THE EFFECT OF SERVICE QUALITY ON CUSTOMER SATISFACTION: (A

CASE OF COMMERCIAL BANK OF ETHIOPIA, TESSO BRANCH)

By: Nibret Didamo

Advisor: Prof. Brehanu Borje (professor in marketing management)

Co-advisor: Medina M.

A MBA Thesis Submitted to Hawassa University in partial Fulfillment of the

Requirements for Master of Business Administration Degree in Marketing
Management

Hawassa University

College of Business and Economics

Department of Management

June, 2022

Hawassa, Ethiopia
 Hawassa University

School of Graduate studies

THE EFFECTS OF SERVICE QUALITY ON CUSTOMER SATISFACTION
(A CASE OF COMMERCIAL BANK OF ETHIOPIA, TESSO BRANCH)

A Thesis proposal Submitted to Hawassa University in partial Fulfillment of the

Requirements for Master of Business Administration Degree in Marketing
Management

By: Nibret Didamo

Advisor: Proff. Brehanu Borje (professor in marketing management)

Co-advisor: Medina M.

Hawassa University

Collage of Business and

Economics

Department of Management

June, 2022
i
 Hawassa, Ethiopia

i
 SCHOOL OF GRADUATE STUDIES
HAWASSA UNIVERSITY
ADVISORS’ APPROVAL SHEET

This is to certify that the thesis entitled “The effect of service equality on Customer Satisfaction in
the case of commercial bank of Ethiopia, Tesso Branch” submitted in partial fulfillment of the
requirements for the degree of Master of Business Administration in Marketing Management, the
Graduate Program of the department of Management, and has been carried out By Nibret Didamo
under our supervision. Therefore, we recommend that the student has fulfilled the requirements and
hence hereby can submit the thesis to department of management.

Proff. Brehanu Borje

Name of Principal Advisor Signature Date
Medina M. (MBA.)

Name of Co-advisor Signature Date

ii
 SCHOOL OF GRADUATE STUDIES
HAWASSA UNIVERSITY
EXAMINERS’ APPROVAL SHEET
===============================================================
We, the undersigned, members of the Board of Examiners of the final open defense by Nibret
Didamo have read and evaluated his/her thesis entitled “The effect of service equality on Customer
Satisfaction in the case of commercial bank of Ethiopia, Tesso Branch”, and examined the candidate.
This is, therefore, to certify that the thesis has been accepted in partial fulfillment of the requirements
for the degree in Masters of Business Administration.

Name of the Chairperson Signature Date

Name of Principal Advisor Signature Date

Name of Co- Advisor Signature Date

_
Name of Internal Examiner Signature Date

Name of External examiner Signature Date

SGS Approval Signature Date

Final approval and acceptance of the thesis is contingent upon the submission of the final copy of the
thesis to the School of Graduate Studies (SGS) through the School Graduate Committee (DGC/SGC)
of the candidate’s department.

Stamp of SGS Date:

iii
Declaration

I Nibret Didamo, hereby declare that this thesis is entitled “the effect of service equality on
Customer Satisfaction in the case of commercial bank of Ethiopia; Tesso Branch” is my
original work. I have carried out the present study independently with the guidance and
support of the research advisors with principal advisor, Proff. Brehanu Borje (Professor in
marketing management) and Co advisor, Medina M. (MBA in marketing management). Any
other research or academic sources used here in this study have been duly acknowledged.
This study is my own work that has not been submitted for any degree or diploma program in
this or any other institution.

Nibret Didamo Signature Date

iv
 Acknowledgments

Most of all I Thank the Almighty God for everything He has done for me. Then, the generous
cooperation of many people has contributed for the success and completion of this thesis. My
special gratitude goes to my major advisor Proff. Brehanu Borje and Co advisor, Medina .M
whose work principle is worth modeling for making invaluable comments and suggestions at
each stage of writing this graduation thesis. I would also like to express my appreciations to
my beloved family, Dad and Mom for their patience, love and encouragement.

I am very grateful especially to Asfaw , Taffese and all friend’s, the right minded persons I
have ever met, for their cooperation and invaluable support during data collection and the
research process. Finally I would like to extend my thanks to the CBE Tesso Branch manager
Yared.A and members for availing the necessary information which were indispensable for
the study.

v
Table of Contents
Declaration...............................................................................................................................................iv
Acknowledgments....................................................................................................................................v
List of Figure...........................................................................................................................................ix
Abbreviation and Acronym......................................................................................................................x
Abstract....................................................................................................................................................xi
CHAPTER ONE......................................................................................................................................1
1.1. Background of the study...........................................................................................................1
1.2. Statement of the problem..........................................................................................................3
1.3. Objectives of the study..............................................................................................................5
1.3.1. General objective...............................................................................................................5
1.3.2. Specific objectives.............................................................................................................5
1.4. Research Hypothesis.................................................................................................................5
1.5. Significance of the study...........................................................................................................6
1.6. Scope of the study.....................................................................................................................6
1.7. Limitation of the study..............................................................................................................6
1.8. Organization of the Paper..........................................................................................................7
CHAPTER TWO.....................................................................................................................................8
Literature Review.................................................................................................................................8
2.1. Theoretical Definitions of Service............................................................................................8
2.2 Service an Overview..................................................................................................................8
2.3. Service Quality..........................................................................................................................9
2.4. Characteristics of Services......................................................................................................10
2.5. Service Quality Dimensions....................................................................................................11
2.7. Customer Satisfaction.............................................................................................................12
2.8. Factors that cause Customer Satisfaction................................................................................15
2.8.1 Empathy............................................................................................................................16
2.8.2 Trust..................................................................................................................................16
2.8.3. Tangibility........................................................................................................................17
2.9. Customer Satisfaction in Banking Services Context..............................................................17
2.10. Empirical framework............................................................................................................18
2.11. Previous Studies....................................................................................................................20
2.12. Conceptual framework..........................................................................................................22
CHAPTER THREE................................................................................................................................24
RESEARCH METHODOLOGY.......................................................................................................24
3.1. Description of the study area...................................................................................................24

vi
 3.2 The Research Design................................................................................................................25
3.3 Types and sources of Data.......................................................................................................25
3.4 Population of the study.............................................................................................................26
3.5. Sample size and sampling techniques.....................................................................................26
3.6. Data Collection Methods and Procedures...............................................................................27
3.7 Methods of Data analysis.........................................................................................................27
3.8 Model specification..................................................................................................................28
3.9 Validity and Reliability data gathering instruments.................................................................28
3.9.1 Validity..............................................................................................................................28
3.9.2 Reliability..........................................................................................................................29
3.10 Ethical consideration..............................................................................................................29
UNIT FOUR...........................................................................................................................................31
DATA ANALYSIS AND INTERPRETATION...............................................................................31
4.1 Introduction..............................................................................................................................31
4.2. Demographic characteristics of respondents...........................................................................32
4.3 Descriptive analysis.................................................................................................................34
4.2.1 Analysis of reliability variable..........................................................................................35
4.2.2 Analysis of assurance variable..........................................................................................36
4.2.3. Analysis of responsiveness variable.................................................................................37
4.2.4. Analysis of empathy variable...........................................................................................39
4.2.5. Tangibles..........................................................................................................................40
4.2.6. Analysis of trust variable.................................................................................................41
4.2.7. Analysis of customer satisfaction.....................................................................................42
4.3 Inferential statistics..................................................................................................................44
4.3.1. Range of the coefficient to analyze score values.............................................................44
4.4. Spearman’s Rank Correlation Coefficient..............................................................................45
4.4.1. Multiple Regression Analysis..........................................................................................46
4.4.3 Regression Analysis..........................................................................................................50
4.5 Hypothesis Testing and Interpretation of Results....................................................................52
UNIT FIVE............................................................................................................................................54
SUMMARY, CONCLUSSIONS AND RECOMMENDATIONS....................................................54
5.1 Summary of finding.................................................................................................................54
5.2. Conclusions.............................................................................................................................61
5.3. Recommendations...................................................................................................................63
5.4. Direction for Further Research................................................................................................64
Reference................................................................................................................................................65

vii
List of Table

Table 2.1. A summary of previous studies.............................................................................................20

Table 3.1 Sample Size determina.............................................................................................27

Table 3.2: Reliability test.......................................................................................................29
Table 4.1: Demographic profile of respondents......................................................................32
Table 4.2: Likert scale ranges of values for analysis of mean score value..............................34
Table 4.3: Reliability variable analysis....................................................................................35

Table 4.4: Analysis of assurance variable................................................................................36

Table 4.5: Analysis of responsiveness variable.......................................................................37

Table 4.6: Analysis of empathy variable..................................................................................39

Table 4.7: Analysis of Tangibles variable...............................................................................40

Table 4.8: Analysis of Trust variable.......................................................................................41

Table 4.9: Analysis of customer satisfaction............................................................................42

Table 4.10: Range of the coefficient........................................................................................44

Table 4.11: Correlation between pairs of independent and dependent variables.....................45

Table 4.12: Multi co linearity test............................................................................................48

Table 4.13: Model summary of coefficient of determination..................................................48

Table: 4.14: ANOVA...............................................................................................................49

Table 4.15: Regression analysis...............................................................................................50

Table 4.16: Hypothesis testing for customer satisfaction........................................................52

viii
List of Figure

Figure 2.1 Conceptual framework..........................................................................................23

Figure 3.1: Location map of City of Hawassa........................................................................24

Figure 4.1: Normality test.......................................................................................................47

ix
Abbreviation and Acronym

CBE: Commercial Bank of Ethiopia

SERVQUAL: Service Quality
CSQ: Customer Satisfaction Questionnaire
SQQ: Service Quality Questionnaire
SPSS: Statistical Package for Social Science
ICT: Information Communication Technology
IT: Information Communication
ANOVA: Analysis of variance
SD: Standard deviation

x
Abstract
This research has focused on to assess the effect of service equality on Customer Satisfaction
in commercial bank of Ethiopia, Tesso branch. The study examined six factors (Reliability,
Assurance, Responsiveness, Tangibles, Empathy and Trust) influencing customer satisfaction.
The objectives of this study were primarily to determine the relationship between service
quality and customer satisfaction in the banking industry, to examine the effect of service
quality on customer satisfaction of the banks, to analyze the customer satisfaction level in
CBE and to see the effects of independent variables on the customer satisfaction of CBE
banks in the study area. The researcher used SERVQUAL and WEBQUAL models to see
effects of service quality on customer satisfaction in the study area. The study employed
descriptive research designs to attain its objectives. To collect data, structured questionnaire
was used. The researcher used Yamane formula developed in 1967 to select sample
respondents from total population. There were two strata in the study, namely, current
account holders and saving account holders. To analyze data, descriptive and inferential
statistics was used. The finding of the study showed all independent variable except trust
have positive and significant relationship with customer satisfaction. Hypothesis formulated
regarding to the variables like Responsiveness, Reliability, Assurance, Empathy and
tangibles were accepted and hypothesis formulated regarding to trust was rejected. The
research result concluded that there exists significant positive relationship between
reliability, assurance, responsiveness, empathy and tangibles and negative relationship
between Trusts. Even the study shown the positive and significance relationship between
these variables, the banking industries especially commercial bank of Ethiopia, Tesso Branch
should have to work to increase the environments related with these variables. The bankers
must give more focus on Trust variable than another variables since the customers were not
satisfied because of trust attention is not enough in the study area.

Key words: customer satisfaction, Responsiveness, Reliability, Assurance, Tangibles, Trust,

Empathy.

xi
 CHAPTER ONE
INTRODUCTION

1.1. Background of the study

The nature of banking globally has gone through various stages of transformation in service
delivery. Traditionally the banks had been predominantly occupied in just cash related
activities like accepting deposits, paying cash and opening accounts as well as giving out
loans to customers (Adiele& Gabriel, 2013). However, in the wake of competition and
technological advancements, banks in the world have been more innovative, crafting new
ways of reaching out to prospective customers and retaining more customers to their base.
Various strategies have been adopted by banks to increase their share of the market in recent
years (Karr, 2012).

Bank is a customer-oriented services industry. A bank depends upon the customers for their
survival in the market. The customer is the focus and customer services are the differentiating
factors (Ghafari, et al., 2011). A bank can differentiate itself from competitors by providing
high quality customer service (Das, 2012). But, for existence and survival of any organization
the way customers handled and treated matter a lot. Banks play an important and active role
in the financial and economic development of a country. An effective banking system greatly
influences the growth of a country in various sectors of the economy. Practitioners in the
banking industry face a large number of complex challenges in the global marketplace.

It is crucial for banks to better understand changing customer needs and adopt the latest
information technology system in order to compete more effectively with global
organizations (Agarwal, 2009).Modern banking in Ethiopia was introduced in 1905 and it
began rendering banking services on February 15, 1906 when Emperor Menelik II officially
opened the Bank of Abyssinia in Addis Ababa-months after he set up a national monetary
system (based on Ethiopian Thalers) and signed a convention with the national bank of Egypt
for establishing the Bank of Abyssinia (Bekele, 2011).

Since economic reform of 1992 under the new government, the existing government banks
have been re-organized so as to operate based on market-oriented policy framework but with
100% Ownership of the government. In addition to this, the new Ethiopian private-owned
financial Institutions are allowed to participate in the country’s financial sector.
(Yaregal,2011).

1
New age business environment is very dynamic and undergoes rapid changes as a result of
technological innovation, increased awareness and demands from customers. Business
organizations, especially the banking industry of the 21st century operates in a complex and
competitive environment characterized by these changing conditions and highly
unpredictable economic climate.
Information and Communication Technology (ICT) is at the center of this global change.
Information technology is considered as the key driver for the changes taking place around
the world. Due to a pervasive and steadily growth of information and communication
technology, the world banking industry is entering intone phenomena of unprecedented form
of competition supported by modern information and communication infrastructure. E-
commerce has become a slogan for companies over couple of years with increased awareness
about the use of computers and internet. The Internet is the driving force for the growth of e-
commerce (Bhaskar R. &TewodrosSisay, 2011).
The information and communication applications are paramount concern to the banks in
today’s business environment and internet become the major platform for all financial,
banking and commercial transactions in the present scenario.

A strategic use of ICT helps an organization gain a competitive advantage through its
contribution to the strategic goals of an organization and/or its ability to significantly increase
performance and productivity. Us a result of this many banks in different countries changes
their operation to the uses of advanced technologies that will enable them to compete with the
growing tastes and preferences of the customers.

