Service gap analysis of state bank of india: a customers perspective

January, 2012 Symbiosis Institute of Telecom Management Pune Assignment by: SYNDICATE X MBA(TM-I) Systems and Finance Date: 05th January, 2012
PRN Number 11020541064 11020541065 11020541066 11020541067 11020541068 11020541069 11020541070 11020541071 Name Tarun Chaturvedi Arun Koshy Thomas Udit Wadhwa Utsab Basak Vidit Kataria Vishal Monika Bharti Vidhu Mahana

TABLE OF CONTENTS
Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 3 4 5 7 8 11 17

Chapter 8

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Chapter 9

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Chapter 10

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Chapter 11

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References

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CHAPTER 1 ABSTRACT
Customer service is an integral part of any organization. It is necessary to identify the key success factors in terms of customer satisfaction so as to survive in intense competition and increase the market share. The banking industry like many other financial

service industries is facing a rapidly changing market, new technologies, economic uncertainties, fierce competition and more demanding customers and the changing climate has presented an unprecedented set of challenges. Banking is a customer oriented services industry, therefore, the customer is the focus and customer service is the differentiating factors. In the backdrop of all these developments we make an attempt to explain the Customer Service satisfaction State Bank. For this study, descriptive research design is used where the data is collected through the questionnaire. The information is gathered from the different customers of State Bank of India. Thirty bank respondents from the bank were contacted personally in order to seek fair and frank responses on quality of service in banks. The service quality model developed by Zeithamal, Parsuraman and Berry (1988) has been used in the present study.

The analysis clearly shows that there exists wide perceptual difference in State Bank of India regarding overall service quality with their respective customers. The work has been carried out with the objective of understanding the reasons of customer dissatisfaction and what are the opportunity areas wherein these banks need to focus and strengthen their Customer Relationship Management practices.

The research work uses both the sources of information, i.e. Primary and Secondary sources, and thereafter SERVQUAL model has been used to identify the discrepancy in the service delivery system. Finally the study concludes by giving some recommendations to improve in the area where these banks do not meet the expectation of their customers.
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CHAPTER 2 INTRODUCTION
The Financial Services is the backbone of service sector. This is important not only for the banking sector but for the Indian economy as a whole. This is so because banking is a catalyst and life of modern trade and commerce. Banking being a service business, the best strategy can only be to identify with the customers and offer them what they actually need. This objective can only be achieved through best customer service. It is an integral part of all the businesses and social activities. This rapid transformation of services in the banking system has led to the evolution of a highly competitive and complex market where there is a continuous refinement of services. These changes are compelling the banks to reorganize themselves in order to cope with the present conditions. With the current change in the functional orientation of banks, the purpose of banking is redefined. Now, the Financial Institutions are trying to provide all the services at the customers doorstep. The customer has become the focal point either to develop or maintain stability in the business. Every engagement with the customer is an opportunity to either develop or destroy a customers faith in the Bank. The expectations of the customers have also increased many folds. Intense competition among the banks has redefined the concept of the entire banking system. The banks like other business organizations are deploying innovative sales techniques and advanced marketing tools to gain supremacy. The main driver of this change is changing customer needs and expectations. Customers in urban India no longer want to wait in long queues and spend hours in banking transactions. This change in customer attitude has gone hand in hand with the development of ATMs, phone and net banking along with availability of service right at the customer's doorstep. With the emergence of universal banking, banks aim to provide all

banking product and service offering under one roof and their endeavour is to be customer centric.

CHAPTER 3 ABOUT STATE BANK OF INDIA

The State Bank of India, the countrys oldest Bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits is today going through a momentous phase of Change and Transformation the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an agility to give the Private and Foreign Banks a run for their money. The Bank is forging ahead with cutting edge technology and innovative new banking models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years. It is also focusing at the top end of the market, on whole sale banking capabilities to provide Indias growing mid / large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list. The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. With about 8500 of its own 13500 branches and another 5100 branches of its Associate Banks already networked, today it offers the largest banking network to the Indian customer. The Bank is also in the process of providing complete payment solution to

its clientele with its over 8500 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc. SBI also has more than 155 branches in about 30 foreign countries, including multiple locations in the US, Canada, and Nigeria. They have offshore banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town. The bank has other units devoted to capital markets, fund management, factoring and commercial services, credit cards, insurance, and brokerage services. The Reserve Bank of India owns about 60% of State Bank of India. The bank is entering into many new businesses with strategic tie ups Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc. each one of these initiatives having a huge potential for growth. The bank is also looking at opportunities to grow in size in India as well as internationally. It presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. Spreading its arms around the world, the SBIs International Banking Group delivers the full range of cross-border finance solutions through its four wings the Domestic division, the Foreign Offices division, the Foreign Department and the International Services division. These strengths are reinforced by a dedicated and highly skilled team of professionals deployed by the bank in each specific segment. Being Indias largest and most trusted commercial bank, the SBI offers you a network of relationships unmatched in strength and span by any other Indian financial entity.
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CHAPTER 4 REVIEW OF LITERATURE

