Literature Review

CHAPTER–2

LITERATURE REVIEW

2.1 Introduction:

In the past few decades, service quality has received a lot of attention from researchers and
practitioners because of its strong impact on business performance, customer satisfaction,
customer loyalty and retention. Service quality is usually understood as a measure of how
well the level of the delivered services matches customer’s expectations (Santos, 2003).
According to the definition of Gro¨nroos (1984) service quality is “the outcome of an
evaluation process, where the consumer compares his expectations with the service he
perceives he has received”. Furthermore, Parasuraman et al. (1988) defined service quality
as “the overall evaluation of a specific service firm that results from comparing that firm’s
performance with the customers’ general expectations of how firms in that industry should
perform”. Dr. H.S. Sandhu et al (2011), found out in their research that SERVQUAL
instrument cannot be applicable to the Indian life insurance sector and further research is
necessitated to comprehend the service quality within the Indian context in similar sectors.

Majority of the service provider deliver higher level of the services as a part of their
business strategy in order to position themselves ahead in the market competition. Most of
the Indian Banks perform the same function & therefore customers place service quality on
the top in their priority list while choosing a particular bank. Moreover, the banks carry
their business with public money & hence customer expects better service from the bank,
they choose. In such situation, customer select the bank based on the quality service
offered to him. Therefore, banks prosper or decline majorly depend on the quality service
offered to the customer and due to this reason majority of the banks in India have placed
service quality at the top of the list of business strategy.

In a view of the importance of the services and its impact on various variables of consumer
behavior, the literature review begins with overview of the concept of service quality,
customer satisfaction, loyalty, retention & committee. This literature review also provides
theoretical framework for this study and the research objectives to be formed.

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2.2 Service Quality:

2.2.1 Definition of service quality:

Since decades, service quality has been widely studied by many researchers but there is no
common consensus about the conceptualization of service quality. Different researchers
have focus on the different aspects of the service quality. The most common definition
among the researchers for service quality is that “service quality is the customer’s
perception of service excellence which means quality is defined by the customer’s
impression of the service provided” (Berry et al. 1988; Parasuraman et al. 1985). The main
assumption behind the definition of service quality is that customers build their perception
of service quality based on their past experiences of service performance and therefore the
customer’s perception decides service quality.

There are many other definition for the customer’s perception of the service quality.
Takeuchi and Quelch 1983 have studied that consumer’s attitudes or judgements are
resulting from comparisons by consumers of expectations of service with their perceptions
of actual service performance. (Berry et al. 1988; Gronroos 1982). Berry (1980), along
with Booms and Bitner (1981), argue that, due to the intangible nature of services,
customer use elements associated with the physical environment when evaluating service
quality. Managing the evidence and using the environmental psychology are often seen as
important marketing tools.

Levitt (1981) proposes that customers use appearances to make judgments about realities,
and less tangible a product the more powerful is the effect of packaging in judging that
product. Hostage (1975) for his part, believes that a service firm’s contact personnel
comprise the major determinant of service quality, while Lewis and Booms (1983) propose
that service quality resides in the ability of the service firm to satisfy its customer needs,
i.e. customer satisfaction. Lehtinen and Lehtinen (1982) have defined service quality in the
context of physical quality, interactive quality and corporate (image) quality. According to
them, Physical quality relates to the tangible aspects of the service. Interactive quality
deals with the interactive nature of services and refers to the two-way flow that occurs
between the customer and the service provider, or his/her representative, including both
automated and animated interactions. Corporate quality refers to the image attributed to a
service provider by its current and potential customers, as well as other publics. They also

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suggest that when compared with the other two quality dimensions, corporate quality
tended to be more stable over time. But the traditional approach for defining service
quality emphasizes that service quality perception is a comparison of consumer
expectations with actual performance (Gronroos 1984; Lewis and Booms 1983;
Parasuraman et al. 1985; Parasuraman et al. 1990). Madu and Madu (2002) defined the 15
dimensions of online service quality: performance, features, structure, aesthetics,
reliability, storage capacity, serviceability, security and system integrity, trust,
responsiveness, product/service differentiation and customization, Web store policies,
reputation, assurance, and empathy.

2.2.2 Characteristics of Service:

The most important and unique feature of services, is that services are processes, not
product. Another important characteristic is that service production & consumption takes
place at the same time and along with the service provider, consumers are also equally
involve in the service process. Due to these characteristics, service firm has no products,
but only interactive processes. The characteristics that differentiate services from
manufacturing in the context of quality have been illustrated by many researchers (Bitran
&Lojo, 1993; Parasuraman, et al., 1993 and Zeithaml, et al., 1996) as follows:

 Nature of Products - which are basically intangible in services including a tangible

action. Therefore customer satisfaction in services is not only influenced by objective
measures of performance but also influenced by intangible aspects during the service
performance.
 Heterogeneity - It creates another challenge for quality management in services,
because quality in service is not just ensuring conformity to standards, but taking into
account service diversity of customers while the service delivery is taking place. It
also take into account the behaviour and expectations of the customer being served
and the need to customize the service delivery accordingly.
 Simultaneity - It means most services are produced and consumed at the same time.
This represents a difficulty in quality management of services because it is not
usually possible to actively monitor all service deliveries that are taking place and the
service cannot be inspected before its consumption.
 Perishability - It refers to the fact that services cannot be saved, stored, resold, or
returned because they are performances. A seat on an airplane or in a restaurant, an

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hour of a lawyers time, a medical/academic advice or telephone line capacity cannot

be reclaimed and used or resold at a later time which is quite in contrast to goods
(Zeithaml,et.al , 1985).

Due to intangibility, heterogeneity, perishability and simultaneous production and

consumption, it has become very difficult to measure the quality of the service. Therefore,
quality is relative & subjective and depends upon perceptions & expectations of the
customers related to the service delivery.

Parasuraman, et.al. (1985) suggested that the criteria used by consumers that are important
in moulding their expectations and perceptions of delivered service fit ten dimensions:
tangibility, reliability, responsiveness, communication, credibility, security, competence,
courtesy; understanding/knowing the customer and access. Subsequent research, analysis
and testing by Parasuraman, et.al. (1988) have condensed these into five dimensions of
service quality:

1. Tangibility : physical facilities, equipment, appearance of personnel

2. Reliability : ability to perform the promised service dependably and
accurately
3. Responsiveness : willingness to help customers and provide prompt service
4. Assurance : knowledge and courtesy of employees and their ability to
convey trust and confidence
5. Empathy : caring individualized attention the company provides to its
customers

Above listed characteristics make service unique & special which has its own
measurements & concepts. Following table summarises the main difference between
services & products:

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TABLE 2.1 Difference between goods & services

Goods Services
Tangible Intangible
Homogenous Heterogeneous
Production and distribution separated from Production, distribution and consumption
Consumption simultaneous from consumption
Represents a thing Represents an activity or process
Core value produced in factory Core value produced in buyer-seller
Interactions
Customers do not normally participate in Customers participate in production process
the production process
Can be stored Cannot be stored
Transfer of ownership No transfer of ownership
Source: Gronroos (2000, p: 47)

2.3 Models of Service Quality:

Since a decade, many researchers have tried to develop various models on service quality
that act as a different construct from the product quality. The main objectives of the service
quality models is to describe factors affecting the service quality in the firm & find out the
solution of the service quality problem and also develop the framework for improving
service quality programs. (Ghobadian, Speller. and Jones, 1994).

2.3.1 Gronroos's Model

Gronroos (1984) developed the service quality model in order to understand how
customers perceive and assess service quality, and also to find out in what way service
quality can be influenced. The Gronroos's model is based on an assumption that perceived
service quality is the outcome of the consumer's comparison between his/her expectations
and perception (the outcome of the evaluation process). Apart from that, this model also
studies that the overall evaluation and perception of service quality highly depends on
three dimensions: technical quality, functional quality and image. The image dimension
answers two questions: what a customer gets from the service company and how a
customer gets this service. So, Gronroos's model tries to study what customers in a service
setting are looking for and how they evaluate it. As a result, the service provider will be
able to control, affect and manage the customer's evaluation in the desired direction
(Gronroos, 1989). Following figure illustrates the Gronroos model of perceiving service
quality.

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Expected
Perceived Perceived Service Quality

Traditional marketing
activities (advertising,
field selling, pricing);
and external influences Ima
by traditions, ideology ge
and word of mouth

What?
Technical How?
Functional
FIGURE
Quality 2.1 TheGronroos’s Model
Quality
Source: Gronroos (1984, p:
40)

In this model, perceived service quality is the results from three dimensions of quality;
technical, functional and image (Gronroos, 2000):

 Technical quality or outcome dimension: Technical quality means what the

consumer gets as a result of his/her interactions with a service firm. So, this
dimension represents the physical outcome of the service delivered to customers, e.
g. a room or a bed provided for a guest in a hotel.
 Functional quality or the process-related dimension: Functional quality shows
how the customer gets the service, and how he/she experiences the production and
consumption process, i. e. the way the outcome of the service is delivered to the
customer. So, this dimension focuses on employees' performance and their buyer-
seller interactions with customer, i. e. this dimension indicates the psychological

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aspect of the service delivered, e. g. the staff's behaviour in a bank, hotel or

restaurant.
 Image: This dimension implies the result of the customer's recognition and
perception of the technical and functional quality dimensions. Hence, the firm's
image, which represents one of the quality dimensions, will affect the customer's
perceived service quality. In addition to the technical and functional dimensions,
corporate image can be influenced by other variables such as price, external
communications, physical location, the appearance of the site and the competence
and behavior of service provider's employee(s) (Ghobadiane t al., 1994).

Kang and James (2004) support the Gronroos's model stating that this model provides a
wide illustration of service quality perception through including the main dimensions of
service quality. So, in other words, the technical quality dimension explains service quality
after the service is performed while the functional quality dimension explains service
quality during delivery of the service. Thus, such a model involves all dimensions of
service quality construct.

Finally as a part of the conclusion, it has been derived from the Gronroos’s model that
functional quality is the most important dimension of service quality followed by corporate
image dimension as it is more dependent on functional dimension and word-of-mouth
communication. And corporate image can compensate the problems in both temporary and
overall technical quality dimension.

2.3.2 Lehtinen and Lehtinen Model:

Lehtinen and Lehtinen (1991) proposed another model to give more details on how
customers perceive service quality. The researchers have proposed two approaches to
understand service quality: the first approach is three-dimensional and second is two-
dimensional. The first approach indicates three dimensions of service quality: (1) Physical
quality, (2) interactive quality, and (3) Corporate image.

Physical quality is further classified in two components: physical product components

which basically refer to the goods deliver during the interaction process like food in
restaurant & physical support components provide a framework where service can be
easily produced & deliver. Physical support components if further divided in two
categories in this model: the environment that comprised of physical layout of the service

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production firm and second category is instrument that includes tools required for
producing & delivering the services like black board & chock stick in education service.

Interactive quality is with reference to the interaction held between customer & service
personnel of the service firm. As per this model, service production can be done by service
provider (interactive person) or by physical equipment (interactive equipment).
Sometimes, interaction also takes place among the customers as well.

Corporate image refers to what current & potential customers perceive about the company.
This is the only dimension of the service quality which can created before consuming or
experiencing the service from any of the service organization. In addition to that, word-of-
mouth has a great influence on corporate image.

