Abstract
The study was carried out to determine the effect of customer service quality on customer patronage of banks in Rivers State. The specific objectives are to ascertain how service atmosphere relates with customer commitment to banks in Rivers State. Also, to assess the degree of relationship between service atmosphere and customer loyalty to banks in Rivers State; to determine how service reliability relates with customer commitment to banks in Rivers State and to determine the multiple effects of customer service quality dimensions on customer patronage. Various studies have been carried out on service quality using customer satisfaction and loyalty as the measures. In this study, a four dimensional construct (service atmosphere, service reliability, customer care responsiveness and service failure recovery) were used as proxies of customer service quality. This study adopted causal research, involving cross sectional survey design. Forty one (41) statement items from a structured instrument weighted with 5-point Likert measurement scale was used to measure data from Three Hundred and forty seven (347) customers of the twenty Three (23) registered commercial banks in Rivers State that constituted the sample size as drawn from the population. The reliability test exceeded the benchmark. Multiple regression and Spearman Rank Correlation analyses were adopted as analytical tools for data analyses aided by SPSS version 23 to cross validate the analytical test result. The study unveiled a very strong relationship between all the dimensions of customer service quality (Service Atmosphere, Service Reliability, Customer Care Responsiveness and Service Failure Recovery) with the proxies of Customer Patronage (Customer Commitment and Customer Loyalty). We therefore conclude that banks under study in Port Harcourt offered reasonable level of customer service and therefore, enjoyed reasonable customer patronage given the strong relationship among them. Given the finding, it is suggested that the banks should continue to improve on their customer service quality level as to delight the customers.
TABLE OF CONTENTS PAGE
Title
Declaration i
Certification ii
Dedication iii
Acknowledgements iv
List of Tables v
List of figures vi
Abstract xiii
CHAPTER 1: INTRODUCTION
1.1 Background to the Study 1
1.2 Statement of the Problem 4
1.3 Objectives of the Study 5
1.4 Research Questions 6
1.5 Research Hypotheses 7
1.6 Significance of the Study 8
1.7 Scope of the Study 9
1.8 Definition of Terms 11
CHAPTER 2: REVIEW OF RELATED LITERATURE
2.1 Overview of Customer Service Quality and Customer Patronage 11
2.2 Conceptual Review 13
2.2.1 Customers’ expectation of service quality 15
2.2.2 Dimensions of service quality 16
2.2.2.1 Service atmosphere 18
2.2.2.2 Service reliability 18
2.2.2.3 Customer care responsiveness 19
2.2.2.4 Service failure recovery 20
2.2.3 Assessing service quality 23
2.2.4 Service quality measurement in Banks 23
2.2.5 Customer service quality and the Nigerian Banking industry 26
2.2.6 Customer patronage 27
2.2.7 Measures of customer patronage 29
2.2.7.1 Customer commitment 29
2.2.7.2 Customer loyalty 36
2.2.8 Relationship between service quality and customer patronage 32
2.2.8.1 Service atmosphere and customer patronage 34
2.2.8.2 Service reliability and customer patronage 36
2.2.8.3 Customer care responsiveness and customer patronage 37
2.2.8.4 Service failure recovery and customer patronage 38
2.3 Theoretical Review 40
2.3.1 Synthesized model of service quality 40
2.3.2 Ideal value model of service quality 41
2.3.3 Model of E-service quality 41
2.3.4 Model of perceived service quality and satisfaction 42
2.3.5 Retail service quality and perceived value model 42
2.3.6 Service quality, customer value and customer satisfaction model 43
2.3.7 Internal service quality DEA model 44
2.3.8 Internet banking model 44
2.3.9 IT-based model 45
2.3.10 Attribute and overall affect model 45
2.4 Empirical Review 48
2.5 Summary of Literature Review 51
2.6 Gap in Literature 52
CHAPTER 3: RESEARCH METHODOLOGY
3.1 Research Design 53
3.2 Sources of Data Collection 53
3.3 Population of the Study 54
3.4 Sampling Design 54
3.4.1 Sample size and sampling procedure 54
3.4.2 Sampling unit 55
3.4.3 Sampling technique/procedure 55
3.4 4 Sampling method 55
3. 5 Validity of the Instrument 56
3.6 Reliability of the Instrument 57
3.7 Method of Data Analysis 57
3.8 Model Specification 57
3.9 Decision Rule 59
CHAPTER 4: DATA PRESENTATION, ANALYSES AND INTERPRETATION
4.1 Data Presentation 61
4.2 Univariate Analysis of Customer Service Quality and Customer Patronage 66 66
4.2.1 Univariate analysis of customer service quality 66
4.2.2 Univariate analysis of customer patronage 70
4.3 Testing of Hypotheses 72
4.3.1 Statistical analyses using Spearman Ranking Correlation 72
4.3.1.1 Test of hypothesis one 72