The foundation for the SERVQUAL scale is the gap model proposed by Parasuraman, Zeithaml and Berry. The gap model maintains that the satisfaction is related to the size and direction of disconfirmation of a persons experience vis--vis his/her initial expectations. As a gap or difference between customers expectations and perceptions, service quality is viewed as lying along a continuum ranging from ideal quality to totally unacceptable quality.

Parasuraman, Zeithaml and Berry held that when perceived or experienced service is less than expected service, it implies less than satisfactory service quality. But when perceived service is more than expected service quality, the obvious inference is that service quality is more than satisfactory.

Parasuraman, Zeithaml and Berry posted that while a negative discrepancy between perceptions and expectations referred to as a performance gap-causes dissatisfaction, a positive discrepancy leads to consumer delight. Based on their empirical work they identified a set of 22 variables/items tapping five different dimensions of service quality construct. Since they operationalized service quality as being a gap between customers expectations and perceptions of performance on these variables, their service quality measurement scale is comprised of a total of 44 items (22 for expectations and 22 for perceptions).

CHAPTER 5 SERVICE QUALITY AND DIMENSIONS

Quality has no predictor. Generally if there is the lack of general Concept/meaning except what the customer really wants. In other words, a product is qualified when it agrees with customers needs. Quality us defined as agreement of product with customer's needs. Service quality can be defined as the difference between customers expectations for service performance prior to the service encounter and their perceptions of the service received Quality service has a positive effect on the bottom-line performance of a firm and thereby on the competitive advantages that could be gained from an improvement in the quality of service offering, so that the perceived service exceed the service level desired by customers.

Fig1: Two dimensional aspect of service quality

DIMENSIONS OF SERVICE QUALITY

The SERVQUAL scale is the principal instrument widely utilized to assess service quality for a variety of services. Parasuraman et al., (1988) have conceptualized a five dimensional model of service quality such as: reliability, responsiveness, empathy, assurance and tangibility. Their measurement instrument is known as SERVQUAL, which has become almost the standard way of measuring service
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quality. Further, each item of SERVQUAL has been used twice: to measure expectations and perceptions of service quality. The central idea in this model is that service quality is a function of difference scores or gap between expectations and perceptions. The five dimensions of SERVQUAL Includes:

Tangibles: Physical facilities, equipment and appearance of personnel. Reliability: Ability to perform the promised service dependably and accurately. Responsiveness: Willingness to help customers and provide prompt service. Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence. Empathy: Caring and individualized attention that the firm provides to its customers.

GAP MODEL OF SERVICE QUALITY

The knowledge of how to measure service quality is of great importance for the companies if they want to succeed on the todays competitive market. The measurement of perceived service quality derives from the Gap analysis, which was originally conducted during the end of the 1980s. The Gap analysis was developed to help managers analyse the sources for quality problems but also to help them in understanding how to improve the service quality.

The first gap in the analyses is due to the lack of managers understandings about the perceived service quality. It states that managers have incorrect understanding of what their customers want and need, e.g. because of wrong information from customers surveys.

The second gap is about service characteristics not complying with management understanding and customers expectations. This may arise due to lacking communication inside the organization and lack of clear organizational goals. It is due to the fact that the specific quality is not fulfilled during the production and deliverance of the service.

The fourth gap deals with problems within the marketing communication. Therefore it is important to always give customers appropriate and correct information. The
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analysis simply describes how the gap between expected and perceived service quality arise from these four gaps while the difference between the delivered and perceived service by customers is the fifth gap. The goal for companies should be to minimize all the gaps as much as possible. The bigger the first four gaps are, the bigger the fifth gap will be. This means that the perceived service quality will be low and companies could fail in delivering high service quality

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CHAPTER 6 SERVICE MARKETING TRIANGLE

Service Marketing Triangle

1. External Marketing: ("Setting the Promise) Marketing to end users Involves pricing strategy, promotional activities, and all communication with customers. Performed to capture the attention of the market, and arouse interest in the service.

