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Perceived Service Quality and Customer Satisfaction: A Missing Link in Indian
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Article in Vision-The Journal of Business Perspective · March 2019
DOI: 10.1177/0972262918821228
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Article
Perceived Service Quality and
Customer Satisfaction: A Missing
Link in Indian Banking Sector
Vision
23(1) 44–55, 2019
© 2019 MDI
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DOI: 10.1177/0972262918821228
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Bindu K. Nambiar1
Hareesh N. Ramanathan2
Sudhir Rana3
Sanjeev Prashar4
Abstract
The purpose of the article is to recognize the moderating effect of customer knowledge on perceived service quality and customer
satisfaction through customer value evaluation in the Indian banking sector. This knowledge can considerably streamline the effort
banks invest in acquiring the right kind of customers. The results of the study indicated that perceptions of service quality positively
impacted customer value evaluation. Moreover, customer knowledge strengthened the relationship that the empathy and responsiveness dimensions of service quality had with customer value evaluation and moderated the relationship that reliability and tangibility
dimensions had with customer value evaluation.
Key Words
Indian Banking, Service Quality Perception, Customer Knowledge, Customer Value Evaluation, Customer Acquisition, Customer
Satisfaction, Customer Profitability
Introduction
The key to any business growth, customer satisfaction
serves as a benchmark for any business organization to
achieve success. In the fiercely competitive banking sector,
acquiring customers, serving them and maintaining relations with them to attain the maximum satisfaction is the
greatest challenge. This upsurge of competition in the retail
banking domain, coupled with customers’ demands for
augmented service quality, is forcing banks to understand
the customers’ buying behaviour up to every possible
extent. Banks are compelled to transform themselves into
profit-oriented businesses in addition to their integral role
in developing the lives of people and the economy on the
whole. To become profit-oriented, banks have to be
increasingly customer-oriented. However, a mere understanding of the needs of the customer and efforts to achieve
their obligation to the banks alone are no longer a priority
for the bank. On the contrary, maintaining and retaining
relationships with the existing customers is the major
concern for banks today (Ghazizadeh, 2010). Banks that
develop an intimate relationship with customers gain
advantages such as repeat purchase, customer commitment, emotional attachment to the bank and trust and liking
towards the bank (Ragins & Alan, 2003).
Banks use successful business models such as service
quality and customer relationship management to identify,
serve and satisfy their customers. However, exploring
‘customer value contribution’ as a strategy enhances banks’
competitive edge with their ability to meet needs of customers and to deliver higher levels of customer satisfaction.
Previous literature in banking identified aspects such as
service quality (Chen, Chang, & Chang, 2005), self-service
technology (Ho & Ko, 2008), operational quality,
SCMS Cochin School of Business, Kochi, Kerala, India.
Department of Management Studies, Toc H Institute of Science and Technology, Arakkunnam, Kerala, India.
3 Fortune Institute of International Business, New Delhi, India.
4 Indian Institute of Management, Raipur, Chhattisgarh, India.
1
2
Corresponding author:
Sudhir Rana, Fortune Institute of International Business, Plot No. 5 Rao Tula Ram Marg, Opp. Army R&R Hospital, Vasant Vihar, New Delhi 110057,
India.
E-mails: rana.sudheer21@gmail.com; sudhir.rana@fiib.edu.in
Nambiar et al.
convenience and access, safety and soundness, monetary
cost (Parente, Costa, & Leocadio, 2015), reduced waiting
time and transaction cost (Dauda & Lee, 2016) affecting
customer value contribution. A small yet growing number
of businesses, however, gains marketplace advantage by
drawing on knowledge regarding customer value contribution over their less knowledgeable competitors. These datadriven customer value assessments, measured in monetary
terms, validated the efforts business invest in their customers
(Anderson, 1998). Hence, customer knowledge and customer value evaluation are becoming one of the most sustainable business models in the retail banking sector.
With the passage of time, banks have realized the significance of maintaining relationships that are beneficial
and needed to improve their satisfaction levels for business
to grow over a longer period of time. As customers draw a
value perception based on the activities conducted by the
bank, the inability of bank employees to assess accurately
their perception of service quality may lead to dissatisfaction with the service experienced. It is vital for banks to
understand that customers bring profit and in return have
to be provided with quality services.
The prime challenge for banks in managing customer
relations is not to obtain information regarding customers
and their needs alone but also to use this data and determine
the best time to offer the relevant product/solution to these
customers. It is found that the convenience of bank’s location, price/charges, the recommendation from other account
holders and promotional activities are no more criteria for
customers to select a bank. Instead, factors such as transaction accuracy, carefulness of employees, and efficiency in
correcting mistakes and the friendliness and helpfulness of
employees (Zineldin, 2005) are used by customers to select
the banks. The existing literature on marketing practices of
banks offers plenty of scope for exploring the relationship
between service quality and customer value evaluation and
the influence of customer knowledge on the mentioned
relationship. In this context, the present article looks into
the impact service quality has on customer value evaluation
with the intermediating effect of customer knowledge.
