Full Project – IMPACT OF QUALITY SERVICE DELIVERY ON CUSTOMER SATISFACTION IN THE NIGERIAN BANKING INDUSTRY
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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Customers in Nigeria’s banking industry are always on the lookout for service providers that can meet and fulfill their ever-increasing requirements as the competition becomes tough. It is widely accepted that the ultimate purpose of any business is to satisfy its customers and stakeholders. The existence and growth of the organization will be ensured if the stakeholders’ demands and requirements are met. It is generally accepted that customers are one of the most crucial stakeholders in every business since without them, firms are unlikely to thrive (Babatunde & Olukemi 2012). Customer selection is becoming difficult due to the rapid growth of Information and Communication Technology (ICT). According to Oliver (1997), disconfirmation occurs when a client compares the discrepancy between their expectations and the actual performance. Consequently, customer attrition occurs, in which consumers may move back and forth between product and service offerings in order to get excellent services that meet their requirements and desires.
The customer’s satisfaction or dissatisfaction is determined by the service’s performance in proportion to the customer’s expectations, according to Kotler (2009). One of the most critical factors in sustaining crucial client connections with a bank is customer satisfaction, which serves as a link between cumulative purchase and post-buy phenomena such as attitude change, repeat purchase, and brand loyalty (Churchill & Surprenant, 1982).
To put it another way, loyal customers can be an asset to a financial institution because each bank wants to keep its customers; customer retention is one of the most important components of service marketing in that it is necessary for a bank to keep its customers happy in order to reduce the defection rate. This refers to clients that switch to a new service provider because they no longer trust their current supplier. Reichheld and Sasser (1996) used the phrase “zero defections” to describe an organization’s capacity to maintain every client it can financially service.
However, a rising defection rate indicates that something is wrong with the product quality (or that competitor‟s offer better value), it may also be a leading indicator signaling a fall in profits. Big customers do not necessarily disappear overnight; they often may signal their mounting dissatisfaction by steadily reducing their patronage and shifting part of their business to the bank‟s competitors and this could be as a result of the quality of services offered by a bank as being below expectation by the customer. Thus Service quality has a positive influence on customer satisfaction (Yee, Yeung, & Cheng 2010).
According to Kabiru, Nik, Abdullahi, Abubakar and Aminu (2012), customer switching has become prevalent and a major concern of both service providers and academics. For example, in a global survey of customer behavior in retail banking, Ernst and Young (2011) reported that worldwide, 36% of customers have changed their main bank to another in the past two years, and another 7% of customers are planning to switch to other banks. Dimension of service quality is one of the many important predictors of customer switching. And the satisfaction reinforces quality perception and drives repeated patronage.
Customer satisfaction refers to the fulfillment of customers‟ expectation after using a particular product or services (Zalatar 2012).If after the use of a particular service provided by a bank the customer has a delightful experience, this will lead to customer loyalty as regards service quality. Service quality is the degree of discrepancy between customer normative expectations of service and their perception of service performance (Parasuraman Zeithaml & Berry1990). Hence, in the banking sector service quality is typically defined in terms of gap analysis or the gap between consumers‟ perceptions of services offered by a particular bank and their expectations about banks offering such services. Therefore, the issue of service quality has become critical to efforts geared towards maintaining competitive advantage.
Since financial institutions such as banks compete in the market place with generally undifferentiated products, service quality becomes a primary competitive weapon (Stafford, 1996 as cited in Khalid, Babak Muzaffar & Shabbir, 2011). Increasing technological innovations could become a differentiation point for service providers such as the banking sector and is causing many banks to rethink their strategies with respect to the services offered to both commercial and individual customers. One of the ways through which Nigerian banks can meet the expectations of their customers is by continually striving to provide quality service, by carving a niche for themselves through effective research on customers‟ needs. It could be argued that the average Nigerian bank customer is more enlightened today than perhaps ten years ago. He/she wants more value for money and believes that value can be found next door. Moreover, many Nigerian bank customers tend to be price sensitive. Many banks subscribe to the fact that high customer satisfaction will lead to greater customer loyalty (Yi, 1991; Anderson & Sullivan, 1993) that in turn, leads to future financial gains.
Although the two terms service quality and customer satisfaction are often used interchangeably and have certain things in common, they are fundamentally different in terms of their underlying causes and outcomes. Satisfaction is generally viewed as a broader concept, whereas service quality assessment focuses on dimensions of service, hence service quality is a component of customer satisfaction (Zeithaml & Bitner 2003). The study, posits that service quality often known as SERVQUAL could inherently affect customers‟ patronage in the banking sector in Nigerian, as most of the DMBs are relatively providing undifferentiated product/services.
According to Soludo (2004) the study also observed that the banking sector in Nigeria has undergone remarkable changes over the years, in terms of the number of institutions, ownership structure, as well as depth and breadth of operations. These changes have been influenced largely by challenges posed by deregulation of the financial sector by the central bank of Nigeria (CBN), globalization of operations, competition, technological innovations and the adoption of supervisory and prudential guidelines and requirements that conform to international standards. This was based on the belief that with increased size, these banks would become stronger, resilient to shocks and capable of funding the real sector and, by extension, enhancing economic growth and development
1.2 Statement of Research Problem
A fundamental issue confronting the banking industry is the issue of money transfer in banks as in most cases customer hardly receives payment of funds transferred into their account immediately. Long queues and huge crowds remain a recurring feature in banking halls mostly at weekends. This could be highly devastating and discouraging to customers and might be as a result of incessant breakdown of computers or software; it could also be as a result of absence of cashiers to load currency or passing duty to one another, as to who is to attend to the customers. All these could really be annoying and time wasting to customer and could lead to customers‟ dissatisfaction resulting to switching their accounts from one bank to another. Such unprofessional conduct of bank personnel in relating in a courteous manner with their customers is known to lead to lots of customer switching. The customer is regarded as “king” in marketing parlance as such must be treated with some measure of respect for the sustainability and growth of any business.
