Banking Industry analysis using SERVQUAL

8/10/2019 Banking Industry analysis using SERVQUAL

1/22

Table of Contents

Abstract............................................................................................................................................... 1

Introduction:........................................................................................................................................ 2

Objectives of the study:...................................................................................................................... 3

Significance of the study:.................................................................................................................... 3

Hypothesis Development:................................................................................................................... 4

Tangibles:............................................................................................................................................ 4

Reliability:........................................................................................................................................... 5

Responsiveness:.................................................................................................................................. 5

Assurance:........................................................................................................................................... 6

Empathy:............................................................................................................................................. 7

Customer satisfaction:......................................................................................................................... 7

Research Methodology:...................................................................................................................... 8

Type of Research:............................................................................................................................... 8

Source of Data:................................................................................................................................... 8

Primary Data Collection:.................................................................................................................... 8

Secondary Data Collection:................................................................................................................ 9

Questionnaire Design:......................................................................................................................... 9

Measures of Questionnaire sources:............................................................................................. 10

Sampling Plan:.................................................................................................................................. 11

Target Population:......................................................................................................................... 11

Sampling Technique:.................................................................................................................... 11

Sample Frame and Sample Size:................................................................................................... 12

Factor analysis:................................................................................................................................. 12

Result and analysis:........................................................................................................................... 14

Discussion:........................................................................................................................................ 17

Conclusion........................................................................................................................................ 19

Practical Implications........................................................................................................................ 19

Limitations of the study.................................................................................................................... 20

Bibliography................................................................................................................................. 21


2/22

1

Abstract

Purpose: The purpose of this research is to examine and measuring the perceived service

quality of Jamuna Bank Ltd. with a view to assist management to enhance the delivery of

service quality based on SERVQUAL model.

Methodology: Data were collected from the customer group of Jamuna Bank Ltd. (n=92

customers) to examine the satisfaction level of customers based on SERVQUAL model

developed by Parasuraman, Zeithaml and Berry (1988). This research employed

questionnaire which was adapted from Nadiri, Kandampully, & Hussain (2009); Caruana,

(2002) and personally distributed to the customer of the bank. Sampling without replacement

technique was used and collected data were analyzed by using SPSS.

Findings: The main findings of this study are responsiveness, assurance and empathy has

positive and significant impact on the level of customer satisfaction. Besides that reliability

has only positive impact and tangibles are negatively associated with the customer

satisfaction level. This study will be helpful to Jamuna bank management and employees to

develop strategy based on customers desire.

Originality:This research will help to understand the most important SERVQUAL area that

customer prefer most and establishing new path between Jamuna bank and its customers.

Future direction of this study: In addition, this research will encourage future researchers

by helping to focus on future evidence-based efforts and providing results that are useful to

the large number of Bangladeshi banks.


3/22

2

Introduction:

Banking is well diversified service oriented business organization that involves with frequent

interactions with customers (Chen, 2009). Success and survival of banking sectors are mostly

dependent on service delivering quality and service quality has become an increasingly

important issue for banking industry (Nadiria, Kandampullyb and Hussain, 2009). Banking

transaction is highly associated with customer dealings, thats why service quality and

customer satisfaction is getting much more importance (Chen, 2009). Customers are much

more concern about banking service quality with safe transaction as they have so many

options to switch. Dissatisfied customers can easily switch to another bank where they might

get comfortable transaction than previous one. Due to availability and customized customer

service, service quality has getting more importance. Management perception of service

delivery may vary from customer to customer and it may leads to gap between perception and

expectation like perception of expectations; management perception of customer expectation

and setting quality specification; difference between service quality specification and service

quality delivery; difference between service delivery and statement to service delivery;

difference between customer expectation and perceived service (Parasuraman A., Berry L.L.

and Zeithaml, 1985). Considering all of the circumstances this study especially explores the

service quality of banks to identify the lagged area of service quality for quality

improvements of bank customers. To improve the banking service quality there has so many

general measurement instruments for measuring banking service quality. All the instruments

try to find out the current service quality level according to company image, growth,

performance and customer expectation (Vibha, Nravichandran and N.K., 2011). Therefore it

is essential to reliably assess, measure, and seek ways to measure the service quality that can

help to enhance the quality of service. According to the SERVQUAL model (Parasuraman,