4.3.1.2 Test of hypothesis two 73
4.3.1.3 Test of hypothesis three 73
4.3.1.4 Test of hypothesis four 74
4.3.1.5 Test of hypothesis five 75
4.3.1.6 Test of hypothesis six 76
4.3.1.7 Test of hypothesis seven 76
4.3.1.8 Test of hypothesis eight 77
4.3.2 Test of hypothesis using multiple regression analysis 78
4.3.2 1 Test of hypothesis using one, three, five and seven 78
4.3.2.2 Test of hypothesis two, four, six, eight 80
4.4: Discussion of Findings 83
4.4.1 Positive relationship between service atmosphere and customer patronage 83
4.4.2 Positive relationship between service reliability and customer patronage 84
4.4.3 Positive relationship between customer care responsiveness
and customer patronage 85
4.4.4 Positive relationship between service failure recovery and customer patronage 86
CHAPTER 5: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary 88
5.2 Conclusion 90
5.3 Implication of the Study 90
5.3.1 Theoretical implication 90
5.3.2 Practical implication 91
5.4 Recommendations 92
5.5 Contribution to Knowledge of this Study 93
5.6 Suggestions for Further Studies 94
References 95
Appendices
1: Questionnaire 101
2: List of Financial Institutions 104
3. Table for Determining Sample size from a given population 106
4: Reliability Test Output 107
5: Frequency of items on Service Atmosphere Responses 109
LIST OF TABLES
3.1: Reliability analysis of the variables 51
4.1: Showing the questionnaire distribution results 61
4.2: Age distribution of respondents. 62
4.3: Gender distribution of respondents 63
4.4: Educational qualification of respondents 64
4.5: Number of years you have been using the services of this bank 65
4.6: Frequencies on item of service atmosphere responses 66
4.7: Frequencies on item of service reliability responses 67
4.8: Frequencies on item of customer care responsiveness responses 68
4.9: Frequencies on item of service failure recovery responses 69
4.10: Frequencies on item of customer commitment responses 70
4.11: Frequencies on item of customer loyalty responses 71
4.12: Correlation analysis showing the relationship between
service atmosphere and customer commitment 72
4.13: Correlation analysis showing the relationship between
service atmosphere and customer loyalty 73
4.14: Correlation analysis showing the relationship between
service reliability and customer commitment 74
4.15: Correlation analysis showing the relationship between
service reliability and customer loyalty 74
4.16: Correlation analysis showing the relationship between
customer care responsiveness and customer commitment 75
4.17: Correlation analysis showing the relationship between
customer care responsiveness and customer loyalty 76
4.18: Correlation analysis showing the relationship between
service failure recovery and customer commitment 77
4.19: Correlation analysis showing the relationship between
service failure recovery and customer loyalty 77
4.20: Regression analysis showing the effect of service atmosphere,
service reliability, customer care responsiveness,
and service failure recovery and customer commitment 78
4.21: Regression analysis showing the effect of service atmosphere,
service reliability, customer care responsiveness, service failure
recovery and customer loyalty 81
4.22: Summary of results with respect to the hypotheses 83
LIST OF FIGURES
3.2.1: Operational conceptual framework 53
4.1: Graphical presentation of age of respondents 62
4.2: Graphical presentation of respondents gender distribution 63
4.3: Graphical presentation of respondents academic qualification 64
4.4: Graphical presentation of respondents’ years of experience 65
5.1: Heuristic model of customer service quality and customer patronage 93
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
The effective management of customer service has become more critical than ever in today’s banking environment. Consumer power has increased with the emergence of the Internet Economy because today customers can easily band together against companies and impose sanctions via exit and voice (Rezabakhsh et al. 2006). High levels of market transparency and low switching costs facilitate consumer defection “with just a few mouse clicks” (Porter 2001). Technologies are changing the nature of business interactions by amplifying the speed and impact of customer complaints as a result of service failures (DeVine, Lal, and Zea 2012) and also by fostering negative customer engagement (Van-Doorn 2011). Increasingly, banks face the rising threat that unhappy customers can easily show their resentment (Trippand Grégoire 2011), In the wake of service failures, banks might have to deal with negative consequences, which may ultimately lead to greater customer churn and substantially affect their overall sales. Thus, there is the need to investigate service quality and customer patronage among Nigerian banks.
