“EFFECT OF CUSTOMER EXPERIENCE QUALITY ON LOYALTY

WITH RESPECT TO BANKING CUSTOMERS”

Submitted to

RAJAGIRI BUSINESS SCHOOL

In partial fulfillment of the requirements for the award of

POST GRADUATE DIPLOMA IN MANAGEMENT

(2017-2019)

By
Aparna Menon
P17171

RAJAGIRI BUSINESS SCHOOL

RAJAGIRI VALLEY
KAKKANAD, KOCHI
682034
 DECLARATION

I, Aparna Menon hereby declare that this report is a bonafide record of the dissertation
programme, as a part of partial fulfillment of the award of the degree, Post Graduate Diploma
in Management from Rajagiri Business School, Cochin.

I also declare that this report has not been submitted to any other University or
Educational Institution for the award of any other degree or diploma.

Place: Cochin Aparna Menon

Date: 11-03-19
 ACKNOWLEDGEMENT

First and foremost, I note my deepest gratitude to the God Almighty for showering his
blessings upon me through out.

I would like to thank my parents for their invaluable support and guidance, without which
this Dissertation would not have been possible

I owe my sincere thanks to Dr. Joseph I Injodey, Rajagiri Centre for Business Studies,
Cochin for having permitted me to undertake and extending his kind support and helping me
in conducting the dissertation

I am extremely thankful to my faculty guide Prof. Deepak Babu for giving me his valuable
guidance and support for doing the dissertation.

Last but not least, I am extremely thankful to all those who had rendered their support,
especially my friends.

Thank You,

Place: Cochin Aparna Menon

Date: 11/03/2019
 TABLE OF CONTENTS

TITLE PAGE NO.

CHAPTER 1: INTRODUCTION ........................................................................................... 1

INTRODUCTION ................................................................................................................ 2

STATEMENT OF THE PROBLEM.................................................................................. 5

SIGNIFICANCE OF THE STUDY .................................................................................... 5

SCOPE OF THE STUDY .................................................................................................... 5

CHAPTER 2 :REVIEW OF LITERATURE ........................................................................ 6

CHAPTER 3: RESEARCH METHODOLOGY ................................................................ 11

RESEARCH QUESTION ................................................................................................. 12

OBJECTIVES .................................................................................................................... 12

HYPOTHESIS .................................................................................................................... 12

VARIABLES ...................................................................................................................... 12

OPERATIONAL DEFINITION OF VARIABLES ........................................................ 12

RESEARCH DESIGN ....................................................................................................... 14

POPULATION, SAMPLE, SAMPLING TECHNIQUE, SAMPLE SIZE ................... 14

DATA SOURCE AND DATA COLLECTION METHOD ........................................... 14

CHAPTER 4: DATA ANALYSIS AND INTERPRETATION ......................................... 16

FREQUENCIES ................................................................................................................. 18

MEASURE CENTRAL TENDENCY .............................................................................. 20

RELIABILITY ................................................................................................................... 20

VALIDITY .......................................................................................................................... 21

EVALUATION OF MODEL USING SEM PLS ............................................................ 21

CORRELATION................................................................................................................ 21

REGRESSION.................................................................................................................... 22

MEDIATION ...................................................................................................................... 23
CHAPTER 5: FINDINGS AND CONCLUSION ............................................................... 27

FINDINGS AND SUGGESTIO ........................................................................................ 28

CONCLUSION ................................................................................................................... 29

BIBLIOGRAPHY .................................................................................................................. 31

ANNEXURE ........................................................................................................................... 33

LIST OF TABLES
Table No. Description Page No.

4.1 Frequencies 17
4.2 Measure central tendency 19
4.3 Reliability 20
4.4 Validity 20
4.5 Hypothesis testing result 22
4.6 Correlation 23
4.7.1 Regression:path coefficient 24
4.7.2 Regression:p value 24
4.8.1 Mediation: Direct effect 25
4.8.2 Mediation : Indirect effect 25
 LIST OF FIGURES

Figure No. Description Page No.

3.1 Conceptual model 13

4.1.1 Frequency: Age 17
4.1.2 Frequency : Bank 18
4.1.3 Frequency : Location 18
4.2 Conceptual model 21
 CHAPTER 1
INTRODUCTION

