THE EFFECT OF SERVICE QUALITY ON CUSTOMER

SATISFACTION, THE CASE OF SIINQEE BANK, THREE

SELECTED BRANCHES (FICHE, DEGAM, AND GERBA
GURACHA)

SALALE UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS DEPARTMENT

OF MANAGEMENT

A Proposal Summited to the Department of Management, College of Business

and Economics, Salale University for the partial fulfillment of the Requirement
for the Award of Masters of Business Administration.

By; -
Dirbeba Lemma Id No. RM0016/15
Main Advisor: Lemma B. (PhD)
Co-Advisor: Dereje M. (MA)

January, 2024
Fiche, Ethiopia
 CERTIFICATE
This is to certify that the Proposal entitled “The Effect of Service Quality on Customer
Satisfaction, The Case of Siinqee Bank, Three Selected Branches (Fiche, Degam, And Gerba
Guracha)”, submitted to the Department of Management, College of Business and

Economics, Salale University by Dirbeba Lemma Garedew, for the degree of

Masters of Business Administration, is original work done by the candidate under
my supervision and all the proposal works were undertaken by the candidate under
my supervision and guidance. Therefore, this proposal has been submitted for
examination with my approval.

Name of the main advisor: Lemma B. (Ph.D.), Signature--------------Date-------

Name of co-advisor: Dereje M. (M.A), Signature--------------Date-------

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 ACKNOWLEDGEMENT
First and foremost, I would like to give my glory and praise to the Almighty GOD for his
invaluable care and support throughout the course of my life which helped me from the inception
of my education to its completion and enabled me to achieve my career. Next, I’m grateful to my
Advisor Dr. Lemma Belay for his patience, motivation, and valuable support while conducting
this Proposal writing. Especially, his prompt advice, tolerance guidance, and useful criticisms
throughout the course in preparing the proposal.

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TABLE OF CONTENTS Page
CERTIFICATE ............................................................................................................................... ii

ACKNOWLEDGEMENT ............................................................................................................. iii

LIST OF TABLES ........................................................................................................................ vii

LIST OF FIGURES ..................................................................................................................... viii

ABBREVIATIONS AND ACRONYMS .................................................................................... viii

ABSTRACT..................................................................................................................................... ix

CHAPTER ONE ............................................................................................................................. 1

INTRODUCTION .......................................................................................................................... 1

1. Background of the Study ......................................................................................................... 1

1.1 Background of the Organization ........................................................................................... 2

1.2 Statement of the Problem ...................................................................................................... 5

1.2.1 Rationale of the study ..................................................................................................... 6

1.3 Objective of the study ........................................................................................................... 7

1.3.1 General objective ............................................................................................................ 7

1.3.2 Specific objective ........................................................................................................... 7

1.4 Hypothesis of the study ......................................................................................................... 8

1.5 Significance of study ............................................................................................................. 8

1.6 Scope of the study ................................................................................................................. 9

1.7 Limitations of the Study ........................................................................................................ 9

1.8 Operational Definition........................................................................................................... 9

1.9 Organization of the Study ................................................................................................... 10

CHAPTER TWO .......................................................................................................................... 11

LITERATURE REVIEW ............................................................................................................. 11

2. Theoretical Literature................................................................................................................ 11

2.1 Definition of Service ........................................................................................................... 11

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 2.1.1 The characteristics of services ...................................................................................... 12

2.2 Service Quality .................................................................................................................... 13

2.2.1 Service Quality Model .................................................................................................. 14

2.2.2 Service Quality Gap Model .......................................................................................... 16

2.3 Customer Expectation & Satisfaction ................................................................................. 18

2.3.2 Customer Satisfaction ................................................................................................... 18

2.4 Customer Satisfaction Measurement ................................................................................... 20

2.5 The Relationship between Service Quality and Customer Satisfaction .............................. 20

2.6 Customer loyalty ................................................................................................................. 21

2.7 Measurement of Service Quality ......................................................................................... 21

2.8 The Empirical Literature ..................................................................................................... 22

2.9 Conceptual Framework of the Study................................................................................... 26

CHAPTER THREE ...................................................................................................................... 28

RESEARCH METHODOLOGY.................................................................................................. 28

3.1 Description of the Study Area ............................................................................................. 28

3.2 Research Design and Approach .......................................................................................... 28

3.3 Type and source of data ...................................................................................................... 29

3.4 Methods of data collection .................................................................................................. 29

3.5 Sample design ..................................................................................................................... 30

3.5.1 Study population ........................................................................................................... 30

3.5.2 Sampling technique ...................................................................................................... 30

3.5.3 Sample size determination ............................................................................................ 31

3.6 Reliability and Validity Test ............................................................................................... 32

3.7 Data analysis ....................................................................................................................... 33

3.7.1 Descriptive statistics ..................................................................................................... 33

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 3.7.2 Inferential statistics ....................................................................................................... 33

3.8 Ethical considerations ......................................................................................................... 34

3.9 TIME PLAN AND COST BUDGET.................................................................................. 35

4. Cost Budget ........................................................................................................................... 35

References ..................................................................................................................................... 37

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 LIST OF TABLES
Table 1 Summary of Gaps ............................................................................................................ 25
Table 2 population of sample ........................................................................................................ 32
Table 3 Reliability......................................................................................................................... 33
Table 4 Time plan ......................................................................................................................... 35
Table 5 Labor cost ........................................................................................................................ 35
Table 6 Questioner cost ................................................................................................................ 35
Table 7 Summary of cost .............................................................................................................. 36

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 LIST OF FIGURES
Figure 1 Conceptual model Source: previous literature & own design, (2024) ........................... 27

ABBREVIATIONS AND ACRONYMS

CAD - Cash Against Documents

MFIs - microfinance institutions

NBE - National Bank of Ethiopia

SERVQUAL- Service Quality

SERVPERF - Service Performance

SPSS - Statistical Package for Social Science

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 ABSTRACT
Due to the economy's large growth in the service sector, there is fierce rivalry in this field. In
Ethiopia, the banking sector is one of the most important service industries, and it is highly
competitive. So the main objective of this study will be to assess the effect of service quality on
customer satisfaction in Siinqee Bank North Shoa district selected (Fiche, Degam, and
G/Guracha) branches and to investigate the effect of service quality dimensions on customer
satisfaction under the study area. The banking industry is one of Ethiopia's most significant service
sectors. As a result, they frequently figure out a way to be competitive in this violent market. This
tactic frequently concentrates on enhancing service quality to raise customer satisfaction to
fiercely compete and attract more customers.

Because service quality is relevant to keeping up their competitive advantage and improving
customer satisfaction. A conceptual model of service quality dimensions is developed. Data for
this study will be collected from the North Shoa district selected (Fiche, Degam, and G/Guracha)
branches, to achieve the goals of the study, a questionnaire based on the five service quality
dimension model is developed. Stratified sampling techniques will be used to choose the samples,
which consists of 398 individuals. This study will utilize the quantitative and qualitative research
design as well as primary and secondary data. The primary data analysis will be conducted using
SPSS software version 27. The researcher also shows how customer satisfaction and service
quality variables are associated using multiple regression and correlation.

Keywords: Tangibility, Reliability, Responsiveness, Assurance, Empathy, Customer

Satisfaction.

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 CHAPTER ONE
INTRODUCTION
This chapter shows the overall content of the study. It is contented with a background of the study
the organization, the statement of the problem, the Rationale of the study, the objective of the
study, the Hypothesis of the study, the significance of the study, the scope of the study, and the
eventual organization of the study.

