CHAPTER 1

INTRODUCTION

1.1 Introduction

Service Quality and Customer Satisfaction are very important concepts that companies must

understand if they want to remain competitive and grow. In today’s competitive environment

delivering high quality service is the key for a sustainable competitive advantage. Customer

Satisfaction does have a positive effect on an organization’s profitability. Customer satisfaction

is becoming one of the most essential objectives which any firm seeking for long-term

relationship with customer considers as the top priority. One of the main elements determining

customer satisfaction is the customer’s perception of service quality. Customer satisfaction is

described as the result of a comparison of the customers’ expectations and his or her subsequent

perceived performance of service quality. Managers of service units often use criteria and

indicators of service quality and customer satisfaction to measure customer needs by the

organization. Based on these criteria and indices, managers of financial institutions show more

interest in services especially those which will influence customer's behavior.

In the field of modern service research, service quality and customer loyalty are always the

focus. The study has found that customer loyalty is much more important than market share in

determining the profits. They need to know that on the basis of satisfaction and perception of

service quality what especial features of their services will influence their customers and lead to

loyalty. Contrary to the beliefs about low importance of the service sector, today direct and

indirect consequences of economic sectors are considerable. So, with regard to this issue we

must know the nature of the services and try to create an advantage over competitors to develop

a greater share of the market. Service quality is one of the important antecedents of customer

loyalty which has an impact on customer loyalty. It is also considered as a prerequisite for

satisfying and retaining the valued customers and also identified as an antecedent of sustainable
competitive advantage. In today's competitive world, companies put the customers at the center

of their attention, and their loyalty is the key to earn competitive advantage for organizations.

1.2 Statement of the Problem

I investigated the problem of study how service quality and customer satisfaction customer

loyalty. The study is based on three variables with Service quality, Customer Satisfaction and

Customer Loyalty. In the previous year; any researcher did not do any work with between

Service quality on Customer Satisfaction and Customer Loyalty. But most of the researchers

have done their article on other variables. Most of the researchers have done their study with

Service quality on Customer Satisfaction. Any researchers have not done any study combining

the two independent variables with Service quality, Customer Satisfaction and Customer

Loyalty. Most of the researchers have done their study based on foreign countries but I have

able to publish my study in Bangladesh Perspective. Before any researchers have done their

study only quantitative research based; but no researchers have not done their research based on

qualitative study. Most of the researchers have done their study based on manufacturing sector,

SME sector, pharmaceuticals sector, some are engineering sector but I could not found any research

paper that has been done on banking sector. Most of the studies consider delivering quality service

as an essential strategy for success and survival for any organization. A principle emphasis of

recent academic and managerial inquiry has focused on determining what service quality

means, developing appropriate measures, and creating market-focused strategies to meet

customer’s expectation. A review of previous empirical studies on SERVQUAL shows that

extensive research on service quality and customer satisfaction has been carried out using

SERVQUAL model in service industries such as telecommunication, banking, health care and

restaurants, whereas, limited studies have focused on banking industry using SERVQUAL. This

study therefore bridged this gap by complementing existing research on service quality

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dimensions and customer satisfaction & customer loyalty in the banking industry context using

SERVQUAL model.

1.3 Significance of the Study

This study aimed to make contributions to policy, practice and research. To policy makers, the

study provided information in designing policies that helped banks in enhancing customer

satisfaction through increased service quality. The policies guide banks managers to adopt

quality service dimensions to serve their customers better. At present time my study is use

significance in the academy Sector. Because in the past many researchers worked with service

quality and customer satisfaction. Any researcher did not do any work combine together with

Service quality and customer satisfaction customer loyalty. But many researchers did different

work on different variables or different sector. Researchers have more worked with Service

quality and customer satisfaction customer loyalty who are all researchers is western countries

like Canada, Australia, US etc, but I have enable to published this study in developing countries

same as Bangladesh. Previous researchers did their research only quantitative research based

study; no researchers have any work based on qualitative study. Similarly, the significance of

the study is to investigate the relationship between customer who practices relationship Service

quality, customer satisfaction & customer loyalty. Significantly the study a strong interrelation

one to other variables similarly Service quality and customer faction positive relation to

customer loyalty and Service quality and customer satisfaction to customer loyalty. As far as

qualitative theoretical efforts are concerned current studies are adding up more information to

the existing literature entities. The findings of this study shed more light on the existing

literature in the emerging field of hotels franchising focusing on service quality dimensions.

Furthermore, the study is valuable to researchers in marketing, operations management and

other related fields as it supports and adds on current issues on service quality and customer

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satisfaction & customer loyalty to the existing body of knowledge. It also provides a basis upon

which other related studies can be founded and even replicated. It also strengthens the empirical

evidence that supports the tenants of the theories underpinning the study through the

contributions made by the research findings.

1.4 Objectives of the Study

1.4.1 General objective

To identify the relationship between service quality, customer satisfaction & customer loyalty.

1.4.2 Specific objective

The proposed objectives of the current study are mentioned in the following:

 To examine the influence of Service quality and customer satisfaction.