1
INTRODUCTION

Every business organization`s success depends on the satisfaction of the customers. Whenever
a business is about to start, customers always come “first” and then the profit. Those companies
that are succeeding to satisfy the customers fully will remain in the top position in a market.
Today’s business company has known that customer satisfaction is the key component for the
success of the business and at the same time it plays a vital role to expand the market value. In
general, customers are those people who buy goods and services from the market or business
that meet their needs and wants. The organization should make sure that they are providing full
service, equivalent to their monetary value. This will increase the number of customers and
holds the long-term relationship between the customer and the organization. And the existing
customer will help to attract the new customers by providing or sharing the information about
the products and services of the companies. Satisfaction means to feel content after what the
person desired or wanted. One of the important aspects to ensure the attention of the customers
is to provide the best and the most favourable products at this competing market. If a customer’s
satisfaction is earned, then it is sure that customer loyalty will also come along with it.
Customer experience refers to the total of all experiences the customer has with the business,
based on all interactions and thoughts about the business. Sometimes the company thinks they
created an excellent customer experience by providing excellent services. But often times, this
may not turn into excellent customer experience as customer experience quality is likely to be
determined from the point of view of an individual customer. Customer experience quality is
likely to be determined based on total experience, not just services provided from a service
provider. Customer experience quality is to determine the perceived value of service and
further, leads to other outcomes such as repurchase intention. Customer experience quality can
be considered as a scale measure of customer that explains important marketing outcomes.
CEQ – whose dimensions are outcome focus, moments-of-truth and peace-of-mind. Outcome
focus is associated with reducing customers’ transaction cost, such as seeking out and
qualifying new providers, reflecting the importance of goal-orientated experiences in consumer
behaviour. Moments-of-truth emphasises the importance of service recovery and flexibility in
dealing with customers once complications arise. Peace-of-mind describes the customer’s
assessment of all the interactions with the service provider before, during and after the purchase
of the service. This dimension includes statements strongly associated with the emotional
aspects of service.

2
Customer experience, unlike customer satisfaction, measures a more holistic consumer
construct by taking into account the sum of all direct and indirect interactions with a service
provider providing both better explanatory power and identification of priority areas for
managerial attention. For example, that a hotel stay was satisfactory does not necessarily mean
that the entire experience was satisfactory. The total experience includes searching for the
room, booking online, travel to the hotel, checking out and getting from the hotel to the next
destination. Unlike customer satisfaction’s unidirectional question of how happy you were with
the service offered, customer experience assesses the influence of other customers and other
service providers on consumer behaviour. Therefore, experience measures provide superior
explanatory power versus customer satisfaction. While customer satisfaction simply measures
a current state, which might lead to a positive consumer behaviour, such as loyalty and word-
of-mouth. EXQ delivers insight as to which factors are most responsible for this behaviour,
allowing managers to directly relate their actions to an outcome, such as loyalty.

There is very scant research on how customer experience quality is impacting the customer
behaviour is unclear. The study explains about the impacts of customer experience quality on
customer loyalty and customer satisfaction. When a customer is loyal to one company, they
aren’t easily swayed by price or availability. Loyalty stems from the fact that most customers
will stick with a bank they’ve been with for years – it would take a significant error on a bank’s
part to destroy that trust and move customers to look elsewhere.

Customer loyalty constitutes an underlying objective for strategic marketing planning (Kotler,
1984) and represents an important basis for developing a sustainable competitive advantage-
an advantage that can be realized through marketing efforts (Dick and Basu, 1994). In the
present environment of an evolving market for organized retail trade in India and with
increasing global competition, the task of managing loyalty is definitely going to emerge as a
focal managerial challenge.

Customer satisfaction has been proved to be an antecedent of customer loyalty (Fornell et al.,
1996; Oliver, 1997, 1999; Zeithaml et al., 1996). In the retail setting, customer satisfaction has
been identified as the main antecedent of customer loyalty (Jones & Suh, 2000). Brakus et al
(2009) reveal positive effects of brand experience on, brand satisfaction and brand loyalty.
Their most general theoretical argument for such an effect is that experiences provide value,
and therefore that stronger experiences increase satisfaction. They also argue that consumers

3
want to repeat experiences that lead to satisfaction, and therefore that experiences also
influence loyalty positively.

Customer experience can be defined as the customer’s cognitive and affective assessment of
all direct and indirect encounters with the firm relating to their purchasing behaviour. The
measure for customer experience (Maklan & Klaus 2011), are as follows.

1. It is assessed as an overall perception by customers and not as a gap to expectations.

2. Customers’ assessment is based on overall value in use and not just a summation of
performance during individual service episodes.

3. The measure of experience has a broader scope than that proposed by SERVQUAL. It
includes emotions and peer influences.

4. Experience begins before service encounters and continues after the encounters.

5. Experience is assessed against service encounters across all channels.

6. An ideal measure should link more directly to customer behaviour and business performance
than do either SERVQUAL or customer satisfaction.

EXQ allows managers to monitor the dimensions and attributes of the customer experience that
link to customers’ assessment of satisfaction, loyalty and positive word-of-mouth behaviour .
EXQ thus allows managers to understand how their customers evaluate the different
dimensions and attributes of their customer experience by linking them to important marketing
outcomes .

4
STATEMENT OF THE PROBLEM
Customer loyalty is important for an organization because selling more to existing customers
is easier and cheaper, than finding and selling to new ones. The study tries to find out how the
factors such as customer experience quality and customer satisfaction contribute to the
formation of customer loyalty. The direct effect of customer experience quality on customer
loyalty and the indirect effect of customer experience quality on customer loyalty through
customer satisfaction are also being examined.

