Measuring Quality of Bank Services in Jordan: Gap analysis

Transcription

1 International Journal of Business and Soial Siene Vol. 2 No. 1; January 2011 Measuring Quality of Bank Servies in Jordan: Gap analysis Naji D. Mualla Professor New York Institute of Tehnology Amman Jordan najmu2005@hotmail.om Abstrat Purpose: Measuring the quality of servie provided by the ommerial banks in Jordan and establishing a database whih an help the management improving the quality of servies. Methodology: The study has been onduted on a sample of (1000) ustomer was randomly seleted from the ustomers of all surveyed banks. The quality of servie was measured by applying the gap model (the differene between the ustomers pereived, and their expeted quality).data required for this study has been olleted by a question0naire whih was designed for this purpose. Findings : The findings of the study indiate that the quality of servies is low (unsatisfatory), and in turn the banks still have a lot of efforts to do regarding the quality of their servies. Limitations: This study is based on sell-report pereptions of the ustomers. Data olleted by this approah may or may not be an aurate to that extent whih reflets the respondent s real feelings. Pratial impliations: The results of this study should enable the management in the ommerial banks in Jordan to design internal marketing programs aimed at building a strong servie-minded employees and improving the quality of their servies. Originality: The study is a first researh attempt whih aims to measure the quality of bank servie in Jordan using the Gap analysis approah. Keywords: bank, quality, marketing, servie, Jordan Introdution [ Commerial banks in Jordan have a vital role in the soio-eonomi development proess. They are the most influening in the whole eonomi system than other institutions, and they had positively ontributed in all developmental efforts devoted by the government. In the past ten years, notieable developments in the banking setor have been ourred. The number of the banks and the size of their operations have been inreased. There are (23) ommerial banks operating in Jordan. these banks are divided into two broad ategories: Jordanian, owned totally by Jordanian stokholders and the number of these banks is (13) banks. The seond ategory is the non-jordanian,owned totally by non-jordanian stokholders and the total of these is (10). With this number of banks ompeting in a relatively limited, and almost saturated market, ommerial banks have to improve the quality of their servies. This strategi objetive an be ahieved through improving the selling effetiveness of bankers. Management reognition is taking hold in the banking setor that employees of the bank must sell. Deregulations, intense ompetition, profit pressures, and a hanging produt line, among other influenes are major hallenges to this management. This reognition must be translated into effetive ation plans and programs. These fators have been reported through long onversation between the researher and bank exeutives over the past several months onerning problems they were experiening in developing servie quality improving programs in their banks, and through the questions he direted to employees attending sales workshops in some Jordanian banks. Most of the ustomers' preferene of the bank servie is signifiantly related to the quality of servie, this quality is onsidered a major determinant of the bank's ompetitiveness beside other fators. It represents a relative advantage whih highly ontributes to the suess of the bank in this ompetitive market where the number of the banks is inreasing, espeially, the non-jordanian banks. Loal banks have to improve the quality of their servies, and to differentiate themselves from ompetitors in order to be able to ompete in suh market situation. 51

2 Centre for Promoting Ideas, USA Thus, the present study aims at: 1. Exploring the onept of quality of servie in banking setor in Jordan. 2. Providing an overall measure of quality of servies provided by the ommerial banks in Jordan 3. Measuring, and assessing the quality of servie provided by the ommerial banks in Jordan Literature Review In this part of the study the most relevant literature to the issue of servie quality is to be reviewed as follows: Servie Quality The term quality has been defined from different perspetives. It means different views to people aording to the ontext. Cravens (1995), identified five perspetives of quality: (1) the transendent view of quality this is synonymous with innate exellene, (2) the produt-based quality whih refers to some attributes whih are existed in the produt. (3) ustomer-based quality, whih is