HOW DO SERVICE QUALITY PERCEPTIONS CONTRIBUTE IN SATISFYING BANKING CUSTOMERS?

Transcription

1 HOW DO SERVICE QUALITY PERCEPTIONS CONTRIBUTE IN SATISFYING BANKING CUSTOMERS? PROF. DR. MUHAMMAD EHSAN MALIK Dean, Faculty of Economics and Management Sciences/Director, Institute of Business Administration (IBA)/Director General, Gujranwala Campus, University of the Punjab, Lahore (Pakistan) BASHARAT NAEEM Lecturer at IBA, University of the Punjab, Lahore (Pakistan) & Ph.D. (Management Sciences) Scholar at COMSATS Institute of Information Technology (CIIT), Pakistan ZOUNE ARIF Student of MBA (Honors) at IBA, University of the Punjab, Lahore (Pakistan) Abstract The notion that service quality enhances the relationship of buyer-seller and shared benefits including performance and customer satisfaction had been acknowledged widely (Zeithaml, 2000). In this connection, Parasuraman et al. (1985) also found that perceived service quality was significant predictor of customer satisfaction by using SERVQUAL instrument. So it was hypothesized that clients using commercial retail services of the banks with favorable perceptions of service quality dimensions (tangibility, reliability, responsiveness, assurance and empathy) will experience higher satisfaction. Multiple regression of survey responses indicated that assurance satisfied banking customers more than did reliability whereas favorable perceptions regarding SERVQUAL remaining dimensions did not prove to be instrumental in satisfying customers. Implications for banking practitioners and future research were also discussed in the paper. Keywords: SERVQUAL, Customer Satisfaction, Banks, Pakistan Introduction: In the era of intense competition, customer satisfaction has achieved higher level of significance in practitioners and researchers mind alike especially in service industry. Practitioners and academicians showed a great interest in managing service quality, more specifically the interpersonal interaction of frontline employees with the customers (Bitner and Hubbert, 1994). According to Sigala and Christou (2006) Service organizations are currently challenged to redefine themselves as experience creators [...] to create long-term customer relations and enhance customer patronage and loyalty. Previous literature suggested that number of factors drives the customer satisfaction. From the last 4 decades, service quality is got paramount important importance because of its robust relationship of profitability, customer loyalty, business operations and customer satisfaction (Seth and Deshmukh, 2005; Hallowell, 1996; Kang and James, 2004; Chang and Chen, 1998; Newman, 2001; Cronin and Taylor. 1992; Sureshchander et al., 2002; Lasser et al., 2000; Gotlieb et al., 1994; Gammie, 1992; Leonard and Sasser, 1982). Blose et al. (2005) declared the service quality as key elements for top management in successful business organizations. Heskett et al. (1994) presented customer satisfaction theory Service Profit Chain which is most widely used in the literature. This theory proposed a linear relationship of staff satisfaction and perceived service quality with profitability and customer satisfaction. Parasuraman et al. (1985) also found that service quality is significant predictor of customer satisfaction by using SERVQUAL instrument. 646