SIGNIFICANCE OF THE STUDY

There is very scant research on how customer experience quality is impacting the customer
behaviour is unclear. The study explains about the impacts of customer experience quality on
customer loyalty and customer satisfaction. When a customer is loyal to one company, they
aren’t easily swayed by price or availability.

SCOPE OF THE STUDY

The study is planned to be conducted based on the survey from customers of South Indian Bank
and State bank of India located in the district of Ernakulam and Trivandrum. Time duration for
the research is for 3 months.

5
 CHAPTER 2
REVIEW OF LITERATURE

6
Customer loyalty

Customer loyalty has been universally recognized as a valuable asset in competitive markets
(Srivastava et al., 1998). Customer loyalty is defined as “a deeply held commitment to re-buy
or re-patronize a preferred product or service consistently in the future, despite situational
influences and marketing efforts having the potential to cause switching behavior” (Oliver,
1997, p. 392). From the definition mentioned above, customer loyalty can be divided into two
dimensions: behavioral and attitudinal. Behavioral loyalty is repeated transactions and
attitudinal loyalty is often defined as both positive affect toward the relationship's continuance,
and the desire to continue to remain in the relationship. Oliver (1999) has proposed four
ascending customer brand loyalty stages according to the cognition–affect–conation pattern.
The first stage is cognitive loyalty. Customers are loyal to a brand based on their information
on that brand. The next phase is affective loyalty, which refers to customer liking or positive
attitudes toward a brand. The third step is conative loyalty or behavioral intention. This is a
deeply held commitment to buy—a “good intention.” This desire may result in unrealized
action. The last stage is action loyalty, where customers convert intentions into actions.
Customers at this stage experience action inertia, coupled with a desire to overcome obstacles
to make a purchase. Although action loyalty is ideal, it is difficult to observe and is often
equally difficult to measure. Some studies argue that repeat purchase alone is too simplistic
and does not capture the multidimensionality of the construct of loyalty (Kumar and Shah,
2004). The enhancement of customer loyalty is a significant research focus among service-
marketing scholars (Zeithaml, 2000). Loyalty can be viewed as a multifaceted behavioural
construct that includes customer retention, positive word-of-mouth communications and
willingness to pay more for the service (Zeithaml et al., 1996).
Cronin and Taylor (1992) found that consumer satisfaction has a significant impact on
repurchase intention in a range of services. Customer satisfaction increases a firm’s
profitability by developing customer retention (Hennig-Thurau and Klee, 1997) and has direct
effects on repurchase intention. Early research (Patterson et al., 1997) identified the main
predictor of repurchase intention as customer satisfaction. Brakus et al(2009) reveals the direct
effect of brand experience on customer loyalty towards a brand on discussing the relevance of
the experience dimensions on loyalty.

7
Customer satisfaction

Customer Satisfaction is the degree of overall pleasure or contentment felt by the customer,
resulting from the ability of the service to fulfill the customer’s desires, expectations and needs
in relation to the service (Hellier et al., 2003). Satisfied customers not only provide a company
with financial resources through continued transactions, they are also an integral factor in
creating a company’s positive brand image, thus performing valuable marketing functions
(Lee, 2001; Pappu & Quester, 2006). Customer satisfaction is the attitude resulting from the
comparison of the expectation of performance and the perceived performance of the service
experience. Satisfaction is the central thrust of all retailing activities. Customer satisfaction has
been proved to be an antecedent of customer loyalty (Fornell et al., 1996; Oliver, 1997, 1999;
Zeithaml et al., 1996). In the retail setting, customer satisfaction has been identified as the
main antecedent of store loyalty (Jones & Suh, 2000). Bloemer and de Ruyter (1998) stated
that satisfaction plays an important role in generating retail customer loyalty. The quest for
customer satisfaction leads to the institutionalization of satisfaction measurement in operations,
primarily through customer service departments and customer surveys. The importance of
satisfaction to a retailer is thus apparent. Many definitions of satisfaction have been offered by
researchers.
The Expectation-Disconfirmation model (Olivier 1980) posits that satisfaction depends on
whether the perceived product or experience is congruent with prior expectations. Customer
satisfaction applies to both tangible and intangible goods and its definition includes both
transactional and cumulative measures (Jones and Suh, 2000) and is the resultant attitude of a
consumer assessment of the service encounter.

Customer Experience Quality

Customer experience has been defined as the quality of all the consumer’s encounters with the
firm’s brand and products (Borowski 2015). It includes every aspect of a company’s offering,
from the advertising, packaging and the actual product, to the quality of customer care, service
features and reliability (Meyer and Schwager 2007). While a strong customer experience has
been shown to produce significant results, mane companies still struggle to identify the specific
plan of action to achieve those results (Borowski 2015).