1. Background of the Study

According to (Johnson & Karlay, 2018), Service quality may be a predictor of customer
satisfaction. Higher service quality will result in happier customers. Clients want to be sure they
get correct information, have options, have excellent communication, obtain consulting, and the
interaction goes smoothly. Meeting these demands would keep the firm going forward while also
fortifying the relationships between the parties and increasing their level of satisfaction and
customer loyalty.

Service quality may be a technique that facilitates to administration of business processes to make
sure to make full customer satisfaction which helps to extend the aggressive and effectiveness of
the business. It is recognized by businesses that improving service quality is an essential strategy
for success and survival in today’s competitive economic environment. The literature makes it
clear that offering high-quality services makes a business competitive and boosts productivity and
profitability. It boosts cash flow and shareholder value, raises the likelihood of success for
businesses, improves customer pleasure, increases the likelihood that customers would speak well
of the service provider, lowers customer churn, and increases customer loyalty. (Freymann, 2011)

All employees in service-oriented businesses must be customer-focused and engage with clients
to meet their requirements and make them happy. In other words, there needs to be a dedication to
providing excellent customer service from staff members and support from management at all
levels. Therefore, staff members who deliver goods or services must maintain up-to-date
knowledge about the company's health in terms of satisfying the expectations of its clients.
(Munna, 2009). Service organizations stand from huge International corporations for instance
airlines, hotels, telecommunication, banking industries, etc. Bank services are made up of a very
complex mix of intangibles (Aydin & Yildirim, 2012). Thus, measuring customers’ expectations,
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as well as their service quality is a real challenge because customer satisfaction is determined by
many intangible factors such as the neatness of the servers and their behaviors, etc.

Defining service quality is not as simple as defining product quality; this is because of the nature
of services. (Parasuraman et al., 1985) have developed a service quality measurement tool
(SERVQUAL) and defined service quality as the gap between customer expectation and
perception based on five dimensions. They further define consumer’s perception of service quality
as a function of the difference between expectations about the performance of a general class of
service providers and assessment of the actual performance of a specific service within that class.
The author identifies five dimensions of service quality measurement as a tool these are: tangibles,
reliability, responsiveness, assurance, and empathy. Based on the five factors, The SERVQUAL
model defines quality as the divergence between customer’s expectations and perceptions of the
service delivered to measure quality the respondents are asked to answer sets of questions dealing
with the same subject (Kotler & Keller, 2012).

As of right now, the most crucial element in a bank's survival and ability to set itself apart from
rival institutions is its level of service quality. The quality of services is extremely important in a
highly competitive Bank such as that of the Siinqee Bank operating environment. Beyond that,
delivering high-quality services supports meeting several requirements such as customer
satisfaction, customer loyalty, market share, soliciting new customers, improved productivity,
financial performance, and profitability (Sata Shanka, 2012). Because of increasing competition
in the banking industry, customer service is the most important part that must give due attention
to customer satisfaction. The Banks challenged by the pressures of globalization, as well as
competition from financial institutions, in addition to volatile market dynamics, are constantly
seeking new strategies to add more value to their services (Murugiah & Akgam, 2015).

1.1 Background of the Organization

Bank plays an important role in the economic development of a country. It is a financial institution
that accepts deposits and channels those deposits into lending activities either directly or through
capital markets. A bank connects customers who have capital deficits to those customers who have
capital surpluses. The banking industry in Ethiopia is facing certain challenges such as challenges
of quality service, customer satisfaction, customer retention, and Customer loyalty; Quality service

2
plays a major role in achieving customer satisfaction and creating brand loyalty in the banking
sector. (Sata Shanka, 2012)

Siinqee Bank, the Formal Oromia Credit & Saving, is among the first microfinance institutions
(MFIs) to grow into banking institutions after the Central Bank of Ethiopia allowed MFIs to evolve
into full-fledged banks.

Siinqee Bank is an icebreaker in the country to be grown from Microfinance Institution, with a
huge capital of Birr 7.1 billion. The Bank is named after Oromo Women's Cultural Practice called
SIINQEE which is part of the grand Geda System. Siinqee is a social power designated to Oromo
women to protect their rights, mediate disputes, safeguard their communities, promote coexistence
and cooperation, and bring about peace and stability.

The Bank works to provide integrated, inclusive, and innovative banking and microfinance
services through its committed, dynamic, and disciplined employees by deploying state-of-the-art
information technology to empower society and maximize stakeholders’ value with a special focus
to be the financial alternative and sources of area knowledge with adherence to the spirit of the
law. To be the Leading Bank in Financial Inclusion and Transformation.

Siinqee had its transformation in May 2021 with 22 shareholders and a paid-up capital of 4.4
billion birr. Which the shareholders managed to rise to 7.45 billion birr. The bank pursues values
like integrated, inclusive, and innovative banking and microfinance services so that women
possess it in society.

Siinqee Bank branches have reached over 400 branches across the country, 2 million customers,
and have managed to mobilize 6.1 billion in deposits. With a total capital of 8.09 billion Br. Siinqee
Bank made its official debut in the banking industry with a capital base that put it on a footing with
veterans a few months ago. (Siinqee Bank Review 2023)

1.1.1 Services Provided by Siinqee Bank

Siinqee Bank Loan Services

i) Term Loan;-Siinqee Bank provides many loan services classified into different types
based on the term duration.

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Short-Term Loan, a Medium-Term Loan, and a Long-Term Loan:

a) Agriculture Term Loan; - It is a short to long-term loan granted for agricultural investment,
agricultural machinery, and production input.

b) Domestic Trade and Services (DTS) Loan;-Credit assistance in the form of working capital
is crucial for the smooth flow of goods from producers to end users or consumers through local
traders.

c) Micro-finance institutions’ Loans;-is a loan availed to institutions that work on providing

credit for Micro-entrepreneurs mainly in the form of term loans that are repayable within short to
medium terms.

ii) International banking

a) Import Trade Service;-Siinqee Bank provides import and export services to its customers who
are involved in international business SIB provides expertise advice and quick customer services
to lay the platform to smooth trade activities and transactions between sellers and buyers.

b) Export Trade Service;- Helps customers to get their products to the worldwide market through
different payment methods(Letters of Credit (L/C), Cash Against Documents (CAD), Cash in
advance, and Consignment) following a similar process with their specific requirements.

c) Forex Services;-Siinqee bank has its forex license from NBE (National Bank of Ethiopia) to
provide currency services to its customers. Customers can get access to these services at the nearest
Siinqee bank branch.

Today, Siinqee Bank delivers a full-fledged Bank service that gives its customers a large variety
of business banking services with 400 Branches (Internal memo dated November 2021). Single
Bank is functioning in prioritizing the approaching years to strengthen its capital base, maximizing
its come-on equity, and cashing in on the most recent technology that follows with the most recent
developments within the native and international money service business (Annual Report 2021).

customer satisfaction is also crucial in the banking sector because of the special nature of the
service which is characterized by intensive contact with customers who have different needs and
require customized solutions and it is known to be one of the most important and serious issues
towards success in today’s competitive business environment.

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As this study encompasses the effect of service quality on customer satisfaction the case of
Siinqee Bank is going to give a brief solution for both customers who need quality service and
satisfaction, and also for the company to make it a winner in terms of its competitors.

1.2 Statement of the Problem

Customer satisfaction is a widely recognized and established notion in the domains of welfare
economics, economic psychology, marketing, and consumer research, among others. According
to the most frequently recognized interpretations offered by various authors, satisfaction is a
feeling that results from a process of evaluating what was expected and what was received, taking
into account both the needs and wants related to the purchase as well as the decision to make it.
Customer happiness is essential to a business's success and survival. Customer satisfaction is
critical to any product or service because it is a strong predictor of customer retention and product
repurchase (Kotler & Keller, 2007).

