Customer Satisfaction In The Mauritian Banking Sector Marketing Essay

Today’s marketing environment is characterized by increased competition and many others changes in macroeconomics variables. There is the increase need for management of banks to understand the needs and wants of customers. (Lewis and Booms, 1983). One of the critical drivers of business success is having a unique competitive advantage. Most managers understand that to attract a larger share of the market, or find enough customers prepared to pay a premium price; they must provide something of greater value than their competition. Lewis et al. (1993) noted that service quality leads to reduced costs, increased profitability, and other beneficial elements. In answer to critics, she noted that there was often an initial cost to implement quality service, but the resultant benefit and subsequent increase in profits offset those start-up costs. For companies in the service industries such as banks, competitive advantage results to providing better Service Quality and hence leading to Customer Satisfaction.

Service Quality and Customer Satisfaction are important attributes as they provide competitive advantage over rival banks. Satisfaction is the customer’s evaluation of a product or service in terms of whether that product or service has met their needs and expectations. (Zeithaml and Bitner, 2003) According to Furey et al. (1995), technology helps to enhance Service Quality as it increases the convenience of use, more services may be offered and information can be obtained about perform. The challenging business environment has lead to banks developing new types of delivery channels to influence perception, attract and satisfy customers (Bauer, 2005). A satisfied consumer will use the products and services to a larger extent. This chapter will provide an overview of what previous researchers stated in relation with service quality and customer satisfaction. The SERVQUAL Model and gaps as discussed by relevant authors will also be found in this chapter.

2.2 Customers’ attitudes toward bank products

With improvements that have been made in the technology, various forms of delivery channels have been put in place for customers to enhance service quality and hence customer satisfaction. Retail banks are keenly aware of the need to target innovative service offerings to appropriate customer segments to optimize the likelihood of product adoption. (Parsons et al., 1998). Experience is a factor that influences adoption of banking products. Consumer experiences are a major determinant of consumer choice and preferences (Bettman and Park, 1980; Foxall, 2003). It determines how consumers judge the quality of service and whether they will use it or not (Carlson and Zmud, 1999). In 1989, Davis introduced a concept known as the Theory of reasoned action. The model was developed to explain why people accept or reject adoption of bank products and services. It stated that consumers’ usage behaviour depends on the intention to use which i turn depended on perceived usefulness and perceived ease of use of the products and services. Perceived usefulness is mainly when a customer will use the products if he finds that it increases his job performance (Doll et al., 1998). Perceived ease of use has been defined by Davis (1989) as the degree to which a person believes that using a particular system would be free from effort.

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!
Find out more about our Essay Writing Service

In selecting a bank for Banking Services, the Customers take into account the reputation and the variety of services offered by the banks (Tan and Teo 2000). According to Herington and Weaven (2007), banks encourage the use of Banking Services by rewarding the Customers. A customer is willing to do business with a banking environment only if he gets value from his exchange with it. Lee et al. (2009) stated that the rate of adoption of Banking Services is affected by two factors namely perceived benefits and perceived risks involved when using the products or services. There are also the element of trust and Security which influences the adoption of the products. Sathye et al. (1999) carried out a research in Australia and found out that variable of system security influenced use of E-Banking Services. Haridas et al (2000b) stated that banks must protect their data from all kinds of threats and any kind of negligence would result in fall of confidence from customers and would lead to financial loss. According to Chellapa et al. (2002), Customers’ trust will be boosted if there is a rise in perception of security in Banking transactions.

2.3 Service Quality, Perception and Expectation of Consumers.

There have been several studies on the concept of Service Quality. Various definitions were suggested and there were difficulties in measuring it (Wisniewski et al. 2001). Service quality can be defined as the difference between customer expectations of service and perceived service. It is the extent to which a service meets customer’s needs and expectations (Lewis and Mitchell, 1990). If service quality is lower than the customer expected, perceived quality is less than satisfactory, there is Customer dissatisfaction (Parasuraman et al. 1985). Quality has an impact customer satisfaction, retention, loyalty and thus service quality is pivotal to the success of all service industries, and banking services. (Wolfinbarger and Gilly, 2003). Hawari and Ward (2006) demonstrated that service quality impacts on customer satisfaction which in turn affects the financial performance of banks.

