Quality Management Journal

ISSN: 1068-6967 (Print) 2575-6222 (Online) Journal homepage: http://www.tandfonline.com/loi/uqmj20

Service Quality: A Case Study of a Bank

Lotfollah Najjar & Ram R. Bishu

To cite this article: Lotfollah Najjar & Ram R. Bishu (2006) Service Quality: A Case Study of a
Bank, Quality Management Journal, 13:3, 35-44, DOI: 10.1080/10686967.2006.11918560

To link to this article: https://doi.org/10.1080/10686967.2006.11918560

Published online: 05 Feb 2018.

Submit your article to this journal

View related articles

Citing articles: 3 View citing articles

Full Terms & Conditions of access and use can be found at

http://www.tandfonline.com/action/journalInformation?journalCode=uqmj20
 Service Quality:
ACase Study of aBank
LOTFOLLAH NAJJAR, UNIVERSITY OF NEBRASKA, OMAHA
RAM R. BISHU, UNIVERSITY OF NEBRASKA, LINCOLN
Today's marketing environment is characterized by
increased competition, uncertain economic conditions,
andshifts in global trading relationships. The pressure to
understand market conditions and customer require-
ments isgrowing to the point where organizations will be
compelled to exceed, rather than simply meet, customer
expectations. In adapting to this pressure, organizations
are looking to service initiatives as a way to create or
sustain competitive advantages. Measuring customer
satisfaction is, therefore, critical to the process ofserving
the customer and responding faster and better than the
competition.
The objective ofthis article isto address the importance
of improving service quality in the banking industry.
A questionnaire was developed to identify underlying
dimensions of bank quality and to assess consumers'
perceptions of the importance of each of these dimen-
sions. Two large banks were selected, with five branches
among them. Service quality questionnaires were sent to
800 customers; the overall response rate was 59 percent.
Anondifference score ofSERVQUAL was used to assess the
dimensions of service quality. The results of the service
quality analysis show that reliability and responsiveness
are the two most critical dimensions of service quality,
andthey are directly related to overall service quality.
Key words: banking industry, service quality
© 2006, ASQ
INTRODUCTION
Service Quality
Cronin and Taylor (1992) support the theory that service
quality is anantecedent of customer satisfaction and cus-
tomer satisfaction exerts a stronger influence on future
purchase intentions than does service quality. Customers
do not necessarily purchase the highest quality service;
they may also weigh convenience, price, and availability
factors (Cronin and Taylor 1992). The customer's per-
sonal experience with the service provider (that is,
courtesy, waiting time, empathy, responsiveness, and so
on) also impacts customer satisfaction (Nowak 1997).
Service jobs began exceeding manufacturing jobs in
the United States in 1956. Today, service jobs dominate
most U.S. business activity. Current Bureau of Labor sta-
tistics indicate that the service sector of the U.S. economy
accounts for more than 75 percent of U.S, gross domestic
product (GDP) and about 80 percent of all U.S. jobs. The
industrial age has been replaced by the information age.
Super-power economies are advancing with information
and service sector growth, while developing economies
are still dominated by smoke-stack manufacturing and
agriculture.
The important question is not whether service is the
industry of the future, but rather: "Do U.S. business
people understand the principles and practices of service
quality well enough to fend off foreign competitors?"
Clearly, U.S. business owners do not want to find them-
selves in a position of playing catch up to other nations,
as they did in the 1980s with Japan's electronics and
automobile manufacturing quality.
Anecdotal and scientific evidence, however, suggests
U.S. business people may be repeating history. For
example, the American Society for Quality, Arthur
www.asq.arg 35
 Service Quality: ACase Study of aBank
Andersen, and the University of Michigan's Business
School created the American Customer Satisfaction
Index (ACSI) ,which conducts interviews with more than
50,000 consumers about satisfaction with some 200
companies in 35 industries. The ACSI report shows a
consistent quarter-by-quarter decline in customer satis-
faction since ACSI inception in 1994. Although the
insurance industry saw a modest increase in 1998, most
other service categories such as restaurants, hospitals,
and banking have continued to decline (Lovelock and
Wright 1999; Sweat and Hibbard 1999).
Service Quality and Banking
Based on the ACSI data and other published studies, the
banking industry may have some cause for concern.
According to asurvey of more than 800 bank customers,
the majority believes that service has not improved over
the past five years. Infact, many customers believe that
customer service has gotten worse. Written complaints
to banks were up 8.4 percent from the previous year,
and bank customer satisfaction reports revealed that
a quarter of all respondents found mistakes on their
current accounts (Barret 1997). On the other hand,
credit unions have generally received high marks for
customer service. Dubroff (1998) cites a Gallup sur-
vey, which indicates that credit unions were ranked
number one in customer service among all financial
institutions for the 14th year in a row. Dubroff also
notes that banks often argue the nonprofit status of
credit unions in an attempt to obscure the real issues
like customer service.
There are many reasons for poor service quality across
industries. One reason may be an inability to collect or
use collected data. For example, in direct opposition to
consumer opinion, bank executives perceive themselves
and their companies to be doing an excellent job. For
example, Allred and Addams (1999) asked executive
officers at the top 100 U.S. banks and credits unions
about their customer service performance. The
researchers found that bank executives gave themselves
consistently higher marks than credit union executives
inall surveyed areas of customer service. This apparent
discrepancy of opinion creates questions about banking
service information-gathering effectiveness.
