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ORIGINAL ARTICLE

ISSN No : 2230-7850

Monthly Multidiciplinary Research Journal

Indian Streams Research Journal

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Indian Streams Research Journal


Volume 2, Issue.10,Nov. 2012

ISSN:-2230-7850 ORIGINAL ARTICLE

Available online at www.isrj.net

MEASURING CUSTOMER SATISFACTION IN INDIAN BANKING INDUSTRY


V.S. MANGNALE AND JAYSHREE CHAVAN Sihgad Institute of Business Management, kamlapur , solapur Maharashtra Solapur university Solapur,Institute of Computer and Management studies, Pandhrpur.Solapur, Maharashtra

Abstract: To survive in highly competitive markets, organizations need to provide services that yield highly satisfied and loyal customers customer satisfaction is currently the new standard by which customers are measuring business performance. Competitive advantage exists when an organization maintains an edge over its rivals in retaining customers and in positioning itself to take advantage of environmental changes. Under these circumstances, successful service organizations realize the importance of carefully monitoring and managing of customer satisfaction. Customer satisfaction has for many years been perceived as key in determining why customers leave or stay with an organization. Organizations need to know how to keep their customers, even if they appear to be satisfied. This study looked for possible finding out the customer satisfaction level with private Indian banks i.e HDFC, ICICI in Pandharpur city. For this study, ACSI Model is used to calculate the customer satisfaction index of the Indian private banks. KEYWORDS: ACSI, Customer Satisfaction, Private Banks. INTRODUCTION: Competitive advantage exists when an organization maintains an edge over its rivals in retaining customers and in positioning itself to take advantage of environmental changes. Under these circumstances, successful service organizations realize the importance of carefully monitoring and managing of customer satisfaction. When customers are satisfied, they are more likely to return, while dissatisfied customers are more likely to go elsewhere. Where the existing literature relates organizational culture and customer satisfaction, those links are either theoretical or indirect. Against this background, this study aims to explore the way that culture relates to customer satisfaction in a service setting, based on front-line employees' perceptions. However, Dawkins, P. M and Reichheld, F. F. (1990) concluded that customer service orientation correlates positively with different measures of customer satisfaction, and consequently it is assumed in this paper that the degree to which front-line employees are oriented towards customer satisfaction is an indicative measure of customer satisfaction. Moreover, since there is some evidence of differences between employees holding managerial and non-managerial positions in terms of organisational culture Daniell, A. (2000) and customer service orientation Baker, M. J. (1993), this study looked for possible finding out the customer satisfaction level with private Indian banks i.e HDFC, ICICI.

