AN ASSESSMENT AND ANALYSIS OF SERVICE QUALITY OF PRIVATE AND PUBLIC SECTOR BANKS OF LAHORE BY USING SERVPERF MODEL

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1 1 of of Applied 2, 2, 2013, AN ASSESSMENT AND ANALYSIS OF SERVICE QUALITY OF PRIVATE AND PUBLIC SECTOR BANKS OF LAHORE BY USING SERVPERF MODEL Abstract Muhammad Jehanzeb Ishaq Hajvery University Lahore, Pakistan Service sector s importance has increased at both developing and developed Countries. Service quality is one of the important factors in the success of a company. Banks are one of the back bones of economy of any country. Today in Pakistan bank services has improved immensely. In Pakistan there are lots of problems for customers related to the services (satisfaction of customers about bank products, after sale service, delivery of products in time etc.) of banks. This dissatisfaction of customers can bring downfall of banks. These downfalls can be in these areas; Strength of customers could go down, financial losses due to lack of customer interest, Reputation of Bank falls down among customers, etc. In this research focus is on to check the service quality of banks. This research is about the comparison between Public (National Bank Pakistan) and Private (Habib Bank of Pakistan) sector banks of Lahore by evaluating the services using SERVPERF Model. This research is based on primary data. Fifty samples are selected by using purposive and convenience sampling. Response rate was 80% and 20 % were overwritten, errors etc. Questionnaire distributed to the selected locations and analysis done through SPSS 20. The results show that different banks have different quality of services. Banks need to invest on every dimension of SERVPERF Model. Results also calculated according to the importance of SERVPERF Model. Key words: Satisfaction, Service Quality, SERQUAL, SERVPERF etc 1. Introduction and Literature Review Service quality is defined as the extent to which a service meets customers needs or expectations Lewis and Mitchell (1990); Dotchin and Oakland, (1994). Service quality can thus be defined as the difference between customer expectations of service and perceived service. Parasuraman et al., (1985).

2 2 of of Applied 2, 2, 2013, To measure service quality there are two measures SERVQUAL and SERVPERF model. SERVQUAL measure the gaps between expectation and perception and SERVPERF measures only perception. Pakistan s Banking industry has recently changed so much and now becomes a profitable industry. During Last five years number of new banks established. There are 34 numbers of total banks in Pakistan. These are as under: a. Public Sector Banks 5 ~19% b. Local Private Banks 22 ~80% c. Foreign Banks (Branch Operations) 7 ~1% d. Total Commercial Banks 34 ~100% These banks have changed the industry from Government sector to profitable private banks. In Today s world every business must uses the banking services. Transactions are much safer than earlier days. Due to the increasing usage of banks there is needed to improve the services of banks. Competition among banks has increased pressure on banks to change their strategy and provide better services than their competitor. Today functionality and purpose of banks is redefined. Customers are the main focus now whether to develop or maintain firmness in the business. The expectations of customers also increased about the services provided by the banks. Now every bank has to develop strategy to be competitive and to retain their customers. Banks are looking for new strategies to retain the customers and become competitive among their competitors. In Pakistan there are lots of problems for customers related to the services (satisfaction of customers about bank products, after sale service, delivery of products in time etc.) of banks. This dissatisfaction of customers can bring downfall of banks. These downfalls can be in these areas; Strength of customers could go down, financial losses due to lack of customer interest, Reputation of Bank among customers, etc. The SERVPERF model was engraved from SERVQUAL by Cronin and Taylor in They argued that there is no need to measure expectation only perception is adequate to measure service quality. The SERVPERF scale is found to be superior not only as the efficient scale but also more efficient in reducing the number of items to be measured by 50% Hartline and Ferrell, (1996); Babakus and Boller, (1992); Bolton and Drew,