Zeithaml, & Berry, 1988), service quality can be measured by identifying the gaps between

customers expectations of the service to be rendered and their perceptions of the actual

performance of the service (Nadiria, Kandampullyb and Hussain, 2009). Despite all criticism

it is the model that helps to match service quality with customers perception about the

service they may purify. Out of all instruments SERVQUAL is the most popular and well

known scale developed by Parasurman that really works for service industry (Bahia and

Natel, 2000). In this study five dimension construct of perceived quality based on

SERVQUAL has been used for measuring the service quality and effectiveness of JamunaBank Limited. The degree of relationship between those five dimensions and customer


4/22

3

satisfaction has been identified. After that the degree of relationship between customer

satisfaction and service performance has been identified based on respondents response

regarding agenda. This research paper explores the way how SERVQUAL it is used in

banking sector for measuring service performance (Newman, 2001). While is to assist bank

managers develop a differentiated service quality strategy that effectively raises the

satisfaction of existing customers and to attract potential customers (Yu, 2008). This paper

started with the review of hypothesis development according to SERVQUAL five dimension

model and subsequent sections discuss the item scale, data purification, data validation and

findings. This paper also includes the difficulties of service quality improvements in the

context of profitability profile and customers perceived satisfaction of Jamuna Bank

Limited.

Objectives of the study:

Banking is much more related with delivering service. In this research researchers objective

is-

To analyze and make the SERVQUAL of customer satisfaction and perceived service

quality only.

Measuring the perceived service quality of Jamuna Bank Ltd. with a view to assistmanagement to enhance the delivery of service quality that will help the management

for making decision based on customer satisfaction.

Significance of the study:

This is a study that will try to find out the difference between customers expectation and

perception of banking service quality. Bank management is always much more aware about

cost rather quality of their service. They always try to provide service in an economic way

that will maximize their economic return. Thats why most of the time customers found huge

gap perceived service quality and promised service quality. So it is really an important factor

from management point of view that is they able to provide committed service. This study

will help management practitioners to set the service quality range based on service criteria as

well as it will help the customer for getting better and reliable service. After all customer will


5/22

4

be satisfied and new customer will attract that will maximize banks wealth as well as all

stockholders wealth.

Hypothesis Development:Service quality measurement is one of the most important and challenging task for any

product or service delivery industry. We can evaluate the quality of goods and service based

on some criteria like search properties, experience properties, and credence properties (Yu,

2008). There has no standard form of scale or model for measuring service quality.

SERVQUAL of Parasurman is probably well known, universal scale for measuring service

quality (Bahia, Natel, 2000). For developing research hypothesis I have used SERVQUALs

five dimension as it is much more popular along with customer satisfaction in accordancewith service performance of Jamuna Bank Limited.

Tangibles:

Appearances of the service providing environment and the facilities that service provider

have available for customers have a greater relationship with customers satisfaction (Chen,

2009). Tangibility includes equipment, the appearance of branches in terms of appeal;

cleanliness and tidiness that actually helps the customer to stay longer in branch and do

frequent banking (Newman, 2001). The interior and the visual outlook of a bank help to

create a favorable perception of service quality upon banking activity (Jayawardhena, 2004).

The activity may take place far away from where the customer is sitting and the place of

service providing place distance is not applicable as customers always demand convenience

of service (Siadat, 2008). The Process of payment and receiving money, location of front

desk, inside interior all of the things helps the customer to make their expectation level for

satisfaction with ease of transaction. As now-a-days more non-human interaction banking

like online banking or e-banking getting popularity compared with physical banking, so

banks have to come up with more friendly websites for their customers. That will help to

create customers fascination for banking service (Yu, 2008). So, whether it is online or

physical banking tangibles always has importance to make customer satisfied.

Hypothesis 1: Tangibles is positively associated with perceived satisfaction by bankcustomers.


6/22

5

Reliability:

According to Zeithaml et al. (1990) reliability is the ability to perform the promised service

dependably and accurately that boosts customer satisfaction. Bank deals with money so there

should have reliability of public sources that this money will be returned after specific time

period (Bahia and natel, 2000). Accuracy of records with error free transaction records and

Reliability became the major focus of banking activity that closely related with customer

demand for specific service. Getting it right first time all the time'' became the target for

account accuracy, keeping promises, meeting deadlines and providing timely and accurate

information to customers (Newman, 2001). Now-a-days information technology is helping to

enhance the reliability of banking service that related with customer satisfaction. To become

a reliable bank in banking industry bank have to maintain error free record with customized

service. Customers always try to do banking with those banks where they feel safe for

transaction. So, it is clear that reliability is much more associated with customer satisfaction.

