Important Role In Todays Competitive Banking Environment Marketing Essay

Abstract: Commercial bank plays an important role in today’s competitive banking environment. Service quality is a key factor in consumer satisfaction. Banks must improve service quality and care about customer demand. To improve service quality in commercial banks can be of great benefit to the banking sector, it will also improve the satisfaction of consumers as well as the internal customers. In order to maintain profitability, banks must improve the quality and efficiency of operations. This study examines the quality implementation level of commercial banks in Pakistan.

INTRODUCTION: In current business scenario, the banking industry has become highly competitive. In today’s competitive environment banking sector plays an important role in Pakistan economy. The Commercial banking sector need improvement in various dimensions of Quality Management and their applications to different departments of commercial bank due to intense competition. To improve quality in banking services may help the overall banking industry to meet the customer satisfaction & excellent performance. Bank is a major financial institute which support any economic system involve in channeling funds from those having surplus to those having its shortage. The objective of this fund channeling is to earn profit. In order to reach maximum customers, banks develop a network of branches. Branches are the points where banks offer their products. Banking products are almost the same in a country but what matters is the way the product is offered and the quality aspects associated with those products. Total Quality Management (TQM), a buzzword phrase of the modern age is based on the assumption that quality can be managed that every business entity tries to get into. Total Quality Management is viewed as virtually a new organizational culture and a way of thinking. So the approach has an intense focus on customer satisfaction, accurate measurement of every critical variable in business operations, continuous improvement of products, services and processes and on work relationships based on mutual trust and teamwork.

Major change in the banking industry concerns customer expectations and needs for banking services. As customers become more educated, they demand new products, better delivery channels and more reliable and responsive services. Improvement in service standards in other industries also raises the expectations of banking customers. Banks need to deal with a generation of more demanding customers. To improve competitiveness, banks have to satisfy their customers by providing higher quality services. [i] 

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Changes in the banking industry concerns changes in culture and technology. Customers are more aware of their rights and are more willing to voice their opinions or complaints than before. With rapid development in mass media, any complaints or negative feelings from dissatisfied customers would be propagated rapidly and easily. Therefore, banks have to be more proactive to prevent complaints and criticism. Rapid advancement in technology facilitates the development of new banking products and services. Information technology is heavily used as a competitive weapon by changing

the critical factors of competition such as cost, price, service and quality. [ii] 

STATEMENT OF THE PROBLEM

Due to increasing competition day by day, quality services ought to be the important part of the commercial banking. The research is conducted to examine the level of quality services implemented in different commercial banks of Pakistan.

OBJECTIVES OF THE STUDY

1. To Study the status of quality management initiatives in the various commercial banks operating in Pakistan.

2. The impact of quality management initiatives on commercial banking.

Conceptual Framework

Service quality has been defined in services marketing literature as an overall assessment of service by the customers. Perceived service quality is believed to be resulting from comparison between customers’ prior expectations about the service and their perceptions after actual experience of service performance. Service quality has been defined by the practitioners in terms of key dimensions that customers use while evaluating the services. Conceptualization of service quality should include both the service delivery process as well as the service outcomes. Gro¨nroos (1984) offered a service quality model with dimensions of technical quality (what consumer gets), functional quality (how consumer gets the service) and corporate image (how consumers perceive the firm and its services). Similarly, Lehtinen and Lehtinen (1991) offered another model with three dimensions of service quality: physical, interactive and corporate. Physical quality is about the quality of physical products involved in service delivery and consumption. Interactive dimension refers to the interaction between the customers and the service organization employees. Corporate quality refers to the corporate image as perceived by the customers. The service quality literature has also highlighted that service quality can also be treated as a second order construct consisting of interaction, physical environment and outcome quality. [iii] 

In the traditional sense, satisfaction was considered to be transaction-specific construct which resulted from immediate post purchase judgment or affective. Customer satisfaction is also considered from a cumulative satisfaction perspective and is defined as customer’s overall experience to date with a product or service provider. Most of the customer satisfaction studies are now using this cumulative satisfaction concept. Another important customer metric is customer loyalty. Many researchers have used service recommendation to other customers as a proxy for customer loyality. Besides recommendation other items which have been used extensively for measurement of customer loyalty are consideration of the company as the first choice service provider and continuing to do business with the same company. [iv] 

Service quality is found to be a strong predictor of customer satisfaction.Research in different industries have investigated the relationship between service quality (its dimensions) and customer satisfaction – telecommunications (Woo and Fock, 1999); restaurants (Gilbert et al., 2004); hospitals (Andaleeb, 1998); hotel services (Voss et al., 1998); travel agencies (Bitner, 1990); internet services (Kim and Lim, 2001; Van Riel et al., 2001); multiple industries (Bitner et al., 2000). In traditional retail banking service quality dimensions of relational performance, core performance and features performance were found to be significant predictors of customer. Various studies have been conducted in similar area,where in banking service quality dimensions have been tested as predictors of customer satisfaction (Krepapa et al., 2003; McDougall and Levesque, 2000; Ndubisi and Wah, 2005). In case of automated banking service quality dimensions have been found to affect customer satisfaction (Al-Hawari and Ward, 2006). [v] 

Competition increased remarkably after the entrance of the international banks. Now, although the international banks government-owned banks are more familiar to customers, with many branches across the nation, the international banks are increasingly offering ready-made products and using advanced technology. Their greater management skills means changes can be introduced promptly to the market, while their competitors face higher branch investment and operating costs. [vi] Employee success depends upon employee empowerment Senior management and HR dept need to be involved. Increased competition and higher customer expectations are the main factors behind the adoption of quality programs in Financial Services. [vii] (TQM- A Recommended Strategypp50)

Research Questions

The main research areas to be examined are:

(1) Problems of customer service and the focus on service quality dimensions

(2) Interest in improving service quality

(3) Actions and success in service quality improvement

(4) Persistence of problems in serving customers

(5) Moves to continue to improve service quality

Hypothesis

We propose the following hypothesis:

H1. Service quality banking has direct positive effect on customer satisfaction.

H2. Customer satisfaction has a direct positive effect on customer loyalty.

H3. Service quality dimensions have direct positive effect on customer loyalty.

H4. Quality management services have a direct positive effect on efficiency.

H5. Internal customer is satisfaction have a direct positive effect on external customer satisfaction

Research Methods

In order to study the quality implementation level, the researcher will develop an interview guide and interviewed senior managers of different commercial banks in Pakistan. Data will be collected from Commercial banks may be by questionnaire or direct interview.Although this is time-consuming and it is difficult to control the range of answers (Hussey & Hussey, 1997), the method was used because it enabled the researcher to win the respondents’ cooperation. Their detailed explanations allowed a good understanding of service quality improvements and initiatives throughout the banking sector. [viii] Data will be analyzed through extensive literature review.