Banking system occupies an important place in a nation’s economy. It plays a vital role in
accelerating the rate of economic growth by mobilizing the existing or potential savings and
by making the disbursement of credit to commercial undertaking and priority areas. Banking
industry is marked by aggressive competition and ever-changing customer demands. As a
result, banks need to adopt themselves to the changing environment. It is essential for the
banks to adopt appropriate various strategies to merge as the preferred bank of customers.
Timely introduction of various products to suit the diverse needs of customers is a functional
necessity to the banks. Technology gives the cutting edge to come out with customer centric
products and delivery channels in time (Biju K, D.Devandhiran&Sreehari R. 2012).

2
1.2. Statement of the problem
Satisfying customers is the first major mission and purpose of any business organization. It is
when customers are satisfied the organizations achieves higher sales, profit and market share
and vice versa. Customer satisfaction also leads organization gain loyalty and achieves the
desired objectives. Therefore, it is essential for organizations to satisfy their customer’s
promptly so that they can achieve what they plan. Banks as a business organization should
provide a great care for its customers‟ to attract, retain and gain their loyalty. Nevertheless,
banks found in our country (Ethiopia) have little care about their customers.

This leads them to use more obsolete and traditional technologies that cause dissatisfaction
and switching among customers. This means the banks are not satisfying their customers
enough due to many factors in which using traditional technologies is among them. Levesque
and McDougall (1996)have confirmed and reinforced the notion that consistent poor
customer experience as a result of poor service quality leads to a decrease in the levels of
customer satisfaction and the chances of further willingness to recommend the service (i.e.,
word-of-mouth advertising or referrals) is lessened.

This is true for commercial bank of Ethiopia, which is the leading bank in the country. Even
though CBE has been providing many kinds of banking services since its establishment in
1942, it cannot go further in satisfying its customers.

The previous literature suggests that the evaluation of quality in services is more difficult
than goods (Parasuraman et al., 1985) and that delivering quality services is increasingly
recognized as the key to success for service providers” (Cronin and Taylor,1992). But,
“perceived service quality has confirmed to be a complex concept to understand” (Brady and
Cronin, 2001, pp.34). Therefore, Rust and Oliver (2000) proposed that it is essential for
companies to develop the awareness of customers‟ perceptions of service quality.

Service's unique characteristics of intangibility, heterogeneity, and inseparability lead them to

possess high levels of experience and credence properties, which, in turn, make them more
difficult to evaluate than tangible goods (Bitner 1990; Zeithaml 1981).“Identification of the
determinants of service quality is necessary in order to be able to specify measure, control
and improve customer perceived service quality” (Johnston1995).

Various empirical researches show that there is significant and positive relationship in service
quality and customer satisfaction. Berry (1990) mentioned that there are ten ‘Quality Values'
which influence satisfaction behavior i.e. Quality, Value, Timelines ,Efficiency, Ease of

3
Access, Environment, Inter-departmental Teamwork, Front line Service Behavior,
Commitment to the Customer and Innovation. Increase in service quality of the banks can
satisfy and develop attitudinal loyalty which ultimately retains valued customers (Kumbhar,
2010).

According to Biju K, D. Devandhiran&Sreehari R. (2012) there is very strong relationship

between service quality and customer satisfaction. Biju K, D.Devandhiran&Sreehari R. in
their research shows that as the bank employees provide quality service in its banking service
customers are highly satisfied.

Vijay M. Kumbhar also shows the relation between service quality and customer
satisfaction in Public Banks and Private Banks in India. His finding indicates that customers
are highly satisfied with service quality. So that one can concludes that as the bank
implement service quality, in it can create high customer satisfaction.

Most of the problems mentioned in above studies are outdated and they used only SERVQUAL
model to see quality dimensions regarding to customer satisfaction. Previously different studies
were conducted in Ethiopian banking industry, those studies were assessing affects of service
quality on customer satisfaction but most of the researchers were not used WEBQUAL model ,
therefore the researcher motivated to conduct in this area to fill the research gap of the study on
creating good service quality for customer satisfaction, So this study will bridges the gap by
assessing the effects of service quality on customer satisfaction by identifying basic drawbacks
& constraints within help of giving quality service, by developing independent variable, and
supporting technical services at the Tesso branch.

Therefore, the purpose of this study is to examine the effect of service quality on customer
satisfaction by using SERVQUAL and WEBQUAL dimensions.

4
1.3. Objectives of the study

1.3.1. General objective

The general objective of this research project is to examine the effect of service quality on
Customer Satisfaction in Commercial Bank of Ethiopia Tesso Branch.

1.3.2. Specific objectives

The specific objectives of this study are the following:

 To examine the effect of service Empathy on customer satisfaction at Commercial

Bank of Ethiopia Tesso Branch.
 To determine the effect of service responsiveness on customer satisfaction at
Commercial Bank of Ethiopia Tesso Branch.
 To examine the effect of service tangibility on customer satisfaction at Commercial
Bank of Ethiopia Tesso Branch.
 To investigate the effect of service reliability on customer satisfaction at Commercial
Bank of Ethiopia Tesso Branch.
 To examine the effect of service assurance on customer satisfaction at Commercial
Bank of Ethiopia Tesso Branch.
 To assess the effect of service trust on customer satisfaction at Commercial Bank of
Ethiopia Tesso Branch.

1.4. Research Hypothesis

To solve the research problem the following hypothesis is formulated.

H01: Tangibility has no positive and significant effect on customer satisfaction.

H02: Reliability has no positive and significant effect on customer satisfaction.

H03: Assurance has no positive and significant effect on customer satisfaction.

H04 Responsiveness has no positive and significant effect on customer

satisfaction. H05: Empathy has no positive and significant effect on customer

satisfaction.

H06: Trust has no positive and significant effect on customer satisfaction.

5
1.5. Significance of the study
Since most bank services are easy to duplicate and provides nearly identical services, they
can only distinguish themselves on the basis of quality of service (Kebede, 2012).

Therefore, this study will be greatly important to the bank to assess whether focusing on
service quality enhance the level of customer satisfaction and identifies the position of
service quality at the bank. Moreover, the study would have the following significances:

 It identified the issues related to the application of service quality and provides feedback
to managers.
 It identified the gap between what customer thinks about customer satisfaction and what
actual customer satisfaction look likes in the bank.
 Result of this research would be used as a base point for further studies in the related
issues.
 This study would benefit to the Governments, banking industry and researchers who will
conduct another research in bank industry.
 The study helped the government and other banks industry play devise means for which
the banks can maximize its customer’s satisfaction by providing customer service quality.

1.6. Scope of the study

This study was undertaken to evaluate service quality on customer satisfaction in CBE Tesso
branch. Therefore, Because of time and resources at hand the study was delimited to only
CBE Tesso branch. The study does not emphasis on employees of the organization, which is
also important in the measurement of service quality for reasons mentioned above it was
delimited to the changes that come after the introduction of service quality. Moreover, the
result will not be extended to other branches of CBE. The study was delimited to six factors
affecting service quality and customer satisfaction. This study was also delimited to 395
respondents.

1.7. Limitation of the study

The main limitation of this study was constraints of resources and time, unwillingness to give
response from customer and access to feasible information. The financial and material
resources needed for a large sample size for this study was inadequate. The assessment was
done only in tesso branches of CBE. Thus, it is difficult to conclude that the findings of the
Banking Industry of the Ethiopia.

6
1.8. Organization of the Paper
The study has five chapters.

Chapter one: includes background of the study, statement of the problem, research
hypothesis, and objectives of the study, significance of the study, scope, limitations and
organization of the paper of the study.
Chapter two: includes review of related literature. In this chapter, theoretical and empirical
foundations of the study are presented.
Chapter three: encompasses research design and methodology which includes description of
the study area, sampling, data collection and data analysis methods, model specification,
validity and reliability test.
Chapter four: deals with results and discussion of the study.

Chapter five: presents the summary of findings, conclusions and recommendation of the
study.

7
 CHAPTER TWO
Literature Review
2.1. Theoretical Definitions of Service
According to Phillip Kotler et al (1997), service is any activity or benefit that one party can
offer to another that is essentially intangible and may not result in the ownership of anything.
Cannon (1998), viewed services as those separately identified, essentially intangible activities
which provide want satisfaction and which are not necessarily tied to the sales of a product or
another service.

In the context of Etzel, Walker, and Stanton (1997), service are the identifiable, intangible
activities that are the main object of a transaction designed to provide want satisfaction to
customers. Jobber (2001) viewed a service as any deed, performance or effort carried out for
the customer.

According to Palmer (2000), services are products which are essentially intangible and
cannot be owned. McCarthy and Perreault (1993), define service as a deed performed by one
party for another. From the definitions as presented by the various authorities, it is clear that
they all emphasis that service is essentially intangible. This means that a service cannot be
seen physical, but the customer experiences it. The idea of service therefore is focused on the
intangibility element and which essentially provides want satisfaction to the customer.

2.2 Service an Overview

Many authors define service on their own words but the ideas of the explanations can be
included in the following concepts;

 A service is an act or performance offered by one party to another. Although the

process may be tied to a physical product, the performance is essentially intangible and
does not normally result in ownership of any of the factors of production.
 Services are economic activities that create value and provide benefits for customers at
specific times and places, as a result of bringing about a desired change in/on behalf of
the recipient of the service (Lovelock et al., 2004).
 Services are any intangible act or performance that one party offers to another that
does not result in the ownership of anything (Kotler& Keller, 2009).

The effect of service quality on customer satisfaction is widely discussed in the literature.
This section covers both theoretical and empirical literature. It is gives an overview of

8
literatures that is related to the research problem presented in the previous chapter. The
service characteristics, service quality, customer satisfaction, relation between service quality
and customer satisfaction, service quality model and conceptual framework are included in
order to give a clear idea about the research area.

2.3. Service Quality

“Quality research in the goods sector was established long before it was established in the
service sector” (Gummesson, 1991). Bandyopadhyay 2003, pp. 187-188) claimed that quality
in goods sectors is “commonly defined as the product’s fitness for its intended use, which
means how well the product meet the needs and the expectations of its customer”. Garvin
(1983) referred to “the product-oriented quality approach as „objective quality.”(Clemes,
Gan, and Kao, 2007).

However, “understanding quality in the goods sector is inadequate for understanding service
quality because of the fundamental difference between the two terms” (Parasuraman, et al.,
1985). (Parasuraman, et al., 1985, pp. 42)“Suggest that service quality is performance based
rather than objects, therefore precise manufacturing specifications concerning uniform quality
can rarely be set”. Service quality is “more difficult for consumers to evaluate than product
quality; this is due to a lack of tangible evidence associated with the service” (Hong and Goo,
2004). In the past decades, researchers (Carman 1990; Garvin 1983; Parasuraman et al,
1985,1988)

Have defined and measured service quality by examining the attributes of service quality,
while others (Bitner and Hubbert 1994; Iacobucci, Grayson, and Ostrom, 1994; Oliver, 1993;
Oliver and DeSarbo, 1988; Parasuraman, Zeithaml, and Berry, 1994) focused on the
application in services to conceptualize the relationship between service quality and customer
satisfaction. Therefore, a combination of the service quality and customer satisfaction
literature has formed the foundation of service quality theory(Clemes et al., 2007;
Parasuraman et al., 1985).Bitner and Hubbert (1994) “define service quality as the
customers‟ overall impression of the relative inferiority or superiority of the organization and
its services.” Gronroos(1984) “identified service quality as the evaluation process outcome,
in which customers are involved and where a certain experience is always compared to the
perceived service received.” “Service quality is not objectively measured according to some
technical standards but is subjectively felt by customers and measured relative to customer
determined standards” (Kwortnik, 2005).Berry et al., (1990) also “defined service quality as
the discrepancy between customers “expectations or desire and their perceptions.”
9
“The previous literature suggests that the evaluation of quality in services is more difficult
than goods (Parasuraman et al., 1985) and that delivering quality services is increasingly
recognized as the key to success for service providers” (Cronin and Taylor,1992). But,
“perceived service quality has confirmed to be a complex concept to understand” (Brady and
Cronin, 2001, pp.34). Therefore, Rust and Oliver (2000) propose that it is essential for
companies to develop the awareness of customers‟ perceptions of service quality.

2.4. Characteristics of Services

According to Bitner et al., (1993) service has four characteristics: intangibility,
inseparability, heterogeneity and perish ability.

A. Intangibility of Services
Regan (1963) “introduced the idea of services being activities, benefits or satisfactions which
are offered for sale, or are provided in connection with the sale of goods”. The degree of
intangibility has been suggested as a means of differentiating tangible products with services
(Levitt, 1981). Most of the time, services are explained as being intangible since their
outcome is considered to be an action rather than a physical product (Johns,1999). (Darby
and Karni 1973 and Zenithal 1981) highlight the fact that the degree of tangibility has
implications for the ease with which consumers can evaluate services and products.

Other researchers propose that intangibility cannot be used to differentiate clearly services
with all products. (Bowen 1990 and Wyckham, Fitzroy and Mandry 1975) suggest that the
intangible tangible concept is difficult for people to grasp. Bowen (1990) “provides empirical
evidence to support this view.” Onkvisit and Shaw (1991) “feel that the importance of
intangibility is over- emphasized”.

B. Inseparability of Services
Inseparability is taken to reflect the simultaneous delivery and consumption of services
(Regan 1963; Wyckham et al 1975; Donnelly 1976; Grönroos 1978; Zeithaml 1981;Carman
and Lingered 1980; Zeithaml et al., 1985; Bowen 1990 and Onkvisit and Shaw1991) and it is
believed to enable consumers to affect or shape the performance and quality of the service
(Grönroos, 1978; Zeithaml, 1981).

C. Heterogeneity of Services
Heterogeneity “reflects the potential for high variability in service delivery” (Zeithamletal.,
1985). This is a particular problem for services with high labor content, as the service

10
performance is delivered by different people and the performance of people can vary from
day to day (Rathmell, 1966; Carman and Langeard, 1980; Zeithaml, 1985; Onkvisitand Shaw,
1991). Onkvisit and Shaw (1991) consider “heterogeneity to offer the opportunity to provide
a degree of flexibility and customization of the service.”Wyckham et al., (1975) suggest that
“heterogeneity can be introduced as a benefit andpoint of differentiation.”

D. Perish ability of Services

In general, services cannot be stored and carried forward to a future time period (Rathmell,
1966; Donnelly, 1976; and Zeithaml et al., 1985 as citied in Wolak et al., 1998). Onkvisit and
Shaw (1991) suggest that “services are “time dependent” and “time important” which make
them very perishable.” Hartman and Lindgren (1993) claim that the “issue of perish ability is
primarily the concern of the service producer” and that the consumer only becomes aware of
the issue when there is insufficient supply and they have to wait for the service.”