This exercise will help in identifying valuable and beneficial
customers with much more clarity.
Background of the Study
A bank has to create customer relationships that deliver
value beyond the core product. This is derived by measuring
and controlling quality through effective implementation of
customer relationship management practices, quality service
and appropriate differentiation strategy (Zineldin, 2005).
CRM is a top priority for banks as they are rated and rewarded
based on customer relationships managed (Swartz, 2000).
The customer’s perception of service quality is achieved
by consistently anticipating and meeting their needs and
expectations. The relationship between service quality and
employee–customer interpersonal skill is pertinent to get a
45
relationship stronger. A high-quality service gives credibility
to the employees. It encourages favourable word-of-mouth
communications, enhances customers’ perception of value
and boosts the morale and loyalty of employees and customers’ alike (Parasuraman, Zeithaml, & Berry, 1988).
A successful CRM implementation requires a committed company-wide focus on key customers in their one-toone marketing efforts. It will further gain traction if the
customers’ needs are interpreted and demands are met on
an enduring basis. A comparative study of the human
encounter vis-à-vis technology encounters in a banking
environment especially when remote technological interventions are frequent, found that technology increases the
overall satisfaction of customers, but the human interface is
also equally indispensable (Simmer, Burman, & Haytko,
2008). Contradicting the above interpretation is a finding
that even though perceived service quality is a global judgement of superiority of a service, the customer’s satisfaction
is specific to encounters or transactions (Parasuraman
et al., 1988). It is observed that researchers and practitioners often assume that CRM is a technical centric practice as
banks have been using different software tools to perform it
(CRMnext, Oracle, Salesforce, etc.).
CRM is not only a technical centric practice but also a
strategic function of the organization. PwC, on the contrary, states that technology is a critical part of managing
existing customers; otherwise, it is not easy to build more
meaningful engagement, a differentiated value proposition
and a consistent experience across a complex new array of
channels. Five leading issues that shaped challenges while
implementing a CRM approach are intelligence, usability,
customer experience, multichannel strategy and customer
data integration (DeGarmo & Hurley, 2011). According
to an Accenture report, banks have the most immediate
challenges as eroding customer trust and satisfaction.
These challenges can be overcome by getting the following
basics right-branch network optimization, basic multichannel integration, proactive and reactive management, operational customer segmentation, sales force effectiveness,
simple and clear communication and performance management (Terrizzano, Pesaresi, & Naja, 2012). Interestingly,
this corresponds to bank’s service quality dimensions of
empathy, assurance, reliability, tangibility and responsiveness (Parasuraman et al., 1988). These perceptions of
service quality determine the degree of CRM implementation. Implementing CRM contains five dimensions:
customer acquisition, customer knowledge, customer information system, customer value evaluation and customer
response (Lu & Shang, 2007). Understanding the perceptions of these dimensions helps banks to anticipate their
expectation in the future and create superior customer
experience so that they do not churn.
Banks usually confront complex difficulties on numerous fronts such as marginal product differentiation, rigid
and inflexible operating guidelines, rising customer
46
expectation, proliferating solutions available. The real
differentiation in banking can occur when banks provide
customer-centric offerings. To build such offering, banks
need to gain deeper insight into customer value. This customer value is the ‘overall assessment of the offering’s
utility on perceptions of what is received and what is given’
(Zeithaml, 1988). It can be measured by collecting customer-related data, and customer knowledge is gained
pertaining to perceptions on tangibility, service assurance,
employee responsiveness, empathy and service reliability
dimensions of service quality. Thus, customer value is
assessed and influences banks to pay attention to calculating the resources expended on acquiring the customer. The
acquired customer then is a satisfied customer who is
always emotionally linked with a service provider for its
favourable perceptions. If the banks have a good CRM
strategy contained by comprehensive customer knowledge
of service quality perceptions, understanding customer
value evaluation and eventually invest resources in valuebased customer acquisition, then customer satisfaction will
automatically be increased.
The present study attempts to explore ways in which
banks can cultivate and implement an effective CRM. The
process can be devised in understanding the relationship
between the customer’s perceptions of bank’s service
quality and the bank’s efforts to acquire new customers,
evaluating the customer value and building customer
knowledge, eventually leads to satisfied customers. The
relationship reveals the intermediary effect of customer
knowledge between service quality perceptions and customer value evaluation and then acquiring the customer. The
study validates that right acquisition results in heightened
satisfaction and more loyalty.
The layout of the article is such that it begins with a
review of the literature, hypothesis formulation, and conceptual model, research methodology, analysis and interpretation, discussion on the congruence or nonconformity
of the hypothesis with previous studies and concludes with
business and research implication.
