CONTRIBUTIONS OF SERVICE QUALITY DIMENSION IN BUILDING POSITIVE

ATTITUDE TOWARDS BANKS

Abstract: bank is a fastest growing service industry. This industry is facing intense competition

now-a-days. Qualities of service provided can differentiate one bank from another in the

marketplace. We studied different dimensions of the service quality to understand the behavior of

customer and to find out the dimensions that contributes to the perception of service quality

among customers. We conducted a survey and we analysis our survey using multiple regression

analysis. From the analysis we found that reliability & responsiveness in the servqual model

contribute to the perception of the service quality among customers. These findings can be used

in the banking industry to formulate the marketing strategy to improve the perception of service

quality among customers.

INTRODUCTION:

The banking industry in Bangladesh is highly competitive. According to International Finance

Corporation - IFC (2009), the financial sector in Bangladesh consists of a central bank

(Bangladesh Bank), 4 state-owned banks, 5 Government owned specialized banks, 30 Domestic

Private Commercial Banks, 9 Foreign-Commercial Banks, and 29 Non-Bank Financial

Institutions. 6562 branches of 49 banks operate in the country (Bangladesh Bank, 2006).

According to IMF (2007), Private Commercial Banks command the greatest market share in

terms of both industry assets and deposits. In late 2006, the contribution of financial sector assets

to GDP was roughly 69%; out of them, the banking sector accounted for 58%. Data shows that

retail banking is one of the most important sectors in the Bangladesh economy. The

interrelationships between service quality and positive customer attitude may provide creative

ideas for improving services in order to gain a competitive advantage in the retail banking sector

in Bangladesh.

Service quality is one of the critical success factors that influence the competitiveness of an

organization. A bank can differentiate itself from competitors by providing high quality service.

Service quality is one of the most attractive areas for researchers over the last decade in the retail

banking sector (Avkiran, 1994;Stafford, 1996; Johnston, 1997; Angur et al, 1999; Lasser et al,

2000; Bahia and Nantel, 2000; Sureshchandar et al, 2002; Gounaris et al, 2003; Choudhury,

2008). However, this study will again investigate the factors that enable banks to attract and

maintain their customers. In Bangladesh, customers in the banking sector are in a strong

bargaining position due to the significant growth of banks. Therefore, banks have to provide

service carefully because of the availability of banks. Banks have to improve the service level

continuously. There is no guarantee that what is excellent service today is also applicable for

tomorrow. To survive in the competitive banking industry, banks have to develop new strategies

which will satisfy their customers. That is why service marketing and bank marketing are

important areas in the marketing literature.

LITERATURE REVIEW:

Gronroos (2000, p.46) defined service as, “A service is a process consisting of a series of more

or less intangible activities that normally, but not necessarily always, take place in interactions

between the customer and service employees and/or physical resources or goods and/or systems

of the service provider, which are provided as solutions to customer problems”. Fogli (2006, p.4)

define service quality as “a global judgement or attitude relating to a particular service; the

customer’s overall impression of the relative inferiority or superiority of the organization and its

services. Service quality is a cognitive judgement”.

Bahia and Nantel (2000) conducted a research to develop a valid measurement of perceived

service quality in the Retail Banking sector in Canada. They argued that the SERVQUAL

approach has not except from critics; therefore, they developed a new measurement for perceived

service quality in Retail Banking. They proposed a scale that was called Bank Service Quality

(BSQ). It comprises 31 items classified across six dimensions as: effectiveness and assurance,

access, price, tangibles, range of services offered and accuracy and reliability. They proved that

the dimensions of BSQ are more reliable than the dimensions of SERVQUAL. Glaveli et al.

(2006) stated that BSQ is more reliable than SERVQUAL.

Stafford (1996) conducted research to identify the core elements of BSQ and identified seven

attributes in assessing BSQ. They are as follows:

Bank atmosphere - environment of the bank including the attitude of the staffs.

Relationship - it indicates the personal relationship with the bank employees.

Rates and charges - an individual’s perception of BSQ is affected by the low cost and

high interest rates.

Available and convenient services - it indicates the full range of available services,

convenient and easily accessible.

ATMs - it indicates the availability of the automatic teller machines.

Reliability/honesty - it emphasizes on the solid bank ratings and reliable, honest staff.

Tellers - enough and accessible tellers.

