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Customer Satisfaction

with Service Quality:
An Empirical Study of Public
and Private Sector Banks
Pooja Mengi*

Customer service is an integral part of any facet of banking and it defines the
future of any banking organization. In India, this realm has undergone vast
changes induced by regulatory and competitive forces and the banking industry
has undergone revolutionary changes since 1991. For a service sector like
banking industry, the whole range of activity and generation of income swivels
around the customer. It is necessary to identify the key success factors in the
banking industry, in terms of customer satisfaction keeping in view the increasing
market size and intense competition. This study compares customers’
perceptions of service quality of public and private banks of Jammu. The service
quality of both the banks has been measured using SERVQUAL (service quality)
scale. SERVQUAL scale was used to determine different dimensions of service
quality and chi-square analysis was used to understand the impact of SERVPERF
(service performance) dimensions (tangibility, reliability, responsiveness,
assurance and empathy) on customer satisfaction. It was found that customers
of public sector banks are more satisfied with the service quality, than those of
private sector banks.

Introduction
In the first decade of the 18th century, banking in India originated (in 1786) with
The General Bank of India followed by Bank of Hindustan. Both these banks are
now defunct. The oldest bank in subsistence in India is the State Bank of India
(SBI) which was established as ‘The Bank of Bengal’ Calcutta in June 1806.
By the 1900s, the bank market expanded with the establishment of banks like
Punjab National Bank (PNB) in 1895 in Lahore and Bank of India in 1906 in Mumbai.
Since 1935, the RBI formally took on the responsibility of regulating the Indian
banking sector.
The banking industry in India has undergone revolutionary changes due to
liberalization and globalization measures initiated since 1991. This measure, along
* Faculty Member (Marketing), INC, Jammu 180018, Jammu & Kashmir, I ndia.
E-mail: mengi.pooja@gmail.com
©
2009 IUP.
All Rights
Customer
Satisfaction
withReserved.
Service Quality:
An Empirical Study of Public and Private Sector Banks

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This revelation would help players in this industry to meet customer expectations. 109) 8 The IUP Journal of Management Research. Figure 1: Customer Perceptions of Quality and Customer Satisfaction Reliability Responsiveness Service Quality Assurance Situational Factors Empathy Tangibles Product Quality Price Customer Satisfaction Customer Loyalty Personal Factors Source: Zeithaml et al. Deregulation. technological blend and attitudinal transformation among bankers have made banks sensitive to customers’ needs and satisfaction. assurance. This paper attempts to understand the dimensions of SERVQUAL. responsiveness. the whole range of activity and generation of income swivels around the customer. 2009 . product quality and price as well as personal and situational factors. VIII. Figure 1 reflects the relationship between customer perceptions of quality and customer satisfaction. relating to the overall superiority of the service” (Parasuraman et al. p. Satisfaction is influenced by perceptions of service quality. For a service sector. (2008. This study compares customers of public sector and private sector banks in terms of their SERVQUAL perceptions. Customer orientation builds long-term relationships leading to customer satisfaction and cash flow to the bank. It is necessary to identify the key success factors in the banking industry in terms of customer satisfaction. entry of private players. with strong contribution from government. increased competition. which will ensure maximum customer satisfaction. the study uses the service performance (SERVPERF) scale which was developed by Cronin and Taylor (1992). Vol. 1988. For this purpose. it is vital to have customer orientation as a bank culture. For delivering quality service. Service quality is a focused evaluation that exhibits the customer’s perception of: reliability. private and foreign banks.with the rapid growth in the Indian economy has transformed the banking sector in India. p. 9.. empathy and tangibles. Service Quality Perceptions: Theoretical Framework Service quality is defined as “a global judgment or attitude. keeping in view the increasing market size and intense competition. 16). No.