8
Meyer and Schwager (2007) describe customer experience quality as a multidimensional
ensemble of customer’s comprehensive responses to the company’s offerings during the entire
customer journey. Customer experience quality includes all direct and indirect contacts
between the customer and the company. Direct contacts signify the contacts initiated by the
customers (e.g. purchase, use and service), as the indirect contacts stand for the contacts
initiated by the company or other consumers (e.g. advertising and word-of-mouth).

Customer satisfaction has a positive effect on loyalty

Assietou Thiam (2013), “Customer Satisfaction and Loyalty Intention of Customers of

Financial Institutions in North Cyprus” The study is about the influence of the 5 dimensions of
interpersonal bond between customers and service providers on customer satisfaction and the
influence of satisfaction on loyalty intention. The study explains about the dimensions of
customer relationships evolution such as familiarity, care, friendship, trust, and rapport which
highly affect satisfaction and loyalty intention in the service industry. Familiarity, care,
friendship, trust, rapport- Independent Variables, Customer satisfaction- Intervening variable,
Loyalty Intention- Dependant Variable Descriptive and quantitative research is used. Those
dimensions that a customer experience promotes consumer satisfaction. Moreover, these
dimensions have been admitted to directly affect customer satisfaction that consecutively
promotes consumer loyalty.

Customer satisfaction is associated with the formation of customer loyalty (Hyun, 2010; Oliver,
1999), and increased repeat purchase behaviors (Bodet, 2007; Chi & Qu, 2008). Such customer
behavior is a significant asset to a service firm. It had been thought and research has found that
by increasing loyalty as it is apparent that satisfied customer are likely to remain loyal to the
service provider. It has been shown that consumer satisfaction affects loyalty. When a
consumer feels good about the relationship and appreciates the product or brand, a high level
of commitment and loyalty results (Anderson and Sullivan 1993; Mittal and Kamakura 2001;
Oliver 1997).

Customer experience quality has a positive effect on loyalty

Gurel Cetin(2013), “Influence of customer experience on loyalty and word-of-mouth in

hospitality operations” The paper attempts to determine the impacts of customer experiences

9
on customer loyalty. The experiences are distinct economic offerings like products and services
and impact consumers’ perception of value. Therefore, experiences create a unique value for
customers, hard to be imitated by competition and strongly affect satisfaction, loyalty, and
recommendation behaviours of consumers Customer experiences -independent variable,
Loyalty & Recommendation- dependent variable. The field research has been conducted. SPSS
software is used to analyse data. Factors influencing customer experiences measures the
intensity and relative importance in strengthening customer loyalty and word-of-mouth
recommendation. Both physical environment and social interaction items are important
dimensions of loyalty and recommendation.

Jignesh B. Bhatt (2009), “Customer Experience: A Key to Build Customer Loyalty” The study
is about the relationship and the factors which are important to build the customer loyalty. The
paper aims to fill the gap between the existing literature and presenting relatively new concept.
The researcher has found that there is an association between quality and experience, it has
been found that the quality of service relies entirely on the impression the customer has about
the service provider delivered during the course of service providers. Customer Experience -
Independent Variable, Customer Loyalty - Dependant Variable, Descriptive Research design
is used. Customer experience has a substantial effect on building customer loyalty through
creating customer value. Loyalty-building value is found in the customer’s experience with the
product/service. Thus, a major key to building customer loyalty is the successful management
of each customer’s service experience.

Customer satisfaction has a mediates the relationship between CEQ and loyalty

Rizky Saputra & Citra K. Dewi (2014), “The impact of brand trust on brand loyalty mediated
by customer satisfaction”, The study aims at investigating and analysing the impact of brand
trust on brand loyalty mediated by customer satisfaction at Tokobagus.com. Higher customer
trust over a brand means a higher customer loyalty towards the brand. Then, it would affect
consumer intentions in the future. Brand trust- independent variable, customer satisfaction-
mediating variable, brand loyalty- Dependant variable. The study was conducted as a causal-
associative research with a quantitative approach. brand trust directly affects customer
satisfaction, while customer satisfaction directly affects brand loyalty. In addition, brand trust
directly affects brand loyalty and, indirectly, brand trust affects brand loyalty with customer
satisfaction as a mediating factor.

10
 CHAPTER 3
RESEARCH METHODOLOGY

11
3.1 RESEARCH QUESTION

How customer experience quality changes the loyalty intentions of the customer?

3.2 OBJECTIVES

To study the influence of customer experience quality on loyalty, mediating by customer

satisfaction.