The second approach in Lehtinen and Lehtinen's model emphasizes on the service quality
process and its output. Process quality refers to the consumer’s experience of service
production process. Basically it assess the fit exists between the participation of the service
personnel & consumer. The degree participation gets differ from the service to service.
For example, there will be heavier participation of customer at ATM machine as compare
to hair salon.

Output quality deals with the customer’s evaluation of the service process. Evaluation of
service is very difficult on the part of the customer as well as service provider. Service
output is not only measured by the customer but also by any person around them and hence
output quality represents the overall result of the service process.

2.3.3 SERVQUAL Scale:

Parasuraman et al (1985; 1988) developed the SERVQUAL scale based on the gap model
and it was used as an instrument for measuring customers' perceptions of service quality.
Parasuraman et al have identified the ten dimensions of the service quality: reliability,
responsiveness, competence, access, courtesy, communication, credibility, security,
understanding (knowing the customers) and tangibles. These dimensions signify the key
factors or elements which can be used by customers to evaluate service quality.

Ten dimensions of SERVQUAL categorized into two groups of statement: the first group
of statements measures customer’s expectations about the firms and second group of
statements measures customer’s perception of service. Half of the statements are positively

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formed & half of the statements are negatively formed. Hence, ten dimensions are used as
foundation for developing the SERVQUAL scale.

Later, researchers of SERVQUAL found that some items in scale are overlapping &
convey the same meaning. Due to overlapping, researchers had refined and improved the
scale. Parasuraman et al (1988), had conducted various stages of data collection &
statistical analysis to refine the scale and final set of the service quality includes only five
dimensions; reliability, responsiveness tangibles, assurance and empathy
(Fitzsimmons and Fitzsimmons,2006).

According to the SERVQUAL scale, the outcome for each dimension of customers'
expectations and customers' perceptions are compared to estimate the gap in scores
between the two components. As a result of this comparison, a firm's level of service
quality assessment can be defined, e. g. the larger the gap, the lower the service quality
evaluation, whilst the lower the gap, the larger the evaluation (Hoffman and Bateson,
1997). To sum up, SERVQUAL scale shows the extent to which service performance in
each of the five dimensions of service quality meet the level of the performance customers
expect from the service firm.

The SERVQUAL instrument provides some applications and advantages as stated below
(Parasuraman et al., 1988; Coulthard, 2004):

1. Can be employed in different types of service companies.

2. Offers valuable information about customers' perception of service quality by

measuring them on the key dimensions of the service quality. Thus, the scale offers a
comprehensive framework of five service quality dimensions.

3. Can be used to follow trends in customers' assessment of service quality.

4. Offers an assessment of service quality for each dimension and also an overall
assessment. Apart from that the scale depicts the relative importance of the five
dimensions.

5. It also allows a firm to categorize customers into various segments, as per their
individual degrees of perceiving service quality.

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Parasuraman et al (1985; 1988) argue that the five dimensions used in the SERVQUAL
scale represent and provide generic instrument and dimensions for measuring service
quality in a variety range of services. Over the past years, the SERVQUAL instrument has
been used widely and extensively for measuring service quality in different contexts and
industries like banking, healthcare, hotels, restaurants retail chains, communication, real
estate, higher education, etc. In addition to that, the SERVQUAL instrument has been used
widely in several cultures and countries including: the USA, UK, China, Honk Kong,
Greece, and so many other countries. The SERVQUAL scale has been imitated and
appreciated well in the service quality literature in the last decades by academics,
researchers and industry people (Buttle, 1996).

2.3.4 SERVPERF Scale:

This scale was established by Cronin and Taylor (1992) to measure service quality as an
alternative approach for measuring this construct. According to the method of measuring
service quality, a performance-based measure of service quality is more valid and reliable
method to measure service quality. Therefore, the SERVPERF scale was developed that
measures only the performance perceptions data. Main assumption of this scale is that
measuring the respondents' expectations is not essential.

In their research, Cronin & Taylor (1992) proved that SERVQUAL is not an adequate
approach for measuring service quality by proposing SERVPERF. In order to act in
response to Parasuraman et al's (1994) criticisms of SERVPERF, Cronin and Taylor (1994)
had reconfirmed the adequacy of the SERVPERF scale for measuring and conceptualizing
service quality after doing another pragmatic study. Brady et al (2002) had adopted the
SERVPERF scale & confirmed the superiority of the scale as more appropriate instrument
for measuring the service quality.

Discussion was carried out among many researchers about whether SERVPERF will
outperform SERVQUAL for measuring service quality or vice versa. To end the
discussion, Carrillat et al (2007) presented result of rigorous meta-analysis study using 17
years of empirical service quality studies. The result signifies the validity of both the scales
for measuring the service quality. Moreover, researchers found that SERVPERF is stronger
than SERVQUAL for service quality measuring with highest correlation coefficient.
Findings of the study also implies that some modification to the extent of the study will

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increase predictive power of SERVQUAL wherein no changes are required in

SERVPERF. But overall, research proves that both the scales (SERVQUAL &
SERVPERF) are very popular, valid & reliable for measuring service quality.

2.4 Service Quality in Banks:

Koushiki (2013) studied that service quality has strong impact on customer’s purchase
intention. The research was conducted in Indian Banking Sector. It has been found out that
reliability is the most important factor of the service quality followed by employee
behavior, tangibles and convenience. The same author has conducted research in 2014 in
order to study how the different dimension of service quality influence the customer’s
word – of – mouth. The findings of the study revealed four dimensions of service quality in
retail banking, namely, attitude, competence, tangibles and convenience and showed that
the service quality factor attitude is most important in influencing WOM.

According to ShirshenduGanguli, Sanjit Kumar Roy, (2011), four dimensions of service

quality has been identified that has significant impact on customer satisfaction and loyalty.
These dimensions are customer service, technology security and information quality,
technology convenience, and technology usage easiness and reliability.

Anand Sharma et al (2014) found in his study that Customer loyalty is very significant in
creating and retaining competitive advantage in the service industry specifically in sectors
like banking industry in India. This realization has made industry researchers and
academics to pay more and more attention to studyservice quality dimensions and their
impact on customer satisfaction and loyalty. It has also been further discussed in the paper
that, there is an impact of service quality on customer satisfaction and loyalty in public and
private sector banks.

V. Surekha et al (2015) discussed in their paper that a small perceptual difference exists
among the customers regarding overall service quality in public and private sector banks.
The respondents of the public and private sector banks mostly concentrate on the staffs of
the banks for improving customer satisfaction. If banks want to sustain customers on a
long term basis, bankers should work towards 100% customer satisfaction that
automatically foster customer delight.

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Abdel Fattah Mahmoud Al-Azzam (2015) confirmed interrelationships among service

quality and customer satisfaction in the retail banking sector. It has been indicated in his
paper that tangibility has a positive influence on customer satisfaction. This can be
explicated by customer significance of tangible variables in terms of physical facilities,
equipment and staff performance. Customers can evaluate bank facilities, design,
sufficiency, vision equipment, and the appearance of workers in the bank. Finally, he
concluded that service quality has a significant influence on customer satisfaction.

2.5 Customer Satisfaction:

In today’s era, the change has observed in the market from manufacture based market to
customer based market. Customers have become valuable asset for the company for which
they compete in the market. Customer’s expectation about the products or services has
direct impact on their satisfaction and hence it is very important for an organization to have
knowledge about the customer satisfaction that will help them to improve their quality of
the services offered to the customers. (Chen, 2004).

2.5.1 Definitions of Customer Satisfaction:

As per the previous research, degree of the satisfaction differs from the customer to
customer as per their likeness, expectation, perception or motivation from the particular
product or services. Reichheld, and Sasser (1990) researched 14 businesses and found that
if a business reduces 5% of the customer loss, it will improve 25 – 95% of the income.
Muller (1991) researched that customer satisfaction will become the future key to success
because customer satisfaction directly influences their loyalty & re-purchase decision.
Customer satisfaction is an indicator that customers have used the product or consumed the
services. Following is the definition of the customer satisfaction.

Kotler (1991) defined the customer satisfaction as a customer perception that compares
their pre-purchase expectation with post-purchase perception. According to Oliver (1981),
customer satisfaction is the evaluation a customer makes to a certain exchange, which
reflects the relation of the customer expectation and their real perception to products or the
services they receive. Expectation is the short-term prediction. Customer satisfaction is the
reflection of the service quality. It comes when the customer satisfaction occurs when the
two are equal, or the latter exceed the former (Cronin & Taylor, 1992; Kotler, 1991).
Customer satisfaction is greatly affected by the quality of the product or services.

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As per the definition of Oliver, 1997 &Zeithaml&Bitner 2000, Customer satisfaction is the
customer’s evaluation of services after purchase as oppose to their expectation. Anderson,
Fornell& Lehmann (1994) mentioned that customer satisfaction is the overall experience
customers have when purchasing & consuming the services. It is accumulative perception
that will influence product quality, service quality & customer re-purchase decisions.
Customer satisfaction & service quality are directly related to each other. Improving
service quality leads to the improvement in customer satisfaction. (Zeithaml&Bitner 1996).

According to the definition of Baker & Crompton (2000), satisfaction is the personal
experience and mentality related the nitration between personal expectation & actual
receive. Ostrom&Iacobuci (1995) mentioned “Satisfaction is the subjective opinion. It is
the benefit that customer get from purchasing products or services.” It is basically
reflection customers make to their previous purchase. If is always exceeds their
expectation their loyalty increases. It provides value to the business.

Satisfaction is a psychological reflection. Satisfaction directly has influence on customer’s

post purchase behavior such as praising, complaining, increasing / decreasing loyalty,
attitude & brand switching.

2.5.2 Measuring Customer Satisfaction:

Caedozo (1965) suggested that using overall measurement to record customer’s response
to different attribute of products & services. As per the research of the Day (1977),
customer satisfaction can be measured by studying the individual part of the services to
learn customer’s real feelings and then add them together to get overall evaluation. Bitner
(1990) said service is intangible & different from product. To measure customer
satisfaction in case of services, he had introduced physical aspect, process management &
personnel to the 4P of marketing mix.

Churchill (1982) summarized the following four concepts:

1. Customer Expectation: Benefits customers expect before purchasing products or

services. It is the expected quality of products or services.
2. Product / Service Quality: Customer’s evaluation after purchase. It is compared
with customer expectation.

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3. Disparity: The differences of customer expectation and service quality. The

difference will influence the evaluation customers give to the services.
4. Customer satisfaction: when customer expectation equals service / product quality
or vice versa.

Kuo (1999) recognized seven factors influencing customer satisfaction: service, content,
price, convenience, corporate image, equipment, staff and procedure. Huang (1998)
identified five factors influencing customer satisfaction: product, service, staff, overall
performance of the products and closeness to the expectations. Customer satisfaction
basically reflects customer attitude which is not quantified and objective in manner.
Various rating scales are used by many researchers to measure customer satisfaction.
Rating scale methods are as follows:

1. Simple satisfaction scale: From 7 – 1, this scale rates customer satisfaction from
Completely satisfied, Very satisfied, to a Little satisfied 7 Not Satisfied.
2. Mixed Scale: From 7 – 1, this scales rates customer satisfaction from Very
Satisfied to Not satisfied wherein very satisfied & not satisfied are at opposite end
of the scale.
3. Expectation Scale: This scale basically measures the service quality. Measurement
standards are the difference between customer expectation & perception to the real
service received by the customer.
4. Attitude Scale: This scale is use for measuring customer attitude & feelings towards
the services. Rating ranges from 1 – 3 or 5 – 7 from Like, Very much like to Do not
like and dislike very much. Higher the customer rate more satisfied they are.
5. Emotion Scale: This scale measures customer’s emotion towards service. Positive
emotion is result of customer satisfaction & negative shows dissatisfaction.