Furthermore, lapses in communication and effective complaint handling process between the bank and its customers could lead to misunderstanding which could invariably affect the quality of service delivery. Hiding spurious charges on customers account still persists and this is fundamentally and ethically wrong of a financial institution; hence making it difficult if not impossible to earn the loyalty and patronage of customers.
Bastos and Gallego (2008) posited that service quality has a direct relationship with customer satisfaction which also inherently affects behavioral intentions which implies that poor service quality could adversely affect customer satisfaction about a particular service offering provided by the bank and could lead to customer churn or customer defection.
Customer satisfaction has been studied in different directions including its relationships with other business aspects. Some researchers have also provided possible means of measuring customer satisfaction from various perspectives (Levy, 2009). According, to KPMG 2014 report on the Nigerian Banking sector, there was a narrowing of the Customer Satisfaction Index (CSI) gap – from 9.3 to 7.7 percentage points in the Customer focused segment of service quality. However, all banks excluding last year‟s top three (Zenith, GTBank and Stanbic IBTC)t in 2014 recorded varying levels of increases in their overall CSI values with a consequent rise in the industry satisfaction index value from 71.9% to 72.8%. The ATM continues to remain a key channel for retail customers with 96% of them highlighting cash availability as one of their most important service measures.
Customer satisfaction is also said to be based upon the level of service quality provided by the service provider and with service quality acting as a determinant of customer satisfaction (Wilson et al., 2008). The banking sector in Nigeria has experienced a lot of challenges regarding customer satisfaction. Several scholars had investigated the impact/effect of service quality on factors such as; Loyalty, Satisfaction, Behavioral Intention and Retention, such as Parasuraman, Zeithaml & Berry1 (1988), Wang, Harris, and Patterson (2012), Bitner (1990), Kumar, Kee, and Charles (2010), Guo, Duff, and Hair (2008). Abdullah,, Hazilah, Manaf and Ferdous (2015). From the foregoing, these studies were particularly conducted in developed countries, hence the culture and technological advancement could have affected directly or indirectly the result of the findings of the study.
However, in Nigeria, studies have been conducted on service quality and these include; Sokefun (2011), Babatunde and Olukemi (2012), Ijeoma (2013) Esther, Abubakar (2015), and Haruna , Kabiru , Faiza. Badiya (2016)). None of these studies examined the impact of service quality on customer satisfaction taking cognizance of different banks in Nigeria, Ijeoma (2013) assessed quality service delivery in zenith bank Nigeria took cognizance of zenith bank branches in Anambra state this study considers one bank in just one state in Nigeria Again Most of these studies were conducted looking at a single location; hence the findings could not be generalized. But this study is concerned with the behavior of customers based on expectation and perception of quality service delivery taking a holistic view of selected Deposit Money Banks in two important locations Lagos and Abuja in Nigeria.
1.3 Research Questions:
The following are the research questions:
- How does tangibility have significant impact on customer satisfaction?
- To what extent does reliability significantly impact on customer satisfaction?
- To what extent does responsiveness significantly impact on customer satisfaction?
- To what extent does empathy significantly impact on customer satisfaction?
- How does assurance have significant impact on customer satisfaction?
1.4 Objectives of the study:
The major objective of this study is to determine the impact of quality service delivery on customer satisfaction. The specific objectives of the study are as follows:
- To determine the significant impact of tangibility on customer satisfaction.
- To assess the significant impact of reliability on customer satisfaction.
- To examine the significant impact of responsiveness on customer satisfaction.
- To determine the significant impact of empathy on customer satisfaction.
- To assess the significant impact of assurance on customer satisfaction.
1.5 Research Hypotheses:
The research hypothesis for this study are presented in form of null hypotheses HO1 Tangibility has no significant impact on customer satisfaction.
HO2 Reliability has no significant impact on customer‟s satisfaction.
H03 Responsiveness has no significant impact on customer satisfaction.
HO4 Empathy has no significant impact on customer satisfaction.
HO5 Assurance has no significant impact on customer satisfaction.
1.6 Significance of the study
There have been remarkable changes in the financial sector in Nigeria, due to high level of information and communication technological advancement and improved communication systems which has led to a more informed customer. Due to these changes, there exist inherent problems of choice selection amongst bank customers, as customer attrition persists from one bank to the other. Hence quality service becomes an important tool that could be used in the banking sector in Nigeria to ensure that the needs and wants of her customers‟ are satisfied effectively to enhance distinctive competitive capability and increased market share.
The research work would expand the body of knowledge pertaining to the applicability of service quality dimensions to the banking industry in Nigeria. The study would be of immense benefit to the management, stakeholders and staff of banks in Nigeria on how effective quality service delivery could impact positively on customer‟s point of contact with the bank. The study would also add to the existing body of knowledge on service quality as it affects customer satisfaction in banks. The study should make contributions to the use of SERVQUAL instrument to measure the differences in the gap between customers‟ expectations and customer perceptions in the banking sector in Nigeria. The work would assist the banking industry in Nigeria in identifying and satisfying the needs of her customers effectively.
1.7 Scope of the Study
The study focused on the impact of quality service delivery on customer satisfaction in five selected Banks in Nigeria.
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Full Project – IMPACT OF QUALITY SERVICE DELIVERY ON CUSTOMER SATISFACTION IN THE NIGERIAN BANKING INDUSTRY