ASSESSMENT OF SERVICE QUALITY ON THE CUSTOMER

SATISFACTION (IN THE CASE OF AWASH INTERNATIONAL BANK

S.C, DIRE DAWA CITY, SABIAN BRANCH)

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

A Research Paper Submitted to the Department of Management in partial

fulfillment of the requirement for Bachelor of art (BA) in Management.

PROPOSED BY:
1. Getinet Chalew ………………………………………………………………….……………. 1305785

2. Gosu Miliyon……………………………………………………………………………………… 1304770

3. Getnet Bililign…………………………………………………………………………………… 1304760

4. Hangasa Abdela………………………………………………………………………………… 1304799

5. Getnet Alene……………………………………………………………………………………… 1202576

Advisor Name:- Ins Birhanu F.

JUNE, 2024

DIRE DAWA, ETHIOPIA

 DECLARATION

We, our group member, declare that this research paper, entitled the “Assessment Of Service
Quality On The Customer Satisfaction (In The Case Of Awash International Bank S.C, Dire
Dawa City, Sabian Branch)’’ is our work submitted for the Partial fulfillment of the award
for Bachelor of Art (B.A) Degree in Economics at the Department of Management, Dire
Dawa University.

I
 ACKNOWLEDGEMENT

First of all, we deepest thanks goes to the Almighty of God for let to stay in life to this day
and enables me to complete our academic life. We also would like to express our deepest
gratitude to our Advisor; Birhanu F for his enthusiastic support from the preparation until the
final discussion of this paper with frequent follow up with receiving in detail, main body of
the paper and forwarding constructive suggestion.

Last but not least, we would like to extend gratitude to all our friends, colleagues and our
beloved family who have supported and motivated us to come this far. My sincere thanks and
appreciation goes to you all.

II
 ACRONYMS/ABBREVIATIONS

AIB = Awash International Bank S.C.

NBE = National Bank of Ethiopia

SERVQUAL = Service Quality

SPSS= Statistical Package for Social Science.

III
Table of Contents
DECLARATION............................................................................................................................
ACKNOWLEDGEMENT............................................................................................................
ACRONYMS/ABBREVIATIONS.............................................................................................III
ABSTRACT.................................................................................................................................VII
CHAPTER ONE............................................................................................................................
INTRODUCTION..........................................................................................................................
1.1. Background of the Study..............................................................................................................1
1.2. Statement of the Problem..............................................................................................................2
1.3. Research Questions.......................................................................................................................3
1.4. Objective of the study...................................................................................................................4
1.4. 1. General objective..................................................................................................................4
1.4. 2. Specific objectives................................................................................................................4
1.5. Significance of the Study..............................................................................................................4
1.6. Scope of the Study........................................................................................................................5
1.7. Organization of the Study.............................................................................................................5
CHAPTER TWO...........................................................................................................................
REVIEW OF RELATED LITERATURE...................................................................................
2.1. Theoretical Review.......................................................................................................................6
2.1.1. Service Quality......................................................................................................................6
2.1.2. Dimensions of Service Quality..............................................................................................7
2.1.3. Customer Satisfaction............................................................................................................9
2.1.4. Customer Expectations........................................................................................................10
2.1.5. Customer Perception............................................................................................................11
2.1.6. Relationship between Service Quality and Customer Satisfaction......................................11
2.2. Empirical Literature Review.......................................................................................................14
2.3. Conceptual Framework...............................................................................................................16
CHAPTER THREE.....................................................................................................................
RESEARCH METHODOLOGY...............................................................................................
3.1. Description of the study area......................................................................................................18
3.2. Research Design.........................................................................................................................18
3.3. Research Approach.....................................................................................................................18
3.4. Types of data and sources...........................................................................................................19
3.5. Population, Sample Size and Sampling Technique....................................................................19
3.5.1. Target Population.................................................................................................................19

IV
 3.4.2. Sample Size..........................................................................................................................19
3.4.3. Sampling Technique............................................................................................................20
3.6. Data Collection Instruments.......................................................................................................20
3.7. Data Collection Procedures........................................................................................................21
3.8. Methods of Data Analysis...........................................................................................................21
3.9. Ethical Considerations................................................................................................................21
CHAPETER FOUR.....................................................................................................................
DATA PRESENTAION, ANALYSIS AND INTERPRETATION.........................................
4.1 Socio-demographic profile of the study participants...................................................................22
4.2 Service Quality of AIB using SERVQUAL................................................................................24
4.2.1. Analysis on the Research Results of Service Reliability and its Attributes........................24
4.2.2. Analysis on the Research Results of Service tangibility and its Attributes.........................24
4.2.3. Analysis on the Research Results of Service responsiveness and its Attributes.................25
4.2.3. Analysis on the Research Results of Service empathy and its Attributes...........................26
4.3 Analysis and Interpretation of the impact of Service Quality Factors.........................................27
4.3.1. impact Level Assessment on Quality Customer Services Factors.......................................27
4.3.2. customers and employees response on service quality........................................................30
4.3.3. customer and employees’ responses on factors that Affect Customer Loyalty...................33
CHAPTER FIVE.........................................................................................................................
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS.............................................
5.1 Summary of Major Findings........................................................................................................35
5.2 Conclusions..................................................................................................................................35
5.3 Recommendations........................................................................................................................36
REFERENCES.............................................................................................................................

V
 LIST OF TABLE

Table 1. socio-demographic profile of respondents 22

Table 2. Respondents years of relation with the bank 23
Table 3. respondents type of account at the bank 23
Table 4. Service Reliability and its Attributes 24
Table 5. Service tangibility and its Attributes 25
Table 6. Service responsiveness and its Attributes 26
Table 7. Service empathy and its Attributes 26
Table 8: Consolidated customers and employees response on the impact Level Assessment
on Quality Customer Services Factors 29
Table 9: Consolidated customers and employees response on service quality 32
Table 10: Consolidated customer and employees responses on factors that Affect Customer
Loyalty 34

VI
 ABSTRACT

The purpose of this research was to Access the service quality on customer satisfaction at
Awash International Bank S.C. (AIB). There is a widely held belief that service quality is a
key driver for customer satisfaction. Many Scholars also agreed that there is a positive
relationship between product and service quality and customer satisfaction. Today the focus
has been on customer perceived quality, especially when dealing with service operations. We
have developed a conceptual frame work in cognizant of these and structured questionnaires
were designed using the five Liker scale. These questionnaires were distributed and data for
analysis were collected from 96 customers. These data were sorted and registered in SPSS
version 20 statistical software to analyzing the data. Customer satisfaction has found to be
an important mediator between perceived service qualities. It is very important that the bank
must design and implement a quality customer service recovery program. The program is
critical to the bank, because correctly addressing and solving a customer’s problems in
service quality can lead to higher customer satisfaction. This can be achieved through
satisfied and committed management and employees in addition to other quality customer
service factors as they are critical to business success. A clear understanding from this and
the postulated relationships among the studied variables might encourage the bank to figure
out appropriate course of action in quality customer service to satisfy high needs of
customers.

Keywords: customer loyalty, customer satisfaction, quality customer service.

VII
 CHAPTER ONE

INTRODUCTION

This chapter gives introductory information about the study. This chapter includes introduction,
statement of the problem, research questions, and objectives of the study, significance, and scope
of the study.

1.1. Background of the Study

The global business landscape is witnessing an increasing emphasis on the issue of service
quality, driven by the dynamic nature of the environment and evolving customer preferences.
Service quality has emerged as a pivotal factor influencing the success of service-oriented
organizations, characterized by customers’ perceptions of overall service performance over time
(Hoffman & Bateson, 2001). Parasuraman (1985) defines service quality as the extent to which
consumers’ perceptions of service delivery align with their expectations across various
dimensions, thereby affecting their future purchasing behavior. In the service sector, the
importance of service quality is underscored by its positive correlation with profitability, market
share, and customer satisfaction (Ramya, 2019).

Customer satisfaction and service quality are deemed essential in business development, with the
quality of service delivery playing a crucial role in retaining customers and fostering loyalty
(Alawni, 2016). Customer satisfaction, as defined by Kotler (2012), stems from the comparison
between perceived performance or outcomes of a product or service and customers’
expectations. This satisfaction is intricately linked to service price and quality, with fair pricing
and superior service quality leading to increased customer loyalty, repeat patronage, and
enhanced profitability (Anderson, 1994). The pursuit of customer satisfaction through superior
service quality is a cornerstone of effective business strategies, as it directly influences company
performance and profitability (Sahar, 2011).

The banking industry, a vital component of the economic landscape, plays a significant role in
facilitating economic growth by mobilizing savings and facilitating investments (Beck et al.,
2002). In today’s competitive financial environment, banks prioritize customer satisfaction to

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retain and attract customers (Buttle, 1995). However, ensuring customer satisfaction in the
Ethiopian banking sector poses challenges, including long waiting times and limited staff-
customer interaction (Dawit, 2018). Awash International Bank S.C. (AIB) stands as a prominent
private commercial bank in Ethiopia, operating branches across the country, including the Sabian
branch in Dire Dawa.

