International Journal of Bank Marketing

Antecedents to perceived service quality: an exploratory study in the banking industry

Spiros P. Gounaris Vlassis Stathakopoulos Antreas D. Athanassopoulos
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Spiros P. Gounaris Vlassis Stathakopoulos Antreas D. Athanassopoulos, (2003),"Antecedents to perceived service quality:
an exploratory study in the banking industry", International Journal of Bank Marketing, Vol. 21 Iss 4 pp. 168 - 190
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Madhukar G. Angur, Rajan Nataraajan, John S. Jahera, (1999),"Service quality in the banking industry: an
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 Antecedents to perceived service quality:
an exploratory study in the banking industry
Keywords
Banking industry, Service quality,
Market orientation,
Customer profiling,
Empirical study, Greece
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
Abstract
Using empirical data derived from
the Greek banking sector, the
authors attempt to model the
influence of bank-specific (market
orientation) and customer-specific
(comparison shopping, influence
by word-of-mouth-communication
and personal relations with banks'
employees) parameters on the
customer's perception of service
quality. The latter is
conceptualised and examined as a
multidimensional concept
comprising employee
competence, the bank's
reliability, the innovativeness of
the bank's products, its pricing
(value for money), the bank's
physical evidence and the
convenience of the bank's branch
network. As the findings suggest,
the various dimensions of the
quality of service offered by a bank
are not influenced by all the
antecedents examined in this
study. Moreover, the gravity of the
influence that each of the
examined parameters exercises
on the customer's perception of
the various dimensions of quality
was also found to vary
considerably, with certain
dimensions being more influenced
by the same parameter than
others. Based on these findings,
the authors suggest specific
implications for both the academia
and practitioners in the banking
industry.
International Journal of Bank
Marketing
21/4 [2003] 168-190
# MCB UP Limited
[ISSN 0265-2323]
[DOI 10.1108/02652320310479178]
[ 168 ]
Spiros P. Gounaris
Department of Management Science and Marketing, Athens University of
Economics and Business, Athens, Greece
Vlassis Stathakopoulos
Athens University of Economics and Business, Athens, Greece
Antreas D. Athanassopoulos
Piraeus Bank, Piraeus, Greece
Introduction
Over the last ten years or so, a great deal of
research attention has been attracted to the
field of service quality (Avkiran, 1994; Crosby
and Stephens, 1987; Cronin and Taylor, 1992;
Edris and Almahmeed, 1997; Johnston, 1997;
Lassar et al., 1997; Rust and Zahorik, 1993;
Brady and Robertson, 2001; Robledo, 2001;
Silvestro et al., 1990; Yavas et al., 1997).
Service quality is now considered a critical
success factor that affects an organization's
competitiveness. Furthermore, service
quality is considered an essential
determinant that allows an organization to
differentiate itself from the competition and
therefore gain a sustainable competitive
advantage. Hence, service quality is at the
forefront of both the marketing literature in
general, and the services marketing
literature in particular (Jensen and Manolis,
1996; Lassar et al., 2001).
A review of the relevant literature reveals
that the principal focus of service quality
research has been twofold. First, the
identification of service quality dimensions
was of primary interest to researchers
(Parasuraman et al., 1985, 1991b). Second, the
development of measurement instruments of
service quality was the focus of subsequent
research efforts (Parasuraman et al., 1988,
1991a, 1993; Cronin and Taylor, 1992, 1994;
Asubonteng et al., 1996; Buttle, 1996). Next,
the agenda on service quality was very
quickly enhanced by examining its
consequences, such as customer retention,
attraction of new customers through word of
mouth advertising, increases in productivity,
improvements in market share, reduction in
staff turnover and operating costs,
improvements in employee morale, financial
performance and profitability (Julian and
The Emerald Research Register for this journal is available at
http://www.emeraldinsight.com/researchregister
Ramaseshan, 1994; Lewis, 1989, 1993; Yavas
et al., 2001).
Yet, research focusing on customer-specific
antecedents of service quality has received
little attention. A notable exception to this
lack of research in this area is the work of
Parasuraman et al. (1988), who suggested that
consumers follow several ways to arrive at
their expectations for service quality and
whether these expectations are actually met
or not (disconfirmation paradigm). More
specifically, consumers' perceptions of
service quality are influenced by factors such
as communications from salespeople and
social referrants, various types of
information collected, and the credence
consumers develop towards a service
organization (Bowen, 2000; Kangis and Passa,
1997). However, the scarce research cited
above is normative in nature.
A parallel research stream that started
developing in the beginning of the 1990s was
that of market orientation (MO) and
customer orientation (CO) development, two
closely related but nonetheless distinct
notions. Again, the primary interest for
researchers was to develop measures to
gauge the companies' degree of MO and/or
CO adoption (Kohli and Jaworski, 1990;
Narver and Slater, 1990). Researchers have
also been interested in studying the effect of
the two notions on company performance
(Kohli and Jaworski, 1990, 1992; Narver and
Slater, 1990; Slater and Narver, 1994, 2000;
Greenlay, 1995). A major finding of this
research stream was that both have a
positive impact on different aspects of a
company's financial performance, including
sales and market share as well as on its non-
financial performance, including delivered
quality, particularly for the service sector
(Caruana et al., 1999; Wood et al., 2000).
However, with the notable exception of the
studies by Deshpande et al. (1993) and Webb
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 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
et al. (2000), past research has almost
exclusively considered market orientation as
an ``employee-perceived'' phenomenon and,
consequently, studies pertaining to the
company's orientation have generally been
based on managers self-reports.
Thus, the scope of this research effort is to
model the impact of particular customer- and
company-specific antecedents to perceived
service quality. To this end, our research
effort adds to existing literature in three
important ways. First, it offers a
comprehensive model to conceptualise the
factors that might influence perceived
service quality. Second, in doing so, it is the
first attempt to empirically examine drivers
of perceived service quality which are not
related to specific features of the service
offered. Rather, it examines how consumers'
perceptions of quality are influenced by their
own characteristics and the company's
degree of market orientation. Third, unlike
prior research, it examines the company's
market orientation as it is perceived by its
customers and not as it is assessed by its
employees.
The rest of this paper is organised as
follows. We first develop our conceptual
model and associated research hypotheses.
We then describe the sample and measures
employed in the study. We follow by
reporting the empirical research results.
Finally, we conclude by identifying study
limitations and proposing future research
directions.
Conceptual framework and
research hypotheses
Figure 1 depicts the antecedents to perceived
service quality model that is advanced and
Figure 1
Antecedents to perceived service quality
tested. The major constructs in the model are
antecedents of perceived service quality.
As can be seen in Figure 1, the major
hypothesis underlying this study is that
perceived service quality is a function of
factors pertaining to both the service
provider and the buyer of the service. With
regard to the former, according to our
conceptualisation of perceived service
quality, the provider's degree of market
orientation is expected to impact the user's
perception of the quality of the service. The
rationale behind this lies on the anticipation
that market-oriented companies are more apt
to understand and meet their targeted
customers' needs and demands. With regard
to the latter, individuals also have their own
mechanisms for forming quality standards
and quality anticipations which, in turn,
influence how they conceive the level of
quality they are offered. In the following
paragraphs, we elaborate in detail the impact
of each factor on perceived service quality
and specific research hypotheses are
developed.
Word-of-mouth communication and
perceived service quality
Word-of-mouth (WOM) communication is
undoubtedly among the strongest factors in
forming expectations and frequently in
leading purchasing behaviour (Arndt, 1967;
Mossberg, 1995). In general, WOM
communication has been researched less for
services than it has been researched for
manufactured goods (Money, 1999) and this
despite the fact that, at least conceptually, its
importance for the services sectors has long
been established (Berry and Parasuraman,
1991). This importance stems from the fact
that service quality is hard to assess in
advance of the purchase and, thus, WOM
becomes a potent factor which consumers
consider (File et al., 1992).
The reason why WOM can play such an
important role in developing perceptions of
quality is better understood when one
considers what generates WOM
communication. Parasuraman et al.'s (1988,
1991a) results indicated that when
consumers' perceptions of service quality are
high, consumers are willing to recommend to
others the company, i.e. they develop positive
WOM. Reichheld and Sasser (1990) also
support this notion. Similarly, Boulding et al.
(1993) found that service quality relates
positively to saying positive things regarding
the company to others, while other
researchers have indicated that when
consumers perceive they have experienced
inferior service performance, they are likely
to engage in complaining behavioural
[ 169 ]
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
[ 170 ]
responses, that is, negative WOM
communication (Richins, 1983; Scaglione,
1988; Singh, 1988). In general, these negative
communicational responses stem from the
fact that consumers have received poor
service quality.
The outcome of this communication
process is used by individuals who are not