2.5. Service Quality Dimensions

Service's unique characteristics of intangibility, heterogeneity, and inseparability lead them to
possess high levels of experience and credence properties, which, in turn, make them more
difficult to evaluate than tangible goods (Bitner 1990; Zeithaml 1981).“Identification of the
determinants of service quality is necessary in order to be able to specify measure, control
and improve customer perceived service quality” (Johnston1995).

The most frequently used scales in the measurement of perceived service quality are
SERVQUAL (Parasuram, Zeithaml, and Berry 1988) and SERVPERF (Cronin and Taylor
1992). Both are the result of research work from the US school of quality. SERVPERF
directly measures the customers‟ perceptions of service performance and assumes that
respondents automatically compare their perceptions of the service quality levels with their
expectations of those services.

The SERVPERF scale is identical to the SERVQUAL scale in its dimensions and structure.
Cronin and Taylor (1992) argued on the framework of Parasuraman et al. (1985), with respect
to conceptualization and measurement of service quality and developed performance only
measurement of service quality called SERVPERF by illustrating that service quality is a
form of consumer attitude and the performance only measure of service quality is an
enhanced means of measuring service quality. They argued that SERVQUAL confounds
satisfaction and attitude.

11
They stated that service quality can be conceptualized as “similar to an attitude”, and can be
operational zed by the adequacy-importance model. In particular, they maintained that
Performance instead of “Performance-Expectation” determines service quality. Service
quality is evaluated by perceptions only without expectations and without importance weight.

The SERVPERF model was carved out of SERVQUAL by Cronin and Taylor in
1992.SERVPERF measures service quality by using the perceptions of customers. Cronin
and Taylor argued that only perception was sufficient for measuring service quality and
therefore expectations should not be included as suggested by SERVQUAL (Baumann etal,
2007 as cited in Mesay S 2012). The SERVPERF scale is found to be superior not only as the
efficient scale but also more efficient in reducing the number of items to be measured by 50%
(Hartline and Ferrell, 1996; Babakus and Boller, 1992; Bolton and Drew, 1991 as cited in
Messy S 2012). In this study, the SERVPERF scale is used to measure to service quality in
retail banking.

2.7. Customer Satisfaction

Early concepts of satisfaction have typically defined satisfaction as a post utility evaluation
and judgment concerning a specific purchase decision (Churchill and Sauprenant 1992;
Oliver, 1980). Most researchers agree that satisfaction is an attitude or evaluation that is
formed by the customer by comparing what they expect to receive to their subjective
perceptions of the performance they actually get (Oliver, 1980). According to Hans mark and
Albinsson, (2004), the major goal of business organizations is customer satisfaction, since
customer satisfaction affects customer retention and companies’ market share, profitability,
sales volume.

However, customer satisfaction is a complex construct which has been defined in various
ways (Hair, et al 2003 &Sheth and Sisodia, 2001). According to Hair, et al (2003), customer
satisfaction is defined as” customer’s response to a product or service in terms of the extent to
which consumption meets expectations”. Indeed, customer satisfaction is crucial for
successful application of the marketing concept. According to Sheth and Sisodia (2001),
successful customer relationship management implementation requires a committed
organizational wide in order to focus on significant customers in customized marketing
efforts to fully realize and fulfill their needs and wants on an enduring basis.

The seller’s entire organizational structure should be centered on customers, often with
customer-focused teams designed to create fully satisfying customer experiences. According

12
to Stefanou et al, (2003), successful customer relationship management activities must
cultivate customer satisfaction by continuously adapting to the evolving needs and wants of
customers.

Definition
Several authors have defined customer satisfaction in various ways:

 According to Kotler (2000), satisfaction is a person’s feeling of pleasure or

disappointment resulting from comparing a product’s perceived performance (or
outcome) in relation to his or her expectation.
 Gaither (1994) defines customer satisfaction as the determination of customer
requirements and demonstrated success in meeting them.
 Kotler (2006) again defined customer satisfaction by giving details on the attributes
of a highly satisfied customer. According to him, a highly satisfied customer stays loyal,
longer, and buys more as the company introduces new products and upgrades existing
products; talks favorably about the company and its products, pays less attention to
competing brands and is less sensitive to price, offers service or product ideas to the
company and costs less to serve him than new customers because transactions are routine.
 Kotler and Armstrong (2001) in their Principles of Marketing, define customer
satisfaction as the extent to which a product’s perceived performance matches buyer’s
expectations. They continued that, if the product’s performance falls short of
expectations, the buyer would be dissatisfied but if performance matches or exceeds
expectation, the customer will be satisfied or highly satisfied. In service equality
literature, customer expectations are understood as desires or wants of consumers
(Zeithaml, berry &Parasuraman 1993) or “what they feel the service provider should offer
rather than would offer” (Parasuraman et al., 1988). Customer perceptions are defined as
“the customer’s judgment of the service organization’s performance” (Parasuraman et al.,
1988).
 Customer satisfaction is a “psychological concept that involves the feeling of wellbeing
and pleasure that results from obtaining what one hopes for and expects from an
appealing product and/or service” (WTO, 1985);
 CS “as an attitude-like judgment following a purchase act or a series of consumer product
interactions.” (Lovelock&Wirtz, 2007);

13
 “Satisfaction is merely the result of things not going wrong; satisfying the needs and
desires of consumers.” (Besterfield, 1994);
 “Satisfaction is a person’s feeling of pleasure or disappointment resulting from comparing
a product’s performance (outcome) in relation to his or her expectation.”
(Kotler& Keller, 2006 p. 144).Again, CS may be described as a process or an outcome. One
area that has received considerable debate in customer satisfaction literature is whether
customer satisfaction should be defined as an outcome or a process. Many early definitions
conceptualized satisfaction as a process which is currently the dominant view held by most
scholars (Oliver, 1980, Parasuraman et al., 1988). The process perspective presupposes that
customer satisfaction is a feeling of satisfaction that results from the process of comparing
perceived performance and one or more predictive standards, such as expectations or desires
(Khalifa& Liu, 2002).

This perspective is grounded in the expectancy disconfirmation theory proposed by Richard

Oliver (Oliver, 1980). The customer is satisfied if the performance of product/service is equal
to his/her expectations and he/she is dissatisfied if the product/service performance is
perceived to be below his/her expectation (negative disconfirmation). If expectation exceeds
perceived performance, the customer is highly satisfied. By taking satisfaction as a process
these definitions do not focus on satisfaction itself but things that cause satisfaction, the
antecedents to satisfaction, which occur primarily during the service delivery process (Vavra,
1997).

Recent studies have found that satisfaction as an outcome or end result during the process of
the consumption of a service; it is viewed as a post-purchase experience (Vavra, 1997).This
view has its roots in motivation theories that postulate that people are driven by the desire to
satisfy their needs (Maslow, 1954) or that their behavior is directed at the achievement of
relevant goals (Vroom, 1964). In this way satisfaction is perceived as a goal to be achieved
and can be described as consumer fulfillment response (Rust &Oliver, 1994). In the context
of this study,

Customer satisfaction is defined from process perspective because the researcher believes
that in core banking arena, customers‟ evaluation of core banking service quality takes place
primarily during the service delivery process and continues, but not just an outcome that
customers strive to achieve.

14
2.8. Factors that cause Customer Satisfaction
A customer satisfaction an ambiguous and abstract concept. Actual manifestation of the state
of satisfaction will vary from person to person, product to product and service to service. The
state of satisfaction depends on a number of factors which consolidate as psychological,
economic and physical factors. The quality of service is one of the major determinants of the
customer satisfaction, which can be enhanced by using ICT available to survive (Vijay M. K.
2012).Several factors affect customer satisfaction.

The kinds of products that banks offer to its customers can cause customer satisfaction or
dissatisfaction. Consumers do not buy a product or service for its own sake. They buy to
acquire benefits that the product offers. They buy to satisfy a need. Products therefore exist
for what they fulfill in terms of consumer needs. It is the essential feature or benefit that the
buyer expects to receive from using the product that motivates buying behavior (Boateng,
1994).

The service delivery process also plays a key role in customer satisfaction. When the process
of service delivery is too long, it lengthens customer waiting time. According to (Sasraku,
2007), the physical evidence also plays a role in customer satisfaction. The physical evidence
includes the edifice or buildings and its decorations, an imposing banking hall with
comfortable seats, places of conveniences, etc. The office or building and its external and
internal decorations can satisfy a customer. The customer can pride him or herself as
customer of that bank. Another service element that causes customer satisfaction or
dissatisfaction is the people or the employees delivering the product or service (Covey,
2004).

The employees occupy the first point of contact with the customer. Employee behaviors are
therefore important to customers. If the employee is cold or rude the customer takes it as a
measure of the state of the company. Unhappy employees will have difficulty in keeping
customers happy (Dei-Tumi, 2005).Also, easy access to the bank premise would make a
customer feel happy in transacting business with a bank, for example, if the bank premise is
located on a high street. However, the nice edifice of a banking hall will not be noticeable if
customer service is poor and there are unnecessary delays and lack of personal support from
staff (Sasraku, 2007).

15
The technology being used by the bank in service delivery could be a source of satisfaction to
customers. When electronic devices like computers are used, they tend to speed up the
processing time of transactions. System and processes solely do no create satisfaction.
Service system quality, behavioral service quality, service transaction accuracy and machine
service quality are necessary to make the technology in use worthwhile(Aldlaigan&Buttle,
2002).

Furthermore, the security of customers and their deposits is an area of concern to

customers. When customers are assured of protection from external threats they feelsecured
and happy. For example, if a bank is situated at a place noted for criminal activities,
customers are scared and dissatisfied (Sasraku, 2007). Of course, the internal security is
equally important to customer who will want to deal with personnel with integrity and good
moral values especially, the financial institutions.

2.8.1 Empathy
Velnampy and Sivesan (2012) stated that empathy can be viewed as the ability to share,
understand and feel another person’s feelings in a relational situation. Thus, it is the
dimension of a business relationship that enables two parties to see a situation from the
other’s perspective. Empathy is the ability to see a situation from another person’s
perspective (Wang, 2007 cited in Taleghani et. al., 2011). Taleghaniet. al., (2011) added to
the above fact that empathy is defined as seeking to understand somebody else desires and
goals. Other writers also described to empathy (including access, communication,
understanding the customer) – as caring and individualized attention that the firm provides to
its customers (Kheng et. al., 2010). Therefore, Empathy is the care and importance the
service provider gives to an individual customer and the degree to which specific customer
needs and preferences can be understood and articulated (Loke, et.al, 2011).

2.8.2 Trust
Trust is defined as a belief or conviction about the other party’s intentions within the
relationship (Taleghani et. al., 2011). Thus, trust plays a major role in separating purely
economic actions from those that have a social nature such as with professional services.
Good relationships and trust are built over time, with give and take on both sides, and not too
much pressure (Rigby et. al, 2003). We conceptualize trust as existing when one party has
confidence in an existing partner’s reliability and integrity (Morgan and Hunt 1994). Trust
can lead to commitment, which can in turn lead to long-term cooperation between the two
sides involved in a relationship (Hunt and Morgan, 1994).

16
Trust is the “cornerstone” of long-term relationships (Jusˇcˇius and Grigaite, 2011). Trust is ".
. . a willingness to rely on an exchange partner in whom one has confidence" A betrayal of
this trust by the supplier or service provider could lead to defection (Ndubisi and Wah, 2005).
It means taking mutually agreed words as fact and reducing one’s perception of the likelihood
that either party will act opportunistically (Leung et al, 2005). Trust is defined as a belief or
conviction about the other party’s intentions within the relationship. In the context of
relationship marketing, trusts defined as the dimension of a business relationship that
determines the level to which each party feels they can rely on the integrity of the promise
offered by the other (Chattananon&Trimetsoontorn, 2009).

2.8.3. Tangibility
Those things which have a physical existence and can be seen and touched. In context of
service quality, tangibles can be referred to as insurance industries equipment, physical
facilities and their 19 appearance (ambience, lighting, air-conditioning, seating arrangement
and hazard assessment); and lastly but not least, the services providing personnel of the
organization (Blery et al., 2009). These tangibles are deployed, in random integration, by any
organization to render services to its customers who in turn assess the quality and usability of
this tangibility.

2.9. Customer Satisfaction in Banking Services Context

In contrast to products, customers are not really able to evaluate services before the service
process takes place. The interaction with the service provider and the customers, theso-called
service encounter, is the key in the evaluation of service performance (Gil, 2008). During
these encounters, the customer is able to get an impression of the way the company provides
its services. His/her service experience is defined by the interaction with the organization, the
processes and the employees. Accordingly, customer satisfaction is built upon the basis of
service encounters.
Service providers have significant opportunities to manage the interactions that together form
the experience (Wirtz, 1994). They can design and the interactive production process; select,
train and manage service employees; design and maintain the service environment;
selectively target, socialize and educate customers. In banking services, satisfaction is usually
conceptualized as a multidimensional construct (Manrai, L.A., Manrai, A.K., 2007). The list
of bank service attributes used for the measurement of satisfaction comprises elements like:
appearance of the facility, attitude and behavior of staff, decor and atmosphere, business
hours, interest rate, waiting time. Bank customers may regard some of these elements as
being not equally important as the others.

17
2.10. Empirical framework
A. Distinction between Service quality and Customer satisfaction
The literature on services has made a distinction between service quality and customer
satisfaction (Bitner, 1990; Bolton & Drew, 1991; Parasuraman et al., 1988 as cited inHarr,
2008). This differentiation is important for firms to concentrate on enhancing their capability
to satisfy customers through providing high service quality. The position of scholars
characterized by Parasuraman et al., (1988), is that “service quality involves an attitude and is
an evaluation over several service encounters overtime”.

It is also “thought to be an overall assessment about a service category or an organization”

(Parasuramanetal., 1988). “In support of this, respondents in Parasuramanet al., (1988) s
study demonstrated satisfaction with specific service encounters but were not happy with the
service quality of the firm. “conversely, recent thoughts on customer satisfaction is
summarized in the following definition of satisfaction by Oliver (1981) as “a psychological
state resulting when the emotion surrounding disconfirmed expectations is coupled with the
consumer’s prior feelings about the consumption experience”. Moreover, Oliver (1981)
distinguished customer satisfaction from service quality in his definition of attitude as “the
consumer’s relatively enduring affective orientation for a product, store, or process while
satisfactions the emotional reaction following a disconfirmation experience which acts on the
base attitude level and is consumption specific” (Oliver, 1981, p. 42).

Therefore, service quality is “more stable and is situational oriented” (Oliver, 1981, p. 42).

