The impact of bank services quality on customer satisfaction

ABSTRACT

The study set out to examine The impact of bank services quality on customer satisfaction (a) to find out the effect of reliability and customer satisfaction (b) find out the effect of responsiveness and customer satisfaction (c) to examine the impact assurance customer satisfaction. From these objectives, four research questions were formulated and hypotheses state in both null and alternative forms was equally formulated. The study adopted the survey research design with a sample 50 employees and customer of two banks in Buea , through a Purposive and convenient sampling procedure. The study used questionnaire for data collection. Result of the study revealed that indicates that just about 29.4% (see the Adjusted R-square value in the model summary) variation of customer’s satisfaction is explained by service quality. The model’s Fisher test (F-test) value 2.615 significant at 10% level of significance indicates that the model is of a good quality. This means there is clear assurance that reliability, responsiveness, assurance and empathy are able to explain customer’s satisfaction. However, it is important to proceed with the analysis in order to see if this is also sustained by the OLS regression results. Base on the findings of the study, the following conclusions was drawn that that the Bank addresses customers concerns and request on time, employees assist all customers in caring manner and without discriminations. It was therefore, recommended that bank top management should educate staff on how to sensitize customer on services available should be prioritize. Again the company’s way of notifying customers about their products and services as well as their account confidentiality should be prioritized.

CHAPER ONE

INTRODUCTION

1.1 Background of the Study

The origin of service quality can be dated right back to the 1920s when inspection activities were performed in the production. Frederick W. Taylor, father of scientific management employed the inspection as a justifiable action to have an effective and efficient quality control tool (Hounshell, 1985). In this emerging era of the formal marketing field, the marketing courses were started to be taught in the universities in the USA such as the University of Pennsylvania, University of Michigan, and New York University in the name of Marketing of farm products and Methods, Marketing of Products and Mercantile Institutions, respectively. The attention was paid to the distribution of produced farm and agricultural goods in these courses (Bartels, 1951). The concept of service quality is also growing, East African countries are members of ISO (international organization for standardization) and certification has been on the increase in the region as a quality management measure. In East and Central Africa, Kenya has the highest number of ISO 9001 certifications with a total of 257, followed by Uganda with 44, Tanzania 12, Republic of Congo two, and Rwanda one. Globally, the 2008 ISO survey reported 982,832 certifications in 176 economies, with China leading with 224,616 (ISO survey, 2008).  Recent years have shown increasing attention to customer satisfaction. Today, there is fierce competition in the banking sector of Cameroon due to the influx of new commercial banks and micro-finance agencies such as the cooperative societies not leaving out telecommunication companies like MTN which also offers banking services. From 1990 to 210, the banking sector of Cameroon had experienced bank liquidation, acquisition, and mergers due to the high competitive forces arising from the globalization of the economy and the frequent changing of monetary rules in Cameroon impose by the World Bank, the bank of Central African States (BEAC), the banking commission for the six central Africa states (COBAC), and parliamentary enactments. For banks to cope with these pressures, they need to secure reasonable profits that will ensure their sustainability through the creation of a larger customer base. As a result, banks in Cameroon in general and those of the Buea municipality, in particular, are setting themselves strategies to ensure customer satisfaction and loyalty to raise reasonable profits that will ensure their sustainability (Beteck., 2019). The bank’s vision is to achieve profitability, and a high degree of customer satisfaction is a necessary condition for achieving this lofty objective in the face of competition. This is why banks listen to customers’ requirements and complaints to provide them with the quality of products and services that will meet their satisfaction ((Beteck., 2019).). Commercial bank’s offerings to their customers are similar and customer satisfaction remains the sole tool that differentiates between one bank’s market share and another, as such measuring customer satisfaction is important (Beteck., 2019).

Given the current level of competition, banks therefore, have the tendency to serve customers with related products. What is important to the customer now is the measure of the quality of what he/she is paying for. This suggests that customer satisfaction is fully achieved if the products or services delivered meet some quality standards as perceived by the customers. The bank industry is amongst the service giving organisation in the world. It provides various services such as:

• Accepting deposit in the form of saving and current account,
• Extending loan and advance,
• Granting overdraft,
• Discounting of bills of exchange,
• Collection and payment of credit instruments,
• Foreign currency exchange,
• Consultancy and advisory in respect of investment, industry, trade, income and taxes,
• Bank guarantees,
• Remittance of funds,
• Credit and debit cards,
• ATM services,
• Home banking, mobile banking and online banking,
• Priority banking such as online bill payments.