familiar with either the service or the
provider as signals of quality. Lewis and
Bingham (1981) and Lewis et al. (1991), in
their studies of how young people choose a
bank, indicated that non-organizational
communications (e.g. parental
communication) influence young people's
assessment of bank service quality.
Furthermore, Jannadi and Saggal (2000)
argued that the perceptions consumers form
about the service quality offered by an
electric company are determined, among
other factors, by the WOM customers are
exposed to. Hence, we expect that WOM
communication influences perceived service
quality since those individuals who consider
this form of communication prior to a
purchasing decision have indirectly
controlled for the result of their choice. On
this basis we investigate the following
hypothesis:
H1. Word-of-mouth communication will
impact the user's perception of quality.
Comparison shopping and perceived
service quality
As pointed out earlier, according to the
disconfirmation paradigm, the consumer's
previous experience with the service
provider or with the service offered is an
important factor (Parasuraman et al., 1989).
Experience is a different notion from
``expertise''. While ``expertise'' captures the
special, uncommon, state of knowledge an
individual may have about a certain product
or service, experience, in the disconfirmation
paradigm, is perceived as a lower level,
general, knowledge about the product or the
service which indicates a certain degree of
familiarity. How do consumers develop
experience and become familiar with a
service or the provider of that service?
Experience may be developed through
personal use of the service; it may also be
developed through exposure to
communication messages; in-store
promotions and comparison shopping may
also help consumers to develop a degree of
experience with certain services (Sundaram
and Webster, 1999).
Empirical evidence exists which
demonstrates that consumers' choices are
frequently guided by the degree of experience
(i.e. comparison shopping in our case) the
individual has with a certain brand. A study
by Arora and Stoner (1996) has shown that
purchase intentions are enhanced when
potential buyers are more experienced and
familiar with particular products and/or
services. Also, the consumer's degree of
familiarity with the service has been found to
moderate information search too; consumers
tend to spend less time shopping for a brand
they are familiar with than they do when
their experience is comparatively limited
(Biswas, 1992).
To the best of our knowledge, there is no
study which has attempted to directly
investigate why consumers, who have
developed a certain experience and are
familiar with the offered service, minimize
information search efforts and are more
inclined to proceed with the purchase.
However, from the above discussion it seems
logical to infer that previous experience
helps consumers to form specific
expectations of the quality of the service and,
consequently, of the perceived service
quality they will derive from the transactions
with a particular service provider. If so, we
expect that:
H2. Comparison shopping will influence the
user's perception of quality.
Personal relationships and perceived
service quality
The impact of personal relationships with the
service provider on perceived service quality
also has not, to the best of our knowledge,
been directly investigated. Research on
customer bonding, however, can be used to
offer some insights as to the effect that
personal relationships may have on
perceived service quality.
In defining the notion of bonding, Cross
and Smith (1996) describe it as a process
through which the provider and the buyer
develop and sustain a mutually rewarding
relationship. Within this context, Wilson and
Mummalaneni (1988) suggested a process
model that explains how relationships
between two parties grow. In their work, they
suggest two broad categories of bonds:
structural and social.
In general, structural bonding refers to ties
developed between organizations and, in that
sense, they are irrelevant for this study.
Social bonding, on the other hand, has been
conceptualized as the inevitable by-product
of any business relationship or exchange
(Wilson, 1990). According to Wilson and
Mummalaneni (1988), the relationships that
foster between the individuals participating
in exchanges are important because they
enhance communication and information
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
flow which, in turn, upgrades the
relationship as a whole .
Social bonds include feelings of likeness,
acceptance, friendship, social interactivity
and so on. Although it is rather rare that poor
performance in the delivery of the service
can be justified on the basis of friendship
alone (Han et al., 1993), evidence exists that
demonstrates that buyers with strong social
bonds with their service providers are more
committed to maintaining the relationship
(Wilson and Mummalaneni, 1988).
This is probably due to the facilitating
effect that social bonding and personal
relationships in particular have on the
encounter experience. That is, from the
providers' perspective, knowing the
consumer could help avoid verbal abuse,
uncooperative behavior or other causes
which lead to unsuccessful encounters
(Bitner et al., 1994). The same is also true for
the customer's viewpoint, since having a
personal relationship with the service
provider may boost authentic understanding
(Price et al., 1995), that is, to make it easier
for the employee to genuinely comprehend
the needs of the consumer. In fact, Lewis and
Bingham (1991) indicate that the lack of
personal contact affects banks' customers'
formation of service quality perceptions.
Since social bonds and personal relations
help develop successful service encounters
(Lovelock, 2001), we expect that perceived
service will be influenced by the extent to
which a personal relationship of some kind
has been developed between consumers and
service provider either prior to or as a result
of the exchange. On these grounds, we
investigate the following hypothesis:
H3. Perceived service quality will be
influenced by the extent to which
personal relationships exist between the
service provider and the user.
Market orientation and perceived service
quality
The company's degree of market orientation
has been the focus of many empirical studies.
The majority of these studies have mainly
investigated the link among market
orientation, quality practices, and the
company's financial performance and, in
doing so, have mainly used the company's
self-assessment of its degree of market
orientation (Kohli and Jaworski, 1992;
Diamantopoulos and Hart, 1993; Greenloy,
1995; Bhuian, 1998; Nilson et al., 2001). The
common conclusion derived from all these
empirical studies is that companies adopting
a market orientation enjoy superior quality
assessments and financial performance. The
rationale behind these findings lies in the
essence of market orientation which is
perceived as the amalgam of a specific
culture with a specific behaviour which,
collectively, can assist the company to
outperform competition in meeting the needs
of its target market (Avlonitis and Gounaris,
1997).
It is this rationale that provides the link
between market orientation and perceived
quality. Once market orientation has been
developed, the company's ability to derive
superior performance is attributed to the
subsequent skills it builds which allow for a
better understanding of the needs of its target
market. Understanding the target customers'
needs permits the company to coordinate all
its assets in a manner which allows it to
increase the value for the customer, hence to
increase the level of output quality received
by the customer.
For instance, developing a market
orientation leads, in general, to positive job
attitude, commitment and team spirit for the
company's employees (Selnes et al., 1996).
This is especially important in the services
sector and particularly for front-line
personnel whose role is, in principle, a very
important one in actually delivering superior
service quality (Harris, 1999). Harris and
Ogbonna (1999), for instance, have
demonstrated that a market-oriented
approach may remain elusive unless the
company has managed to effectively
communicate the values of market
orientation and the behaviour towards the
customer that comes along with it.
Furthermore, McCullough et al. (1986) found
that a bank's market orientation relates
positively with the customers forming a
positive impression about the quality of the
products/services offered by the bank.
To this end, one can argue that successful
market orientation development impacts the
perceived service quality in terms not only of
the characteristics of the service being
delivered, but also in terms of the customer's
experience regarding the outcome of the
dyadic encounter between the service
provider and him/herself. On this basis, we
investigate the following hypothesis:
H4. The greater the provider's degree of
market orientation, the higher the users'
definition of quality of the service that
the provider delivers.
Research methodology
Sample selection
The sample of customer responses was drawn
from the general area of Athens, Greece.
Personal interviews, based on a
[ 171 ]
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
questionnaire, were conducted by trained
personnel in order to increase the validity
and reliability of the responses. The
interviewers approached the respondents
and explained to them the survey in detail
(including its purpose, the meaning of the
items and what was expected of the
respondent). The respondents were asked to
give their perception of the level of service
quality delivered by the banks on a five-point
Likert type scale (ranging from 1 = ``strongly
disagree'' to 5 = ``strongly agree'').
The sample consisted of 793 individual
customers of commercial retail banks.
Since this study did not intend to measure
quality perceptions in relation to any
particular bank, respondents were
Research instrument
Perceived service quality (PSQ)
Researchers and practitioners seem to
generally agree that the 22 items of the
SERVQUAL scale developed by Parasuraman
et al. (1988) are good predictors of overall
evaluation of service quality by consumers.
However, the point worth mentioning here is
that the completeness of the scale in
addressing the critical dimensions of service
quality is a subject of further investigation
(Sureshchandar et al., 2002). Indeed, a careful
scrutiny of the scale items reveals that most
of the items mainly focus on the human
aspects of service delivery and the remaining
on the tangibles of service (like the effect of