To deliver high quality service to customers, bank managers must have knowledge of how consumers perceive and evaluate the services. (Parasuraman et al. 2005). Perceived Service Quality can be described as customers’ view or judgement of a service that contributes to his/her satisfaction, buying intentions and performance of companies (Zeithaml et al. 1996). Parasuraman et al. (1985) considered that a customer’s assessment of overall service quality depends on the gap between the expected and perceived service. Thus, the key to managing perceived service quality is to minimize this gap. Zeithaml et al. (1988) defined perceived service quality as the customers’ assessment. Expected Service Quality is the level of quality customers’ demand and expect from service providers (Deming and Gale et al.1994). Expectations are viewed by customers what they feel a service should offer rather would offer.

Olivier et al. (1980) stated that the service quality theory predicts low quality to be because performance did not match expectations and that high quality is when performance exceeds expectation. Consumer behavioural intentions are also influenced by the standards of service quality (Choi et al., 2004). Schneider and White (2004) noted that “service quality judgments were viewed as global evaluation that were composites of consumers’ experiences with an organization (global-level evaluation),” thus, users’ perception is a tool to evaluate the rate of service quality of the organization. Further, a good service is considered to be based of behavioural intentions of consumers (McCleary and Weaver 1982).

2.4 Service Quality and Customer Satisfaction

Service Quality and Customer Satisfaction has been the subject of many research in the past years. It was found that Customer satisfaction and service quality are inter-related. The higher the service quality, the higher is the customer satisfaction. Sureshchandar et al, (2003) stated that there is a strong relationship between service quality and customer satisfaction such that these two concepts are both important to eye of customers. According to Bitner and Zeithaml (2003), customer satisfaction occurs when expectations of customers are met and customers are satisfied. Boselie, Hesselink, and Wiele (2002) suggested that satisfaction is a positive state of mind where customers approve all modifications made to the products by the other party. Curry and Curry, 2000 pointed out that Customer satisfaction is obtained largely by the quality and reliability of products and services.

In today’s world of fierce competition, a firm’s ability to deliver high quality service those results in satisfied customers is the key to a sustainable competitive advantage (Shemwell et al. 1998). These because banks all over the world are constantly innovating their products and services and thus sometimes similar products and services are found on the market. Muffato and Panizzolo (1995) also suggested that customer satisfaction will provides competitive edge other rivals banks for the future, and will be the best indicator of a firm’s profit ability. Further, they stated that companies will try at all costs to improve their service quality, relationship with customers, reputation and image in order to bolster their turnover and market share (Karatepe et al. 2005). Anderson and Mittal (2000) went in line with Muffato and Panizzolo (1995)’s theory, stating that improvement in service quality attributes will help to increase the level of satisfaction in relation to the perception of the services they receive. Chaoprasert and Elsey (2004) found that customers differentiate products and services in terms of quality of service and hence level of satisfaction received. Moreover, customers evaluate banks’ performance mainly on the basis of their personal contact and interaction (Gronroos, 1990).

In addition, Several Studies found that there is a relationship between service quality, customer satisfaction, and pro¬tability. Chang and San’s (2005) carried a study in the Taiwanese banking industry and found that quality is an antecedent of customer satisfaction and customer satisfaction is an antecedent of pro¬tability. Moreover, Heskett et al. (1997), Zeithaml et al.(2000) and Vimi and Mohd (2008) noted the same relationship i.e. impact of high level of quality of service and customer satisfaction on profits of firms. Thus Service Quality and Customer Satisfaction must be taken into consideration when developing marketing tools and strategies. There is a substantial body of empirical literature that establishes the benefits of customer satisfaction for firms. High Service Quality and level of satisfaction leads are the main attributes contributing to retaining customers and attract new ones. Consequently, higher customer satisfaction leads to greater customer loyalty (Yi, 1991; Anderson and Sulivan, 1993 Boulding et al., 1993). It is the main key to long term success of banks (Zeithaml et al. 1996; McColl-Kennedy and Schneider, 2000).

2.5 Service Quality Dimensions and Measurement

Service Quality has been used to a large extent to measure the effectiveness and efficiency of services offered in the banking industry (Cowling and Newman, 1995). Parasuraman et. al (1985) developed a Service Quality Model to use as a framework for future research. There were 10 dimensions of service quality namely reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding the consumer and tangibles. He proposed gap-based service quality model in which service quality perceptions is obtained by the difference between Service Quality perception and Expectation. Parasuraman et. al (1985) obtained 4 four organizational gaps associated with the design, marketing, and delivery of services. In addition, Zeithaml et al. (2002) argue that there is a 5th gap which is the perceived service. The 5 gaps are listed below:

Management Perception Gap

This Gap relates to Management’s perception of what consumers expect. It may be inaccurate. Thus appropriate management style and market research are required.