Yau and his colleagues (2000) developed and validated a measurement of Relationship
Marketing Orientation (RMO) scale & had defined it as “The RMO centers on the creation
and maintenance of relationship between two parties of exchange, the supplier as an
individual and the customer as an individual through the possession of the desire to be
mutually empathic, reciprocal, trusting, and to form bonds.” This scale is basically having
six dimensions: Trust, Bonding, Reciprocity, Empathy, Communication and shared value.

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Customer satisfaction and purchasing behavior can be described as a cycle. Customer’s

post – purchase perception to product or service have direct influence on their re-purchase
intentions that results in positive word-of-mouth & influencing other people as well.
Service industry faces more difficulty as compare to manufacturing sector in measuring
customer satisfaction & hence service industry more effective system to be design for
assessing customer satisfaction which will help the service firms for improving the quality
of the services offered to the customers.

Customer satisfaction is the degree of the happiness customers have towards the products
or service & it also shows the probability of repurchase intentions. Satisfaction is the
outcome of the comparison between the expectation & actual experience. Organizations
should always try to identify the reasons why customers are not satisfied; it should be
discussed addressed promptly because old customers bring new customers. Unsatisfied
customers will quit & also take potential customers with them.

Every research studies the relationship of the different items with the satisfaction level &
determines the sequence for improvement. The following is a ranking system provided by
Japanese Efficiency Association 1994;

1. Excellent Items: Items have a strong effect on satisfaction. Customers are very
satisfied with them.
2. Problematic Items: Items have strong effect on satisfaction. Currently, customers are
not very satisfied with them.
3. Questionable Items: Items do not have a strong effect on satisfaction and customers
are not very satisfied with them.
4. Mediocre Items: Items that do not have a strong effect on satisfaction and customers
are highly satisfied with them. They do not need any change at present time.

Because of the unique nature of the services, it is very much important to study customer
satisfaction separately in service industry. Whether customer is getting what they are
expecting or are they being underdeliver? According to the Zahorik, Rust (1992), service
fails because of the gap between expectation & perfromance of the services on any of the
five dimensions: tangibles, reliability, responsiveness, assurance or empathy that will
ultimately result in customer dissactisfaction & in order to avoid customer dissatisfaction,

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management ought to identify customer’s needs & desire in order to design service to serve
them.

Further researchers opined that Satisfaction has long been recognized as an important
model of customer reactions to the service design often incorporate it as a variable. Are
customer’s complain being properly addressed? It has also been highlighted by the
researcher that how customers’ who complain may have more loyalty than those who don’t
and customers whose complain have been successfully remedied may be more loyal still.

In late 1980’s, it was believed that to focus on service quality as toll for increasing or
maintaing market share was not a priority. These belief are not held in high esteem today.
Parasuraman, Zeithaml & Berry (1988), stated that customer satisfaction is directyl linked
with profits & lowering customer defection rate can be profitable to the company & infact
it is more profitable than gaining market share or lowering costs. In addition to this,
researchers also added that the longativity of customer’s relationship favorably influences
profitability. Customers who remain with the firm for periods of years because they are
pleased with the service & more likely to buy additional services & spread positive word-
of-mouth than short term customers.

In fact author says that these long term relationship also provide price insulation allowing
the service provider to charge higher prices and the customer willing to pay those increased
prices to maintain the relationship and obtain the value they believe they are receivening.

But how satisfied customers have to be lift up service provider to this level? Zeithaml,
Berry & Parasuraman (1995) continue in their research that thresholds of the service
appear to affect the consumer behavior. When satisfaction rose above the a certain
threshold, repurchase loyalty climbed rapidly. In contrast, when satisfaction fell below a
threshold, customer loyalty declined with equaly rapidly. So the research continues to
suggest that a positive service experience does affect customer satisfaction & subsequently
retention.

Anderson, Fornell and Rust (1997) examined that what had to surrendered to atain desired
threshold further researchers explained that the firm wants to achieve superior level of the
customer satisfaction needs to devote resources for handling return, rework, warranties &
complaint management & thus by doing so, firm can lower down the costs & improve

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productivity. Further authors stated that reducing defects leads to greater productivity,
favorable word-of-mouth & price premium.

Andreassen (2001) states that whether superior service recovery efforts leads greater
satisfaction than if nothing had gone wrong. He further explored whether this phenomenon
would turn an indifferent customer to satisfied customer or not and findings of the showed
that customers who had gone through the service recovery phase were no different than
ordinary satisfied customers.

In a research carried out by Zemke in 2002, it was found out that today’s consumers are
savvier than the consumers of past & harder to satisfy. Poor customer service directly
affects satisfaction which in turn affects customer retention. Today’s customers are more
educated & informed. The new customer is more sensitive to disparities in service.

According to the Jones, Taylor, Becherer and Halstead (2003), customers who understand
the service instruction are more satisfied & less likely to switch. This research has
emphasis more on expectations & the role those expectation plays in satisfaction.
Reserachers further add that When expectations are met or exceeded, customers report
higher level of satisfaction. Therefore it is very important step for a service firm in
managing customer satisfaction is creating relaistic expectations. Literature also suggests
that thorough knowledge of use of service will enahnce the knowledge & benefit of the
service and lead to greater satisfaction & reduce switching behavior. Additionally, this
satisfaction lead to advocay through positive word of mouth.

Ranaweera and Prabhu (2003), write that The more satisfied customers are, greater the
retention rate, positive word-of-mouth, & financial benefits to the firm. Mere satisfaction is
not enough. In their research, researchers found out that, there are varying degree of
customer satisfaction & trust is one important key determinant that is having direct impact
on customer satisfaction. Customer satisfaction is also found to be stronger drive of
customer retention. Further authors investigated, importance of service recovery after
service failure & stated that customers are ready to accept apology & compensation offered
by the service provider as a part of service recovery process.

Jones & Farquhar (2003), researcherd on banking industry & acknowledge that perception
of service quality & customer satisfaction have influence on customer loyalty. Service
personnels play key role in customer satisfaction as banking industry is known for having

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passel of less than satisfied customers due to the hassel of switching to another bank.
Moreover, customer loyalty is also heavily influenced by services offered by the service
personnels of organization. Authors also mention the strong possibility of customer who is
dissatisfied with service they are receiving as being more susceptible to the competition.

Fecikova (2004), states that there are two type of customers, internal (employees) and
external (market place). Quality springs from a satisfied work force. Altenatively,
employee turnover can be traced external customer dissatisfaction due to poor work
product from the disgruntled staff. Customer satisfaction is ultimately reflected by both
internal & external customers simultaneously.

2.6 Customer Satisfaction in Banks:

Vinita Kaura (2013) has studied the effect of service quality on customer satisfaction in
India Public & Private Sector Bank. Three dimensions of the service quality were
discussed in the paper. Dimensions of service quality are employee behavior, tangibility
and information technology. Dimensions of service convenience are decision convenience,
access convenience, transaction convenience, benefit convenience and post‐benefit
convenience. For public sector banks, except tangibility, all antecedents have positive
impact on customer satisfaction. For private sector banks except tangibility and benefit
convenience all antecedents have positive impact on customer satisfaction.

Vinita et al (2014), examined in their study that the extent to which service quality,
perceived price fairness and service convenience (antecedents of customer satisfaction)
influence customer satisfaction for Indian retail banking sector. Dimensions of service
quality are human behaviour, tangibility and information technology. Dimensions of
service convenience are decision convenience, access convenience, transaction
convenience, benefit convenience and post-benefit convenience. Results indicate that
except tangibility, all antecedents of customer satisfaction have positive impact on
customer satisfaction. Human behaviour contributes maximum in explaining customer
satisfaction. This study highlights the importance of service quality, service convenience
and price in satisfying customers.

Kingshuk&Mounita (2014) stated in their study that Customer satisfaction increases the
existing customer loyalty, repurchase process, awareness of the people about the firm,
decrease the price flexibility, the cost of gaining new customers and prevent the customers

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being affected from competitive enterprise. With better understanding of customers'

perceptions, commercial banks can ascertain the actions required to meet the customers'
needs. Enhancing the customers‟ experience is now a crucial component of attracting new
customers and retaining the existing customers in order to grow and protect a profitable
business. Customer satisfaction with respect to service quality is an invaluable asset for the
modern organizations, providing unmatched competitive edge.

2.7 Customer Loyalty:

The early literature on loyalty conceptualized the term as a behavior of repeat purchasing
of a particular product/service over time. Churchill (1942) focused on the purchased
sequence in particular brands, while other researchers (e.g. Brody & Cunningham, 1968;
Cunningham, 1956) measured loyalty through the percentage of purchasing contributed to
a given service business; moreover, Farley (1964) stated on random measures like
probability of purchase. Most of the early studies suppose loyalty in terms of repeated
purchases of the same brand mostly.

The factors that measure loyalty are switching, recommendations, repurchase intentions,
and willingness to pay a price premium. (Anderson & Sullivan, 1993). This approach is
widely used but it is not enough to explore the complex pattern of repeat purchases.
Therefore Day (1969) proposed two category of customer loyalty one is the behavioral and
another is the attitudinal loyalty. He argued that the use of solely behavior-based loyalty
measures because these do not discriminate between true loyalty and temporary loyalty.
The important point is that these spuriously loyal buyers do not have any attachment to
brand attributes, and they can be immediately approached by another brand that provides a
better deal.

Jacoby (1971) investigates a conceptual definition of brand loyalty. He researched that the
significance of a conscious evaluation process, leading to loyal behavior, thereby
excluding random repeat purchase. Many researchers emphasised that true customer
loyalty also should include a positive attitude, and in a sense of commitment to the
organization. (Dick & Basu 1994; Ganesh et al. 2000); Oliver (1997) defined the loyalty of
the same commitment to keep re-buying behaviors of consumers preferred products /
services, these consumers do not have much negative impact of market changes.

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Jones and Sasser (1995), said that there are long-term and short-term customer loyalty. A
long-term loyal customer has a long-term purchase, and will not easily change their choice,
and the short-term loyal customers will immediately change their minds when they have a
better choice of products or services. According to Weiss and Kurland (1997)‘s research,
the length of relationship lead to the asymmetric investments in customers of different
sources, which adversely affected the direction of the relationship. They have further
questioned the issue that the effect of maintaining strong relationships between service
suppliers and customers, and the benefit of the relationship. Though customers & service
providers have long-term relationship but it must be based on balance between giving and
getting but people always tend to forget giving and favor getting.

Oliver (1997) believed that the customer loyalty means that customers may purchase the
product under the environmental impact or the marketing events prompt the transformation
that possibly hidden in customer behavior, but they would not change their commitment of
repeated purchase and further purchase intention with the preferred product/ service. Ha
(1998) showed that pressures and influences from the social environment explain the
consumer‘s pattern of repeated purchases to buy a specific brand. In fact, the social impact
is so mandatory that although the consumers may have a negative attitude towards a brand,
and she/he decides to buy it in order to avoid the criticism of the social environment

2.7.1 Categories of Customer Loyalty:

Gounaris & Stathakopoulos(2004) have categorized customer loyalty in the following four
categories:

Premium loyalty represents the highest level of loyalty since premium loyal consumers
have a favorable attitude towards the brand, they repeatedly purchase it and, also, they
have the approval of their social environment for doing so.