randomly approached in the street and atmospherics, design and decor elements,
shopping centres. Although the sample is appearance of equipment, employee dress,
clearly a convenience one, the interviews etc.). Moreover, one has to bear in mind that
were conducted at different locations and the notion of service quality is industry and
on different days, as well as at uniformly country specific (Ford et al., 1993; Akviran,
distributed time intervals, in order to 1994; LeBlanc and Nguyen, 1988).
reduce location, date, and time related Thus, to operationalise PSQ, we used 31
response bias. An analysis of the question-items that sought to evaluate
respondents' demographic characteristics different dimensions of quality. In doing so
is presented in Table I. we:
. included items that represent the five
dimensions of service quality described
Table I by Parasuraman et al. (1991a); and
Demographic characteristics of the sample . added items that sought to capture extra
(n = 793) dimensions of service quality specific to
Demographic variable Valid per cent the banking industry as well as to the
Age of respondent Greek banking context.
Up to 20 years 6.1 In order to derive the additional items, we
20-30 years 32.0 first ran a thorough review of relevant
30-40 years 19.0 literature and particularly of studies in the
40-50 years 20.1 banking sector in the USA (since SERVQUAL
50-60 years 13.3 was originally developed in the USA) and
60 years and older 9.6 also in non-US environments (Akviran, 1994;
Missing 0.6
Johnston, 1997; Angur et al., 1999). This
Gender allowed us to develop a solid preliminary
Male 54.6 conception of service quality and how
Female 45.4 cultural variations affect the construct.
Missing 2.4 Then, we sought assistance from experts in
Income (in GDR)a the banking sector in Greece.
up to 1 million 12.6 More specifically, we conducted ten
1-3 million 32.3 personal in-depth interviews with managers
3-4.5 million 22.3 in the banking sector. First, we contacted two
4.5-6 million 12.3 marketing managers and a customer service
More than 6 million 20.5 manager from three different retail banks in
Missing 2.6 order to derive their conception of the
dimensions which, according to their expert
Education
opinion, comprise the broader notion of
Up to high school 46.4
service quality in retail banking. Next, their
College 25.7
answers were further probed by asking seven
University 27.9
Missing 6.7 branch managers from four different retail
banks to comment on the factors suggested
Note: a Income is annual per person (e1 = GDR (Greek by the marketing managers and the customer
Drachmas) 340.75) service manager.
[ 172 ]
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
While scale development based on the
expert opinion of practitioners is a common
procedure, particularly when it comes to
quality assessment instruments (Johnston,
1997; Angur et al., 1999; Sureshchandar et al.,
2002), the rationale behind this two phase
development approach is that we expected
marketing and/or customer service
managers to have a solid and broad,
understanding of the most important
dimensions of service quality for the bank
customers. However, because branch
managers are closer to the customer and day-
to-day encounters, their opinion was used as
a ``filter'' in order to unveil specific quality
dimensions which their experience has
shown that really matter for the consumers.
The dimensions, for which there was
congruity in the opinion of the managers we
asked, were eventually the ones included in
the questionnaire, namely:
. employee competence;
. bank reliability;
. product innovativeness;
. value for money;
. physical evidence; and
. proximity-convenience.
Interestingly enough, only three of the six
dimensions (employee competence,
reliability and physical evidence) coincide
with the original dimensions proposed under
the SERVQUAL instrument but this is in line
with empirical evidence which has
demonstrated that the construct of service
quality may vary depending on the national
context in which the measurement is taken
(LeBlanc and Nguyen, 1988; Sureshchandar
et al., 2002).
The seven branch managers were also
employed to assist us in developing the
wording of the items. This involved adapting
items from the SERVQUAL scale, forming
new ones where necessary and also
modifying items and putting them under
different constructs. Such practices are
frequently adopted when developing an
instrument to measure service quality in
cultural environments (e.g. India) which are
grossly different from the USA, where the
SERVQUAL was initially developed
(Sureshchandar et al., 2002). As to the nature
of the measurement, this was similar to that
of Cronin and Taylor (1992, 1994). They report
convincing evidence that researchers are
better off when measuring perceived service
quality directly instead of attempting to
estimate it as the result of the gap between
consumer expectations and consumer
perceptions. Finally, the scales (originally
developed in English) were translated into
Greek by native speakers and then back
translated into English to ensure equivalent
meaning (Brislin, 1980).
Antecedents to perceived service quality
Customer-specific antecedents
A ten-item battery was developed to gauge
the customer-specific antecedents to
perceived service quality. The ten items were
grouped into three a priori categories:
1 word-of-mouth communications;
2 personal relations; and
3 comparison shopping.
However, the respondents were not aware of
these groupings. They were merely asked to
indicate their degree of agreement with each
statement using a five-degree Likert-type
scale. All the items included in the study are
presented in the Appendix.
Bank-specific antecedents: perceived
market orientation (PMO)
A scrupulous review of the literature on
market orientation reveals that almost all
attempts to measure the notion pivot around
two basic research approaches developed by
Kohli and Jaworski (1990) and Narver and
Slater (1989). Interestingly enough, both
alternative measures rely on scales which
are developed to be used by company
managers or employees while their
customers are still left out (Gray, 1998; Kahn,
2001). Given the centrality of customers in
conceptualising market orientation, this
almost exclusive emphasis on self-reported
measures of market orientation appears to be
somewhat away from the core principles of
market-oriented practices. Hence, in this
study we attempted to derive a market-
oriented measurement for market
orientation since it is questionable whether
the customers can provide a valid and
reliable assessment of the company's degree
of market orientation, merely by rewording
the items included in the original scales of
market orientation. These scales are
comprised of such dimensions of market
orientation which consumers could not
possibly assess (for instance ``salespeople
share competitor information'', ``all functions
contribute to customer value'' and so on (see
Narver and Slater, 1989, p. 9)).
Thus, to do so we relied on the notion and
dimensions proposed by Narver and Slater
(1989). However, consumers care more about
the value they derive from using a product or
a service rather than how or why this value
is created (Silverman and Grover, 1995).
Hence, any attempt to measure a company's
market orientation from its customers'
perspective should consider this and strive to
translate the elements which characterise a
[ 173 ]
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
[ 174 ]
market oriented company into specific,
customer-defined, value-adding
characteristics.
To this end, we attempted to develop items
that can describe the bank's degree of market
orientation but which can be assessed by the
bank's customers. For this purpose we also
consulted the work of Webb et al. (2000) who
recently have also attempted a similar effort
in the banking sector. Furthermore, we
asked the bank managers, who were
providing assistance in the development of
the research instrument, to attempt to
translate specific dimensions of the market
orientation to benefits and actions which the
bank's customers could assess.
This process generated an initial pool of 20
items. Once this initial pool was developed,
50 students from our university were
presented with a definition of market
orientation, as well as with the initial items
and were then asked to tick what, in their
opinion, ``a market-oriented bank is expected
to do''. Items from the initial list which were
ticked by less than ten students were
eliminated. This process produced a final list
of 12 items which were included in the study.
Measurement refinement and
validation
In order to develop and validate the measures
for perceived market orientation (PMO) and
customer specific antecedents (CSA) we
employed both exploratory factor analysis
(EFA) and confirmatory factor analysis
(CFA).
Conventionally, exploratory factor
analysis (EFA) is used for the situation
where the relationships between the
observed and latent (factors) variables are
unknown or uncertain. The approach
proceeds in an exploratory manner to reveal
the underlying factors, thereby illustrating
the relationships between the latent factors
and the observed variables. The purpose is to
come out with the minimum number of
factors that will explain the covariation
among the observed variables. EFA is
particularly useful only in the absence of a
sufficiently detailed theory about the
relationships of the observed variables to the
latent constructs (i.e. only for constructs that
are at a very nascent stage of research). This
is because of the limitations of the method for
scale development purposes. For instance, in
pure EFA, items are loaded only on a
statistical basis, thereby affecting the valid
identity of the factors. Also, the concept of
unidimensionality (i.e. extent to which items
on a factor measure one single construct) has
not been taken care of in the EFA approach
(Ahire et al., 1996).
On the contrary, the CFA approach, to a
very great extent, overcomes the above
mentioned limitations and addresses the
situation wherein the researcher specifies a
model a priori, and tests the conjecture that a
relationship between the observed and the
latent variables does in fact exist. In short,
the hypotheses that form the constraints are
an integral part of the CFA technique.
Moreover, the researcher knows which
factors account for the covariation among the
observed variables. The proposed model is
built on logic and other research and
theoretical findings, and if the researcher has
a reasonably good idea about the observed
variables that are likely to be reliable
indicators of a particular factor, CFA is more
appropriate than EFA (Arbuckle and
Wothke, 1995).
Thus, given the fact that this study entailed
scales such as market orientation (PMO)
from the customer's perspective as well as
customer-specific antecedents of service
quality, for which the relationships between
the observed and latent (factors) variables
were unknown or uncertain, we had to
employ both approaches. To do this, we
randomly split the sample in two halves,
SampleA (n = 402) and SampleB (n = 391). The
EFA was run in SampleA in order to unveil
the underlying dimensions for PMO and
CSA. The CFA was run in SampleB in order
to examine the dimensionality and
psychometric properties of the scales
(Table II).
With regard to the underlying dimensions
of PMO, Table III summarises the results of
EFA. According to the results of this
analysis, market orientation, as perceived by
the bank's customers, appears to be a two
dimensional concept, one pertaining to how
the bank's strategy is conceived by its
customers and the second capturing the
customer's perception of the implementation
of its strategy.
Interestingly enough, the results of the
EFA we performed do not fully coincide with
those of Narver and Slater (1989), as one
might have reasonably expected, since the
items we have employed were based on their
work. Nonetheless, one has to notice that the
notions of customer orientation, competitor
orientation and interfunctional coordination
are, in fact, encompassed in both the way a
company's strategy is formed as well as the
way it is implemented. The fact that it is the
bank's customers who made the assessments
probably obscures them and does not allow
them to be revealed in the same manner as is
the case when the company's employees
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Spiros P. Gounaris,