3.3 HYPOTHESIS

H1: Customer experience has a significant positive impact on customer satisfaction

H2: Customer experience has a significant positive impact on customer loyalty

H3: Customer Satisfaction have a positive impact on customer loyalty

H4: Customer satisfaction mediates the relationship between CEQ and customer loyalty

3.4 VARIABLES

Independent variable- Customer Experience Quality

Dependent variable-Customer Loyalty

Mediating Variable-Customer satisfaction

3.5 OPERATIONAL DEFINITION OF VARIABLES

a. Customer loyalty
Customer loyalty is defined as “a deeply held commitment to re-buy or re-patronize a preferred
product or service consistently in the future, despite situational influences and marketing
efforts having the potential to cause switching behavior” (Oliver, 1997, p. 392). Customer
loyalty is measured using dimensions which include customers’ self-reports of their feelings
about the company and behavior toward the company. The measure includes, word of mouth,

12
 recommendation to friends/colleagues, Likelihood of continuing business with the firm. Items
were measured using a 7 point likert- type scale which ranges from Extremely likely to not at
all likely.

b. Customer satisfaction
Satisfaction is the degree of overall pleasure or contentment felt by the customer, resulting
from the ability of the service to fulfill the customer’s desires, expectations and needs in
relation to the service. Customer satisfaction is measured using constructs like overall
feeling, the performance etc. Items were measured using a 7 point likert- type scale which
ranges from Strongly agree to Strongly Disagree.

c. Customer Experience Quality

Customer Experience Quality is defined as the the customer’s cognitive and affective
assessment of all direct and indirect encounters with the firm relating to their purchasing
behavior. It can be measured by considering three dimensions: outcome focus, moments-
of-truth and peace-of-mind. These were measured using a 7 point likert scale which ranges
from Strongly agree to Strongly Disagree.

3.6 CONCEPTUAL MODEL

Figure 3.1 : Conceptual model

Customer
Satisfaction

Customer
Customer
Experience
Loyalty
Quality

13
The conceptual model depicts how the independent variable such as customer experience
quality effects the dependent variable, customer loyalty. It also shows the direct effect of
experience quality on loyalty and the indirect effect of experience quality on loyalty mediated
through customer satisfaction. In this model one indirect path of experience quality to customer
loyalty and one direct path of experience quality to customer loyalty has been considered.

3.7 RESEARCH DESIGN

The study is descriptive in nature - It attempts to describe the characteristics of concepts and
explains the relationships between the concepts selected.

3.8 POPULATION, SAMPLING TECHNIQUE, SAMPLE SIZE

Population

People above age 18 who are the customers of South Indian Bank and State bank of India
located in the district of Ernakulam and Trivandrum

Sampling

Convenience sampling

Sample Size

200

3.9 DATA SOURCE AND DATA COLLECTION METHOD

A printed questionnaire is distributed to customers of both the banks. Respondents rated their
customer experience and customer satisfaction on each scale item using a 7-point scale (1 =
Strongly disagree, 7 = Strongly agree) and Loyalty intensions on each scale item using a 7-
point scale (1=not at all likely,7=extremely likely).

14
The survey generated 200 responses, which were subsequently analysed utilising the software
packages SPSS and WarpPLS

3.10 LIMITATIONS

The study focused only on banking customers. It didn’t include other sectors.

The study was conducted on only two branches of the bank.

Only three factors of customer experience quality are considered here.

15
 CHAPTER 4
DATA ANALYSIS AND
INTERPRETATION

16
ANALYSIS AND INTERPRETATION
For the analysis, both SPSS and SEM(Warp-PLS) are used.

SPSS is short for Statistical Package for the Social Sciences, and it’s used by various kinds of
researchers for complex statistical data analysis. The SPSS software package was created for
the management and statistical analysis of social science data. Statistics included in the base
software:

• Descriptive statistics: Cross tabulation, Frequencies, Descriptives, Explore, Descriptive

Ratio Statistics
• Bivariate statistics: Means, t-test, ANOVA, Correlation (bivariate, partial,
distances), Nonparametric tests, Bayesian
• Prediction for numerical outcomes: Linear regression
• Prediction for identifying groups: Factor analysis, cluster analysis (two-step, K-
means, hierarchical), Discriminant
• Geo spatial analysis, simulation
• R extension (GUI), Python

Structural Equation Modeling (SEM) is a second generation multivariate data analysis. It can
test theoretically supported linear and additive causal model .It can visually examine the
relationships that exist among variables. Unobservable, hard to measure, latent variables can
be used in SEM. Two sub models in SEM are inner model (structural model) and outer model
(measurement model).Inner model specifies relationship between independent variable and
outer model specifies relationship between latent variables and observed indicators.

Various approaches can be used to perform SEM like

• Covariance Based SEM ( CB SEM) which is done using AMOS, EQS,LISREL & Mplus
• Partial Least Square SEM (PLS SEM) which is done using PLS graph ,Visual PLS, Smart
PLS and Warp PLS and is based on variances.
• Component Based SEM also known as generalized structure component analysis (GSCA)
using Visual GSCA or GSCA web based.