Understanding customer perceptions of service quality is essential for banks to identify areas for
improvement and enhance customer satisfaction (Zhou, 2004). Several studies have explored the
relationship between service quality and customer satisfaction in the banking sector (Etana,
2021; Agarwal & Kassahun, 2017; Raghava, 2022). These studies highlight the importance of
service quality in various contexts, including public and private banks in Ethiopia (Agarwal &
Kassahun, 2017). Within this context, understanding the impact of service quality on customer
satisfaction is crucial for AIB and the broader banking sector in Ethiopia. Therefore, this study
aims to assess service quality and its influence on customer satisfaction specifically within the
Sabian Branch of Awash International Bank S.C. in Dire Dawa City, Ethiopia.

1.2. Statement of the Problem

The banking sector plays a crucial role in a nation’s economic development by mobilizing
savings, facilitating investments, and promoting financial inclusion (Hasan & Lim, 2024).
Customer satisfaction is paramount for banks in today’s competitive landscape. Delivering high-
quality service fosters customer loyalty, positive word-of-mouth promotion, and ultimately,
increased profitability (Kotler, 2003). Customer satisfaction is often considered a very significant
factor for thriving in today is fast globalizing insurance business and delivery of service quality,
with internal and external customer satisfaction well thought-out as the most significant factor
for gaining competitive edge in today’s highly changing insurance business and service quality
(Lenin, 2016). Given the increasing role of service organizations in the economic area and the
importance of services in competitive environments, the service and public organizations such as
insurance should have strategic and dynamic look on managing service qualities and also have
clear understanding of service quality, customer expectations and general specifications of
quality (Sahar, 2011). Understanding customer perceptions of service quality is essential for
banks to identify areas for improvement and enhance customer satisfaction (Zhou, 2004).

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Several studies have revealed that the assessment of service quality and its association with
customer satisfaction is a critical aspect of organizational performance (Hasan & Lim, 2024 &
Raghava, 2022). A lot of previous studies on service quality and its association with customer
satisfaction have been conducted in various industries and geographical locations, providing
valuable insights into the factors influencing customer perceptions and evaluations (Biswakarma,
2021; Kratudnak, 2018; Tesfahun, 2017). However, most of the previous studies have focused on
sectors other than banking or have been conducted in different cultural and socio-economic
contexts, limiting their applicability to the specific challenges and dynamics of the banking
sector in Dire Dawa City, Ethiopia.

Past researches have proven that service quality plays a crucial role in shaping customer
satisfaction and loyalty (Agarwal & Kassahun, 2017). While several studies have been conducted
exploring the relationship between service quality and customer satisfaction in the banking sector
(e.g., Agarwal, & Kassahun, 2017; Raghava, 2022), these studies often focus on broader industry
trends or specific service aspects. There is a lack of research specifically investigating customer
satisfaction with service quality at the branch level, particularly for Awash International Bank’s
(AIB) Sabian branch in Dire Dawa City, Ethiopia. This lack of branch-specific research is
problematic.

Customer expectations and perceptions of service quality can vary depending on factors like
location, branch size, and staff composition. Thus, understanding these at the AIB Sabian branch
is crucial for ensuring customer satisfaction. Furthermore, a potential gap may exist between the
service quality AIB aspires to deliver and the service quality actually experienced by customers
at the Sabian branch. This disconnect can lead to dissatisfaction, customer churn, and negative
word-of-mouth promotion. Therefore, this study was assess customer perceptions of service
quality at the AIB Sabian branch and determine how it influences their overall satisfaction. This
study was address the knowledge gap by focusing on a specific branch and its unique customer
base.

1.3. Research Questions

Building upon the identified gap in understanding customer satisfaction with service quality at
the AIB Sabian branch, this study seeks to answer the following key research questions:

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 1. How do customers describe their experiences with service quality at the AIB Sabian
branch?
2. How satisfied are customers with the services provided by AIB at the Sabian Branch?
3. What aspects of service quality are most prominent in enhancing customer satisfaction at
the AIB Sabian branch?
4. What areas of service quality could be improved at the AIB Sabian branch?

1.4. Objective of the study

1.4. 1. General objective

The general objective of this study is to assess service quality and customer satisfaction at the
AIB Sabian branch in Dire Dawa City.

1.4. 2. Specific objectives

The specific objectives of the study were:

 To describe customer experiences with service quality at the AIB Sabian branch.
 To measure customer satisfaction with the services provided by AIB at the Sabian
branch.
 To identify the key dimensions of service quality that are most critical for enhancing
customer satisfaction at the AIB Sabian branch.
 To identify potential areas for improvement in service quality at the AIB Sabian branch.

1.5. Significance of the Study

The findings of this study was significant for several stakeholders. For Awash International
Bank, the research was provide valuable insights into customer perceptions of service quality at
the Sabian branch. This information was used to identify areas for improvement, develop
targeted service strategies, and ultimately, enhance customer satisfaction and loyalty. For
academicians and researchers, the study was contribute to the growing body of knowledge on
service quality and customer satisfaction in the Ethiopian banking sector. The findings was used
for comparative analysis and to inform future research in this area. Finally, the study’s findings
may be beneficial to other banks operating in the area by providing valuable benchmarks for
service quality and customer satisfaction.

4
1.6. Scope of the Study

This study was focus on assessing service quality and customer satisfaction at Awash
International Bank’s Sabian branch in Dire Dawa City. The research was utilize a quantitative
approach, employing a survey instrument to collect data from customers of the branch. The study
was target both customers and employees of the bank to obtain comprehensive insights into the
phenomenon under investigation. In addition, the research focuses on a single branch, and the
findings may not be generalizable to all AIB branches or other banks in Ethiopia.

1.7. Organization of the Study

This study comprises five chapters, each addressing different aspects of the study. Chapter One
provides an introduction to the research topic, including the background, problem statement,
objectives, research questions, significance, scope, and organization of the study. Chapter Two
presents a review of relevant literature on service quality, customer satisfaction, and their
interrelation in the banking sector. Chapter Three outlines the research methodology, including
the research design, data collection methods, and data analysis techniques. Chapter Four presents
the findings of the study based on the data collected and analyzed. Finally, Chapter Five offers
conclusions, recommendations, and suggestions for future research.

5
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

The aim of this section is to present literatures relevant to this research and to provide a
theoretical and empirical literature on the effect of service quality on customer satisfaction. This
section covers both theoretical and empirical literature. It is gives an overview of literatures that
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.

2.1. Theoretical Review

2.1.1. Service Quality

Service quality is a crucial concept in today’s competitive banking landscape. It refers to the
customer’s perception of how well a service provider’s performance meets their expectations
(Zeithaml, Parasuraman, & Berry, 1993). A positive perception of service quality translates to
customer satisfaction, loyalty, and positive word-of-mouth promotion. Service quality is the
consumer’s judgment about an entity’s overall excellence or superiority (Zethimal et al., 1986).
It is a form of attitude, and results from a comparison of expectations to perceptions of
performance received. Service quality is a customer’s perceptions that occur when the need of
service is meet above average more than just adequate. In other words, service quality is the
ability of services that meets a customer’s expectations for that service. It represents the
properties of the service valued by the customer service quality is measured by five dimensions
that are reliability, assurance, tangibility, empathy and responsiveness proposed two dimensions
of service quality, which are the technical quality and functional quality (Hoang, 2016).

Service quality is a focused evaluation that reflects the customer’s perception of elements of
service such as interaction quality, physical environment quality and outcome quality. Service
performance has been the quality of service, or the evaluation of the performance of the service.
These elements are in turn evaluated based on specific service quality dimensions: reliability,
assurance, responsiveness, empathy and tangibles (Uyen, 2018). According to Kratudnak (2018),

6
service quality is an approach to manage business processes in order to ensure full satisfaction of
the customers which was help to increase competitiveness and effectiveness of the industry.
Service quality can thus be defined as the difference between customer expectations of service
and perceived service performance (Ali, 2015). In the banking sector, service quality plays a
significant role in customer satisfaction and loyalty. Customers expect efficient and timely
services, courteous staff, and a secure environment. When banks deliver on these expectations,
customers are more likely to be satisfied and maintain long-term relationships with the institution
(Zhou, 2004).

2.1.2. Dimensions of Service Quality

The most common service quality model is the one designed by Parasuraman et al. (1985) and
the model includes five main dimensions for service quality. Several frameworks have been
developed to understand service quality. A widely recognized framework is the SERVQUAL
model by Parasuraman et al. (1988), which identifies five key dimensions:

[Link]. Tangibles
The physical appearance of facilities, equipment, personnel, and communication materials
(Kotler & Armstrong, 2002). As far as the insurance industry is concerned, insurers seem to give
too great importance to the tangibility aspects or physical aspects as some refer to while pursuing
their dealing activities. Supporting factors in terms of physical facilities are related to
environment, capacities and they importantly include the ways and the friendliness of employee
interaction with their customers (Raza et al., 2012). In terms by Parasuraman et al., (1988), an
organization’s physical environments are part of tangibles dimension, which might cover various
kinds of facilities, equipment and materials for communication. The physical amenities and staff
appearance result in the largest incongruity between expectation and perception (Urban, 2009). It
is unanimously agreed that the physical environment must be supportive and convenient for the
customers for them to have a favorable perception of service quality.

[Link]. Reliability
The ability to deliver promised service dependably and accurately (Zeithaml et al., 1993).
Reliability in the insurance industry refers to the timeliness and precision of service employees’
ways of handling customer issues and fulfilling their promises to the customers. It can

7
immensely affect the service quality perception of customers. Early research suggested reliability
as one of the significant attributes on which customers form their expectations of service quality
(Dabholkar, 1996). Moreover, reliability as per Parasuraman et al., (1988) is a key driver for
overall service quality which relates to an organization’s capability in executing the service as
promised in an accurate and dependable manner.