The two constructs are related in that service encounters of customer satisfaction overtime
result in perceptions of service quality (Oliver, 1981; Parasuraman et al., 1988).There is also
a lot of argument regarding whether customer satisfaction is the antecedent of service quality
or the outcome of service quality. “Initially, scholars take the position that satisfaction is an
antecedent of service quality since to reach an overall attitude (service quality) implies an
accumulation of satisfactory encounters” (Bitner, 1990;Bolton& Drew, 1991).

However, other scholars take the opposite view that service quality is the antecedent of
customer satisfaction (Cronin & Taylor, 1992; Ekinci, 2004;Rust& Oliver, 1994; Swan &
Bowers, 1998).Empirical research by Cronin & Taylor (1992) “showed that service quality
has a significant effect on customer satisfaction.” Similarly, recent studies by (González
&Brea, 2005; &Ekinci 2004) using recursive structural models provided empirical support
that service quality results in customer satisfaction. According to Zeithaml et al., (2006),
18
customer satisfaction “is a broader concept than service quality which focuses specifically on
dimensions of service”.

B. Relation between service quality and customer satisfaction

Private Banks dealing in retail banking Industry is consequently put into lot of pressures due
towards increase in global competition. Different strategies are formulated to satisfy and
retain the customer and the key of it is to increase the service quality level. Typically,
customers perceive very little difference in the banking products offered by private banks
dealing in services as any new offering is quickly matched by competitors.Parasuramanet.al
(1985) and Zeithaml et., al (1990) noted that the key strategy for the success and survival of
any business institution is the deliverance of quality services to customers.

The quality of services offered will determine customer satisfaction and attitudinal loyalty
(Ravichandran et al. 2010).Parasuraman, A.,ZeithmaI,V.A., &Berry,L.L.(1988) found that
the performance of the service provider on core and relational dimensions of services was an
important driver for customer satisfaction in retail banking. According to S. SIVESAN 2012,
there is positive linear relationship between the service quality and customer satisfaction.

19
2.11. Previous Studies
Research on quality of service currently has received special attention from marketing
researchers. Below is a summary of results of previous studies regarding the service quality
and its influence on satisfaction, published in various scientific journals.

Table 2.1. A summary of previous studies

Authors Authors Result
The four service quality dimensions
(tangibility, reliability, assurance,
5dimensions of SERVQUAL
and responsiveness) have a positive
(tangibility,Reliability,
Al-Hawary et al., (2011) and significant effect on customer
responsiveness, assurance and
satisfaction. Empathy has a negative
empathy.
and significant effect on customer
satisfaction.
Customers‟ satisfaction on
Biju K, core
Customers are satisfied on core
D.Devandhirn&Sreehari banking: A study with special
banking
R. (2012), reference to a nationalized
bank in THIRUNELVELI
The five service quality dimensions
Five dimensions of Service (tangibility, reliability,
Mohammad quality (tangibility, reliability, responsiveness, assurance and
and Alhamadan(2011) responsiveness, assurance and empathy) have a positive and
empathy) significant effect on customer
satisfaction.
Five dimensions of service The three service quality dimensions
quality(tangibility,reliability,re (assurance, empathy, and
Munusamyet al., (2010) responsiveness) have positive and
sponsiveness,assurance and
insignificant effect on
empathy) customer satisfaction. Tangibility
has a positive and significant impact
on customer satisfaction. However,
reliability has a negative and
insignificant effect on customer
satisfaction.

20

The Effect of Customer
Service
Tizazuk.2012 Quality on Customer
Satisfaction in
Selected Private Banks
There is positive and significant
relationship between Tangibility,
reliability,
assurance, empathy and customer
satisfaction. However, the results
also
indicate that, there is a negative and
insignificant relationship between
responsiveness and customer

Alternative Banking Channels There significant relationship

and between core
Vijay M.
Customers‟ Satisfaction: An banking and overall customer
Kumbha
Empirical Study of Public and satisfaction in
Private Sector Banks alternative banking.
The two dimensions of service
Malik et al., 5 dimensions of SERVQUAL quality
(2011) (tangibility) (reliability, assurance) have a
significant
Source: Own survey, 2022

21
2.12. Conceptual framework
Service Quality is a vital antecedent of customer's satisfaction (Cronin and Taylor, 1992).In
turn customer satisfaction is believed to affect post-purchase and perception and future
decisions. Following from the literature review done above, the relationship between service
quality variables and customer satisfaction can be shown as following. In this conceptual
model the Six Service quality dimensions have been selected form the study conducted by
Parasuramanet al., (1985) conducted research on different service organization (Bank,Hotel,
Electrical Corporation, Hospital, Transportation) by using ten service quality dimensions
(tangibility, reliability, responsiveness, communication, access, competence, courtesy,
credibility, security, and knowledge). Later Parasuraman et al., (1985) conducted research
and then the ten dimensions were further purified and developed into five dimensions
(tangibility, reliability, responsiveness, assurance and empathy).

The reason behind purified the ten dimensions into five dimensions was the appropriateness
of each service quality dimensions to different service organizations for example security
dimension is appropriate for transportation, credibility dimension is appropriate for hotel.
Therefore, this convinced me to use Parasuraman et al., (1988) ‟s model. On the other hand,
the conceptual model that is intended to show the relationship between Service quality and
customer satisfaction is developed by the researcher from different findings.
BijuK,D.Devandhiran&Sreehari R. (2012), on their research identified seven (7) core
banking factor that can be used as parameter to conduct research on Service quality.
Therefore, the researcher employs these factors to conduct this research.

22
 Independent variables Dependent variable

Tangibility

Reliability

Assurance
Customer
Satisfaction
Responsiveness

Empathy

Trust

Figure 2.1 Conceptual framework (Source: Own survey, 2022)

23
 CHAPTER THREE
RESEARCH METHODOLOGY
3.1. Description of the study area
The study was conducted in Hawassa city, which is located on the Northern part of the
newely formed Sidama National Regional State that is founds at a distance 273 K.M far from
Addis Abeba. It served as a capital of the Sidama Province from 1978 until 1995, after 1995
as South Nations Nationalities and Peoples Regional States’ and, after 2020, serving as a
Capital of both Sidama and South Nations Nationalities and Peoples Regional States’. The
City divided in to 8 sub-cities and 32 Kebeles, These Eight sub cities are Hayek Dare,
Menehariya, Tabore, Misrak, BahileAdarash, Addis Ketema, Hawela-Tula and Mehal sub
city.
According to 2017 data, Hawassa City projected a total population of 457,231, with annual
growth rates of 4.8 and 2.8 per cent in urban and rural areas, respectively.

According to EshetayehuKinfu, 2018, Hawassa is a five-decade-old emerging city that

characterizes the ongoing rapid urbanization and urban growth of Ethiopian cities. The City
lies on the Trans-African Highway to Cairo-Cape Town. The City had a giant infrastructure
of airport, industrial park; International hotels and Hawassa lake were served as a growth
pole for the regional economic development corridor. These make Hawassa as a business
center in the region and at national level. These attracted many business investments
including banks, micro-finance institutions and different insurance companies.

Figure 3.1: Location map of City of Hawassa

24
3.2 The Research Design
The study involved both qualitative and quantitative approaches of data collection there by
involving descriptive survey design, which could assist the study clearly explaining and
describing the state of affairs in the study area. The same author discusses three types of
research design, namely explanatory (emphasizes discovery of ideas and insights), descriptive
(concerned with determining the frequency with which an event occurs or relationship
between variables) and causal (concerned with determining the cause and effect
relationships).

The purpose of descriptive research design is describing the state of affairs as it exists at
present. An extensive review of the literature and previous studies was undertaken.
This was followed by a descriptive analysis of the cross-sectional primary data collection
through questionnaires to accomplish the objectives.
According to Creswell (2003), the primary criterion to be considered for selecting an
approach is the research problem. In view of this, quantitative researchers measure variables
on a sample of subjects and express the relationship between variables using effect statistics
such as correlations, relative frequencies, or differences between means, analysis of variance;
their focus is to a large extent on the testing of theory or understanding the best predictors of
outcomes (Hittleman& Simon, 1997).
The researcher used both qualitative and quantitative approaches to study factors affecting
customer satisfaction. Moreover, the study was cross-sectional survey data in the sense that
all relevant data was collected at a single point in time. The reason for preferring a cross-
sectional study is due to the vast nature of the study and the limitation of time. And obtaining
information from a cross-section of a population at a single point in time is a reasonable
strategy for pursuing many descriptive researches (Ruane, 2006).

3.3 Types and sources of Data

For this study, the main sources of data were both primary and secondary sources. Primary
data was collected from primary sources. The main primary source of this study which is
quantitative in its nature was collected from the customers of Commercial bank of Tesso
branch. The data was collected from selected sample respondents using questionnaire
methods as data collection instruments. Secondary data which is qualitative in its nature was
collected from secondary sources such as published journals, article, books, and written
documents through reviewing.

25
3.4 Population of the study
A population is a group of individuals, objects or items from which samples are taken for
measurement. It refers to an entire group of persons or elements that have at least one thing in
common (Kombo and Tromo, 2006).
The general population of this project was all customers of Commercial Bank of Ethiopia,
Tesso branch. Numerically, the total number of the branch customer (i.e. current and saving
account holder) is 22553 (current account 523& saving account22030).

3.5. Sample size and sampling techniques

The sampling technique that has been used for the study is probability sampling techniques.
In order to acquire sufficient information on both quality and quantity, the researcher was
employed stratified sampling techniques. Customers of the bank were classified in to
different groups (strata) based on their type. I.e. Current account holder and saving account
holder and customers from each group were selected as a respondent using random sampling
technique. The size of strata i.e. current account holder is 523 and the size of strata i.e. saving
accountholder 22030.
So that, three hundred ninety-five (395) respondents was selected. The researcher has
calculated the sample size by using Yamane (1967) formula. n=𝑁/ 1+N (e) 2

n=22,553/1+22,553(0.05)2 n= 395 Thus, sample size of 395 customers was selected from the
population of 22,553.

n= sample size, N=the total number of customers

e= error term.

n0=sample size for current account holders,

ni= sample size for saving account holders

To distribute this sample size to each stratum, the study used proportional sampling technique
the formula of which is as follows:

26
Table 3.1 Sample Size determination

Customer category Number of key customer(Ni) Sample taken from each customers
(n0=n. No/N)

Current Account holder 523 395.523/22553=10

Saving Account 22030 395.22030/22553=385

3.6. Data Collection Methods and Procedures

These are tools that are used to collect primary data for the study. For the purpose of this
study, a self-administered questionnaire was used to collect the relevant data. The
questionnaire was structured to reduce variability in the meaning possessed by the questions
and as a way of ensuring comparability of responses (Kothari, 2006). Structured
questionnaire used because they are simple to administer and relatively inexpensive to
analyze.
A pilot test of questionnaire was conducted to remove any inconsistencies and confirm the
suitability of the content, structure and design of the questions and the questionnaire. In order
to achieve the objectives of this research and effectively undertake data analysis in the later
stage of the research, a structured questionnaire used to collect information from the
respondents. Structured questionnaires are important as they could be aggregated in to
composite scale for statistical analysis (Kothari, 2004). A five-point Likert scale ranging from
“strongly disagree to strongly agree” have been used to record data from respondents.
The respondents were assured of confidentiality of their names and responses would not be
handed over any other person, but used purely for academic purposes.

3.7 Methods of Data analysis

To analyze data, statistical package for social science (SPSS) version-20 was used. For the
analysis of the primary data, descriptive and inferential statistical analysis techniques were
employed. With regards to the descriptive analysis, percentages, means, standard deviations
and frequencies was calculated. With regards to inferential statistics, correlation, as well as a
regression analysis was used to investigate the most important questions and objectives of
this study and to arrive at the core findings of the study.
The correlation analysis reports on the magnitude and direction of relationships between
variables in the study. A multiple linear regression analysis was employed to investigate the
extent of effects of the service quality on customer satisfaction.

27
3.8 Model specification
The model was built around two sets of variables, specifically dependent variable (Customer
satisfaction) and independent variables (Commitment, Reliability, Assurance,
Responsiveness, Empathy and Trust). The basic objective of using regression equation on this
study was to make the study more effective at describing, understanding and predicting the
stated variables.
The following regression model was formulated with six independent variables and one
dependent variable.
Y = β0 + β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + β6X6 + E
Where:

Y = Dependent variable – Customer Satisfaction.

β0 = Constant term

X1= Tangibility, X2=Reliability, X3=Assurance, X4 = Responsiveness, X5

=Empathy, X6= Trust

E = Disturbance or error term

β1, β2, β3, β4, β5, β6 = Coefficient of independent variables

3.9 Validity and Reliability data gathering instruments

3.9.1 Validity
The content validity of measuring instruments provides the assurance that the instruments
give adequate coverage of the construct under study (Kothari, 2004). Accordingly, its
determination is primarily judgmental and intuitive, and as a result the researcher validated
the content of the measuring instruments in the questionnaire through help from the research
advisor and discussion and reviews with peer researchers. The other type of validity, which is
construct validity, was validated through the analysis and calculation of Pearson Correlation.
With these validity tests and confirmations, the researcher is confident that the measuring
instruments were employed for the study was valid and have result in precise measurements.

28
3.9.2 Reliability
Table 3.2: Reliability test

Variables Cronbach’sAlha Number of items

Tangibility .784 9

Reliability .763 9

Assurance .792 9

Responsiveness .754 9

Empathy .719 9

Trust .834 9

Customer satisfaction .874 9

Collective of All .788 63

variable

Source: Own survey 2022

3.10 Ethical consideration

Some of expected principles of ethical behavior that are widely accepted with in scientific
community are: voluntary participation and harmlessness, anonymity and confidentiality,
disclosure analysis and reporting (Bhattacharjee, 2012). Therefore, the researcher has
attempted to consider these issues as follows.
Voluntary participation and harmlessness: subjects in research must be aware that their
participation in the study is voluntary, that they have the freedom to withdraw from the study
at any time without any problem, and they are not harmed as result of participation or non-
participation in the study. To this effect, the researcher gave freedom to the respondents and
they are exercised freely on the given questionnaire.
Anonymity and confidentiality: To protect the interest of participants and future well-being,
their identity must be protected in scientific study. This would be using the dual principle of
Anonymity and confidentiality. Anonymity implies the researcher or reader of final research
cannot identify a given response with a specific respondent. Confidentiality means the
researcher can identify a given response but promises not to divulge person’s identity in any
report.

29
Disclosure: usually, the researcher has an obligation to provide some information about his
or her study to potential subjects before data collection to help him or her decide whether or
not they wish to participate in the study. Guided by this principle, the researcher has to
disclose about the content and purpose of the study. Moreover, the benefit of the research
after finalization has to be well disclosed to the respondents.