Theoretical Background and
Conceptual Framework
CRM ensures acquiring the right customer with the right
needs so that banks provide more value and have a positive
impact on customer satisfaction levels. CRM has defined
dimensions as customer acquisition, customer knowledge
and customer value evaluation. Customer acquisition
covers the bank’s flexibility in measuring customers’
urgent requirements and using customer information in
developing different marketing mix for targeting customers and identifying newer markets. Customer knowledge
comprises the bank being knowledgeable about obtaining
key customers and understanding their service requirements. Customer value evaluation covers the bank to
Vision 23(1)
analyse the individual customer’s profit contribution and
analyse customer types and behaviours to identify customer value (Lu & Shang, 2007).
Quality in the service sector has been a topic of discussion for both practitioners and academics. Service quality
is a multidimensional concept with which the quality is
measured, and it is also known as the service quality exterminator or SERVQUAL. It consists of five indicators:
reliability, responsiveness, assurance, empathy and
tangibility in services.
Each of these dimensions is important for customers;
however, in certain contexts, some are more needed over
others (Parasuraman at al., 1988).
Customer satisfaction is paramount to a favourable
perception of service quality and a successful execution of
CRM, especially in financial services. Since customers are
unable to evaluate services prior to the service experience,
service encounter, explained as the interaction between
the service provider and the customers, is key in evaluating
the service performance (Gil, Berenguer, & Cervera, 2008).
During these encounters, the customer is able to get an
impression of the way the organizations provide their
services. It is a triumvirate of the interaction between the
organization, processes and employees. Experience during
the service encounter, the interaction between the triumvirate and the customer, determines the level of customer
satisfaction. In banks, customer satisfaction, hence, is a
multidimensional construct. The list of bank service attributes used for the measurement of satisfaction comprises
elements such as the appearance of the bank, behaviour of
bank employees, layout and atmospherics, operating hours,
interest rate and waiting time (Manrai & Manrai, 2007).
These elements are found in the earlier mentioned CRM
constructs such as customer knowledge, customer value
evaluation and customer acquisition and service quality
dimensions. Bank customers may regard some of these
elements as being not equally important as the others.
The constructs used in this study are mentioned in
Table 1 as follows:
Within the above conceptual, structural and theoretical
background, this article presents a framework illustrated in
Figure 1, showing the CRM practices of customer value
evaluation, customer knowledge and customer acquisition
adopted by banks and the customer’s perception of bank’s
service quality and the above-stated CRM practices.
Drawing from the aforementioned literature review and
research framework, the accompanying hypotheses were
proposed (refer to Table 2).
Service Quality and Customer Value
Evaluation
Service quality of service firms has demonstrated the positive relationship between increased customer satisfaction
and future purchase intentions (Zairi, 2000). In the modern
customer-centred era, customer value is a strategic weapon
47
Nambiar et al.
Table 1. List of Constructs
Construct
Definition
Service quality
Tangibility
Reliability
Assurance
Responsiveness
Empathy
Customer value evaluation
Assessment of how well bank has delivered service conforming to the customer’s expectations
The appearance of physical facilities, equipment, personnel and communication materials
Ability to perform the promised service dependably and accurately
Knowledge and courtesy of employees and their ability to convey trust and confidence
Willingness to help customers and provide prompt service
Caring, individualized attention the firm provides its customers
Bank analysing individual customer’s profit contribution and categorizing value based on various
customer types and behaviours
Bank being knowledgeable about obtaining key customers, understanding their service
requirements
Bank’s flexibility in measuring customers’ urgent requirements and using customer information in
developing different marketing mix for target customers and identifying newer markets
Measure of how products and services supplied by a company meet or surpass customer
expectation
Customer knowledge
Customer acquisition
Customer satisfaction
Source: The authors.
Figure 1. Conceptual Framework
Source: The authors.
Table 2. List of Hypothesis Statements
Hypothesis Statement
H1
H2
H3
H4
There is a positive relationship between service
quality perception and customer value evaluation.
There is a positive relationship between
customer value evaluation and customer
acquisition
There is a positive relationship between
customer acquisition and customer satisfaction
Customer knowledge moderates the relationship
between service quality perceptions and
customer value evaluation
Source: The authors.
in attracting and retaining customers. Delivering superior
customer value has become a matter of ongoing concern in
the building and sustaining competitive advantage by
driving CRM performance (Wang, Lo Po, Chi, & Yang,
2004).
Customer value evaluation covers the bank to analyse
an individual customer’s profit contribution and analyse
customer types and behaviours to identify customer value
(Lu and Shang, 2007). Customer value has a significant
role to play in the bank’s operational decision-making.