[Link]. Responsiveness
The wasingness to help customers promptly and resolve their inquiries (Parasuraman et al.,
1988). In the service quality dimension, responsiveness points to the company’s wasingness to
assist consumers. These consumers expect the company to provide them with service that is
characteristically fast of high quality and good. This would lead to the customers feeling valued
and appreciated when receiving the best quality during the rendering of service. Therefore, this is
also a very important dimension to be considered for investigation in this study.

[Link]. Assurance
The knowledge and courtesy of employees and their ability to inspire trust and confidence
(Zeithaml et al., 1993). The employees that work in the company form the assurance component
that is part of the service quality dimension. These employees are viewed to be skilled workers
that the consumer was trust and have confidence in during the rendering of service. Therefore, in
occurrences when the consumer is far from comfortable when coming face to face with the
employee, there is a greater probability that the consumer would cease dealing with the company
and would take his or her money and patronage elsewhere. Thus, this component is also pertinent
for investigation in this study.

[Link]. Empathy
The provision of caring, individualized attention to customers (Parasuraman et al., 1988). When
the company or more to the point, the employees of the company spend, the extra time and effort
in making the consumer feel extra special and valued, this would have an effect on service
quality. In terms of the dimension of service quality, this would refer to the way the firm deals
gives individualized attention to their customers the term for which is empathy. When the
employees are able to empathize with the customers by giving good quality and individualized
attention, there is a greater probability that the consumer would continue to deal with the

8
company and keep his or her money and patronage with the company. Thus, this component is
also of great importance for exploration in this study.

2.1.3. Customer Satisfaction

Customer satisfaction is a critical outcome of service quality. It reflects the extent to which a
customer’s perception of a service experience meets or exceeds their expectations (Marczyk,
DeMatteo, & Festinger, 2005). Satisfied customers are more likely to be loyal, engage in positive
word-of-mouth promotion, and repurchase services. Zeithami et al. (1996) as defined the term
customer satisfaction and its importance, to achieve continuous success of companies in the long
run, the need to emphasize customer satisfaction is a key consideration. In other words,
satisfaction can only met when the performance generated by companies exceeds customer
expectations. In this context, various authors and researchers have accentuated the importance of
customer satisfaction as well as dissatisfaction as related to the company’s achievement of
success and the incurrence of failures in the aspect of meeting the expectations of both the
customers and the company (Chidambaram & Ramachandran, 2012; Kheng et al., 2010).

Customer satisfaction can be defined as a person’s felt state, either pleasure or discontent,
ensuing from comparing a product’s perceived performance (or outcome) in relation to the
person’s expectations as cited on (Zhilin, Minjoon, Robin, 2004). Customer satisfaction has long
been recognized as one of the critical success factor in today’s competitive business environment
as it affects companies’ market share and customer retention. “Satisfied customers tend to be less
influenced by competitors, less price sensitive, and stay loyal longer” as cited by (Zhilin,
Minjoon, Robin, 2004).

Lau and Cheung (2013) specifically explained that meeting the expectations of the customers
was not only provide customer satisfaction but also develop customer loyalty that was then
lessen the cases of customer loss rates or improve the retention rate. Service quality delivery is
considered an important factor to consider in establishing customer satisfaction and the
relationship that was developed between the company and the customers (Amin & Isa, 2008).

According to Kotler (2003), satisfaction is a person’s feelings of pleasure or disappointment

resulting from comparing products’ perceived performance in relation to his or her expectations.
Here we see that there is a close relationship between service quality and customer satisfaction

9
because they seem to be measured in terms of the difference between perceived performance and
expected performance. Therefore, a company must first find out the level of satisfaction of its
current customers to improve its customer satisfaction. One common way of measuring
satisfaction is to ask customers first to identify what factors are important in satisfying them and
then to evaluate the performance of a service provider and its competitors on these factors.

2.1.4. Customer Expectations

Customer expectations are beliefs about a service that serve as standards against which service
performance is judged (Zeithaml et al.,1993); what customers think a service provider should
offer rather than what might be on offer (Parasuraman et al.1988). On the other hand,
expectations are formed from a variety of sources such as the customer’s personal needs and
wishes (Edvardsson etal., 1994). The customer’s personal philosophy about a particular service,
by promises (staff, advertising and other communications), by implicit service promises (such as
price and the tangibles associated with the service), by word-of-mouth communication (with
other customers, friends, family and experts), as well as by experience of that service (Zeithaml
& Bitner, 1996).

Expectations play an important role in the satisfaction formation. The extent to which a product
or service fulfills a customers need and desire may play an important role in forming feelings of
satisfaction because of the impacts of confirmation or disconfirmation that have on satisfaction.
Consumers expect to be delivered quality products and services; therefore companies try to offer
quality products and services. The term expectations really matters to companies because they
want to know what customers‟ expectations are. The term “expectations” has different uses, in
the satisfaction literature, it is viewed as a prediction made by a consumer about what is likely to
happen during an exchange or transaction. According to Bitner (2012), “Customer expectations
are viewpoint about service delivery that work as standards or reference points against which
performance is judged.”

Customers form their expectations from their past experience, friends‟ advice, and marketers and
competitors information and promises. Therefore, perceived service quality is viewed as the
difference between consumers‟ perceptions and expectations for the service provided.
Organizations in order to keep expectations rising, they have to perform services properly from

10
the first time. Thus, customer expectations for the service are likely to rise when the service is
not performed as promised. Expectations serve as reference points in customers’ assessment of
performance. Thus, retailers can increase customer satisfaction by decreasing customer
expectations.

2.1.5. Customer Perception

Customer perception plays a crucial role in shaping their evaluation of service quality and
satisfaction. It refers to how customers interpret and make sense of their interactions with a
service provider based on their experiences, expectations, and cognitive processes (Zeithaml,
Parasuraman, & Berry, 1993). Customer perception is influenced by various factors, including
previous experiences, word-of-mouth recommendations, advertising, and personal values
(Zeithaml et al., 1993). Positive perceptions arise when customers perceive service encounters as
meeting or exceeding their expectations, leading to satisfaction and loyalty (Zeithaml et al.,
1993). Conversely, negative perceptions result from instances where service falls short of
expectations, leading to dissatisfaction and potential disengagement (Zeithaml et al., 1993).
Understanding customer perception is essential for service providers to identify areas for
improvement, tailor services to meet customer needs, and enhance overall satisfaction levels. By
actively managing customer perceptions, organizations can cultivate positive relationships, build
trust, and differentiate themselves in the marketplace.

2.1.6. Relationship between Service Quality and Customer Satisfaction

It is believed that customers who are satisfied with the perceived quality of service they get was
have a favorable emotional response, which is customer satisfaction. Service quality and
customer satisfaction are important concepts to academic researchers studying consumer
evaluations and to practitioners as a means of creating competitive advantage and consumer
loyalty. Researchers have attempted to make distinctions between service quality and customer
satisfaction, even if the terms, service quality and customer satisfaction used interchangeably in
practice. The most common explanation of the difference between the two is that perceived
service quality is a form of attitude (the customer’s relatively enduring affective orientation), a
long-term overall evaluation, whereas satisfaction is an emotional reaction, a transaction-specific
measure (Bitner, 1990; Bolton & Drew 1991; Cronin & Taylor, 1992; Rust & Oliver, 1994).

11
Rust & Oliver (1994) clarified in detail some distinctions between the meanings of quality and
satisfaction. First, the dimensions underlying quality judgment are rather specific, whether they
are cues or attributes; yet satisfaction judgment can result from any dimension, quality related or
not. Secondly, quality perceptions do not require experience with the service or provider;
satisfaction, in contrast, is purely experiential. Third, Rust & Oliver note that quality has fewer
conceptual antecedents, but satisfaction is influenced by a number of cognitive and affective
processes including equity, attribution, and emotion.

Given a premise that only customers judge quality, service quality can also be defined as “a
judgment about a service’s overall excellence or superiority” (Schneider & White, 2004). On the
other hand, satisfaction can be defined as “a judgment that a product or service feature, or the
product or service itself, provided (or is providing) a pleasure level of consumption-related
fulfillment, including levels of under- or over-fulfillment” (Oliver, 1997). That is, satisfaction is
more related to a judgment of how the service emotionally affects the customer and customers’
experiences, while service quality is related to a judgment of the service product itself and is not
necessarily tied to these experiential processes.

Customer satisfaction has been considered to be based on the customer’s experience on a

particular service encounter, (Cronin and Taylor, 1992) it is in line with the fact that service
quality is a determinant of customer satisfaction, because service quality comes from outcome of
the services from service providers in organizations. Another author stated in his theory that
“definitions of consumer satisfaction relate to a specific transaction (the difference between
predicted service and perceived service) in contrast with ‘attitudes’, which are more enduring
and less situational-oriented,” (Zeithaml et al.,2006).

The academic literature postulates that customer satisfaction is a function of the discrepancy
between a consumer’s prior expectations and his or her perception regarding the patronage of the
service. Regarding the relationship between customer satisfaction and service quality, Oliver
(1993) first suggested that service quality would be antecedent to customer satisfaction
regardless of whether these constructs were cumulative or transaction specific. In relating
customer satisfaction and service quality, researchers have been more precise about the meaning
and measurements of satisfaction and service quality.

