Sunteți pe pagina 1din 9

SERVICE QUALITY AND CUSTOMER SATISFACTION IN BANKING SECTOR COMPARATIVE STUDY OF CONVENTIONAL & ISLAMIC BANKS IN PAKISTAN

Group Members Rehan Sarfraz Sumera Samar Ubaid-ur-Rehman Bilal Safdar Umair Ali Khan Muhammad Ali Akhter Ahsin Raza

Introduction The subject of service quality has been studied and debated over the past two decades. (Asubonteng, P., McCleary, K.J., & Swan, J. E, 1996) assert the importance of managements ability to understand what constitutes service quality and how to appropriately measure it, in order for subsequent actions to be taken so as to make improvements and increase value to customers. Substantial work has been done to understand the nature and dimensions of service quality and customer satisfaction across many different service settings. Pakistani banking sector is continuously improving with diversified pattern of ownership due to an active participation of foreign and local stakeholder. It resulted into an increased competition among banks to attract a greater number of customers by the provision of quality services for long-term benefits. Now there are 6 full-fledged Islamic banks and 13 Conventional banks offering products and services according to principles of Shariah in different parts of the country. They are competing in a highly competitive environment for the provision of quality services according to customers' expectations. It is reported that customers of Islamic bank have greater perception of service quality as compared to customers of conventional bank in Pakistan (Ahmad et al., 2010). Now bank customers are much concerned regarding the quality of services due to increased awareness. They continue to deal with their current bank only if they feel satisfied; otherwise they feel no hesitation to switch to other banks. Islamic banks work within the limits prescribed by Sharia'h to stimulate business and trade activities. It experienced an expansion in its network, size and structure due to beautiful blending of commercial banks, micro finance institutions and Islamic banks in the country. In recent years, banks are ever more concerned and started realizing that the service acquiring decisions of customers is not only influenced by the value alone, but also by the service support available after the delivery of the service (Agnihothri, S., Sivasubramanian, N., & Simmons D, 2002). The effective delivery of high quality service can help to build and sustain long term relationships with customers. According to (Rust, R. T., & Oliver, R. L, 1994), Service quality is by nature a subjective concept, which means that understanding how the customer thinks about service quality is essential to effective management. It is thus the customers perception of the service quality a firm delivers that is dominant, and ultimately has competitive result. Finally, bankers should concentrate on service quality to have satisfied customers as it is evident that service quality has greater and strong positive impact on customer satisfaction in case of Islamic banks as compared to conventional banks in Pakistan (Ahmad, Rehman & Saif, 2010). Despite existing research, little attention has been paid to the study of service quality in the Pakistani banking industry. While a great deal of research has been conducted regarding service quality, to date few studies have been conducted relative to the dimensions of service quality in the context of Pakistani banking industry. In order to adress the exiting research gap, this study aims to: i. Identify various dimensions of service quality from the customers perspective, and to establish the relationship is between service quality and customer satisfaction by making comparison between Islamic and conventional banking system. ii. Examine how the quality of services affects the customer satisfaction. It can be believed that this study will provide a platform for discussing the issues on service quality and customer satisfaction in the Pakistani banking industry.

Literature Review Customer Satisfaction: Since early 70s some important developments in theory and research on consumer satisfaction have been made by different studies including Olshavsky and Miller (1972); Anderson (1973). Major Theoretical as well as empirical investigations during 70s supported the idea that satisfaction is related to the size and direction of disconfirmation experiences, where disconfirmation experienec is related with the persons initial expectations (Churcill and Carol, 1982) . Satisfaction, conceptually, may be considered as an outcome of purchase and use which is the outcome of customers comparison of the benefits and costs involved in acquiring any product or service experience in relation to the expected outcomes, whilst, in operational terms, satisfaction is similar to the attitude whereas it can be evaluated as the accumulated satisfaction experiences with the different attributes of the product (Churcill and Carol, 1982). Later, in 80s, addition of "an emotional response to the experiences provided by, associated with particular products or services purchased (Westbrook and Reilly 1983; Oliver 1981) set forth new dimension for the research in customer satisfaction. However, further development customer satisfaction research during 90s and also at the inception of year 2000, dominated by model built on confirmation/disconfirmation paradigm to describe customer satisfaction (Davis and Heineke, 1998; Woodruff et al., 1991).Where satisfaction, or dissatisfaction determined by the difference between customer expectations of the product or service and their actually perceived performance. If customer expectations are met, the result is satisfactory, and if not, dissatisfaction occurs (Vavra, 1997; Davis and Heineke, 1998; Szymanski and Henard, 2001). Recently, R.L, Oliver (2009) in his book, Satisfaction: A Behavioral Perspective on the Consumer defined customer satisfaction as, satisfaction is the consumers fulfillment response. It is a judgment that a product/service features, or the product or service itself, provided (or is providing) a pleasurable level of consumption-related fulfillment, including levels of under-or over fulfillment (Oliver, 2009). Throughout the development phase of research in customer satisfaction, one question remain almost ignored with some exceptions thats whether customer satisfaction is different for products and services or it is the same? And another related question is what measures direct or indirect should be used to fully conceptualize and measure the behavioral components of customer satisfaction resulting from consumption experience (Malhotra et al., 1994).There are some researchers like (Boulding et al., 1993; Mittal and Baldasare, 1996; Chandon et al., 1997; Dobni et al., 1997) analyzed customer satisfaction using multiple behavioral measures. Furthermore, various studies on customer satisfaction with particular reference to financial services also reflect the inherited deficiency of literature about customer satisfaction in general services and made little efforts to define some specific measures of customer satisfaction analysis for their experiences of using finical services. A relatively organized list of dimensions provided by Howell (2006) includes (a) availability, (b) responsiveness, (c) timeliness, (d) completeness, (e) tangibility, (f) empathy, (g) reliability, and (h) professionalism.