21/4 [2003] 168-190

Antecedents to perceived
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos

International Journal of Bank

study in the banking industry
service quality: an exploratory
Table II
Person correlations between alternative dimensions of perceived service quality in the random half of the sample
Climate I get Employees
Atmosphere Interior between Employees prompt have Employees
Willing to Warm- Employees gives design employees know the service knowledge find time
No discuss Not visit Trust- friendly well impression facilitates helps service Employees bank's from the to serve to serve
errors problems repeatedly worthy atmosphere dressed of quality transactions outcome are friendly products employees promptly better
Willing to discuss
problems 0.233**
Not visit repeatedly 0.146** 0.211**
Trustworthy 0.321** 0.340** 0.103*
Warm-friendly
atmosphere 0.232** 0.290** 0.202** 0.423**
Employees well
dressed 0.151** 0.283** 0.060 0.378** 0.642**
Atmosphere gives
impression of quality 0.173** 0.183** 0.109* 0.370** 0.541** 0.598**
Interior design facilitates
transactions 0.159** 0.210** 0.037 0.341** 0.421** 0.421** 0.395**
Climate between
employees helps service
outcome 0.209** 0.261** 0.126* 0.314** 0.487** 0.511** 0.484** 0.364**
Employees are friendly 0.186** 0.297** 0.170** 0.333** 0.621** 0.623** 0.549** 0.339** 0.512**
Employees know the
bank's products 0.215** 0.285** 0.149** 0.338** 0.340** 0.383** 0.359** 0.261** 0.323** 0.427**
I get prompt service from 0.299**
the employees 0.152** 0.267** 0.153** 0.430** 0.488** 0.422** 0.247** 0.383** 0.565** 0.435**
Employees have
knowledge to serve
promptly 0.277** 0.244** 0.130** 0.376** 0.414** 0.483** 0.463** 0.258** 0.418** 0.486** 0.554** 0.592**
Employees find time to
serve better 0.197** 0.246** 0.077 0.370** 0.391** 0.403** 0.431** 0.288** 0.359** 0.484** 0.456** 0.529** 0.522**

(continued)

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[ 176 ]
Marketing
Spiros P. Gounaris,

21/4 [2003] 168-190

Antecedents to perceived
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos

International Journal of Bank

study in the banking industry
service quality: an exploratory

Table II
Climate I get Employees
Atmosphere Interior between Employees prompt have Employees
Willing to Warm- Employees gives design employees know the service knowledge find time
No discuss Not visit Trust- friendly well impression facilitates helps service Employees bank's from the to serve to serve
errors problems repeatedly worthy atmosphere dressed of quality transactions outcome are friendly products employees promptly better
Employees can match
products with needs 0.231** 0.247** 0.087 0.279** 0.339** 0.441** 0.369** 0.281** 0.359** 0.419** 0.371** 0.366** 0.421** 0.409**
Located near workplace 0.012 0.000 ±0.020 0.065 0.034 0.052 0.078 0.036 0.053 0.045 0.127* 0.016 0.028 0.091
Located near
governmental buildings 0.030 0.029 0.033 0.043 0.053 0.082 0.109* 0.077 0.037 0.055 0.060 ±0.001 0.098 0.053
Located near shopping
centres 0.091 ±0.035 0.092 0.091 0.167** 0.164** 0.080 0.146** 0.092 0.108* 0.162** 0.015 0.122* 0.091
Interest for loans is high 0.022 ±0.038 0.067 ±0.041 ±0.027 ±0.119* ±0.079 ±0.021 0.026 ±0.134** ±0.046 ±0.085 ±0.043 ±0.118*
Interest for deposits is
lower ±0.052 0.006 ±0.096 ±0.002 ±0.035 ±0.007 ±0.022 ±0.039 ±0.070 ±0.033 ±0.091 ±0.028 ±0.090 ±0.154**
Commission charges are
high ±0.037 ±0.060 ±0.045 ±0.086 ±0.097 ±0.184** ±0.124* ±0.180** ±0.078 ±0.158** ±0.230** ±0.207** ±0.167** ±0.163**
Wide variety of products 0.172** 0.172** ±0.024 0.236** 0.197** 0.192** 0.188** 0.161** 0.241** 0.175** 0.156** 0.212** 0.253** 0.203**
Flexible products
meeting my needs 0.161** 0.182** 0.029 0.278** 0.278** 0.227** 0.199** 0.181** 0.220** 0.211** 0.287** 0.211** 0.314** 0.263**
New products meet my
needs 0.202** 0.238** ±0.005 0.203** 0.196** 0.176** 0.124* 0.145** 0.187** 0.173** 0.219** 0.162** 0.191** 0.142**
Offers phone banking 0.152** 0.254** ±0.013 0.157** 0.193** 0.256** 0.162** 0.219** 0.194** 0.200** 0.149** 0.175** 0.283** 0.193**

