Service Quality and Customer Satisfaction at Siddhartha Bank Kakarvitta A Dissertation submitted to the Office of the Dean, Faculty of Management in partial fulfillment of the requirements for the Master’s Degree By Chandramani Dahal Roll No: 8075/18 Registration No:7-0002-0039-2013 Campus: Mechi Multiple Campus Chapter I Introduction 1.1 Background of the study In business Customers are god. For any business to be success customer’s satisfaction is the most. In today’s competitive worlds satisfying customer has been one of an important Banking strategy. So as to satisfy its customers there is a need to identify quality dimensions and improve service quality for banks management. In Today’s world banking industry has been highly competitive, with banks not only competing among each other; but also with non-banks and other financial institutions. Almost all of the bank product developments can be duplicated easily and as banks provide almost similar services, it can only distinguish itself on the basis of price and quality. Hence, customer satisfaction is an effective tool that each bank should use to gain a higher level advantage and survive in today’s ever-increasing banking cut-throat competitive environment. In today's competitive business world, so as to become number one bank by maximizing deposits and gaining trust of customers, the commercial banks are competing with each others in Nepal. So, for this situation the customer satisfaction, loyalty and retention become the major issues. The major center to attract the customers in today’s scenario is high interest rates and the other is fast/prompt including quality services. Those bank that is able to provide high quality prompt services are able to retain the existing customers and also able to pull the new customers to their branch and offices. That is why; banks frequently launch new schemes and provide different quality services and facilities which will be helpful in retaining and attracting the customers with different ideas, opinion, objectives and businesses. Hence, as a means for customer satisfaction, this study explores service quality. For the achievement of customer satisfaction and competitive advantage service quality has been the most ever important thing. Service quality has been coupled with the increasing complexities of the need and expectation of customers, to explore the relationship between service quality and customer satisfaction it had been imperative. So, on the basis of service provided by the commercial banks in Nepal, to examine the level of customer satisfaction is the major objective of this study. The specific objectives are: to analyze the problems solved by the banks which are rose by the customers; to analyze the promises and services made by the banks is fulfilled and to identify how often the banks inform about their various products and services in Nepal. The service quality provided by the selected commercial banks is determined by customer satisfaction, shows this study. 1.2 Problem Statement To examine the impact of service quality as an independent variable on dependent variable i.e. customer satisfaction a study is designed, keeping in view the importance of customer satisfaction and service quality. 1.3 Objectives of the study • To assess the dimension of service quality and understanding satisfaction level of the customers. • To investigate the relationship between service quality and customer satisfaction. • To put forward some possible recommendations to improve customer satisfaction. To identify the impact of Human-Related service quality factors towards the perceived customer satisfaction in commercial banking sector. To identify the impact of Non-Human Related service quality factors towards the perceived customer satisfaction in commercial banking sector To evaluate the relationship between service quality and perceived customer satisfaction. To propose recommendations to enhance perceived customer satisfaction in banking industry. 1.4 Conceptual Framework Service Quality Human Related Factors Assurance Reliability Perceived Customer Satisfaction Responsiveness Empathy Non Human Related Factors Tangibility Reliability: delivering on promises; Reliability is defined because the pliability to perform the promised service dependably and accurate. Reliability means the corporate delivers on its promises about delivery, service provision, problem resolution, and pricing, within the broadest sense. Customers want to undertake to businesses with companies that keep their promises, particularly their promises about the service out come and core service attributes. Tangibles: representing the service physically; Tangibles are defined as the looks of physical facilities, equipment, personnel and communication materials. Tangibles provide physical representations or images if the service that customer, particular new customers will use to gauge quality. Responsiveness -being willing to help; Responsiveness is that the willingness to help customers and provide prompt services. This dimension emphasizes attentiveness and promptness in addressing customer requests, questions, complaints and problems, responsiveness is communicated to customers by the length of it slow they have to attend for assistance, answer to questions or attention to problems, responsiveness also captures the notion of flexibility and talent to customize the service to customer needs. Assurance- inspiring trust and confidence; An assurance is defined as the flexibility of the firm and its employees to inspire trust and confidence using employees’ knowledge and courtesy. This diminution is perhaps visiting be particularly