Hypothesis 2:Reliability is positively associated with customer satisfaction of a bank.

Responsiveness:

Customers always want to get help from the employees and to get individual priority that

increases their satisfaction level. Responsiveness is the degree of willingness of employees to

help customers and provide prompt service to ensure that customers are satisfied with current

service (Chen, 2009). The responsiveness dimension actually incorporates a number of

activities, including the readiness of staff to tell customers exactly when things will be done,

the provision of prompt service, giving customers their undivided attention as well as being

demonstrably responsive to customers' requests. Now-a-days private banks are getting more

priority than public bank just because of providing customer driven service to make them

happy regarding service by private bank employees. And there has high propensity to convert

public bank to private just to increase customer loyalty by improving responsiveness through

which customer base will increase (Vibha, Nravichandra, N. K., 2011). Improvements in staff

behavior became a prime focus for individual staff as well as for teams' improvement


7/22

6

initiatives with apparent success (Newman, 2001). Bank always have to be responsive to

service what customer demand and what kind of serve have to be provided to make them

satisfied (Jayawardhena, 2004). Customers are always aware about the degree of attention

and prompt service that they are getting from their bank, so it is related with customers

satisfaction.

Hypothesis 3:Responsiveness is positively associated with customer satisfaction of a bank.

Assurance:

Service provider is how much capable to provide promised and committed service that

basically denotes the assurance level of that organization that determines the customers

satisfaction level. Assurance requires staff to have the knowledge to answer customers'

questions and the ability to provide competent, confidential, courteous and friendly service to

heighten satisfaction intensity (Newman, 2001). In general employees capability to provide

service with most recent data along with promised service accurately helps customer to set

their assurance level for any service (Chen, 2009). Increased level of service assurance leads

to create positive loyalty and readiness to pay extra compared to competitors service for the

service, decreased intentions to switch to competitors (Vibha, Nravichandran and N.K.,

2011). Assurance and customer satisfaction is much more associated with one another as

customers set their level of expectation based on that. If the customer has a problem, the

customer service option of telephone or e-mail is how to report this and it is here that the

companys ability to respond well and at a reasonable speed is judged. This is also relevant if

fulfillment is part of the service and the customer has to send back an item or it is late

arriving (Siadat, 2008).

Hypothesis 4: Assurance is positively associated with customer satisfaction of a bank.


8/22

7

Empathy:

Empathy is one of the most valued dimension that directly impact on customer loyalty of a

bank, willingness to banking with that bank, customer commitment and customer trust(Kumar, Kee and Charles, 2010). Empathy is individualized attention to customers and

willingness of bank personnel to help customers and resolve their problems in a timely

manner (Chen, 2009). It includes Caring, easy access, good /communication, customer

understanding and individualized attention given to customer (Zeithaml, 1990). According to

the study (Lewis Gabrielsen, 1998), service quality and delivery is subjective and is

experienced and judged by customers during service encounters and can be used as a strategic

variable among organizations (Yu, 2008). Customers dont what to waste time in bank and

they expect problem of their solution within a short time period. Personnel have to be

prepared in a way that they can satisfy a customer may with quality service displayed by staff

when they demonstrably had customer best interests at heart by offering convenient opening

hours, understanding of individual customer needs and problems as well as providing

individual attention(Newman, 2001).

Hypothesis 5: Empathy is positively associated with customer satisfaction of a bank.

Customer satisfaction:

Berry and Parasuraman (1991) found that the customers service expectation exists at two

levels, the desired level and the adequate level. The desired service level describes the service

that the customer hopes to receive. This level is made up by a mix of what the customerbelieves can be and should be. The adequate level describes what the customer finds

acceptable (Nadiria, Kandampullyb and Hussain, 2009). Always it is not possible to fulfill

customers expectations based on their demand and also customer expectation vary from

customer to customer so, it is possible that satisfaction level of customers may vary (Vibha,

Nravichandra, N. K., 2011). Customers satisfaction level varies from customer to customer

based on service performance of banks and both are related with each other.


9/22

8

Research Methodology:

Type of Research:

Objective of this research was to find out the service quality level of Jamuna Bank Limited in

terms of customer satisfaction. The study has been conducted within some specific condition

for analyzing the service quality situation. This research is a conclusive research and

objective was to provide information that is useful in reaching conclusions or decision-

making (Malhotra and Dash, 2010). It tends to be quantitative in nature that is to say in the

form of numbers that can be quantified and summarized. This research has already been

evidently defined. Indeed, it was a conclusive research which was appropriate for this study.