Inertia loyalty on the other hand is much weaker. Although it encompasses a pattern of
repeated purchases, it lacks both affectional and social reinforcement. Habitual or
convenience-seeking behavior can explain the pattern of repeated purchases.

Covetous loyalty is quite different from both premium and inertia loyalty in the sense that
it does not involve purchasing of the brand. However, covetous loyal consumers have
grown positive feelings and affection for the brand. The social environment reinforces this

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attitude. Such consumers are important for the company because of the income they
indirectly generate through influencing the choices of peers, relatives, and friends and so
on.

No loyalty is no purchase at all, and a complete lack of attachment to the brand. Also no
social influences to be even cognitively loyal to a brand.

Basically, the development of the concept of customer satisfaction is loyalty intentions,

which meansa willingness to repurchase a brand, which is the company primary concern.
Various researches have been carried out emphasising the benefits of the customer loyalty
to service provider.

As per the research of Xu et al. (2006), those benefits consist of (1) Positive word of
mouth; (2) Increases in the number of purchases; (3) Increases in the value of purchases.
Loyal customers can be very helpful to the service firms for improving service quality, as
they provide genuine feedback about the service quality & in a positive way.

A positive word of mouth is defined as informal communications and evaluations between

existing and potential customers regarding the products or services. It is the result of a
customer‘s view of the value received in a transaction or relationship and can be
understood as the customer‘s overall evaluation of the performance (Hennig-Thurau et al.,
2002). As personal communication is considered as a more reliable source than non-
personal information (Zeithaml & Bitner, 1996), word-of-mouth and oral communication
has strong impact on the future of consumer purchasing decisions. Especially in banking
industry, when the service involves high risk for the customers, word-of-mouth
communication could broaden the customer base for the bank (Hennig-Thurau et al.,
2002).

For the banking industry, Bowen and Chen (2001) mentioned that through providing
strong word-of-mouth, create business referrals, provide references, loyalty of customers
will help bank promote its market performance. These loyal customers will help the banks
in raising sales volume by purchasing broader categories of the bank‘s products or by
making frequent purchases. Some banks are only worried about meeting customers‘
expectations, in a high level of customers‘ satisfaction. These banks think that repurchase
will be increased if they satisfy customers‘ needs.

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However, Jones and Sasser (1995) had proven that customer repurchase does not
necessarily mean that customers are loyal. They might at any time defect and for different
reasons.

Shankar, Smith, & Rangaswamy, (2003) stated that loyalty and commitment strengthen
overall satisfaction and made customers to be tolerant to the disappointing experiences.
From a managerial perspective, it is very essenatial for management who is responsible for
customer retention programs need to provide information on the determinants of customer
loyalty. This is particularly important for managers to know for which customers could
rely heavily on satisfaction as a driver of loyalty. Bitner (1990) shows that satisfaction has
an mediated effect on loyalty by perceived service quality.

According to Jones and Sasser (1995), there were two types customers predominate:
loyalists and mercenaries. Loyalists are very satisfied customers who are willing to buy
back, while mercenaries are mild-satisfied customers who do not have a long-term
commitment and are continuously finding a better deal from another company.

In sum, maintaining customer loyalty in the long-term could be one of most important
strategies for service industry. Steyn (2000) said that, loyalty brings growth in customer
base and generate benefits for an industry. Therefore how to develop the potential
customer value through maintaining higher quality of service and then loyalty of customers
is at the heart of most service industry.

2.7.2 Theoretical framework for the multi-item loyalty scale:

Oliver (1999) hypothesised that there are four phases in the development of customer
loyalty. Each phase has a number of characteristics or dimensions, that act as either
sustainers (attracting the customer to stay) or vulnerabilities (pulling the customer towards
a substitute). The following figure depicts characteristics of customer loyalty development,
there are two mediating factors, sustaining and vulnerability elements. The mediating
factors allow modelling of the continued influence of competitors, advertising, service
failure and other external influences that sustain or make an existing customer’s loyalty
development vulnerable.

According to the author, as As customers progress through the phases of loyalty

development, the sustainers and vulnerability elements change to reflect the degree of

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involvement. The theory is that once a customer has found a product or service that he or
she enjoys (meeting with expectations of cost, quality and benefits), and continues to use,
he or she becomes less concerned with seeking alternatives and does not respond to
advertising or competitive threats (Oliver, 1999).

FIGURE 2.2 Customer Loyalty Scale

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2.7.3 Customer Loyalty In Banks:

Rizwan et al (2014) indicated in their paper that service quality, trust and reputation are
positively influences customer’s loyalty. The impact of service quality on customer loyalty
stalks from positive relations between service quality and factors such as reputation and
trust. Improvement in service quality leads to the increase in customer loyalty. Authors
further added that service quality should be given more importance while formulating
strategies for developing customer loyalty.

Sayed and Abdul (2014) researched in their paper that, perceived value and service quality
is important determinants to create the customer satisfaction and trust. The strong positive
correlation of customer satisfaction and customer loyalty means that the bank customers
will recommend the bank to other people. There is a direct relationship between overall
service quality and satisfaction response, the banks should not overlook the importance of
quality, whenever the quality improvement efforts are oriented to meet the
customers’needs.

2.8 Customer Retention:

Reichheld& Sasser (1990) stated that, longer the firm retains the customer, more profit
customer generates. Authors also claimed that higher the retention rates leads to higher net
present value of the customers. This is a result of various factors like effects of the higher
cost of attracting new customers, increased cost of purchases over a period of time,
expanded number of purchases, positive word – of- mouth and mutual understanding
between customers & firm. According to Ahmad &Buttle (2002), Service firms must
improve customer service quality and satisfaction in order to retain customers. Authors
further advocated retention measurement and preventing customer disloyalty by analyzing
complaint and service data and identifying & creating deterrents to customer switching.

Reichheld& Sasser (1996), suggested that in order to succeed in retaining the customers,
firm should adopt the strategies like defining & measuring retention and seeking loyalty by
focusing on the quality of the service. Moreover, strategy should also include changing the
channel of distribution, reducing the number of undesirable customers through filtering,
offering the rewards to service personnel for retaining the customers, using coupons to
distinguish and reward the customer who re-purchase and designing the program to attract
& retain the valued customers.

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Appiah-Adu (1999) conducted research on increasing the effectiveness of the customer

retention. He recommended that service firms needs to investigate the length & depth of
the relationship through cross-selling. Higher customer retention leads to generate the
higher profits through higher sales, decreased cost for attracting new customers, satisfied
price-sensitive customer and decreasing the cost of customer service. According to the
author, 5% increase in customer retention increased the average customer value by 125%.

Customer retention is the important factor leads to increase profitability & revenue. Boles,
Barksdale & Johnson (1997), proposed that retaining customers is not only cheaper than
attracting the new one but it is also profitable for suppliers & buyers. Authors further
added that companies that retain high percentage of customers can improve their retention
& easily attract the new customers in future. Usually, increased customer retention is
usually associated with higher customer satisfaction. The Harrison company (2003),
defines the customer retention as engaging the customers in a fair and equitable marketing
promises that encourages consolidation and growth of customer relationships for lifetime
and provide the missing piece to the marketing puzzle – RETENTION.

Boles et al (1997) examined the effect of quality of salesperson’s relationship with a

customer on the likelihood of retaining the customer business. They hypnotized that
customer intentions & willingness to continue doing business with the current supplier are
associated with higher level of relationship quality. Research findings indicated that the
quality of salespeople impacts the attitudes and intentions of customers. Customers who
gave high score for their relationships with their sales representative were more likely to
remain customers.

Outstanding service quality leads to the customer retention. According to the research of
Zeithaml (1996), service quality leads to continuing profits, increased expense, payment of
cost and generation of referred customers. Further, author stated that certain behavior
signals that customers are falsifying commitments with the firm. Customers demonstrate
their favorable intentions such as admiring the company, conveying fondness, enhancing
purchasing volume, paying premium readily, making positive comments about the firm to
others and continue buying with the same firm.

Berry &Zeithaml (1988) found the positive and significant link between perceived service
quality of the customers & their intention to refer the firm to the others. Zeithaml (1996),

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proposed the list of particular indicator of the favorable behavioral intentions and these
indicators are making positive comments about the firm, recommending firm to the others,
paying price premium to the company and remaining loyal to the firm. On the contrary,
inferior service quality leads to unfavorable behavioral intentions that causes customers to
defect from the firms, leading to reduced expenditure, lost customers and increasing the
cost of acquiring the new customers. Author further noted that complaining is perceived as
a mixture of deconstructive responses that arise from discontent & forecast defection.

Tax & Brown (1988), classified complaining behavior into three category: voice responses,
private response (negative word-of-mouth communication) and third-party response
(taking lawful action). Tax & Brown (1998) noted that sometimes customers, who defect
from the firm without explanation later on spread negative word-of-mouth. The propensity
of customers to switch can affect the firm’s market share & profitability. In such situation,
firm needs to understand that customer switch to the competitors because of better or
higher service quality. Customer may only switch because of unsatisfactory service of the
company. It has also been proved in the research of Zeithaml (1996) that improve in
service quality can enhance favorable behavior intentions & reduce unfavorable intentions
amongst the customers.

Barnes &Howlett (1998) presented evidence that service quality is directly related to the
customer retention. Lassar, Manolis and Winsor (2000), explored & confirmed the impact
of service quality on customer satisfaction in banking industry. It is very essential for a
service firm to hire right people as they are the customer’s first impression of organization.
Having wrong people in the customer service can lead to lower sales & decrease in
customer retention. According to Gittell (2002), relationship between service providers &
customers are important for achieving high level of customer satisfaction and customer
retention.

Banking service provider has to understand the consumer and try to influence the
purchasing behavior of the customer. According to Moira (1997), many service providers
use three strategies to minimize the customer defection including discounts, enhanced
services & value added services. Service firms spend numerous resources to attract the
new customers rather than focusing on the retaining the existing one. According to
Pedersen &Nysveen (2001), found that loyal customers reduce marketing cost and raise
entry barriers to the market. Moreover, authors also opined that customers tend to remain

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with the current service provider when rating customer satisfaction to be very high.
Further it was reported that customer satisfaction & corporate revenue increases 1.3% &
5% respectively, for every 5% increase in employee satisfaction.

Bowen et. al (2001) found that customer satisfaction was significantly related to the
employee satisfaction variables of working climates, colleagues, atmosphere & access to
timely information. As a result, increased satisfaction within the employees of the service
providers can lead to improve service quality, customer satisfaction & retention. Strauss
and Mang (1999) found that cultural differences play significant role in service evaluation.
Researchers have measure the customer evaluation of service provider based on five
dimensions: mutual understanding, provision of extra attention, perceived authenticity in
interaction, competence of service provider and meeting the customer expectation.

Operational environment of the bank have two areas, back-stage and front stage. Back-
stage emphasize on efficiency essential for operations not directly observed by the
customers. Front-stage operations consist of the responsibilities & actions occur at the
moment of truth or when customers directly interact with service staff. Technology-
orientation promotes back-stage activities and people-orientation promotes front-stage
operations. Therefore, banking service business is partly carried out by technology but
mostly through the people.