ICICI. where ‘1’ represents highly dissatisfied and ‘5’ represents highly satisfied. etc. hotels. this study used SERVPERF in measuring banking service. 2005). Public sector. 2003) and fast food restaurants (Jain and Gupta. The scale has been used extensively in India to measure the quality of services provided by retail stores (Kaul. In the empirical work. This measure states that the customers’ assessment of overall SERVQUAL is established by the degree and direction of the gap between their perceptions and expectations of actual performance levels. Primary as well as secondary data were collected. quality magazines. 2004). Objective The objective of the study is to identify the dimensions of SERVQUAL that ensures maximum satisfaction for customers in the banking sector. a questionnaire was designed on 5 point Likert scale. the SERVQUAL scale has been criticized for its validity and reliability. (1985. For the purpose of the study. insurance companies. Accordingly.. The perceived SERVQUAL can be illustrated as: Perceived SERVQUAL = Customer Perceptions – Customer Expectations SERVQUAL has been used to measure SERVQUAL in various service settings. Hence. The study is based on the assumption that all banks belong to the same category. 2005). banks. Research Methodology This study is based on a survey conducted in Jammu (Jammu & Kashmir) in March 2009. Customer Satisfaction with Service Quality: An Empirical Study of Public and Private Sector Banks 9 . The theoretical foundation of the study is based on various secondary sources such as texts on service quality. hotels (Sivakumar and Srinivasan. articles. However. Cronin and Taylor (1992 and 1994) demonstrated that the measures of SERVPERF performs better than SERVQUAL. viz. 1988 and 1991). hospitals (Deshpande. 2006). article features and published and non-published papers. This categorization was based on the responses of the customers. telecommunications companies (Madhavaiah.Service Performance Measures A SERVQUAL measure designated SERVQUAL was developed by Parasuraman et al. this hypothesis is proposed: Hypothesis: Superior service quality performance in certain dimension(s) ensures maximum customer satisfaction in banking industry. dental clinic. and respondents were asked to respond to the statements in the SERVQUAL scale. telecommunications. Two public sector banks—SBI and PNB—and four private sector banks—HDFC. Axis and J&K— were selected for the study. health care organizations. private sector and foreign banks operating in Jammu form the universe of the study.

0 0. Vol.2 77.000 22.6 72.7 79. 25.0 Post Graduate 20. Findings and Analysis Sample Characteristics The demographic profile of the respondents is presented in Table 1.0 Graduate 64.1 15.0 49.1 Under 30 years 36. VIII.7 13.0 50.7 33. Although there were differences between the two samples of public sector and private sector bank customers.3 Dependent 50.9 Married 51.3 10.7 Below Rs.0 8.5 31-40 years 21. 9.000-25.3 33.6 67.6 12.0 58.7 Female 54. there were also some similarities.3 31. Table 1: Demographic Profile of the Respondents Bank Type Public Sector Private Sector (in %) Overall Sex Male 48.6 46.7 14.0 9.6 84. No.4 48. Chi-square test is used to find a significant difference among bank groups regarding service performance. 15.4 78.9 57.1 Marital Status Age 51 years above Qualification Profession Monthly Income 10 The IUP Journal of Management Research. out of which 88 were usable.8 10.0 25.4 51.0 Student 36.5 Service Class 53.6 Business Class 33.8 100.6 Housewife 66.3 66.4 35.000 75.4 63.4 63.4 63.3 Single 42.000 51. The demographic details of the respondents are represented in Table 1.8 27.6 12.A 100 questionnaires were distributed.0 22. 2009 . 15.7 41-50 years 85. Forty four customers belonged to public sector banks and 44 belonged to private sector banks.0 Above Rs.2 45.6 47.2 Rs.