Previous studies have been carried out on service quality in the Nigerian banking sector. The findings of Cuffe (2008) indicated that not all Nigerian banks employ quality operations. This leaves many questions unanswered in the minds of researchers and students about the operations of the Nigerian banking industry. In respect to this, Goyit (2015) examined the relationship between investments in service quality programmes by banks on their financial performance as well as the relationship between service quality delivery and the choice of banks and repeat purchase decisions by bank customers. The study investigated causality between investments in service quality programmes and the financial performance of Nigerian banks. The aggregated results of the study indicate a positive relationship between service quality and repeat purchase decisions. Also, there is a positive but insignificant relationship between volume of deposits and investments in service quality; there is also a positive but insignificant relationship between investments in service quality programmes and the earnings of banks.
The reality of the scenario in the Nigerian banking industry does portray the contrary as studies by scholars such as Olaleke (2010) indicated that poor service quality is a common feature. Woldie (2003) also found great level of dissatisfaction by many people with the quality of services that are provided by Nigerian banks. This is also the case in Rivers State of Nigeria, where customer service quality in banks differs remarkably from one bank to the other. For instance, personal observation in some branches of First bank, Fidelity bank and EcoBank in Port Harcourt, Rivers State, customers struggled with issues like constant network failure which left many customers frustrated because of their inability to carry out their financial transactions, wrong or arbitrary charges which leaves customers unsatisfied with services offered, unauthorized deductions from customers’ bank accounts, long queues inside the banking halls and at the ATMs, failure of ATM machine to dispense money after debiting account, among others. The issue of money transfer in banks is one major problem that customers of banks like Ecobank have been made to experience. In most cases, the customer hardly receives the payment of the money transferred in his account immediately. When transfers do not go through, it takes up to one month for it to be reverted in EcoBank.
Customer service quality is one of the most attractive areas for researchers over the last decade in the retail banking sector (Avkiran, 1994; Stafford, 1996; Johnston, 1997; Angur et al, 1999; Lasser et al, 2000; Bahia and Nantel, 2000; Sureshchandar et al, 2002; Gounaris et al, 2003; Choudhury, 2008). Most previous studies on customer service quality have been carried out
outside of Nigeria. The variables studied also differed. Majority of these studies examined the effect of service quality on customer satisfaction and loyalty (Jayaraman, Shankar & Hor, 2010; Khan & Fasih, 2014; Goyit & Nmadu, 2016; Aremu, Ademola & Aremu, 2017).
There is the need to investigate the relationship between customers service quality and customer patronage particularly in the Banking industry in Nigeria. Customer patronage is one of the important outcomes of marketing activity (Oliver, 1980; Surprenant and Churchill, 1982; Spreng et al, 1996; Mick and Fournier, 1999). In the competitive banking industry, customer patronage is considered as the essence of success. The link between customer service quality and customer patronage is important. Kumar et al (2009) stated that high service quality will result in high customer patronage and increases customer loyalty.