Customer Satisfaction and Service Quality: There are few studies which initiated the idea that the customer satisfaction can result from any dimension (whether or not it is quality related) and its judgments may arise from non-quality issues (e.g. needs, equity, perceptions of fairness) and require experience with the service or provider (Taylor et al, 1994; Howard and Sheth, 1969). Given this pervasive nature of customer satisfaction phenomena and generally recognized orientation of customer satisfaction mainly as behavioral response by the literature, research directions point us to the popular concept of service quality through which customer satisfaction can be better analyzed. However, it is still under debate that whether customer satisfaction is an antecedent of service quality judgments (Bitner, 1990; Parasuraman, et al, 1985) or service quality is an antecedent of customer satisfaction (Anderson and Sullivan, 1993; Cronin and Taylor, 1992; Taylor et al, 1994). The concept of service quality began to receive significant attention in the early 1980s with the writings of Gronroos,C. (1984), and Lehtinen & Lehtinen (1982). Parasuraman, et al., (1985) identified ten dimensions of service quality, including, Reliability, Responsiveness, Competence, Access, Courtesy, Communication, Credibility, Security, Understanding/Knowing the customer, and Tangibles. However, these dimensions reduced to five dimensions that are: Reliability, Assurance, Tangibles, Empathy (Parasuraman, et al., 1988) Dimensions of service quality measured using a 22-item scale named SERVQUAL. SERVQUAL used for measuring the quality of service in different service context that include appliance repair and maintenance firm, several retail banks, a long distance telephone provider, a security broker, and credit card companies; such multi perspective validation of service quality dimensions helped in develop and design a relatively standardized scale which could be applied for the measurement of service quality of different type of services organizations. SERVQUAL has been used by different research studies conducted in a various settings like the quality of service offered by a hospital (Babakus and Mangold 1989), banking (Cronin and Taylor 1992; Spreng and Singh 1993), business school placement center, tyre store, dental school patient clinic and acute care hospital (Carman 1990), discount and departmental stores (Finn and Lamb 1991; Teas 1993; Dabholkar et al. 1996) and others. Though the scale has seen only a limited application in financial services context, it nonetheless remains one of the many areas where SERVQUAL has been applied for measuring service quality.