Creating customer value is a major source of competitive
advantage for organizations. The more the customers
perceive to receive, the more value gets derived from their
total experience. In this scenario, customers are not buying
goods or services alone, but specific benefits, which solve
problems. They contribute value when the service is offered
to match their perception of bank’s ability to solve their
problem (Knox, 2003). On the aforementioned discussion,
hypothesis 1(H1) is formulated as:
H1: There is a positive relationship between service
quality perception and customer value evaluation.
Customer Value Evaluation and Customer
Acquisition
Organizations have given immense importance to acquiring and retaining profitable customers. For effective customer management, it is important to gather information on
the customer’s value contribution. The value is assessed,
48
and customers are segmented based on their value
(Hyunseok Hwang, 2004). Customer value, however, is a
dual concept. First, in order to be successful, firms create
perceived value for the customers. Customer perceived
value is measured, and those perceptions are provided/
altered through the marketing-mix elements. Second, customers, in return, contribute value through multiple forms
of engagement to the firm. Organizations need to measure
and manage this value of the customer(s) and incorporate
this knowledge back into real-time marketing decisions
(Reinartz, 2016). The lifetime value of the customer considers customer profitability to have a significant role in
service provider’s customer acquisition activities and
customer acquisition/retention trade-off activities (Berger
& Nasr, 1998). On the aforementioned discussion, hypothesis 2 (H2) is formulated as:
H2: There is a positive relationship between customer
value evaluation and customer acquisition.
Customer Acquisition and Customer
Satisfaction
In today’s arena, success in the marketplace necessitates
building customer relationship and not just creating products. This building of customer relationship means delivering superior value over competitors to the target customers
(Kotler, 2002). Doing so leads to satisfied customers.
Recognizing and anticipating customers’ needs results in
customer satisfaction. Organizations that are able to rapidly
understand and satisfy customers’ needs make greater
profits than those which fail to understand and satisfy them
(Barsky & Nash, 2003). By acquiring the right customer
with the right value contribution and favourable perception
regarding the service quality, the benefits become twofold.
First, the acquisition cost for such customers is low and
second, customer satisfaction is guaranteed as the customer
is understood well ahead of implementing acquisition
activities. On the aforementioned discussion, hypothesis 3
(H3) is formulated as:
H3: There is a positive relationship between customer
acquisition and customer satisfaction.
Moderation Effect of Customer Knowledge
Between Service Quality and Customer
Value Evaluation
Enterprises realize customers as their most important asset
and recognize that a high level of customer satisfaction can
only be achieved by enhancing service quality. Thus,
acquiring customer knowledge to initiate and maintain customer relationships, to enhance service quality has become
an important issue for these enterprises (Tseng & Wu,
2009). On the aforementioned discussion, hypothesis 4
(H4) is formulated as
H4: Customer knowledge moderates the relationship
between service quality perceptions and customer value
evaluation
Vision 23(1)
Research Methodology
The study started as an exploratory in nature at the first
phase of research. A comprehensive review of literature
helped on exploring the gap in the existing literature and
introducing the role of customer knowledge as a moderator
variable between service quality and customer acquisition.
To initiate the nobility of the concept, with experts with
practical banking experience, academicians performing
research on the same field were consulted and brought under
one umbrella to deliberate through focus group discussion.
The focus group was organized by a group of 10 academicians as well as senior-level banking professionals working
in India. This exercise helped researchers to gain greater
insights into the usage of banking services and their perceptions of the bank’s activities meeting their expectations.
In the subsequent phase of the survey, a descriptive
research was taken, and this fell into a conclusive design.
This study utilized, apart from self-developed items, items
from the validated questionnaires of earlier research like
items from the SERVQUAL/RATER instrument from
Parasuraman et al. (1988) and CRM items from Lu and
Shang (2007). The obtained data on fundamental variables
of service quality dimensions, customer knowledge, customer value evaluation and customer acquisition dimensions of customer relationship management and customer
satisfaction in retail banking.
Subsequently, the hypotheses framed in the study are
tested using the questionnaire as a tool to survey research.
Data thus collected were analysed with IBM SPSS and
AMOS (Version 20*). The respondents were also asked
regarding the level of satisfaction based on the overall
banking experience and the likelihood action taken eventually. In all the statements in section B, a format of a fivepoint ordinal Likert scale was used with the response
continuum ranging from 1 to 5, where 1 = strongly disagree;
2 = disagree; 3= neutral; 4 = agree and 5 = strongly agree.
The prepared questionnaire, then, was tested through
a pilot study on 200 respondents prior to being used for
the study. The survey was conducted using multicriteria
sampling on customers who had bank accounts in various
private (old generation and new generation) and public
sector banks in India. Public sector banks—State Bank of
India and its associates which include State Bank of India
(SBI) and State Bank of Travancore (SBT) and Nationalized
banks which include Union Bank of India (UBI) and
Canara Bank; Old generation banks—South Indian Bank
(SIB) and Federal Bank; New generation banks—ICICI
Bank and HDFC Bank. Initially, a sample size of 838 was
estimated as adequate, but it was decided to distribute 860
questionnaires of these, and 846 responses were found
suitable to conduct the analysis further.