Several works on customer service quality, for example Zeithaml et al., (1993), Parasuraman, Zeithaml and Berry, (1985, 1988), Gronroos, (1982, 1984); Takeuchi and Quelch, (1983) have adopted the five major SERVQUAL dimensions (reliability, responsiveness, assurance, empathy and tangible) to measure service quality. In this study however, a four dimensional construct (service atmosphere, service reliability, customer care responsiveness and service failure recovery) were used as proxies of customer service quality. This study successfully adopted service atmosphere and service failure recovery as the point of departure.
Trusting on these vast scholarly inputs, it makes some academic sense to lend our voice to the fact that achieving improved customer patronage in the ever-competitive banking sector in Rivers state depends largely on the degree of customer service quality. Consequently, it will not be out of place to adopt two proxies of customer patronage (customer commitment and customer loyalty) in this study and four dimensions of customer service quality namely, service atmosphere, service reliability, customer care responsiveness and service failure recovery. In line with extant literature, we opine that improved quality of service in banks in Rivers state can have a positive resultant effect on the rate of customer patronage in terms of customer commitment and customer loyalty. Hence, this study examines the relationship between customer service quality and customer patronage of banks in Rivers State.
1.2 STATEMENT OF THE PROBLEM
In Nigeria, extracts from Central Bank of Nigeria (2014) and Barungi (2014) reports indicate that the sectoral contribution to the country’s GDP in 2008, 2013 and 2014 is as follows: Agriculture 33.9%, 32.5% and 20.28%, Services 26.1%, 32.3% and 36.62% and industry 42,3%, 35.2% and 21.85% respectively. These statistics indicate a sizeable contribution of the service sector to the economy. Also, according to National Bureau of Statistics (NBS) the services sector of the economy measured by the Gross Domestic Product (GDP) grew by 1.83 per cent in 2018. As a result of the importance attached to service quality across multiple sectors, diverse interest and academic research have flooded this area in recent years. Research interests in the service sector now span the banking, mobile telephones, insurance, medical services, aviation etc. Several researches have established service quality as an important determinant of customer satisfaction which in turn influences patronage and customers’ loyalty (Hossain and Leo, 2009; Ilias and Panagiotis, 2010; Kuo et al., 2011).
Despite these vast interests from scholars and major industry players, there are still evidences of poor customer service quality which have reflected on the patronage rate. Bank customers in Rivers State of Nigeria daily relive their experiences and frustrations with their bank’s patterns of service quality. Exploratory research and observations about activities of most banks in Rivers State of Nigeria recently tend to suggest that they have failed in meeting with customers’ expectations arising from network failure, poor customer relationships, long queues in the banking halls, arrogant frontline employees, wrong or arbitrary charges on ATM maintenance and other illicit deductions which are likely to leave customers unsatisfied and trigger reduced patronage. Olaleke (2010) indicated that poor service quality is a common feature in banks, while Woldie (2003) acknowledged the existence of great level of dissatisfaction by many bank customers regarding quality of services in Nigerian banks. Given the findings from both exploratory research and observations, it is of research interest to know whether majority of the banks customers in Rivers State would confirm the poor service quality and their reactions. Essentially, this study would seek to establish the relationships that exist between the customer service quality dimensions (service atmosphere, service reliability, customer care responsiveness and service failure recovery) and customer patronage (commitment and loyalty).
1.3 OBJECTIVES OF THE STUDY
The objective of this study is to determine the relationship between customer service quality and customer patronage of Banks in Rivers State, Nigeria.
The specific objectives are to:
i. ascertain how service atmosphere relates with customer commitment to Banks in Rivers State, Nigeria;
ii. examine the relationship between service atmosphere and customer loyalty to Banks in Rivers State, Nigeria;
iii. determine how service reliability relates with customer commitment to Banks in Rivers State, Nigeria;
iv. determine the relationship between service reliability and customer loyalty to Banks in Rivers State, Nigeria;
v. ascertain how customer care responsiveness relates with customer commitment to Banks in Rivers State, Nigeria;
vi. determine how customer care responsiveness relates with customer loyalty to Banks in Rivers State, Nigeria;
vii. ascertain the degree of relationship between service failure recovery and customer commitment to Banks in Rivers State, Nigeria;
viii. determine how service failure recovery relates with customer loyalty to Banks in Rivers State, Nigeria.
ix. determine the joint effect of customer service quality dimensions on customer patronage.
