Service Quality and Customer Satisfaction: Study of Indian Banks Using Servqual
Service Quality and Customer Satisfaction: Study of Indian Banks Using Servqual
Service Quality and Customer Satisfaction: Study of Indian Banks Using Servqual
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ABSTRACT
This study is done with the objective to determine the customer’s satisfaction with quality of banking services
on the basis of different constituent factors. The study is done on 384 respondents using the factor analysis,
correlation and regression analysis. The factor analysis revealed the significant impact of service quality on the
customer satisfaction. The regression analysis found that all the factors of service quality have a significant and
positive impact on the customer satisfaction. This study has managerial implication as it can be used by banks
to improve the service quality by focusing more on the important criteria.
JEL classification codes: G21.
Keywords: Customer satisfaction, Service quality, SERVQUAL, Factor Analysis.
1. INTRODUCTION
The Indian banking industry is one of the most competitive industries. According to RBI report on
bank profile 2015, there are total 89 banks, which belonging to public sector banks, private sector banks
(Old and New) and foreign banks. In order to survive and grow in the competitive market, it is important
for banks to provide quality services to their customers. SERVQUAL is one of the important models to
measure the service quality on five different factors, namely, reliability, assurance, tangible, empathy and
responsiveness Parasuraman et al, (1988).
199 International Journal of Economic Research
Parag Rijwani, Ritesh Patel and Nikunj Patel
2. CONCEPTUAL BACKGROUND
3. LITERATURE REVIEW
Many studies carried out across globe, related to SERVQUAL model and service quality are reviewed.
Islam (2011) analyses the customer satisfaction with banking services in Bangladesh. The Researcher has
surveyed 222 respondents who had taken banking services of public and private sector banks. By applying
correlation and confirmatory factor analysis, the researcher had revealed a positive relationship between
service quality and customer satisfaction. Further, it has enhanced that the customer satisfaction leads to
increase in level of loyalty for bank. Chong (2011) has studied the service quality of banks in Malaysia using
SERVQUAL Model. The Researcher has surveyed 287 respondents who are using banking services. The
Findings of the study revealed that service quality affects customer satisfaction and leads to word of mouth
to other customers in a positive direction. Ravicharan, Prabhakaran and Arun Kumar (2010) has analysed
the customer satisfaction from banking services in india and Saudi Arabia. The Researcher has applied
regression and revealed impact of service quality on satisfaction of the customer. Kumar, Kee and Manshor
(2009) have analysed the customer satisfaction from banking services in Malaysia. Total 308 respondents
have been surveyed using SERVQUAL based 26-point scale questionnaire. Researchers have applied
the confirmatory factor analysis and revealed that service quality on four dimensions, namely, Empathy,
Reliability, Responsiveness and Tangibility has made a significant impact on the customer satisfaction.
Culiberg and Rojsek (2010) have studied the customer satisfaction from retail banking service in Slovenia.
Researchers have developed 28-Item based SERVQUAL scale and conducted survey of 150 respondents.
Researchers have applied factor analysis and regression analysis. The Findings of the study have revealed
that service quality affects significantly to the customer satisfaction. The customer satisfaction from retail
banking service in Slovenia is affected positively. Bahia and Nantel (2000) have done a study on customer
satisfaction from banking service in Canada over 360 customers. Researchers have applied the correlation
and regression to measure the impact of service quality on customer satisfaction. The findings revealed a
positive relationship between service quality and customer satisfaction. Further study enhanced that the
customer satisfaction leads to customer loyalty towards the bank. Ilyas, Nasir, Malik, Mirza, Munir and Sajib
(2013) have studied the customer satisfaction from banking services in Pakistan. Total 306 respondents
have been surveyed using SERVQUAL based 22-point scale questionnaire. Researchers have applied paired
sample t-test and revealed that the service quality affects the customer satisfaction, but the satisfaction
differs on the dimension of gender. Chong, Kumar and Fong (2010) studied the customer satisfaction
from Islamic banking services in Malaysia. Total 287 respondents have been surveyed and studied using
the confirmatory factor analysis. Researchers have revealed that the service quality has significant impact
on the customer satisfaction and tangibility affects the most to the customer satisfaction. Sulieman (2013)
has studied the customer satisfaction from banking services in Jordan. The Researcher has surveyed 375
respondents who are using banking services. By applying the regression, the study found that customer
satisfaction is based on the service quality and responsiveness is the most important factor which drives
the customer satisfaction. Lau, Cheung, Lam and chu (2013) have examined the impact of banking service
quality on customer satisfaction in Hong Kong. A Study of 119 respondents has been carried out by applying
confirmatory factor analysis and regression. The Study revealed that service quality has significant impact
on the customer satisfaction and among all factors tangibility and responsiveness has major impact on the
customer satisfaction. Albarq (2013) studied the impact of service quality on customer satisfaction from
banking services in Riyadh city of Saudi Arabia. Total 422 respondents who are using banking services from
five banks, have been surveyed using SERVQUAL based questionnaire. Finding from the study revealed
that the service quality has significant impact on customer satisfaction and responsiveness affects most
of the customer satisfaction. Raza (2009) have studied the customer satisfaction from banking services in
Pakistan. In total 450 respondents has been studied using Confirmatory factor analysis. The Study found
that the service quality has significant impact on customer satisfaction. Further, customer satisfaction is
affected most by reliability and responsiveness.