12
Oliver (1993) first suggested that service quality would be antecedent to customer satisfaction
whether these constructs were cumulative or transaction-specific. Some researchers have found
empirical justification for this view where customer satisfaction came as a result of service
quality (Anderson & Sullivan, 1993; Fornell 1996; Spreng & Macky1996). Despite the fact that
factors such as price, product quality, delivery etc. can affect customer satisfaction, perceived
service quality is a component of customer satisfaction (Zeithaml, 2006). Satisfaction and service
quality have certain things in common, but satisfaction generally is a broader concept, whereas
service quality focuses specifically on dimensions of service (Wilson, 2008). This theory
conforms to the idea of Wilson (2008) and has been confirmed by the definition of customer
satisfaction presented by other researchers.

More evidence has been proved that the service quality acted as one of the factors that influence
satisfaction. Parasuraman (1985) in their study confirmed that when perceived service quality is
high, then it would lead to increase in customer satisfaction. Some other authors also
acknowledged that customer satisfaction is based on the level of service quality being provided
by the service entities (Saravana & Rao, 2007). Cronin & Taylor (1992) has view of customer
satisfaction to be base itself on the customers experience on a particular service encounter
implying that service quality is a determinant of customer satisfaction.

The relationship between service quality and customer satisfaction is well-established and
critical for success in the banking sector. Service quality acts as a key driver of customer
satisfaction. When a bank consistently delivers high-quality services across all dimensions, it
fosters positive customer experiences. These experiences meet or exceed customer expectations,
leading to feelings of satisfaction. This positive perception translates into several benefits for the
bank. Satisfied customers are more likely to be loyal, maintain long-term relationships with the
bank, and recommend its services to others. Furthermore, they are more receptive to using a
wider range of banking products and services offered by the institution. Conversely, poor service
quality, characterized by long wait times, unresponsive staff, or unreliable services, leads to
customer dissatisfaction. This can result in negative word-of-mouth promotion, customer churn,
and ultimately, lost revenue for the bank. Therefore, prioritizing service quality and continuously
striving to meet customer expectations is essential for achieving long-term success in the
competitive banking landscape.

13
2.2. Empirical Literature Review

Understanding customer perceptions of service quality and their impact on satisfaction is crucial
for businesses to thrive in today’s competitive landscape. This section reviews existing research
on service quality and customer satisfaction, focusing on empirical studies from various service
sectors to provide context for the current investigation at the AIB Sabian branch. Several studies
have explored the relationship between service quality dimensions and customer satisfaction
across different service industries. Ramya (2019) conducted a general study on service quality,
highlighting its various dimensions and their potential influence on customer satisfaction. This
study serves as a foundation for understanding the core concept of service quality.

Beyond general service quality principles, research examining specific sectors can offer valuable
insights. For instance, Uyen (2018) investigated the factors affecting service quality and
passenger satisfaction within the airline industry. Similarly, Biswakarma (2021) explored how
domestic airlines in Nepal maintained service quality during the COVID-19 pandemic and its
impact on customer satisfaction. These studies demonstrate how service quality expectations
and their influence on satisfaction can vary depending on the industry context.

Research within the financial services sector holds particular relevance for this study. Ejigu
(2020) examined the relationship between service quality of motor insurance and customer
satisfaction in Ethiopia. This study provides valuable context for understanding customer
expectations and satisfaction within the Ethiopian financial service industry. Another relevant
study by Kratudnak (2018) analyzed key factors influencing airport service quality in Thailand.
While this study focuses on airports, it highlights the importance of aspects like tangibles,
reliability, and responsiveness, which are also relevant to the banking sector.

While Oladokun’s (2019) study on factors influencing service quality in shopping complex
property management may not directly pertain to banking, it demonstrates the use of empirical
research to assess service quality in a service-oriented industry. This reinforces the value of
employing a similar approach to examine service quality.

The banking sector plays a crucial role in the global economy, and understanding the dynamics
between service quality and customer satisfaction within this sector is essential for sustaining
competitiveness and fostering customer loyalty. This section provides an in-depth review of

14
empirical studies conducted in the banking industry, shedding light on the influence of service
quality on customer satisfaction.

Hasan and Lim (2024) investigated “The Influence of Service Quality Factors on Customer
Satisfaction in the Banking Sector in Batam City.” Their study aimed to determine how various
service quality factors influence customer satisfaction levels in the banking sector. Using data
collected from 304 participants through online surveys, the researchers found that service quality
significantly influences customer satisfaction, emphasizing the importance of enhancing service
quality to meet customer expectations effectively.

Agarwal and Kassahun (2017) conducted a comparative study titled “Assessment of Service
Quality of Public and Private Banks in Wolaita Sodo, Ethiopia.” Their research focused on
evaluating the service quality of the Commercial Bank of Ethiopia (a public bank) and Bank of
Abyssinia (a private bank) in Wolaita Sodo. Through surveys conducted with 200 customers
from each bank, the study revealed that both banks exhibited satisfactory service quality levels,
particularly in technical and functional aspects. However, areas such as responsiveness and
assurance required improvement for both public and private banks to enhance overall service
quality.

Raghava (2022) explored the “Effect of Service Quality on Customer Satisfaction in Commercial
Bank of Ethiopia Branches in Wolaita Sodo.” Their study aimed to assess the impact of service
quality dimensions on customer satisfaction within the branches of the Commercial Bank of
Ethiopia in Wolaita Sodo. Analyzing data from 344 respondents using the SERVPERF
instrument, the researchers found positive and significant relationships between service quality
dimensions (empathy, responsiveness, reliability, and assurance) and customer satisfaction. They
recommended that the bank focus on improving all aspects of service quality, particularly by
providing personalized attention to customers and promptly addressing their needs.

Etana (2021) investigated the “Impact of Service Quality Performance on Customer Satisfaction:
A Case of Oromia International Bank (OIB), Ambo Branch, West Shoa Zone, Oromia Regional
State, Ethiopia.” Through quantitative analysis of data collected from 321 customers, the study
revealed significant gaps between customers’ perceptions and expectations of service quality,
particularly in the dimension of tangibility. The findings underscored the importance of banks

15
understanding and meeting customer expectations to enhance service quality and improve
customer satisfaction levels effectively.

The existing literature on service quality and customer satisfaction in the banking sector provides
valuable insights, yet several gaps remain, particularly concerning the specific context of the
Awash International Bank S.C Sabian branch in Dire Dawa City, Ethiopia. Firstly, while global
studies offer broad perspectives, there is a lack of research focusing on the intricacies of the local
banking environment in Ethiopia. Understanding the unique cultural, economic, and regulatory
factors influencing customer perceptions and experiences in this specific context is essential for
tailored improvements. Additionally, while qualitative methodologies have been prevalent in
exploring customer perceptions, a quantitative approach is underrepresented. By conducting a
quantitative assessment, the current study aims to fill this gap, providing robust descriptive
analysis to quantify the relationship between service quality dimensions and customer
satisfaction, offering actionable insights for the improvement of banking services at the Sabian
branch.

2.3. Conceptual Framework

The conceptual framework for this study was built upon the established theories and empirical
evidence regarding service quality and customer satisfaction in the banking sector, adapted to the
specific context of the Awash International Bank S.C Sabian branch in Dire Dawa City,
Ethiopia. The framework was incorporate the following key components:

Service Quality Dimensions: Drawing from established frameworks such as SERVQUAL and
SERVPERF, the conceptual framework was include dimensions of service quality such as
tangibility, reliability, responsiveness, assurance, and empathy. These dimensions was serve as
the foundational elements for assessing the quality of services provided by the Sabian branch.

Customer Satisfaction: At the core of the conceptual framework lies the concept of customer
satisfaction, representing the degree to which customers’ expectations are met or exceeded by the
services offered at the Sabian branch. Customer satisfaction was measured as the primary
outcome variable in the study.

16
Figure 1: Conceptual Framework of the study
Tangibility
Service Quality

Reliability

Perception Customer’s Satisfaction

Responsiveness

Assurance

Empathy

The SERVPERF model developed by Cronin & Taylor, (1992), was derived from the
SERVQUAL model by dropping the expectations and measuring service quality perceptions just
by evaluating the customers overall feeling towards the service.

17
 CHAPTER THREE

RESEARCH METHODOLOGY

This chapter discusses the research design and methodology in detail to have a clear picture on
the processes and techniques used in conducting the study. The research design shows the
general plan how to answer the research questions. It also gives information on how a sample
respondent drawn from the population and gives description on the number of respondents and
how they was selected. It also discuss about research design and the instruments for data
collection.

3.1. Description of the study area

This study was conducted at Awash International Bank’s Sabian branch located in Dire Dawa
City, Ethiopia. Dire Dawa is the second-largest chartered city in Ethiopia, known for its
historical significance and bustling commercial activity (Central Statistical Agency, 2020). As a
major financial hub within the city, Awash International Bank’s Sabian branch caters to a diverse
clientele, making it an ideal location to explore the relationship between service quality and
customer satisfaction in the banking sector.

3.2. Research Design

This study was adopt a descriptive research design to assess the service quality on customer
satisfaction at Awash International Bank’s Sabian branch. We was employ a quantitative
approach, gathering data through self-administered questionnaires distributed to customers. This
method allows for efficient data collection from a large sample and ensures standardization in
responses. Descriptive statistics was then be used to analyze the collected data, providing a
comprehensive picture of customer experiences and their link to service quality. Descriptive
research involves gathering data that describe events and then organizes, tabulates, depicts, and
describes the data collection (Glass & Hopkins, 1984) whereas explanatory design used to
predict the relationship between variables.