2 In services marketing literature, numbers of research are available which determined the impact of perceived service quality by using SERVQUAL scale on customer satisfaction in Western countries like USA, the UK, and Canada (Tsoukatos, Rand 2006). Additionally, despite problems associated with the dimensionality of SERVQUAL and its strength in various contexts, many studies have used, adapted, or replicated this scale to measure service quality. However, measures of service quality in specific cultural settings need to be tested (Imrie et al. 2002; Winsted 1997). Taking this drawback into consideration, the current research aimed to determine the impact of SERVQUAL dimensions on overall customer satisfaction of the banking clients. Literature Review: Service quality scale proposed by the Parasuraman et al. (1985) has been reasonably used by the academicians and managers (Parasuraman et al., 1991; Cronin and Taylor, 1992; Babakus and Boller, 1992; Woodside et al., 1989; Crompton and Mackay, 1989; Carman, 1990; Webster, 1989). Zeithaml (1987) explained the service quality as Service quality is the consumer's judgment about an entity's overall excellence or superiority. It is a form of attitude, and results from a comparison of expectations to perceptions of performance received. Another definitation proposed by Lewis and Booms' (1983) that Service is a measure of how well the service level delivered matches customer expectations. Delivering quality service means conforming to customer expectation on a consistent basis. According to Buttle (1994), the popularity of SERVQUAL instrument (with five dimensions such as reliability, responsiveness, tangibles, assurance and empathy) is because of advantages associated with this instruments: Considered as a standard for measuring service quality dimensions. It has valid situations for assessing the service. Reliable instrument. Parsimonious construct for measuring services. Standard guidelines for measuring and interpretation the results. A close examination of the related literature existed in service marketing points out that the causal order of the quality of service and customer satisfaction has been considered as a source of debate (e.g. Yavas et al. 2004; Babakus et al. 2004). It may be debated that customer satisfaction precedes perceived quality of goods and services (Bitner 1990; Bolton, Drew 1991). Simply put, this perspective proposes that satisfied customers make favorable quality judgments about services, because such customers judge things in higher quality due to positive affect they have experienced (Babakus et al. 2004). At the other side, it is argued that encouraging perceptions regarding the quality of service add to satisfaction (Anderson et al.1994; Babakus et al. 2004; Cronin et al. 2000). This is also supported in the context of financial services. For example, Jamal and Naser (2002) found that relational and core features of bank s quality of service appeared to be linked to customer satisfaction. Karatepe et al. (2005) demonstrated that the customers of retail banks with favorable perceptions of service quality had higher satisfaction. Siu and Mou (2005) also found that service quality dimensions in Internet banking, such as credibility, problem handling, and security enhanced customer satisfaction. Although there are empirical studies which demonstrate that customer satisfaction completely mediates the relationship of service 647

3 quality and loyalty (Ibánez et al. 2006; Lenka et al. 2009), there is considerably more empirical research for the partial mediating role of customer satisfaction. Cronin et al. (2000) demonstrated that satisfaction had a role in the relationship between behavioral intentions and service quality between the customers of different service settings (e.g. entertainment, fast food) in the USA. Choi et al. (2004) found similar results among the South Korean health care consumers. Bei and Chiao (2006) found the consequence of perceived service quality on loyalty and satisfaction between the Taiwanese bank customers. Such results were also reported for the customers of retail banks in Iran (Mosahab et al. 2010). Another study conducted by Al-Hawari and Ward (2006) on banking sector and argued that the positive effects exerted by e-service quality on customers satisfaction while these effects increase the bank s benefits. So, the hypothesis is as follows: Research Hypothesis: Clients using commercial retail services of the banks with favorable perceptions of service quality dimensions (tangibility, reliability, responsiveness, assurance and empathy) will experience higher satisfaction. Research Methods: Data was collected the banking customers having accounts in government-owned, international and private banks operating in Lahore (Pakistan). Service quality was assessed in two ways both as antecedents (Wang et al., 2004) based on Parasuraman et al s (1988) five dimensions namely, tangibility, reliability, responsiveness, assurance and empathy. All questions were measured on 5-point likert scale where 1=strongly disagree, 2= disagree, 3=neutral, 4=agree, and 5=strongly agree. Overall customer satisfaction was measured by one item question: Overall, how satisfied are you with [the bank]? The responses are made on scale labelled very satisfied (and very dissatisfied at both extremes. The problems associated with the use of a single response variable are moderated by the simplicity of the question; and Yi s (1990) suggestion that a single overall satisfaction measure scored as this one was is reasonably valid (p. 71). Multiple regression analysis was employed to assess survey responses of the banking clients of retail commercial services. Results: As regards demographic profiles of customers consuming retail commercial services, majority was male (174) and 80% were up to 40 years whereas only 13% were aged above 40 years. Table 1 shows the descriptive statistics such as mean and standard deviation of all independent and dependent variables Table 1: Descriptive Statistics (N=244) Mean Std. Deviation Overall Customer Satisfaction Reliability Tangibles Empathy Assurance Responsiveness