equated with ustomer's maximum satisfation. (4) the manufaturing-based quality whih refers to the onformane to internally developed speifiations, popularly known the tehnial quality, and (5) value-based quality, whih refers to the ulture of a ustomer's pereptual ost-benefit analysis (trade-off between possible values and osts. The researher also, developed eight omponents of quality, these are: (1) performane, (2) onformane, (3) reliability, (4) onformane, (5) durability, (6) servieability (speed, ourtesy, ompetene, and ease of having problems settled), (7) aesthetis (how a produt appeals to the ustomer's senses and feelings), and finally, (8) the pereived quality. Despite the above lassifiations were developed within manufaturing ontexts, they an be generalized for servies. However, the intangibility whih is involved in the servie text led many researhers into the field to insist that quality of servie should be measured by a distintive approah. Servies researhers (Brady and Cronin, 2003; Rust and Oliver, 2006) have suggested that ustomers evaluate quality of servie based in their pereptions of the tehnial outomes provided, the proess by whih that outomes was delivered, and the quality of the physial environment where the servie is delivered and that ustomers do not pereive quality in a one-dimensional way but rather, evaluate the quality based on multiple fators relevant to the ontext. Parasuraman et al.,(1988) identified five riteria used by ustomers in evaluating servie quality. These are: Reliability, whih refers to the ability of the firm to perform the promised servie dependably and aurately. 2. Responsiveness, whih refers to the willingness to help ustomers and to provide prompt servie. 3. Assurane, it refers to the employees' knowledge and ourtesy and their ability to inspire trust and onfidene. 4. Emapthy, it means aring, individualized attention given to ustomers. 5. Tangibles, it implies the appearane of physial environment elements, equipments, personnel, and ommuniation material (reports, billing statements). Gronroos, (2007), suggests that the quality of servie as pereived by ustomers is the result of an evaluation proess in whih they ompare their perspetive of servie outome against what they expeted. This is referred to as the ustomer gap and what is going to be applied in measuring the quality of bank servie within the ontext of the present study.on the other hand, quality means zero detetion. It has been desribed as keeping every ustomer the bank an profitably serve. When ustomers have a long term relationship with the bank, their use of the servie an be traked on an individual aount basis. It should be noted that both ustomer and employee retention an be built if loyalty is reognized by top management in the banks as a systemati hallenge, not just a tatial ourses of ation. It should be seen as standing at the ore of sustained ompetitive suess (Lovelok, 1994). Cohen (2005) pointed out that servie quality, has three distint omponents: ustomer quality riteria servie, ompany the ommerial banks employees' pereption of sales ulture and its effets on the ustomer's pereiv faets, and the relationship among these omponents.( Al-Haddad (2008) defined the quality as the differene between the atual performane of servie with the ustomer's expetations about it. This differene indiates the level of quality of servie. In a previous study onduted by Mualla (1998), the findings indiated that the ustomer's evaluation of the quality of servies provided by the Jordanian ommerial banks was negative (-2), and the servie quality expeted by those ustomers' was higher than that they have delivered. The study reommended that the management in those banks should adopt effetive programs to improve the quality of servies provided, and the neessity for more researh on the ustomers' satisfation.

3 International Journal of Business and Soial Siene Vol. 2 No. 1; January 2011 Salah (2004) attempted to measure quality of servies provided by Islami banks in Jordan, the findings of the study indiated that the ustomers' evaluation of the quality of servie was positive on three dimensions of the quality: the tangibles, responsiveness, and empathy, where their evaluation was negative regarding both the reliability and assurane dimensions.in a reent study onduted by Al-Atari (2009) on the quality of servies provided by the ommerial banks in Jordan, the findings indiated that the ustomer's evaluations about the quality of servies were low. Hypotheses of the Study Quality of servie has emerged as one of the most important determinants of ustomer satisfation and retention. The literature review indiated that high levels of profitability