Angur et al (1999) examined the applicability of alternative service quality measure in the Retail

Banking industry in India. They conducted their research on the consumers of two major banks

in India. They use SERVQUAL model to measure the overall service quality. They found that all

the dimensions are not equally important in explaining variance in overall service quality. The

result indicated that responsiveness and reliability seem to be the most important dimensions

followed by the empathy and tangible dimensions; whereas, assurance appears to be the least

important dimension. Finally, they concluded that SERVQUAL is the best measure of service

quality in banking industry.

The applicability of the SERVQUAL measure is well established in the retail banking industry.

As mentioned earlier, Angur et al (1999) stated that SERVQUAL is the best measure of service

quality in the retail banking industry in the developing country. Most of the researchers use the

SERVQUAL measure or the modified SERVQUAL measure in the retail banking industry.

From the above discussion it can be concluded that SERVQUAL is still suitable as an

assessment tool to measure the service quality perceptions in the retail banking industry, whether

it is based on difference score, gap score or performance only.

OBJECTIVES OF THE STUDY:

We are going to use servqual model in this study. There are five dimensions in this model. The

dimensions are: reliability, responsiveness, assurance, empathy & tangibles. Our objective is to

find out the dimensions which contribute to build positive attitude among customer in terms of

bank.

RESEARCH QUESTION:

This study proposed to investigate the following research question:

1. Is there any relationship between service quality dimension & building positive

customer’s attitude toward bank?

HYPOTHESIS:

The hypothesis from the above research question is

H0: there is no relationship between service quality dimension & building positive customer

attitude toward bank

H1: there is significant relationship between service quality dimension & building positive

customer attitude toward bank

CONCEPTUAL FRAMEWORK:

We are trying to develop and show the relationship between service quality dimension & positive

customer attitude in the banking industry. The presence or absence of these dimensions may

influence the customer’s attitude toward a particular bank.

The relationship can be shown by the following graphical model:

RESEARCH METHODOLOGY:

Research design: this study has been designed to identify the research questions and to test its

hypothesis by conducting a co-relational research. The preceding conceptual framework of the

proposed model depicts the pattern and structure of the co-relational relationships among the set

of measured variable. The conceptual framework illustrates the name of the research variables

and relationship with them. The research question and hypothesis clearly support this model. In

this study the researcher are going to investigate the relationship between service quality

dimension and building positive customer relationship. According to Cooper & Schindler (2003),

Reliability

Responsiveness

Assurance

Empathy

Tangibles

Customers Attitude

the research that studies the relationship between two or more variables is referred to a co-

relational study. That is why co relational research design has been adopted in order to detect the

appropriate answers of research question and to test the hypothesis.

The purpose of this study is to investigate the causal relationship among the measured variables.

Here banks service quality dimension are considered as independent variables and customer’s

attitude is considered as dependent variable. In this research, the researcher intended to identify

whether any relationships exists between these measured variables or not. So the researcher is

attempting to find out, if any changes in the independent variable have a changing effect on the

dependant ones as well, thereby proving that a relationship exists. A co-relational study provides

a measure of the degree between two or more variables. Therefore, the present study was

characterized as a co relational study.

Research Approach: To analyze this research problem, the researchers will gather information

from the clients who maintain regular transaction with bank for the last 5 years. Researcher uses

structured questionnaire for this study.

The rationale behind using questionnaire to collect data is:

1) It takes competitively less time to fill up a questionnaire. Therefore, the customers will not be

reluctant in providing accurate data.

2) Personal interview is both time and cost consuming.

3) The data gathered through questionnaire is easy to put in quantitative analysis.

The entire participants were given a letter from the researchers explaining the context of the

research focus. All participation was voluntary. If the participants wanted to withdraw, they were

free to do so at any time without providing any reason. Therefore, questionnaire is the most

useful method to collect data for this study.

Sampling Method: The sample of this research is formed by the clients who had taken service

from 5 renowned private commercial banks in Dhaka city during the data collection period of

this study. The researcher used simple random sampling method to collect data from the

population of this research. Malhotra (2003) categorized simple random sampling as a

probability sampling. The sampling frame for this research was client’s database of each bank.

From this data base the researcher collected the name of clients and during the survey period

who had undertaken transaction, from them information were received. The list was considered

as the appropriate source to use for this study. It covers all clients of the bank who deposit and

withdraw cash on a regular basis. The sample size was 20 in this case. In the previous

researchers which are conducted on similar topic has used a sample size of 100 to 200 (Yonggui

Wang, Hing- P. Lo, 2003). But due to time limitation researcher only use a sample size of 20.