Research Results
The data were normally distributed and passed the reliability test with above the acceptable limit (Cronbach’s
49
Nambiar et al.
Figure 2. Service Quality and Customer Value Evaluation: Mediating Role of
Customer Knowledge
Source: The authors.
Table 3. Empirical Results on Service Quality and Customer Value Evaluation
SERVQUAL
Variables
Tangibility
Reliability
Responsiveness
Empathy
Regression
Coefficient
Std. Regression
Coefficients
Significance
Decision
0.238
0.131
0.233
0.604
0.057
0.078
0.077
0.055
p < 0.05
p < 0.05
p < 0.05
p < 0.05
Supported
Supported
Supported
Supported
Source: The authors (using survey data).
coefficient Alpha was found above 0.70). It is observed
that the relationship between tangibility, reliability, responsiveness and empathy dimensions of service quality
with customer value evaluation dimension is significant.
‘Customer Value Evaluation’ was the dependent variable, and
Tangibility, Reliability, Responsiveness, Empathy dimensions of the service quality were the independent variables
used to conduct path analysis and analysis of interaction
effects. The independent variables were Tangibility,
Reliability, Responsiveness, Empathy dimensions of the
service quality (see Figure 2). Impact of service quality
dimensions also checked in relation to the mediation of
‘Customer Knowledge’ on customer value evaluation. The
assurance was not included in the model since in banking,
service providers are expected to be delivering products
and services as per the guidelines of regulatory bodies.
Therefore, there is no perceived differentiation between
banking institutions on the basis of assurance.
The regression coefficient and the standard regression
coefficient depicted that the relationship between empathy
and customer value evaluation dimension has the highest
strength (regression coefficient 0.604 and standard regression coefficient 0.055) followed by tangibility (regression
coefficient 0.238 and standard regression coefficient 0.057)
and responsiveness (regression coefficient 0.233 and
standard regression coefficient 0.077). Reliability dimension has the least influence on the customer value evaluation (regression coefficient 0.043 and standard coefficient
regression 0.175).
Service Quality and Customer Value
Evaluation
The empirical data as analysed and summarized were
shown in Table 3:
It can thus be interpreted that customers would bank
more and invest more if banks express empathy. Empathizing
with the customer’s concerns would lead to an increase in
profit contribution of customers. Banks are to be designed
providing right solutions to customers on time with no
delay. Banks fundamental business model has evolved from
a ‘product push’ siloed approach to a customer-centric
fully integrated self-service mode of operations (Veenstra,
2014). Self-service technology is becoming a new norm
for the retail banking industry. Hence, the dimensions
responsiveness and reliability are gradually experiencing
technology intervention reducing the human interface.
Newer ways of assessing these service quality dimensions
emerge as financial institutions are realigning their business
to incorporate technology (Iberahim, 2016). Hence, it is
becoming a challenge for banks to maintain responsiveness
and reliability as promised to customers even with the lesser
human interventions.
Customer Value Evaluation,
Customer Acquisition and
Customer Satisfaction
The empirical data as analysed and summarized were
shown in Table 4.
50
Vision 23(1)
Table 4. Customer Value Evaluation, Customer Acquisition and Customer Satisfaction
Variables
Customer
value evaluation
and customer
acquisition
Customer
acquisition
dimension
and customer
satisfaction
Regression
Coefficient
Std. Regression
Coefficients
Significance
Decision
0.033
0.385
p < 0.05
Supported
0.036
0.152
p < 0.05
Supported
Source: The authors (using survey data).
The results show that the relationship between customer
value evaluation and customer acquisition dimensions
of customer relationship management is significant. The
regression coefficient and the standard regression coefficient
depict that the relationship between customer value evaluation and customer acquisition is 0.033 and 0.385. It can
thus be concluded that any change in the customer value
evaluation dimension of customer relationship management
would have its effect on customer acquisition. This argument holds true, especially in banking. To obtain the desired
result of customer satisfaction and banks’ profitability,
profiling of the customers with proper determination of
customer value leads to quality customer acquisitions. This
profile mapping helps banks to assess the requirements of
the customers prior to acquiring them. As customer acquisition involves a cost to the bank, it is imperative for banks to
assess the profitability of the customers and then decide
the type of offering and the level of service to be offered.
This emphasizes the core philosophy of CRM as each
customer is different in value, banks need to efficiently
allocate resource among customers. Customer value evaluation uses the customer knowledge that would drive customer purchase to optimize the resent and future value of
customers.
