Banking is a service that encapsulates all the characteristics of services, directed towards the customer’s money and its management. A membership relationship is entailed in this industry due to its continuous nature. Banking is also high in credence qualities meaning that it cannot be evaluated confidently even immediately after receipt of the good due to customer ignorance or lack of knowledge. In addition, an extended period of time may be required in this industry for a fully informed evaluation (Devlin, 2001). Hence, customer satisfaction in banking is both difficult to measure and ascertain.
Customer satisfaction is a judgement by the customer, post purchase. The most popular view of customer satisfaction in academia is that customer satisfaction is the judgement borne out of the comparison of pre–purchase expectations with post purchase evaluation of the product or service experience (Oliver, 1997). Customer satisfaction can result from any dimension (whether or not it is quality related) and its judgements may arise from non-quality issues (e.g. needs, equity, perceptions of `fairness’) and require experience with the service or provider (Taylor et al, 1994; Howard and Sheth, 1969).
Strong linkages have been apparent between service quality dimensions (for example speedy responses to enquiries) and overall customer satisfaction (Anderson and Sullivan, 1993). But much debate arises from whether customer satisfaction is an antecedent of service quality judgements (Bitner, 1990; Parasuraman, et al, 1985) or the other way round (Anderson and Sullivan, 1993; Cronin and Taylor, 1992; Taylor et al, 1994).
The foundations of service quality may be viewed from two widely accepted perspectives – the SERVQUAL model and the Technical/Functional Quality Framework (Gronroos, 1983, 1990). SERVQUAL, offers five dimensions of service quality to be evaluated in any service setting; reliability, responsiveness, assurance, empathy, and tangibles (Parasuraman, et al, 1985), and it has been widely used in practice in its original and modified form (Levesque and McDougall, 1996). However, further research has illustrated that there are two overriding dimensions to service quality, the core or outcome aspects and the relational or process aspect of the service (Naser, Jamal and Khatib, 1999). While reliability is largely concerned with the service outcome, tangibles, responsiveness, assurance, and empathy are more concerned with the service process. Customers judge the accuracy and dependability (i.e., reliability) of the delivered service, but they judge the other dimensions as the service is being delivered. It was found that although reliability is the most important dimension in meeting customer expectations, the process dimensions (especially assurance, responsiveness, and empathy) are most important in exceeding customer expectations (Parasuraman et al, 1991).
Another perspective on service quality is the Technical/Functional Quality perspective originally conceptualised by Gronroos (1983). Technical quality refers to the quality of what is provided while functional quality (process quality) refers to the quality of how it is provided. Technical outcome quality involves the actual competence of the provider and the technical outcome of the product, while this is considered difficult to evaluate due to the lack of knowledge on the part of the consumer, functional quality (or process quality) is more easily judged. Functional quality refers to the delivery of the service. Its elements include items such as courtesy, confidence and attentiveness. These form the basis of the customer’s evaluation of the service provided and provider. In banking, this would be judged through an evaluation of the personnel’s’ efficiency and speed in dealing with problems as well as the opening or closing hours of the bank. Effectively, once technical quality has attained an acceptable level, functional quality becomes more imperative in determining the overall perception of the service (Gronroos ,1983). Due to the relative speed in which innovations in products and other aspects of technical quality of the banking service may be replicated, this is highly indicative of the heightened importance of the functional aspects of the service.
In the final analysis, service quality cannot be separated from the concept of customer satisfaction. Further research has also identified other factors such as customer specific and situational factors as contributing to overall satisfaction (Zeithaml and Bitner, 2000).
The nature or characteristics of the service has been found to influence the relative importance of the drivers of customer satisfaction. For instance, where core service quality (technical qualities) is easier to evaluate it may be a more critical driver of customer satisfaction, on the other hand in services high in credence qualities, functional qualities is suggested as a more critical driver of customer satisfaction (Shemwell, Yavas and Bilgin, 1998). Therefore, elements of customer satisfaction, which may be more important in retail banking, are functional elements.
An element that strongly drove customer satisfaction in banking was the warmth factor related to the bank’s features and personnel attributes (Rust et al, 1993). In another study by Krishnan, Ramaswamy and Venkatram (1999), satisfaction with perceived product quality was suggested as a primary driver of overall customer satisfaction. This finding contradicts the notion of banking being a service with high credence features, making evaluation of core service (technical quality) difficult. However they also found that other drivers of satisfaction were the financial statements and services provided through differing delivery channels. Their study suggests that the impact of service delivery factors differs substantially on customer satisfaction. For instance they found that for customers who trade heavily and have high investable assets, the effect of an automated telephone service is higher that the other drivers of satisfaction.
A study by Hallowell (1996), also examined customer satisfaction but in relation to loyalty and similar to Parasuraman et al (1994), concluded that service satisfaction and satisfaction with price were elements in the overall satisfaction measurement. The measurements used in Hallowell’s study were fairly comprehensive; concluding that all the elements measured had an impact on overall satisfaction. But the service features of branch, staff and information were found to be more influential.
Johnston (1997) forwarded the idea that banks in general were in effect `barking up the wrong tree’ by improving service quality efforts that had little or no effect on improving customer satisfaction. This study, one of the few examining customer satisfaction in the UK retail banking setting, focussed on quality issues. Johnston (1997) suggests that satisfaction /dissatisfaction with retail banking does not stem from the same elements. Rather, some elements of service quality if improved, improve customer satisfaction however other elements may not improve satisfaction but merely act to keep dissatisfaction at bay or at best, reduced dissatisfaction alone. This trend of thought emanates from the hygiene factors of Herzberg’s motivation theory. Johnston identified 18 determinants of service quality suggesting that certain actions such as increasing the speed of processing information and customers, delighted customers whilst improving the reliability of equipment lessened dissatisfaction.
Levesque and McDougall (1996) comprehensively analysed the effects of service quality, service features and customer complaint handling on customer satisfaction in the Canadian retail banking sector. Their findings suggest that satisfaction determinants in retail banking are driven by a number of factors including service quality dimensions. Key variables explaining customer satisfaction in the service quality domain were – core and relational performance, problem encountered and satisfaction with problem recovery. The provider’s offering can also be expected to affect customer satisfaction (overall) and ongoing patronage. Levesque’s et al (1996) study indicated that the bank’s features (e.g. location), the competitiveness of the banks interest rates, the customers’ judgements about the bank employees’ skills and whether the customer was a borrower were all factors that drove customer satisfaction, while bank features and competitive interest rates were significant contributors. However, this study did not categorically point out which had more influence; rather both core and relational issues were categorised as one for retail banks to consider when satisfying customers. The literature thus far presented encourages the following research questions to add clarity to the issue of customer satisfaction in retail banking, its determinants and relative influence, to aid retail bankers in highlighting or improving particular areas of service in order to increase overall customer satisfaction;
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