According to Yavas&Yasin (2001), back-stage operation directly do not affect customer

satisfaction unless & until employees are familiar with the system &/or service. Customer
satisfaction can only being achieved by handling them in a friendly manner. Loyal
customers in banking are defined as those who will stay with the same bank, are likely to
try new products of their bank and willingly recommend their banking service to others.
Thus, customer loyalty is the connection to a company’s products or services above &
beyond that of the competitors in the market place.

In today’s competitive environment, the major challenge in front of the bank is to gain the
new customers & retaining the existing profitable customers. The banking industry is
basically an establishment that involved in admitting demand & other deposits and making
commercial, industrial and customer loans. Currently, banking is one of the key service
industries where customer satisfaction research has increased its importance. The main
reason behind this is growing level of competition. Lassar et al (2000)’s research supported

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that the banking industry offered a proper setting for comparing models of service quality.
The increased competition has led banking industry to focus on customer satisfaction &
customer retention through improved service quality.

Prior research on bank service provider and customers found that service provider’s morale
is strongly related to the customer satisfaction, customer retention and customer loyalty;
that is when bank customers perceive the front-line service providers to be happy with their
work, these customers are more likely to be satisfied and retain with the bank as per the
research of the Allred (2001). Moreover, author also suggested that in order to maximize
the customer retention in banking, service providers need to pay close attention to the
customer needs & quality of services.

According to Moira (1997), service provider & customer perceptions of service quality are
relevant to the customer retention rates. Author studied two large branches of retail banks.
One retail bank had a higher customer retention rate of 75% and the second had lower
customer retention rate of 60%. The rates were computed by separating all inactive
accounts & including current account holders. Both the banks had similar geographic
locations, size, number of employees and socio-economic profile of customers but the big
difference between these two banks are of the customer retention rate. The research had
identified that customer- employee correlation & practices for conveying service to the
customers are the major reason of having higher retention rate of the customer in one retail
bank.

2.8.1 Customer Retention in Banks:

Muhammed S. Alnsour (2013) discussed the important drivers of relational strategies in

banks: trust, satisfaction, loyalty, commitment, closeness, communication, transparency,
confidentiality, privacy, culture, customer acquisition, and reputation. Strategies proposed
by the researchers in this paper to achieve customer retention include loyalty scheme
programmes, developing product and service quality, continuous contact and two-way
communication, developing the internal customers (human resources) through emphasizing
the important role of internal marketing, and benchmarking with other banks to stay
competitive.

Msoka&Msoka (2014) stated that improve service quality enhance the customer retention
and quality of the service product has significant influence on customer satisfaction. Major

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indicators of customer retention discussed in the paper are staff kindness, adequate and
timely information, complaints handling and better prices of banks products and services.

Emmah et al (2015) stipulate in their study that Retaining customers is key in giving a
competitive edge in the banking industry. Banks must identify factors that they need to
improve on so as to increase customer retention.Banks need to come up with ways of
rewarding the sales force for retaining customers. Organizations should endeavor to create
value for their customers. For the banks to gain a sustainable competitive advantage, bank
need to extend the quality of their services beyond the core services.

2.9 Customer Commitment:

The famous motivation theory which proposed by Maslow (1943) is the satisfaction of
needs that the origins of the conceptualization of commitment. This paper explores the
meaning of commitment in banking services with particular reference to the relationship of
bank staff vs. their clients and the relationship of bank staff vs. organization. Commitment
has also been closely related to the need for social belonging.

Garbarino& Johnson (1999) have emphasized that commitment is an important component

of successful relationship because it gives rise to mediate behaviors. It will help build a
long-term relationship between the service parties. Commitment is effective to influence
investors‘ decisions that seek to establish and maintain long-term, mutually beneficial
relationships.

Beatty, Homer and Kahle (1988) conducted a research on the distinct constructs of
commitment, in order to state that commitment in the buyer-seller relationship, directly
generate loyalty among customers. In this research, authors had proposed three different
types of commitment, that is, affective commitment, calculative commitment and
normative commitment.

2.9.1 Affective commitment:

According to Allen & Meyer (1990), affective commitment can be defined as a party‘s
willingness to maintain certain relationship. Instead of utility benefit, people choose to
maintain such relationship out of the own sake of this relationship (e.g. the pleasure or the
sense of belonging derived from such relationship). Further authors described that affective

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commitment is the relative strength of an individual’s identification with and involvement

in a particular organization. Moreover, authors said that since affective commitment is
linked with productive behavior aimed at contributing meaningfully to the organization, it
is often seen as the most valuable part for building commitment for an organization.
Moreover, Jaros, Jermier, Koehler, &Sincich (1993) referred affective dimension as a bond
to an organization as an affective attachment that includes feelings like: affection, warmth,
belongingness, loyalty, fondness, pleasure, and so on.

2.9.2 Calculative or continuance commitment:

Unlike affective commitment, the reason of calculative or continuance commitment is the

review of switching costs of leaving the original counterpart in a relationship. If the
calculation of costs and benefits of available alternatives or substitutes of previous choice
show the higher gains for customer, then they have the higher possibility to maintain a
relationship (Allen and Meyer, 1990). This implies that customers will calculate the benefit
of stay and deduct the cost of leaving, if the result is plus, then the customers will stay in
the original choice as probably. Finally, according to the researcher’s continuance
commitment involves profit associated with continued participation and a ‘cost’ associated
with leaving.

Meyer and Allen,(1990) have extended continuance commitment to further two

dimensions: high sacrifice and low alternatives. The high sacrifice means the personal cost
of discarding and losing an investment in an organization, and the low alternatives means
there are few existing alternatives feasible for the personal individual.

2.9.3 Normative commitment:

Normative commitment is referred as the moral obligation generated from a relationship

(Allen and Meyer, 1990). Authors further defined normative commitment as the
internalized normative pressure to act in a way, which meets organizational goals and
interests. This has been studied extensively & referred as emotional bond between an
employer and employee. In another word, it can be described as the degree to which an
individual feels psychologically attached to an employing firm through internalization of
its goals, values and missions.

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Allen and Meyer (1990) have explained three different dimensions of commitment:
Affective commitment (desire), moral commitment (perceived obligation) and technical-
economical commitment (perceived cost-benefit). Meyer and Herscovitch (2001) defined
the difference between the moral and affective dimensions of commitment as the moral
commitment being in the rational moral perception and affective commitment as being in
the sphere of desire and feelings. For human behaviors, judgments and feelings can be seen
differently, but still linked together as they are human behaviors that cannot be separated
and only distinguished as mind-sets constructs.

Another aspect of commitment is the focus (or foci) of commitment. Foci of commitment
are the individuals or groups to whom a person is attached (Reichers 1985). People could
be attached to organizations, unions or occupations (entities)-Attitudinal commitment or to
some courses of action (e.g. continuing membership, goals or policies) -Behavioral
commitment conclusively, commitment is described including both aspects (Meyer and
Allen, 1990).

An organization is comprised of various components such as the profession, managers,

work groups and customers. Each component has unique role to play role and keeps its
own goals. If the customers do not receive good service quality from employees than the
commitment of employee towards organization cannot bring benefit for the organization.
Therefore, dual foci of commitment’ is necessary to be emphasized on, added the customer
commitment in the employee commitment (Reichers (1985). According to the research of
Bremmels (1995) and Becker&Billing (1993), Dual foci of commitment’ could be referred
as a distinctive construct, keeping stronger power in explaining commitment than the
single foci construct. In addition, a Dual focus of commitment has important implications
for the relationship between an employee and customer. For example, if an employee is
committed to the organization but not the customer, then the stuff may serve customer just
out of organizational rules, and eventually impact negatively on the service quality
perceived by the customer. Therefore author emphasized that employee commitment is
negatively related to the customer perceptions of service quality.

In this study, role of organizational commitment is also been examined because in service
industry, service personnel plays very important role in providing good quality service to
the customers as they are the one who are in the direct contact with the customers &
actively involved in the service delivery process. Meyer and Herscovitch (2001) present a

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definition of commitment in the workplace basically, it is a force that binds an individual

to a course of action of relevance to one or more aims. According to Porter, Steers,
Mowday&boulian research (1974), organizational commitment was defined as an
individual‘s (1) belief in and acceptance of organizational goals and values, (2) willingness
to exert effort toward organizational goal accomplishment, and (3) strong desire to
maintain organizational membership. Morrow (1983) is of an opinion that definitions
should be limited to an employee‘s compliance (submit driven by reward and punishment),
identification (a desire for identify), and internalization (individual value compact with
organizational goal and value). So, Reichers (1985) stated that organizational commitment
should be viewed as a union of various groups and, therefore, organizational commitment
can be accurately understood as a collection of multiple commitments to various groups
that comprise the organization.

Meyer and Allen (1997) have proposed three main antecedent groups of commitment:
(1) Organizational variables, such as the nature of a job, job design, human resource
policies, communication and participation policies, or manager behaviors.
(2) Personal variables, such as age, gender, tenure, job expectations, job values, kinship
responsibilities, affectivity and motivation toward work.
(3) Environmental variables like job opportunities.

It is necessary to examine the reason why customer choose particular service provider. As
per the commitment theory of relationship marketing the reason for successful relationship
development with a particular service firm is due to the commitment and trust so, building
commitment amongst to customer for a bank is very essential for establishing long-term
relationship. As per the research of Morgan and Hunt (1994), organization needs to
promote commitment in order to develop a cooperative network of customer relationships.
Moreover, authors recommend that market relationships are described as the power of one
partner over another. They suggest that since members in a relationship are compelled to
do and they want to do so. The coercive power of commitment gives fulfillment between
partners.

According to Bessant (2005), banking sector is now a fast growing industry with its GDP
in UK generating twice more than before. The origin of professions is that of groups of
people that are joined together to practice their occupation with training that is specifically
designed to them under the rigorous ethical and knowledge standard basis. Hence, the

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result of relationships is being based on implicit commitments between the two parties. It
has also been notices that the banking professionals service firms are increasingly being
noticed as excellent examples of relationships where the two parties show the relationship
between commitment and trust evidently.

Sheth and Sobel (2000), describe the attributes of successful banking professionals as: The
two foundational attributes for any banking professional who aspires to serve clients are
selfless independence and empathy - they (successful banking professionals) are dedicated,
loyal and focus on their client’s agenda, not their own.

Maister (1997) stated that there are not many research conducted into commitment within
the banking profession but he provides some insights about the attributes of a successful
banking professional. The emphasis is on the importance of values and passion for client
assistance. Client is the judge of banking professionalism. As per the researcher, banking
professionals should possess the intentions such as:

Successful (banking professional) firms are clearly differentiated by a strict adherence to

values, i.e. to banking professionalism…New business will be won only to the extent that
the client believes that the banking professional is interested, cares and is trying to help…
Believe passionately in what you do, and never knowingly compromise your standards and
values. Act like a true banking professional, aiming for true excellence, and the money will
follow.

Potentially banking staff is a great example of commitment amongst the professions

because of the nature of banking service. Banking services have very specific obligations
to be fulfilled by the banking staff with competence of duties and care. Thus banking
services usually requires the banking staff to learn and acquire knowledge of their clients
& competence to offer them best service over & above the industry define standards.