 To determine the influence of Service quality and customer loyalty.

1.5 Definition of Key Terms

1.5.1 Service quality

Service quality has been defined in service marketing literature as an overall assessment of

service by the customer. Perceived service quality is believed to be resulting from comparison

between customers’ prior expectation about the service and their perceptions after actual

experience of service performance. The concept of service quality has been acknowledged as an

important factor of competitiveness in the development and maintenance of satisfying

relationships with customers. service quality is customer interface and relationships by

customer. And service quality focused on the customer’s experience during the process of the

transaction. service quality is the focus on meeting customer’s needs and requirements and also

how well the service matches customer’s expectations. service quality can be defined as the

consumer’s comparison between service expectation and service performance. They proposed

service quality to be a function of pre-purchase customer expectations, perceived process

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quality, and perceived output quality. service quality as the degree and direction of discrepancy

between the consumer’s perceptions and expectations, or the extent to which a service meets or

exceeds customer expectations. The quality of a service depends on that service consistently

conforming to customers’ expectations Quality of service – is a new standard by which

customers judge the quality of the product. Customers identify service quality from many

different phases, and employees are the first transmitters of perceived service quality. service

quality model that identified perceived service quality into five dimensions: tangibility,

reliability, responsiveness, assurance, and empathy. Tangibles involve the appearance of

physical facilities, including the equipment, personnel, and communication materials.

Reliability involves the ability to perform the promised service dependably and accurately.

Responsiveness involves the willingness to help customers. Assurance involves the knowledge

and courtesy of employees and their ability to convey trust. and confidence. This assurance

includes competence, courtesy, credibility and security. Empathy involves the provision of

caring, individualized attention to customers. This empathy includes access, communication,

and understanding the customer. Most customers prefer good service to lower prices. Think

about all the situations where you are prepared to pay a little extra to get a better or more

efficient service. Companies that give these added service benefits are likely to be winners.

They have a competitive advantage over rivals. Customers are requiring and demanding better

services and the goals of all Telecoms must be to make the customers feel special. This will

lead to customer’s perceptions exceeding their expectations and greater customer satisfaction. A

personal, proactive approach, such as knowing guest history, issues and preferences is vital to

impressing customers and increasing repeat business.

1.5.2 Customer satisfaction

Customer satisfaction has been paid much attention among theoretical literatures and practical

researches. It is also an expected outcome of implementing marketing activities, as providing

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satisfying products or services to customers relates to success achieved in today’s tensely

competitive world of business. Customer satisfaction satisfaction as an overall evaluation

dependent on the total purchase and consumption experience of the target product or service

performance compared with repurchase expectations over time. Customer satisfaction as

pleasurable fulfillment which is sensed by customers in the consumption. It means that “the

consumer senses that consumption fulfills some need, desire, goal, or so forth and that this

fulfillment is pleasurable”. In relationship marketing literatures, customer satisfaction has also

been thought to be an key performance indicator for evaluating the quality of a relationship

between service provider and customers. Customers’ expectations regarding costs and benefits

of the relationship mainly depend on past experience, and satisfying experiences increase the

motivation and the likelihood that an individual stays in the relationship. Customer satisfaction

is dynamic and relative. Only the idea “customer-centric” can help companies improve

satisfaction and keep customer truly, conversely, if competitors improve customer satisfaction,

then it may loss corporate customers. While improving customer satisfaction, customer

expectations should be noticed. Service quality, product quality and value for money have a

direct positive impact on customer satisfaction. Employee satisfaction is equally important

before achieving the customer satisfaction. If employees have a positive influence, then they

can play a big role to increase customer satisfaction level. Satisfaction is a dynamic, moving

target that may evolve overtime, influenced by a variety of factors. Particularly when product

usage or the service experience takes place over time, satisfaction may be highly variable

depending on which point in the usage or experience cycle one is focusing.

Satisfaction/dissatisfaction is an emotional response to the assessment of a good or service

which is consumed or offered. Satisfaction is the customer assessment of a product or service,

depending on whether that product or service has met the needs and demands of customers or

not. Failure in satisfying the needs and expectations of customers leads to feelings of

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dissatisfaction with the subjective evaluation. Customer satisfaction provides many advantages

for companies. Higher levels of customer satisfaction lead to more loyalty. Finally, it is more

beneficial to maintain a good customer than constantly replacing a customer who has left the

company with new one. Customer satisfaction is psychologically a feeling that occurs as a

result of comparison between specifications of the product received and customers’ needs or

demands and their social expectations about the product. An interesting point in the concept of

customer satisfaction is that customer satisfaction does not depend on the type of commercial

activity of an organization nor on the situation of the organization in the market, rather it

depends on the ability and capacity of the organization in providing the quality expected by the

customer.

