ASSESSING THE IMPACT OF CUSTOMER SERVICE QUALITY ON


FINANCIAL INSTITUTIONS


           


            The common sense assumption of the impact of customer service quality on financial institutions and on any other institutions is that: high customer service quality equals higher customer loyalty; high customer loyalty equals higher profitability.  


            Today financial institutions such as banks no longer just deliver services inside the bank premises but use the power of information technology to facilitate delivery of services through the internet, automated teller machines and phone banking. With the rise in the number of banks both global and national, banks institute corporate banking strategy to attract more customers and increase profitability. Attracting customers however is not the only key concern of banks, matters such as customer satisfaction and customer loyalty are the key areas that banks give considerable attention to.


            A study conducted among bank customers in Penang Malaysia by Kheng et.al. (2010) gives us an idea about the relationship between customer service quality, customer satisfaction and customer loyalty. Customer service quality is a matter of perception by customers and it refers to the attitudes and judgments by the customer on the superiority of the banking service vis a vis the service of other financial institutions. Satisfaction on the other hand relates to customer’s attitude on a specific transaction. It is said that customers’ satisfaction determines loyalty and that there is a positive relationship between customer satisfaction and customer retention or loyalty. Customer satisfaction in this study is viewed as a mediating factor between customer service loyalty and customer loyalty. Customer loyalty is important to make profits.


            To assess customer service quality vis a vis customer satisfaction and customer loyalty, the study identified several dimensions such as: tangibles, reliability, responsiveness, assurance and empathy. Tangibles refer to the banks physical facilities and equipment and its personnel. Reliability is the dependable and accurate service quality promised by the bank to the customers. Responsiveness is the willingness of the bank personnel to provide prompt service and help to customers. Assurance is the ability of the personnel to inspire trust and confidence among customers by showing courtesy and displaying knowledge and competence and credibility as well as an assurance of protection of the security of the customer. Empathy is the individualized attention given to customers this includes understanding the customers, ability to communicate, and accessibility.


            Results show that there is a positive relationship between reliability and customer loyalty. Customers stay even if they are not satisfied because they have no choice and because of the cost of switching banks. The tangibles or the physical facilities and equipment however are not significant on customer satisfaction. Customers do not view physical equipment and facilities as important. This may be due to the fact that most transactions are done online. Responsiveness, which includes prompt service and help to customers has a significant relationship with customer loyalty. There is a significantly positive relationship between empathy and customer loyalty. It is observed that friendly service employees who develop friendship with customers also develop customer loyalty. This relationship is even strengthened through customized service by offering personalized, adjustable and flexible, services to suit the needs of customers. Finally, assurance is significant predictor of customer satisfaction. A positive communication line between customer and service personnel is a strong indicator of customer satisfaction. Further, more experienced employees and their speedy delivery enhances perception of service quality. The no-waiting time also increases level of satisfaction of customers. It is important to establish customer loyalty to retain customers.


            An earlier study conducted by Herrington (1991) established the relationship between online service quality and e-trust. His study revealed that online service quality has no impact on customer delight, e-trust or the development of stronger relationships with customers. Banks who want to develop customer loyalty and strong relationship must provide an efficient, well-organized site and user-friendly website. Banks must also attend personally to the needs of the customers. Online service quality alone is not enough to retain customers. (Herrington, 1991)


            In conclusion customer service quality must be provided by the bank to the customers in a number of mediums. It can be through online, automated teller service, phone service and even through face to face personal interaction and take into consideration the dimensions of quality customer service: tangibles, reliability, responsiveness, assurance and empathy. These dimensions assure us of increased customer satisfaction, and increased loyalty and ultimately increase in profitability as well.


 


REFERENCES:


Herrington, C., 1991. Can banks improve customer relationships with high quality online services? [online] Available at: <http://www.emeraldinsight.com/journals.htm?articleid=1615785> [Accessed 8 May 2011]. Kheng, LL., Mahamad, O.,   Ramayah, T., and Mosahab R., 2010. The Impact of Service Quality on Customer Loyalty: A Study of Banks in Penang, Malaysia.  Published in International Journal of Marketing Studies. Vol 2 No 2 (2010). [online] Available at: < http://www.ccsenet.org/ijms> [Accessed 8 May 2011].

 


 

 



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