(continued)
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Marketing
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21/4 [2003] 168-190

Antecedents to perceived
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos

International Journal of Bank

study in the banking industry
service quality: an exploratory

Table II
Empl. Located
match near Located Interest Flexible New
products Located govern- near Interest for Commission Wide products products
with near mental shopping for loans deposits charges variety of meeting meet
needs workplace buildings centres is high lower are high products my needs my needs
Located near workplace ±0.023
Located near
governmental buildings 0.089 0.258**
Located near shopping
centres 0.088 0.142** 0.295**
Interest for loans is high ±0.001 ±0.025 0.116* 0.088
Interest for deposits is
lower ±0.038 ±0.003 0.069 ±0.021 0.311**
Commission charges are
high ±0.061 0.099* 0.065 ±0.039 0.251** 0.213**
Wide variety of products 0.234** 0.107* 0.060 0.123* ±0.015 ±0.012 ±0.119*
Flexible products
meeting my needs 0.238** 0.037 0.152** 0.218** ±0.008 ±0.093 ±0.094 0.491**
New products meet my
needs 0.243** 0.035 0.042 0.085 ±0.058 0.034 ±0.024 0.404** 0.639**
Offers phone banking 0.194** ±0.021 0.022 ±0.010 ±0.008 0.056 ±0.059 0.301** 0.298** 0.309**
Notes: * Correlation is significant at the 0.05 level (2-tailed); ** correlation is significant at the 0.01 level (2-tailed)

[ 177 ]
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
Table III
Exploratory factor analysis for perceived market orientation
Factors Items loading on each factor Loadings
Perceived market orientation
F1: Marketing strategy design Matches products with needs 0.723
Monitors competition 0.713
Growth is based on meeting customer's needs 0.610
Offers financial products for everyone (r) 0.533
F2: Marketing strategy implementation Emphasis on customer satisfaction 0.755
Emphasis on communication with the customer 0.729
Offers high quality service 0.722
Offers the best financial products 0.680
Departments are coordinated 0.662
Measures offered services quality 0.569
Selects customers carefully (segmentation) 0.457
Customer's interests come first 0.442

Customer specific antecedents (CSA)

F1: Comparison shopping You are better off checking different banks 0.693
Check different banks before final choice 0.783
Check different banks results in better bargains 0.700
F2: Personal relations Acquaintance with managers of the bank 0.893
Personal relationships with managers of the bank 0.885
F3: Word-of-mouth communication ``Family'' bank 0.625
Recommended by my friends 0.696
Get information from advertising campaign (r) 0.638

assess the degree of their firm's market
orientation. Although the development of a
customer-derived measurement for market
orientation is beyond the scope of this study,
this finding is important and ought to trigger
research in this direction.
With regard to customer specific
antecedents (CSA), the results of EFA are
also shown in Table III. As can be seen from
Table III, the items load clearly on three
factors, i.e. comparison shopping, personal
relations and word-of-mouth communication.
Measurements purification
In order to purify the measures employed in
this study and assess their psychometric
properties we used the second randomly
generated half of the sample (SampleB).
Following Gerbing and Anderson (1988), the
first step was to employ confirmatory factor
analysis (CFA) in order to examine the
dimensionality of the scales. The basis of the
statistical analysis was the covariance
matrix of the observed responses in SampleB.
Overall fit and the significance of the loading
of individual variables on the hypothesised
factors were considered.
Table IV shows the fit indices using the
chi-square test, the goodness of fit index
(GFI), Bentler's comparative fit index (CFI)
and the root mean square of approximation
(RMSEA) for the three scales employed in
this study. The RMSEA measures the lack of
[ 178 ]
fit and takes parsimony into account by
assessing the discrepancy per degree of
freedom between the population covariance
matrix and the fitted matrix. That is, it
penalises for overfitting. The adjusted
goodness of fit index (AGFI) is not reported
as its usefulness is questionable (Mulaik
et al., 1990).
With regard to perceived service quality,
the measurement model was first tested for
the adequacy of a six factor solution. The
results from a six factor solution have been
tested extensively, via all possible solutions
of reduced dimensionality by collapsing
dimensions and the results obtained were
always inferior. For illustrative purposes the
information in Table IV tests results
concerning the potential unidimensionality
of perceived quality (Figure 2).
These empirical results seem to support
our earlier position that perceived service
quality dimensions tend to be industry
specific as well as country specific. In that
notion, our results have similarities with
results reported in other studies from other
national environments of retail banking (see
for instance LeBlanc and Nguyen (1988)). Yet,
the most important issue arising from the list
of factors identified in this study should be
the fact that perceived service quality is
recognised as a multidimensional construct.
As it is well known in the literature, there
are conflicting empirical findings as to
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
whether the customers recognise the
differential nature of service quality drivers
(see Babakus and Boller, 1992; Davis, 1991;
Parasuraman et al., 1988). The findings of the
current study, however, without resolving
the issue, provide additional insights about
the possibility of having multiple dimensions
of service quality with the presence of
additional factors, such as value for money,
innovativeness, and convenience (see
Figure 3).
Confirmatory factor analysis (CFA) was
also employed in order to examine the
dimensionality of perceived market
orientation (see Table IV). Though the
overall chi-square test was statistically
significant (2 = 151.9, 53 d.f.) the GFI of 0.94
Table III, the two factor solution was
superior to that of the single factor (Figure 4).
The same approach was used in order to
explore the dimensionality of the customer-
specific antecedents of PSQ (see Table III).
Again, although the overall chi-square test
was statistically significant (2 = 55, 15 d.f.)
the GFI of 0.97 and a low value (below 0.10)
of the root mean square residual
(RMSEA = 0.01) also suggested a good model
fit. A single factor model was also tested but,
as can be seen in Table IV, the three factors
solution was superior to that of the single
factor.
Psychometric properties (convergent
validity, discriminant validity and internal

and a low value (below 0.10) of the root mean consistency)

square residual (RMSEA = 0.06) suggested a Convergent and discriminant validity for the
good model fit (Sharma, 1996). A single factor three scales were evaluated by calculating
model was also tested but, as can be seen in the average variance extracted (AVE) for

Table IV
Summary statistics of model's fit
Perceived service quality Perceived market orientation Measurement for customer-
measurement measurement specific antecedents of PSQ
Six factors One factor Two factors One factor Three factors One factor
Chi-square (2 ) 487.1 973 151.9 260.5 55.0 198
Degrees of freedom (d.f.) 256 271 53 54 15 18
GFIa 0.92 0.81 0.94 0.89 0.97 0.88
CFIa 0.93 0.77 0.91 0.81 0.96 0.58
RMSEAb 0.04 0.08 0.06 0.10 0.01 0.15
Notes: a CFI and GFI values close to one indicate a good fit; b The lower the RMSEA values, the better the model is considered. Values below 0.1
suggest adequate fit

