research is to analyze the factors which can improve Bank Customer Service Quality as well as Customer Satisfaction.

Overview of Target Population

The Sample data use for the research will be time series data. The data will be gather from customers of Commercial banks of Nankana Sahib District Punjab, Pakistan through administrative questionnaire.

Research Questions

Either Pvt Banks are filling the level of satisfaction of their customers?

Either Customer Services of the Pvt Banks have Impact on Customer satisfaction?

Either banks are working with customer service quality?

Literature Review

MesaySataShanka(2012) study customer service quality of private banks in Ethiopia. The researcher has investigate the relationship between service quality, customer satisfaction and customer loyalty. SERVPERF model which include (Reliability, Assurance, tangibility, empathy and responsiveness) were used to measure the quality of services offered by the private banks in Hawasa city. Data were gathered by using both primary and secondary sources. Administrative questionnaire were used for the collection of primary data. For to investigate the relationship between dependent variable and independent variable correlations and different regressions were used. Which shows that service quality have significant impact on customer satisfaction, the research result shows that high quality services leads to customer satisfaction and customer loyalty.

R Saeed, A Riaz, RN Lodhi, A Iqbal, A Sami (2014) analyzed the Service quality impact on Customer Loyalty in Islamic Banking of Pakistan. Study was conducted by using variable’s Service quality, Customer Loyalty and customer satisfaction.SERVQUAL model was also used in the research. Author used AMOS Graphic.18 and SPSS techniques for the interpretation of the results. Data for the research was collected through customer questionnaire from different banks of Bahawalpur, Rahim Yar khan, Lahore and Sialkot. The results shows that Service Quality has effect on Customer loyalty and customer Satisfaction.

A Mukhtar , H Ashiq, H Nasar, H Inam, R Amjad(2014) analyzed the satisfaction level of the customers regarding financial services of Commercial banks of Bahawalpur .Study investigate the factors affecting customer satisfaction towards banks financial services. The study used 152 Customers of different banks for sampling. Data was collected through customer questionnaire. SPSS was used for data analysis. Regression and correlations were used for gaining results. Statistical techniques were used for Empirical results. Results findings shows significant relationship between assurance tangibility and Customer Satisfaction and Insignificant Relationship between empathy, reliability, and responses,for customer satisfaction.

SA Taylor, JJ Cronin Jr(1992) Study reveals the relationship b/w Quality Service, Customer satisfaction and Purchase intension. Study is conducted for four basic aim.1st aim of the study is the measurement of Service Quality. 2nd objective of the study is to investigate relationship between Service Quality, PurchaseIntension and Customer Satisfaction.3rd aim of the study is to investigate whether the Customer Satisfaction level Affect his purchase intention. Final objective of study is to investigate that whether Customer perception of service quality effect his Purchase intensions. The data for the study is gathered through personal questionnaire in the city of Southeastern of United States. SPSS-X, LISREL VII analysis Correlation matrix and multiple regression are used for data analysis. Study results shows that customer satisfaction have impact on purchase intensions. Study Results also reveals that Service quality has less impact on purchase intension then Customer Satisfaction.

AAkram, MI Saif, H Naeem,(2009) Conducted a research for to investigate the impact of Service Quality on Customer Satisfaction from Pakistani Banking Sector. Hypothesis for the study was “higher level of service quality leads to higher level of Customer Satisfaction”. Data was collected through sampling from two hundred people. One hundred from foreign Bank and Hundred from Public sector Banks. Data was collected from two twin cities of Pakistan, Islamabad and Rawalpindi. Data was collected through random sampling on the basis SERVQUAL and SERVPREF models. SPSS 14 in the research for data analysis.

Regression results accept alternative Hypothesis with R2 of 0.644 and rejecting null hypothesis

for PublicSector banks. Study concluded that if Organization work with service quality it can contribute for Customer Satisfaction.