18
3.3. Research Approach

In this study, a quantitative approach was adopted. This approach involves the collection of
numerical data through structured questionnaires to quantify customer perceptions and
experiences regarding service quality dimensions and overall satisfaction levels. By employing
descriptive analysis techniques, the relationship between service quality and customer
satisfaction was examined, providing empirical evidence to support the research objectives. This
quantitative research approach enables the systematic investigation of the phenomenon under
study, facilitating the generation of reliable and generalizable findings to inform decision-making
in the banking industry.

3.4. Types of data and sources

In this study, both primary and secondary sources of data was utilized to comprehensively
explore the assessment of service quality on customer satisfaction at Awash International Bank
S.C’s Sabian branch in Dire Dawa City. Primary data was collected through self-administered
questionnaires distributed to customers visiting the bank, capturing their perceptions and
experiences regarding service quality and satisfaction. Additionally, secondary data was sourced
from existing literature, including academic journals, industry reports, and relevant publications,
to provide a contextual understanding of service quality dimensions, customer satisfaction
models, and banking industry trends. By integrating both primary and secondary data sources,
this study aims to offer a robust analysis and meaningful insights into the factors influencing
customer satisfaction in the banking sector.

3.5. Population, Sample Size and Sampling Technique

3.5.1. Target Population

The target population for this study was all customers of Awash International Bank’s Sabian
Branch in Dire Dawa City, Ethiopia. This encompasses both individual and business customers
who utilize the branch’s services. According to the data obtained from AIB Sabian branch in
2024, the total population of these customers was about 2,389 customers.

19
3.4.2. Sample Size

To ensure the reliability and generalizability of the study’s findings, a representative sample size
was determined based on statistical significance and population characteristics. Following the
principles outlined by Yamane (1967), a minimum sample size of 96 respondents was targeted.
This calculation considers a 90% confidence level and a 10% margin of error. Efforts was made
to maximize participation within practical constraints to enhance the generalizability of the
results. The sample size was calculated using the following formula developed by Yamane
(1967):

N
n= ¿
1+ N ¿ ¿

Where:
n= Number of sample taken
N= Total Population Size
e = sampling error/level of precision (0.1) or 10%
Accordingly, the target population results, the following samples;
2,389
Therefore,n= ¿, n = 96
1+2,389 ¿ ¿
3.4.3. Sampling Technique

Convenience sampling was employed in this study to select participants from the sample
population. Given the practical challenges of reaching all clients due to various constraints and
the intermittent availability of clients, convenience sampling is deemed suitable. Furthermore,
this method offers an economical and efficient means of data collection within a limited
timeframe. Respondents was conveniently approached as they visit the bank service counter for
assistance.

3.6. Data Collection Instruments

In this study, data collection was primarily rely on structured questionnaires designed to assess
service quality and customer satisfaction levels at Awash International Bank S.C’s Sabian branch
in Dire Dawa City. These questionnaires was carefully crafted to capture relevant dimensions of
service quality, such as reliability, responsiveness, assurance, empathy, and tangibles, as

20
identified in established models like SERVQUAL or SERVPERF. In addition, customers was
presented with statements or questions that gauge their experience with various aspects of the
bank’s service quality, such as wait times, staff responsiveness, and overall satisfaction. Likert-
scale questions (e.g., strongly disagree, disagree, neutral, agree, strongly agree) are commonly
used in such scenarios. The questionnaire was include specific questions to measure customer
satisfaction with the bank’s services. These might involve direct inquiries about their overall
satisfaction level or ask them to rate their likelihood of recommending the bank to others.

3.7. Data Collection Procedures

In the data collection phase, a systematic approach was adopted to ensure the collection of high-
quality and reliable data. Firstly, the research team was obtain necessary approvals and
permissions from relevant authorities, including Awash International Bank S.C and any
regulatory bodies, to conduct the study at the Sabian branch in Dire Dawa City. Next,
researchers’ group members was deployed to administer the structured questionnaires to
customers visiting the bank’s Sabian branch. Questionnaires was distributed to customers during
their interactions at the bank, with clear instructions provided on how to complete them.

3.8. Methods of Data Analysis

The data from the questionnaires was analyzed using descriptive statistics to understand
customer perceptions. Frequency tables and distributions was reveal how respondents from
different demographics (age, gender, etc.) view service quality and satisfaction. In addition,
measures like mean, and median was describe the average and range of customer experiences,
providing a clear picture of how customers generally perceive the bank’s service quality and
overall satisfaction at the Sabian branch.

3.9. Ethical Considerations

In this research, the researcher’s was try their best to follow an ethical path in the collection,
analysis, and interpretation of the data. During the collection of data, customer cares of the
selected branch was approached and helped the researcher in the collection of data, as they are
the contact point for every customer. Some of the basic tenants of the ethical behavior in
research like voluntary participation and harmlessness, informed consent, anonymity and

21
confidentiality and disclosure was kept in the research. In giving response to the questionnaire
participants was informed why the research was conduct and how their response is confidential.
In addition, they were aware they had the right to withdraw from answering the questionnaire at
any moment they prefer.

CHAPETER FOUR

DATA PRESENTAION, ANALYSIS AND INTERPRETATION

This chapter of the research illustrates the result of the fieldwork conducted by the researcher. It
is organized based on the research questions. The results are obtained from questionnaires
administered to customers of AIB, who are found to be in the Dire Dawa main branch. The
chapter presents the data collected and their findings. Analysis is also made based upon the
findings in collaboration with the literature reviewed. A total of 96 questionnaires were
administered while undertaking the research.

4.1 Socio-demographic profile of the study participants

No Item Alternative Response

Frequency Percentage
1 Sex Male 67 69.8
Female 29 30.2
Total 96 100.0
2 Age Below 18 years old 13 13.5
19-30 years 27 28.1
31-40 years 32 33.3
Above 40 24 25.0
Total 96 100.0
3 Education back ground Certificate and 19 19.8
precertification
Diploma 31 32.3
Degree 41 42.7
MA and above 5 5.2
Total 96 100.0
4 Mortal status Married 51 53.1

22
 divorced 14 14.6
unmarried 31 32.3
Total 96 100.0
Table 1. socio-demographic profile of respondents

Questionnaires were distributed to AIB S.C. customers‘who were found in Dire Dawa. As shown
table above total of 96 customers were participated in answering questionnaires. From the
attendant 67 (69.8%) were male and 29(30.2%) were femals.13 (13.5%) were below 18 years old
age group, , 27 (28.1%) were in the age range of 19-30, 32(33.3%) were in the age range of 31-
40, 24(25%) was above the age of 40 years old. 19.8% of AIB customers who participated in
the study have attended Certificate and precertification. Moreover, around 80.7 percent of the
customers have diploma and above. Out of those who have professional qualification, around
32.3 percent have diploma, 42.7 percent have first degree and around 5 percent have second
degree and above. On the other hand 53.% of AIB costumer at dire dawa branch have married,
while 14.6 % are divorced and 32.3% are unmarried

On the other hand the table below show that all of the study participants had experience in using
the banking services of Awash International bank for at least 12 months. Most of the customers
(around 44.8 percent) have spent 6-10 years with Awash International Bank, 24 percent have
spent 1-5 years and 31.3 percent have spent 10 years and above

Table 2. Respondents years of relation with the bank

No Item Alternative Response

Frequency Percentage
1 Years of relation with the 1-5 year 23 24.0
bank 6-10 year 43 44.8
above 10 30 31.3
year
Total 96 100.0

23
With regard to the type of banking service 67.7 percent of the participants are using, saving
account, 21 percent of the respondents revealed that they are using current account and 11.5%
were using fixed account banking services, 5.25 are using interest free account

Table 3. respondents type of account at the bank

No Item Alternative Response

Frequency Percentage
1 type of account Saving account 65 67.7
current account 21 21.9
Fixed account 11 11.5
Interest free account 5 5.2
Total 96 100.0

4.2 Service Quality of AIB using SERVQUAL

4.2.1. Analysis on the Research Results of Service Reliability and its Attributes

Service reliability is a quality customer service factor that is dependent on staff‘s commitment to
do activities as promised. As indicated table below 33.3% of customer at the bank where Mostly
customers are promise dependent. If you perform activities as you promised customers assumed
as they get dependable services unless you do not execute activities as promised customer was
frustrate. The most important service reliability attributes like staff keeping promise meeting
customers ‘Among the reliability of service quality attributes sincere interest in solving
customers ‘problems got 25 percentage in satisfying customers of the bank. Sincere interest in
solving customers ‘problems, provide services at the time they promise to do got 16% and insist
on error-free records create a highly satisfied customers each got a mean percentage of 10.4%.

Table 4. Service Reliability and its Attributes

No Item Alternative Response

Frequenc Percentag
y e
1 In what Staff keeping promise 32 33.3
way does Sincere interest in solving customers’ problems 24 25.0
the bank Staff performing service right the first time 14 14.6
ensure Provide services at the time they promise to do so 16 16.7
reliability Insists on error free records 10 10.4
to service Total 96 100.0
quality

24
4.2.2. Analysis on the Research Results of Service tangibility and its Attributes

Service tangibility is dependent on such factors as modern looking equipment, equipment for
service must facilitate quality customer service delivery, and must be incognizant of the present
services in its accuracy, reliability, timeliness‘s, attractiveness in looking, etc. Appealing
physical activity, i.e. the working environment of the service area must be attractive to see and
work. The neat appearance of service staff contributes its part for QCS delivery. Well-dressed
staff attracts more customers and create pleasant environment to see and get service. Materials
associated with the service must be visually attractive and arranged artistically to invite sight.