Service Quality Specification Gap

It concerns mainly what the management think consumers want and what the customers expect from the company to provide. The customers may want accurate and timely service instead of new design of products.

Service Delivery Gap

This gap suggests that high service quality is not guaranteed. The service offered may not be what the management specified in guidelines. The employees may not deliver the appropriate services to the level required. The demands of the customers are not met.

External Communication Gap

It is concerned with how consumers are influenced by external communication such as advertising. The products and service may not be what the consumers thought when they saw the advertisement.

Perceived Service Gap

This gap is considered to be the most important and it deals with what is the consumers’ expectation and perception of the service (The SERVQUAL Model was developed to measure this gap).

Further research was carried out and Parasuraman et al. (1988) developed the SERVQUAL Model which reduced the list of 10 dimensions to 5. It is a 22-item instrument that includes the five service dimensions of tangibles, reliability, responsiveness, assurance and Empathy which defines quality as the difference between customer’s expectation and their perception of the service delivered.

Service Quality Dimensions

Measurement Criteria

Reliability

This dimension refers to the ability to perform the service dependably and accurately. According to some empirical studies, reliability is the most important dimension of Service Quality. In the Banking Environment, it is vital to make customers to trust that the company is going to perform what it promises to do. Reliability can make customers recognize the consistency and credibility of the company as well.

Responsiveness

This dimension refers to the willingness to help customers and provide prompt service and making customers feel more comfortable during purchasing and continue purchasing without interruption. ( Joseph et al. 1999)

Tangibles

This dimension refers to the Physical facilities, equipment, and appearance of personnel. It is an important dimension as the consumers take into account the tangibles of the bank and the services environment (Jamal and Naser, 2002).

Assurance

This dimension refers to employees’ knowledge, courtesy and ability to convey trust and confidence. Employees must have a good knowledge and the products or service that they are offering. Further they must be motivated to offer the services. If not, they will not convey confidence to consumers. (Hallowell et al. 1996)

Empathy

This dimension refers to the level of caring and individual attention provided to customers. Providing customer individual attention shows empathy to customers. Response to customers should always be cognizant of customer’s needs and show understanding of customer’s needs, enables customers to deal with their banks more easily (Levesque and McDougall, 1996).Source: Journal of Internet Banking and Commerce; Parasuraman et al (1988, 1994)

The following dimensions will be used in developing a questionnaire to carry out a survey. Questions of the questionnaire will be derived by using attributes of each dimension as follows:

Tangibility (4 attributes)

Reliability (5 attributes)

Responsiveness (4 attributes)

Assurance (4 attributes)

Empathy (5 attributes)

The same methodology was used by Izah Mohd Tahir and Nor Mazlina Abu Bakar (2007) in assessing perception, expectation of consumers and Service Quality Gap in the Malaysian Banking Sector.

2.5.1 Measuring Customer Satisfaction

The purpose of analyzing customers’ satisfaction is trying to confirm the degree of satisfaction or dissatisfaction as a result of high or low service quality level and establishing a relationship between Service Quality and customer satisfaction. Levesque and McDougall, (1996); Fornell et al. (1996) used a construct with multi-item measures to measure Customer Satisfaction. A seven-point scale ranging from “1 = very un-satisfied” to “7 = very satisfied” was used to assess overall satisfaction. Customer Satisfaction is measured by primarily by perception (Levesque and McDougall, 2000). Consumers perceive the banking services and the extent to which they are satisfied with them. Carman (1990) found that there were sufficient empirical findings to support SERVQUAL dimensions in customer Customer Satisfaction , subject to small variations for different industries. Fornell (1991) concluded that customer satisfaction is based upon a group of service quality attributes. Smith et al. (2000) suggested three elements of service process that can be used to evaluate customer satisfaction namely:

Overall Satisfaction

Personal Contact

Quality of Service

2.5.2 The SERVQUAL Model

Since the invention of the SERVQUAL Model (Parasuraman, 1988), there has been several changes in the format of the SERVQUAL instrument. There have been frequent critics. However, all the researchers (e.g., Brown, et al; 1993, Teas, 1993; Dabholkar, et al, 2000 accept and recognize the determinant roles of expectations and perceptions in service quality evaluation.