Figure 2
Dimensions of perceived service quality

[ 179 ]
 Spiros P. Gounaris, Figure 3
Vlassis Stathakopoulos and Company specific antecedents to PSQ ± perceived market orientation
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)

Figure 4
Customer specific antecedents to PSQ

each factor in each model. Convergent
validity is established if the shared variance
accounts for 0.50 or more of total variance.
Discriminant validity is evident when AVE
for each construct is greater than the squared
correlation between that construct and any
other construct in the model (Fornell and
[ 180 ]
Larcker, 1981). The results, presented in
Table V, confirm both the convergent and
discriminant validity of the three scales.
Internal consistency was assessed by
means of the Cronbach's alpha coefficient
(Nunnally, 1978). That is the ability of the
measure to yield consistent results
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Marketing
Spiros P. Gounaris,

21/4 [2003] 168-190

Antecedents to perceived
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos

International Journal of Bank

study in the banking industry
service quality: an exploratory

Table V
Reliability and validity assessment (second random half of the sample)
REL
PSIM PSD
AVE REL AVE (Corr)2 CONV DISC
Market orientation
0.75 0.52 0.77 0.59 0.36 Yes Yes
Personal antecedents
WOM COMPSHOP PERSREL
AVE REL AVE REL AVE (Corr)2 CONV DISC
0.77 0.54 0.78 0.62 0.76 0.64 0.36, 0.41, 0.31 Yes Yes
Perceived service quality
EMPCOM RELB PRODINN PRICE PHYSEVD
AVE REl AVE REL AVE REL AVE REL AVE
0.79 0.72 0.88 0.90 0.76 0.88 0.81 0.80 0.81 0.85
CONV
AVE (Corr)2 CONV DISC
0.78 0.82 0.32, 0.41, 0.59, 0.44, Yes Yes
0.33, 0.39
Notes: PSIM = Perceived strategy implementation; PSD = Perceived strategy development; WOM = Word-of-mouth communication; COMPSHOP = Comparison shopping; PERSREL = Personal relations;
EMPCOM = Employee competence; RELB = Bank's reliability; PRODINN = Product's innovativeness; PRICE =value for money; PHYSEVD = Physical evidence; CONV = Convenience; REL = Cronbach
alpha coefficient; AVE = Average variance extracted = (standard loadings)2/(standard loadings)2 + ij ; CONV = Convergent validity (AVE > 0.50); DISC = Discriminant Validity = AVE/(Corr2) > 1;
(Corr)2 = highest (Corr)2 between factor of interest and remaining factors

[ 181 ]
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
[ 182 ]
(Nunnally, 1988). Even a highly
unidimensional scale would be of very little
use if the resultant aggregate score is
ascertained basically by measurement error,
with the values of the scores broadly
fluctuating over repeated measures
(Anderson and Gerbing, 1988).
Several measures of reliability can be
ascertained in order to establish the
reliability of a measuring instrument. These
include test-retest method, equivalent forms,
split-halves method and internal consistency
method. Of all the above methods, the
internal consistency method requires only
one administration and consequently is
supposed to be the most effective, especially
in field studies. Moreover, this method is
considered to be the most general form of
reliability estimation (Nunnally, 1988). In
this method, reliability is operationalised as
internal consistency, which is the degree of
intercorrelations among the items that
constitute a scale (Nunnally, 1988). Internal
consistency is estimated using a reliability
coefficient called Cronbach's alpha
(Cronbach, 1951). An alpha value of 0.60 and
0.70 or above is considered to be the criterion
for demonstrating internal consistency of
new scales and established scales
respectively (Nunnally, 1988). The
Cronbach's alpha values for all the five scales
are shown in Table V. All the values exceed
the minimum requirements, thereby
demonstrating that all the five scales are
internally consistent and have acceptable
reliability values in their original form.
Having established the discriminant and
the convergent validity as well as the
internal consistency of the measures, the
next step involved the development of scales
for each construct as the simple arithmetic
mean of the items comprising each construct.
These scales were used in subsequent
analysis.
Results
To test the hypotheses put forward in this
study we performed a canonical correlation
analysis. This analysis, when compared
against more traditional correlational
analyses, has the characteristic that
examines the degree of association between
two sets of variables rather than individual
pairs of variables. Consequently, given that
PSQ represents a multidimensional notion,
canonical correlation analysis is more
appropriate when attempting to examine the
potential relationship between PSQ and its
antecedents, both customer- and company-
specific ones. Table VI provides a summary
of the results of this analysis.
Redundancy in the criterion set, given the
predictor set, was about 19 per cent with four
significant relationships accounting for 100
per cent of total redundancy. Although not
too high, this level is comparable to that
reported in other research (Alpert and
Peterson, 1971; Ford, 1984; MoÈller and
Laaksonen, 1984; Grossbart and Crosby, 1984;
Avlonitis and Gounaris, 1999). Information
on loadings for the four significant variates
is also provided in Table VI. Loadings with
an absolute value of 0.40 and over which
appeared to be significantly related to each
variate are in bold type to assist
interpretation. In order to test for the validity
of this analysis, the sample was split
randomly in two halves and the canonical
analysis was recomputed. Both the
redundancy coefficient and the canonical
loadings remained stable. suggesting that the
results reported here are not due to chance.
When considering the canonical functions
elicited from the analysis, it would appear
that, overall, PSQ is indeed influenced by the
customer- and company-specific factors
examined in this study. However, as our
findings suggest, not all dimensions of PSQ
are influenced by all the factors examined.
More specifically, the customer's
expectations regarding the bank's reliability
and the competence of the bank's personnel
are mainly influenced by the effectiveness of
the bank's marketing strategy
implementation as well as by the customer's
comparison of the bank in question with
other banks and the personal relations the
customer may have with manager(s) from the
bank.
On the other hand, the customer's
perceived physical evidence and personnel
competence (encounter experience) is mainly
the result of the customer's conception of the
bank's marketing strategy and of the extent
to which the customer perceives the
implementation of the bank's strategy to be
in line with the strategy that the bank,
explicitly or implicitly, has promised. This is
a particularly interesting finding for two
reasons. First, it is in line with existing
literature on market orientation and the
effect that has been recorded through
empirical studies that the company's degree
of market orientation influences positively
the job attitude of the company's employees
(Jaworski and Kohli, 1993; Selnes et al., 1996).
This positive influence is reflected on the
bank's front-line personnel during their
encounters with the bank's customers.
Second, it proves that the evaluation of the
encounter by the customer is not influenced
by customer-specific antecedent factors, a
fact which further enhances the importance
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Marketing
Spiros P. Gounaris,

21/4 [2003] 168-190

Antecedents to perceived
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos

International Journal of Bank

study in the banking industry
service quality: an exploratory

Table VI
Canonical correlation analysis
Criterion set Per cent of total Per cent of total
Variables Canonical R 2 d.f. Sign. redundancy redundancy redundancy ± accumulative
1 0.703 641.7 30 0.000 0.174 90.16
2 0.269 107.2 20 0.000 0.009 4.66 94.82
3 0.189 48.2 12 0.012 0.006 3.11 97.93
4 0.155 19.6 6 0.003 0.004 2.07 100.00
5 0.028 0.6 2 0.729 0.000 0.00 100.00
0.193
Relationships between individual variables and the canonical variables
Canonical loadings
1 2 3 4
Company specific antecedents Criterion set
Perceived market orientation: conception of the bank's strategy 0.313 0.597 ±0.083 0.248
Perceived market orientation: perceived implementation of the 0.718 0.851 0.471 0.282
bank's strategy
Customer specific antecedents
Word-of-mouth communication ±0.146 ±0.061 ±0.040 0.883
Comparison shopping 0.629 0.283 0.924 0.443
Personal relations 0.501 0.094 0.437 ±0.531
Perceived service quality Predictor set
Bank's reliability 0.472 0.140 0.058 0.168
Physical evidence and encounter experience 0.363 0.496 0.289 0.122
Employee competence 0.456 0.073 0.047 ±0.088
Convenience 0.007 ±0.167 0.060 0.626
Product's innovativeness 0.322 0.124 0.980 0.153
Price (value for money) ±0.024 0.126 0.785 0.087