In today's market, addressing the needs of customers through efficient service is the primary focus
of all business operations, resulting in a more customer-oriented market. The level of service
quality has a significant impact on customer satisfaction. It is acknowledged as being essential to
the longevity of any business system and the source of an organization's competitive advantage.
Continuous assessment of the service delivery quality is at the center of every service-giving
organization (Puri & Singh, 2018).

The financial services that banks offer are typically homogeneous products that face powerful
competition in deregulated markets. In the last several years, this has placed a significant burden
on the bank sector as management has struggled to accurately understand what customers want
and expect from them. To stand out from competitors, banks have attempted to improve the quality
of their services, which is essential for growing their market share.(Sanchez et al., 2010).

Due to this, the service quality has gained more importance in the banking industry. Also, much
empirical evidence could be found in the literature worldwide investigating the relationship
between service quality and customer satisfaction such as(Sthapit, 2023) (Agarwal & Dhingra,
2023), and (Generation, 2020) indicated that there is a direct relationship between service quality
dimensions and customer satisfaction in a different sector. This indicated that service quality has
played a great role as a means to satisfy and retain customers.

5
Also, there are empirical studies conducted in Ethiopia by different individuals targeted to identify
the effect of service quality on customer satisfaction in the bank sector. To mention some of them,
(Kelil, 2018); (Getahun, 2019) (Salfore Sharecho & Raghava, 2022). Some conduct research,
Based on extensive information from this study, banks with several branches have not received
much attention when it comes to the relationship between service quality and customer satisfaction
in Ethiopia and the study has Knowledge and Methodological gaps. To overcome these Research
gaps the Researcher will use large samples from different branches, Quantitative and Qualitative
Research Designs, and probabilistic sampling Designs.

Even though several researches have been done on the banking industries of Ethiopia, there is no
research made on Siinqee Bank. Therefore the main interest of this study is to assess the effect of
service quality on customer satisfaction in Siinqee Bank in the area of North Shoa district (Fiche,
Degam, and G/Guracha) branches.

1.2.1 Rationale of the study

The financial services sector has become so competitive in recent times due largely to the
liberalization of the banking industry. Also, as a result of the changing technologies, pressure to
achieve corporate objectives, the need to improve productivity and profitability, and the need to
control operation costs and prevent wastage, there is a need to improve customer service in the
industry. In the past, most service providers hardly acknowledged the importance of customer
service. However, the modern customer expects to be treated as an equal partner with courtesy and
efficiency (Otoo, 2016). Increased competition, highly educated consumers, and an increase in the
standard of living are forcing many businesses to review their customer service strategy. Many
business firms are channeling more efforts to retain existing customers rather than to acquire new
ones since the cost of acquiring one new customer is greater than the cost of retaining existing
customers. There is enough evidence that demonstrates the strategic benefits of quality in
contributing to market share and return on investment (Rai & Srivastava, 2012).

In the context of Siinqee Bank, there are many barriers such as Inconsistency in Service Quality:
Siinqee Bank operates multiple branches, each catering to a diverse customer base. Despite efforts
to standardize service quality, variations have been observed across branches, raising concerns
about the consistency of service delivery. Inconsistencies may lead to disparities in customer

6
experiences, impacting the bank's overall reputation and customer loyalty(Motuma Getachew,
2021).

Reports and feedback from customers indicate a rising trend of dissatisfaction with the services
provided by Siinqee Bank. This dissatisfaction may be rooted in factors such as prolonged waiting
times, transaction errors, or inadequate communication. Understanding the specific sources of
discontent is vital for addressing customer concerns and retaining a satisfied client base. (Own
survey)

Competitive Advantage: In the dynamic landscape of the Ethiopian banking sector, maintaining a
competitive advantage is essential for sustained growth (Dawit Degefa, 2019). Siinqee Bank needs
to ensure that its service quality aligns with or surpasses industry standards. Failure to address the
identified problems may result in a loss of market share to competitors who excel in providing
superior services.

1.3 Objective of the study

1.3.1 General objective

The general objective of this study is to assess the Effect of Service Quality on Customer
Satisfaction, in the case of the Siinqee Bank Branches, (Fiche, Degam, and Gerba Guracha).

1.3.2 Specific objective

The specific objective of the study:

1. To examine the effect of tangibility on customer satisfaction in the case of Siinqee Bank.

2. To examine the effect of reliability on customer satisfaction in the case of Siinqee Bank.

3. To examine the effect of responsiveness on customer satisfaction in the case of Siinqee

Bank.

4. To examine the effect of assurance on customer satisfaction in the case of Siinqee Bank.

5. To examine the effect of empathy on customer satisfaction in the case of Siinqee Bank.

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 1.4 Hypothesis of the study
In light of the objectives expressed above, the following hypotheses will be investigated in the
Banking Services:

𝐻1 = There is a positive relationship between tangibility and customer satisfaction in Siinqee

Bank at selected branches.

𝐻2 = There is a positive relationship between reliability and customer satisfaction in Siinqee

bank at selected branches.

𝐻3 = There is a positive relationship between responsiveness and customer satisfaction in

Siinqee bank at selected branches.

𝐻4 = There is a positive relationship between assurance and customer satisfaction in Siinqee

bank at selected branches.

𝐻5 = There is a positive relationship between empathy and customer satisfaction in Siinqee

bank at selected branches.

1.5 Significance of study

This study will be significant in the following regards;

The findings will offer practical insights to Siinqee Bank on how to improve service quality,
ultimately enhancing customer satisfaction, Academic Contribution to the existing body of
knowledge by exploring the specific dynamics of service quality and customer satisfaction.

It will support the creation and execution of initiatives by Siinqee Bank to enhance service quality
and give the general public a better idea of the bank and the ability of the services it offers. It is
intended that the data gathered will serve as a foundation for better banking operations and service
development choices. The finding of this study helps banks to understand the role of good customer
service on customer satisfaction. It provides solutions for bank industry service quality problems
and it may give them an idea of where they are currently in terms of their service quality and what
they should do in the future.

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 1.6 Scope of the study
The study scope would limited to the study of the effect of service quality on customer Satisfaction
in the case of Siinqee Bank would conducted on selected branches. Even though, as it is well
known Siinqee Bank has many branches in different areas; due to time and financial constraints,
the study does not undertake all branches of Siinqee Bank. This study will not include non-sampled
branches of Siinqee Bank and other private banks and the time before and after study schedule are
not included in the area of study. This is because branches have a lot of customers and a large
amount of transactions and time and resource limitations, the data is collected only from selected
branches of the North Shoa district. As a result, it’s better to measure customer satisfaction from
the viewpoint of service quality in these types of branches as it can have a major effect on the
bank's service delivery and customer satisfaction.

1.7 Limitations of the Study

This study is restricted to the Effect of service quality on customer satisfaction in Siinqee Bank
North Shoa branches, specifically three selected branches (Fiche, Degam, and Gerba Guracha),
even though Siinqee Bank operates throughout the country. Even still, the results of this study
would have been far more significant if a larger sample of consumers had been involved because
different geographic populations may have varied perspectives on the quality of customer service.

Unfortunately, time and budgetary limitations prevented the study from being expanded to
examine the relationship between the customer satisfaction levels of outlying branches and city
branches about the perception of the need for bank services. Consequently, the study's subjects
were limited to the city branches' key Customers.

1.8 Operational Definition

Service quality: - perceptions resulting from a comparison of consumer expectations with actual
service performance” (Parasuraman et al., 1985).