Tangibility is one service quality factor encompasses sub quality service attributes as modern
looking equipment, appealing physical activities, neat appearance of staff and materials
associated with the service are very important in delivering quality customer service

As indicated in table below the customer respondents of AIB dire dawa branch tangibility
attributes customers were appealing physical activities 32(33.3%), second and modern-looking
equipment 24(25%) whereas 21(21.9%) of respondents chose neat appearance the remaining
11(11.5%) and 8(8.3%) of customer of staff chose Materials associated with the service and
convenience location

Table 5. Service tangibility and its Attributes

No Item Alternative Response

Frequency Percentage
2 In what way does Modern looking equipment 24 25.0
the bank ensure Visually Appealing physical facilities 32 33.3
Tangibility to Neat appearance of staff 21 21.9
service quality Materials associated with the service are 11 11.5
visually appealing
Convenience Location of Branches 8 8.3
Total 96 100.0

4.2.3. Analysis on the Research Results of Service responsiveness and its Attributes

Service is one of the quality customer service factors with the following service responsiveness
attributes. Customers should be informed and know when service was performed. The nature of

25
the services varies from service to service. Some take relatively some times and others are
performed at the spot. As much as possible you must provide services at the spot (prompt
service). Staff must be wasing to help customers. The main purpose of their existence is to help
customers. Prompt response to customers query satisfies customer. Customers do not want future
action; they need response at the spot.

Based on the research findings 29.2% of the respondents were responded that Prompt service to
Customers, 27.1% of the attendants were locked Staff wasingness to help, 24% were satisfied
with that Staffs are never be too busy to respond to customers’ requests, and 19.8% were happy
with Staff telling customers exactly when services was performed

Table 6. Service responsiveness and its Attributes

No Item Alternative Response

Frequency Percentage
3 in what way does Staff telling customers exactly when 19 19.8
the bank ensure services was performed
Responsiveness to Prompt service to Customers 28 29.2
service quality Staff wasingness to help 26 27.1
Staffs are never be too busy to respond 23 24.0
to customers’ requests
Total 96 100

4.2.3. Analysis on the Research Results of Service empathy and its Attributes

Quality customer service factors; i.e. service empathy was realized when there are service
empathy attributes as when customer want to get individual attention by the staff, customers
need to have convenient operating hours that maximize their interest, customs need to get
personal attention by staff, customers need a staff who can fulfill their best interest at heart and a
staff who understand the specific needs of customers. The existence of the service empathy
attributes meets customer satisfaction and their absences are the cause for customer
dissatisfaction. Customers of AIB S.C. were asked to assure the existence or absence of service
empathy in the bank. Based on the finding 27.1% of Customers satisfied on Convenient
operating hours, 19.8% of customer chose the bank understanding the specific needs of
customers, while 18.8% say staff giving customers best interest at heart and 17.7% and 16.7% of

26
respondents individual attention given by staff and Staff giving customers personal attention was
selected.

Table 7. Service empathy and its Attributes

No Item Alternative Response

Frequency Percentage
3 In what way individual attention given by staff 17 17.7
does the bank Convenient operating hours 26 27.1
ensure Empathy Staff giving customers personal attention 16 16.7
to service quality staff giving customers best interest at heart 18 18.8
Understand the specific needs of customers 19 19.8
Total 96 100.0

4.3 Analysis and Interpretation of the impact of Service Quality Factors

4.3.1. impact Level Assessment on Quality Customer Services Factors

Customers who were getting the banks service thought that the impact level of the under
mentioned quality service factor were very high; customer service training to employees and
Management attitude towards quality customer service (52%), the external environment
(political, economic, social, technological, legal etc.) (50%), policy and procedures of the bank
on quality customer service (47%), financial and none financial incentives to employees 43%)
and employees motivation and commitment (42%). Policies are guidelines to do or not to do an
activities; clear policies facilitate quality customer service and performance and if policy is
vague it was affect quality customer service delivery and procedures are steps how to do
something clearly avoiding any ambiguity; financial and none financial incentives to
employees , their presence motivate employees to perform their regular activities as scheduled
even some times more than the plan, they was encouraged to do extra time and above their
scope; well-motivated employees are an engine to the organization to move it a step forward;
increases their involvement in all the banks affairs, increase their moral and participation in
decision making on any QCS matters and they was committed to implement them as planned and
their absence leads to low QCS delivery and performance. Customer service training to

27
employees; it is a tool that sharpen employees to deliver wasful, reliable and skillful QCS,
untrained employees did not well understand their existence in the organization and difficult to
meet the objectives of the organization, anyone can be discouraged when he thinks that he did
not serve customers professionally; training is a long term investment that bring return in the
long run; their absence affect the bank negatively.

The external environment (political, economic, social, technological, legal etc.), the external
competitive environment has greater impact on quality customer services, the political situation
of a country can affect QCS positively or negatively, if a country is economically developed it is
true that it‘s QCS delivery also developed; social development also affect QCS either positively
or negatively. If the development of society is progressive their service delivery was also be
progressive because service delivery is highly dependent on the civilization and development of
society; so, must be well understood and managed; the working environment of organization and
management attitude towards quality customer service ; conducive working environment that
motivate employees to deliver proper customer service and help customers to get prompt and
reliable services, their absence adversely affects on QCS. Resources are key inputs for QCS and
better performances, inadequate resources being material, human, financial, information etc.
Hinder QCS delivery one cause for lower performance; and technology ease and highly
facilitates service delivery , automating branch network through management information
systems make all branches accessible through branch network; which make one branch customer
to be customer of all bank branches which help the customer to get service at any branch without
limiting him to his home branch their absence hinder QCS and performance. Respondents
expected that the bank‘s quality customer service factors; financial and none financial incentives
to employees and employees motivation and commitment (74%), customer service training to
employees (67%), availability of resources (manpower, material, financial, information, etc.)
(64%), the increase in the service recipients need on quality customer service and policy and
procedures of the bank on quality customer service (52%), their impact on quality customer
service were considered high. Some respondents believed the impact of quality customer service
factors; Availability of resources (manpower, material, financial, information, etc.) (46%),
Customer service training to employees, the working environment of the organization (33%) and
Management attitude towards quality customer service (31%) had been considered as no impact
at all. Here we want to give stress on very high missing results particularly; The working

28
environment of the organization (58%), The increase in the service recipients need on quality
customer service and Policy and procedures of the bank on quality customer service (56%), The
external environment (political, economic, social, technological, legal etc.) (50%) and
Technology and infrastructure (48%) were believed that there were ambiguity and
misunderstandings between the concepts of the question and their response. As indicated from
table 6 the impact level of quality customer service factors like Customer service training to
employees (119%),financial and non-financial incentives to employees (117%), employees
motivation and commitment (116%), Policy and procedures of the bank on quality customer
service (99%),availability of resources (98%) , the external environment (political, economic,
social, technological, legal etc.) (95%) and Management attitude towards quality customer
service (93%) were equal to and more than the averages. These results were the sums of the
results under high and very high; these results were big and their influence on quality customer
service factors were great; the researcher can conclude that; these quality service factors are
factors that have higher influence on quality customer service delivery.

Table 8: Consolidated customers and employees response on the impact Level Assessment
on Quality Customer Services Factors.

The numbers 1, 2, 3, 4, 5 and 99 represents in the table as: Very low=1 Low=2 No impact=3
High=4 Very high=5 99=Missing

Service quality factors their frequencies ( frequency

percentage)
No Service quality
. Factors 1 2 3 4 5 99
1 Financial and none
financial incentives to 11(23%) 14(25%) 14(23%) 32(74%) 17(43%) 8(14%)
employees
2 Customer 7(12%) 15(30%) 16(33%) 31(67%) 22(52%) 5(8%)
service training
to employees
3 Employees 10(16% 16(34%) 14(25%) 31(74%) 19(42%) 6(10%)
motivation and )
commitment
4 Availability of

29
 resources 2(4%) 14(34%) 17(46%) 29(64%) 14(34%) 2(8%)
(manpower, material,
financial,
information, etc.)
5 Technology and 9(29%) 23(29%) 22(26%) 19(39%) 12(30%) 13(48%)
infrastructure
6 The increase in the
service recipients 1(2%) 9(24%) 12(23%) 25(52%) 16(29%) 15(56%)
need on quality
customer service
7 The working
environment of the 5(12%) 4(10%) 15(33%) 12(49% 16(40% 16(58%)
organization

8 Management attitude
towards quality 2(6%) 12(27%) 11(31%) 19(41%) 22(52%) 12(44%)
customer service
9 Policy and -
procedures of 9(19%) 12(27%) 27(52%) 15(47%) 15(56%)
the bank on
quality customer
service
10 The external
environment 1(2%) 12(27%) 12(27%) 20(45%) 19(50%) 14(50%)
(political, economic,
social, technological,
legal etc.)