30
 UNIT FOUR
DATA ANALYSIS AND INTERPRETATION
4.1 Introduction
This chapter presents the data analysis and the discussion of research findings. Both
descriptive, focusing on the description of the sample population as well as inferential
statistics, which makes inferences about the population based on the data from sample
population, are presented in this chapter. The data analysis was undertaken with the help of
computer statistical package for social science (SPSS V.20). The demographic profiles of the
study sample, effects of service quality on customer satisfaction are discussed in this chapter.

The collected data from the sample population of Tesso branch of commercial bank of
Ethiopia was screened and evaluated to achieve the objectives of the study.

A total of 395 questionnaires were distributed for customers of CBE Tesso branch in Ethiopia
out of which 384 were collected. However, only 384 questionnaires were usable to the
research which made the response rate 97%.Under this study, 384 respondents were involved
and out of these 11 questionnaires were not completely filled due to incomplete data and
these were rejected. Therefore, the study takes 384 questionnaires as valid input for the
analysis. The general information includes: Gender and age group of the respondents,
educational background and type of customer group. The demographics feature of the
respondents is illustrated in the following table.

31
4.2. Demographic characteristics of respondents
Table 4.1: Demographic profile of respondents

Demographic characteristics Frequency Percent

Gender
Male 250 65
Female 134 35
Total 384 100
Age in years
18-30 96 24
31-45 178 47
46-60 70 18
Above 61 40 11
Total 384 100
Educational level
Primary to 10 complete 90 23
Diploma 105 27
BA/BSC degree and above 124 33
Masters and above 65 17
Total 384 100
Frequency in using bank
Daily 103 27
Weekly 160 42
Twice a weekly 80 21
Monthly 41 10
Total 384 100
Service Type
Current account user 12 3
Saving account user 372 97
Total 384 100
Source: own survey 2022

32
As it can be seen from Table 4.1, the information of personal characteristics of the
respondents was given. As sex variable is concerned, 250 (65%) were males, whereas 134
(35%) were females. This implies that most of the respondents who participated in this study
were males.

As far as the age is concerned in table 4.1, most of respondents 178 (47%) fall with the age
range between 31-45 years, 96(24%) falls between 18-31, & 70(18%) fall between 46-60, 40
(11%) above 61 years. This implies that, most of respondents were found in the most
valuable age for the purpose age of this study.

As far as the educational level of the respondents is concerned, 105 (27%) Diploma holders,
120 (33%) were Degree holders and 65 (17%) degree and above. This implies that, most of
respondents who have been participated in the study were educated peoples. As a result, they
can give rational and highly considered responses to the study.

As far as marital status is concerned, 90(23%) respondents were primary to grade 10

completed, some of respondents are single 108 (26%) and some of them are married 245
(64%) and the others are 31 (10%). This implies that most of respondents are married and
they can give relevant information about the effects of service quality on customer
satisfaction.

As far as frequency in bank is concerned, some of respondents100 (27%) use banking service
daily, some of them 160 (42%) use baking service weekly and40 (10%) use the banking
service monthly. This implies that most of respondents use the banking service weekly and
they can provide the information about how service quality in banking sector affects
customer satisfaction.

As far as the type of service the respondents use is concerned, 372(97%) were saving account
users and 12(3%) of respondents were current account users. This implies that most of
respondents used as sample were saving account holders.

33
4.3 Descriptive analysis
The statistical approach of calculating and analyzing the mean and standard deviation of the
variable so interest in a study gives a good indication of the significance of the variables
under consideration. The mean indicates to what extent the sample population averagely
agrees or does not agree with the different statements. The higher mean, they or their
respondents agree with the statement. The standard deviation, which is ales presented, on the
other hand indicates the variability of an observed response from a single sample.

To evaluate the responses given to Likert sale, the following table is used for analysis of
responses given in Likert table.

Table 4.2: Likert scale ranges of values for analysis of mean score value:

No Mean Range Response option

1 (1.00-1.80) Strongly Disagree

2 (1.80-2.60) Disagree

3 (2.60-3.40) Neutral

4 (3.40-4.20) Agree

5 (4.20-5.00) Strongly Agree

Source: Al-Sayaad et al. (2006, Cited in Ayele, 2018

34
4.2.1 Analysis of reliability variable
Table 4.3: Reliability variable analysis

Items SDA DA N A SA
% % % % Mean SD
Banks fulfill its promise at the time 4.5 10.2 19 47.3 19 3.92 0.92
indicated
Banks perform the service exactly at the 8.3 12 17 48 14.7 3.87 1.03
first time
Bank show a keen interest in solving your 9 11.2 21 49.3 9.7 3.76 1.56
problems
Bank insist on error free record 12.5 7.1 13.6 42 24.8 3.70 1.54

Grand Mean 8.6 10.1 17.7 46.7 17 3.81 1.23

Source: Own survey 2022

In table 4.2, with the first item, the respondents were asked whether or not Banks fulfill its
promise at the time indicated. The result of study showed mean score value 3.92 with SD
0.92 which lies between mean score value 3.40 and 4.20.This implies that most of
respondents 47.3% were agreed with the statement provided because of in the study area, that
banks fulfill its promise at the time indicated.

In the light of the second item, the respondents were asked whether or not Banks perform the
service exactly at the first time. The result of study showed means score value 3.87 with SD
1.03 which lies between mean score value 3.40 and 4.20. This implies that most of
respondents 48% were agreed with the statement provided because of in the study area; banks
perform the service exactly on time.

As third item in the table is concerned, the respondents were asked whether or not banks
show a keen interest in solving your problems. The results of study showed mean score value
3.76 with SD 1.56 which lies between mean score range between 3.40 and 4.20. This implies
that most of respondents 49.3% were agreed with the statement provided because of in the
study area, banks show a keen interest in solving customers’ problems.

As far as the fourth item in the table 4.2 is concerned, the respondents were asked whether or
not bank insist an error free record. The results of study showed mean score value 3.70 with
SD 1.54 which lies between mean score range 3.40 and 4.20. This implies that most of

35
 respondents 42% were agreed with the statement provided because of in the study area; bank
insists an error free record.

As far as grand mean in the table 4.3 is concerned, the mean score value showed 3.81 with
SD 1.23 which lies between mean score value 3.40 and 4.20. This implies that indicating that
most of respondents 46.7% were agreed with the statements provided because of in the study
area; bank fulfills the items related with reliability.

4.2.2 Analysis of assurance variable

Table 4.4: Analysis of assurance variable

Items SDA DA N A SA
% % % % % mean SD
Bank’s staff behavior instills confidence in 13 10 22 41 14 3.61 1.12
me
I feel safe in my transaction with the bank 6.5 12.5 22 47 12 3.75 1.50
Bank’s staff are courteous with me 9.2 10 19 50.1 11.7 3.85 1.67
Bank’s staff have the knowledge to answer 14.5 10.2 20.3 46 9 3.86 1.58
all my question
I feel safe in my transaction with the bank 4 10.5 12.5 56 17 3.51 1.12

Grand Mean 9.3 8.5 19.2 48 12.4 3.7 1.4

Source: own survey 2022

In table 4.3, with the first item, the respondents were asked whether or not Bank’s staff
behavior instills confidence in them. The result of study showed men score value 3.61 with
SD 1.12 which lies the mean score range between 3.40 and 4.20. This implies that most of
41% were agreed with the statement provided. This implies that Bank’s staff behavior instills
confidence in them.

In light of second items the respondents were asked whether or not they feel safe in their
transaction with the bank. The result of study showed mean score value 3.75 with SD 1.50
which lies the mean score range value between 3.40 and 4.20. This implies that most of
respondents 47% were agreed with the statement provided because of in the study area,
consumers feel safe in their transaction with the bank.

As the third item in the table is concerned, the respondents were asked whether or not Bank’s
staffs are courteous with them. The result of study showed mean score value 3.85 with SD
1.67 which lies the mean score value between 3.40 and 4.20. This implies that most of
36
respondents 50.1% were agreed with the item provided because of in the study area, bank’s
staffs are courteous with the consumers.

In the view of the fourth item in the table, the respondents were asked whether or not Bank’s
staff have the knowledge to answer all questions. The result of study shown mean score value
3.86 with the SD 1.58 which lies the mean score range between 3.40 and 4.20. This implies
that most of respondents 46%were agreed with the statement provided because of in the study
area; banks ’staff have the knowledge to answer all questions of their customers.

As far as fifth item in the table is concerned, the respondents were asked whether or they feel
safe in their transaction with the bank. The result of study showed mean score value 3.51 with
SD 1.12 indicating that 56% of respondents were agreed with the statement provided because
of in the study area, consumers feel safe in their transaction with bank.

As far as grand mean in the table 4.4 here above is concerned, the grand mean score value
showed 3.7 with SD 1.4 which is located the mean score range value between 3.40 and 4.20.
This implies that most of respondents 48% were agreed with the statements provided because
of in the study area; bank fulfills the items related with assurance variable.

4.2.3. Analysis of responsiveness variable

Table 4.5: Analysis of responsiveness variable
Items SDA DA N A SA
% % % % % Mean SD
Bank’s staff tell you exactly the time 4.2 2.22 23.6 48.6 1.4 3.87 1.34
the service will be performed
Bank’s staff give your prompt 16.7 19.4 9.7 51.4 2.8 3.93 1.52
services
Bank’s staff always willing to assist 2.8 15.3 26.4 50.2 5.7 3.76 1.21
you
Banks staff are not too busy to 2.75 18.1 23.6 58.3 4.2 4.09 1.32
respond to my question
Bank’s staff tell you exactly the time 5.6 18.1 22.2 51 4.1 3.70 1.36
the service will be performed
Grand mean 6.11 17.6 21.1 51.9 3.64 3.87 1.35
Source: Own survey 2022

37
In table 4.5, with the first item, the respondents were asked whether or not Bank’s staff tell
them exactly the time the service will be performed. The result of study showed men score
value 3.87 with SD 1.34 which lies between mean score value 3.40 and 4.20.This implies that
most of respondents 48.6% were agreed with the statement provided because of in the study
area, Bank’s staff tell them exactly the time the service will be performed.

In light of second items the respondents were asked whether or not bank’s staff give to the
respondents prompt services. The result of study showed mean score value 3.93 with SD 1.52
which lies between mean score value range 3.40 and 4.20.This implies that most of
respondents 47% were agreed with the statement provided because of in the study area,
bank’s staff give to the respondents prompt services.

As the third item in the table is concerned, the respondents were asked whether or not bank’s
staff always willing to assist the customers. The result of study showed mean score value
3.76 with SD 1.21which lies the mean score value range 3.40 and 4.20. This implies that
most of respondents 50.1% were agreed with the item provided because of in the study area
bank’s staff always willing to assist you.

In the view of the fourth item in the table, the respondents were asked whether or not banks
staff are not too busy to respond to the question of respondents. The result of study shown
mean score value 3.86 with the SD 1.58 which lies between mean score value 3.40 and
4.20.This implies that most of respondents 46%were agreed with the statement provided
because of in the study area, banks staff are not too busy to respond the question of
respondents.

As far as fifth item in the table is concerned, the respondents were asked whether or not
bank’s staff tell to the customers exactly the time the service will be performed. The results
of study showed mean score value 3.70 with SD 1.22 which lies between the mean score
range values 3.40 and 4.20. This implies that most of respondents 51% were agreed with the
statement provided because of in the study area, bank’s staff to the customers exactly the time
the service will be performed.

As far as grand mean in the table 4.5 here above is concerned, the grand mean score value
showed 3.87 with SD 1.35 which lies between the mean score range 3.40 and 4.20. This
implies that most of respondents51.9% was agreed with the statements provided because of in
the study area; bank fulfills the items related with responsiveness variable.

38
4.2.4. Analysis of empathy variable
Table 4.6: Analysis of empathy variable
Items SDA DA N A SA
% % % % % Mean SD
Banks give me individual attention 7.5 22.1 5 41 24.4 3.65 0.93
Bank operating hours convenient to 5 32 15.9 40.1 7 3.78 1.21
me
The bank has my interest at heart 9 2 16 49.5 23.5 3.54 1.10
Bank’s staff understand my specific 12 19 7.2 50 11.8 3.66 1.00
needs
Grand mean 8.4 18.8 11 45.1 16.7 3.65 1.05
Source: own survey 2022
In the table 4.6 with the first item, the respondents were asked whether or not Banks give
them individual attention. The result of study showed means score value 3.65 with SD 0.93
which lies between the mean score range values 3.40 and 4.20. This implies that 41% were
agreed with the statement provided because of in the study area, Banks give customers
individual attention.

In the light of the second item, the respondents were asked whether or not Bank operating
hours convenient to them. The result of study showed mean score value 3.78 with SD
1.21which lies between the mean score range values 3.40 and 4.20. This implies 40.1% were
agreed with the item because of in the study area Bank operating hour is convenient to the
customers.

In the view of the third item in the table, the respondents were asked whether or not the bank
has my interest at heart. The result of study showed mean score value 3.54 with SD 1.10
which lies between the mean score value range 3.40 and 4.20. This implies that most of
respondents 50% were agreed with the statement provided because of in the study area; the
bank has customers’ interest at heart.

As the fourth item in the table is concerned, the respondents were asked whether or not
bank’s staff understand their specific needs. The result of study showed man score value 3.66
with SD 1.00 which lies between the mean score range values 3.40 and 4.20. This implies
that most of respondents 49.5% were agreed with the statement provided because of in the
study area; bank’s staffs understand specific needs of customers.

39
 As far as grand mean is concerned in the table 4.6 here above, the mean score value showed
3.65 with SD 1.05 which lies the mean score range between 3.40 and 4.20. This implies that
most of respondents 45.1% were agreed with the items provided regarding to empathy
variable.

4.2.5. Tangibles
Table 4.7: Analysis of Tangibles variable

Items SDA DA N A SA
% % % % % Mean SD
The bank's employees have a neat & 3.7 15 14.5 52.9 13.9 3.55 1.34
professional appearance
Material associated with the 7.5 13.2 10 58.5 10.8 3.42 0.78
service like pamphlets; statements are
visually
appealing at the bank
Bank physical facilities visually nice 5.5 12.5 14.7 48.2 19.1 3.45 1.13
Banks has modern equipment & tools 6.9 18.5 26.4 47.2 1.4 3.89 1.10
Grand mean 5.9 14.8 16.4 52 11.3 3.6 1.1
Source: Own survey 2022

In the table 4.7, with the first item, the respondents were asked whether or not the bank's
employees have a neat & professional appearance. The result of study showed mean score
value 3.55 with the SD 1.34 which lies between mean score range value 3.40 and 4.20. This
implies that most of respondents 52.9% were agreed with the statement provided because of
in the study area; the bank's employees have a neat & professional appearance.