In addition, customer expectation of service quality has increased proportionately Parasuraman & Ziethaml (1988) developed a model containing five service quality dimensions i.e Tangibility, Reliability, Responsiveness, Empathy and Assurance. These instruments are known as “SERQUAL Five-Factor Model that is now commonly used for measuring services quality (Paul, Mittal, & Srivastav, 2016). This model defines quality as the divergence between customer’s expectation and perception of the service delivered to measure quality, Customers now demand high quality services from banks such as:

1. Reliability; for example, how efficiently banks address customer problems and how accurately they maintain customers’ records, and timely delivery of services
2. Responsiveness, how efficiently the bank addresses customers’ queries and provides solutions to their problems
3. Assurance, customers’ trust and confidence in the bank to render the best possible service
4. Empathy; being able to understand and share the feelings of customers

Banks aim to build a competitive advantage through high quality service and by developing a loyal customer base. A satisfied customer base also helps in increasing market share (Khan & Marriam, 2014). Many leading firm focus on providing quality services for creating differentiation and competitive advantage. This leads to a stronger brand image. Customer satisfaction is a psychological state. Customers are highly satisfied when service quality exceeds their expectations (Paul, Mittal & Srivastav, 201ta). It is believed that satisfied customers keep a sustainable relationship with the company by regularly purchasing its product and services (Kashif, Suzana, Shukran & Rehman, 2015). Several studies have found that services quality has a significant contribution to customer satisfaction (Loke, Taiwi, Salim & Downe, 2011). A high quality service leads to competitive advantage, satisfied customer base and improved bottom line for the company.

Many empirical and conceptual studies have been done on customer service quality and customer satisfaction. The finding of Mohammad and Alhamadani, (2011), indicated that service quality is an important antecedent of customer satisfaction. Accordingly, Messay (2012), “found that service quality is vital to business profitability, and survival”. Thus, from the findings of Messay (1996), the researcher understands that if service quality is going down in the organisation, it will have negative effects on the organisation’s profitability.

Therefore, this study assesses the impact of service quality on customer satisfaction in the case of banking sectors in Cameroon. The study will help managers identify what kind of factors are highly influential to improve customer satisfaction, identify factors affecting the provision of quality services to customer and recommends solutions to the identified problem.

1.2 Statement of the problem

Commercial banks in Cameroon face stiff competition, first within themselves and secondly from non-banking financial institutions like ORANGE, MTN and are constantly seeking new ways to add value to their services. In an increasingly competitive market where a rising number of players is spoiling customers for choice, banks must identify the factors that are best able to attract new customers and retain the existing ones. Since the nature of banking is such that product innovation is easy to replicate and therefore fails to offer any long term benefits, it is the service quality that can act as the differentiator and not only help banks carve a niche in the market but will also lead to satisfied customers who are likely to recommend the bank to others.

In Cameroon, banks have not been doing enough to sensitize their customers and offer them high-quality services. Cameroon banks have focused more on lending which is the most profitable function of a commercial bank. As a result, less attention has been put on service quality (Ngu, 2007). Nowadays, to be able to survive the prevailing intense competition in the banking industry, service quality must be given great importance especially as banks offer similar products in a competitive environment. To keep customers in the highly competitive and changing market arena, most companies are emphasizing maintaining and expanding their customer base using customer acquisition marketing strategies for survival aimed at maintaining and enhancing relationships with customers (Krishnamoorthy & Srivasan, 2013). Firms have realized the need for creating and maintaining long-lasting relationships with the existing customer base than attracting new customers and providing customized services preferred by customers through customer’s lifetime value (Ampofu, 2012). Globally, banks are faced with a highly competitive environment as they progress from product and sales-focused practices to a marketing Orientation where competition is based on customer-centered strategies that enhance customer satisfaction (Godson, 2009).

1.3 Research question

1.3.1General research question

The main research question will be what is the impact of service quality on customer satisfaction in the banking sector in the Buea municipality?

1.3.2 Specific questions

1. What is the effect of service quality dimension “Reliability” on customer satisfaction in the banking sector in Buea municipality?
2. How does responsiveness affect customer satisfaction in the banking sector in Buea municipality?
3. What is the influence of service quality dimension “assurance” on customer satisfaction?
4. What is the effect of empathy on customer satisfaction in the banking sector in Buea municipality?

1.4 Research objectives

1.4.1 General objective

The main objective of this study will be to evaluate the impact of service quality on customer satisfaction in the banking sector in the Buea municipality.

1.4.2 Specific Objectives

1. To assess how reliability, affect customers’ satisfaction in the banking sector in Buea municipality.
2. To determine the influence of responsiveness on customer satisfaction in the banking sector in Buea municipality.
3. To establish how assurance impacts customers’ satisfaction in the banking sector in Buea municipality.
4. To establish how the service quality dimension “empathy” affects customer satisfaction in the banking sector.

1.5 Hypotheses

H1: There is no significant impact of Reliability on customer satisfaction in the banking sector.
H2: There is no significant impact of Responsiveness on customer satisfaction in the banking sector.
H3: There is no significant impact of Assurance on customer satisfaction in the banking sector.

H4: Tangibility has no significant impact on customer satisfaction in the banking sector.