Indian Streams Research Journal Volume 2 Issue 10 Nov 2012

MEASURING CUSTOMER SATISFACTION IN INDIAN BANKING INDUSTRY

OBJECTIVES OF THE STUDY: 1.To use ACSI model for measuring satisfaction in banking industry. 2.To calculate the satisfaction level of bank customers. 3.To identify the key dimensions affecting on Customer's satisfaction levels. LITERATURE REVIEW: Customer satisfaction in service industries To survive in highly competitive markets, organizations need to provide services that yield highly satisfied and loyal customers Oliver, P. (2004). As Marple, M and Zimmerman, M. (1999) claimed, customer satisfaction is currently the new standard by which customers are measuring business performance. Satisfied customers are more inclined to be loyal, producing several benefits for organizations Abratt, R and Russell, J. (1999). First, repeat business generates income. Second, it limits costs related to acquiring new customers, such as advertising, promotion and start-up activities. Third, satisfied customers often spread the good news and recommend products and services to others. Consequently, customer satisfaction is considered to be a key to organisational survival Curasi, C. F and Kennedy, K. N. (2002) as well as increased market share and profitability Healy, T. J. (1999). All organizations are faced with the challenge of identifying the critical factors that determine customer satisfaction and loyalty Mylonakis, J., Malliaris, P. G., & Siomkos, G. J. (1998). Nevertheless, the service industry has several particularities that need to be taken into account. Services are more or less intangible, their production and consumption are inseparable, customers are at least to some extent active participants in their production process while service production and consumption are simultaneous. Moreover, due to the fact that the production process of services involves employee-customer interaction, it is hard to ensure consistency and reliability Ioanna, P. D. (2002). For all these reasons, customers' perception of the service experience is frequently the only way accurately to estimate quality level of services provided Bharadwaj, S. G., Varadarajan, P. R and Fahy, J. (1993).According to Rust, R. and Zahorik, A. (1993) customer service is all about perceptions. A service cannot be tested before it is sold, it cannot be stored, returned or exchanged. As a result, customers' perceptions of care experience and interpretation of it is what matters the most Chang, Z. Y., Chan, J and Leck, S. L. (1997). This is probably the reason why the argument that customers are greatly influenced by their interaction with employees when assessing services provided is gaining increased recognition within the services industry. In businesses where the underlying products have become commodity-like, quality of service depends heavily on the quality of its personnel. This is well documented in a study by Reidenbach, R.E. (1995), who documented that approximately 40 percent of customers switched banks because of what they considered to be poor service. Leeds further argued that nearly three-quarters of the banking customers mentioned teller courtesy as a prime consideration in choosing a bank. The study also showed that increased use of service quality/sales and professional behaviors (such as formal greetings) improved customer satisfaction and reduced customer attrition. Indeed, customer satisfaction has for many years been perceived as key in determining why customers leave or stay with an organization. Organization's need to know how to keep their customers, even if they appear to be satisfied. Reichheld (1996) suggests that unsatisfied customers may choose not to defect, because they do not expect to receive better service elsewhere. Additionally, satisfied customers may look for other providers because they believe they might receive better service elsewhere. However, keeping customers is also dependent on a number of other factors. These include a wider range of product choices, greater convenience, better prices, and enhanced income (Storbacka et al., 1994). Fornell (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 such as banks, insurance, mail order, and automobiles. Penny, L. (1993) further proposed that product differentiation is impossible in a competitive environment like the banking industry. Banks everywhere are delivering the same products. For example, there is usually only minimal variation in interest rates charged or the range of products available to customers. Bank prices are fixed and driven by the marketplace. Thus, bank management tends to differentiate their firm from competitors through service quality. Service quality is an imperative element impacting customers' satisfaction level in the banking industry. In banking, quality is a multi-variable concept, which includes differing types of convenience, reliability, services portfolio, and critically, the staff delivering the service.

MEASURING CUSTOMER SATISFACTION IN INDIAN BANKING INDUSTRY

RESEARCH MODEL BASE For this study, ACSI Model is used to calculate the customer satisfaction index of the Indian private banks. The American Customer Satisfaction Index (ACSI) Fig 1 is the national indicator of customer evaluations of the quality of goods and services available to U.S. residents. It is the only uniform, crossindustry/government measure of customer satisfaction. Since 1994, the ACSI has measured satisfaction, its causes, and its effects, for seven economic sectors, 41 industries, and more than 200 private sector companies, two types of local government services, the U.S. Postal Service, and the Internal Revenue Service. ACSI has measured more than 100 programs of federal government agencies since 1999. This allows benchmarking between the public and private sectors and provides information unique to each agency on how its activities that interface with the public affect the satisfaction of customers. The effects of satisfaction are estimated, in turn, on specific objectives (such as public trust). The ACSI is produced through a partnership of the University of Michigan Business School, CFI Group, and the American Society for Quality. Fig: 1

As we are interested in calculating only the satisfaction level of the customer so we will not take into account the customer loyalty and customer complaints part into consideration, so our model for this research project will be as shown in fig2; Fig: 2

MEASURING CUSTOMER SATISFACTION IN INDIAN BANKING INDUSTRY

As, ACSI model has been used in many industry and service sector so it considered to be as a model base for this research project. SAMPLE DESIGN Sample Unit: Customer of ICICI, HDFC is the sampling unit for this project Sample size: 96 customers. Sampling Techniques: Quota sampling techniques is used in this research project. Sampling Area: Pandharpur city in Maharashtra DATA COLLECTION The study entailed data collection with the help of a questionnaire from the customer visiting in the different bank in the Pandharpur region. Data was collected by personally contacting the respondents and explaining in detail about the survey. A total of 96 Customer's from different areas participated in the survey break-up of which is given in table 1.