For the three statements measuring assurance dimension. Using coefficient alpha (Cronbach. service promises are kept (Mean = 4. in both the cases. the alpha values of all the measures were greater than 0. public bank samples evaluated banks services more favorable than the private bank samples. The t-test value (–0.83 Empathy 0. the level of satisfaction is not on the higher side and the level falls in above average. all the dimensions reflected acceptable reliability. Similarly. in the empathy dimension of service quality.96). The two statements measuring the empathy dimension (t-value: –2.73 0. Hence. The results are summarized in Table 3. However.56). The individuals of public sector bank sample are highly satisfied with the bank service in comparison to the individuals of private sector.12).08) and timely bank statements (Mean = 3. 1951) and on analysis.74 0. The highly rated factors in public bank sample compared to private bank sample were—the bank statement gives complete information (Mean = 4). Table 2: Cronbach’s Coefficient Alphas for SERVPERF Dimensions Dimension Cronbach’s Alpha Private Sector Bank Public Sector Bank Tangibility 0.Measure Validation The next step of analysis dealt with how well the SERVPERF measures exhibited reliability when used in banking services of public and private sector in Jammu city.84 0.84 Responsiveness 0.1) Customer Satisfaction with Service Quality: An Empirical Study of Public and Private Sector Banks 11 . In particular. and the employee knows what your needs are (Mean = 3.7 (Table 2). there was an interesting contrast between samples on assurance and empathy dimensions.12). the bank service keeps records accurately (Mean = 4. the public bank sample was more favorable than the private bank sample.76 Assurance 0. employees are always willing to help customers (Mean = 3.81 0. the cutoff recommended by Nunnally (1978) for the basic research. the reliability analysis predicted the trustworthiness of the data obtained from the questionnaires. The highly rated factors in private bank sample compared to public bank sample were—Employees are well-dressed and neat (Mean = 3.63) reveals that customers of public sector banks are more satisfied with the quality of the services in comparison to the private sector banks.77 Reliability 0.25 and –3.64). Individual measures were subjected to a reliability analysis in accordance with predicted SERVPERF dimensions.88 0.79 SERVPERF Measures The respondents of public and private sector banks were asked to evaluate the quality of services provided by the respective banks in which they held accounts utilizing the overall measures and various SERVPERF scale items.

Vol.11 You receive prompt service from the bank 3.96 3. VIII.72 1.36 The bank service has up-to-date equipment 3.04 –0.90 3. 9.40 1.24 3.84 4. Correspondingly.70 The bank service of sending timely bank statement 3.54 Employees are eager to instill confidence 2.96 0.31 Employees are courteous 2.00 –0.10 Overall I am satisfied with the service of the bank Tangibles Reliability Responsiveness Assurance Empathy 12 The IUP Journal of Management Research.31 The bank statements gives complete information 3.88 0.08 2.76 –0.28 0.44 –0.88 4.64 2.72 3.32 –0.29 Employees are always willing to help customers 3. there was a noticeable difference in the rating of the statement “employees are well-dressed and neat” of tangibles (t-value 3.84 Employees are polite 3.71 Employees are well-dressed and neat 3.96 –3.08 2.12 3.38 The bank service keeps records accurately 3. Private bank customers rated the respective statements of the two dimensions higher than the public bank customers. 2009 .28 0.12 –1.76 –0.60 3.28 3.12 3.43 The bank service keeps promises 4.11 Pamphlets are clear and give complete information 3.60 3.32 3.04 3.84) of private and public sector bank services.17 The bank service keeps time 3.25 The bank service provides best interest at heart 3.60 –2.11) and the statement “the bank service of sending timely bank statement” measuring responsiveness (t-value 2.56 2. Table 3: SERVPERF Measures—Results of the t-test Mean Variables t-value Private Sector Public Sector 3.25 Employees know what your needs are 3.90 3.63 The bank’s premises is visually appealing 3.evaluated the SERVQUAL of public sector banks more favorably than the private sector banks.36 3.63 The bank service of handling customer problems 3.04 –0.68 2. No.