36 QMJ VOL 13,NO. 3/© 2006, ASQ
Service Quality Determinants
Goods quality is tangible and can be measured by
objective indicators like performance, features, and
durability. Service quality, however, is intangible.
Hence, the service quality literature defines service
quality interms ofsubjectivity, attitude, and perception.
Zeithaml (1987) explains:
"Service quality is the consumer's judgment about
anentity's overall excellence orsuperiority. It is a
form of attitude, and results from a comparison
of expectations to perceptions of performance
received."
Lewis and Booms' (1983) definition clearly states:
"Service isa measure of how well the service
level delivered matches customer expectations.
Delivering quality service means conforming
to customer expectation on a consistent basis."
Parasuraman, Zeithaml, and Berry (1985) provide a
list of determinants of service quality: access, communi-
cation, competence, courtesy, credibility, reliability,
responsiveness, security, understanding, and tangibles.
The research team conducted a series ofpilot studies
and found a high degree of correlation between com-
munication, competence, courtesy, credibility, and
security. There isalso a correlation between access and
understanding. So, they combined them into two broad
dimensions of assurance and empathy, that is, a total
of five consolidated dimensions (Berry, Zeithaml, and
Parasuraman 1985):
• Reliability: The ability to perform the promised
service dependably and accurately.
• Responsiveness: The willingness to help customers
and provide prompt service.
• Assurance: The knowledge and courtesy of employees
and their ability to convey trust and confidence.
• Empathy: The caring, individualized attention
provided to customers.
• Tangibles: The appearance of physical facilities,
equipment, personnel, and communication materials.
They then used these five dimensions as the basis for
their 22-item service quality measurement instrument
 Service Quality: ACase Study of aBank
called SERVQUAL, which was originally used for assess-
ing customer perceptions of service quality inservice and
retailing organizations (Parasuraman, Zeithaml, and
Berry 1994a). For each item, a difference score Q(repre-
senting perceived quality along that item) was defined
as Q= P- E, where Pand Eare the rating onthe corre-
sponding perception and expectation statements,
respectively. In 1993, it was argued that "SERVQUAL
failed to achieve discriminate validity from its component
and the nondifference score measure did not exhibit
these problems (Parasuraman, Zeithaml, andBerry
1994b). Moreover, it displayed better than discriminate
and nomological validity properties. In sum, itwas the
preferred alternative" (Brown, Churchill, and Peter 1993).
Cronin and Taylor (1992; 1994) argue that measuring
service quality using a performance-minus-expectations
(SERVQUAL) basis is inappropriate and suggest that a
performance-only (SERVPERF) measurement is a better
method. Parasuraman, Zeithaml, and Berry (1994a),
however, contend that the SERVQUAL scale using the
expectations/performance gaps method is a much richer
approach to measuring service quality and augment
their earlier assertion (Parasuraman, Zeithaml, and
Berry 1985; 1988; 1993) that service quality is a multi-
dimensional rather than a unidimensional construct.
Unfortunately, the conceptualization and measure-
ment ofservice quality is not bereft ofcontroversy.
Although the debate onservice quality began in 1985 in
the marketing literature, it was given a major boost by
Cronin and Taylor (1992). Subsequent work on service
quality (Parasuraman, Zeithaml, and Berry 1993;
Cronin and Taylor 1994; Avkiran 1994; Teas 1994;
Newman and Cowling 1996; Yavas, Shemwell 1997)
notwithstanding, the debate has not yet reached a point
of resolution. In its wake, however, it has raised many
issues for both academics and practitioners by providing
important but somewhat conflicting insights into the
conceptual, methodological, analytical, and practical
issues related to the service quality concept.
The five dimensions of service quality mentioned
previously (tangibles, reliability, responsiveness, assur-
ance, and empathy) were the basis for this research. For
this research, a nondifference score measure was used
for each dimension of service quality inorder to achieve
discriminate validity from its component.
Research Objective/Questions
The objective of this research was to identify underlying
dimensions ofservice quality in the banking industries
and to assess the importance of each of these dimen-
sions in the banking industries with the following
hypotheses.
• HOI: The mean of each dimension of service quality
does not differ across banks.
• H02: The mean of each dimension of service quality
does not differ among the branches of the same bank.
• H03: The five dimensions of service quality are
related to the overall service quality.
METHODOLOGY
Survey Instrument
The service quality questionnaire was obtained from
the marketing department of bank A. It had been used
several times in the past and was developed by aca-
demic experts. The questionnaire was developed to
identify underlying dimensions of bank quality and to
assess consumers' perceptions of the importance of each
of these dimensions. The questionnaire covered the five
dimensions ofservice quality, including the overall
service quality of the bank. Each question was rated
using a Likert-type scale of 0 (poor) to 10 (excellent).
This questionnaire has been used effectively in both
public and private sectors.
SERVQUAL was originally used for assessing customer
perceptions of service quality in service and retailing
organizations (Parasuraman 1993). For this research,
a nondifference score measure was used and the score
for each dimension of service quality was computed by
taking the average score in items making up the
dimension, in this case three items per dimension. The
service quality questionnaire isshown inthe Appendix.
Sampling and Data Collection
1\\'0 large regional banks in Nebraska were selected
(bank Awith three branches and bank Bwith two
branches). To get the cooperation of management and
www.asq.org 37
 Service Quality: ACase Study of aBank