3 3 of of Applied Applied of Applied 2, 2, 2013, 2013, , 2013, (1991).The SERVPERF model proposes five dimensions upon which customers evaluate service quality. 1. Tangibles are the appearance of physical facilities, equipment, personnel, and communication materials. 2. Reliability is the service provider s capability to perform the promised service consistently and perfectly 3. Responsiveness is the keenness to facilitate clients and give punctual service. 4. Assurance is the awareness and politeness of employees and their ability to inspire faith and confidence 5. Empathy refers to the kind, individualized attention the provider gives to its clients. Parasuraman, et al.,, (1988) 2. RESEARCH METHODOLOGY 2.1 Objectives The following are the objectives of the study: 1. Find out what customers think about service quality of banks? 2. Find out the key areas which are affecting the service quality of banks? 3. Compare and evaluate the perceptions of the customers in Private () and Public () banks. 3. SCOPE OF THE STUDY In this study National Bank of Pakistan is selected from Public Banks and Habib bank of Pakistan is selected from private banks. A survey of 50 people 25 from each bank is conducted from general people of the banks. These people are Doctors, Businessmen, professors and persons from self-employed category, etc. 4. RESEARCH DESIGN This research is a primary research. The research design used is descriptive research. Primary data is collected by Questionnaires and secondary data is collected from previous research, internet and banks data. A survey is conducted in one city (Lahore). A modified Questionnaire Sabrina Tazreen (2012) is developed. It has 2 parts. The first part is showing respondents personal data such as gender, bank type, income, age, qualification and the second part asked respondent to rate their satisfaction level to their bank us-

4 4 of Applied 2, 2013, ing Likert Scale from Extremely satisfied 5 to Not at all satisfied 1 for 22 questions. Total 50 Questionnaires distributed among customers of 2 banks ( and ). Banks are selected by using purposive sampling and Purpose was to choose the largest banks of Public sector and Private Banks. Customer s data is collected by using convenience sampling. Results are analyzed using SPSS 20. Analysis of the data is done by using weighted. 5. ANALYSIS AND INTERPRETATION Descriptive statistics is used to analyze both banks. s of 5 dimensions (Tangibles, Reliability, Responsiveness, Assurance, and Empathy) is computed to analyze. In this study satisfaction of customers is dependent variable and 5 dimensions of service quality are independent variable. 5.1 OVERALL SERVICE QUALITY This analysis of Table 1 shows that there is a slight difference between the satisfaction level of and customers. customers are overall little bit more satisfied of the banks services than customers. The comparison of both means i.e. mean of (79.05), mean of (78.15) clearly shows that customers are getting better services than customers.

5 of Applied of Applied of Applied 2, 2013, , , , 2013, Table 1 s of 5 dimensions of Service Quality Dimensions 1. Tangibility Reliability Responsiveness Assurance Empathy Overall Service Quality DIMENSION-WISE ANALYSIS Tangibility: The Table 2 shows that overall (25.70) customers are more satisfied than (25.45) customers about tangibility of banks. While analyzing about the elements of tangibility Management needs to improve on three things premises of bank, e-banking and brochure information on the other hand needs to improve their location and equipment of bank. Satisfaction of customers of both banks about ATM service is pretty high. Table2 of Tangibility

6 Tangibility6 Mea n Mea n 1 Premises of the bank Equipment s of the bank The dressing of employee Information given in brochures e-banking(internet, mobile etc.) services The ATM service The presentation of bank statement Total of Applied 2, 2013, Reliability: The Table 3 shows that overall (17.50) customers are more satisfied than (17.05) customers about reliability of banks. While analyzing about the elements of reliability needs to improve their staffs problem handling skills according to customers they are not handling customer s problem efficiently on the other hand needs to improve on their record. They need to update their record regularly and deliver to customers well on time. customers are most satisfied with operating hours of the bank and customer are most satisfied with the timing of the promised services they think service is almost provided on time.

7 7 of of Applied Applied 2, 2, 2013, 2013, Table 3 of Reliability Reliability Mea n Mea n 1 The services provided by the bank as promised 2 The service of handling a problem The way bank provides service at the time they promised 4 The operating hours of the Bank The way bank delivers up to date record Total Responsiveness The Table 4 shows that overall (14.35) customers are more satisfied than (13.15) customers about responsiveness of banks. While analyzing about the elements of responsiveness needs to improve their delivery of bank statement to customers, most customers said they receive late statements on the other hand needs to work on after sale service of bank to customers, Bad after sale service can give bad image to customers and this can effect on banks profitability. customers are most satisfied with delivery of bank statement and customer think that there employees are more helpful than other banks.