1.5.3 Customers loyalty

Customer loyalty is defined as an important aspect of service provision because maintaining

existing customers may generate a higher profit than attracting new one. Increasing customer

loyalty will have benefits in reducing the initial cost of introducing and attracting new

customers, positive word of mouth, increase the number of purchase and value of purchase,

increase company’s profitability, growth and performance and increase market share. Customer

loyalty as "a deeply held commitment to rebuild and re-patronize a preferred product or service

in the future despite situational influences and marketing efforts having the potential to cause

switching behaviors. “Customer loyalty is viewed as the strength of the relationship between an

individual’s relative attitude and re-patronage. Today’s unforgiving market where creating and

maintaining customer loyalty is more complex than it used to be in the past years. This is

because of technological breakthrough and widespread of the internet uses. Loyalty building

requires the company to focus the value of its product and services and to show that it is

interested to fulfill the desire or build the relationship with customers. Loyal customers will

encourage others to buy from you and think more than twice before changing their mind to buy
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other services. Customer loyalty is not gained by an accident, they are constructed through the

sourcing and design decisions. Designing for customer loyalty requires customer-centered

approaches that recognize the want and interest of service receiver. Customer loyalty is built

over time across multiple transactions. Customer loyalty into three different categories that

include behavior loyalty, intentional loyalty, and emotional loyalty. Behavior loyalty is

repeating purchasing behavior while intentional loyalty is the possible buying intention.

Emotional loyalty, however, is achieved when a customer feels that a brand corresponds with

their value, ideas, and passion.

1.6 Scope of the Study

Based on literature review & questionnaire, scope of the study is qualitative research method

focused this study and based on secondary data. Theoretical study has used this research such as

journals, books, unusual articles, periodicals, proceedings, magazines, newsletters, newspapers,

websites, and other sources. This study is based on barking sector. The scope of the study is to

determine the relationship of service quality on customer & satisfaction customer loyalty. The

service quality is correlation with the customer satisfaction and customer loyalty. This study is

qualitative research conducted based on previous researcher theoretical study & questionnaire

survey. Thesis is qualitative study method to assess their follower relationship of service quality

and customer satisfaction customer loyalty. This study intends to consider subsequent aims.

This study proposes to find out service quality inter-relation customer satisfaction & service

quality how relates to customer loyalty.

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1.7 Structure of the Thesis

The thesis covered the following structure:

Chapter one includes Introduction, Statement of the Problem, Significance of the Study,

Research Objective, Why Chosen? Definition of Key Terms, and Scope of the Study,

Conclusion.

Chapter two covers Literature review including Introduction, Theoretical Framework, Research

Conducted on the Issue, What did Past Researches describe Key Terms, Conclusion.

Chapter three covers Data and Methods incorporating Introduction, Research Design, Data-

Primary Data and Secondary Data, Conclusion.

Chapter four describes data findings.

Chapter five describes Relationship between Service quality and Customer Satisfaction, Service

quality and Customer Loyalty and Conclusion.

Chapter six includes Implications and Conclusion covering Introduction, Research Summary,

Practical Implications, Limitation of the study, Suggestions for Further Research.

1.8 Conclusion

Service Quality and Customer Satisfaction are very important concepts that companies must

understand if they want to remain competitive and grow. Customer satisfaction is described as

the result of a comparison of the customers’ expectations and his or her subsequent perceived

performance of service quality. Service quality is one of the important antecedents of customer

loyalty which has an impact on customer loyalty. It is also considered as a prerequisite for

satisfying and retaining the valued customers and also identified as an antecedent of sustainable

competitive advantage. The study is based on three variables with Service quality, Customer

Satisfaction and Customer Loyalty. Most of the researchers have done their study with Service

quality on Customer Satisfaction. Any researchers have not done any study combining the two

8
independent variables with Service quality, Customer Satisfaction and Customer Loyalty. Most

of the researchers have done their study based on foreign countries but I have able to publish

my study in Bangladesh Perspective. Any researcher did not do any work combine together

with Service quality and customer satisfaction customer loyalty. But many researchers did

different work on different variables or different sector. Researchers have more worked with

Service quality and customer satisfaction customer loyalty who are all researchers is western

countries like Canada, Australia, US etc, but I have enable to published this study in developing

countries same as Bangladesh. Previous researchers did their research only quantitative research

based study; no researchers have any work based on qualitative study. Similarly, the

significance of the study is to investigate the relationship between customer who practices

relationship Service quality, customer satisfaction & customer loyalty. Furthermore, the study

is valuable to researchers in marketing, operations management and other related fields as it

supports and adds on current issues on service quality and customer satisfaction & customer

loyalty to the existing body of knowledge. It also provides a basis upon which other related

studies can be founded and even replicated. It also strengthens the empirical evidence that

supports the tenants of the theories underpinning the study through the contributions made by

the research findings. To identify the relationship between service quality, customer satisfaction

& customer loyalty. I have chosen this study because in the past no researcher did not do any

work qualitative study on with service quality on customer satisfaction & customer loyalty,

many previous researchers did different work based on quantitative study with similar or

different variables or different sector. Theoretical study has used this research such as journals,

books, unusual articles, periodicals, proceedings, magazines, newsletters, newspapers, websites,

and other sources. This study is based on barking sector This study is qualitative research

conducted based on previous researcher theoretical study & questionnaire survey.