Source of Data:

Data has been collected from so many sources to test hypotheses of this study. Data that that

has been collected were actually categorized in to two main sources. One was Primary Data

and another one was Secondary Data. Both of the data has been used to develop and validate

hypotheses of this study based on past research and present research.

Primary Data Collection:

Primary data are those data that are originated by researcher to perform research work for the

specific purpose of addressing problem at hand (Malhotra and Dash, 2010). Primary data

collection is expensive and time consuming as researcher have to do field work to collect data

from target respondents. For this study target respondents were customers of Jamuna bank

Limited, all of the primary data has been collected through structured questionnaire based on

SERVQUAL model developed by Parasurman. Primary data has been collected through:

Structured questionnaire Survey


10/22

9

Secondary Data Collection:

Secondary data are those data that have already been collected for any research or any other

purpose. It is easy to collect secondary data and secondary data is inexpensive too. For this

research I have used so many secondary data from different sources like journals, books, e-

journals and many more sources. I tried to collect all secondary data in relation with my

research topic and research objective.

The secondary data has been collected from following sources:

A lot of academic articles and journals on SERVQUAL.

Different online libraries and educational websites which publish articles and reviews.

Different education associated websites.

A lot of research related books from North South University library.

Questionnaire Design:

Primary data has been collected through Structured Close Ended Questionnaire, so that it was

easier to collect information from respondent as well as it was easier for respondents to

response. To measure customer satisfaction Likert scale has been used in this study that

helped to covert qualitative data to quantitative data with a value of 1 to 5 where 1 stands for

strongly disagree, 2 for disagree, 3 for neither agree nor disagree, 4 for agree, and 5 for

strongly disagree. There were five independent variables and one dependent variables with 28

scale items. Independent variables were collected from SERVQUAL model. Questionnaire

has been collected from published journals and articles with standard value. In my research I

have used Parasurmans (1988) SERVQUAL five dimension construct of service quality

named tangibles, reliability, responsiveness, assurance and empathy (Bahia and Natel, 2000).

These five items were used as independent variable in relation with customer satisfaction.

Questionnaire for independent variables were 22item scales with five dimension item were

collected from a journal named Zone of tolerance for banks: a diagnostic model of service

quality by Nadiria, Kandampullyb and Hussain, 2009. Dependent variable customer

satisfaction questionnaire were collected from an article named service loyalty by Caruana,

2002. There I used three item scales to measure the customer satisfaction. And that last

dependent item service performance were collected from Dyer and Reevess (1995) proposed


11/22

10

dimensions of company performance and there I used three scale item to measure the service

performance of Jamuna Bank Limited.

Measures of Questionnaire sources:

Constructs Origin Questionnaire Items

Tangibles Nadiri, H., Kandampully,

J., & Hussain, K. (2009)

1. The bank has modern looking

equipment

2. The banks physical facilities are

visually appealing

3. The banks employees are neat

appearing

4. Materials associated with the

service are visually appealing at

the bankReliability Nadiri, H., Kandampully,

J., & Hussain, K. (2009)

1.

When the bank promises to do

something by a certain time, it

does so

2. When you have a problem, the

bank shows a sincere interest in

solving it

3. The bank performs the service

right the first time

4. The bank provides its services at

the time it promises to do so

5.

The bank insists on error-freerecords

Responsiveness Nadiri, H., Kandampully,

J., & Hussain, K. (2009)

1. Employees of the bank tell you

exactly when services will be

performed

2.

Employees of the bank give you

prompt service

3. Employees of the bank are

always willing to help you

4. Employees of the bank are never

too busy to respond to your

requests

Assurance Nadiri, H., Kandampully,

J., & Hussain, K. (2009)

1. The behavior of employees of

the bank instills confidence in

customers

2. You feel safe in your transaction

with the bank

3. Employees of the bank are

consistently courteous towards

you

4.

Employees of the bank have the

knowledge to answer yourquestions


12/22

11

Empathy Nadiri, H., Kandampully,

J., & Hussain, K. (2009)

1.

The bank gives you individual

attention

2.

The bank has operating hours

convenient to all its customers

3. The bank has employees who

give you personal attention4. The bank has your best interest

at heart

5. Employees of the bank

understand your specific needs

Customer

satisfaction

Caruana, A. (2002) 1. Based on all of your experience

you are satisfied

2. Compared to other banks you

have done business with

satisfaction

3.