important for services that customers perceive as high risk or for services of which they feel uncertain about their ability evaluate outcomes. Empathy –treating customers as individuals; Empathy is defined because the caring individualized attention that the firm provides its customers. The essence of empathy is conveying, though personalized or customized service, customers are unique and special which their needs are understood. Customers want to feel understood by and important to firms that provide service to them. Personal at small service firms often know customers by name and build relationships that reflect their personal knowledge of customer requirements and preferences. When such a tiny low firm competes with larger firms, the flexibleness to be empathic may give the little firm a transparent advantage. CUSTOMER SATISFACTION Customer satisfaction is that the extent to which a product’s perceived performance matches a buyer’s expectations Kotler (2006). It further argues customer satisfaction depends on the product’s perceived performance relative to a buyer’s expectations. If the product’s performance falls in need of expectations, the customer is dissatisfied. If performance matches expectations, the customer is satisfied and if performance exceeds expectations, the customer is extremely satisfied or delighted. (Kotler 2006) . Oliver (1997) defines customer satisfaction because the customers’ evaluation of a product in terms of whether that product has achieved their needs and expectations. If it fails to undertake to to so, dissatisfaction would occur. Satisfaction commonly has thresholds at a lower level (under fulfillment) and at an upper level (over-fulfillment). A consumer’s satisfaction may drop if he “gets an excessive amount of of an honest thing”. People focus upon the lower threshold and neglect the potential for an upper threshold. Outcomes of satisfaction feelings may involve intent to repurchase, word-ofmouth and complaints. 1.5 Hypothesis (if any) a. The greater the service quality of the bank, the higher will be the customer satisfaction. b. There are two variables involved; independent Variable is Service Quality and its various constructs are Reliability, Assurance, Tangibles, Empathy, and Responsiveness. The dependent variable is Customer Satisfaction. 1.6 Rationale of the study The findings of the study are likely to help service provider (Siddhartha banks) to spot service quality dimensions that the majority predict customer’s satisfaction, so as to focus on them consistent with their degree of importance. Thus, the current study helped bank managers to rise understand a way to hold loyal customers by satisfying their overall needs with expectation that they'll advocate for the bank, and hold their trust upon the bank which ends up good profit, and enhances reputation further. The findings from this study are likely also to be used as references for further research work by anyone who may well be inquisitive about this area of study. By leveling the sensitivity of various attributes of service quality on the customer satisfaction, the study are likely to contribute academically towards future research, providing strategies to be put in situ so as to fulfill customers’ needs in terms of satisfaction. The findings of this study are likely to help policy makers in several Banks including SBL its self, government and general public. They’re likely to use it while reviewing and Drafting policies that usually act as guidelines on the approach that they always bear in mind to ensure customer satisfaction. Finally the study is probably going to assist customers to specific their feelings and perceived position on the way banks are delivering services, with expectation to receive improved service quality. The consideration that banks will give to findings from this study is taken by customers as a possible upgrading of perceived service. Chapter II Literature Review 2.1 Introduction Literature review is an important chapter which provides background and validation for study undertaken (Scott &Bruce, 1994). This chapter provides a review of pertinent literature on customer perception on banking communication among "A" grade banks in Nepal. Therefore, related and relevant reviews are made on the literature about the topic. This chapter is divided into six different sub-headings. First section deals with concept related to study where general conceptual knowledge on the study is portrayed. Second section showcases theoretical review where various theories related to the study formulated by various scholars are presented. Third section is followed by conceptual review which shows various conceptual models and application of theories linking to study on the basis of articles developed by various researchers. Empirical review is made on fourth section where studies related to our area of study are reviewed. Policy review was conducted in the fifth section where we discussed about various acts, policies, rules, procedures formulated by government in the area of related study which shows the suitability and need for the present study 2.2 Theoretical Review: (theorizes supporting the topic) After hunting the literature review, the impact of service quality on customer satisfaction is identified by using different theories which describes the role and importance of service quality that ends up in customer satisfaction which is that the main objective of all the service firms now days. Also various authors described that quality of service together with other factors positively affect the amount customer satisfaction. Literature depicts that quality isn't the sole factor that affects