Before summing the review of literature on commitment, it is very essential to discuss the
nature of commitment in service industry. Porter et al. (1974) described the important
distinction between attitudinal and behavioral commitment as:

Attitudinal commitment emphasized on the processes by which people think about their
relationship with the organization … behavioral commitment, on the other hand, relates to

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 Literature Review

the process by which individuals’ become locked into a certain organization and how they
deal with the problem.

The concept of service profit chain is proposed by Heskett, Jones, Sasser and Schlesinger
(1994) the constructs that connects the models – management practice, employee attitude,
customer behavior and business performance together but this model does not involve the
commitment behavior as a construct. However, it suggests that employee productivity
decreases costs and increased customer perceived value for service. Thus the connection
between customer satisfaction and retention is linked. This signifies the importance of
banking professionals as they have a great knowledge of their customers & they will be
able to provide a better customer service, in turn, the customers will be more satisfied with
the service, thus sends positive feedbacks back to the bank employees. This is rather
significant in terms of understanding commitment, as productivity and retention are crucial
factors related to commitment. The twenty-nine banking professional service firms sees the
link between the employees ‘commitments and financial performance.

Following five statuses explore the meaning of commitment in banking industry with
reference to the relationship between banking professionals and related clients:

Firstly, according to (Beaton and Beaton, 1995), the relationships between banking
professionals and their clients are often long-term, dedicated and participative. These key
points are often associated with high commitment relationships Thus a banking
professional tends to perform superb jobs for their clients with much commitment.

Secondly, banking professionals should have competences & knowledge that are strongly
demanded and the services delivered are usually intangible with high complexity.
Sometimes the customers also have enough knowledge to support their bank professionals
to perform the service delivery process. At the same time, sometimes the technology
quality is not easy to be identified by customers, the behavior of banking professional does
affect the customer‘s judgment for the value of service Hence the method of service by the
banking professional is utterly important. The commitment behavior of banking
professional helps to determine a client‘s perception of service quality (Freeman and Dart,
1993).

Third, the characteristics of these banking professionals and their organizations are
particularly related to examining commitment. For example, in partnership firm, equity

3
 Literature Review

partners provide a financial investment to the firm & become co-owner of the firm. In such
case, the partner needs to be stable and stays long-term in the organization, and sometimes
participates in strategic decision making. Thus making them more likely to be committed
to the organization.

Maister (1997) indicates the bank staff is becoming more committed to selected clients,
fulfilling many vital roles as a business partner and advisor. The strategic roles fulfilled by
advisors results in the client’s tendency to choose and remain with to build long-term
relationships with the banks. He further added that, there is also a continuous trend towards
specialization by banking professionals in particular domains such as specialist financial
service. Both banking staff and clients also invest time and mutual commitments especially
when large organizations need specific advices. According to (Wallace, 1995), Investments
added may result from the change in service delivery process. For example, banks invest in
computer systems linked to the client’ systems, and enabling them to produce and
exchange documentation that conforms to their client’s systems. This requires an
investment of resources to their client relationships.

Fifth, with little research carried on the commitment of the relationship between banking
professionals and clients, it is surprising to take into consideration that the rapid growth of
banking professional services within the economy (Frow, 2007). Work in this area has
largely focused on conflict of commitment between the relationships held by the banking
professional internally within the organization and externally within the profession
(Wallace, 1995). Thus additional research is essential for the examination of the process
that underlines successful relationships within banking professional services. (Frow, 2007).

As per Buttle& Burton (2002), there is a positive relationship between loyalty and
satisfaction; satisfaction and commitment (Fornell, 1992); commitment and retention
(Bolemer&Oderkerken-Schroder, 2003;), However, there has been no evidence for which
variables that will have greater impact of service quality.

2.10 Customer Commitment in Banks:

Mohd. Al Hawari (2011) stated in his paper that automated factors have a direct and
positive influence on customer delight, which in turn has a direct influence on both
customer trust and customer commitment. Further, he added that customer commitment is
a predictor of strong customer- bank relationship and ultimately helps in enhancing

3
 Literature Review

customer delight. This paper significantly shows the importance of automated service
quality in gaining customers' commitment in retail banking context.

Yu-TeTu et al (2014) stipulate in their research that committed customers have a more
positive impression of their relationship with the company and indicate strong intentions to
remain in the relationship. Customer commitment is a factor that also leads to the customer
loyalty.

RahmatMadjid (2015) stated in his paper that customer trust and commitment can provide
real of contributions on customer satisfaction. This means better customer trust and
commitment, the higher the customer satisfaction. Frequent bank visit is the most
important indicator of the customer commitment. Relationship quality and service quality
are antecedent of the customer commitment.

2.11 Summary of Literature Review:

TABLE 2.2 Summary

Sr.
Author Year Journal Title of the Paper Key Findings
No
Service Quality
1 Hostage 1975 Harvard Quality Control in Five dimensions of service
Business a Service Business quality discussed in this
Review paper.
2 Booms &Bitner 1981 Journal of Marketing This paper outlines the
Marketing Strategies and importance of the physical
Organisation cues in service deliverables.
Structures for
Services Firms
3 Gronroos, 1984 European A service quality Service quality model in the
Journal of model and its context of technical &
Marketing marketing functional quality discussed.
implications
4 Parasuraman, zeithaml& 1985 Journal of “A Conceptual GAP Model
berry Marketing Model of Service
Quality and Its
Implications for
Future Research,
5 Lehtinen and Lehtinen 1991 The Service Two Approaches Model developed in this
Industrial to Service Quality paper that emphasized
Journal Dimensions mainly on three dimensions
of service quality –
Physical; interactive &
corporate image
6 Zahorik& Rust 1992 Advances in Modeling the In this paper authors have
service impact of service discuss return on quality
marketing and quality on approach wherein they have
management profitability proposed that manager
should consider financial
impact of service quality

3
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
before spending heavily on
service quality.
7 Cronin & Taylor 1994 Journal of SERVPERF versus SERVPERF Model
Marketing SERVQUAL:
Reconciling
Performance-
Based and
Perceptions-
Minus-
Expectations
Measurement of
Service Quality
8 Zeithaml, Parasuraman, 1994 Journal of Alternative Scales In this paper, authors have
Berry Retailing for Measuring develop three column scale
Service Quality: A for measuring service
Comparative quality but practically it is
Assessment Based not more feasible use
on Psychometric alternative scale. The major
and Diagnostic finding of the study is that
Criteria there is considerable inter
dimensional overlap among
responsiveness, empathy &
assurance.
9 Zeithaml, Parasuraman, 1996 Journal of The Behavioural SERVQUAL Model & also
Berry Marketing Consequences of mention that service quality
Service Quality & customer satisfaction is
directly related to each
other.
10 Moira, C. 1997 Management Modeling the The relationship quality of
Decision impact of the employees with the
customer- customer helps firm for
employee developing good
relationship on relationship with the
customer retention customer for longer period
rates in a major of time. Commitment comes
UK retail bank out to be the strongest
dimension in thi.
11 Barnes &Howlett 1998 International Predictors of Research reveals that
Journal of equity in dimensions of service
Bank relationships quality affect customer
Marketing between financial retention but in financial
services providers services, it needs to be
and retail explored further.
customers
12 Gronroos, 2000 Book by John Service Difference between goods
Wiley & Sons, Management and & services discussed along
UK. Marketing: a with it, author has discussed
Customer characteristics of the
Relationship services in detail.
Management
Approach,
13 Yavas, U. &Yasin 2001 The Journal of Enhancing Service quality is the factor
Service organizational which plays important role
Marketing performance in in enhancing organizational
Banks: A performance. This paper
systematic demonstrate that service
approach quality enhance employee’s
productivity result in

3
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
responding promptly to
customer demands which in
turn reduce complaints and
improving customer
satisfaction.
14 Madu&Madu 2002 International Dimensions of e- This paper has found out
Journal of quality”, that other than the five
Quality & traditional dimension of
Reliability service quality, there are
Management few more aspects like
security, web policies,
system integrity should also
be incorporated while
measuring service quality.
15 Rizal Ahmad, Francis 2002 Marketing Customer retention Authors have confirmed that
Buttle, Intelligence & management: a relationship marketing in
Planning reflection of theory the context of services
and practice should be considered for
developing retention
strategies.

16 Jones & Farquhar 2003 Journal of Contact Author stated that

financial management & customer’s perception of
services customer loyalty service quality have
marketing influence on customer
loyalty.
17 Rangaswamy, A 2003 International Customer Service quality has
Journal of satisfaction and individual impact on
Research in loyalty in online customer loyalty &
Marketing and offline commitment & jointly
environments. loyalty & commitment
affecting customer
satisfaction.
18 Bloemer&Oderkerken- 2003 Australasian Antecedents and This paper found that to
Schroder Marketing consequences of develop loyalty among
Journal affective customer, key factors are
commitment. commitment & satisfaction.
But still impact of service
quality on commitment is
yet to be explored.
19 Santos, J 2003 Managing E-service quality: a Author has proposed some
Service model of virtual dimension of e-service
Quality (MCB service quality quality such as reliability,
UP Ltd) dimensions efficiency, support,
communication, security,
and incentives
20 Mushtaq A Bhat 2005 The Journal of SERVICE The major findings of the
Business QUALITY study is that Indian
Perspective PERCEPTIONS consumers perceive that
IN BANKS: A service quality of all the
COMPARATIVE banks in India is below their
ANALYSIS ; expectation & hence
VISION dimensions of Service
quality needs to investigated
in depth again in the context
of all the sectors of Indian
Banking
21 Mushtaq A Bhat 2005 Journal of CORELATES OF The major findings of this

3
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
Services SERVICE paper are that understanding
Research QUALITY IN of the service quality gets
BANKS: AN differ among various
EMPIRICAL demographic variable.
INVESTIGATION
22 Monica Bedi 2010 Journal of An integrated This study has found out
Services framework for significant impact of service
Research service quality, quality on customer
customer satisfaction in private &
satisfaction and public sector bank but the
behavioral degree to which service
responses in Indian quality affects customer
banking industry— satisfaction is not yet
a comparison of explored.
public and private
sector banks
23 IliasSantouridis and 2010 The TQM Investigating the Customer service, pricing
Panagiotis Trivellas Jouranl impact of service structure and billing system
quality and are the service quality
customer dimensions that have the
satisfaction on more significant positive
customer loyalty in influence on customer
mobile telephony satisfaction, which in turn
in Greece has a significant positive
impact on customer loyalty.
The mediation role of
customer satisfaction on the
service quality and customer
loyalty relationship has also
been confirmed.
24 H.S Sandhu & Naresh 2011 International Measuring Life Evidently, SERVQUAL
Nagpal Business Insurance Service instrument cannot be
Research Quality: An applicable to the Indian life
Empirical insurance sector and further
Assessment of research is necessitated to
SERVQUAL comprehend the service
Instrument quality within the Indian
context.
25 ShirshenduGanguli&Sanjit 2011 International Generic A customer service ,
Kumar Roy Journal of technology‐based reliability and technology
Bank service quality usage easiness has
Marketing dimensions in significant impact on
banking: Impact on customer satisfaction and
customer loyalty
satisfaction and
loyalty
26 Krishna A. Goyal, & Vijay 2012 International Indian Banking General sentiments,
Joshi Journal of Industry: challenges & opportunities
Business Challenges And discussed in this paper
Research and Opportunities giving more emphasis on
Management marketing strategies in
context of services order to
get sustainable competitive
edge over the intense
competition from national
and global banks.
27 Koushiki Choudhury 2013 International Service quality and This paper highlighted the
Journal of customers’ fact that service quality in