4.3.2. customers and employees response on service quality

Neatness and attractiveness of branch office contributing it part on QCS; they please customers‘
sight and invite them to come again and again to get the service of the company more frequently.
Neat and attractive work environment give the first impression to customers what type of service
was follow. The internal office arrangement and adequate spacing helps in creating attractive
work environment and facilitate QCS delivery by producing enough space to move and do once
job properly and sequentially, to arrange office equipment and facilities better, to do once job on
time and in a good condition etc.; this pleased both the internal and external customers and
facilitate customer service delivery. Branch accessibility through branch networking simplifies

30
service delivery accessing all branches of a bank through technology support network; this
minimizes transportation and other invisible related costs, save time and energy, widen customer
base. Availability adequate of office furniture, equipment, and facilities and their proper
functioning enables the bank to deliver suitable customer service and satisfy both the service
recipient and provider too. The most important and very decisive factors that can able to
integrate all the above quality customer service factors is management participation and follow
up on quality customer services. This is a quality customer service factor with the dynamic
human involvement that matter all other factors. It is the human part that can bring dynamic and
a continuous change. Here the management and head of the organization with the ability to plan
in the uncertain future, implement its plan and closely follow up their proper implementation and
get feedback for corrective action. The participation of management in QCS delivery is
mandatory and a must; because; unless they are not committed and take the initiative as a role
model the rest of the subordinates loss their motivation and moral to deliver quality customer
service.

Customers and employees highly satisfied on the bank‘s branch accessibility through branch
networking (54%), internal office arrangement and adequate spaces (37%), neatness and
attractiveness of branch office both internal and external and availability of office facilities,
furniture and equipment for service (33%). Note that though these service quality factors
classified as highly satisfied, almost all were below the average the highest was 54% and the
lowest was 33%, these were not higher than satisfaction as you see their percentage amount
which were small. Respondents were satisfied on availability of office facilities, furniture and
equipment for service (82%), internal office arrangements and adequate spaces (77%), neatness
and attractiveness of branch offices (74%), Branch accessibility through branch networking
(73%), proper functioning of all note counting machines to deliver cash counting services, and
management participation and follow up on quality customer service (62%).

A small number of respondents were dissatisfied on quality customer service items specially on
internal office arrangements and adequacy of the spaces (46%), some doubt the neatness and
attractiveness of branch offices (40%), 33% of the respondents were not satisfied on availability
of office facilities, furniture and equipment and the same percentage dissatisfied on
managements participation and follow up on quality customer service. In rating service quality

31
items by customers it is concluded that service quality factors ranked first the bank‘s branch
accessibility through branch networking (54%), second internal office arrangement and adequate
spaces (37%), third neatness and attractiveness of branch office both internal and external and
availability of office facilities, furniture and equipment (33%) etc.

Note that though these service quality factors classified as highly satisfied, almost all were below
the average the highest was 54% and the lowest was 26%, these were not higher than
satisfaction as you see their percentage amount 54%, 37%, 33%, and 31% which were small. It
is possible to conclude from the findings that customers of AIB S.C. satisfied on availability of
office facilities, furniture, and equipment for service (82%), internal office arrangements and
adequate spaces (77%), neatness and attractiveness of branch offices furniture and equipment
(74%); branch accessibility through network (73%), Proper functioning of all note counting
machines in branches

Service quality related item frequencies (frequency

percentage)

No Service quality items

1 2 3 4 5 99
1 Neatness and attractiveness of
branch offices both internal and
2(4%) 16(40%) 28(42%) 29(74%) 11(33%) 10(18%
external

2 Internal office arrangements and

adequate spaces (cages, counter,
back office and lobby) arrangement
for service
5(6%) 21(46%) 17(31%) 35(77%) 14(37%) 4(4%)

3 Availability of office facilities,

furniture and equipment for service
1(2%) 14(33%) 18(46%) 32(82%) 12(33%) 1(4%)

4 Branch accessibility through

branch networking
4(10%) 10(21%) 14(36%) 21(73%) 17(54%) 2(6%)
5 Proper functioning of all note

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 counting machines in branches 5(14%) 15(31%) 21(54%) 24(62%) 10(31%) 3(10%
)
Table 9: Consolidated customers and employees response on service quality rating The
numbers 1, 2, 3, 4, 5 and 99 represents in the table as: Very dissatisfied=1 dissatisfied=2
Neutral=3 Satisfied=4 Very satisfied=5 99=Missing

4.3.3. customer and employees’ responses on factors that Affect Customer Loyalty

Usually the higher the level of customers‘ satisfaction the higher was the loyalty of customers to
the bank where they are the cause for performance and achievement. The satisfaction level of
customers is very important to the bank. Satisfying customers only did not assure loyalty of
customers and achieve better performance. Only satisfy customers are customers ready to change
the bank‘s service with no good reasons. These are customers which are not relay up on them. To
make them highly reliable and long run dependable customers the level of satisfaction should
reach higher to the limit highly satisfied customers. The satisfaction level of customers can reach
very high when the bank meets all quality customer service factors in favor of customer interest
that was reward the bank positively affecting its performance.

The level of service quality must also reach high, because the higher customer satisfaction and
loyalty is a direct results of high quality customer services. Only quality customer service could
create satisfied customers. Both high level of customer satisfaction and high level of quality
customer services are greatly related with the quality service dimensions and attributes. The bank
can meet them giving high attention and closely following the service dimensions and their
attributes in designing a tool that check and assure the existence of high quality customer service
and high customer satisfaction and loyalty in all the time. In addition to these customer trust and
affective commitment towards the bank is another customer loyalty factor that directly or
indirectly affects customers‘ satisfaction and loyalty. To make customers loyal it is a must to

33
meet the needs and demands of customers higher. Higher customer satisfaction is possible only
when high quality customer service delivery is assured which has a direct impact on customer
trust and affective commitment towards the bank; it is true that a customer who are highly
satisfied by the banks services was trust and develop affective commitment towards to the bank
to remain working with the bank as long as these relationship exists. Furthermore, the positive
image of the company can be a cause for customer loyalty. In most cases positive image of a
service giving company emanates from its quality customer services. Therefore, a company
should cautious for its quality customer service delivery ability to build positive company image
which is a cause for customer satisfaction and loyalty. More over the relational benefit perceived
by the customer is another customer loyalty factor. The relationship between the bank and
customer was very good when there are very good relationship in quality customer service
delivery and reception. If quality customer service delivery of the bank is sound and reliable
customers need to form relationship with the bank in order to maximize their relational benefits
with the bank.

Basing with the above points attendants who were participated in the research and answering
questionnaires were strongly agree on customer loyalty factors from the higher to the lower as
follow; the relational benefit perceived by the customer (52%), customers feelings of trust and
affective commitment toward to the bank (48%), higher level of customer satisfaction (33%),
higher level of service satisfaction (29%) and the positive image of the company (28%).

Table 10: Consolidated customer and employees responses on factors that Affect Customer
Loyalty

The numbers 1, 2, 3, 4, 5 and 99 represents in the table as: Strongly disagree=1;

Disagree=2 Neutral=3; Agree= 4 strongly Agree = 5 ; 99=Missing

Customer loyalty factors frequencies(percentage)

No Service quality factors
1 2 3 4 5 99
1 High level of
customer
4(2%) 14(25%) 25(62%) 31(74%) 18(33%) 5(6%)
satisfaction
2 High level of Service quality 5(4%) 19(38%) 23(54%) 28(69%) 16(29%) 5(6%)

34
 3 Customer feelings of trust and
affective commitment toward
the bank
1(2%) 9(27%) 17(46%) 28(72%) 21(48%) 2(6%)
4 The positive image of the
company
3(6%) 10(27%) 16(49%) 36(87%) 11(28%) 2(6%)
5 The relational benefits
perceived by the customer
2(4%) 5(17%) 23(58%) 30(65%) 16(52%) 2(4%)

CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary of Major Findings.

The researcher has summarized major findings based on the results of the analysis on the
perceived service quality and customer satisfaction at AIB.

 The impact level of quality service factor like employee‘s motivation and commitment,
policy and procedures of the bank on quality customer service, financial and none
financial incentives to employees, customer service training to employees were high.
 Customer loyalty was found as dependent on the relational benefit perceived by the
customer, customers‘ feeling of trust and affective commitment toward to the bank,
positive image of the company, higher level of customer satisfaction and higher level of
service satisfaction respectively.
 Quality customer service factors like branch location, prompt maintenance of office
equipment, neatness and attractiveness of branch offices, internal office arrangements,
neatness and attractiveness of branch offices, availability of office facilities, furniture and
equipment were dissatisfactory.
 Quality customer service factors employee selection and recruitment, loan delivery time,
foreign currency approval procedure and time, prompt response of H.O to office

35
 facilities, manpower assignment speed and accuracy on demand and customer complaint
handling and management systems of AIB were found very dissatisfactory.

5.2 Conclusions

The researcher has made the following major conclusions based on the research questions and
statement of the problem.

 The results of almost all quality customer service factors that favor quality were below
the average; this indicates that quality customer service delivery of the bank is also poor.
 The impact level of policy and procedures of the bank on quality customer service,
financial and none financial incentives to employees, customer service training to
employees, the external environment, the working environment of the organization,
management attitude towards quality customer service and availability of resources to
QCS were very high
 Sequentially the relational benefits perceived by customers, customer feelings of trust and
affective commitment towards the bank and positive image of the company were
unusually found customer loyalty factors than higher level of customer satisfaction, and
higher level of service satisfaction.
 The bank has not effectively utilized the newly implemented banking solution and has not
got competitive advantage by entertaining customers‘ multidimensional services.
 Quality customer service factors employees‘ selection and recruitment, loan delivery
time, foreign currency approval procedure and time, prompt response of H.O to office
facilities, manpower assignment speed and accuracy on demand and customer complaint
handling and management systems of the bank were found very dissatisfactory.
 The bank did not give high attention and value for employees‘ knowledge and
development and continual customer service training a tool for quality customer service
and long term investments to assure quality customer service for long.
 Offering high quality service to customers typically results important benefits like
positive company image, increase productivity, higher customer satisfaction and loyalty,
lower rework time, reduce costs and increase profitability

36
5.3 Recommendations

Based on the above conclusion and findings the researcher has pointed the following
recommendation to the bank‘s management on the perceived service quality and customer
satisfaction of the bank.