In the view of the second item in the table here above, the respondents were asked whether or
not material associated with the service like pamphlets; statements are visually appealing at
the bank. The results of the study showed mean score value 3.42 with SD 0.78 which lays
between the mean score range values 3.40 and 4.20. This implies that respondents 58.5%
were agreed with the statement provide because of in the study area material associated with
the service like pamphlets; statements are visually appealing at the bank.

In the light of the third item in the table above, the respondents were asked whether or not
bank physical facilities visually nice. The results of study showed mean score value 3.45 with
SD 1.13 which lies between the mean score range values 3.40 and 4.20. This implies that
40
 most of respondents48.2% was agreed with the item provided because of in the study area,
bank physical facilities visually nice.

As the fourth item in the table here above is concerned, the respondents were asked whether
or not banks have modern equipment & tools. The result of study showed mean score value
3.89 with SD 1.10 which lies between the mean score range values 3.40 and 4.20.This
implies that most of respondents 47.2% were agreed with the item provided because of in the
study area, banks have modern equipment & tools.

As far as the grand mean is concerned in the table 4.7 here above, the grand mean value
showed 3.6% with SD 1.1 which lies the mean score range values 3.40 and 4.20 This implies
that most of respondents 52% were agreed with the statements provided regarding to
Tangible’s variable.

4.2.6. Analysis of trust variable

Table 4.8: Analysis of Trust variable

Items SDA DA N A SA
% % % % % Mean Sd
Bank provide needed service on time 13 40.8 19 14 13.2 2.57 1.54
Bank is trustworthy to show different 8 56.5 12 10 13.5 2.49 0.98
transactions
Bank provides all your needs quickly 13 42 10.3 17.3 2.4 2.60 1.43
Bank is okay to handle your materials 14 47.3 12 9 17.7 2.55 1.20
when you go to them to get their services
Grand mean 12 58.4 17.8 11.8 11.7 2.56 1.30
Source: Own survey 2022

As the first item in the table 4.8 is concerned here above, the respondents were asked whether
or not bank provide needed service on time or not. The results of study showed mean score
value 2.57 with SD 1.54 which lies between mean score value 1.80 and 2.60. This implies
that most of respondents 40.8% were disagreed with the item provided because of in the
study area, bank do not provide the needed service on time.

In the light of the second item in the table here above, the respondents were asked whether or
not bank is trustworthy to show different transaction. The result of study showed mean score

41
value 2.49 with SD 0.98 which lies between mean score value 1.80 and 2.60. This implies
that most of respondents 56.5% were disagreed with the statement provided because of in the
study area; bank is not trustworthy to show different transactions.

As the view of the third item on the table, the respondents were asked whether or no banks
provide all their needs quickly. The results of study showed mean score value 2.60 with SD
1.43 which lies between mean score value 1.80 and 2.60. This implies that most of
respondents 42% were disagreed with the statement provided because of in the study area,
bank do not provide all their needs quickly.
As the fourth item in the table 4.8 is concerned here above, the respondents were asked
whether or not bank is okay to handle your materials when you go to them to get their
services. The results of study showed mean score value 2.55 with SD 1.20, which lies
between mean score value 1.80 and 2.60. This implies that most of respondents 47.3% were
disagreed with the item provided because of in the study area bank is not okay to handle
materials of customers when they go to them to get their services
As far as grand mean in the table 4.8 is concerned, the mean value showed 2.56 with SD
1.34, which lies between mean score value 1.8 and 2.60. This implies that most of
respondents 58.4% were disagreed with the statements provided regarding to trust variable,
because of in the study area, the bank is not fulfilling the items related with trust variable.

4.2.7. Analysis of customer satisfaction

Table 4.9: Analysis of customer satisfaction

SDA DA N A SA
Items % % % % % Mean SD
I am satisfied with the banks complete 6.9 16 20.8 45.8 9.7 3.43 1.42
range of service
I am satisfied with the performance of the 12.5 20.8 29.2 34.7 2.8 4.09 1.35
employees of this bank.

I am satisfied of being a client of this 20.9 12.3 26.4 37.5 2.7 4.10 1.32
bank.
I am satisfied with the bank employees‟ 1.35 13.9 25 47.1 18.1 4.20 0.81
professional competence

I am satisfied with the quick service of 1.4 23.6 27.8 41.6 5.6 4.19 1.31
this bank.
I am satisfied with the respectful 1.5 11.1 30.6 38.9 18.2 4.13 0.72
behavior of employees.

General Satisfaction towards service 2.8 5.4 22.2 40.2 29.2 4.20 1.11
quality of this bank.
Grand mean 6.8 24.1 26 41 12.3 4.05 1.22
Source: Own survey, 2022

42
In the table 4.9, in the view of the first item, the respondents were asked whether or not they
are satisfied with the banks complete range of service. The results of study showed mean
score value 3.43 with SD 1.42. This implies that most of respondents45.8%was agreed with
the statement provided because of in the study area; customers are satisfied with the banks
complete range of service.

In the view of the second item in the table 4.9, the respondents were asked whether or not
they are satisfied with the performance of the employees of this bank. The results of study
showed mean score value 4.09 with SD 1.35 which lies between mean score range 3.40 and
4.20. This implies that most of respondents 37.4% were agreed with the statement provided
because of in the study area; customers are satisfied with the performance of the employees
of this bank.

According to the third item in the table, the respondents were asked whether or not they are
satisfied of being a client of this bank. The result of study showed mean score value 4.00 with
SD 1.32 which lies between the mean score value range 3.40 and 4.20. This implies that most
of respondents 37.5% were agreed with the statement provided because of in the study area,
the customers satisfied of being a client of this bank.

As the fourth item in the table is concerned, the respondents were asked whether or not they
are satisfied with the bank employees‟ professional competence. The result off study showed
mean score value 4.20 with SD 0.81 which lies between the mean score value range 3.40 and
4.20. This implies that most of respondents 47.1% were agreed with the item provided
because of in the study area; customers are satisfied with the bank employees‟ professional
competence.

In case of fifth item in the table, the respondents were asked whether or not they are satisfied
with the quick service of this bank. The results of study showed mean score value 4.19 with
SD 1.31 which lies between mean score value 3.40 and 4.20. This implies that most of
respondents 38.9% were agreed with the item provided because of in the study area;
customers are satisfied with the quick service of this bank.

As the sixth item in the table is concerned, the respondents were asked whether or not they
are satisfied with the respectful behavior of employees. The result of study showed mean
score value 4.13 with SD 0.72 which lies between the mean score value 3.40 and 4.20. This
implies that most of respondents 40.2% were agreed with the statement provided because of
in the study area, customers satisfied with the respectful behavior of employees.

43
As the seventh item in the table 4.19 is concerned in the table, the respondents were asked
general Satisfaction towards service quality of this bank. The results of study showed mean
score value 4.20 with SD 1.11 which lies between mean score value 3.40 and 4.20. This
implies that most of respondents 48.6% were agreed with the statement provided because of
in the study area, customers have general Satisfaction towards service quality of this bank.
As far as grand mean in the table 4.19 here above is concerned, the mean score value showed
4.05 with SD 1.22 which lies between mean score range value 3.40 and 4.20. This implies
that most of respondents 41% were agreed with the statements provided because of the bank
fulfills the items related with dependent variable, which is customer satisfaction

4.3 Inferential statistics

To establish the relationship between the independent variable (reliability, assurance,
responsiveness, empathy and tangibles and Trust) and the dependent variable of the study, an
inferential analysis which involved the coefficient of determination and multiple regression
analysis were carried out. The inferential analysis was utilized in this study to determine if
there was a relationship between the variables, as well as the strength of the relationship. The
inferential statistics analysis aimed to reach conclusion that extend beyond the immediate
data alone between the independent variables in this study which included reliability,
assurance, responsiveness, empathy and tangibles and Trust. To quantify the strength of the
relationship between variable, the researcher used spearman’s correlation coefficient. The
correlation between the study variables and the finding were presented in the Table 4.11.
Stating only the relationship is not enough as if it may involve both dimensions from zero
(negative zero itself or positive). Therefore, to know the strength and type of correlation
between the variables, the following table set as a rule of thumb for the discussion of this
thesis.

4.3.1. Range of the coefficient to analyze score values

Table 4.10: Range of the coefficient

No Range of coefficient Description of the strength

1 +/-0.80 to +/-1.00 Very strong
2 +/-0.61 to +/-0.8 Strong
3 +/- 0.41 to +/-0.6 Moderate
4 +/-0.21 to +/-0.4 Weak
5 +/-0.00 t0 +/-0.2 No relation
Source: Bhattarjee, 2012: cited in Ayele, 2018

44
 4.4. Spearman’s Rank Correlation Coefficient
To quantify the strength of the relationship between the variables, the researcher used
Spearman’s coefficient of correlation. The researcher used the spearman’s coefficient (P) to
study the correlation between the study variables, and the finding was presented as in the
table below.
Table 4.11: Correlation between pairs of independent and dependent variables

Customer Reliab Assur responsi Empat Tangi Trust

satisfactio ility ance veness hy bles
n
Spe Customer
arm satisfaction Correlation 1.000 .771** .654** .672** .624** .655** .677**
an’s coefficient
coef Sig. . .000 .000 .000 .000 .000 .001
ficie (2-tailed)
nt N 384 384 384 384 384 384 384
Reliability Correlation .665 1.000 .575** .472** .423** .457** .425**
coefficient
Sig. .000 . .000 .000 .000 .002 .000
(2-tailed)
N 384 384 384 384 384 384 384
Assurance Correlation .672** .385 1.000 .488 .545 .551 .332
coefficient
Sig. .000 .002 . .000 .001 .000 .000
(2-tailed)
N 384 .384 384 384 384 384 384
Responsive Correlation .774** .433 .463 1.000 .563 .335 .441
ness coefficient
Sig. .000 .000 .001 . .000 .003 .000
(2-tailed)
N 384 384 384 384 384 385 384
Empathy Correlation .755** .573 .336 .349 1.000 489 .491
coefficient
Sig. .000 .000 .000 .003 . .001 .000
(2-tailed)
N 384 384 384 384 384 384 384
Tangibles Correlation .642** .441 .328 .379 .497 1.000 .498
coefficient
Sig. .000 .000 .000 .000 .002 . .000
(2-taled)
N 384 384 384 384 384 384 384
Trust Correlation .353** .553 .454 .564 .536 .432 1.000
coefficient
Sig. .000 .000 .000 .000 .000 .004 .
(2-tailed)
N 384 384 384 384 384 384
**. Correlation is significant at 0.01 level (2-tailed)
*. Correlation is significant at 0.05 level (2-tailed)
Source: survey 2022

45
As it can be seen from Table 4.11 here above, there is strong, positive, and significant
relationship between predictor variables (Reliability, Assurance, Responsiveness, Empathy,
and Tangibles) and dependent variable (Customer satisfaction) except Trust variable.

4.4.1. Multiple Regression Analysis

Prior to running analysis of multiple regression models, it is necessary to assess whether the
collected data violate some key assumptions of the standard linear regression models because
an assumption violation can result in distorted and biased parameter estimates. The
assumptions include sample size, normality, multiple linearity, homoscedasticity, and
independence of residual crucial to confirm them.

Assumption 1 – Linearity Relationship

The first assumption for computing multiple regressions is testing of the linear relationship
between dependent and independent variables. This means that, a unit increase of the one or
all independent variables cause respective increment for the customer satisfaction of the
company. For this study, the independent variables of study have linear relationship with
dependent variable.

Assumption 2 – Normality Test

To check whether the residuals have a normal distribution, scatter plots of residuals against
each independent variable were analyzed (i.e., as histogram was used).

Histogram residual is a simple graphical tool that is used to learn something about the shape
of probability density function of random variables. On the horizontal axis, the values of the
variable of interest (OLS residuals) are divided in to stable intervals, and in each class
interval rectangles are erect equal in height of number of observations in that class interval. If
the residuals are normally distributed, around mean value of zero the histogram is bell
shaped. The shape of histogram shown below in fig 4.1 revealed that the residuals are
normally distributed around its mean zero.

46
 Normality Test

Fre q. Dependent Variable: Customer satisfaction

80-
Mean=0.00
60 SD=.019
N=384

40

20

p -4 -3 -2 -1 0 1 2 3 4
Figure.4.1: Normality test (Source: Own survey 2022)

Assumption 3 – Multicolinearity of the variables

According to Field (2009) if there is perfect colinearity between the independent variables, it
is impossible to obtain unique estimate of regression coefficients because there are an infinite
number of combinations of coefficient that would work equally well. Multicolinearity can be
controlled by two ways: tolerance values and Values of variance of inflation factor (VIF).
Any variable with tolerance below 0.20 or VIF with a value above 10.0 would have a
correlation more than 0.90 with other variables, indicative of multi colinearity problem.

The tolerance is calculated with an initial linear regression analysis. Tolerance is defined as
T=1-R2 for the first step regression analysis. With T<0.2 there might be multi colinearity
problem in the data. And the variance inflation factor of the linear regression is defined as
VIF=1/T. similarly, with VIF>10, there is signal that multi colinearity problem exists.
According to Table 4.12, the present study reveals that the value of tolerance is more than 0.2
and value VIF is less than 10, this indicates the fitness of the models in explain in explaining
the factors affecting customer satisfaction.

47
Table 4.12: Multicolinearity Test

Model Co linearity statistics

T Significance Tolerance VIF
Constant 6.231 .000 - -

1 Reliability 4.712 .003 .817 2.480

2 Assurance 4.853 .001 .776 2.657

3 Responsiveness 5.883 .000 .879 2.207

4 Empathy 4.442 .002 .726 2.481

5 Tangibles 5.752 .000 .616 2.372

6 Trust 5.218 .000 .912 2.109

Source: Own survey 2022

Prior to conduct regression analysis, it was crucial to look in to the problem of multico
linearity or association among the independent variables. The variance inflation factor (VIF)
is a measure of multicolinearity among continuous independent variables. For multico
linearity to be a good or less, the tolerance value should be greater than 0.2 and VIF should
not exceed 10.00. As a rule of thumb, if the mean VIF is of variable exceed 10, it is an
indication of the existence of multicolinearity problem. The above result in Table 4.12 shows
that the co linearity between independent variables is greater than 0.2 and VIF is less than 10.
As a result, analysis conducted in the table, there is no multicolinearity problem between the
independent variable of the study.