satisfaction; there are various other factor that affects the both constructs. The theoretical review introduces and critically comments on definitions, theories. It introduces and describes the theories that designate why the research problem under study exists (H.M.G.Y.J.Hennayake, 2017). It helps us to work out what theories and a thought exists in relevancy our field of study. The relationship between service quality and customer satisfaction has received considerable academic attention within the past few years. Kirti Dutta & Anil Dutta, (2009) observed that Customer expectations are more than perceptions and this gap varies across the banking sector with tangibility having the very best impact on overall customer satisfaction. Dharmalingam, Ramesh & Kannan,(2011) stated that everyone the service quality attributes are positively correlated with customer satisfaction. Prof Gopalkrishnan, et al, (2011) determined that Service quality and customer satisfaction had a right away positive effect on customer’s retention intentions out of which customer satisfaction could be a stronger predictor for retention. (Jackie&Tam, 2004) found that customer with higher perceptions of the worth of the service ends up in turn with greater satisfaction. Montes, Mar &Fernandez, (2003) found that customers’ perceptions, attitudes and intentions are being full of employees’ experiences and attitudes who are the inner customers of the organization. In line with the foresaid literature the subsequent conceptual framework has been developed in association of the model developed by Ziethmal& Bitner 2003. To higher understand the consequences of quality on customer satisfaction, the link between constructs is explained by using Oliver’s 1993, satisfaction and repair quality model. Oliver’s model is further tested and modified by Spreng and Mackoy 1996, it specifies the effect of desires, perceived performance and expectations on overall service quality and satisfaction. Another model presented by Mcdougall & Levesque 2000, was wont to explain the link between satisfaction and quality. It specifies the effect of core and relational quality and perceived value on customer satisfaction that ultimately effect switching and loyalty (repurchase) intensions. By considering the models from the literature a model is developed to elucidate the link between the both constructs. After discussing the importance and factors affecting the relationships between service quality and satisfaction, further it is explained that how organisations can improve its quality standards to retain the customers. The improvements are described at three levels. For these purpose different theories of Leonard, Parasuraman & Zeithmal 1994; Pfeffer et al., 1995 and Parasuraman et al., 1985 are used. First, Leonard theory described step by step strategies to improve the service standards in the organisation. However from Leonard et al research seven important steps are discussed in this study. Second, Pfeffer theory explained the importance of managing work force in the organisation in order to perform services as expected by the customers. Pfeffer theory explained thirteen practises out of which the seven important were chosen to discuss in this study. Third, the Gap theory as explained by Parasuraman et al.,1985 is considered as most important in the service setting, was also covered in this study. Parasuraman et al., 1985 explained the gaps by describing how these gaps can be reduced in the organizations. These gaps are considered as main hurdles in delivering high performance services. 2.3 Empirical review Empirical review of literature includes observed data or collected data. It is the review of previous studies that relate or argues with the study being conducted at present time. It can further be said as systematic identification, location and analysis of documents containing information related to a research problem under investigation. This review encompasses research question, objectives, methodologies and findings of the previous studies (Healy & Palepu, 2014). Through empirical review researcher is trying to gain brief knowledge on the field as empirical review deals with reviewing previous studies related to similar topic of present study. It would ease and create convenience for researcher to move forward in the research showing paths to explore further. It will also help to identify gaps of previous study which can be fulfilled in the present study. Similarly, through empirical review researcher can build certain picture of whole research and prepare themselves accordingly. Customer satisfaction is one in all the important aspects of this research. It refers to serving people with their requirements and making them satisfy. It’s a person’s feeling of delight of or disappointment resulting from comparing a product’s, perceived performance in reference to his or her expectations. If the performance falls in need of expectations, the customer is dissatisfied. If the performance matches the expectations, the customer is satisfied. If the performance exceeds the expectations, the customer highly satisfied or delighted (Kotler & Keller, 2012). So customer satisfaction refers to the extent to which customers are proud of the products and services provided by a business. Customer satisfaction level is measured using survey techniques and questionnaire. Gaining high level of customer satisfaction is incredibly important to a business because satisfied customer are possibly to be loyal and to form repeated orders and to use a good range of services offered by a business. Customer satisfaction has been gaining increasing attention from the