 Management commitment and dedication to alleviate the quality of customer service is

very important; unless they are not committed and take the initiative as a role model the
rest of the subordinates loss their motivation and moral to deliver quality customer
service; So that commit yourself for quality customer service delivery in making policies
and procedures incognizant of QCS and develop means to ascertain proper
implementation of the quality customer service dimension and their attributes in the
satisfaction of customers in all the time.
 Unless there are highly satisfied customers; there was high customer migration to other
commercial banks which was endanger the existence of the bank; so management should
be aware of it and implement a service recovery program to enhance quality customer
service by conducting quality customer service survey. It is also important to conduct
competitor analysis research on service quality and compare yourself against others and
use benchmarking to improve quality customer services of the bank.
 Quality customer service delivery would be realized with, qualified, trained, experienced,
empowered, satisfied, customer service oriented staff, so that the bank should recruit and
employee qualified, trained, motivated, satisfied, empowered staff and retain them to
assure the satisfaction of customers. The other quality customer service dimension and
attributes were not exercised by staff and not satisfied customers of AIB; So that the
bank needs to give attention and provide quality customer service training to its
employees regularly and continually to improve service quality that grant customer
satisfaction.
 Proper utilization of the newly implemented modern banking technology facilitates the
usual day to day activities of the bank and enhances quality customer service delivery; so
that knowledge, skills, and experiences of the user of the system in general and specially
information technology staff in particular are well developed through training and
development in addition to formal knowledge gained from the vender. Problems related

37
 to banking solution system like network interruption and failure, power failure, delay in
correcting irregularities and other problems need acute management attention and prompt
correction to serve customers and get competitive advantage from the technology.
Moreover; management should design a mechanisms to entertain customers during
system failure and unavailability of network
 Almost all banks‘ in Ethiopia are providing one and same service products. What
differentiate among themselves are their abilities to deliver quality services; this is a
means to have highly satisfied loyal customers that assure positive performance.
Therefore; the bank is advised to give high attention to quality customer service like other
sensitive bank issues as deposit mobilization, disbursement of more loans and advances,
generating profits, etc.
 Service quality factors like policy and procedure of the bank, financial and none financial
incentives to employee, employee motivation and commitment, the working environment
of the organization, management attitude towards QCS should get great attention as their
impact on QCS are very high.
 Office supply, office equipment, office furniture and other facilities and resources and
their availability and prompt maintenance when there are defects must be assured all the
time to maintain the satisfactions of customers.
 Give weight and value quality customer service factors like internal office arrangement,
branches networking, ideal location of branches, availability of quality materials in all
the time, effective two way communications , lesser loan delivery time, ease foreign
currency approval procedure, manpower assignment on need; these are some means to
quality customer service.
 Create conducive work environment, develop a culture realize sustainable quality
customer service delivery process, build good customer relationship management,
develop and implement customer complete handling mechanisms, recognize the
important of customers, fulfill both material and psychological matters of employee, treat
employees and customers impartially and transparently, this alleviates the quality of
services which finally improve customer satisfaction and loyalty, this leads to market
share and growth, image building and good financial perform and achievement.

38
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ANNEXES/APPENDICES
Dire Dawa University Graduate studies, questionnaire on “Assessment of Service Quality
on The Customer Satisfaction (In The Case Of Awash International Bank S.C, Dire Dawa
City, Sabian Branch)

Questionnaire for Customers

Dear Respondent, I am currently a student of Dire Dawa University, and I am doing my

Bachelor of art (BA) in Marketing Management. On the assessment of service quality on the
customer’s satisfaction; in the case of Awash International bank at Sabian Branch in Dire Dawa.
The purpose of this questionnaire is to gather data regarding the Service quality and
Customer satisfaction in the case of Awash International bank at Sabian branch.
Thank you in advance for your cooperation and timely response!
Note:
1. No need of writing your name.

42
 2. Where alternative answers are given, encircle your choice and put “√” mark
where necessary.
3. Please return the completed questionnaire in time.

Questionnaire to be filled by customer of Awash International Bank at Sabian Branch

Part I. BACKGROUND OF THE RESPONDENT

Please mark you answer (x or √)

1. Sex: male female

2. Age: Below 18 years old 19-30 years old 31-40 years old
Above 40
3. Education status of employees
precertification diploma degree Msc and above
4. Mortal status
Married divorced unmarried
5. How long have you been the customer of Awashs International bank S.C.?
1-5 year 6-10 year above 10
6. Which type of account do you have?
Saving account Fixed account
current account Interest free account

7. For what purpose have you come to bank

To deposit money
To withdraw money
To transfer money
To open new account

8. How long have you been the customer of Adis International bank S.C.?

43
 1-5 years 6-11 years 12-17 years 19 years & above
9. What type of services are you frequently using from the bank? You can select
more than one item.
Saving deposits Current account Borrower In ternational Banking
10. Are you customers of other private or government banks?
No, I am not Yes, other private banks Yes, Government banks

Yes, Both government & other private banks

Part II. Information Related to Customer Experiences with Service Quality of AIB

1. .In what way does the bank ensure reliability to service quality?
A. Staff keeping promise
B. Sincere interest in solving customers’ problems
C. Staff performing service right the first time
D. Provide services at the time they promise to do so
E. Insists on error free records
2. In what way does the bank ensure Tangibility to service quality?
A. Modern looking equipment
B. Visually Appealing physical facilities
C. Neat appearance of staff
D. Materials associated with the service are visually appealing
E. Convenience Location of Branches
3. In what way does the bank ensure Responsiveness to service quality
A. Staff telling customers exactly when services was performed
B. Prompt service to Customers
C. Staff wasingness to help
D. Staffs are never be too busy to respond to customers’ requests
4. . In what way does the bank ensure Empathy to service quality
A. Individual attention given by staff
B. Convenient operating hours
C. Staff giving customers personal attention
D. Staff giving customers best interest at heart
E. Understand the specific needs of customers
5. .In what way does the bank ensure Assurance to service quality
A. Behaviors of staff instill confidence in customers
B. Customers feel safe in their transactions
C. Friendliness and courtesy of staff
D. Staff having knowledge to answer questions

III. Assessment of service quality in respect with technological

advancement, waiting time and responsiveness

44
1 stands for Poor”, 2 is “Satisfactory”, 3 stands for “Good”, 4 stands for “Very Good”, 5 stands for
“Excellent”.

Dimensions 1 2 3 4 5
1 How do you rate AIB’s modern banking service in relation with
technology like, core banking system, mobile banking etc
2 To what extent do you believe that AIB banking system is advanced
in modern technology utilization compared with other banks in the
country
3 How do you rate the waiting time of AIB’s service
4 Are you satisfied with the service of the bank in respect to your
specific needs of service, like loan service, domestic banking &
foreign banking service
5 If there is a deviation, how do you rate the gap between your
expectation and the actual performance of AIB’s

IV. Assessing customers expectation towards AIB S.C quality

A, Please put a tick mark under the given number to show the impact level of the
following quality customer service factors‘ on AIB S.C..
Very low=1 Low=2 No impact=3 High=4 Very high=5

No. Factors 1 2 3 4 5
1 How do you rate the total service quality of AIB
2 How do you rate your satisfaction level with the overall
service of the bank
3
4 Financial and none financial incentives to employees
5 Customer service training to employees
6 Employees motivation and commitment

45
 7 Availability of resources (manpower, material, financial,
information, etc.)

8 Technology and infrastructure

9 The increase in the service recipients need on quality
customer service
10 The working environment of the organization
11 Management attitude towards quality customer service
12 Policy and procedures of the bank on quality customer
service

13 The external environment (political, economic, social,

technological, legal etc.)

B. Please put a tick mark under the proper ratings for each under listed service quality related
facilities and branch locations and branch related matters of AIB S.C..:
Very dissatisfied=1 dissatisfied=2 Neutral=3 Satisfied=4 Very satisfied=5

Service quality related items 1 2 3 4 5

14 Neatness and attractiveness of branch offices both
internal and external
15 Internal office arrangements and adequate spaces
(cages, counter, back office and lobby) arrangement
for service
16 Availability of office facilities, furniture and
equipment for service
17 Branch accessibility through branch networking
18 Proper functioning of all not counting machines in
branches
19 Management participation and follow up on quality
customer service

46
C. Please indicate your agreement or disagreement on the factors that affect customer loyalty in
AIB S.C. circling the number that best represents your opinion in the table below.
Strongly disagree=1 Disagree=2 Neutral=3 Agree=4 Strongly agree=5

Customer loyalty factors

1 2 3 4 5
20 High level of customer satisfaction
21 High level of Service quality
22 Customer feelings of trust and affective commitment
toward the bank
23 The positive image of the company
24 The relational benefits perceived by the customer

Thank you for your wasingness and precious time.

47