Customer satisfaction: - is the feeling of somebody satisfied or otherwise once comparing reality
and expectations received from a product or service (Genoveva, 2015)

Customer Expectation; - Customers hold different types of expectations concerning service, the
very best form of these are appropriate and required services (Phiri & Mcwabe, 2013).

9
Reliability;- depends on handling customers' service problems; performing services right the first
time; providing services at the promised time and maintaining error-free records. (Yang et al.,
2004).

Responsiveness; - defined as the willingness or readiness of employees to provide service. It

involves timeliness of services (Parasuraman et al., 1985).

Empathy; - the caring and individual attention the firm provides its customers. (Parasuraman et
al., 1985).

Assurance; - knowledge and courtesy of employees and their ability to inspire trust and
confidence. (Parasuraman et al., 1985).

Tangibility; - the appearance of physical facilities, equipment, personnel, and written materials
(Parasuraman et al., 1985).

1.9 Organization of the Study

The study was incorporated into three chapters, which have the following:-

Chapter one was all regarding the introduction of the study, the background of the organization,
statement of the problem, Rationale of the study, Objective of the study, Hypothesis of the study,
the significance of the study, the scope of the study, Limitation of the study, Operational Definition
and Organization of the study.

Chapter two deals with the literature review that consists of theoretical and empirical frameworks
chapter three deals with the overall research methodology and lastly deals with cost breakdown
and budget

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 CHAPTER TWO
LITERATURE REVIEW
2. Theoretical Literature

2.1 Definition of Service

Since the 1980s, the term "service" has been defined by Churchill and Surprenant (1982), who
popularized the customer satisfaction theory by gauging a company's actual service delivery about
customers' expectations, which are determined by achieving perceived quality, or exceeding
customers' expectations in terms of wants and needs.

(Panjaitan & Siagian, 2020) demonstrated that the service sector of the economy is one in which
the activities involved in production generate benefits with a monetary value rather than tangible
physical products; in this sense, production, and consumption occur simultaneously and cannot be
stored; services are also actions, procedures, and methods of performing specific tasks that provide
customers with a sense of value beyond meeting their needs and expectations.

Many writers define ‘service’ in different ways: for example (Kotler & Armstrong, 2018) Defined
service as "any activity or benefit that is essentially intangible and does not result in ownership of
anything that one party can offer to another." Its manufacture might or might not be connected to
a tangible good. Any intangible acts carried out by people, technology, or both to improve users'
perceptions are referred to as services. Even though service providers and customers work together
to perform services, the customer's perception and evaluation of the services' quality depends on
it. (Rao; 2007).

According to (Grönroos, 2006), Services are an ongoing process of interactions between customers
and service providers that include a variety of intangible activities offered as superior (quality)
solutions to client's problems, as well as the financial, material, and other helpful components of
the system that are involved in delivering these services. All things considered, services are the
creation of a necessary good, either on their own or as a major, non-ancillary component of a
physical good that, in return for some sort of exchange, meets a specific need for a client.

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 2.1.1 The characteristics of services

Four distinctive service characteristics greatly affect the design of promoting programs:
intangibility, inseparability, variability, and perishability (Kotler & Keller, 2006).

1. Intangibility

This is the most basic and often mentioned difference between goods and services. Unlike tangible
goods, services cannot generally be seen, tasted, felt, heard, or smelled before being consumed.
The potential customer is often unable to perceive the service before (and sometimes during and
after) the service delivery.

2. Inseparability (Simultaneous Production and Consumption).

There is a marked distinction between physical goods and services in terms of the sequence of
production and consumption: Whereas goods are first produced, then stored, and finally sold and
consumed, services are first sold, then produced and consumed simultaneously.

The involvement of the customer in the production and delivery of the service means that the
service provider must exercise care in what is being produced and how it is produced. The latter
task will be of particular significance. How teacher doctors, bank tellers, lawyers, car mechanics,
and hairdressers conduct themselves in the presence of the customer may determine the likelihood
of repeat business. Therefore, proper selection and training of customer contact personnel is
necessary to ensure the delivery of quality.

3. Variability (Heterogeneity)

An unavoidable consequence of simultaneous production and consumption is variability in the

performance of a service. The quality of the service may vary depending on who provides it, as
well as when and how it is provided. One hotel provides a fast efficient service and another, a short
distance away, delivers a slow, inefficient service. Within a particular hotel, one employee is
courteous and helpful while another is arrogant and obstructive. Even within one employee, there
can be variations in performance over the course of a day.

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4. Perishability

Services cannot be stored for later sales or use. Hotel rooms not occupied, airline seats not
purchased, and college places not filled cannot be reclaimed. As services are performances they
cannot be stored. If demand far exceeds supply it cannot be met, as in manufacturing, by taking
goods from a warehouse. Equally, if capacity far exceeds demand, the revenue and/or value of that
service is lost. Fluctuations in demand characterize service organizations and may pose problems
where these fluctuations are unpredictable. Strategies need to be developed to produce a better
match between supply and demand. (Worku et al., 2020).

Generally, as a consequence of these characteristics, service marketing must pay particular

attention to the tangibility of the services and reduce consumer-perceived risk. Furthermore, the
process of service delivery also attracts marketing attention because the involvement of the
consumer in the process suggests that the nature of delivery may have a significant impact on
consumer evaluation of the service. Tennewand Waite, (2007).

2.2 Service Quality

According to Lewis and Booms (1983), a service's quality determines whether it can fulfill or
surpass the expectations of its customers. When a customer submits a service request, the service
encounter is typically completed at the service interface. The requested service is subsequently
provided by the service provider and is concurrently received by or used by the customer.

Service quality is an important tool for measuring customer satisfaction (Hazlina et al., 2011).
Service quality can be defined as “perceptions resulting from a comparison of consumer
expectations with actual service performance” (Parasuraman, Zeithaml & Berry., 1985). Service
quality is important for the development and maintenance of an organization's credibility and
reputation. In addition to improving organizational performance, success, and profitability, it is
essential for ensuring customer satisfaction. Consequently, for an organization to thrive in the
cutthroat market, it must prioritize service quality and customer pleasure.

However businesses must be able to quantify the several facets of the customer's viewpoint to
better understand the needs, wants, and expectations of their clients and how to meet those
demands. A specific framework for determining and assessing quality is necessary because of the

13
intricate and unique characteristics of services, which make it extremely challenging to measure
service quality.

In the competitive banking industry, customer satisfaction is considered as the fundamental of

success. Satisfying customers is one of the main objectives of every business. Businesses recognize
that keeping current customers is more profitable than having to win new ones to replace those
lost since it costs the company a lot of money. Management and marketing theorists emphasize
the importance of customer satisfaction for a business’s success (Mccoll-Kennedy & Schneider,
2000).

Banks must always increase the standard of service incessantly since there is no assurance that the
current outstanding service is appropriate for the future. Thus, banks ought to develop new
strategies to satisfy their client and should give quality services to realize a competitive advantage
over competitors (Siddiqi, 2011).

2.2.1 Service Quality Model

In response to these methods, several models such as disconfirmation models or attitude-based

measures have been created to quantify the quality of services. (R. Singh & Khanduja, 2010)
asserts that measuring service quality is crucial because it makes it possible to compare outcomes
before and after modifications, pinpoints issues with quality, and aids in the establishment of
precise guidelines for service delivery.

The SERVPERF model developed by (Cronin & Taylor, 1992), uses the performance approach
method which measures service quality based on the customer’s overall feeling towards service.
This model is good for measuring service quality but does not provide information on how
customers will prefer service to be for service providers to make improvements.

Teas, (1993), developed the Evaluated Performance model which measures the gap between
perceived performance and the ideal amount of a dimension of service quality, rather than the
customer’s expectation. This was to solve some of the criticism of some previous models.