2. Internal Marketing: ("Enabling the Promise)

Marketing to employees Involves training, motivational, and teamwork programs, and all communication with employees. Performed to enable employees to perform the service effectively, and keep up the promise made to the customer.

3. Interactive Marketing: (Moment of Truth, Service Encounter) This refers to the decisive moment of interaction between the front-office employees and customers, i.e. delivery of service. This step is of utmost importance, because if the employee falters at this level, all prior efforts made towards establishing a relationship with the customer, would be wasted.

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SCENARIO IN SBI
INTERNAL MARKETING INITIATIVES The top management realized that to achieve the transformation they sought, getting the grassroots level employees on board was extremely important. So a massive internal communication initiative called Parivartan which means transformation/change was launched. The initiative was aimed at obtaining the support and acceptance of employees for the change initiatives undertaken by the bank, and explaining to them why change was necessary. The project also sought to bring about a change in the attitude and approach of the employees and to help them develop a more customer-centric approach. According to SBI, the program succeeded in achieving its objective. Industry observers too appreciated the initiative and said that Bhatt had succeeded in changing the employees' approach to work, which in turn, had led to the bank performing well and maintaining its market leadership position in the Indian banking sector.

Issues:
Understand the issues and challenges in change management.

Understand the issues and challenges in communicating a change initiative. Study the Parivartan internal communication initiative and understand how SBI tried to change the attitude and mind-set of its grassroots level employees. Appreciate the importance of HR in an organizational transformation initiative.

EXTERNAL MARKETING INITIATIVES

SBI carried out various marketing initiatives to enhance its reach like: They included segregating and targeting existing high value customers, cross sales of other products, setting up call centres and outbound sales force to secure new customers.

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Plans were also made to utilize database marketing to pursue large and medium sized corporate, government and trade finance customers. Database marketing was expected to draw increased revenue from cross selling, lower costs and increased customer loyalty. SBI also introduced various other ways of reaching out to customers like extension of hours of work and aggressive marketing through print and television media.

SBI increased daily working hours by two hours and Sunday banking was introduced.

INTERACTIVE MARKETING INITIATIVES: SBI is today using RFID technology in smart cards which work in conjunction with a mobile phone working on near field communication technology (NFC). Through it transactions can happen in both online & offline mode & allows real time updating of account balances. This allows a better customer relationship management. In addition to that at many branches of SBI customer relation officers have been deployed to make the customers aware of the services, professional offerings & various loan schemes to minimize the interaction gap between the employees & customers. It is also carrying out pilot projects in the rural areas for carrying out disbursements for the NREGS (National Rural Employment Guarantee Scheme)

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PORTERS FIVE FORCES MODEL WRT BANKING INDUSTRY

SERVICE MARKETING STRATEGIES OF SBI WRT PORTERS MODEL

Participation in various customer exhibitions & meetings Tie ups with builder & vehicle dealers Festive loan products Advertising in TV & newspapers Oral marketing Professional offerings Advertisements at display boards Targeting rural customers

Threat of suppliers

Threat of bargaining power of customers

Threat of competitors, substitutes & new entrants

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ANALYSIS OF STRATEGIES TAKEN BY SBI

SWOT ANALYSIS OF SBI W.R.T SERVICE DELIVERY

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CHAPTER 7 RESEARCH METHODOLOGY

OBJECTIVES
The main objective is: To evaluate the Quality of Service in State Bank of India. To study the major factors responsible for their satisfaction. To identify the gap between customer expectation and perception. To identify the areas that needs to improved by bank to deliver superior quality of service.

RESEARCH DESIGN
For this study, we took the data from an already conducting survey and after analysing the data, we are putting forward the key findings and recommendations. This survey was conducted on 100 SBI customers. The service quality model developed has been used in the present study. The statements in the construct are one-dimensional and performance based, which incorporate the statements of 'SERVQUAL' model that can be used as measurement The 22 statements have been grouped under five dimensions. In order to ascertain the perceptions of service quality, Likert's 7-point scale has been used for its suitability to estimate the range and variations in the perceptions. The scale 1-7 represents '7' as strongly agree and '1' as strongly disagree.

VARIABLES USED FOR THE STUDY

The following variables are used for collection of data: SERVQUAL dimensions Tangibles, Reliability, Responsiveness, Assurance, and Empathy.