4.4.2 Model Summary

Table 4.13: Model summary of coefficient of determination.
Model R R-Square Adjusted R-Square Std. Error of the Estimate
1 .894 .876 .867 .32046
Source: 2022
As it can be seen from table 4.13, “R” has the value of .894. It is a multiple correlations
coefficient between dependent and independent variables of the study. According to Field
(2005), “R” represents the value of multiple correlation coefficients between the predictor
and outcome. Therefore, “R” value represents simple correlation between customer
satisfaction and independent variables. And they all have strong correlation except Trust.

48
The value of R square is a measure of how much variability in the outcome is accounted for
by the independent variables. The result shows that a value of R square is .876 which implies
that 87.6 percent of variation was caused by the considered independent variables. .876 R
square value means that the total variation in the dependent variable is explained or caused by
87.6% of the change in all independent variables: reliability, assurance, responsiveness,
empathy, tangibles and trust. In other words, 12.4% of the variation in customer satisfaction
cannot be explained by these six independent variables.

It is explained by other extraneous variables which are not included in this study. Positivity
and significance of most values shows that the model summary is also significant and
therefore gives logical support to the study model.

An ANOVA Table is then produced which tests the significance of the regression model. The
following table shows the details of the significance of the regression model of the current
study.

Table: 4.14: ANOVA

Model Sum of squares Df Mean square F Sig.

1 Regression 8.139 6 1.163 144.865 0.000
Residual 1.180 148 0.008
Total 9.319 154
Dependent variable Customer satisfaction
Independent Reliability Assurance, Responsiveness, Empathy, Tangibles, Trust
variables
Source: Own survey, 2022

The lower the ANOVA table variance or significance number, the better the fit. Generally, if
“sig” is greater than 0.05, the researcher concluded that the model could not fit the data.
Accordingly, in order to fit the model and the data the ‘sig’ result should be less than 0.05.
Therefore, the researcher results that the overall significance of the model in the above
ANOVA table is fit at ‘sig’ of 0.000. So that a researcher concluded that the model could fit
the data.

49
4.4.3 Regression Analysis
To confirm a basic assumption of multiple liner regressions, which is the absence of high
correlations between independent variables, normality, and colinearity statistics were
calculated during the data analysis.

Table 4.15: Regression analysis

Unstandardized coefficients Standardized T Sig.

Model coefficients
Β Std. Error Beta
Constant 2.090 .187 - 7.699 .000
Reliability .143 .047 .283 2.357 .003
Assurance .157 .024 .381 3.032 .004
Responsiveness .373 .034 .417 5.275 .000
Empathy .020 .032 .032 .459 .029
Tangibles .153 .057 .341 4.592 .015
Trust .047 .036 .029 .356 .125
Source: Own survey 2022

According to Table 4.18, coefficient of regression shows relationship between independent

variables: Reliability, Assurance, Responsiveness, Empathy, Tangibles and Trust on
Customer satisfaction.

Each of the beta values has an associated standard error indicating to what extent these values
would vary across different samples, and these standard errors are used to determine whether
or not beta values differ significantly from zero. The T-test associated with p-value is
significant (if the value in the column labeled sig. is less than 0.5), if the predictor is making
significant contribution to model. The smaller the value of Sig (the larger the value of T), the
greater the contribution of that predictor. For this model, the T-value and associated p-value
are given as follows: Reliability (2.357, p<.05), Assurance (2.032, p<.05), Responsiveness
(5.257. p<0.5), Empathy (.459, p<05) Tangibles (4.592, p<.05) and Trust (.356, p>.05).

The coefficient of independent variables or their Beta weights presented in table 4.15 above
are heavily relied on to assess the importance of the independent variables in explaining the
variation in the dependent variable. These weights indicate the expected score difference in
dependent variable because one unit change from specific independent variable with all other
independent variables being constant (Johnson, 2004).

50
And the magnitude of relationship between these independent variables and customer
satisfaction is predicted using the standardized Beta values.

Beta Coefficient

To compare different variables, it is important that you look at the standardized coefficient,
not the unstandardized coefficient. “Standardized” means that these values for each of
different variables have been converted to the same scale so that you can compare them. If
you were interested in constructing a regression equation, you would use the unstandardized
coefficient values listed as B (Pallant, 2016).

unstandardized coefficient

By recalling the model specifications of the variables from chapter three of methodology part,
it was said that the unstandardized coefficients (B1 up to B6) are the coefficients of the
estimated regression model. Hence, the model of customer satisfaction can be written by Y
and including error term (e), in the form here under.

Y = β0 + β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + β6X6 + E

Where, y = Dependent variable (customer satisfaction).

B0= a constant term

β1 = unstandardized regression coefficient of Reliability

β2 = unstandardized coefficient of Assurance

β3 = unstandardized coefficient of Responsiveness

β4 = unstandardized coefficient of Empathy

β5 = unstandardized coefficient of Tangibles

β6 = unstandardized coefficient of Trust.

Taking in to consideration the result of table 4.15, the regression equation for the customer
satisfaction of the study was as follows:

Y = 2.090+0.143(X1)+0.157(X2)+0.337(X3)+0.200(X4)+0.153(X5)+0.047(X6)+0.187(E)

Interpretations:

Keeping all other things constant:

51
For every one-unit increase Reliability, the percentage of customer satisfaction increased by
14.3 percent. For every one unit increase in Assurance, the percentage of customer
satisfaction increased by 15.7 Percent. For every one unit increase in Responsiveness, the
percentage of customer satisfaction increased by 37.3 percent. For every one unit increase in
Empathy, the percentage of customer satisfaction is increased by 20 percent for. For every
one unit increase in Tangibles, the percentage of customer satisfaction is increased by 15.3
percent. For every one unit increase in Trust, the percentage of customer satisfaction is
increased by 4.7 percent.

4.5 Hypothesis Testing and Interpretation of Results

Table 4.21: Hypothesis testing for customer satisfaction.

Hypothesis Result Reason

H01: Reliability has no significant effect on customer H0: Rejected B = 0.143
satisfaction in the study area. P<0.05
H02: Assurance has no significant effect on customer H0: Rejected B = 0.157
satisfaction in the study area. P<0.05
H03: Responsiveness has no significant effect on customer H0: Rejected B = 0.373
satisfaction in the study area. P<0.05
H04: Empathy has no significant effect on customer H0: Rejected B = 0.020
satisfaction in the study area. P<0.05

H05: Tangibles has no significant effect on customer H0: Rejected B = 0.153

satisfaction in the study area. P<0.05
H06: Trust has no significant on customer satisfaction in the H0:Accepted B = 0.047
study area. p>0.05
Source: Own survey 2022

H01:Ho1: Reliability has no significant effect on customer satisfaction in the study area.

The result of multiple regression analysis in Table 4.15 indicated that Reliability has a
significant effect on the customer satisfaction with a p value of 0.003. In addition, the value
of beta 0.143 indicating that the positive influence of the Reliability on customer satisfaction.
This implies that one percent increase in product quality results in 14.3 percent increase on
customer satisfaction. Hence, the proposed hypothesis (H01) is rejected.

52
H02: Assurance has no significant effect on customer satisfaction in the study area.

The result of regression analysis in the Table 4.15, indicate that assurance has significant
effect on customer satisfaction with a p value of 0.004. In addition, the value of beta 0.157
indicating the positive influence of assurance on customer satisfaction. This implies that one
percent increase in assurance results in 15.7 percent increase in customer satisfaction.
Therefore, the proposed Hypothesis (H02) is rejected.
H03: Responsiveness has no significant effect on customer satisfaction in the study area

The result of regression analysis in the Table 4.15showed that Responsiveness has significant
effect on customer satisfaction with a p value of 0.00.In addition, the value of beta 0.373
indicating that the positive influence of Responsiveness on customer satisfaction. This
implies that one unit increase in Responsiveness results in 37.3 percent increase in customer.
Therefore, the proposed hypothesis (H03) is rejected.

H04: Empathy has no significant effect on customer satisfaction in the study area.

As Table 4.15, the regression analysis showed that the Empathy has insignificant effect,
which is less than five percent, customer satisfaction with a p value of 0.029. In addition, the
value of beta 0.200 indicating that positive influence of Empathy on customer satisfaction.
This implies that one unit increase in Empathy results in 20 percent increase in customer
satisfaction. Therefore, the proposed hypothesis (HO4) is rejected.

H05: Tangibles has no significant effect on customer satisfaction in the study area.

As stated in Table 4.15, the regression analysis showed that, the Tangibles has significant
effect on customer satisfaction with a p value 0.153. In addition, the value of beta 0.153
indicating that positive influence of Tangibles on customer satisfaction. This implies that one
unit increase on Tangibles increases 15.3 percent of customer satisfaction. Therefore, the
proposed hypothesis is (H05) Rejected.

H06: Trust has no significant effect on customer satisfaction in the study area in the study
area.

The result of regression analysis in Table 4.15 showed that, Trust has no significant effect on
customer satisfaction with a p value 0.125. In addition, the value of beta 0,047 indicating that
negative influence of Trust on customer satisfactions. This implies that, one unit increase in
Trust increases 4.7 percent on customer satisfaction. Therefore, the proposed hypothesis
(H06) is accepted.

53
 UNIT FIVE
SUMMARY, CONCLUSSIONS AND RECOMMENDATIONS
5.1 Summary of finding
This chapter deals with the summary of findings, conclusions drawn from the findings and
the recommendations forwarded for improvement in services delivery process of tesso branch
under study. The recommendations cover the importance of improving on those dimensions
in which CBE got inferior score and also to keep working on the superior scored dimensions.
The chapter is presented under the headings: summary of findings, conclusion, and
recommendation.

The method resulted in a conceptual model based on adoption of SERVQUAL and

WEBQUAL models. The variables included under SERVQUAL model were: reliability,
Assurance, Responsiveness, Empathy and Tangibility variable included and under
WEBQUAL model was Trust as independent variables influencing customer satisfaction. The
Tesso Branch customers of CBE were taken as the sampling frame and respondents were
selected using convenience sampling and the formula developed by Yamane in 1967 was
used to select respondents.

Descriptive techniques were used to analyze the primary data collected structured
questionnaires from customers of Bank under investigation. This analysis showed the
significance and importance of the six variables in describing and effects of service quality on
customer satisfaction. The influencing variables except Trust were found to be significantly
influencing customer. The data analysis was undertaken with the help of computer statistical
package for social science (SPSS V.20).

As it can be seen from Table 4.1, the information of personal characteristics of the
respondents was given. As sex variable is concerned, 250 (65%) were males, whereas 130
(35%) were females. This implies that most of the respondents who participated in this study
were males.

54
As far as the age is concerned in table 4.1, most of respondents 178 (47%) fall with the age
range between 31-45 years, 92(24%) falls between 18-31, & 70(18%) fall between 46-60,

40 (11%) above 61years. This implies that, most of respondents were found in the most
valuable age for the purpose age of this study.

As far as the educational level of the respondents is concerned, 105 (27%) Diploma holders,
120 (33%) were Degree holders and 65 (17%) degree and above. This implies that, most of
respondents who have been participated in the study were educated peoples. As a result, they
can give rational and highly considered responses to the study.

As far as marital status is concerned, 90(23%) respondents were primary to grade 10

completed, some of respondents are single 108 (26%) and some of them are married 245
(64%) and the others are 31 (10%). This implies that most of respondents are married and
they can give relevant information about the effects of service quality on customer
satisfaction.

As far as frequency in bank is concerned, some of respondents100 (27%) use banking service
daily, some of them 160 (42%) use baking service weekly and 40 (10%) use the banking
service monthly. This implies that most of respondents use the banking service monthly and
they can provide the information about how service quality in banking sector affects
customer satisfaction.

As far as the type of service the respondents use is concerned, 372(98%) were saving account
users and 8(2%) of respondents were current account users. This implies that most of
respondents used as sample were saving account holders.

As far as grand mean in the table 4.3 is concerned, the mean score value showed 3.81 with
SD 1.23 which lies between mean score value 3.40 and 4.20. This implies that indicating that
most of respondents 46.7% were agreed with the statements provided because of in the study
area; bank fulfills the items related with reliability.

As far as grand mean in the table 4.4 here above is concerned, the grand mean score value
showed 3.7 with SD 1.4 which is located the mean score range value between 3.40 and 4.20.
This implies that most of respondents 48% were agreed with the statements provided because
of in the study area; bank fulfills the items related with assurance variable.

55
As far as grand mean in the table 4.5 here above is concerned, the grand mean score value
showed 3.87 with SD 1.35 which lies between the mean score range 3.40 and 4.20. This
implies that most of respondents 51.9% were agreed with the statements provided because of
in the study area; bank fulfills the items related with responsiveness variable.

As far as grand mean is concerned in the table 4.6 here above, the mean score value showed
3.65 with SD 1.05 which lies the mean score range between 3.40 and 4.20. This implies that
most of respondents 45.1% were agreed with the items provided regarding to empathy
variable.

As far as the grand mean is concerned in the table 4.7 here above, the grand mean value
showed 3.6% with SD 1.1 which lies the mean score range values 3.40 and 4.20 This implies
that most of respondents 52% were agreed with the statements provided regarding to
Tangible’s variable.

As far as grand mean in the table 4.8 is concerned, the mean value showed 2.56 with SD
1.34, which lies between mean score value 1.8 and 2.60. This implies that most of
respondents 58.4% were disagreed with the statements provided regarding to trust variable,
because of in the study area, the bank is not fulfilling the items related with trust variable.

As far as grand mean in the table 4.19 here above is concerned, the mean score value showed
4.05 with SD 1.22 which lies between mean score range value 3.40 and 4.20. This implies
that most of respondents 41% were agreed with the statements provided because of the bank
fulfills the items related with dependent variable, which is customer satisfaction.

As it can be seen from Table 4.15 here above, there is strong, positive, and significant
relationship between predictor variables (Reliability, Assurance, Responsiveness, Empathy,
and Tangibles) and dependent variable (Customer satisfaction) except Trust variable.

As it can be seen from table 4.13, “R” has the value of .894. It is a multiple correlations
coefficient between dependent and independent variables of the study. The value of R square
is a measure of how much variability in the outcome is accounted for by the independent
variables. The result shows that a value of R square is .876 which implies that 87.6 percent of
variation was caused by the considered independent variables. .876 R square value means
that the total variation in the dependent variable is explained or caused by 87.6% of the
change in all independent variables: reliability, assurance, responsiveness, empathy, tangibles
and trust. In other words, 12.4% of the variation in customer satisfaction cannot be explained

56
by these six independent variables. It is explained by other extraneous variables which are not
included in this study.