(Parasuraman et al., 1985), developed a model of service quality after carrying out a study on four
service settings: retail banking, credit card services, repair and maintenance of electrical
appliances, and long-distance telephone services. The SERVQUAL model represents service
quality as the discrepancy between a customer’s expectations of service offering and the
14
customer’s perceptions of the service received Parasuraman et al., (1985). This makes it an attitude
measure. What this model strives to measure exactly is the consumer perception of the service
quality which depends on the size of the gap between expected service and perceived service which
in turn, depends on the gaps under the control of the service provider such as delivery of service,
marketing, (Parasuraman et al., 1985). This measurement of service quality is based on both how
a consumer evaluates the service delivery process and the outcome of the service.

The SERVQUAL model was made of ten dimensions of service quality when created; tangibles,
reliability, responsiveness, communication, credibility, security, competence, courtesy,
understanding the customer, and access, (Parasuraman et al., 1985) but later on these dimensions
were reduced to five because some dimensions were overlapping (communication, credibility,
security, competence, courtesy, understanding customers and access) and they included,
Tangibles- physical facilities, equipment’s, and staff appearance.

a) Reliability

Reliability requires handling customer service concerns, finishing jobs accurately the first time,
providing services on time, and maintaining error-free documentation. Furthermore, they stated
that dependability is the most important component of traditional service (Parasuraman et al.,
1988). Additional elements of reliability include precise order fulfillment, precise paperwork,
precise bids, precise invoicing, precise commission computations, and upholding service
commitments. Furthermore, he said that dependability is the most important component of
financial services.

b) Responsiveness

Responsiveness is the state in which an employee is ready or willing to help. The issue is one of
timely service delivery (Parasuraman et al., 1985). It also means understanding the needs and
preferences of the customer, having convenient hours, giving personalized attention, addressing
problems, and ensuring the customer's security at all times.

15
 c) Empathy

According to (Parasuraman et al., 1985), empathy is the considerate and customized service a
business offers its customers. It entails providing each customer with individualized attention,
having staff members who are aware of their needs, and having convenient business hours. In their
study on private sector banks, (Anthonisamy, 2014) defined empathy as understanding the unique
needs of the customer, providing personalized attention, having the best interests of the customer
at heart, and offering convenient operation hours.

d) Assurance

(Parasuraman et al., 1985) defined assurance as the staff members' ability to inspire confidence
and trust as well as their knowledge and civility. According to (Anthonisamy, 2014), assurance in
British banks is described as having a management team with expertise and competence, offering
financial advice, having comfortable interiors, having easy access to account information, and
having polite and helpful staff.

e) Tangibility

(Parasuraman et al., 1985) defined tangible as the physical appearance of written materials,
personnel, facilities, and equipment. (Ananth et al., 2011) defined tangibility in their research of
private sector banks as having visually appealing items, a physical facility, well-groomed
personnel, and modern-looking equipment.

2.2.2 Service Quality Gap Model

According to Parasuraman, A., V., Berry, & L. (1988), who developed a gap analysis-based service
quality model, service quality is a function of the differences between performance and
expectations along the quality dimensions. The many gaps in the model are shown as follows:

Gap 1: Customer expectation – management perception gap:

There are differences between the expectations of consumers and the perceptions of executives.
Essentially, executives at service firms might not always know what qualities consumers associate
with high quality in advance, what features a service must have to satisfy their needs, and what
performance level is required for those characteristics to provide high-quality service.

16
Gap 2: Management perceptions – service quality specification gap:

The gap between management's view of what customers expect from management and the actual
requirements set forth for a service can be caused by several factors, including resource constraints,
market conditions, and/or management apathy. From the perspective of the customer, service
quality will be impacted by this discrepancy between management's assessment of customer
expectations and the company's service quality requirements.

Gap 3: Service quality specifications – service delivery gap:

High-quality service may not always be guaranteed, even in situations where there are rules for
providing good customer service and handling complaints. Executives understand that employees
of service firms have a significant impact on how consumers view the quality of their work and
that performance standards aren't always met. From the perspective of the customer, service quality
will be impacted by the discrepancy between the specifications and the actual provision of services.

Gap 4: Service delivery – external communications gap:

Consumer expectations can be influenced by an Organization's media advertising and other

communications. If consumers' perceptions of service quality are heavily influenced by
expectations, businesses must take care to avoid making unfulfilled promises in their
communications. Setting higher initial expectations and then lowering them when promises are
not kept will result in promising more than can be achieved. Customers' perceptions of the services
they receive as well as their expectations about them might be influenced by external
communications.

Gap 5: Expected service – perceived service gap:

Meeting or surpassing customer expectations is essential to providing high-quality services.

Customers' perceptions of real service performance about their expectations determine whether a
service is rated as high or low quality. The size and direction of the difference between the expected
and perceived quality of a service determines its perceived quality by the customer.

17
 2.3 Customer Expectation & Satisfaction
2.3.1 Customer Expectation

Consumers have varying expectations when it comes to services; the best kinds of expectations
are those that are desired and adequate. The quality of service that a customer wants to obtain is
known as desired service. (Zeithaml et al., 1993).

The expectations signal the extent of client hopes and desires and belief that they will be
consummated, so failure to satisfy these expectations could result in customers lowering on
purchase, customers usually settle for that the service wouldn't continually be performed in step
with their expectations and this is often rest referred to as adequate service(Pranav et al., 2014).

Adequate service is the level of service that customers can settle for though' customers’ hopes and
desires should be high; they have a particular level of understanding in cases where receiving
desired service doesn't appear realistic in the slightest degree. For instance, customer’s area units
won't to the self-service approach employed in the market and so have sure levels of understanding
or tolerance towards food retailers‟ service delivery (Pranav et al., 2014).

2.3.2 Customer Satisfaction

(Segoro & Limakrisna, 2020) say that customer satisfaction is the consumer's attitude, assessment,
and emotional response to the product they purchase and the services they enjoy. Customer
satisfaction can be viewed as a customer's entire attitude toward a service provided, a customer's
emotional responses to how a product or service fulfills their desires, including the level of
response above and below the desired level, define customer satisfaction. It is an indicator that
customers are satisfied with a product or service.

In the competitive banking industry, Customer satisfaction is considered to be the foundation of

success. Keeping customers satisfied is one of the main objectives of every business. Businesses
know that keeping their present customers is more profitable than trying to get new ones to make
up for lost sales, as the latter may be very expensive. Management and marketing experts
emphasize how important customer satisfaction is to a company's success (Kennedy and
Schneider, 2000).

18
Good customer satisfaction affects the profitability of nearly every business. For example, when
customers receive good service, each will typically tell nine to ten people. However, customers
who receive poor service will typically relate their dissatisfaction to between fifteen and twenty
others (Krishna Naik et al., 2010). Therefore, customer satisfaction is an asset that should be
monitored and managed just like any physical asset.

A widely accepted theory of consumer satisfaction established by Oliver (1980) states that
customer satisfaction is determined by the difference between customer expectations and
perceived performance. Oliver (1980) also pointed out that customer satisfaction embodies a
consumer's psychological satisfaction, and a consumer's experience is the primary function of a
product or service. Customer needs, emotions, service, and product features are among the
antecedents that have been recognized as contributing to satisfaction. Organizations should provide
efficient customer service to increase customer satisfaction, as delighted customers are one of the
organization’s most valuable assets. Therefore, customer satisfaction is crucial for businesses,
governments, and consumers (Ricca & Antonio, 2019).

There are various components in customer satisfaction according to Wilkie (2004), as cited
(Genoveva, 2015).