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Tangibility Modern looking equipment Visually appealing physical facilities Neat-appearing employees Visually appealing materials associated with the service

Reliability Keeping promise to do something by a certain time Showing sincere interest in solving a customers problems Performing the service correctly the first time Providing the service at the time the service was promised Insisting on error-free records

Responsiveness Employees telling customers exactly what services will be performed Employees giving prompt service to customers Employees always being willing to help customers Employees are never too busy to respond to customers requests Assurance The behaviour of employees instilling confidence in their customers Customers feeling safe in their transactions Employees being consistently courteous with their customers Employee having the knowledge to answer customers questions Empathy Giving customers individual attention Operating hours convenient to all their customers Employees giving customers personal attention Having the customers best interests at heart The employees understanding the specific needs of customers

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CHAPTER 8 ANALYSIS

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CHAPTER 9 KEY FINDINGS

SBI has more satisfaction level of respondents for reliability, responsiveness, and assurance. Most of the respondents were less satisfied as far as visually appealing physical facilities concerned and neat appearing employees are concerned.

Insisting on error-free records the difference in score was huge for SBI. . Also there is moderate difference in score for performing the service correctly the first time for SBI.

For these three factors keeping promise to do something by certain time, providing the service at the time the service was promised and, performing the service correctly the first time both the banks can improve the level of satisfaction as there were less number of respondents who were satisfied.

For employees telling customers exactly what services will be performed difference is so large for SBI.

Whereas for SBI they are almost performing well on responsiveness dimension, but they need improvement on employees always being willing to help customers.

Employees telling customers exactly what services will be performed and employees are never too busy to respond to customers request for these two questions both the banks had less satisfaction of customers so by focusing on this to factors they can improve satisfaction level.

Customers feeling safe in their transaction for this question, score of SBI is more. Employees having enough knowledge to answer customers questions, here the banksneed to improve on this factor as there were more numbers of respondents in level 3 and level 4, so by focusing on this they can improve satisfaction level of their customers.

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SBI has to improve in all the aspects for the dimension empathy. Mainly they have to focus on giving customers individual attention and employees giving customers personal attention as they were more lagging behind.

The bank need to improve its service for employees giving customers personal attention, operating hours convenient to all their customers, having the customers best interest at heart and the employees understanding the specific needs of customers as there were more numbers of respondents who were either not satisfied or less satisfied.

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CHAPTER 10 CONCLUSION
SBI performing well on reliability, responsiveness and assurance dimensions. SBI is doing well on insisting on error free record, employees telling customers exactly what service will be performed and employees are never too busy to respond to customers. SBI need to improve on empathy dimension.

CHAPTER 11 RECOMMENDATION
The main areas where SBI needs to improve upon understanding the customer needs and enhancing their credibility as these factors are important for banking industry and they are lagging in these two factors. SBI should make sure that the employees should be self-driven and selfmotivated, always being willing to help customers, on giving customers individual attention. Personalization is very important factor to retain and attract new customers. As SBI is performing poorly in all the aspect of empathy dimension, so SBI should concentrate on this dimension more. Beside above the other five factors where SBI should work on are Appearance, Promises, Doing it right, Competency, and Approachable as these are the areas where either SBI is not performing well or not doing up to the mark .
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SBI also needs to improve on these three factors i.e. Promise, Doing it right and Competency as these factors are quite important.

SBI should maintain these four factors i.e. Promptness, Willingness, Competency and Understanding as in these factors either SBI is not performing well or not doing up to the mark.

SBI should concentrate on insisting on error free records, on performing the service correctly the first time and employees telling customers exactly what services will be performed.

SBI should increase satisfaction level of their customers by mainly focusing on following factors: o Under promising and over delivering. o Providing services at the time the service was promised. o Performing the services correctly the first time.

As on above factor, most of the respondents shows neither satisfied nor dissatisfied, so by improving this factors satisfaction level can be improve.

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CHAPTER 12 REFERENCES

WEBSITES: 1) business.mapsofindia.com/banks-in-india 2) rbidocs.rbi.org.in/rdocs/Speeches/PDFs/86160.pdf 3) www.researchandmarkets.com/reports/4020/indian_banking_industry 4) www.mckinsey.com/locations/india/mckinseyonindia/pdf/india_banking_ 2010.pdf 5) media.wiley.com/product_data/excerpt/34/04713931/0471393134.pdf 6) www.marketresearch.com/product/display.asp?productid=2156584&g=1 7) www.sbi.co.in/

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