Table 1 Customers' response rate. Figure 1 Service quality dimensions for banks.
Number of 10
contacted Number of Response
Banks customers respondents rate 9
;
§ 8 ... Bank A
A(branch 11 160 92 58%
~ 7
~
~ ... - Bank B
~
A(branch 2) 160 81 51% 6
5
A(branch 3) 160 73 47% Reli Resp Assu Emp Tang Over
B(branch 1) 160 117 73% ~ Dimensions
8-
~
B(branch 2) 160 105 66% e follow-up survey 75 responses were received, giving a
combined response rate of 46 percent for the first and
second follow-up.
Table 2 Service quality (All banks). Each set of responses was further divided as "sam-
Dimensions Mean Std Dev ple I" and "sample 2." To assess the nonresponse bias
a t-test was performed on both samples using five
Responsiveness 7.8625 0.8576
dimensions of service quality, as well as the overall
Reliability 7.8219 0.8389 service quality. No significant differences between the
Overall 7.7543 0.8390 two samples were found.
Assurance 7.6702 0.7472

Empathy 7.6474 1.1382 RESULTS

~
Tangible 6.9637 0.8537

Note: Customers were asked tochoose the top two

8-
~
@
the marketing department they were informed of the
objective of the research and how itwould benefit them
and the organization. Asample of 800 customers was
randomly selected from five branches and the service
quality questionnaires were mailed to them. The over-
all response rate was 59 percent. Table 1 shows the
breakdown of sample sizes and response rates for the
banks and the branches.
Nonresponse Bias
Descriptive Statistics
As shown in Table 2, responsiveness, reliability, and
overall service quality, respectively, are the most impor-
tant dimensions of service quality for all the banks
based on the mean values.
Figure 1 shows that bank Ahas a higher mean
value for all the dimensions of service quality than
bankB.
• Responsiveness: Figures 2 and 3 show that
branch 3 within bank Ahas a higher mean value
than branches 1 and 2 (branch 2has the lowest) for
this dimension. Also, branch 2 within bank Bhas a
higher mean value than branch 1for this dimension.