In general, I am satisfied

Sampling Plan:

Target Population:

Target population has been set after questionnaire design and this target population was the

respondent who actively participated in my research. My targeted population was customers

of Jamuna Bank Limited who actually scored the bank in terms of their service quality.

Sampling Technique:

I included one element only one times and followed sampling without replacement technique.

Meaning my questionnaire was structured with non-repetition of questions. Every respondent

got only one chance to response; they were not allowed for second time participation in

survey as my survey technique was non-replacement technique of respondents.


13/22

12

Sample Frame and Sample Size:

I have conducted a convenient survey. I have collected data from those samples which were

convenient for me to reach and collect data. All of the respondent were taken from Jamuna

Bank Malibagh branch whish was easier for me as I was working there as internship student.

Although convenience survey may lead to biasness but indeed it is helpful to measure the

service quality within short time span. Sample respondent has been chosen those who can

understand the questionnaire and can response independently. There were total 92

respondents from and all of them from Malibagh branch.

Factor analysis:

Exploratory principal component factor analysis with Varimax rotation identified five

SERVQUAL factors namely: tangibles, reliability, responsiveness, assurance and empathy

and one independent factor namely: customer satisfaction. Result of the factor analysis is

showed at table 01. The Kaiser-Meyer-Olkin measure of sampling adequacy exhibited score

of (0.51) or more than (.51), which indicates that that factor analysis was appropriate for the

study.


14/22

13

The first factor was categorized as tangibles of Jamuna Bank. This factor had four scale items

which are related to tangibles and appearance of service environment. This factor accounted

for (77%) of explained variance and considered as most vital.

The second factor reliability had five items which comprised of error-free records, service

promises and service performance. This factor accounted for (58%) of explained variance.

The third factor responsiveness accounted for (50%) of variance. This factor consisted of four

items which are related to providing prompt service, employees willingness to help

customers and service speediness.


15/22

14

The fourth factor assurance explained (53%) variance. The factor was defined by four scale

items that primarily related to behavior of employees, transaction safety, bank courteousness

and knowledge of employee regarding banking service.

The fifth factor empathy had five scale items to measure empathy of the bank. These five

items are related with convenient operation hours, individual attention towards customers and

banks interest to help its customers. This factor is accounted for (53%) of explained

variance.

The sixth and the last factor is customer satisfaction the most important factor of this study.

Based on this factor we found the level of customer satisfaction based on their perceived

service quality. This factor comprised of three scale items and all of the items were basically

related with observed service quality satisfaction. The factor table (table: 01) shows that this

factor is accounted for (66%) of explained variance.

Result and analysis:

Table: 02 Correlation table with mean and standard deviation

VariablesMean St. Dev. 1 2 3 4 5 6

1. Customer

Satisfaction

3.34 .72 1

2. Tangibles 3.82 .84 -.024 1

3. Reliability 3.58 .79 .085 .716** 1

4. Responsiveness 3.35 .78 .210* .416** .424** 1

5.

Assurance 3.22 .80 .412** .089 .217* .410** 1

6. Empathy 3.11 .77 .429** .048 .035 .362** .393** 1

* Correlation is significant at the 0.05 level (2-tailed).

** Correlation is significant at the 0.01 level (2-tailed).

Correlation table (table: 2) shows the means, standard deviations, and correlations for all the

variables used in this study. The result indicated that SERVQUAL factors have significantinfluences on the perceived service quality by customers of Jamuna Bank Limited. Table 2


16/22

15

shows that tangibles are negatively associated with customer satisfaction of Jamuna Bank

Limited (r = -.024, p


17/22

16

SERVQUAL variable has to ensure customer satisfaction of Jamuna Bank limited. Here we

can see the magnitude of change of each variable to ensure customer satisfaction.

Theoretical evidence shows a positive relation between customer satisfaction and tangibles

(Parasuraman A., Berry, L.L. and Zeithaml, 1991). Regression table of this study shows that

service performance negatively related with customer satisfaction based on customer group:

= -.149 (p< .280) which doesnt support hypothesis 1 of this study. We can also see that

overall strength of association between tangibles and customer satisfaction is not significant

as R square value is .266. So, according to my findings my hypothesis 1 was rejected as

Tangibles and Customer satisfaction are not positively associated with each other.

Reliability is an SURVQUAL variable that interlinked with customer satisfaction helps to

determine the level of customer level. Regression table (table: 3) shows that service

performance is positively related with customer satisfaction but not in a significant level (p

Banking Industry analysis using SERVQUAL

Documents

Transcript of Banking Industry analysis using SERVQUAL