[ 183 ]
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
[ 184 ]
of the bank's market orientation in
delivering premium quality services.
With regard to the perceived quality
dimensions referring to the innovativeness
of the bank's products and its pricing (value
for money), our findings seem to suggest that
these two particular dimensions are
influenced mainly by the customer's
experience with the products and the prices
of other banks that (s)he has contacted as
well as by the bank's success to implement its
marketing strategy.
Finally, the analysis presented in Table VI
suggests that the dimension of convenience is
mainly influenced by word-of-mouth
communication as well as by comparing
alternative banks. Interestingly enough,
personal relations have a negative impact,
suggesting that customers who do have such
relationships feel ``obliged'' to use the
particular branch where their acquaintance
works, irrespective of the locational
convenience of the particular branch.
Conclusions
Major findings
When the findings of this study are jointly
considered they clearly show that PSQ is
indeed a function of customer- and company-
specific antecedents. However, the formula is
not an easy one since different dimensions of
the overall perceived service quality are
influenced by different antecedents.
To start with, our study shows that the
notion of service quality is a
multidimensional concept. As it is well
known in the literature, there are conflicting
empirical findings as to whether the
customers recognise the differential nature
of service quality drivers (Babakus and
Boller, 1992; Davis, 1991; Parasuraman et al.,
1988). The findings of the current study,
however, without resolving the issue,
provide additional insights about the
possibility of having multiple dimensions of
service quality with the presence of
additional factors, such as value for money,
product innovativeness, and convenience.
Moreover, the findings of this study seem to
provide additional evidence in congruence
with the research stream that has put
forward that the dimensions of service
quality are not only industry but also
culture-specific (Ford et al., 1993; Akviran,
1994).
With regard to the findings of the study and
the model we investigated concerning the
influences on perceived quality, our work
provides a comprehensive model which can
be used to understand and explain what
influences the consumers' perceptions of
service quality in the bank sector. Naturally,
it cannot be claimed that the factors we
investigated are the only ones which
influence perceived quality. However, our
study provides a starting point for further
investigation.
To begin with, this study is the first to look
at the impact of market orientation on
service quality and, in doing so, it has
demonstrated the significant effect that it
bears. In particular, the findings presented in
this manuscript reveal that the greater the
degree of market orientation adoption by the
bank the higher the perceived quality of its
offering by its customers.
More specifically, the quality dimension of
employees' competence influences the
customer's perception of the bank's
marketing strategy as the latter is reflected
through contact personnel. Apparently,
being market oriented improves the
effectiveness of this dimension of the bank's
marketing strategy by influencing positively
the customer's experience during the
encounter with contact personnel, since
improved job attitude and satisfaction of the
contact personnel is a consequence of market
orientation adoption (Harris and Ogbonna,
1999). In addition, the adoption of market
orientation has also a direct positive impact
on the customers' perceptions regarding the
physical evidence (e.g. atmospherics,
aesthetics, stylish appearance, design) of the
bank. This is because market oriented banks
emphasize the adaptation of the
servicescapes to the specific market
segments they target and, as a consequence,
they enjoy increased perceived quality.
Furthermore, the bank's perceived degree
of market orientation, as it is reflected
through its customers' perceptions regarding
the implementation of the bank's marketing
strategy, directly influences the customer's
perception regarding the innovativeness of
the bank's products and its approach in
pricing. Market-oriented companies, as
opposed to non-market oriented ones, are
more apt to deliver greater value to the
markets they target (Slater and Narver, 2000)
and our study provides additional evidence
in this direction by pointing the two specific
dimensions of quality (innovativeness and
value for money) which are influenced by a
market-oriented behaviour. Moreover,
market orientation adoption also has a
positive impact on the customers' perception
regarding the reliability of the bank. Market-
oriented banks strive to excel in terms of the
value they offer to their clients by delivering
the service without any hassles or excessive
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
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bureaucracy, in minimum delivery times and
without errors.
With regard to the customer-specific
antecedents of perceived quality, consumers'
comparison shopping is an important factor
of perceived service quality since it also
influences five out of the six dimensions of
perceived quality that this study has
revealed. More specifically, our findings
would seem to suggest that, with regard to
financial services, consumers tend to become
more involved, they develop the habit of
``shopping around'' to find the best bargain.
This seems to influence their perception of
the quality of the bank's offering since,
through this process, consumers become
more knowledgeable of alternative offerings.
As such, their perception of the quality of the
service they receive is influenced and,
particularly, their perception regarding the
bank's reliability, the innovativeness of its
products and pricing (value for money) as
well as the convenience of the bank's branch
location.
As far as WOM is concerned, our findings
seem to suggest that it is not such an
important factor influencing perceptions of
service quality. As a matter of fact, only one
of the six dimensions of perceived quality
(that of convenience) was found to be
influenced by WOM. This is an interesting
finding since the pertinent literature in
service quality emphasises its importance for
service companies (e.g. Parasuraman et al.,
1985). Two reasons could explain this finding.
One possible reason may be the fact that, as
pointed out earlier, consumers' involvement
and familiarity with financial services is
increasing, leading them to become more
knowledgeable about banks' offerings. To
this end, it might be possible that they tend to
rely more on their own judgement rather
than on the advice and opinion provided by
third parties, even if close friends and highly
esteemed persons are included among those
offering their opinion or advice. If this is the
case, then practices to foster WOM should be
cautiously reviewed under a cost-benefit
approach. The second reason may be culture-
specific since empirical evidence exists
which substantiated the sensitivity of the
usage of WOM to the individuals' culture
(Money et al., 1998). If that is the case, then
cautiousness is needed along with further
investigation before definite conclusions can
be drawn.
Finally, with regard to personal
relationships, as might have been expected,
they have a direct influence on customers'
perceptions regarding the bank's reliability.
Apparently the bank benefits from the
personal relationships that its employees
build with customers, since the bond of trust
that develops between them, as a
consequence of the personal relationship, is,
indirectly, conveyed to the relationship
between the bank and the customer.
Interestingly enough, personal relationships
are found to be inversely related with the
dimension of convenience. This is most
probably due to the fact that the employee
with whom the customer has developed the
relationship is not necessarily posted at a
branch conveniently located for the
customer. In fact, it might be that consumers,
driven by their inner need to have their
exchanges carried over by front-line
personnel they know and with whom they
have developed such a relationship, are
willing to trade the convenience factor.
Managerial implications
The study also has important implications
for practitioners. It provides them with a
comprehensive model of the factors which
influence the perceptions of quality and,
consequently, with specific priorities.
According to our findings, the banks' top
management should conscientiously attempt
to increase their company's degree of market
orientation. In general, this calls for
increased emphasis on market intelligence
generation, commitment on understanding
the needs of the customers and development
of a marketing mix which will be tailored to
specific targeted market segments. In doing
so, they unavoidably have to re-shape both
the bank's culture and behaviour. This calls
for an effort to sensitise the business as a
whole with the aim to achieve an
understanding of what MO is about. It is