(1) Expectation; - is consumer expectation for an honest or service that has been established before
customers purchase goods or services;

(2) Performance; - is client expertise on the performance of the particular product or services they
used while not impacted by their expectations;

(3) Comparison; - is completed by analysis of the expectations of the performance of the products
or services before buying and also the perception of the particular performance of the products or
services;

(4) Confirmation/Disconfirmation is client expectations are influenced by their experiences to

use the mark from the products or services completely different from others.

19
 2.4 Customer Satisfaction Measurement
Customer satisfaction measurement involves the collection of data that provides information about
how satisfied or dissatisfied customers are with a service. This information can be collected and
analyzed in many different ways. Many organizations regularly check the levels of customer
satisfaction to monitor performance over time and measure the impact of service improvement.
Henley Center Headlight Vision (Smith, 2007) states the research carried out in the UK with public
sector organizations suggests that five themes are likely to be relevant to all organizations in
measuring customer satisfaction. - Delivery of the service (how problems were handled, reliability,
outcome.) - Timeliness (waiting times, number of times contacted) - Information (accuracy,
enough information, kept informed) – Professionalism (competent staff, fair treatment) - Staff
attitude (friendly, polite, sympathetic)

2.5 The Relationship between Service Quality and Customer Satisfaction

According to (Raboca, 2006), customer satisfaction should be seen as a multidimensional
construct just as service quality meaning it can occur at multiple levels in an organization and it
should be operationalized along the same factors on which service quality is operationalized.

Parasuraman et al., (1985) suggested that when perceived service quality is high, then it will lead
to an increase in customer satisfaction. He supports the fact that service quality leads to customer
satisfaction and this is in line with those who acknowledge that customer satisfaction is based on
the level of service quality provided by the service provider.

(Rasli et al., 2011) discovered that customer satisfaction and service quality both positively impact
customers' feelings to return, demonstrating the critical roles that these two factors have in the
survival and success of any company in a cutthroat market. This study demonstrated the strong
correlation between customer happiness and service quality.

(Yi & La, 2004) conducted research to determine the relationship between customer satisfaction
and service quality. Based on their findings, they concluded that there is a strong correlation
between the two variables and that raising one is likely to raise the other. Additionally, they made
the point that service quality is more fragile than customer satisfaction because the latter is
influenced by perceptions of value (benefit relative to cost) or by the experiences of others that

20
may not have been as positive. In contrast, customer satisfaction expresses the customer's feelings
about numerous interactions and experiences with the service firm.

2.6 Customer loyalty

Customer loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or
Service consistently in the future, thereby causing repetitive purchasing of the same brand, despite
situational influences and marketing efforts. It can also be defined as the degree to which a
customer exhibits repeat purchasing behavior from a service provider, possesses a positive
attitudinal disposition toward the provider, and considers using this provider when a need for this
service arises. Loyalty is therefore an attitude or behavior that customers explicitly repeat or
exhibit (Seyed, 2007).

In addition, Loyalty in service businesses refers to the customer’s commitment to do business with
a particular organization, purchasing their products repeatedly and recommending others to the
organization’s products. (Christopher and Jochen, 2006) ascertain that customer loyalty is the
result of an organization creating a benefit for customers so that they will maintain or increase
their purchases from the organization. They indicate that true loyalty is created when the customer
becomes an advocate for the organization without incentives.

2.7 Measurement of Service Quality

According to Johns and Howard (1998), quality measurements only have operational value if they
can indicate how service was or was not satisfactory. For service providers, the assessment of
service quality is made during the actual delivery of the service.

Measurements need to take account of the service process, they need to measure both tangible and
intangible aspects of services and they should take account of the specific context in which a
service occurs. Given that services are processes; measurements need to take account of the
complete service process. Such measurements need to address all stages in the service experience,
the pre-, during, and post-service experience of the customer, and, where the design of a service is
linked to technology, if appropriate (Gilmore & David, 2000).

There have been several attempts made by a group of researchers who have systematically
identified the variables that quantify service quality, among which the two most popular metrics

21
are SERVQUAL and SERVPERF Varambally & Motlagh( 2011).SERVQUAL is based on the
conceptualization of service quality as the difference between a consumer’s Perceived
performance and Expectation (Parasuraman, Zeithaml, & Berry, 1991).On the other hand,
SERVPERF is purely a Performance-based approach to the measurement of service quality
(Cronin and Taylor, 1992). Even though SERVQUAL and SERVPERF are the most commonly
used scales of service quality measurement among these two the most commonly used measure is
SERVQUAL. There is no universal and encompassing approach to quality dimensions that can be
appropriate and applicable to all service industries and Based on the above literature review the
following conceptual framework is developed.

Across all socio-cultural and economic environments. However as discussed by many researchers
SERVQUAL has a wide range of applications in service quality measurement which includes:
health care applications Woodside, Frey, & Daly (1989) as cited by Varambally & Motlagh (2011).
Even though there is not one universally accepted measurement model of service quality that is
applicable for all types of services as already mentioned there are two most popular models namely
SERVQUAL and SERVPERF because SERVQUAL provides rich information and also as a
measurement tool it also helps as identify which parts of the service provided are contributing
positively and which aspects of the service needs to implement as a result the study used
SERVQUAL model

2.8 The Empirical Literature

So many different studies have been conducted on the effect of service quality on customer
satisfaction in the service industry including banking service. Some of these studies are the study
(DAGNE, 2022) The Effect of Service Quality on Customer Satisfaction: The Case of Commercial
Bank of Ethiopia at West Addis district selected Merkato branches. Results show that service
quality of customer satisfaction is below average, and customers are not satisfied with the service.
Based on the findings all service quality dimensions have a significant effect on service quality
and customer satisfaction. The study concluded that the service quality of banks is not good and
customers are not satisfied with the services of the organization.

The results of (Chimdessa, 2021), titled " The Effect of Service Quality on Customer Satisfaction
in Jimma University: The Case of Registrar Services." showed that customer satisfaction increases
with better service delivery Understanding the causal relationship between service quality and

22
customer satisfaction has captured the interest of Organization for well over a decade now.
Customer satisfaction became the battle cry of Organizations trying to compete in a newly
globalized marketplace.

The finding (Getahun, 2019) based on the title The Effect of Service Quality on Customer
Satisfaction: A Case Study of Commercial Bank of Ethiopia Adama, The finding of this study
indicates that customers were most satisfied with the assurance dimensions of service quality and
dissatisfied with the network quality dimension. The findings of the study also indicated that there
are positive and significant relationships between seven service quality dimensions and customer
satisfaction. And also except responsiveness all service quality dimensions have a positive and
significant effect on customer satisfaction.

Further, a (Kelil, 2018) study under the title ‘The Effect of Service Quality on Customer
Satisfaction: (the case of Commercial Bank of Ethiopia) found out service quality domination is
an important factor that has an impact on establishing good relationships with customers. The
findings show that the characteristics of service quality and customer satisfaction have a positive
relationship. The regression test revealed that providing excellent service has a beneficial impact
on overall customer satisfaction. Also, timeliness and customer happiness have the strongest link.

According to Naeem, Asma, & Iqbal, (2009), A bank can differentiate itself from competitors by
providing high-quality customer service The service quality of banking services provided to
customers has been enhanced and it can be used as a prime weapon to realizing service excellence
to win the competition, where legendary service has become the basis for differentiation between
the banks. Under a dynamic business environment, banks are seeking to reach beyond the quality
by providing distinguishing banking services, creating a sense of satisfaction to the customer
through the service acquired, and meeting their anticipation.