The effect of customer acquisition dimension of customer
relationship management on the level of customer satisfaction is significant from the survey results. The regression
coefficient and the standard regression coefficient depict
that the relationship between customer acquisition dimension of customer relationship management and the level of
customer satisfaction is strong (regression coefficient 0.036
and standard regression coefficient 0.152). Thus, it can
be concluded that any change in the customer acquisition
dimension will have its significant effect on the level of
customer satisfaction. Acquiring right customers and matching service offering with the requirements of the customers
leads to exceeded customer satisfaction, Doing so, customer
commitment increases, and there is increased value to banks.
Banks must adopt appropriate acquisition strategy to convert
potential customers into paying customers, and the customer
base gets expanded. Measuring the costs, comparing it with
customer’s potential and later with the profits generated
by them helps banks to balance acquisition cost and cost
of keeping the customers satisfied. The success of banks
thus would lie in reducing the marketing cost to acquire new
customers and increase overall customer response rates,
which is an evidence of a satisfied customer (Kumar, Kee,
& Charles, 2010).
Moderation Effect of Customer
Knowledge Between Service Quality
and Customer Value Evaluation
The moderating behaviour of customer knowledge in the
relationship between service quality and customer value
evaluation of CRM dimension is tried in this part of the
analysis. The empirical data as analysed and summarized
are shown in this section taking each service quality dimension over customer value evaluation with the moderating
customer knowledge dimension.
Moderation One
Customer knowledge acting as the moderator between tangibility and customer value evaluation is shown in Table 5.
Tangibility is the appearance of physical facilities, equipment, personnel and communication materials (Zeithaml,
2006). From the Table 5 and Figure 3, the regression results
show that the relationship between tangibility and customer
value evaluation is moderated by customer knowledge, and
this moderating variable weakens the strength of the relationship (interaction, −0.005). In other words, although the
tangibility dimension of service quality has a positive influence on customer value evaluation (Table 3), it is weakened
by the moderating customer knowledge variable. Symbolizing
(Table 5, Figure 3) there is an impactful relation between
upgraded technologies in banks, the operational hours of
banks, visually appealing facilities and materials used and
the professional appearance of the employees, with measuring profit contribution of various customer groups and analysing the customer types and behaviour to identify their
51
Nambiar et al.
Table 5. Regression Coefficients for Two-way Interaction—
Levels of Tangibility
Variable Names
Independent variable
Tangibility
Moderator
Customer knowledge
Dependent variable
Customer value evaluation
Unstandardized Regression Coefficients
Independent variable
0.522
Moderator
0.508
Interaction
−0.005
Source: The authors.
Figure 4. Interaction Effect of Customer Value Evaluation and
Levels of Reliability with Customer Knowledge as Moderator
Source: The authors.
It may be interpreted as more customers are aware of the
terms and conditions, the operations standard of the banks,
very few customers would rely on the tangibles offered by
banks. The more technology is implemented in delivering
services, and less would have tangible influence on the
profit contribution of the customers.
Moderation Two
Figure 3. Interaction Effect of Customer Value Evaluation and
Levels of Tangibility with Customer Knowledge as Moderator
Source: The authors.
Table 6. Regression Coefficients for Two-way Interaction—
Levels of Reliability
Variable Names
Independent variable
Reliability
Moderator
Customer knowledge
Dependent variable
Customer value evaluation
Unstandardized Regression Coefficients
Independent variable
0.720
Moderator
0.503
Interaction
−0.008
Source: The authors.
value. However, customer knowledge, which is the banks’
effort on obtaining knowledge on their key customers, understanding their service requirements and insisting them to use
more and more of the banks’ services and products, weakens
the strength of the relationship between tangibility and customer value evaluation. Hence, the hypothesis is accepted.
Customer knowledge acting as the moderator between reliability and customer value evaluation is shown in Table 6
and Figure 4:
It is the judgement of customers/clients regarding an
overall performance of the organization and its services
(Zeithaml, 2006). In banks, reliability measurement is
established by testing consistency and stability. The major
reason for customers to choose banks is dependability.
Banks always promise customers a high level of security
during transactions. Banking service can increase customers’ confidence and trust if employees are able to provide
appropriate service to each customer (Iwaarden, Wiele,
Ball, & Millen, 2003). The regression results show that
although the reliability dimension of service quality has a
positive influence on customer value evaluation (Table 3),
it is weakened by the moderating customer knowledge
variable (interaction, −0.008). Results depicted that customer’s knowledge can dampen the strength of the relationship between the perception of stability and consistency
of banking services with the bank’s comprehension of the
customer’s profit contribution. Banks knowledge of key
customers and their requirements moderates dependability
over accuracy and consistency in delivery of services
leading to the bank’s examining value contribution.
52
Vision 23(1)
Moderation Three
Customer knowledge acting as the moderator between
responsiveness and customer value evaluation is shown in
Figure 5.