4 Table 2 illustrates the inter correlation matrix for study variables. Table 2: Inter-correlation Matrix X1 X2 X3 X4 X5 X6 X X2 0.44* 1.00 X3 0.43* 0.59* 1.00 X4 0.24* 0.37*.40* 1.00 X5 0.47* 0.60*.73*.46* 1.00 X6 0.42* 0.56*.59*.49*.67* 1.00 X1 = Overall Customer Satisfaction, X2 = Reliability, X3 = Tangibles, X4 = Empathy, X5 = Assurance, X6 = Responsiveness, * Significant at level Table 3 explains the stepwise regression analysis where all five dimensions of SERVQUAL were regressed on overall customer satisfaction. The table reflects that 26% variance (adjusted R 2 =.26) in overall customer satisfaction of baking clients was explained by model containing assurance and reliability dimensions of SERVQUAL only. Assurance alone explained 22% variability (R 2 change = 0.22) and reliability accounted for only 4% (R 2 change = 0.04) in overall customer satisfaction. However, tangibles, empathy and responsiveness did not contribute to satisfying customers. Table 3: Model Summary (Dependent Variable: Overall Customer Satisfaction) Model R R 2 Adjusted Std. Error Change Statistics Durbin- R 2 of Estimate R 2 F df1 df2 Sig. F Watson 1.47a b a. Predictors: (Constant), Assurance, b. Predictors: (Constant), Assurance, Reliability ANOVA results (Table 4) is indicative of predictive strength (F 2,241 = 42.87, p<.001) of the model suggesting its appropriateness for explaining variance in customers satisfaction. Table 4: ANOVA (Dependent Variable: Overall Customer Satisfaction) Model Sum of Squares df Mean Square F Sig. Regression Residual Total Predictors: (Constant), Assurance and Reliability Table 5 demonstrates the beta coefficients which indicate how and to what extent SERVQUAL dimensions such as assurance and reliability had an impact on overall customer satisfaction. As shown, assurance (beta=.32, t=4.68, p<0.001) had the highest significant positive impact whereas reliability (beta=.25, t=3.60, p<0.001) had relatively lower but significant positive impact on overall customers satisfaction. 649

5 Table 5: Coefficients Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta (Constant) Assurance Reliability a. Dependent Variable: Overall Customer Satisfaction Conclusion and Recommendations: The purpose of this current research was to find out differential impact of SERVQUAL dimensions on overall customer satisfaction of banking clients. From the study findings, it can be concluded that not all SERVQUAL dimensions have their role in boosting the satisfaction level of the banking clients in Pakistani context. It was interesting to note that assurance posted relatively higher contribution in satisfying the clients than did reliability. The study findings are consistent with what Dagger et al. (2007) found out that positive relationship of service quality dimensions with customer satisfaction. Similarly, Kueh (2006) suggested that the relationship between the service quality dimensions with customer satisfaction can be varied because it had dependency on service type. The findings of the study have important implications for the practitioners in the banking industry in Pakistan. They are urged to focus such human resource development initiatives for banking staff to make them more knowledgeable to provide accurate banking services with courteous and in trusting manner to promote satisfying experience of the clients. This study also had several limitations. In future, the researchers should use longitudinal research rather than cross sectional design to track changes in the relationship over specific period of time and to establish causal relationship among study constructs. This study was conducted in banking sector of Pakistan only but researchers should conduct this research to other services sectors like insurance, hospitals, telecommunication and hotel industry etc. Additionally, other important variables such as customer loyalty, intention to stay, word-of-mouth communication, switching costs, degree of involvement can be conceptualized as mediator, moderator and dependent variables. 650

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