3
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
Bank purchase the retail banking has
Marketing intentions: an significant impact on the
empirical study of purchase intention of the
the Indian banking customers. The important
sector factors are reliability,
employee behavior,
tangibles and convenience.
28 Anand Sharma, Ashish 2014 Int. J. of Trade
Factors Impact of service quality on
Gupta, Sandeep and Determining customer satisfaction and
Kumar Bharti Commerce- Service Quality loyalty is confirmed in this
IIARTC, Aspects of paper.
Banking Sector in
India
29 V. Surekha, S. Anitha& 2015 International Impact of e - This paper focus on the
S. Kaleeswari Journal in banking on service bank employees as an
Commerce, IT quality of public important parameter in
& Social and private sector delivering good quality
Sciences banks service to the customer.
30 Abdel Fattah Mahmoud 2015 European The Impact of Influence of tangibility on
Al-Azzam Journal of Service Quality customer satisfaction is
Business and Dimensions on discussed in this paper.
Management Customer
Satisfaction: A
Field Study of
Arab Bank in Irbid
City, Jordan
Customersatisfaction
31 Churchill & Carol 1982 Journal of An investigation Customer satisfaction and
Marketing into determinants purchasing behavior cycle
Research of consumer
satisfaction
32 Reichheld& Sasser 1990 Journal of A model of Customer’s react strongly to
Marketing customer service failure & it is
Research satisfaction with essential for service firm to
service encounter have effective service
involving failure & recovery strategy because
recovery findings of the paper
suggest that customer
satisfaction is highly depend
upon customer’s evaluation
of service recovery in case
of service failure.
33 Muller, Wolfgang 1991 European Gaining Author has depicted
Management competitive importance of satisfaction in
Journal advantage through highly competitive market
customer of Europe. He has also
satisfaction mention that service quality
is the key driver of
customer
satisfaction.
34 Zahorik& Rust 1992 A review. Modeling the This paper has provide
Advances in impact of service insight that five
service quality on determinants of service
marketing and profitability quality have greater impact
management on customer satisfaction in
the retail banking market of
USA.
35 Fornell 1992 Journal of A National In this study, quality was
Marketing customer important parameter in

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
satisfaction measuring customer
barometer: The satisfaction. Satisfaction
Swedish found to be lower in the
experience heterogeneous industries.
The same results needs to be
investigated in the context
of India as services are
heterogeneous in nature.
36 Anderson & Sullivan 1993 Marketing The antecedents The major findings of the
Science and consequences study is that quality which
of customer falls short of expectations
satisfaction for has a greater impact on
firms satisfaction and repurchase
intentions than quality
which exceeds expectations
37 Garbarino& Johnson 1999 Journal of The different roles As per this paper, customer
Marketing of satisfaction, satisfaction gets differ in
trust and their relationship with the
commitment in firm on a continuum from
customer transactional to highly
relationships relational bonds. Customer
satisfaction is a primary
construct towards customer
commitment.
38 Baker & Crompton 2000 Annals of Satisfaction & According to the paper,
Tourism Behavioral quality is the important
Research Intentions. attribute of the service &
satisfaction is referred as
customer’s emotional state.
perceived quality would
have a stronger effect on
satisfaction
39 Yau el.al 2000 European Is relationship RMO Scale.
Journal of marketing for
Marketing everyone
40 Jones, Henry and Fraquhar 2003 Contact Journal of financial This paper has explored the
management services marketing theories of contact
& customer management wherein
loyalty customers interact with
bank’s point of contact
person on the front desk.
The major finding of the
study conclude that banks
needs to manage the service
quality in contact
management as it has direct
impact on customer
satisfaction.
41 Chen 2004 Master A Study of This study has emphasized
Dissertation, customer on need of study of the
Yi-Shou satisfaction and service quality & customer
University, Behavioral satisfaction in the context of
Kaohsuing, Intentions of telecommunication. With
Taiwan Service Quality for the use of SERVQUAL,
Fixed Network author has indicated that
Communication service quality is the key
driver of customer
satisfaction.

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
42 Fecikova, 2004 TQM An index method This paper have depicted
magazine. Vol of satisfaction the importance of customer
16 (1), satisfaction in commercial
and public service
organizations. Companies
success depends upon the
customer retention which
can come through customer
satisfaction & service
quality extent great help in
managing the customer
satisfaction.
43 Vinita Kaura 2013 International Antecedents of It has been stipulated in the
Journal of customer paper that there are three
Bank satisfaction: a dimension of the service
Marketing study of Indian quality that has an effect on
public and private customer satisfaction –
sector banks employee behavior,
tangibility and information
technology.
44 Vinita Kaura, Chalasani 2014 Management Impact of Service Importance of service
S., Sourabh Sharma and Labour Quality, Service quality discussed in this
Studies Convenience and paper. Human behavior,
Perceived Price tangibility and information
Fairness on technology are the
Customer dimension of service quality
Satisfaction in significantly contributing to
Indian Retail the customer satisfaction.
Banking Sector
45 Kingshuk&Mounita 2014 A Journal of Service Quality Author stated in their paper
Humanities & and Customer that Customer satisfaction
Social Science Satisfaction in increases the existing
Commercial customer loyalty,
Banks: An repurchase process,
Empirical Study awareness of the people
about the firm and decrease
the price flexibility
CustomerLoyalty
46 Day 1969 Journal of A two.- Author has discussed two
Advertising dimensional categories of customer
Research, concept of brand loyalty – Attitudinal loyalty
loyalty & behavioral loyalty
47 Jacoby 1971 Proceedings Brand loyalty: A In this paper, author has
of the 89th conceptual distinguished brand loyalty
Annual definition from repeat purchase. Brand
Convention of loyalty is a broader aspect
the American that includes repeat
Psychological purchase as well but it has
Association to be viewed as a broader
term.
48 Dick &Basu 1994 . Journal of Customer loyalty: Customer loyalty is viewed
the Academy Towards an as the strength of the
of Marketing integrated relationship between an
Science conceptual individual's relative attitude
framework and repeat patronage. The
relationship is seen as
mediated by social norms
and situational factors.

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
Cognitive, affective, and
conative antecedents of
relative attitude are
identified as contributing to
loyalty, along with
motivational, perceptual,
and behavioral
consequences
49 Jones & Sasser 1995 Harvard Why satisfied In this paper, authors have
Business customers defect viewed customer loyalty in
Review the category of short term &
long term. Authors further
added that customer loyalty
is the feelings of an
attachment or affection for
company’s people, product
or services. These feelings
manifest themselves in
terms of purchasing from
the firm. The ultimate
measure of the loyalty is the
share of the purchase.
50 Ha, C 1998 Journal of The theory of As per the paper, attitudes
Product and reasoned action towards the purchase and
Brand applied to subjective norm like quality
Management customer loyalty of product or services leads
to the maximum unit brand
loyalty.
51 Oliver 1999 Journal of Whence consumer As per the author, loyalty
Marketing loyalty emerges as a combination of
perceived product
superiority, personal
fortitude, social bonding,
and their synergistic effects.
As each fails to be attained
or is by individual firms that
serve consumer markets, the
potential for loyalty erodes.
Multi – Item loyalty Scale
52 Steyn 2000 Management Making customer According to the author,
Today loyalty real: unlike manufacturing
Lessons from industries, quality of service
leading plays important role in
manufacturers managing customer loyalty.
53 Pedersen, E. P. &Nysveen 2001 The Shopbot banking: Agent technology has been
International An exploratory applied to design new
Journal of study of customer services simplifying product
Bank loyalty effects and merchant broker is
Marketing termed “shopbots”.
Findings of the study shows
that cognitive loyalty
depends upon customers’
past switching behavior.
Further it has been added
that strong forms of loyalty
developed in long-term on
the basis of the service
quality will not be affected

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
by shopbots.
54 Bowen & Chen 2001 International The relationship It has been found out that
Journal of between customer word of mouth, customer
Contemporary loyalty and commitment is highly
Hospitality customer associated with customer
Management satisfaction loyalty. But there are no or
little evidence for linear
relationship between
customer satisfaction &
customer loyalty.
55 Hennig-Thurau, Gwinner, 2002 Journal of Understanding According to the author, it
Gremler Service relationship is very important to develop
Research marketing and maintain enduring
outcomes: An relationships with customers
integration of of service businesses.
relational benefits Customer loyalty is the
and relationship approach that focuses on the
quality benefits
consumers receive apart
from the core service.
56 Gounaris, S. and 2004 Brand Antecedents and Author has proposed four
Stathakopoulos Management consequences of types of loyalty: (premium
brand loyalty: An loyalty, inertia loyalty,
empirical study covetous loyalty and no
loyalty) related to four types
of consumer behavior
(word-of-mouth
communication, buy
alternative brand, go to
different store and buy
nothing)

57 Xu, Y.Z.; Goedegebuure, 2006 Customer This study proposed link

R. & Van der Heijden Journal of perception, between customer perceived
Relationship customer service value to customer
Marketing satisfaction, and loyalty. Customer perceived
customer loyalty service quality has a
within Chinese significant effect upon
securities business: loyalty in terms of positive
Towards a word of mouth, willingness
mediation model to pay more and to stay with
for predicting the business.
customer behavior
58 Christopher Lovelock, 2011 Pearson Book on Service Wheel of loyalty
JochenWirtz&Jayanta Education Inc Marketing –
Chatterjee People,
Technology,
Strategy
59 Rizwan Ali, Gao Leifu 2014 International Factors Influencing This study confirms The
and Ramiz Rehman Journal of Customer Loyalty impact of service quality on
Learning & of Banking customer loyalty stalks from
Development Industry: Empirical positive relations between
Evidence from service quality and factors
Pakistan such as reputation and trust.
Improvement in service
quality leads to the increase
in customer loyalty.
60 Syed Usman Ali Gillani 2014 International Customer Loyalty A strong and positive

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
and Abdul Ghafoor Awan Journal of in Financial association is established
Accounting Sector: A case between customer
and Financialstudy of satisfaction and customer
Reporting Commercial Banks loyalty in this paper.
in Southern Punjab
CustomerRetention
61 Tax & Brown 1988 Management Recovering and According to the author,
Review Learning from Many companies consider
Service Failure investments in complaint
handling as means of
increasing customer
retention. Retention has
direct association with
complaint handling.
62 Reichheld F.F and Sasser 1990 Journal of A model of Customer retention has a
W.E Marketing customer powerful impact on the
Research satisfaction with bottom line. It can have
service encounter more to do with a service
involving failure & company’s profits than
recovery scale, market share, unit
costs, and many other
factors usually associated
with competitive advantage.
As a customer’s relationship
with the company
lengthens, profits rise.
Companies can boost profits
by almost 100% by
retaining just 5% more of
their customers.
63 Reichheld 1996 Harvard The loyalty effect, In this paper, author has
Business Boston shown loyalty as economic
School Press necessity. Further, author
has emphasized that
acquiring customer is more
expensive than retaining the
existing one. If customer
stick to the firm & make
repeat purchase than firm
can easily maintain
profitability for the long
term.
64 Boles, Barksdale, & 1997 The Journal of Business Buyer-salesperson
Johnson, Business & relationship: An relationships were more
Industrial examination of likely to generate
Marketing effects of buyer- recommendations and
salesperson referrals from customers.
relationship on Author further suggested
customer retention that a salesperson’s efforts
and willingness to to build relationships are
refer and rewarded by greater
recommend customer retention and
increased business through
referrals and
recommendations.
65 Moira 1997 MCB UP Ltd Modeling the This paper reveals that
impact of employee and customer
customer- perceptions of service