Table No. 1 Customers of Banks Name of Bank ICICI HDFC Total No. of Customers 56 40 96

Table No. 1 shows 96 customers taken for study from respective banks out of that 56 customers from ICICI banks and 40 customers from HDFC banks. FINDINGS AND ANALYSIS Factor Analysis: for determining the various factors leading to customer satisfaction in Banking Industry Factor analysis was performed to identify the key dimensions affecting Customer's satisfaction levels, the impact of various bank facilities. The respondent ratings were subject to principal axis factoring with varimax rotation to reduce potential multicollinearity among the items and to improve reliability on the data. Varimax rotation (with Kaiser Normalization was converged in twelve iterations). A.Process For process part 7 questions have been asked from the bank customers. Since value of KMO is greater than .50 which shows that data is adequate for further analysis.

Table 2:

KMO and Bartlett's Test .622


102.627

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity


Approx. Chi-Square

Df Sig.

21 .000

[Index for comparing the magnitudes of the observed co-relation coefficient to the magnitude of the partial correlation coefficients. Large value for the KMO measure indicates factor analysis of the variables. KMO >= 0.5 is acceptable.] Bartlett's Test of Sphericity

MEASURING CUSTOMER SATISFACTION IN INDIAN BANKING INDUSTRY

Strength of relationship among variables is strong. It presents good idea to proceed a factor analysis for the data. Ho : Variables in the population correlation matrix are uncorrelated. H1 : Variables in the population correlation matrix are correlated. The observe significance level is 0.005. It is small enough to reject the hypothesis which shows that the variables are correlated with each other. B.Information For information part 6 questions have been asked from the Customer. Since value of KMO is greater than .50 which shows that data is adequate for further analysis

Table 3:

KMO and Bartlett's Test .598 67.397 6 .000

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity


Approx. Chi-Square

Df Sig.

C.Service For service part 7 questions have been asked from the Customer. Since value of KMO is greater than .50 which shows that data is adequate for further analysis.

Table 4:

KMO and Bartlett's Test .744 103.011 15 .000

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity


Approx. Chi-Square

Df Sig.

D.Customer Expectation For service part 6 questions have been asked from the Customer. Since value of KMO is greater than .50 which shows that data is adequate for further analysis.

Table 5:

KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity


Approx. Chi-Square

.516 53.224 10 .000

Df Sig.

Thus from the above table we can say that all the four parameter of questionnaire have passed the KMO test. So we can now get on with further analysis.

MEASURING CUSTOMER SATISFACTION IN INDIAN BANKING INDUSTRY

RESULT & ANALYSIS Model Indices The ACSI model is a variation of the model used to measure customer's satisfaction level from the service of Indian private Bank's. This model was developed at the National Quality Research Center of the University of Michigan Business School. Each agency also identified the principal activities that interface with its customers. The effects of these activities on customer satisfaction/dissatisfaction are estimated by the model. Thus the model, shown in Figure 3 for customer's satisfaction index, should be viewed as a cause model that moves from left with satisfaction (RSI) in the right. The percentage of variable components is measured by several questions. The large arrows connecting the components in the circles represent the strength of the effect of the component on the left to the one to which the arrow points on the right. These arrows represent impacts. The larger the number on the arrow, the more affects the component on the left has on the one on the right. The RSI is a weighted average of four parameters in the questionnaire in Appendix A. The questions are answered on 1-5 scales, but the weighted average is transposed and reported as an index on a 0-100 scale. This four parameter questions measure overall satisfaction of the Customer from the service of Bank in NCR. Figure 1

The Customer satisfaction index (CSI) for Bank Customer is 55.70 on a 0-100 scale. DRIVERS OF SATISFACTION It has been identified that there are three activities that interface with Bank Customer. These are Process, Customer Service, and information, identified by these names in Figure 1 above. Each activity is measured by multiple questions. The three component scores or indices are weighted averages of these questions. Apart from this customer expectation is also considered as drivers of satisfaction. The score for the drivers is listed in Table 6.