Data and Methodology

The research will be conducted with following variables

Proposed Dependent Variable

Bank Customer’s Satisfaction

Proposed Independent Variables

Tangibility,

Reliability,

Empathy,

Responsiveness,

Assurance,

Proposed Techniques

The research will be conducted by applying different techniques

Descriptive Statistics,

OLS,

Normality Test,

Causality,

Fixed effect,

Hypothesis

H0: Tangibility will have no impact on customer Satisfaction

H1: Tangibility will have positive impact on customer satisfaction

H0: Reliability will have no impact on customer Satisfaction

H1: Reliability will have positive impact on customer satisfaction

H0: Empathy will have no impact on customer Satisfaction

H1: Empathy will have positive impact on customer satisfaction

H0: Responsiveness will have no impact on customer Satisfaction

H1: Responsiveness will have positive impact on customer satisfaction

H0: Assurance will have no impact on customer Satisfaction

H1: Assurance will have positive impact on customer satisfaction

Proposed Econometrics Model

CStt + β(Tt)t+ β(Rt)t+ β(ey)t+ β(Rs)t+ β(Ae)t+ μt

Expected signs

Proposed Variables Name

Expected Signs

TANGILBILTY

+

RELIABILTY

+

EMPATHY

+

RESPONSIVENESS

+

ASSURANCE

+

 

References

Cronin Jr, J. J. and S. A. Taylor (1992). “Measuring service quality: a reexamination and extension.” The journal of marketing: 55-68.

Qureshi, M. I., A. Khan, et al. (2012). “Structural investigation of service quality in conventional and Islamic banking in Pakistan.” Industrial Engineering Letters2(2): 11-

17.

Saeed, R., A. Iqbal, et al. (2014). “Impact of Service Quality on Customer Loyalty in Islamic Banking Sector of Pakistan: A Mediating Role of Customer Satisfaction.”

Agus, A., Barker, S., and Kandampully, J. (2007). “An exploratory study of service quality in the Malaysian public service sector”. International Journal of Quality & Reliability Management, 24(2), 177-190.

Bitner, M. J. (1990). “Evaluating service encounters the effects of physical surroundings and employee responses”. Journal of Marketing, 52(2), 69-82.

Caruana, A. (2002).” Service loyalty. The effects of service quality and the mediating role of customer satisfaction”. European Journal of Marketing, 36(7/8), 811-828.

Caruana, A., Money, A.H. and Berthon,P.R. (2000). “Service quality and satisfaction- the moderating role of value”. European Journal of Marketing, 34(11/12), 1338-1352.

Colgate, M., Stewart, K., and Kinsella, R. (1996). “Customer defection: a study of the student market in Ireland”. International Journal of Bank Marketing, 14(3), 23-29.

Cowling, A., and Newman, K. (1996).” Service quality in retail banking: the experience of two British clearing banks”. International Journal of Bank Marketing, 14(6), 3-11.

Diaz, A.B.C., and Ruiz, F.J.M. (2002).” The consumer’s reaction to delays in service”. International Journal of Service Industry Management, 13(2), 118-140.

oseph, M., Sekhon, Y., Stone, G., and Tinson, J. (2005). “An exploratory study on the use of banking technology in the UK. A ranking of importance of selected technology on consumer perception of service delivery performance”. International Journal of Bank Marketing, 23(5), 397-413.

Jun, M., and Cai, S. (2001). “The key determinants of Internet banking service quality: a content analysis”. International Journal of Bank Marketing, 19(7), 276-291.

Kish, J. (2000).” Before your customers leave”. Bank Marketing, 32(2), 30.

Kotler, P., Ang, S.H., Leong, S.M., and Tan, C.T. (1999).” Marketing Management: An Asian Perspective”. New Jersey: Prentice Hall Inc.

Lam, R., and Burton, S. (2006). “SME banking loyalty (and disloyalty): a qualitative study in Hong Kong”. International Journal of Bank Marketing, 24(1), 37-52.

Lam, S.Y., and Bojei, J. (2007). “Effects of technical quality, functional quality and satisfaction on trust”. Retrieved on March 16, 2008 [Online] Available:

Lehtinen, U., and Lehtinen, J.R. (1982). “Service quality- a study of dimensions”. unpublished working paper, Service Management Institute, Helsinki, 439-460.

 


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