17
The sample size used in this case is very small. Predictive accuracy is paramount and correct
model specifications can’t be ensured. It requires high value path co-efficient if sample size is
small. Problems with multi co linearity are not well handled. It may create large mean square
errors in estimating path co-efficient loading.
PLS is useful for structural equation modeling in applied research projects especially when
there are limited participants and that the data distribution is skewed, e.g., surveying female
senior executive or multinational CEOs. PLS-SEM has been deployed in many fields, such as
behavioral sciences, marketing , organization , management information system , and business
strategy.

4.1 FREQUENCIES

Table 4.1 :Frequencies

Frequency Percent
Age 18-28 99 49.5
29-39 73 36.5
Above 40 28 14
Bank State bank of India 100 50
South Indian Bank 100 50
Location Trivandrum 93 46.5
Ernakulam 107 53.5
Output from SPSS

Figure 4.1 : Frequency-Age

Age

18-28 29-39 Above 40

18
 Figure 4.2: Frequency-Bank

Bank

SBI SIB

Figure 4.3: Frequency- Location

Location

Trivandrum Ernakulam

Majority of the respondents (49.5) belong to the age group 18-28 years. Half of the population
are the customers of State bank of India and other half are the customers of South Indian Bank.
Majority of the respondents have account in the Ernakulam branch.

19
4.2 RELIABILITY

Reliability is a measure of the quality of a measurement instrument; the instrument itself is

typically a set of question-statements. A measurement instrument has good reliability if the
question-statements (or other measures) associated with each latent variable are understood in
the same way by different respondents. Cronbach’s Alpha is a measure of reliability
associated a latent variable. It usually increases with the number of indicators used, and is often
slightly lower than the composite reliability coefficient. De Villis (1991) considered a
Cronbach’s α greater than 0.7 as acceptable.

Table 4.2: Reliability

Cronbach’s Alpha
Peace of mind 0.745
Moments of truth 0.749
Outcome focus 0.808
Customer Experience quality 0.891
Customer satisfaction 0.890
Loyalty Intension 0.911
Output from SPSS

Here the value of Cronbach’s Alpha for all the variables is greater than 0.7. This shows that all
the variables have a high level of internal consistency.

4.3 MEASURE CENTRAL TENDENCY

A measure of central tendency is a summary statistic that represents the center point or typical
value of a dataset. These measures indicate where most values in a distribution fall and are also
referred to as the central location of a distribution.
The mean describes an entire sample with a single number that represents the center of the data.
The mean is the arithmetic average.
The standard deviation is the "average" degree to which scores deviate from the mean. More
precisely, you measure how far all your measurements are from the mean, square each one,
and add them all up. The result is called the variance.

20
Table 4.3: Measure central tendency

Minimum Maximum Mean Std.

Deviation
CEQ 2.67 7 5.4417 0.84601
Satisfaction 1.4 7 5.441 0.94136
Loyalty 1 7 5.598 1.04222
Output from SPSS
The mean value shows that most of the respondents marked the response “Agree” for all the
three variables.

4.4 VALIDITY

Here Customer Experience Quality scale is adopted from Klaus and Maklan’s (2012), and the
impact of customer experience quality and its impact on important marketing outcomes, like
customer satisfaction and loyalty is taken from the article of Klaus and Maklan’s. The validity
is ensured in the article from which it is taken. Thus, the validity of the model is taken care of.

4.5 CORRELATION

Correlation is a statistical technique that can show whether and how strongly pairs of variables
are related. There are several different correlation techniques. The Survey System's
optional Statistics Module includes the most common type, called the Pearson or product-
moment correlation. Like all statistical techniques, correlation is only appropriate for certain
kinds of data. Correlation works for quantifiable data in which numbers are meaningful,
usually quantities of some sort. It cannot be used for purely categorical data, such as gender,
brands purchased, or favorite color.
The main result of a correlation is called the correlation coefficient (or "r"). It ranges from -
1.0 to +1.0. The closer r is to +1 or -1, the more closely the two variables are related.

If r is close to 0, it means there is no relationship between the variables. If r is positive, it means

that as one variable gets larger the other gets larger. If r is negative it means that as one gets
larger, the other gets smaller (often called an "inverse" correlation).

21
Table 4.6: Correlation
CEQ CS CL
CEQ (1.000) 0.842 0.787
CS 0.842 (1.000) 0.819
CL 0.787 0.819 (1.000)
Output from WarpPLS

There is a strong positive correlation between the constraints.

4.6 REGRESSION

Linear regression is a basic and commonly used type of predictive analysis. The overall idea
of regression is to examine two things: (1) does a set of predictor variables do a good job in
predicting an outcome (dependent) variable? (2) Which variables in particular are significant
predictors of the outcome variable, and in what way do they–indicated by the magnitude and
sign of the beta estimates–impact the outcome variable? These regression estimates are used
to explain the relationship between one dependent variable and one or more independent
variables.
The Regression Coefficient is the constant ‘b’ in the regression equation that tells about the
change in the value of dependent variable corresponding to the unit change in the independent
variable.