To encourage nonrespondents to participate, the first
follow-up was conducted by mail and the service quality
questionnaires were sent to the customers; 73 responses
were received, giving a response rate of 22 percent. The
second follow-up was conducted by mail, including
an invitation from the bank's president encouraging
customer participation in the survey and emphasizing
the importance of the research project. For the second
• Empathy: Figures 2 and 3 show that branch 3
within bank Ahas a higher mean value than
branches 1and 2 (with branch 1the lowest) for this
dimension. Branch 2 within bank Bhas a higher
mean value than branch 1for this dimension.
• Tangible: Figures 2and 3show that branches 2and
3 within bank Ahave a higher mean value than
branch 1(branch 1has the lowest) for this dimension.

38QMJ VOL. 13,NO.3/© 2006, ASQ

 Service Quality: ACase Study of aBank
Figure 2 Service quality dimensions for Bank A.
:1 ~ ~ I 1 Dimensions
l: =::-:::~:~~ ~
§ + Branch
Reli Resp Assu Emp Tang Over
Mean
Figure 3 Service quality dimensions for Bank B.
8,..-------------,
c:: + Branch 1
~ 7 +-----~-_JL........j _ Branch 2
Reli Resp Assu Emp Tang Over
Dimensions
Reliability Test
Ameasure of construct reliability (Cronbach's alpha)
was computed for each dimension to assess the relia-
bility of the set of items forming that dimension. These
a coefficients range from 0.76 to 0.88 (see Table 3 and
Appendix). As a rule, alphas of 0.70 or greater repre-
sent satisfactory reliability of the items measuring the
construct (dimension). Thus, the items measuring the
dimensions appear to be sufficiently reliable.
Assessment of Dimensionality
The next step of analyses involves an assessment of
dimensionality. Bagozzi's rules for "convergence" and
"discrimination" indicate that items representing a dis-
tinct dimension should correlate highly with each other
in a uniform pattern, and should not correlate as
strongly with items representing another dimension
(Bagozzi 1981). Sample correlation (Q1-Q15) is shown
inTable 4. The correlation matrix follows Bagozzi's rule.
Factor Analysis
Factor analysis was performed using five factor solutions
(five common factors), since there are five dimensions of
Table 3 Reliability coefficient for dimensions of
service quality.
Cronbach ex
Reliability 0.79
Responsiveness 0.83
Assurance 0.76
CJ
V")
Empathy 0.77 <{
'0-
0
0
Tangible 0.88
N
e
service quality, as was observed inthe original SERVQUAL
study. Another convention frequently encountered in
packaged computer programs is to set m (number of
common factors) equal to the number of eigenvalues of
~ R (correlation matrix) greater than one. The best
~ approach is to retain few rather than many factors,
N
@
assuming they provide a satisfactory interpretation of
the data and yield a satisfactory fit to R (correlation
matrix) (lohnson and Wichern 1982).
The main purpose of factor analysis isto describe, if
possible, the covariance relationships among many
variables in terms of a few underlying, but unobserv-
able, random quantities called factors. Factor analysis
can be considered anextension of principal component
analysis. Both can be viewed as attempts to approximate
the covariance matrix. However, the approximation
based on the factor analysis model is more elaborate.
The primary question in factor analysis is whether the
data are consistent with a prescribed structure (lohnson
and Wichern 1982).
In this article only five factors were chosen with
eigenvalues of more than one, as shown inTable 5. The
five-factor solution was subjected to Varimax rotation
and the rotated factor loading matrices are shown in
Table 6. An orthogonal transformation of the factor
loadings, and the implied orthogonal transformation of
the factors, is called factor rotation, and rotating factors
often reveal asimple structure and aid interpretation.
The general pattern of loadings in Table 6 for five
dimensions (15 items) is fairly stable. Ideally one
would like to see a pattern of loadings such that each
variable loads highly onasingle factor and has small-to-
moderate loadings on the remaining factors (lohnson
WWW.asq.arg 39
 Service Quality: ACase Study of aBank

Table 4 Correlations (Pearson).

Ql Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Qll Q12 Q13 Q14
Q2 28

Q3 45 47

Q4 27 43 59

Q5 12 37 37 70

Q6 1 29 25 50 67

Q7 33 26 35 33 21 22

Q8 24 25 23 35 30 47 55

Q9 18 21 16 26 27 26 48 55

QIO 18 18 20 23 21 24 39 26 29

QII 8 6 12 -10 -1 6 12 4 3 12

QI2 8 12 20 19 17 17 37 21 28 28 5

QI3 -15 -9 -8 -13 -4 -9 -12 -16 4 0.4 -12 4

Q14 -5 -3 -1 0.5 8 -5 -7 -10 7 2 7 -3 13

Q15 9 -3 -9 -8 -4 3 -1 -0.4 -5 6 15 -1 -19 -12

Note: Correlations are multiplied by 100.