from urrent ustomers, and few lost ustomers are strategi goals whih should be ahieved by the bank management. Delivering high quality of servie appears to be valued by ustomers. Hene, the following hypotheses investigate several aspets of the two onstruts and the relationships between them: HO1: The overall servie quality provided by the ommerial banks is low. HO2: There are no signifiant differenes between Jordanian and non-jordanian banks regarding the overall quality of servie provided. HO3: There are no signifiant differenes between Jordanian and non-jordanian banks regarding the ustomers' pereived quality of servie. HO4: There are no signifiant differenes between Jordanian and non-jordanian banks regarding the ustomers expeted quality of servie. HO5: There are no signifiant differenes between Jordanian and non-jordanian banks regarding the on all its dimensions. The study framework and sampling proedure The present study has been onduted within the ommerial banks working in Jordan. A total of (23) ommerial bank, of whih (13) banks were Jordanian, and (10) banks were non-jordanian, and most of them were branhes of either Arab or foreign ountries. All those banks were used as a framework for the sampling proedure of this study. Table (1) displays a list of the ommerial banks and the number of employees in eah, in addition to the size of their deposits: Table (1) Commerial Banks Operating in Jordan No. Name of Bank No. of Employees % of the total Deposits (000)m. % of the total 1. Arab Bank Housing Bank for Commere and Finane Jordanian Islami Bank Jordanian National Bank Bank of Jordan Cairo-Amman Bank Jordan Kuwait Bank Jordanian Commerial Bank Arab Banking Institution Union Bank for Savings and Investments Jordanian Arab Bank for Investment HSPC (Middle East) Capital Bank International Islami Arabi Bank Standard Chartered Bank Egyptian Arab Land Bank Jordanian Bank for Investment and Finane Soete General Bank Audi Bank BLOM Bank City Bank Kuwait National Bank Al-Rafedain Bank Total

4 Centre for Promoting Ideas, USA The sampling proedure The data required for this study has been olleted from a sample whih has been randomly seleted from the ustom mers of all banks surveyed. Beause the number of the banks' ustomers was unable to be reahed for privay and serey reasons laimed by the management in these banks, the following statistial law was applied: 54 ( ) 2 Z σ α E η = 2 Where: η = refers to the ustomer' sample size Z α = refers to the value on the standardized normal distribution at 95% degrees of onfidene this 2 value was (1.96) with probability of ( σ ) = refers to the standard deviation of the population whih is 2 E= refers to the allowed error whih is 10%. Applying this previous equation, the ustomers size was reahed as follows: ( ) 2 Z σ α E η = η 2 = ( ) 2 η = η = ( ) 2 η = To inrease the external validity of the results expeted from this study, the sample size was raised to (1000). A total of (1330) questionnaires were distributed to reah the required sample size whih represents a reliable rate of response (75%). On the other hand, the rational that has been followed in seleting the sub- sample from eah bank was as follows: (The deposits of eah bank / Total deposits of all banks) x 1330 Both indiators an be onsidered as suffiient to reflet the relative importane of eah bank in the total samples of both the employees and ustomers. Tables (3) present the proedure used in seleting the sample Table (2): The total ustomers sample of the ommerial banks No. Name of Bank Deposits (000)m. Distributed Questionnaire Returned Questionnaire 1. Arab Bank Housing Bank for Commere and Finane Jordanian Islami Bank Jordanian National Bank Bank of Jordan Cairo-Amman Bank Jordan Kuwait Bank Jordanian Commerial Bank Arab Banking Institution Union Bank for Savings and Investments Jordanian Arab Bank for Investment HSPC (Middle East) Capital Bank International Islami Arabi Bank Standard Chartered Bank Egyptian Arab Land Bank Jordanian Bank for Investment and Finane Soete General Bank Audi Bank BLOM Bank City Bank Kuwait National Bank Al-Rafedain Bank Total