Moreover, many researchers have analysed the service quality and found that only some factor has
significant impact on service quality. Such as, Kumar (2010) has analysed the service quality of banks in
Peru and Malaysia using the SERVQUAL model. With study on 308 respondents, researchers have revealed
the banking service in both the countries is similar on the criteria of tangibility and convenience, whereas
on reliability and competence banks from both countries have difference in service quality.Lau (2010) has
analysed the service quality of banks in Hong Kong. The study was done on 119 customers using factor
analysis & regression and found that tangibility, responsibility and assurance has significant impact on the
customer satisfaction.
201 International Journal of Economic Research
Parag Rijwani, Ritesh Patel and Nikunj Patel
Overall, the literature review suggests the selection of proper methodology and proper variables to
understand the impact of service quality on customer satisfaction.
4. RESEARCH METHODOLOGY
This study is done with the objective to determine the customer’s satisfaction from banking services as
perdifferent constituent factors. Further, the study is also undertaken to assess the impact of each service
quality dimension on the customer satisfaction. This will help in knowing the most and least impacting factor
with respect to the customer satisfaction. The SERVQUAL five dimensions (Parasuraman, 1988) are used in
this study. The variables are Assurance, Empathy, Reliability, Responsiveness and Tangibility(Parasuraman,
1994). The relationship of five variables and the customer satisfaction is depicted in figure 1.
Assurance
Empathy
Responsiveness
Tangibility
Z2 . p.q
n = 2
e
Z = 1.96,
p = 0.5,
q = 0.5,
e = 0.05
(1.96)2 × 0.5 × 0.5
n =
(0.05)2
0.9604
=
0.0025
= 384 Respondents
Gujarat State
5. DATA ANALYSIS
Table 1
Age
Table 2
Gender
Table 3
Occupation
Table 3 shows the occupational profile of the respondents. Here, 60.7% respondents are Private sector
employee, followed by Self-employed respondents of 29.2%. Out of 384 respondents, 33 are government
employees, which constitute to 8.6% of the total sample. 1.6% of the respondents are housewife. Overall,
there is mix sample from all segments of occupation.
Table 4
Education Level
Table 5
Monthly Income
Table 6
Item wise Cronbach alpha
Table 7
KMO test
Table 8
Total variance explained and cumulative variance (in %)
Table 9
Factor Analysis
Table 10
Correlation
Table 11
Regression analysis
6. CONCLUSION
The study is done to determine the customer’s satisfaction from the quality of banking services on
the basis of different constituent factors.The study is carried out using the reliability analysis, factor
analysis, correlation analysis and regression analysis. The result of reliability analysis reveals data to
be “acceptable” for analysis. The factor analysis is carried out and revealed the customer satisfaction
from the Service quality. The result of correlation analysis depicted the positive correlation among the
customer satisfaction and each selected variable. The regression analysis has drawn a result showing
positive and significant impact of service quality of customer satisfaction. Among all the factors, the
customer satisfaction was highly depending on Assurance and least depends on the reliability. Moreover,
all the five aspects are accepted which reveals the significant impact of service quality on the customer
satisfaction. The same results are also found by some of the previous researchers (Chong et al., 2011;
Bahia and Nantel, 2000).
The present study also has some managerial implication. Through the service quality analysis bank
managerscan able to draft their strategies by focusing more on such areas which are of high importance
to the customer satisfaction. Moreover, Banking in india is now becoming more and more competitive. In
such situation each customer is important for banks. Service quality is a factor because of which customer
is attracted towards the banks. Thus, the bank can focus on the high importance areas, i.e. Assurance,
Empathy and tangibility and can get more customers.
209 International Journal of Economic Research
Parag Rijwani, Ritesh Patel and Nikunj Patel
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