and Wichern 1982). Reliability (Q1-Q3) has a large
loading on the third factor, responsiveness (Q4-Q6) on
the first factor, assurance (Q7-Q9) on the second factor,
empathy (QlO-Q12) on the fourth factor, and tangible
(Q13-Q15) on the fifth factor. It is not always possible to
get this structure, although the Varimax rotated loadings
in this example provide a nearly ideal pattern.
The General Linear Models
• Responsiveness: Table 7shows that this dimension
of service quality for bank Ais significantly different
from bank B, but this dimension of service quality
for all the branches within each bank is the same
except for branches 2and 3within bank A.
• Assurance: Table 7 shows that this dimension of
service quality for bank Ais significantly different
from bank B, but this dimension of service quality
for all the branches within each bank is the same.

The general linear models procedure of ANOVA was
used to see the differences ofdimensions of service
quality between banks and among the branches. The
branches were nested within the banks. The level of sig-
nificance was established at 0.05. The following table
shows the ANOVA summary.
• Reliability: Table 7 shows that the reliability
dimension for bank Ais significantly different from
bank B, but the reliability dimension for all the
branches within each bank is the same.
• Empathy: Table 7 shows that the two banks and all
the branches differ inthis dimension of service quality.
• Tangible: Table 7shows that the two banks differ in
this dimension of service quality. Only branches 1and
2 within bank Bare the same in terms of tangible
dimension.
• Overall service quality: Table 7 shows that the
two banks differ in this dimension of service quality,
but all the branches within each bank are the same
interms of overall service quality dimension.

40 QMJ VOL. 13, NO. 3/© 2006, ASQ

 Service Quality: ACase Study of aBank

Regression Table 5 Principal component analysis.

Stepwise regression analysis was used for linking overall Varimax Factor Factor Factor Factor Factor
rota~on 1 2 3 4 5
service quality as a dependent variable and five dimen-
Eigenvalue 2.487 2.342 2.256 1.395 1.136
sions of service quality (reliability, responsiveness, assur-
anee, empathy, and tangible) as independent variables. Proportion 0.17 0.16 0.14 0.09 0.08
The following results were found as shown inTable 8. Cumulative 0.17 0.33 0.47 0.56 0.64
For all banks, reliability and responsiveness were
both significant with R2 = 0.87. For bank A, reliability
was significant with RJ = O. 81. For bank B, reliability Table 6 Factor analysis (Varimax rotation).
was significant with RJ = O. 81. For bank Pl.s branch 1, Factor Factor Factor Factor Factor
reliability and responsiveness were both significant Variable 1 2 3 4 5
with R2 = O. 81. For bank Pl.s branch 2, reliability was Reliability
significant with RJ = O. 83. For bank Pl.s branch 3, reli- 01 76
Q2 37 60
ability was significant with R2 = O. 81. For bank B's 03 27 81
branch 1, reliability and responsiveness were both signifi-
Responsiveness
cant with R2 = O. 80. For bank Pl.S branch 2, reliability 04 70 50
was significant with R2 = O. 81. 05 88
06 85

DISCUSSIONS AND Assurance

07 ·75 36
08 34 ·67 26
CONCLUSIONS 09 ·75
The results show that reliability and responsiveness are Empathy
the two most critical dimensions of service quality and 010 ·59 75
011 77
they are directly related to overall service quality. 012 ·58 78
Responsiveness and reliability have been shown to be
Tangible
important factors, supporting previous work by Berry, 013 65
Zeithaml, and Parasuraman (1985) and Avkiran 014 ·76
015 66
(1994). Allred and Addams (2000) conducted a similar ~
study in a banking industry in a midwestern city and Note: All numbers in the table aremagnitudes offaclor laadings ~
discovered that assurance, reliability, and responsive- multiplied by 100. Loadings of.25orless arenat shown. @

ness are the most critical dimensions of service quality.