To realize the effectiveness of the bank, they need to know whether perceived service quality
dimensions affect customer satisfaction or not. They also need to identify which service equality
dimensions mostly affect customer satisfaction. (B Dawit & Adem, 2018).

Generally, most of the literature reviewed shows a trend that firms are giving due attention to
improving service quality to create a competitive advantage. In addition, most of them agree on

23
the concept that rendering quality service will result in customer satisfaction which in turn will
result in customer loyalty, improved sales, and profitability.

Furthermore, by using the common and universal service quality dimensions (reliability, tangibles,
responsiveness, empathy, and assurance), the reviewed research developments in Ethiopia's retail
banking sector have consistently found low levels of statistical results that can be used to predict
or explain service quality dimensions and overall service quality, or service quality customer
satisfaction and loyalty. The researchers think that by modifying the bank-specific service quality
model at the item or variable level, they can map service quality in the Ethiopian private banking
sector and obtain a stronger correlation and higher model fitness. Moreover, most of the previous
research is bank-specific and fails to represent the banking sector at large.

24
 Summary of Research Gaps

Table 1 Summary of Gaps

Authors The focus of the study Findings Research Gaps

(Kelil, 2018) the effect of service The results of the
quality on customer investigation revealed that Knowledge gaps,
satisfaction (the case of CBE's performance in The study was done
the Commercial Bank of providing quality service in Ethiopia's
Ethiopia) falls short of the customer's banking sector with
expectations. Customer a small sample of
satisfaction suffers as a result 193.
of poor service quality.
(Getahun, 2019) The paper studied the Indicates that customers Methodological
effect of service quality were most satisfied with the gaps The study was
on customer satisfaction assurance dimensions of done on the
in commercial Bank of service quality and Commercial Bank
Ethiopia Adama city dissatisfied with the network of Ethiopia Adama
quality dimension. city by Quantitative
method.
(gemechu,2020) the effect of service The results confirmed that all Methodological
quality on customer the service quality gaps, The study was
satisfaction in the case of dimensions that were done in the Bank of
the Bank of Abyssinia considered in this study have Abyssinia only by
positive and significant using Quantitative
effects on customer Method
satisfaction.
(Salfore Sharecho Effect of Service Quality Indicated that there was a Methodological
& Raghava, 2022) on Customer Satisfaction positive and significant gaps, The study was
in Commercial Bank of relationship between all done on
Ethiopia, Branches in service quality dimensions Commercial Bank
Wolaita Sodo and customer satisfaction. of Ethiopia,
Four service quality Branches in Wolaita
dimensions: namely, Sodo by using Non-
empathy, responsiveness, probabilistic
reliability, and assurance sampling
positively and significantly Techniques.
affect customers’ satisfaction
and the tangibles dimension
was insignificant for
analyses.

25
 2.9 Conceptual Framework of the Study
The conceptual framework serves as the research project's blueprint, assisting scientists in
conceptually comprehending analysis and description as well as operationalizing dependent and
independent variables to enable straightforward and significant information processing,
measurement, and result interpretation. Consumer perceptions following a transaction and their
future purchasing decisions are thought to be influenced by customer satisfaction. Customer
service and quality service are important predictors of customer satisfaction, according to Cronin
and Taylor (1992). It is evident from the literature review discussion above that, in whatever
situation the former leads to, there is a relationship between customer happiness and service
quality. The literature provided a range of approaches for gauging the quality of services.

Among the models that investigators use most commonly are SERVQUAL and SERVPERF. Five
service quality dimensions are used in each model. The empirical research also demonstrates the
relationships between service quality and its characteristics. Various publications and journals
demonstrate that customer satisfaction is impacted by service quality parameters, albeit to varying
degrees. The SERVPERF model is a modified version of Parasurman’s SERVQUAL model. The
foundation of SERVQUAL is the integration of service quality and satisfaction, while SERVPERF
focuses primarily on perceived service quality. The conceptual framework for this study is
developed after reviewing theories and empirical research on service quality as well as the
circumstances surrounding the service delivery of Siinqee Bank.

26
The following conceptual model has been used in this study.

Independent variable

Service quality dimensions

Tangible
Dependent variable
Reliability
Customer
Responsiveness
Satisfaction
Empathy

Assurance

Figure 1 Conceptual model Source: previous literature & own design, (2024)

27
 CHAPTER THREE
RESEARCH METHODOLOGY
This section aims to investigate the overall methodological content of the research. Which contains
a description of the Study Area, Research Design and Approach, Type and source of data, Methods
of data collection, Sample design, Study population, Sampling technique, Sample size
determination, Reliability, and Validity test, Data analysis method, and finally, present Ethical
considerations.

3.1 Description of the Study Area

Under this study area, the researcher wants to describe Fiche, Degam, and Gerba Guracha which
are part of the selected, The researcher wants to assess the Effect of Service Quality on Customer
Satisfaction, the case of Siinqee Bank, Three selected Branches (Fiche, Degam, and Gerba
Guracha) according to data gathered from Siinqee bank North Shoa district selected, fiche branch
has 32,614 customers, Degam branch has 27,173 customers and Gerba Guracha branch has 21,829
customers. Fiche is a town in central Ethiopia. It is the administrative center of the Northern
Shewa Zone in Oromia And is located about 119 kilometers from the main Addis Ababa, Fiche
has a latitude and longitude of 9°48′N 38°44′E and an elevation between 2,738 and 2,782 meters
above sea level. Degam is one of the towns in the North Shewa Zone of Oromia in Ethiopia It is
100 km from Addis Ababa Latitude: 9° 39' 59.99" N Longitude: 38° 39' 59.99" E.

Gerba Guracha is a town in central Ethiopia. Located in the North Shewa Zone of Oromia Region,
Ethiopia, it is an inland port city in Salale. It has a latitude and longitude of 9°48′N 38°24′E/
9.800°N 38.400°E and an elevation between 2,515 and 2,547 meters above sea level, it is 165Km
from Addis Ababa and 46Km from fiche city. It is the administrative center of Kuyu woreda.

3.2 Research Design and Approach

The research will be approached in a quantitative and qualitative approach. Use a quantitative
research technique to answer the research questions, Hypothesis of the study, and study objectives
since the data for this study will be analyzed using quantitative measures, i.e., statistical analysis,
to look into the relationship between service quality and customer satisfaction, Qualitative research
comprises studies that follow the interpretative/constructivist pattern of various meanings of

28
experience and observation rather than trying to quantify their conclusions through statistical
summary or analysis.

Qualitative research uses specific techniques, such as focus groups, and observation, to explore
different facets of social and human behavior. Because the researcher thinks that these data
analysis techniques are suitable for providing accurate answers to the research topics that are being
considered.

For analysis purposes, the researcher will employ Research Design both explanatory and
descriptive statistics. explanatory studies are used to explain the relationship between the
independent variables (service quality characteristics) and the dependent variable (customer
satisfaction), while descriptive analysis is used for demographic factors and to describe each
independent variable, it helps to show the existing reality services quality and level of customer’s
satisfaction.

3.3 Type and source of data

The research methodology employed in this study is quantitative and qualitative to meet the study's
goal. The study uses both primary and secondary sources of data in terms of data sources. The
researcher uses questionnaires, open-ended and close-ended questions such as focus groups, and
observation, secondary data sources, such as books, documents, previously published research
papers, journals, and publications, websites, Siinqee bank reports, and other pertinent periodicals,
depending on the nature, scope, aims, and availability of time and resources.