Table value = 15. Conclusion In the emerging competitive environment and IT era.5 (5% level of significance). Hence.2. It is evident from Table 3 that the chi-square calculated value (43.6.2) is higher than the table value at 5% level of significance. The results are summarized in Tables 4 and 5. assurance and empathy which plays an important role in service quality.Chi-Square Analysis A chi-square analysis was performed on each sample to determine the impact of SERVPERF on customer satisfaction with banking services. The banks need to focus on other dimensions of SERVPERF such as responsiveness. with little or no distinction in the product offerings. Table 4: Impact of SERVPERF on Customer Satisfaction— Responses of Private Banks Sample Level of Satisfaction SERVPERF Dimensions Tangibility Reliability Responsiveness Assurance Empathy Total High 73 58 25 21 20 197 Medium 46 30 37 35 15 163 6 12 13 19 15 65 125 100 75 75 50 425 Low Total Note: Chi-square calculated value = 43. It can be seen from Table 4 that the SERVPERF dimensions have an impact on the satisfaction level of a public bank sample. the SERVPERF dimensions have an impact on the satisfaction level of private banks sample. Table value = 15. it is the quality of service that sets one bank apart from another. Table 5: Impact of SERVPERF on Customer Satisfaction— Responses of Public Banks Sample Level of Satisfaction SERVPERF Dimensions Tangibility Reliability Responsiveness Assurance Empathy Total High 57 49 26 28 32 192 Medium 49 34 27 22 13 145 Low 19 17 22 25 5 88 125 100 75 75 50 425 Total Note: Chi-square calculated value = 23.6) is higher than the table value at 5% level of significance. The results of the study indicate that tangibility and reliability provides maximum satisfaction to customers of private as well as public sector banks.5 (5% level of significance). as the computed chi-square value (23. Superior SERVQUAL performance will ensure maximum customer satisfaction and also help Customer Satisfaction with Service Quality: An Empirical Study of Public and Private Sector Banks 13 .

Cronin J J and Taylor S A (1992). price. pp. the results obtained through the study relate to only those respondents chosen through convenience sampling. i.. Vol. 16. No. Cronin J J and Taylor S A (1994). 3. the time period of this study was during the recovery post recession phase of the business cycle. in order to measure customer satisfaction. “SERVPERF vs. The sample size is 100. 2.  References 1. Second. Service loyalty as an after effect of satisfaction could be added as an additional variable for further research. SERVQUAL: Reconciling Performance-Based and Perception-Minus-Expectations Measurement of Service Quality”. where the organizations were focusing on cost cutting.e. Vol.in attaining customer’s loyalty. 1. 1993). No. There might be other situational factors like advertising. Hence. “Measuring Service Quality: A Reexamination of Extension”. Subsequent empirical research should look at the impact of these factors on customer expectations (Zeithaml et al. 3. pp. 58. No. Limitations and Future Research The limitation associated with this study is that the sample is taken only from six banks. 3. This is done in consideration of the limited number of private banks available in Jammu city. repurchase intention and word-of-mouth recommendation. Improved customer satisfaction through SERVQUAL would result in a positive word-of-mouth and consequently better customer acquisition and retention. 2009 . Psychometrika. this study considered the influence of two factors (tangibles and intangibles) on customer satisfaction in banks. as there are only two public sector banks (SBI and PNB) with a major market share and limited private sector banks with minor market share. 297-334. 56. “Coefficient Alpha and the Internal Structure of Tests”. overall satisfaction and SERVQUAL measures have been considered. VIII.. and since the profile of the sample is not a model of actual market share of different public and private sector banks in India. Also. Vol. Fourth. this study should be seen as giving a direction for future research and generalization from this study to a wider population of retail banking industry should be done with some caution. No. the sample size was 50 each for public sector and private sector banks. Third. 125-131. 9. 55-68. pp. Cronbach L J (1951). The performance of the bank services may be different during growth. Journal of Marketing. Vol. Journal of Marketing. 14 The IUP Journal of Management Research. two public sector and four private sector banks. Future research needs to examine a wider sample extending to maximum number of public and private sector banks.