Dependant Variable: Loyalty

Table 4.7.1: Regression : Path coefficients
CEQ CS CL
CEQ
CS 0.862
CL 0.337 0.529
Output from WarpPLS

22
Table 4.7.2: Regression- p value

CEQ CS CL
CEQ
CS <0.001
CL <0.001 <0.001
Output from WarpPLS

p-value

The level of marginal significance within a statistical hypothesis test, representing the
probability of the occurrence of a given event. The p-value is used as an alternative to rejection
points to provide the smallest level of significance at which the null hypothesis would be
rejected. The smaller the p-value, the stronger the evidence is in favor of the alternative
hypothesis. If p-value is less than 0.05, hypothesis is accepted or probability of rejecting is less.
Here p value is less than 0.05. Thus it is significant.

4.7 MEDIATION

Direct effect of CEQ on Loyalty

Table 4.8.1 : Mediation- Direct effect

Effect LLCI ULCI

0.4127 0.2377 0.5876
Output from SPSS Hayes Process

Indirect effect on CEQ on Loyalty

Table 4.8.2 : Mediation -Indirect effect

Effect BootLLCI BootULCI

0.5565 0.3871 0.7408
Output from SPSS hayes Process

The indirect effect is more than direct effect and also both the effects are significant. There
exists a partial mediation of satisfaction on CEQ and Loyalty.

23
4.8 EVALUATION OF MODEL USING SEM PLS (WARP PLS)

The conceptual model is evaluated using SEM PLS in Warp PLS 4.0 for overall fit of the
model, to find the relationships among the variables and various other factors. The study tries
to find out the impact of Customer experience quality and customer satisfaction on customer
loyalty. The model takes into consideration all these variables and try to establish the
relationship between them. Based on certain measurement parameters such as R square values,
P values, and the model fit indices, the models developed is analyzed, and the results are
obtained.

Figure 4.2 :Conceptual model(SEM)

The average variance extracted (AVE) for all the factors has to be greater than or equal to 0.5,
which is acceptable (Fornell&Larcker, 1981).

Table 4.4 : Convergent Validity

CEQ CS CL
Avg. Var. Extrac. 0.538 0.695 0.738
Output from WarpPLS
Composite reliability is greater than 0.7 and average variance extracted is greater than 0.5.
Thus, convergent validity exists.

24
The figure shows the model indicating path co-efficient (β), p-value and R squared value.
R-squared coefficient.

This is a measure calculated only for endogenous latent variables, and that reflects the
percentage of explained variance for each of those latent variables. The higher the R-squared
coefficient, the better is the explanatory power of the predictors of the latent variable in the
model, especially if the number of predictors is small.

Path coefficients

It is the fraction of the standard deviation of the dependent variable (with the appropriate sign)
for which the designated factor is directly responsible. It indicates the amount of expected
change in the dependent variable as a result of a unit change in the independent variable.
p-value

The level of marginal significance within a statistical hypothesis test, representing the
probability of the occurrence of a given event. The p-value is used as an alternative to rejection
points to provide the smallest level of significance at which the null hypothesis would be
rejected. The smaller the p-value, the stronger the evidence is in favor of the alternative
hypothesis. If p-value is less than 0.05, hypothesis is accepted or probability of rejecting is less.

Table 4.5: Hypothesis testing result

Hypotheses Result
H1 CEQ → CS Accepted
H2 CEQ → CL Accepted
H3 CS → CL Accepted
Abbreviations used : CEQ- Customer Experience Quality, CL -
Customer Loyalty, CS- Customer Satisfaction

If p-value is less than 0.05 , hypothesis is accepted or probability of rejecting is less. Hence
here all the hypothesis are acceptable. Path coefficients, Beta (β) indicates the amount of
expected change in the dependent variable as a result of a unit change in the independent
variable. That is it is the slope of the regression line. Here, β = 0.859 between Customer
experience quality and customer satisfaction which means for unit change in experience
quality, customer satisfaction changes by 0.859 units.

25
β1 = 0.86, in the relationship between Customer experience quality and customer satisfaction.
β2 = 0.34, in the relationship between Customer experience quality and customer loyalty.
β3 = 0.53, in the relationship between Customer satisfaction and customer loyalty.
The higher the R-squared coefficient, the better is the explanatory power of the predictors of
the latent variable in the model, especially if the number of predictors is small.

R square = 0.74 for Customer satisfaction.

R square = 0.71 for Customer loyalty towards the bank.