Van Dyke & Kappelman (1997) and Babakus & Boller (1992) critised the SERVQUAL Model. They doubt the validity of the 5 dimensions and whether it can be applied to all sectors of the industry. According to an analysis by Thomas P. Van Dyke, Victor R. Prybutok, and Leon A. Kappelman, the use of difference scores in calculating SERVQUAL contributes to problems with the reliability, discriminant validity, convergent validity, and predictive validity of the measurement. These findings suggest that caution should be exercised in the use of SERVQUAL scores. A further criticism is that SERVQUAL fails to capture the dynamics of changing expectations. Consumers learn from experiences.

It is argued that the main reasons behind the variability in the nature of SERVQUAL dimensions are the cultural differences across countries or ethnicities (Furer, Ching-Liu and Sudharshan, 2002). Customer values and beliefs vary from one culture to another and this determines the importance and perception of service quality. New Studies have demonstrated that Service Quality varies under the situation under which it is offered. In the end, researchers have concluded that the dimensionality of service quality is situation specific. Further, Brown et al. (1993) stated that the SERVQUAL Model has to be modelled by including questions when applying to different sectors of the industries.

Cronin and Taylor (1992) criticize the Parasuraman’s work for its uncertainty to define perceived service quality in attitudinal terms. In 1992, they developed the SERVPERF Model and tested it in four industries. They found that SERVPERF explained more variance in an overall measure of the service quality than the SERVQUAL Model. However, Quester et al. (1995) carried the same analysis as Cronin and Taylor and stated that SERVQUAL performed better than SERVPERF and that SERVQUAL is more scientific approach and is firmly based on literature. Parasuraman, et al (1994) agreed measuring variances is the only area in which SERVPERF performs better than SERVQUAL, but indicated that SERVQUAL’s superior ability to be diagnostic more than outweighs any loss in predictive power.

Though there has been criticism on the SERVQUAL, it is considered to be the main tool and approach for measuring service quality. It can be used to compare customers’ expectations before a service encounter and their perceptions of the actual service delivered (Gronroos et al. 1982; Parasuraman et al. 1985). The SERVQUAL instrument has been the predominant method used to measure consumers’ perceptions of service quality. The concept of measuring the difference between expectations and perceptions in the form of the SERVQUAL gap score proved very useful for assessing levels of service quality (Parasuraman et al., 1995, 2003). He further argued that with minor modifications, SERVQUAL can be adapted to any service organisation and that data obtained from the SERVQUAL Model can be used by managers to concentrate in area where there is need for improvement. Brysland and Curry (2001) further argued that the SERVQUAL Model is a Model which has been used and tested by various researchers and has been used for many benchmarking purposes. SERVQUAL can also be administered on a repeated, regular basis.

Future of Service Quality in Banking

With financial liberalisation, there has been increasing competition in the banking sector. Banks are directing their strategies towards increasing quality of service and hence achieving customer satisfaction (Vimi and Mohd, 2008). Various strategies are formulated to retain the customer and the key of it is to increase the service quality level. Parasuraman et. al (1985) and Zeithaml et., al (1990) noted that the key strategy for the success and survival of any business institution is the deliverance of quality services to customers. Service Quality will be the main factor that will be differentiating banks. Competing on price means we are dependent on what the competition is doing – for our success. Competing on quality means staying ahead of the competition. The banks have to change their thinking; have to put the new innovations in the field of banking and the customer satisfaction should be on the top priority (Prof. Vinayak. Gopal. Patil et al, 2010).

According to Bank Technology News, Electronic Banking is the new wave of the future. People will be more encouraged to use technology as a means to carry out their financial transactions. It will provide several benefits to customers and to the banks itself. However, there will be more competition and only the fittest firm will survive (Barr et al. 2000). Banks will have to provide more products and services with higher service quality. According to Yi-Jen Yang, for Electronic Banking to expand further in the future, enhancing the security and privacy will be important as consumers must be protected from any frauds, any sort of technological crimes and errors. Thus indicating that whatever new products, services or any innovation that the banks are offering, Service Quality is indeed important to compete in the market. Quality is an ever ending journey.

2.7 Conclusion

This chapter is done with some literature review from some resources such as internet, online books, and journals. Literature reviews according to the previous works from several researchers that applied certain approaches, methods, framework or techniques that are related Measuring service quality, customer satisfaction and SERVQUAL model, was stated.