johnston (1997) conducted a study inthe U.K. banking
Table 7 ANOVA table for service quality.
industry to combine the classification of quality factors
into satisfiers and dissatisfiers together with relative Independent variables
Dependent variables Bank Branches
importance. The factors that may delight customers tend
to be concerned more with the intangible nature of the Assurance *
service, commitment, attentiveness, friendliness, care, Empathy * *
and courtesy. The main sources of dissatisfaction appear Overall
to be cleanliness, aesthetics, integrity, responsiveness, *
Reliability *
reliability, and security, which are associated with either
the more tangible aspects of service orsystemic issues. Responsiveness * *
Thus, reliability and responsiveness dimensions of serv- Tangible * *
ice quality have been shown to be important factors,
supporting previous works.
Note: * = statistically significant at 0.01 level ofsignificance

WWW.asq.arg 41
 Service Quality: ACase Study of aBank

Service quality tools that were used in Table 8 Regression (overall service quality vs. five dimensions
this research have been used extensively in of service quality).
the other service industries as well as the
Stepwise selections R-sq
manufacturing industries. The five-
dimensional structure could possibly serve All banks Overall =.25 + .91 Reliability + .05 Responsiveness .87

as a meaningful framework for tracking a Bank A Overall =.63 + .91 Reliability .81
firm's service quality performance over Bank B Overall =.768 + .89 Reliability .81
time and comparing this performance
Bank A (branch 1) Overall =.14 + .86 Reliability + .11 Responsiveness .81
against the performance ofcompetitors
(Parasuraman, Berry, and Zeithaml Bank A (branch 2) Overall =.60 + .921 Reliability .83

1993). The wording ofsome individual Bank A (branch 3) Overall =.236 + .96 Reliability
items may need to be customized to each Bank B(branch 1) Overall =.77 + .81 Reliability + .082 Responsiveness .80
service setting, and items on some dimen-
Bank B(branch 2) Overall =.009 + .992 Reliability
sions should be expanded if necessary for
reliability.
As was shown before, the response rate of customers
from bank Bis higher than bank A, and this may cause
differential biases in data collection. Since the sample
sizes are large enough and data are normalized, the
differential biases indata collection should not have an
effect on the analysis. One explanation might be that
bank Bcustomers had a high morale and were satisfied
with the service quality or very dissatisfied with the
service quality.
Tracking customers and developing creative strate-
gies to retain them isvery profitable. For example, in
1982, Charles Cawley, the president ofthe credit card
company MBNA of America, became increasingly
frustrated by numerous complaints from defecting
customers and took action. Cawley announced to all
MBNA employees that the mission of the company
would be to keep every customer. To accomplish this
goal, a strategy was implemented to call defecting
customers personally and obtain information about
the reason for their defection. Chronic problems were
determined and prioritized; appropriate changes
were implemented. Eight years later, MBNA's defec-
tion rate was reduced to just 5 percent, one of the
lowest in the industry. Without making any acquisi-
tions, MBNA's industry ranking went from 38 to 4, and
profits increased 16-fold (Reichheld and Sasser 1990).
Many studies indicate that it costs eight to 10 times
less to keep a customer than to develop a new one.
Thus, improving service quality leads to the customer
satisfaction and, ultimately, to customer loyalty.
.81
.81
RECOMMENDATIONS
Reliability isanobvious place to start. Customers want
to know their resources are safe and within trustworthy
institutions. Away to ensure this peace of mind would
be to take steps to ensure bank employees are well
trained, so each bank associate is able to offer complete
and comprehensive information atall times. Consistent
policies combined with a knowledgeable staff will foster
a high degree of institutional cohesion and reliability.
Responsiveness, again when associated with a
well-trained staff and timely answers to service-related
questions, would make significant inroads into causing
various banking institutions be regarded as responsive.
Staff should be encouraged to present relevant options
to banking customers in a manner that does not
resemble salesmanship so much as adesire to serve.
Intangibles please customers just as much as tangi-
bles in the banking industry. People tend to visit the
same branch of a bank over and over again. Usually,
this isa location close to their home ortheir workplace.
It is natural that customers become comfortable and
habituated to these branch banks, for the same reason
they develop familiarity with a neighborhood super-
market orconvenience store. It makes sense that bank
employees would be encouraged to learn to recognize
these regular customers, learn their names, and begin
to identify their basic service requirements.
Learning to understand customers needs will allow
bank associates to offer enhanced services, perhaps