MEASURING CUSTOMER SATISFACTION IN INDIAN BANKING INDUSTRY

Table:6 Activities that Drive satisfaction Process Information Customer Service 2012 58.16 60.70 55.75

Major Drivers of satisfaction

Customer Expectation (Anticipated quality) Customer Expectation (Perceived quality)

56 57.66

For this study, one measured component clearly stands-out above the rest - information, with a score of 60.70. This component scores statistically higher than either Process or Customer service. Customer Service represents the lowest scoring of the three identified drivers of satisfaction within the CSI model at 55.70 and the Process of the distributor is in between the two driver with score 58.16.Perceived Quality, the primary driver of satisfaction in the CSI model, scores at 57.66. This component measures Customer perceptions of the overall quality of their experiences with the above banks. Customer Expectations, a measure of customer perceptions of above banks scores 56.00 FINDINGS & CONCLUSIONS During the period of my visits to the Pandharpur city of western Maharashtra it was clear that company should put more emphasis in Pandharpur city region as the satisfaction level is just above 50 % and lots of improvement is needed in the region and there is a huge potential in the above mentioned city. It is also evident that with a score of 55.70 the bank should work more to increase the satisfaction level of the customers. Moving forward the customer should work to improve their services to the customers and would also be well-served in working on the Process part. Improvements in either or both of these processes are likely to yield a marked improvement in retailer satisfaction in the future. REFERENCES: Abratt, R and Russell, J. (1999). Relationship Marketing in Private Banking South Africa. The International Journal of Bank Marketing, 17(1), p.5. Baker, M. J. (1993). Bank Marketing - Myth or Reality? The International Journal of Bank Marketing, 11(6), p. 5. Bharadwaj, S. G., Varadarajan, P. R and Fahy, J. (1993). Sustainable Competitive Advantage in Service Industries: A Conceptual Model and Research Propositions. Journal of Marketing, 57(October), pp. 8399. Chang, Z. Y., Chan, J and Leck, S. L. (1997). Management of Market Quality for Correspondent Banking Products. The International Journal of Bank Marketing, 15(1), p. 32. Curasi, C. F and Kennedy, K. N. (2002). From Prisoners to Apostles: A Typology of Repeat Buyers and Loyal Customers in Service Businesses. The Journal of Service Marketing, 16(4), pp. 322-342. Daniell, A. (2000). The Myth of Cross-Selling. American Banker, 165(53), March, p. 7. Dawkins, P. M and Reichheld, F. F. (1990). Customer Retention as a Competitive Weapon. Directors and Boards, 14(4). Fornell, C. (1992). A National Customer Satisfaction Barometer: The Swedish Experience. Journal of Marketing, 56, January, pp. 6-21. Healy, T. J. (1999). Why You Should Retain Your Customers. America's Community Banker, 8(9), September, p. 22-26. Ioanna, P. D. (2002). The Role of Employee Development in Customer Relations: The Case of UK Retail

MEASURING CUSTOMER SATISFACTION IN INDIAN BANKING INDUSTRY

Banks. Corporate Communication, 7(1), pp. 62-77. Marple, M and Zimmerman, M. (1999). A Customer Retention Strategy. Mortgage Banking, 59(11), August, pp. 45-50. Mylonakis, J., Malliaris, P. G., & Siomkos, G. J. (1998). Marketing-Driven Factors Influencing Savers In The Hellenic Bank Market. Journal of Applied Business Research, 14(2, Spring), pp. 109-117. Oliver, P. (2004). Banking on Young Love. The New Zealand Herald. Penny, L. (1993). How do you Catch a Straying Customer? American Banker Association, ABA Banking Journal, 85(9), September, pp. 66-70. Reidenbach, R.E. (1995). Value-Driven Bank: Strategies for Total Market Satisfaction. Irwin Professional, U.K Rust, R. and Zahorik, A. (1993). Customer Satisfaction, Customer Retention and Market Share. Journal of Retailing, 69(2), pp. 193-215. Storbacka, K., Strandvik, R and Gronroos, C. (1994). Managing Customer Relationship for Profit: The Dynamics of Relationship Quality. International Journal of Service Industry Management, 5(5), pp. 21-38.

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