The lower the ANOVA table 4.14 variance or significance number, the better the fit.
Generally, if “sig” is greater than 0.05, the researcher concluded that the model could not fit
the data. Accordingly, in order to fit the model and the data the ‘sig’ result should be less than
0.05. Therefore, the researcher results that the overall significance of the model in the above
ANOVA table is fit at ‘sig’ of 0.000. So that a researcher concluded that the model could fit
the data.

According to Table 4.18, coefficient of regression shows relationship between independent

variables: Reliability, Assurance, Responsiveness, Empathy, Tangibles and Trust on
dependent variable Customer satisfaction.

Each of the beta values has an associated standard error indicating to what extent these values
would vary across different samples, and these standard errors are used to determine whether
or not beta values differ significantly from zero. The t-test associated with p-value is
significant (if the value in the column labeled sig. is less than 0.5), if the predictor is making
significant contribution to model. The smaller the value of Sig. (the larger the value of t), the
greater the contribution of that predictor. For this model, the t-value and associated p-value
are given as follows: Reliability (2.357, p<.05), Assurance (2.032, p<.05), Responsiveness
(5.257. p<0.5), Empathy (.459, p<05) Tangibles (4.592, p<.05) and Trust (.356, p>.05).

The coefficient of independent variables or their Beta weights presented in table 4.15 above
are heavily relied on to assess the importance of the independent variables in explaining the
variation in the dependent variable. These weights indicate the expected score difference in
dependent variable because one unit change from specific independent variable with all other
independent variables being constant (Johnson, 2004).

And the magnitude of relationship between these independent variables and customer
satisfaction is predicted using the standardized Beta values.

57
Beta Coefficient

To compare different variables, it is important that you look at the standardized coefficient,
not the unstandardized coefficient. “Standardized” means that these values for each of
different variables have been converted to the same scale so that you can compare them. If
you were interested in constructing a regression equation, you would use the unstandardized
coefficient values listed as B (Pallant, 2016).

Unstandardized coefficient

By recalling the model specifications of the variables from chapter three of methodology part,
it was said that the unstandardized coefficients (B1 up to B6) are the coefficients of the
estimated regression model. Hence, the model of customer satisfaction can be written by
including error term (e), in the form here under.

Y = β0 + β1X1 + β2X2 + β3X3 + β4X4 + β5X5 + β6X6 + E

Where, y = Dependent variable (customer satisfaction).

B0= a constant term

β1 = unstandardized regression coefficient of Reliability

β2 = unstandardized coefficient of Assurance

β3 = unstandardized coefficient of Responsiveness

β4 = unstandardized coefficient of Empathy

β5 = unstandardized coefficient of Tangibles

β6 = unstandardized coefficient of Trust.

Taking in to consideration the result of table 4.15, the regression equation for the customer
satisfaction of the study was as follows:

Y=2.090+0.143(X1)+0.157(X2)+0.337(X3)+0.200(X4)+0.153(X5)+0.047(X6)+0.187(E)

Interpretations:

Keeping all other things constant:

58
For every one-unit increase Reliability, the percentage of customer satisfaction increased by
14.3 percent. For every one unit increase in Assurance, the percentage of customer
satisfaction increased by 15.7 Percent. For every one unit increase in Responsiveness, the
percentage of customer satisfaction increased by 37.3 percent. For every one unit increase in
Empathy, the percentage of customer satisfaction is increased by 20 percent for. For every
one unit increase in Tangibles, the percentage of customer satisfaction is increased by 15.3
percent. For every one unit increase in Trust, the percentage of customer satisfaction is
increased by 4.7 percent.

H01: Ho1: Reliability has no significant effect on customer satisfaction in the study area.

The result of multiple regression analysis in Table 4.15 indicated that Reliability has a
significant effect on the customer satisfaction with a p value of 0.003. In addition, the value of
beta 0.143 indicating that the positive influence of the Reliability on customer satisfaction. This
implies that one percent increase in product quality results in 14.3 percent increase on customer
satisfaction. Hence, the proposed hypothesis (H01) is rejected.

H02: Assurance has no significant effect on customer satisfaction in the study area.

The result of regression analysis in the Table 4.15, indicate that assurance has significant
effect on customer satisfaction with a p value of 0.004. In addition, the value of beta 0.157
indicating the positive influence of assurance on customer satisfaction. This implies that one
percent increase in assurance results in 15.7 percent increase in customer satisfaction.
Therefore, the proposed Hypothesis (H02) is rejected.

H03: Responsiveness has no significant effect on customer satisfaction in the study area

The result of regression analysis in the Table 4.15 showed that Responsiveness has
significant effect on customer satisfaction with a p value of 0.00. In addition, the value of
beta 0.373 indicating that the positive influence of Responsiveness on customer satisfaction.
This implies that one unit increase in Responsiveness results in 37.3 percent increase in
customer. Therefore, the proposed hypothesis (H03) is rejected.

H04: Empathy has no significant effect on customer satisfaction in the study area.

As Table 4.15, the regression analysis showed that the Empathy has insignificant effect,
which is less than five percent, customer satisfaction with a p value of 0.029. In addition, the
value of beta 0.200 indicating that positive influence of Empathy on customer satisfaction.

59
This implies that one unit increase in Empathy results in 20 percent increase in customer
satisfaction. Therefore, the proposed hypothesis (HO4) is rejected.

H05: Tangibles has no significant effect on customer satisfaction in the study area.

As stated in Table 4.15, the regression analysis showed that, the Tangibles has significant
effect on customer satisfaction with a p value 0.153.In addition, the value of beta 0.153
indicating that positive influence of Tangibles on customer satisfaction. This implies that one
unit increase on Tangibles increases 15.3 percent of customer satisfaction. Therefore, the
proposed hypothesis is (H05) Rejected.

H06: Trust has no significant effect on customer satisfaction in the study area in the study
area.

The result of regression analysis in Table 4.15 showed that, Trust has no significant effect on
customer satisfaction with a p value 0.125. In addition, the value of beta 0,047 indicating that
negative influence of Trust on customer satisfactions. This implies that, one unit increase in
Trust increases 4.7 percent on customer satisfaction. Therefore, the proposed hypothesis
(H06) is accepted.

The regression analysis results revealed that there is significant relationship between
independent and dependent variables. According to the findings obtained from multiple
regression models, in all cases a unit increase of independent variable results in increase of
dependent variable.

All correlation analysis, regression analysis and ANOVA results showed that there is
significant and positive relationship between independent and dependent variable except
trust.

60
5.2. Conclusions
The main purpose of this study is to measure the effect of service quality dimensions on
customer satisfaction in the case of CBE Tesso branch. In order to address this issue in the
CBE Tesso branch this study adopted the modified SERVQUAL and WEBQUAL model
measure and took adjustments to align it with the context of the Ethiopian banking industry.

Depending on hypotheses result the research concluded as follows

Assurance has significant effect on customer satisfaction in the study area
Tangibles has significant effect on customer satisfaction in the study area
Responsiveness has significant effect on customer satisfaction in the study area
Reliability has significant effect on customer satisfaction in the study area
Empathy has significant effect on customer satisfaction in the study area.
Trust has no significant effect on customer satisfaction in the study area.
Three questions were also raised to measure the general level of customer satisfaction and
measure its relationship with the SERVQUAL and WEBQUAL service quality dimensions.
The results of the analysis in this research show higher perceptions of customers in relation to
responsiveness, assurance and reliability dimensions of the company. Special considerations
should be drawn to elements of tangibility and empathy attributes.

The Tesso Branch customers of commercial bank of Ethiopia were taken as the sampling
frame and respondents were selected using convenience sampling and the formula developed
by Yamane in 1967 was used to select respondents.

The study showed for every one-unit increase Reliability, the percentage of customer
satisfaction increased by 14.3 percent. For every one unit increase in Assurance, the
percentage of customer satisfaction increased by 15.7 Percent. For every one unit increase in
Responsiveness, the percentage of customer satisfaction increased by 37.3 percent. For every
one unit increase in Empathy, the percentage of customer satisfaction is increased by 20
percent for. For every one unit increase in Tangibles, the percentage of customer satisfaction
is increased by 15.3 percent. For every one unit increase in Trust, the percentage of customer
satisfaction is increased by 4.7 percent.

61
The research result concluded that there exists significant positive relationship between
reliability, assurance, responsiveness, empathy and tangibles.

However, this study concluded that there is no significant relationship between trust and
customer satisfaction. Generally, this study identified the different influences in which each
of the industry understudies has different effects to customer satisfaction. The research
clearly illustrated that, even if the degree of one critical factor is slightly different from the
other critical factors; most of the factors are considerably common for all branches. It has
been noted that there exists significant positive relationship between reliability, assurance,
responsiveness, empathy and tangibles. Depending on hypotheses result the research
concluded as follows

Assurance has significant effect on customer satisfaction in the study area

Tangibles has significant effect on customer satisfaction in the study area
Responsiveness has significant effect on customer satisfaction in the study area
Reliability has significant effect on customer satisfaction in the study area
Empathy has significant effect on customer satisfaction in the study area.
Trust has no significant effect on customer satisfaction in the study area.

62
5.3. Recommendations
The Ethiopian banking sector more than ever is characterized by stiff competition. The sector
is also converging to similar products as newly introduced banking products are easily
imitated by competitors. The fact that availability of banking software off the shelf have also
eased product imitation. These factors compelled banks to look for other competitive
advantages in order to beat the competition.

This research has shown the effects of service quality on customer satisfaction in CBE in
Tesso branch. The results obtained confirm that all the service quality dimensions have a
positive effect on customer satisfaction. Based on the findings and conclusions of the study,
the following recommendations are forwarded to the management of the bank.

 The uses of appealing facility and modern or advance technologies could be

considered deficient in the case of CBE Tesso branch. Even though reliability
dimension shows higher satisfaction result, the underwriting and claims process failed
to fulfill customer’s satisfaction that is evident in the lowest scores registered in
attributes like Settlement of claims with unnecessary delays and providing clear and
understandable policy terms.
 The empathy dimension registered the lowest perception because the banks failed to
deliver personal attention and didn’t attend to their need; customers expect empathetic
behavior from banking industry. According to the results of the regression it is safe to
say that the assurance, responsiveness and empathy play a dominant role in predicting
customer satisfaction level in the case of CBE Tesso branch. Time is becoming an
expensive commodity and it is important for customer service personnel to promptly
deliver their service.
 They should also give attention to their customers need and give the necessary
professional service to instill confidence in their customers. The dimension Empathy
is also with a high beta coefficient that enables us to conclude there is a significant
relationship between this dimension and customer satisfaction. In general, the
following specific empirical findings emerged from the investigation:
 The five service quality dimensions (tangibility, reliability, responsiveness, assurance
empathy and the variable have positive and significant effect on customer satisfaction.

63
The bankers must give more focus on Trust variable than another variables since the
customers were not satisfied because of trust attention is not enough in the study area.

Trust items that the bank has to give the attention are:

 The bank should Providing different services to customers on time.

 The bank should be Trustworthiness to show different transactions.

 Bank should Providing all needs to customers quickly.

 The bank should Being okay to handle customer materials when they go to the bank
to get different services from the bank.

In general, delivering a quality service for customers have a tremendous effect on customers’
satisfaction that in turn determines the existence and success of banks. So, it’s mandatory that
the bank should attempt to maintain consistent service quality at or above customers’
satisfaction by examining all the service quality dimensions regularly

5.4. Direction for Further Research

The current study was based on customer satisfaction in commercial bank of Ethiopia, Tesso
Branch, and Hawassa city. The result cannot be generalized to other banking industry beyond
the study area. A researcher in this study tried to investigate different effects of service
quality on customer satisfaction. Further research can be conducted by increasing the study
area on one hand and by including other effects not included in this study on the other hand.
This study is open for the future researchers

64
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 APPENDEX
QUESTIONNAIRE

Respected madam/sir,

I am post graduate student in MBA from hawassa university .this questionnaire is a part of
research project.

This questionnaire aims at assessing effect of service quality on customer satisfaction in

CBE Tesso Branch. As a part of my project I would like to gather some information from
you which will help me in an in-depth study of the project. I would be indebted if you co-
operate with me in filling the questionnaire. Since the questionnaire is being used for
academic purpose, the information gathered will be strictly confidential.

Name: NibretDidamo
Emaail–didamonibret@gmail.com
Phone address -0937327167

Please put a tick mark in the appropriate box

Part1. Demographical Information
1. Sex

Male Female

2. Age:
18 to30 31 – 45

46–60 61and above

71
 3. Educational level:

Primary to 10th complete Diploma

Degree Masters and above

4. Frequency of using the bank:

Daily weekly

Twice a weekly monthly

5. Service type

Saving Account user

Current Account user

Part 2. Customer satisfaction with relation to service quality

dimensions.
Please rank your views using 1-5 on whether you are satisfied or not with the service
provided by the bank and the general environment under which it operates
1=strongly disagree 2=Disagree 3=Neutral
4=Agree 5=strongly agree

Item Scale

Very dissatisfied Very satisfied

1 2 3 4 5

RELIABILITY

Banks fulfills its promise at the time indicated

Bank’s perform the service exactly at the first time

Bank show a keen interest in solving My problems

Bank insist on error free record

ASSURANCE

Bank’s staff behavior instills confidence in me

I feel safe in my transaction with the bank

72
Bank’s staff are courteous with me

Bank’s staff have the knowledge to answer all my

question

Bank’s staff behavior instills confidence in me

I feel safe in my transaction with the bank

RESPONSIVENESS

Bank’s staff tell you exactly the time the service

will be performed

Bank’s staff give your prompt services

Bank’s staff always willing to assist My

Banks staff are not too busy to respond to my

question

Bank’s staff tell you exactly the time the service

will be performed

EMPATHY

Banks give me individual attention

Bank operating hours convenient to me

The bank has my interest at heart

Bank’s staff understand my specific needs

TANGIBLES

The bank's employees have a neat & professional

appearance

Material associated with the service like

pamphlets, statements are visually appealing at the
bank

Bank physical facilities visually nice

Banks has modern equipment & tools

TRUST
Bank provide needed service on time
Bank is trustworthy to show different transactions
73
Bank provides all your needs quickly
Bank is okay to handle your materials when you go
to them to get their services
QUESTIONNAIRE OF CUSTOMER SATISFACTION
I am satisfied with the banks complete range of services.

I am satisfied with the performance of the employees of

this bank.

I am satisfied of being a client of this bank.

I am satisfied with the bank employees‟ professional

competence

I am satisfied with the quick service of this bank.

I am satisfied with the respectful behavior of employees.

General Satisfaction towards service quality of this

bank.

74