8 8 of Applied of Applied 2, 2013, 2, 2013, Responsiveness Table 4 of Responsiveness 1 The employees promptness in providing services in the bank The willingness of employees to help customers The bank service of sending timely bank statement? 4 The after sales service of bank Total Assurance The Table 5 shows that overall (11.40) customers are more satisfied than (10.90) customers about Assurance of banks. While analyzing about the elements of Assurance both banks and needs to work more on the employee s motivation to help customers. Similarly and both customers are most satisfied with the security of the bank

9 9 of Applied 2, of 2013, Applied , 2013, Empathy Table 5 of Assurance The Table 6 shows that overall (11.05) customers are more satisfied than (10.65) customers about Empathy of banks. While analyzing about the elements of empathy needs to show to customers that their interest is first priority and needs to help customers in choosing the best product that suits them. According to customers perception they are not helping customers to choose best suited products. Overall both customers are satisfied with service quality which bank are providing to them. Assurance 1 The security of the bank Mea n The employee s eagerness of filling confidence to you 3 The knowledge of the employees Total Table 6 of Empathy Empathy 1 By banks service of providing customers best interest at heart By the bank service of providing the product that best suits to you 3 By the overall service quality of your bank Total

10 10 of Applied 2, of 2013, Applied , 2013, CONCLUSION: The banking sector has changed rapidly in few years. There are lots of competitors among banks. To be competitive and get competitive edge the banks needs to provide excellent services to the customers. These must be customer focused and fulfill the desires of customer. This study also shows the satisfaction level of customers towards their banks. After getting whole study done there are few recommendations which can improve the service quality of both banks and can give them competitive edge. 1) Both banks need to improve their service quality to be competitive among other banks. Private bank is exceeding the perceptions of customers in comparison to public sector bank. 2) Both banks need to invest on Physical facilities like ATM machine, Internet banking, Pamphlets, etc. This will ensure better services to their customers at any time. 3) To catch and retain customers both banks needs some marketing strategies to be implemented. are doing little bit more advertisement then. 4) Enhance their product line. Introduce some new products to catch customers. 5) Banks should give services equally to all customers. There should be no biasness to businessman or large balance holders. There is a perception among customers that there is a difference between customers services provide to retail customers and company account holders. 6) Banks must do surveys quarterly to know about the needs of customer. Services 7) changed from time to time. A good service today can change to bad service tomorrow. REFERENCES

11 11 of Applied 2, 2013, Parasuraman, Z. a. B. (1988) "A Multiple Item Scale for Measuring Customer Perceptions of Service Quality,," of Retailing, p. 64. Mitchell L.a. (1990), "Defining and Measuring the Quality of Customer Service"," Marketing Intelligence & Planning, vol. 8. Dotchin, J. &. O. (1994). "Total quality management in services. Part 1: understanding and," of Quality & Reliability Management. Parasuraman et. al, (1985) "A conceptual model of service quality and its A conceptual model of service quality and its," of Marketing. Lewis, et. al, "The marketing aspects of service quality," American Marketing Association, Hartline, Michael D, Ferrell OC (1996). "The Management of Customer-Contact Service Employees: An EmpiricalInvestigation," J. Mark. 60 (11): Lau, P. M., Akbar, A. K., & Fie, D. Y. G. (2005). Service quality: A study of the luxury ho - tels in Malaysia. of American Academy of Business, Vol. - 7(2), Ganguly et. al (2011) SERVQUAL versus SERVPERF: An Assessment from Indian Banking Sector, available at: Sabrina Tazreen (2012) An Empirical Study of Servqual as a Tool for Service Quality Measurement IOSR of Business and Management (IOSRJBM) ISSN: X 1, Issue 5 (July-Aug. 2012), PP 09-19www.iosrjournals.org