Data Collection Procedure: The questionnaire, which is mentioned before to be used for data

collection of this study will be distributed among the clients through the personal contacts of the

researchers. There are several reasons behind the selection of this method. First, it allows large

amounts of information to be obtained at a relatively low cost. Second, more accurate responses

are obtained because interviewer bias is avoided. Finally, the number of non-usable

questionnaires is reduced since the personal contacts tend to make respondents more cooperative

in completing the questionnaires.

Data analysis Method: Multiple regression analysis will be used to find out whether any

relationship exists between the independent and dependent variables. Multiple regression

analysis is used when the dependent variable is metric and the independent variable is also

metric. Researcher will use SPSS to conduct multiple regression analysis.

RESULTS OF THE STUDY:

In the below the summary of the regression analysis is given.

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .956a .913 .827 .42006

a. Predictors: (Constant), Tangibles, Responsiveness, Reliability,

Empathy, Assurance

Here value of R2 is .913 it means 91.3% of the variation in the dependent variable is accounted

by the variation in the independent variable. The value of the adjusted R2 indicates 82.5%

variation after adjusted for the number of independent variable and sample size.

In the below the ANOVA is given:

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 9.300 5 1.860 10.541 .011a

Residual .882 5 .176

Total 10.182 10

a. Predictors: (Constant), Tangibles, Responsiveness, Reliability, Empathy, Assurance

b. Dependent Variable: Attitude toward bank

The F value in this ANOVA is 10.541 which are significant at 5% level. So the Null Hypothesis

is rejected and we can say that variation in the dependent variable is accounted for by the

variation in the independent variable.

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) -6.249 2.856 -2.188 .080

Reliability .753 .227 .604 3.312 .021

Responsiveness 1.035 .338 .770 3.063 .028

Assurance -.251 .359 -.232 -.699 .516

Empathy .236 .238 .234 .989 .368

Tangibles .813 .478 .564 1.699 .150

a. Dependent Variable: Attitude toward bank

From the above table we can conclude not all the independent variables contribute in the

variation of dependent variable. Only reliability & responsiveness is significant at 5% level.

Assurance, empathy & tangible are not significant at 5% level. This means variation in the

reliability & responsiveness will contribute for the variation in the dependent variable.

CONCLUSIONS & RECOMMENDATIONS:

Banking company can benefit from this analysis. In the servqual model they can put emphasis on

Reliability & Responsiveness dimension to better increase the positive attitude among the

customers. Their marketing program should be directed towards reliability & responsiveness’

dimension because this two have significant impact.

REFERENCES

Ahmed, I., Nawaz, M.,Usman, A., Shaukat, M., Ahmad, N. and Iqbal, H. (2010) Impact of

Service Quality on Customers' Satisfaction: Empirical evidence from telecom sector of Pakistan.

Interdisciplinary Journal of Contemporary Research in Business. 1(12), 98-113.

Al-hawari, M. (2008) The Influence of Traditional Service Quality Factors on Customer

Satisfaction: A Practical Study within the Context of Australian Banking. The Business Review,

Cambridge. 11(2), 114-119.

Al-Wugayan, A. and Pleshko, L. P. (2010) A study of satisfaction, loyalty, and market share in

Kuwait banks. Allied Academies International Conference. Academy for Studies in International

Business. Proceedings. 10(1), 2-8.

Amin, M. and Isa, Z. (2008) An examination of the relationship between service quality

perception and customer satisfaction: A SEM approach towardsMalaysian Islamic banking.

International Journal of Islamic and Middle Eastern Finance and Management. 1(3), 191-209.

Anderson et al. (1998) Multivariate Data Analysis. 5th ed. London: Upper Saddle River.

Angur,M. G., Nataraajan, R, and Jahera, J. S. (1999) Service Quality in the banking industry: an

assessment in a developing economy. International Journal of BankMarketing. 17(3), 116-123.

Arasli, H., Smadi, S.M., and Katircioglu, S. T. (2005) Customer Service Quality in the Greek

Cypriot banking industry. Managing Service Quality. 15(1), 41-56.

Bitner, M. (1990) Evaluating service encounters: the effects of physical surroundings and

employee responses. Journal of Marketing. 54(2), 69.

Barich, H. and Kotler, P. (1991), “A framework for marketing image management”, Sloan

Management Review, Vol. 32 No. 2, pp. 94-104.

Cooper, D.R., & Schindler, P. S. (2003). Business Research Methods (8th ed.). McGraw-Hill.

Caminiti, S. (1992). “The payoff from a good reputation”,Forlune, Vol. 125 No. 3, pp. 49-53.

Churchill, G. A. J. (1979). A paradigm of developing better measures of marketing constructs.

Journal of marketing research, 16,64 – 73.