usually an educational learning process
involving training and educational programs
on how a company might change its
structures, policies and practices in order to
develop a MO. At a later stage, banks ought to
get involved in an experiential learning
process. This calls for experimentation with
specific actions which modify the way a
company competes in the market. Basically,
this is a continuous-learning approach and is
implemented through modifications of the
existing company practices and within a
broader concept of continuous learning from
the company's actual customer-value-
creation performance (Narver et al., 1998).
Furthermore, banks' management must
place particular attention on the
management of the contact personnel, from
the branch's tellers to its director. More
specifically, as this study reports, front-line
staff must be selected on the basis of their
competence to manage interpersonal
communication effectively, since this helps
[ 185 ]
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
[ 186 ]
develop personal relationships with the
bank's customers which, in turn, impacts
directly on the client's perception of
personnel competence and trustworthiness.
In doing so, this calls for customer-centred
human resource practices (e.g. the
employee's motivation plan, their job
description, etc.). Empowering the contact
personnel can help them provide the
customers with solutions to their problems,
so that trust and a stronger personal
relationship with the client can be developed.
Along the same lines, contact personnel
rotation should be cautiously practised so
that the entire effort to develop personal
relationships with the bank's customers is
not hampered.
When it comes to innovative product
development and pricing schemes, the bank's
management must stay vigilant of
competitive reactions. Consumers are
informed, shopping around and looking for
the best possible solution to their individual
financial services needs. The bank which will
more effectively match its innovation and
pricing strategy with the individual needs of
the customer is the one that will enhance its
position in the banking arena.
Finally, with regard to location decisions,
banks are faced with two problems. The first
relates to attracting customers to its existing
branch-network. The second pertains to the
expansion of its network. As far as the former
is concerned, this study shows that the
bank's management should capitalize on
personal relationships between the existing
clients and the branch contact personnel as
customers are willing to trade convenience
for personalized service. With regard to the
latter, stimulating word-of-mouth-
communication and establishing new
branches near competitors' sites influences
positively the traffic for the new branch.
Limitations and future research
Our study is not free of limitations. The first
limitation concerns the national context of
the study which put constraints on the ability
to generalise for other companies and
national-cultural contexts. To this end,
replication of the study is necessary before
we can generalise. Particularly so with
regard to specific dimensions of our model,
such as the impact of WOM as well as of
personal relationships on perceived quality.
Future researchers may also wish to examine
their impact controlling for the (possible)
moderating effect that the consumer's
experience may have on the influence both
factors have on perceived quality.
A second limitation concerns the measure
of market orientation. Our study provides a
fairly reliable and valid customer-derived
measure for market orientation. However,
given the rather novel nature of our effort,
one has to consider our endeavour as a first
attempt to develop a pilot measure. To this
end, before it can be widely used, it is
required that a more extensive and,
simultaneously, more detailed development
process is followed, particularly to further
increase the content validity of the measure.
Finally, future research efforts could
concentrate in building a broader conceptual
model of factors that influence PSQ, by
including other variables, such as company
incentives and communication programs in
general, the front-line personnel's conduct
during the encounter and the interaction of
the user with the technology employed
during the provision of the service.
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Research Report No. 3, Institute for the Study
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Buyer-Seller Relationships, Institute for the
Study of Business-to-Business Markets,
Research Report No. 5, University Park, PA.
Wood, V.R., Bhuian, S. and Kiecker, P. (2000),
``Market orientation and organizational
performance in not-for-profit hospitals'',
Journal of Business Research, Vol. 48,
pp. 213-26.
Yavas, U., Bilgin, Z. and Shemwell, D.J. (1997),
``Service quality in the banking sector in an
emerging economy: a consumer survey'', The
International Journal of Bank Marketing,
Vol. 15 No. 6, pp. 217-23.
Further reading
Anderson, J.C. and Gerbing, D.W. (1991),
``Predicting the performance of measures in a
confirmatory factor analysis with a pretest
assessment of their substantive validities'',
Journal of Applied Psychology, Vol. 76 No. 5,
pp. 732-40.
Berry, L.L., Zeithaml, V.A. and Parasuraman, A.
(1985), ``Quality counts in services too'',
Business Horizons, Vol. 28 No. 3, pp. 44-52.
Bitner, M.J. (1990), ``Evaluating service
encounters: the effects of physical
surroundings and employee responses'',
Journal of Marketing, Vol. 54, April, pp. 69-82.
Fritz, W. (1996), ``Marketing orientation and
corporate success: findings from Germany'',
European Journal of Marketing, Vol. 30 No. 8,
pp. 59-74.
Kotler, P. (1994), Marketing Management,
Prentice-Hall, Englewood Cliffs, NJ.
Narver, J., Slater, S. and Tietje, B. (1998),
``Creating a market orientation'', Journal of
Market Focused Management, Vol. 2 No. 3,
pp. 241-55.
Sinkula, J. (1994), ``Market information
processing and organizational learning'',
Journal of Marketing, Vol. 58, January,
pp. 35-45.
Appendix
Scale items concerning perceived service
quality
sq_1 The bank's employees know very well
the bank's products
sq_2 You receive prompt service from the
bank's employees
sq_3 Bank employees have the necessary
knowledge to serve you promptly
sq_4 Bank employees do not hesitate to
find the time to serve you better
sq_5 Bank employees know what your
needs are and how the bank's
products can satisfy them
sq_6 It informs me without errors for my
transactions
sq_7 If there is a problem, the bank is
willing to discuss it with me
sq_8 You do not have to visit your bank
many times to solve a particular
problem
sq_9 It is a bank that is worth trusting
sq_10 The bank offers a wide product
variety
sq_11 The bank offers flexible products that
meet my needs
sq_12 The new products that my bank offers
meet my needs
sq_13 The bank offers telephone services
sq_14 The loan interest rates of my bank are
higher than those of other banks
sq_15 The deposit interest rates of my bank
are lower than those of other banks
sq_16 I feel I pay a lot on commissions
charged
sq_17 There is a warm and friendly
atmosphere inside the bank
[ 189 ]
 Spiros P. Gounaris,
Vlassis Stathakopoulos and
Antreas D. Athanassopoulos
Antecedents to perceived
service quality: an exploratory
study in the banking industry
International Journal of Bank
Marketing
21/4 [2003] 168-190
Downloaded by AKDENIZ UNIVERSITY At 17:06 23 December 2014 (PT)
sq_18 Employees of the bank are well
dressed and appear neat
sq_19 The atmosphere inside the bank gives
you a positive impression for the
services it offers
sq_20 The interior design of the premises
facilitates the transactions
sq_21 The climate among the bank's
employees contributes to receiving
better service
sq_22 Employees of the bank have a friendly
behaviour
sq_23 The bank's branch is near your
workplace
sq_24 The bank's branch is near other state
buildings and other banks
sq_25 The bank's branch is near shopping
q_5_8_1 Get information from advertising
campaign (r)
q_5_9_1 You are better off checking
different banks
q_5_10_1 Check different banks results in
better bargains
Scale items concerning bank-specific
antecedents
q_5_24_1 Matches products with needs
q_5_26_1 Monitors bompetition
q_5_27_1 Growth is based on meeting
customer's needs
q_5_28_1 Offers financial products for
everyone (r)
q_5_22_1 Emphasis on customer
satisfaction

centres I usually visit q_5_23_1 Emphasis on communication with

the customer
Scale items concerning customer-specific q_5_25_1 Offers high quality service
antecedents q_5_29_1 Offers the best financial products
q_5_2_1 Recommended by my friends q_5_30_1 Departments are coordinated
q_5_3_1 Acquaintance with managers of q_5_31_1 Measures offered services quality
the bank q_5_32_1 Selects customers carefully
q_5_5_1 ``Family'' bank
(segmentation)
q_5_6_1 Personal relationships with
q_5_33_1 Customer's interests come first
managers of the bank
q_5_7_1 Check different banks before final Note: All are five-point scales ranging from 1
choice (``strongly disagree'') to 5 (``strongly agree'').

[ 190 ]
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