26
 CHAPTER 5
FINDINGS AND CONCLUSION

27
5.1 FINDINGS AND SUGGESTIONS

1. Majority of the respondents (49.5) belong to the age group 18-28 years.
2. Half of the population are the customers of State bank of India and other half are the
customers of South Indian Bank.
3. Majority of the respondents have account in the Ernakulam branch.
4. The analysis of the study proves that customer experience quality has a positive relationship
with the customer loyalty. It suggests that for the customers to be loyal, the important
factors that a company should consider in customer experience quality
5. It also shows that customer experience quality has a positive relationship with customer
satisfaction. It suggests that by increasing the customer experience quality, the company
can increase the overall satisfaction of the customer.
6. The study shows that Customer satisfaction acts as a mediator between customer
experience quality and customer loyalty. This suggests that by giving good customer
experience quality, the customer will get satisfied and thus they will be loyal to the
company.
7. The factors that make the customers satisfied or loyal due to the customer experience
quality are peace of mind, outcome focus and moment of truth. This suggests that suggests
that the consumer’s evaluation of experience goes beyond the direct service encounter. It
also includes direct and indirect encounters with all touchpoints, such as marketing
communication, advertising, internet presence and after sales care.

28
5.2 CONCLUSION

Managing the customer experience is considered one of today’s most complex and pressing
issues for service organisations globally. This study examines the impact of the service
experience on important marketing outcomes comprehensively. The purpose of this study is to
explore the influence of customer experience quality and customer satisfaction on customer
loyalty. The study took banking customers as research sample. The valid sample totalled 200.
In this study, using a conceptual model, the relationship between customer experience quality,
customer satisfaction and its implication on the customer loyalty was studied. This study results
indicate significant relationships between customer experience quality and customer loyalty
mediated through customer satisfaction. The results suggest that constructs namely ‘Customer
Experience Quality’ and ' Customer satisfaction' contributes significantly to the model fit and
is ultimately linked to the ‘Customer loyalty. Customer experience, unlike customer
satisfaction, measures a more holistic consumer construct by taking into account the sum of all
direct and indirect interactions with a service provider providing both better explanatory power
and identification of priority areas for managerial attention . For example, that a hotel stay was
satisfactory does not necessarily mean that the entire experience was satisfactory . The total
experience includes searching for the room, booking online, travel to the hotel, checking out
and getting from the hotel to the next destination . Unlike customer satisfaction’s unidirectional
question of how happy you were with the service offered, customer experience assesses the
influence of other customers and other service providers on consumer behaviour . Therefore,
experience measures provide superior explanatory power versus customer satisfaction . While
customer satisfaction simply measures a ‘current state’, which might lead to a positive
consumer behaviour, such as loyalty and WOM, EXQ delivers insight as to which factors are
most responsible for this behaviour, allowing managers to directly relate their actions to an
outcome, such as loyalty . This, in turn, will address the question on how marketing
programmes can become more accountable .

29
5.3 FUTURE RESEARCH

The limitations can be covered by including other sectors as well. Also, other factors of
customer experience quality can also be considered. This study shows how the customer
experience quality changes the loyalty intentions. In future, how customer experience quality
influences important marketing outcomes such as market share, share of wallet and, ultimately,
profitability can be determined.

30
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32
ANNEXURE

QUESTIONNAIRE

KINDLY FILL THE FOLLOWING.

1. Age
18-28 29-39 above 40

2. Name of the bank in which you have your account

State bank of India South Indian Bank

3. Location
Trivandrum Ernakulam

Please rate the following questions from 1 to 7

(1 for strongly disagree, 2 for moderately disagree, 3 for disagree, 4 for neutral, 5 for agree, 6
for moderately agree, 7 for strongly agree)

4. I am confident in my bank’s expertise

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

5. The whole process with the bank was easy

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

33
6. I stay with this bank because of my past dealings with them

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

7. They were flexible in dealing with me and looked out for my needs

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

8. My bank is a safe and reputable company

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

9. The people there have good people skills.

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

10. Staying with the bank makes the process much easier.

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

34
11. The bank gives me what I need swiftly.

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

12. I prefer my bank over an alternative provider.

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

13. My feelings towards the bank are very positive.

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

14. I feel good about coming to this bank for the offerings I am looking for.

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

15. Overall, I am satisfied with the bank and the service they provide.

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

16. I feel satisfied that the bank produces the best results that can be achieved for me.

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

35
17. The extent to which the bank has produced the best possible outcome for me is satisfying.

Strongly 1 2 3 4 5 6 7 Strongly
Disagree Agree

Please rate the following questions from 1 to 7

(1 for extremely unlikely, 2 for unlikely, 3 for more or less unlikely, 4 for neutral, 5 for more
or less likely, 6 for likely, 7 for extremely likely)

18. Say positive things about the bank to other people?

Extremely 1 2 3 4 5 6 7 Extremely
unlikely likely

19. Recommend bank to someone who seeks your advice?

Extremely 1 2 3 4 5 6 7 Extremely
unlikely likely

20. Encourage friends and relatives to use this bank?

Extremely 1 2 3 4 5 6 7 Extremely
unlikely likely

36
21. Consider this bank the first choice?

Extremely 1 2 3 4 5 6 7 Extremely
unlikely likely

22. Use this bank more in the next few years?

Extremely 1 2 3 4 5 6 7 Extremely
unlikely likely

37