42 QMJ VOL. 13, NO.3/© 2006, ASQ

 Service Quality: ACase Study of aBank
lowering customers' banking costs and increasing their
investment potential. This could also open up the possi-
bility of increased profits for banks, for when perceived as
more service and customer oriented, they will, in effect,
become a useful and pleasant way to "shop."
In essence, this article argues for continued decen-
tralization of banking services, which would allow
convenient access and yet the old-fashioned service of
a smaller community. Keeping these smaller branch
locations presentable and up-to-date technologically
are important factors. The idea of increasing multiple
maintenance expenses, in terms of staffing, technol-
ogy, and the cosmetic upkeep of many branches, must
be regarded as a cost of doing business. If the staff
inside ispleasant and well-informed, in an aestheti-
cally pleasing environment, then customer satisfaction
will be high.
Many financial institutions are trending in this
direction, even in the face of large banking organiza-
tions merging. It will be difficult to merge these two
trends, and in the end, a choice may have to be made
between service quality and economies of scale.
Access has been improved through online banking,
though convenience has come atthe expense of individu-
alized service. Online banking has not been a universal
conversion. Not everyone is convinced of Internet security,
and banks must aggressively deal with this issue to
enhance perceptions of safety, reliability, and security.
The five-dimensional structure could possibly serve
as a meaningful framework for tracking a firm's serv-
ice quality performance over time and comparing it
against the performance of competitors. The wording
of some individual items may need to be customized
to each service setting. Items on some dimensions
should be expanded if that is necessary for reliability.
Thus, the banking industries must continuously
measure and improve these dimensions in order to
gain customers' loyalty.
REFERENCES
Allred, A., and H. L. Addams. 2000. Service quality at banks
and credit unions: What do their customers say? Managing
Service Quality 10, no. 1:52-60.
Allred, A, andH. L. Addams. 1999. Cost containment andcustomer
retention practices at the top 100commercial banks, savings institu-
tions, andcredit unions. Managing Service Quality 9, no. 5: 15-21.
Avkiran, N. K. 1994. Developing an instrument tomeasure customer
service quality in branch banking. International Journal of Bank
Marketing (12 November): 10-18.
Bagozzi, R. P. 1981. Evaluating structural equation models with
unobservable variables and measurement error: A comment.
Journal of Marketing Research 18:375-381.
Barret, P. 1997. Banks lend an ear to service: Improved customer
service. Marketing 16 (January): 16-20.
Berry, L. L., V. A Zeithaml, and A. Parasuraman. 1985. Quality
counts in services, too. Business Horizons. (May-June): 44-52.
Brown, T. J, G. A Churchill, and P. J Peter. 1993. Improving the meas-
urement ofservice quality. Journal ofRetailing 69,no. 1:127-139.
Cronin, J. J., and S. A. Taylor. 1994. SERVPERF versus
SERVQUAL: Reconciling performance-based and perceptions-
minus-expectations measurement of service quality. Journal of
Marketing 58 (January): 125-31.
Cronin, J J., and S. A Taylor. 1992. Measuring service quality: A
reexamination andextension. Journal ofMarketing 56 (July): 55-68.
Dubroff, H. 1998. Competition is at the heart ofcredit union-bank
squabble. The Business Journal 15,no. 3: 51-60.
Johnston, R. 1997. Identifying thecritical determinants of service
quality in retail banking: Importance and effect. International
Journal of Bank Marketing 15, no. 4: 111-116.
Johnson, R. A., and D. W. Wichern. 1982. Applied multivariate
statistical analysis. Englewood Cliffs, N.J.: Prentice-Hall.
Lewis, R. C, andB. H. Booms. 1983. The marketing aspects ofservice
quality. In Emerging Perspectives on Services Marketing, eds. L. Berry,
G.Shostack, andG.Upah. Chicago: American Marketing: 99-107.
Lovelock, C, and L. Wright. 1999. Principles of service marketing
and management. Upper Saddle River, N.J.: Prentice Hall.
Nowak, L. I. 1997. Partnering relationships between banks and
their research firms: The impact on quality. International Journal
of Bank Marketing 15, no. 3: 83-90.
Newman, K., and A. Cowling. 1996. Service quality in retail
banking: The experience of two British clearing banks.
International Journal of Bank Marketing 14, no. 6: 3-11.
Parasuraman, A, V. A Zeithaml, and L. L. Berry. 1994a. Reassessment
af expectations as comparison standard in measuring service quality:
Implications for further research. Journal ofMarketing 58, 111-124.
Parasuraman, A., V. A. Zeithaml, and L. L. Berry. 1994b.
Alternating scales for measuring service quality: A comparative
assessment based on psychometric and diagnostic criteria.
Journal of Retailing 70, no. 3: 201-230.
Parasuraman, A., V. A. Zeithaml, and L. L. Berry. 1993.
SERVQUAL: A multiple item scale for measuring consumer percep-
tion ofservice quality. Journal of Retailing 69, no. 1: 127-139.
Parasuraman, A., L. L. Berry, and V. A. Zeithaml. 1993.
Research note: More on improving service quality measurement.
Journal of Retailing 69 (Spring): 140-7.
www.asq.arg 43
 Service Quality: ACase Study of aBank