researchers and practitioners as a recognized field of scholarly study and may be a fundamental tool employed by financial institutions for enhancing customer loyalty and ultimately organizational performance and profitability (Faizan, et al., 2011). In businesses where the underlying products became commodity- like, quality of service depends heavily on the standard of its personnel. This is often well documented in an exceedingly study Leeds (1992). He documented that approximately 40 percent of customers’ switched banks thanks to what they considered to be poor service. Leeds further argued that just about three-quarters of the banking customers mentioned teller courtesy as a chief consideration in choosing a bank. The study also showed that increased use of service quality and professional behaviors (such as formal greeting) improved customer satisfaction and reduced customer attrition. Additionally, satisfied customers may probe for other providers because they believe they're visiting receive better service elsewhere. However, keeping customers is additionally obsessive about quite other factors. These include a wider range of product choices, greater convenience, better prices, and enhanced income (Storbacka, et al, 1994). Formell (1992) in his study of Swedish consumers notes that although customer satisfaction and quality appear to be important for all firms, satisfaction is more important for loyalty in industries like banks, insurance, order and automobiles In one research, Ioanna (2002) further proposed that product differentiation is impossible during a competitive environment a bit like the industry. Banks everywhere are delivering the identical products. For example, there's usually only minimal variation in interest rates charged or the range of products available to customers. Bank prices are fixed and driven by the value. Thus, banks management tends to differentiate their firm from competitors through service quality. Service quality is a crucial element impacting customers’ satisfaction level within the industry. In banking, quality is also a multi-variable concept, which has differing kinds of convenience, reliability, services portfolio, and critically, the staff delivering the service. Service Quality Service quality is additionally an important aspect to the present research. The attainment of quality in product and services has become an important concern of the 1980s. While quality in tangible goods has been described and measured by marketers, quality in services is basically undefined and not being researched. Parasuraman, Zeithaml and Berry (1988) try and rectify this instance by investigating the quality in numerous service businesses and by developing a model of service. Service quality has been described as a range of attitude that results from the comparison of expectation with performance (Cronin & Taylor, 1992: Parasuraman et al., 1985). Gronroos (1982) argued that customers, while evaluating the quality of a service, compare the service they expect with perceptions of the services they really receive it has been argued that the quality of services isn't a one-dimensional that relate to both core and augmented service offerings (Bitran & Lojo, 1993; Gronroos,1984;Lewis 1993). Customer satisfaction can thus be based not only on the judgment of the customer towards reliability of the delivered service but also on customer’s experiences with the service delivery process. It’s generally accepted that customer satisfaction often depends on the quality of product or service offering (Anderson & Sullivan, 1993;Levesque & McDougall, 1996). For this reason, research on customer satisfaction is typically closely associated with the measurement of quality. Thus, both service quality and customer satisfaction share an thorough relationship. Chapter III Research Methodology 3.1 Research Design In this study, descriptive research design is going to be used. This study is going to be mainly supported primary data. Primary sources of information are going to be collected through comprehensive interview with employees of various departments with the assistance of structured and unstructured questionnaire. So on accommodate level of customer satisfaction within the context of Nepalese commercial banks, the study are going to be conducted by suing survey methodology. Secondary data are going to be used for the industry and company analysis. Annual report of banks and NRB, brochures, web pages, books, business publication and government publication are going to be the secondary sources of information. 3.2 Population and Sampling Procedure There are all together 27 commercial banks operating in Nepal till fiscal year 2076/77. Among these banks Siddhartha Bank limited having 186 branches till date is the population of the study. Out of them, Siddhartha Bank Limited of Kakarvitta branch. Is considered as sample unit using convenience sampling method. For the survey 50 questionnaires were randomly distributed to 15 customers of each sampled bank. Out of 50, only 33 usable questionnaires were returned for a response rate of approximately 65 percent. Out of them 8 respondents will be loan taker and remaining 15 respondents will be account holder. 3.3 Method of Analysis Cronbach's alpha was wont to test the reliability. The results of Cornbach's alpha value were compared to the published estimates (Nunnaly's 0.70) for pre-existing scales employed in the study. The calculated value is 0.75 which is larger than the published estimate of Nunnaly. It strongly describes internal consistency estimate of reliability of summated scale. 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