Vol. 13. Zeithaml V A. pp. Serials Publications. Journal of Retailing. Madhavaiah C (2005). 41-50. New York.). McGraw-Hill. Deshpande Priya (2006). SERVPERF Scales”. 1-12. 1. Services Marketing. 12-40. Ahmedabad. New Delhi. Kadapa”. 4th Edition. 4. Sivakumar C P and Srinivasan P T (2003). 25-37. in Balaji Prasad P (Ed. “A Conceptual Model of Service Quality and Its Implications for Future Research”. Vol. No. “A SERVQUAL Model Approach for Training Hotel Staff to Deliver Service Quality”. Berry L L and Parasuraman A (1993). Working Paper No. 2005-10-02. “SERVQUAL: A MultipleItem Scale for Measuring Consumer Perceptions of Service Quality”. “Refinement and Reassessment of the SERVPERF Scale”. Journal of Retailing. Journal of Marketing. Parasuraman A. “Measuring Service Quality: SERVQUAL vs. 9. 12. Vol. “Service Quality Perspectives and Satisfaction in Health Care Systems—A Study of Select Hospitals in Hyderabad”. Zeithamal V A and Berry L L (1991). No.4. 6. 5. Vol. 29. Management Challenges of Service. 4. Vol. Fall. Zeithamal V A. 9. Zeithamal V A and Berry L L (1985). Unpublished M. 11. No. 64. Kaul Subhashini (2005). 231-248. “Measuring Retail Service Quality: Examining Applicability of International Research Perspectives in India”. “The Nature and Determinants of Customer Expectations of Service”. pp. pp. 1. Psychometric Theory. Parasuraman A. pp. pp. Journal of the Academy of Marketing Science. 2. Indian Institute of Management. Customer Satisfaction with Service Quality: An Empirical Study of Public and Private Sector Banks 15 . 36. “Service Quality in Telecommunications: A Case Study of BSNL. Annamalainagar. 10. 3-7. Indian Journal of Marketing. 7. pp. Vol. Parasuraman A. Bitner Mary Jo and Gremler Dwayne (2008).Phil Dissertation Submitted to Annamalai University. New Delhi. Tamil Nadu. Jain S K and Gupta Garima (2004). pp. 420-450. No. 21. Vikalpa. The McGraw-Hill Companies. Zeithamal V A and Berry L L (1988). 14. Nunnally J C (1978). No. 8. October. 67.

No. 25. 9. 4. 15. 16 Questions 1. Are you satisfied with the way employees dress? 4. S. 3.000 Above Rs. 2009 . No.000-Rs. A. Are you satisfied with the technological up-to-date equipments of the bank? 3.000 Profession: Employee Student Businessman House wife B. 5 = highly satisfied. Are you satisfied with the pamphlets distributed by the bank? Are they clear and give complete information? 5.000 Any Other 31-40 yrs Rs. 2 = dissatisfied. Are you satisfied with the bank statement? Is it visually clear? 6. 25. General Information Customer Name Bank Name Bank Type: Private Public Type of Account: Savings Salary Gender: Male Female Marital Status: Married Single Age: Under 20 21-30 yrs 41-50 yrs Above 50 yrs Graduate Post Graduate Qualification: Income (Monthly): Dependent Below Rs. 1 against the appropriate box where. Vol. 1 = highly dissatisfied. 3 = neither satisfied/nor dissatisfied. 15. VIII. 2.Annexure Customer Satisfaction Survey Questionnaire Note: This information will exclusively be used for research purpose and in no case will be disclosed to anybody. Reliability Are you satisfied with the services provided by the bank as promised? 7. Please tick () 5. Are you satisfied by the service of handling customer’s service problems? 5 4 3 2 1 The IUP Journal of Management Research. 4 = satisfied. Tangibility Are you satisfied with the premises of the bank? Is it visually appealing? 2.

Are you satisfied with the employee’s eagerness of instilling confidence in customers? 15. Are you satisfied by the overall service quality of your bank? 4 3 2 1 Reference # 02J-2009-09-01-01 Customer Satisfaction with Service Quality: An Empirical Study of Public and Private Sector Banks 17 .Annexure (cont. No. Are you satisfied with the record maintaining procedure of your account? 10. Are you satisfied by the bank service of providing the product that best suits you? 18. Assurance Are you satisfied with the way employees behave with you? 14. Are you satisfied by the employee’s behavior of showing consistently courteousness towards you? 16. Are you satisfied with the bank service of sending timely bank statement? 13. Responsiveness Are you satisfied with the promptness in providing service to you? 11. Are you satisfied with the willingness of employees to help customers? 12. Questions 5 8. Empathy Are you satisfied by banks service of providing customers best interest at heart? 17. Are you satisfied with the way bank informs about the time when service will be performed? 9.) S.

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