5 International Journal of Business and Soial Siene Vol. 2 No. 1; January 2011 Operational definition of quality of servie For the purpose of this study, the operational definition of servie quality (SERVQUAL) presented by Zeithaml and her olleagues (1988) has been adopted. Therefore, servie quality (SERVQUAL) was operationally defined through five broad onsolidated dimensions, those were: (1) Tangibles, whih reflets the appearane of physial elements. (2) Reliability, whih reflets the dependability and aurate performane of the servie. (3) Responsiveness, whih reflets promptness and helpfulness. (4) Assurane, whih is represented in ompetene, ourtesy, redibility and seurity, and finally, (5) Empathy, whih means the easiness of aess, good ommuniations, and ustomer understanding. Based on the above operational definition, servie quality (SERVQUAL) was measured by using the SERVQUAL sales onsist of (22) harateristis of the servie provided by the banks. The (22) harateristis represent the major (5) dimensions of the servie quality as proposed by Parasuraman et.al.,(1988)who applied the gap model in their measurement of servie quality. Aording to this model, the servie quality was defined as the differene between the servie atual performane (p) and the ustomers expeted servie quality. When pereived performane sores are lower than the expetations sores, this indiates a poor (low) quality; the ontrary is a sign of good quality. Adopting this rational, the researher assures the onept of servie quality from the ustomer's perspetive, beause he always believes that the evaluations of the quality are inherited in the minds of ustomers. The (22) statements through whih the quality of servie was measured has been reahed after some modifiations were made in the original SERVQUAL so as better to apture the expetations and pereptions of the Jordanian ustomers of the ommerial banks. Modifying the SERVQUAL sale was to improve the validity and reliability of the sale as an instrument of measurement of the quality of bank servies in Jordan. The modifiation of the original sale of SERVQUAL made after it has been presented through in-depth interviews with fous groups onsisting from senior managers who have been randomly seleted from the surveyed banks (Jordanian and non-jordanian). In addition to a pilot study onduted on a small representative sample seleted from the original sample used for this study. The modified sale ontained (22) statements that are distributed throughout the five servie quality dimensions as follows: 1) Reliability, measured throughout the statements from (1-5). 2) Responsiveness, measured throughout the statements from (6-9). 3) Assurane, measured throughout the statements from (10-13). 4) Empathy, measured throughout the statements from (14-18). 5) Tangibles, measured throughout the statements from (19-22). The sale also ontained expetation statements (the same 22 but in future tense). The (22) statements were attahed with a seven-point sale ranging from "Strongly disagree" (1) to "strongly agree" (7). The sale was presented as a part of a questionnaire designed for the purpose of this study. It should be indiated that the SERVQUAL was presented to the respondents in two forms, one measures the servie quality on the (22)statements,as it is pereived by ustomers, subsequently, they were asked to reord their expetations regarding the same (22)statements. The gap between the two measurements represents the measure of the servie quality. Data Colletion Data required for this study was olleted from the sample by a strutured questionnaire was designed. Customers pereived and expeted SERVQUAL were measured by the SERVQUAL sales, as developed by Parasuraman et. al.,(1988). Initially, their pereptions of their banks' performane on (22) harateristis of the SERVQUAL provided by their banks were rated. Subsequently, they were asked to express their expetations on the same (22) harateristis after some modifiations were made in the original SERVQUAL.The modifiations in the sale were made by presenting the statements through in-depth interviews with fous groups onsisting from ustomers randomly seleted from the surveyed banks (Jordanian and non- Jordani). In addition, a pilot study was onduted on a small representative sample, whih also, randomly seleted from the bank's ustomers. The modified (22) statements were attahed with a 7-point sale ranging from strongly disagree (1) to strongly agree (7). 55

6 Centre for Promoting Ideas, USA Reliability and Validity Test The reliability test was applied to examine the internal onsisteny of the serie quality(servqual)variable in the two questionnaire. The results show that the value of Cronbah oeffiient Alpha was(0.94).indiating that there is a good internal onsisteny among items within eah of the dimensions of the servie quality. this result enhaned the internal and external validity of the study and reinfored the generalization of the results Findings and Disussion In this part of the study, the major findings are reported as follows: Customers' evaluations of servie quality (SERVQUAL) In measuring the ustomers' evaluations of SERVQUAL, the gap model of servie quality developed by Parasuraman et. al., (1988) was applied. It indiated the ustomer's gap whih