SERVICE QUALITY IN BANKING: Service quality is gaining more importance in the banking industry and the value of improving service quality should be determined. (Berry, L. L., & Thomson, T. W, 1982) suggest that developing strong relationships between customers and financial institutions serve as incentives for customers to remain loyal and thus provide financial institutions with a source of differential advantage. Similarly, (Teas, 1987) finds that a centrally important aspect of a commercial customers dealing with a bank is the quality of the long-term relationship that develops with the bank. Several researchers models have provided a basis for many of the quality initiatives adopted by financial services companies(Boaden, R. J., & Dale, B. G, 1993), (Howcroft, 1993), (Kwan, W., & Hee, T. J, 1994), (Laroche, M., & Taylor, T,1988), (LeBlanc, G., & Nguyen, N, 1988), (Lewis, 1989; 1991), (Lewis, B. R., & Smith, A. M, 1989), (Smith, A. M.,& Lewis, B.R, 1988), (Smith, A. M., & Lewis, B. R, 1989), (Teas, R. K., & Wong, J, 1991), (Tilston, 1989), (Wilkinson, A., Allen, P., & Snape, E, 1991).(Tilston, 1989) believes that a few initiatives have had any significant impact, either on customer perceptions or on commercial results. (Teas, R. K., & Wong, J, 1991) developed a measure of concepts related to retail bank customers perceptions of retail bank service delivery systems. The results of their research indicate four potentially important aspects of the retail bank service delivery systems, general bank personal service, teller personal service, reaction capacity, and location convenience. The research results support the hypotheses that retail bank customers perceptions of these issues may be related to customer satisfaction and intentions to do business with the bank in future. These include intentions to purchase additional products and intentions to give the bank a larger percentage of the customer business. LeBlanc, & Nguyen (1988) focused on service quality in financial institutions and discussed 6 factors that explain perceived service quality, (a) degree of customer satisfaction, (b) contract personnel, (c) internal organization, (d) physical environment and instruments, (e)corporate image, and (f) personnelcustomer interaction during the service encounter, contribute to service quality. Smith, & Lewis (1989) studied service quality programs and the way in which the customer care philosophy permeated organizations from top management to customer contact staff in 31 major UK organization spanning financial services, retailing, and leisure. One aspect of the research was to identify what the management thought were the key elements which comprise good customer service i.e., what external customers expect from the company. The main suggestions related to quality and knowledge of personnel, speed and efficiency, systems and procedures, retail design, technology, and product range. Finally, service quality theory was validated in an Asian banking industry. For example, in Singapore, (Kwan, W., & Hee, T. J, 1994) examined measuring service quality in Singapore retail banks using SERVQUAL instrument developed by (Parasuraman, A., Zeithaml, A. V., & Berry, L. L., 1988). They found the overall results indicated that performance as perceived by customer (P) was below their expectations (E) across all service quality dimensions. The studys overall picture of service quality of retail banks was highlighted in the following conclusions: (a) the widest gap between perceived performance and expectations is in the empathy dimension, (b) the tangibles dimension shows the smallest gap and the lowest score among the 5 dimensions for expectation, and bank customers expectations are highest for reliability.

The preceding review of the literature reveals that while extensive investigation of service quality has been conducted in the services marketing arena over the past few decades, research and debate still continues. Moreover, very little has been done to understand the determinants of service quality in the realms of banking sector. Satisfaction of the consumer is considered by most researchers as an attitude that is formed by comparing expectations prior to consuming with perceptions of outcome after consumption. This discrepancy approach is the generally adopted paradigm for use in understanding and explaining satisfaction as a construct. Successful arguments have been made for satisfaction being a multidimensional construct, with specific dimensions being dependent on the consumption experience under study. It has been suggested that as researchers trying to measure satisfaction, we should specify the domain (macro/ micro) and the relevant dimensions of that domain. Also, it is suggested that we select an approach to measurement (external difference / internal global) that best matches the consumers ability to respond and needs of the research effort. To this point, consumer satisfaction literature offers primarily conceptual guidance and little specific insights as to dimensionality. Measurement and dimensionality considerations are left to needs of individual researchers and the situation under study. Theoretical Framework The research model designed in this study is given below. In the current research model, the numbers of items per dimension are established in the qualitative part of the study, and the ultimate numbers of dimensions are determined by factor analysis. The approach in this study is to use a direct disconfirmation scale to measure functional service quality. As noted from earlier, (Rust, R. T., Zahorik, A. J., & Keiningham, T. L, 1996) conclude that measuring disconfirmation directly has the double advantage of statistical reliability as well as a reduction in the length of the questionnaire. The items utilized 7-point LIKERT scales end attach with strongly disagree / strongly agree. Many of the multi-item scales in the literature that are used to measure customer satisfaction employ response scales that often change substantially from item to item. (Spreng, R. A., & Mackoy, R. D, 1996), for instance, used items that employed the exact same wording, but used four different response scales. Other studies employ polarity changes between various items. This study used wording from a multi-item scale to measure overall customer satisfaction adapted from (Bitner, M. J., & Hulbert, A. R, 1994). One difference being, however, that consistent divisions were retained throughout to avoid potential respondent confusion. The three differently worded items were end anchored 7-point LIKERT scales indicating very dissatisfied / very satisfied scales. Dimensions of Service Quality a) b) c) d) Reliability Response Assuranc Empathy

e) Tangibles Dimensions of Customer Satisfaction a) b) c) d) e) RESPONSIVENESS SAFE TRANSACTION COMPETITIVE SERVICES COMPETENCY KNOWLEDGE

Banking Types a) Islamic Banks b) Conventional Banks

Hypothesis: Service quality has a positive impact on Customer satisfaction. Islamic Banks has a positive impact on customer satisfaction than conventional banks.

Service Quality

Customer Satisfaction
Banking Type

Service Quality

Customer Satisfaction

Banking Type

S-ar putea să vă placă și