Responsiveness is defined as the willingness to help
customers and provide prompt service (Zeithaml, 2006).
The future of banking is responsive, and banks need to
design and fold the banking experience around their customers by providing them with the right product or service at the
right time. Banking experiences that are dissatisfactory are
discussed twice above good ones. Likewise, customers
dissatisfied with the bank’s attempt to resolve a problem or
answer a query confide to 16 more people. Customers who
complain and have their complaints resolved are more brand
loyal than customers who have no complaints (Lynn, 2000).
From Table 7 and Figure 5, it is seen that customer knowledge moderates the relationship by strengthening it (interaction 0.002). Responsiveness deals with the process of
Figure 6. Interaction Effect of Customer Value Evaluation and
Levels of Empathy with Customer Knowledge as Moderator
Source: The authors.
banking, and this dimension of service quality ensures
customers not having any problem while dealing with banks.
Knowledge of customers helps banks in providing services
performed to expected standards, correctly, promptly and
timely leading to more valuable contribution.
Moderation Four
Figure 5. Interaction Effect of Customer Value Evaluation
and Levels of Responsiveness with Customer Knowledge as
Moderator
Source: The authors.
Table 7. Regression Coefficients for Two-way Interaction—
Levels of Responsiveness
Variable Names
Independent variable
Responsiveness
Moderator
Customer Knowledge
Dependent variable
Customer Value Evaluation
Unstandardized Regression Coefficients
Independent variable
0.364
Moderator
0.352
Interaction
0.002
Source: The authors.
Customer knowledge acting as the moderator between
empathy and customer value evaluation is shown in
Figure 6.
Empathy is the caring and individualized attention the
firm provides its customers. Empathy as a dimension of
service quality primarily drives customer satisfaction.
Banks are trying to divert their customers from bank offices
to ATMs, and the internet may undermine the importance of
human contact, which is essential for successful customer
service. Therefore, bank managers should bear in mind
while striving to improve the service quality that the problem
is genuine empathy and interest that cannot be put into a
script (Ica, 2010). From the aforementioned table and figure,
the regression results show that although the empathy
dimension of service quality has a positive influence on
customer value evaluation (Table 3), it is strengthened by
the moderating customer knowledge variable (interaction,
0.004). The above data (Table 8, Figure 6) is interpreted as
the customer’s knowledge can strengthen the relationship
between the perception of caring and empathy. The firm
provides its customers with the bank’s comprehension of
customer’s profit contribution. Banks knowledge of key
customers and their requirements moderates employees
empathizing with the customers while delivering services
and bank’s identifying and utilizing the customer’s value
contribution.
53
Nambiar et al.
Table 8. Regression Coefficients for Two-way Interaction—
Levels of Empathy
Variable Names
Independent variable
Empathy
Moderator
Customer Knowledge
Dependent variable
Customer Value Evaluation
Unstandardized Regression Coefficients
Independent variable
0.252
Moderator
0.267
Interaction
0.004
Source: The authors.
Discussion
Today, organizations are obliged to render more services
apart from their product offerings. Service as a component
is an integral part of customer satisfaction. Experts have
demonstrated that service quality is identified with customer satisfaction. Service quality enhancements and
building strong and fruitful relationships with customers is
the prime concern for organizations, specifically banks
(Khare, 2010). Improving service quality has become the
tool that banks utilize to retain customers (Gradener, 1999).
Banks are facing a tremendous competition and the demand
of the customers for better service quality is in the upsurge.
Consequently, banks are forced to identify customers as an
important asset that needs to be protected and nurtured
(Bowman & Narayandas, 2001).
By paying attention to service quality, banks gain a
competitive advantage in the undifferentiated marketplace.
A higher perception of service quality provided by banks
can lead to increased revenue, satisfied customer base and
an improved rate of customer retention (Kumar et al.,
2010). Thus, to survive the prevailing intense competition,
banks attempt to create convenient banking. Banks provide
services such as ATM, ready cash service, money transfers,
national electronic fund transfer and the real-time gross
settlement, banking via mobile phone, and so on are insufficient as they can be easily replicated by other banks.
Customer relationship management is the centre of all
activities as banks have moved from being transactional to
the relationship oriented. For building a long-term relationship with customers, banks should look into the customers’
satisfaction from the customer’s perspective instead of
bank’s perspective (Peppers & Rogers, 2004). While maintaining the relationship with customers, banks focus on
identifying customer needs and providing services exactly
matching with those needs. Service quality has a positive
influence on customer satisfaction (Thaichon, Quach,
Bavalur, & Nair, 2017), and using CRM effectively provides a comprehensive view of the customer groups
obtained and it increases the chances of repeat business
enhancing the net growth of the business.
As banking deals with financial needs, this study found
four dimensions positively impacting the value customers
contribute to the bank name, tangibility, responsiveness,
empathy and reliability. Assurance dimension does not
influence value contribution. In other words, social interactions between employees and customers classified as
empathy will make the customers contribute more to value.
