CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Service quality, especially in the banking sector, has been a popular research topic. Gefen (2000) defined service quality as “the subjective comparison that customers make between the quality of the service that they want to receive and what they actually get.” Sudesh (2007) reported that the poor service quality in public sector banks is mainly due to deficiency in tangibility, as well as a lack of responsiveness and empathy. On the other hand, private sector banks were found to be more refined in this regard. Overall, foreign banks were relatively close to their customers’ expectations in term of the various dimensions of service quality. Furthermore, the study revealed the presence of service quality variations across demographic variables. It suggests that bank management should pay attention to potential failure points and respond to customer problems (Sudesh, 2007). Banks should pay attention to service quality to increase customers’ loyalty to the company, willingness to pay, customer commitment, and customer trust (Hazra and Srivastava, 2009). Therefore, there is a need to emphasize the understanding of multidimensional constructs of service quality and its implications in a competitive environment. A satisfied customer does not necessarily become loyal, while customers may maintain a relationship with a company despite being dissatisfied (Matos et al., 2013).
According to Hossan (2012) customer satisfaction is a key factor in positioning a firm’s performance. This can be measured in ditterent ways. One of the ways of measuring the customers’ satisfaction is by understanding benefits and costs relationship of the customers’ expectations. This can depend on their past experiences. Another way is through the life cycle of the relationship of the customer (Ojo, 2010). In the past, quality was seen as a measurable aspect for tangible products only. This was due to inferiority of the service sector in the economy. Due to the increasing importance of service sector in the economy, the measurement of service quality began to be of interest to individuals in this field (Ghost & Gnanadhas, 2011). Quality of service is not only a vital factor of customer satisfaction in manufacturing industries but also in service firms today that are developing (Karim & Chowdhury, 2014). Research indicates that customer satisfaction plays a very important role in customer loyalty and retention although it does not ensure repeat purchase (Mohsan et al., 2011). Firms in the service sector need to strive through service quality. One of the major factors which influence the customer satisfaction is the quality of service (Timothy, 2012). Measurement of service quality enables firms to compare before and after changes, identify the quality-related problems, and establishing clear standards for service delivery. High service quality will improve customer satisfaction, give a firm an edge in the market share, and attract profit (Hossan, 2012). The global economic recession and unrest in financial markets has greatly damaged the confidence of banking and finance sector consumers all over the world. Banking industry has become greatly competitive in the existing business setting. Banks are greatly realizing the need to single out themselves from the competitors, on various criteria which can boost customer satisfaction and loyalty, since banks are offering approximately homogenous products to the customers. The result has shown paramount importance of customer satisfaction and loyalty for the enhanced performance of an organization in the long run (Hallowell 1999). With the aim of enhancing confidence of customers in the abilities of service provides, service quality, customer satisfaction and loyalty are the vital factors deliberated in the current literature (Dick, & Basu 2001).