3.4 Methods of data collection

To address research questions, primary and secondary data sources will be consulted. A
questionnaire will be utilized, among other primary data-gathering methods, to ensure that the
study's objectives are properly accomplished. When obtaining services from a certain branch, the
respondents who are customers of the bank’s branch are asked for their cooperation and to
complete the questionnaire. Structured surveys with closed-ended and open-ended questions are
created so that responders may understand them with ease. In general, the designed questionnaire
includes three main parts; the first part aims to gather information on demographic variables, the
second part aims to gather knowledge on independent variables, the third part aims to gather data
on the dependent variables, and lastly, open-ended questions are formed.

29
The SERV PERF questionnaire consists of twenty-two question statement aimed to measure the
variables of the study using a five-point Likert Scale (1= highly dissatisfied/strongly disagree, 2=
Dissatisfied/Disagree, 3= Neutral, 4= agree/Satisfied, and 5= highly satisfied/strongly agree)
(Colin Robinson, 2002).

While secondary sources, such as historical research and archives, can be accessible through a
variety of academic publications, prior studies on particular titles, journals, articles, and yearly
reports produced by the bank, as well as through, unpublished materials, and online reports.

3.5 Sample design

There are two different kinds of sampling methods but the study will use probability sampling
techniques. The researcher will use particularly a straightforward Stratified sample method. To
obtain responses from the study participants, a probabilistic sample method using a stratified
sampling technique will be used.

3.5.1 Study population

The study population is a group of people or organizations or any other entities that the
research/researcher is attempting to make a valid inference and generalization about. The inference
and generalization are based on a statistically and logically representative study population that
the researcher is investigating directly and indirectly. In the case at hand, the study populations
were retail bank customers of Siinqee Bank. The study focuses on Siinqee Bank’s facility of
service quality rendered to its customers located in selected Branches. According to the Siinqee
Bank Review in 2023 over 2 million customers were registered and using services provided by
the bank. Among these exceeding 89,774 of them were found in selected branches. Those branches
were selected because they carry out all banking services. To produce a realistic outcome, the
collections of data were distributed to selected three branches.

3.5.2 Sampling technique

According to Creswell (2009), the sampling technique is outlined because it is the method of
drawing inferences from a few populations while not learning the complete population below the
study. In this study, the researcher will use stratified sampling techniques. These techniques were
used for the population of the study. Sampling theory supports stratified sampling as an economical

30
and best alternative as a result of the suggestion that the stratified samples measure to be nearer to
the mean of the population overall.

Based on the stratified sampling technique the customers of Siinqee Banks are divided into three
strata based on the branch location: fiche, Degam, and G/guracha, and randomly samples the same
number of customers from each stratum.

3.5.3 Sample size determination

Even with the population's growth and the passage of time, gathering data on the entire population
has proven challenging. Thus, delegates were selected for the investigation, and the ( Yamane,
1967) technique of determining sample size was employed. Consequently, the formula is used to
determine the sample size.

𝑁
𝑛=
(1 + 𝑁 (𝑒)2 )

Where: n = sample size

N = total population = 89,774

e = is that the error term, that is five-hitter (i.e. at 95% confidence interval)

Using the above formula the sample size of the study is decided as

89,774 89,774
𝑛= 2
= = 398
(1 + 89,774 (0.05) ) 225.435

Because the population varies by branch, researchers distribute the sample in the following ways:

𝑛𝑁1
𝑛1 = Where 𝑛 = total number of sample 𝑛1 = sample in each branch, and
𝑁

𝑁 = total population 𝑁1 = total population in each branch

31
 Table 2 population of sample

Name of Branches Total number of customers Sample size at each branch

from each branch 𝑛𝑁1
𝑛1 =
𝑁
Fiche 32,614 145
Degam 27,173 120
G/Guracha 29,987 133
Total 89,774 398
Source: Internal document dated Sept 18, (2023)

3.6 Reliability and Validity Test

The term ‘Reliability’ is a concept used for testing or evaluating quantitative research, though the
idea is often used in all kinds of research. The most important test of any qualitative study is its
quality. Reliability is a concept to evaluate quality in the quantitative study with the “purpose of
explaining” while quality concept in the qualitative study has the purpose of “generating
understanding” (Twaissi & Aldehayyat, 2021).
For this study, Cronbach's alpha coefficient was used to estimate the Reliability of data.
Cronbach’s alpha coefficient is the most popular and commonly used technique to estimate the
reliability or internal consistency of assessments and questionnaires in the behavioral sciences
coefficient. Evaluators and researchers must estimate this quantity to add validity and accuracy to
the interpretation of their data. It is expressed as a number between 0 and 1. A value of 0.6 or less
generally indicates unsatisfactory internal consistency & and poor reliability (Bollen & Jackman,
1989).

32
 Table 3 Reliability

Service Quality Dimensions Number of attributes Cronbach’s alpha perceived

performance.
Reliability 6 0.913
Responsiveness 7 0.863
Tangibility 6 0.834
Assurance 7 0.893
Empathy 6 0.845
Overall service quality 7 0.933
Source: Own survey (2023)

3.7 Data analysis

The Researchers are carrying out quantitative research and this will involve some quantitative
analyses with the use of statistical tools (descriptive and inferential) and Qualitative.
Understanding the findings and applying the knowledge to decision-making requires data analysis.
the procedure for assessing, cleaning, modifying, and modeling data to locate pertinent
information, strengthen conclusions, and facilitate decision-making ( Kothari 2004). Following a
review of relevant literature to determine how service quality at the Bank of Siinqee affects
customer satisfaction, the study will evaluate the data gathered from questionnaires using SPSS
version 27 with descriptive statistics, and inferential statistics data analysis.
3.7.1 Descriptive statistics

It is used to explain each variable in the research of service quality and, consequently, the
customer's satisfaction with service delivery, in addition to quantifying the proportion and
frequency of information provided by the respondents. With Descriptive statistics: Frequency,
Mean and standard deviation will be analyzed in this study.
3.7.2 Inferential statistics

Correlation, statistical procedures, and analysis of variance are utilized to examine the potential
relationship between each of the five service quality dimensions and the quality of repairs. The
correlation analysis technique is employed by the investigators to determine the potential
relationship between the customer's satisfaction and the service quality dimensions. To examine
the degree of customer satisfaction and its significance, an ANOVA analysis is performed.
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 3.8 Ethical considerations
Since the researcher will be using the data from customers which will be collected through a
Questionnaire, permission is obtained from the customers. To maintain the confidentiality of the
information provided by the respondents, the respondents will be instructed not to write their
names on the questionnaire and assured that the responses will be used only for academic purposes
and kept confidential. A brief description of the central objectives or purpose of the study will be
clearly in the introductory part of the questionnaire to motivate them and participate in the study
and provide pertinent information about the company under study.
Finally, respondents will be included in the study based on their free will.

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 3.9 TIME PLAN AND COST BUDGET
Table 4 Time plan

No Activities performed Nov 2023 Dec 2023 Jan 2024 Feb 2024 March2024 April2024 May 2024 June 2024 July 2024

1 Preparation of proposal   

2 Reviewing literature  

3 Data collection 

4 Data interpretation 

5 Editing and proof     

6 Preparation of final activity 

7 Presenting final report 

4. Cost Budget
Table 5 Labor cost

No. Item Purpose No.of Day Per day Total

Person Expense
1 Data To collect 3 10 400 12,000birr
collectors data

Table 6 Questioner cost

No. Item No. of pages Price No. of Total

sample
1 Papers and 3 3 398 3,582birr
printing

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 Table 7 Summary of cost

Number Item Total cost

1 Labor cost 12,000
2 Questioner cost 3,582
3 Transportation cost 500
4 Miscellaneous expense 2000
5 Thesis binding 300
6 Adviser fee 6,000
Total 24,382

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