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
employee quality are related to
relationship on customer retention rates.
customer retention
rates in a major
UK retail bank
66 Banrnes&Howlett 1998 The Predictor of equity As per the author, there is a
International in relationship little investigation made in
Journal of between financial the field of financial
Bank service providers services with respect to
Marketing and retail relationship marketing.
customers Findings of the paper
reveals that service quality
is important component of
relationship marketing.
67 Appiah – Adu 1999 The Service Marketing Author recommended that
Industry effectiveness and customer retention is
Journal customer retention significantly associated with
in service sector marketing effectiveness in
service industry. Marketing
effectiveness is an attempt
to satisfy the customer &
than after maintaining long
term relationship with them.
68 Lassar, Manolis, & 2000 The Service quality This paper has examined
Winsor International perspectives and effect of service quality on
Journal of satisfaction in relationship marketing. The
Bank private banking findings of the paper,
Marketing explore that fact that service
quality is define with
reference to the ability of
sales person’s ability to
satisfy & retain the
customer.
69 Gittell 2002 Journal of Relationship Author has examined the
Service between service relationship between service
Research providers and their provider & customer and
impact on identify that it is very
customers important for achieving
customer outcomes like
loyalty, satisfaction as well
as retention. Further author
has identify that stronger the
provider-customer
relationship directly
increase customer retention
with the firm.
70 Ranaweera, Chatura, 2003 Journal of On the relative Author has examine the
Praghu, Jaideep Targeting, importance of relationship between trust,
Measurement customer word-of-mouth & customer
and Analysis satisfaction and retention. The major
for Marketing trust as a outcome of the paper is that
determinants of trust & positive word-of-
Customer retention mouth is strongly associated
and positive word with customer retention & it
of mouth. can only been achieve by
offering good quality
service to the customer.
71 Muhammed S. Alnsour 2013 International How to Retain a Drivers of relational

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
Journal of Bank Customer: A strategies such as trust,
Marketing Qualitative Study satisfaction, loyalty,
Studies of Jordanian Banks commitment, closeness,
Relational communication,
Strategies transparency,
confidentiality, privacy,
culture, customer
acquisition, and reputation
identified in this paper.
72 Msoka&Msoka 2014 Journal of Determinants of The major finding of the
Finance and Customer paper is that improve
Bank Retention in service quality enhance the
Management Commercial Banks customer retention and
in Tanzania quality of the service
product has significant
influence on customer
satisfaction.
73 Emmah 2015 International Effectiveness of Customer retention was
Journal of Customer identified as strategic tool in
Business and Retention this paper. Further, it has
Management Strategies: A Case also been discussed in the
of Commercial paper that For the banks to
Banks, Kenya gain a sustainable
competitive advantage, bank
need to extend the quality of
their services beyond the
core services.
CustomerCommitment
74 Reichers 1985 Academy of A review and In this paper author argued
Management reconceptualisation that a global conception of
Review of organizational organizational commitment
commitment needs to be reviewed on a
macro level. He further
added that a multiple
commitments approach has
to be more precise and
meaningful and employees
experience several different
commitments adds value to
the service offered to
customer.
75 Beatty, Homer &Kahle 1988 Journal of The involvement- Author has proposed
Business commitment commitment model wherein
Research model: Theory and they have discussed about
implications affective commitment,
calculative commitment and
normative commitment
76 Allen & Meyer, 1990 Journal of The measurement Author has discussed
Occupational of antecedents of affective, normative &
Psychology affective, continues commitment in
continuous and detail wherein they have
normative define it in general term as
commitment to the willingness of individual of
organization being associated with one
organization for certain
period in time.
77 Becker & Billings 1993 Journal of Profiles of Author has indicated that
Organizational commitment: An Foci of commitment are the

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
Behavior empirical test individuals and groups to
whom an employee is
attached, and bases of
commitment are the motives
engendering attachment.
Based on this four profiles
of the commitment is
discussed: (1) The Locally
Committed (employees who
are attached to their
supervisor and work group),
(2) the Globally Committed
(who are attached to top
management and the
organization), (3) the
Committed (who are
attached to both local and
global foci), and (4) the
Uncommitted (who are
attached to neither local nor
global foci). This profiles
has impact on employees
performance in service
delivery process.
78 Morgan & Hunt 1994 Journal of The commitment- In this paper, it has found
Marketing trust theory of that successful relationship
relationship marketing requires
Marketing relationship commitment.
Relationship commitment is
very essential in order to
compete at global level in
service industry.
79 Beaton & Beaton 1995 Journal of Marrying service This paper highlights
Marketing providers and their growing recognition of
Management clients: A commitment as a predictor
relationship of successful long‐term
approach to relationships between
services service providers and their
management clients. Components of
commitment are service
values and investment &
alternatives of services.
Commitment incorporates
and overtakes quality and
value as the primary
concern of service managers
80 Maister 1997 New York: True In this book, author has
The Free Press professionalism discusses the role of
commitment among
different professionals. He
further added that little
research is conducted on
role of commitment in
banking industry. He has
emphasized on certain
attributes that banking
professional must possessed
: Strong value system,

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
knowledge, care,
competence to understand
the client’ s requirement
which is somewhere
overlapping with the
dimension of service quality
& hence direct relationship
between service quality &
client-customer
commitment is proven but it
required further research to
be conducted in the context
of banking industry.
81 Sheth& Sobel 2000 New York: Clients for life - As per the author,
Simon & how great Marketing is undergoing a
Schuster professionals paradigmatic shift from the
develop exchange of goods, to
breakthrough providing a service and due
relationships to this service organizations
have started focusing on
having global account
management teams who
aspire to serve the customer
with selfless independence
and empathy which are the
key dimensions of service
quality.
82 Meyer &Herscovitch 2001 Human Commitment in the According to this author, it
Resource workplace: Toward is recognized now a day that
Management a general model employees can develop
Review multiple work-relevant
commitments, and that
commitment itself is a
multidimensional construct.
Author further added that
Commitment is a force that
binds an individual to a
course of action of
relevance to a target and this
is very essential in service
industry as service
personnel plays very
important role in offering
good service to the
customer.
83 Bloemer, J. &Oderkerken- 2003 Australasian Antecedents and Findings of the paper is that
Schroder Marketing consequences of affective commitment has
Journal affective impact on loyalty in terms
commitment of word of mouth, purchase
intention, price insensitivity
and complaining. Affective
commitment is a key
determinant of word of
mouth, purchase intention
and price sensitivity.
84 Bessant 2005 Book : New Directions Author has specifically
Innovation in taken the reference of
professional banking sector of UK to

4
 Literature Review

Sr.
Author Year Journal Title of the Paper Key Findings
No
services discussed commitment.
Banking is a group of
professional work together
to serve the customer. This
is an excellent example of
commitment between
employee & customer.
85 Frow 2007 Journal of The meaning of As per the author,
Marketing commitment in conceptualization of
Management professional commitment from
service psychology and
relationships: a organizational behavior
study of the literatures, cannot be used
meaning of without considering the
commitment used market-based context in
by lawyers and which it is used. There is
their clients requirement for in depth
research of commitment in
the context of marketing
relationship. The findings
show that the meaning of
commitment used in
professional relationships
may be more complex than
its traditional
conceptualization and
should be extended to
include at least three
additional components
including: 'partnership
commitment', 'impression
management commitment'
and 'personal commitment.
86 Mohd. Al Hawari 2011 Asia Pacific Automated service Customer commitment has
Journal of quality as a identified as an important
Marketing and predictor of predictor of strong
Logistics customers' customer- bank relationship
commitment: A and ultimately helps in
practical study enhancing customer delight
within the UAE in this paper.
retail banking
context
87 Yu-TeTu 2014 Journal of Customer Major finding of the study
Education and Commitment as a is that Customer
Vocational Mediating Variable commitment is a factor that
Research between Corporate leads to the customer
Brand Image and loyalty.
Customer Loyalty
88 RahmatMadjid 2015 International Explaining Frequent bank visit is found
Journal Of Customer out to be more important
Engineering Satisfaction with indicator of the customer
And Science Experience, commitment. Relationship
Customer Trust quality and service quality
and Commitment are antecedent of the
in Syariah Banks customer commitment.
Kendari City

5
 Literature Review

2.12 Research Gap:

After review various literatures on service quality, it can be concluded that delivery of high
service quality is a must for attaining customer satisfaction and a number of other desirable
behavioral outcomes. Zeithaml&Bitner (1996) state that Customer satisfaction & service
quality is directly related to each other. Improving service quality leads to the improvement
in customer satisfaction. They have further added that positive service experience does
affect customer satisfaction & subsequently retention. Zemke (2002), study that Poor
customer service directly affects satisfaction which in turn affects customer retention.
Ranaweera and Prabhu (2003), write that Customer satisfaction is found to be stronger
drive of customer retention. Jones & Farquhar (2003), have carried out their study on
banking sector & state that perception of service quality & customer satisfaction have
influence on customer loyalty. Shankar, Smith, & Rangaswamy, (2003) state that
satisfaction has an mediated effect on loyalty by perceived service quality & opine that
loyalty and commitment strengthen overall satisfaction.According to Ahmad & Buttle
(2002), Service firms must improve customer service quality and satisfaction in order to
retain customers. Barnes &Howlett (1998) study that service quality is directly related to
the customer retention. Lassar, Manolis and Winsor (2000), explored the impact of service
quality on customer satisfaction in banking industry. As per Buttle & Burton (2002), there
is a positive relationship between loyalty and satisfaction; satisfaction and commitment
(Fornell, 1992); commitment and retention (Bolemer & Oderkerken-Schroder, 2003;).
However, in the various literature reviewed, overall service quality has been studied but
there has been no evidence for which factors of service quality that will have greater
association and impact on customer satisfaction, retention, loyalty and commitment in the
context of Indian Banking Sector and this has become the research gap for the study.

2.13 Conceptual Framework:

Impact of service quality on customer satisfaction, retention, loyalty and commitment has
studied in the Indian Banking Sector. Literature review has laid down the foundation for
developing the conceptual framework. After narrowing down the scope of literature
review, variables of service quality, customer satisfaction, retention, loyalty and
commitment were identified. A structured questionnaire was developed with the identified
variables of service quality, customer satisfaction, retention, loyalty and commitment. The
empirical investigation involves developing & testing the factor structure of service quality

5
 Literature Review

Custom
with the use of exploratory and confirmatory
er factor analysis. With the use of correlation
and simple regression, association and impact of service quality on customer satisfaction,
retention, loyalty and commitment were examined.
Customer
Commitme

Service Quality

1. Competency FIGURE 2.3 Research Model

of bank Customer
employees Satisfacti
2. Augment
ed Service
Custom
3. Physical er
Evidence

4. Ethos of the bank

5. Assortment
of Service

6. Service Product

7. Interior
Signage &