Parasuraman, A., V. Zeithaml, and L. Berry. 1988. SERVQUAL: BIOGRAPHIES

A multiple-item scale for measuring consumer perceptions of
service quality. Journal of Retailing 64 (Spring): 12-40.
Parasuraman, A., V. Zeithaml, and L. Berry. 1985. A conceptual
model of service quality and its implications for future research.
Journal ofMarketing 49 (Fall): 41-50.
Reichheld, F.F., and W. E. Sasser. 1990. Zero defections: Quality
comes toservices. Harvard Business Review: 105-11.
Sweat, J, and J Hibbard. 1999. Businesses arespending heavily on
customer service, but many aren't getting the job done-customer
disservice. Information Week (21 June).
Teas, K. R. 1994. Expectations as a comparison standard in
measuring service quality: An assessment of a reassessment.
Journal ofMarketing 58 (January): 132-9.
Yavas, U., and D. J Shemwell 1997. Meeting the service quality
challenge: Structural problems and solutions. Managing Service
Quality 7, no. 4: 198-203.
Zeithaml, V. 1987. Defining and relating price, perceived quality,
and perceived value. Report no. 87-101. Cambridge, Mass.:
Marketing Science Institute.
Lotfollah Najjar isan assistant professor in the college ofinformation
science and technology at university ofNebraska atOmaha. Najjar's
research interests center on: quality information systems (data quality)
in the service and manufacturing industries; business process reengi-
neering and IT; data mining; and total quality management and IT in
both service and manufacturing industries. His teaching interests
include quality information systems; business process reengineering
and IT; business data communications; introduction to management
information system, quality control, operations management; statistics;
and mathematics. He began teaching at UNO in 1989. Najjar
earned a doctorate in industrial management systems engineering
with a minor in MIS from the University ofNebraska-Lincoln in 2002.
He may becontacted bye-mail at Najjar@unomaha.edu .
Ram Bishu is a professor in the college of engineering at the
University ofNebraska-Lincoln. Bishu's research interests center on
ergonomics, information processing, total quality management, and
quality control. His teaching interests include quality control,
ergonomics, design of experiments, and operations management.
Bishu earned a doctorate in industrial management systems engi-
neering from SUNY Buffalo in 1985. He may becontacted bye-mail
at rbishu@engunx.unl.edu .

APPENDIX
Customer questionnaire
Please show the extent to which you think your bank offers the following services.
On a scale of 0 to 10, please circle the appropriate rating.
Poor Excellent
1. Serving you quickly and efficiently 0 1 2 3 4 5 6 7 8 9 10
2. Handling your transaction accurately 0 1 2 3 4 5 6 7 8 9 10
3. Being dependable 0 1 2 3 4 5 6 7 8 9 10
4. Providing clear explanations of services 0 1 2 3 4 5 6 7 8 9 10
5. Solving problems/troubleshooting 0 1 2 3 4 5 6 7 8 9 10
6. Understanding your banking needs 0 1 2 3 4 5 6 7 8 9 10
7. Thanking you for your business 0 1 2 3 4 5 6 7 8 9 10
8. Feeling secure doing business here 0 1 2 3 4 5 6 7 8 9 10
9. Making it easy to do business here 0 1 2 3 4 5 6 7 8 9 10
10. Greeting & acknowledging you promptly 0 1 2 3 4 5 6 7 8 9 10
11. Addressing you by name 0 1 2 3 4 5 6 7 8 9 10
12. Providing friendly and caring service 0 1 2 3 4 5 6 7 8 9 10
B. The location of our bank to you is 0 1 2 3 4 5 6 7 8 9 10
14. Having up-to-date equipment 0 1 2 3 4 5 6 7 8 9 10
IS. Accessibility to ATM 0 1 2 3 4 5 6 7 8 9 10
16. Overall service quality 0 1 2 3 4 5 6 7 8 9 10
Thank You

44QMJ VOL. 13,NO. 3/© 2006, ASQ