represents the differene between the overall ustomers' pereived and expeted SERVQUAL. The importane of this measure omes from the fat that ustomers expetations are the standards of servie performane (or referene point s performane) against whih ustomers experienes are ompared. Within this ontext, the following findings were reahed: The overall ustomers' pereived SERVQUAL: Respondents rated their sores of the pereived SERVQUAL on a 7-point sale ranging from "strongly disagree" (1) to "Strongly agree" (7). The overall mean sores of pereived SERVQUAL were omputed (1000) on the (22) individual SERVQUAL statements, and then dividing the total sum of the mean sores by the total number of ustomers sample (1000). The higher the mean sore, the more positive evaluations about the quality of servies provided by the ommerial banks the ustomers have made. Aordingly, the overall mean sore of ustomers' pereived SERVQUAL was (3.5) The overall ustomers' expeted SERVQUAL: Respondents ompleted SERVQUAL sales whih measured their expetations of (22) harateristis (statements). Again, the overall mean sores of expeted SERVQUAL was omputed by totalling the rating of all ustomers (1000) on the (22) individual SERVQUAL statements, and then dividing the total sum of mean sores by the total number of ustomer (1000). The higher the mean sore, the higher the expetations about the quality of servie provided by the banks the ustomers have made. Aordingly, the overall mean sore of the ustomers' expeted SERVQUAL was (5.7). Applying the gap model of servie quality, the gap between the two measurements of ustomers' servie quality represents the level of SERVQUAL of the ommerial banks. Therefore, overall SERVQUAL (gap) = ustomers' pereived SERVQUAL ustomers' expeted SERVQUAL. The Gap (Quality) = P E = = Aording to the SERVQUAL deision rule, the SERVQUAL is onsidered as unsatisfatory (low) if the pereived SERVQUAL mean sore is lower than the expeted. So, it ould be onluded that the ustomers' SERVQUAL provided by ommerial banks was low (unsatisfatory), and thus, the third main hypothesis (HO3) was aepted. In order to test for differenes between banks with higher and lower levels of SERVQUAL, it was found similar (-2.2), whih means that there are no signifiant differenes in the ustomers' evaluations of SERVQUAL, in both the Jordanian and non-jordanian banks, and therefore, the first hypothesis (HO1) was supported. Similar results regarding the quality of bank servies provided by ommerial banks in Jordan was reahed in a previous study onduted by the researher (Mualla,1998). It then, ould be onluded that after (10) years, quality of servies provided by those banks has not been hanged, and therefore, intensive efforts still to be devoted by the management of these banks to improve the quality of their servies in order to enhane their ompetitive position in the market. Signifiant variations were deteted between non-jordanian and Jordanian banks regarding eah of the overall pereived and expeted SERVQUAL provided by them. Customers of non-jordanian banks appeared to have higher sores of both overall pereived and expeted SERVQUAL, than those of Jordanian banks, this means that eah of the seond and third hypotheses ( HO2, HO3 ) was supported. Assessing whih dimension of SERVQUAL has been sored higher by the ustomers of both, Jordanian and non-jordanian would generate valuable strategi insights for the management of quality of bank servie. Apparently, ustomers of non- Jordanian banks had higher sores of SERVQUAL than those of Jordanian banks on all SERVQUAL dimensions. However, both ategories of banks sored almost similarly regarding the gap on eah of the SERVQUAL dimension; this means that the forth hypothesis (HO4) was supported. 56

7 International Journal of Business and Soial Siene Vol. 2 No. 1; January 2011 Table (3) summarizes the aggregate means of the overall SERVQUAL, the individual dimensions for both, Jordanian and non-jordanian banks. Also, the major gaps (SERVQUAL) on all dimensions are shown in table (4). Table (3): Summary of the aggregate means of the overall SERVQUAL and its five dimensions Dimensions Reliability Responsiveness Assurane Empathy Tangibles (physial evidene) Overall SERVQUAL means sores * ** nationality of the bank Jordania n Banks (500) Non- Jordania n Banks (500) Overall (1000) Individual dimension gap (-2.1) (-2.1) (-2.2) (-2.2) (-2.3) (-2.2) *Pereived SERVQUAL **Epeted SERVQUAL Table (4): The major gaps in the strutural dimensions of SERVQUAL in ommerial banks Nationality of the banks Jordanian banks Non-Jordanian banks Overall gap SERVQUAL Dimensions Reliability (-2.2) (-2.3) (-2.1) Responsiveness (-2.2) (-2.2) (-2.1) Assurane (-2.3) (-2.3) (-2.2) Empathy (-2.3) (-2.3) (-2.2) Tangibles (-2.4) (-2.3) (-2.2) Overall SERVQUAL (gap) (-2.2) (-2.2) (-2.2) Pratial Impliations In deregulated finanial markets, many banks are realizing the neessity of having a ompetitive edge over their ompetitors. They should develop more proative marketing strategies to find and keep ustomers. A part of this strategi option is that the management must devote more intensive efforts towards improving the quality of their servies. The findings of this study do lead to some potential ideas regarding a well-managed quality assurane. The findings also indiate that higher levels of quality servie an be delivered when banks adopt the ustomer orientation, and reinfore their relationship with them. The overall impliation to these findings is that onsistent with the importane of being adaptable the employee s servie ulture is neessary for a sustainable relationship. Along with this line of thinking, managers in the ommerial banks in Jordan an more effetively align the interest of the employees and ustomers. Aordingly, employees laking a strong ustomer-orientation are inappropriate to be assigned with ustomers aounts needing long-term relationship. The management's ommitment to quality of servie should be extended to strengthening the internal relationship. The results of this study should enable the management in these banks to design internal marketing programs aimed at building a strong servie-minded employees. This requires more attention to employees feelings, reognition of employees as invaluable assets to the bank, and frequent interation between employees and management. All these values reate a favourable internal environment that helps the empowerment of employees. 57

8 Centre for Promoting Ideas, USA Limitations of the Study As it is the ase in any study, some limitations relevant to this study annot be abandoned, for instane, the findings of this study are based on sell-report pereptions of ustomers. Data olleted by this approah may or may not be an aurate to that extent whih reflets the respondent s real feelings. Suggestions for Future Researh The insight reahed from this study may be just as enlightening as more repliating researh is to be onduted. Further, the next suggested researh should identify expeted anteedents and outomes of servie quality. If this study was applied to other servie organizations, this would expand our understanding of the adoption of servie quality to those organizations. This, in turn, suggests that with more validation the onlusion derived from this study ould prove to augment many of the managerial ativities suh as reruitment, seletion, and training whih would be refleted on the bank s profitability. Conlusions The purpose of this study has been to assess the servie quality in the ommerial banks in Jordan. The findings of this study have indiated that the quality of servie as it has been pereived by the ustomers of all ommerial banks was low. The impliations of this study suggest that ommerial banks must devote onsiderable efforts toward the quality of their servies. They an more produtively assign relational ustomers to employees, based on their inlination to onsider the long-term relationship with ustomers. This study also emphasises the importane of establishing a sustainable relationship with ustomers. Servie quality is inherited in the minds of ustomers. Referenes 1. Brady, M. K and Cronin, J. J.(2001), "Some new thoughts on oneptualized pereived servie quality: A hierarhial approah", Journal of Marketing, Vol. 65, pp Cravens, D. W.(1995), The hanging role of the sales fore, Marketing Management, Vol.4. Fall.pp Gronroos,C.(2007),Servie Management and Marketing: Managing the moments of truth in servie ompetition, Massahusetts: Lexington Books. 4. Lovelok, C.(2009), Servie Marketing, New Jersey, Upper Saddle: Prentie-Hall. 5. Mualla, N.(1998), "Measuring the quality of servie provided by ommerial banks in Jordan", Dirasat, University of Jordan, Vol. 25, No. 2, pp Parasuraman, A., Berry, I. and Zeithaml, V. (1988), SERVQUAL: A multiple-item sale for measuring onsumer pereption of servie quality, Journal of Retailing, pp Rust, R. T. and Oliver, R. L. (2005), Servie Quality: New diretion in theory and pratie, Thousand Oaks, CA: Sage, pp Salah, T., (2004), Measuring the quality of Islami banking servies, Central Bank of Jordan, Amman. 9. Zeithaml,V.A.and Parasuraman, A.(2004),Servie Quality,MSI Relevant Knowledge Series.Cambridge, MA:Marketing Siene Institute. 10. Parasuraman,A, Berry, L.L, and Zeithaml, V.(1990), Guidelines for Conduting Servie Quality Researh, Marketing Reasearh :A Magazine of Management and Appliations, pp