Perception of service performance called reliability will
also have a positive impact on the customer’s value contribution. The visual images which help customers to form
impressions regarding the quality of service called tangibles will have a positive effect on the customer’s contribution to profit. On the contrary, altering assurance dimensions
has no effect on the customer value evaluation. In other
words, the customer’s value contribution is not increased
or decreased due to the enhanced perceptions of assurance
regarding the service provider, as these dimensions are a
problem-/grievance-specific and do not directly lead to
more purchase. In other words, trust and confidence gained
from skilful employees do not influence customer’s value
contribution. Customer value evaluation and customer
acquisition indicate that banks are making progress in analysing the customer’s contribution to profit, assessing
their behaviour in identifying value and accordingly are
developing new products and services enhancing personalized approaches. All of this will all have its influence on
activities implemented and approaches used by banks
to meet the needs of the customers and attract large customers. This realization will improve the manner in which
customer information is utilized to attract new customers,
customize products and services and fulfil promises on
time. In addition to this, information on customer value
would help to acquire them providing a total financial
solution through knowledgeable/trained employees who
have a sincere interest in the benefit of those customers.
Banks take up approaches, that can attract customers,
utilizing the right information to customize products and
services, fulfil promises on time and provide complete endto-end financial solution through trained and competent
employees who are pleasing and have a sincere interest in
the benefit of the customer. This will all lead to a more
satisfied customer reaping greater benefits to the banks in
the long run.
Implications of the Study
This study can be extended to find the influence of four
dimensions of service quality and three dimensions of customer relationship management on customer satisfaction.
It can also be advantageous to study in detail the perceptions of customer relationship management of different
segments of respondents. Considering the diverse application possibilities and the value provided to banks, the study
can be extended to further delving into comparisons
between old and new generation banks, and perceptions on
service quality dimensions. The study provides actionable
information to banks with which they can design and
implement marketing programmes catering to the diverse
requirements of the customers.
54
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect
to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research,
authorship and/or publication of this article.
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Nambiar et al.
About the Authors
Bindu K. Nambiar (bindu.unnithan@gmail.com) is an
Associate Professor and Management trainer in the area of
Marketing and Retailing. Having completed MBA from
Madurai Kamaraj University with a University Rank (2001),
Bindu has a blend of corporate and academic experience.
Her passion for academics led her to receive AIMA
Accredited Management Teacher certificate in Marketing
after a decade long experience in management teaching,
management consulting and corporate training. She has published research in several national and international journals
and presented papers in conferences of international repute.
Her research areas of interest include customer relationship
management in services sector, consumer behaviour in retail
marketing, branding for locally manufactured/homegrown
products and sustainability in business using societal marketing. She is also a member of the Editorial & Reviewer
Board of Business Perspectives and Research (ISSN: 2278–
5337). She was awarded PhD in Management studies from
Mahatma Gandhi University in 2017.
Hareesh N. Ramanathan (hareeshramanathan@gmail.
com) is a Doctoral Degree holder in Management having 15
years of experience in teaching post-graduate Management
students and in doing research. He is an approved PhD guide
under two universities and a management trainer in the field
of analytics. He got several indexed journal publications to
credit and presented many research papers in International
and national conferences. His areas of strength are research
and analytics. One of the authors of the book Statistical
Methods for Research: A Step by Step Approach Using
IBM SPSS.
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Sudhir Rana (rana.sudheer21@gmail.com) is faculty in
marketing area at Fortune Institute of International
Business located in the heart of India’s capital city. Dr
Rana believes in driving and motivating academics and
research such a way that, it can be best utilized in an
enthusiastic and dynamic environment to foster versatile
personalities. His research profile is followed by reputed
publications into several ABDC & ABS Ranked/indexed
journals published by Emerald, Inderscience, Neilson,
SAGE Publications and so on.
Along with the Editorship of FIIB Business Review, he
is also active as Guest Editor and Editorial Board member
in many journals of repute. He is associated with Journal
of International Business Education, International Journal
of Indian Culture and Business Management, International
Journal of Business and Globalisation, Journal of Global
Business Advancement and Asian Journal of Management
Science and Applications to name a few.
Sanjeev Prashar (dr.sanjeev.prashar@gmail.com) is a
Professor at Indian Institute of Management Raipur, India
in the area of marketing management. Prior to this, he worked
with Institute of Management Technology (IMT), Ghaziabad,
as a Professor in the area of marketing management. His
areas of interest include impulse buying, online buying,
mall selection, rural marketing, international marketing/
exports management and marketing of services. He has
published research papers/case studies in various journals
such as Richard Ivey School of Business and Emerald
Group Publishing Limited and Journal of Retailing and
Consumer Services.