1.4 RESEARCH QUESTIONS
The following research questions are formulated to guide the study
i. How does service atmosphere relate with customer commitment to Banks in Rivers State, Nigeria?
ii. What is the relationship between service atmosphere and customer loyalty to Banks in Rivers State, Nigeria?
iii. How does service reliability relate to customer commitment to Banks in Rivers State, Nigeria;
iv. What is the relationship between service reliability and customer loyalty to Banks in Rivers State, Nigeria;
v. How does customer care responsiveness relate to customer commitment to Banks in Rivers State, Nigeria;
vi. How does customer care responsiveness relate to customer loyalty to Banks in Rivers State, Nigeria;
vii. What is the relationship between service failure recovery and customer commitment to Banks in Rivers State, Nigeria;
viii. How does service failure recovery relate to customer loyalty to Banks in Rivers State, Nigeria
ix. What is the joint effects of customer service quality dimensions on customer patronage?
1.5 RESEARCH HYPOTHESES
The following hypotheses are formulated to guide the study
Ho1: Service atmosphere has no significant relationship with customer commitment to Banks in Rivers State, Nigeria.
Ho2: There is no significant relationship between service atmosphere and customer loyalty to Banks in Rivers State, Nigeria,
Ho3: Service reliability has no significant relationship with customer commitment to Banks in Rivers State, Nigeria.
Ho4: There is no significant relationship between service reliability and customer loyalty to Banks in Rivers State, Nigeria
Ho5: Customer care responsiveness does not have any significant relationship with customer commitment to Banks in Rivers State, Nigeria
Ho6: Customer care responsiveness does not relate to customer loyalty to Banks in Rivers State, Nigeria.
Ho7: Service failure recovery does not have any significant relationship with customer commitment to Banks in Rivers State, Nigeria,
Ho8: There is no significant relationship between service failure recovery and customer loyalty to Banks in Rivers State, Nigeria.
Ho9: Customer service quality dimensions do not have any relationship effect on customer patronage.
1.6 SIGNIFICANCE OF THE STUDY
The findings of the study will be of immense benefit to the following;
Banks: It is believed that the findings of this study will help banks in Rivers State to adopt better service delivery strategies that will improve their overall industry position and equally enable them to realize other business objectives as well as utilize all their opportunities.
Managers: The recommendations made in this study would provide initial steps for managers in major decision areas facing their respective banks. Such areas includes; decision on the determination of the present positioning strategies that can be used by the studied banks to improve the market positions and of their services in the market place, and also for vital expansion of business activities.
Marketers: It will also widen marketers’ knowledge about the various marketing strategies available and how they can be effectively applied to any company’s products and services so as to improve the performance of their business.
Industrialists/Businessmen: It will equally aid the banking industry immensely by providing them with the appropriate positioning strategies to be adopted in making high sales over. The study will help other people such as businessmen, industrialists and so on to know the value of positioning strategies and how they can be effectively used to attract new market and also win more market share from the existing market.
Researchers/Readers: The study has got a high value and paves a way for new researchers in this field. The research will serve as a resource material and sufficient guide and good source of secondary data on this topic for future researchers and students in this field of study. In addition, the study will enable the readers to know that the success of banks depends on good positioning strategies that will promote good image for the banks and as well increase their sales revenue.
1.7 SCOPE OF THE STUDY
The study is domiciled in the area of services marketing and customer behaviour with emphasis on customer service quality and customer patronage. The study covered customer service quality dimensions and how they impact on customer patronage. Other proxies in the study are customer commitment and customer loyalty.
Geographically, the study was carried out in Rivers State of Nigeria. Rivers State is one of the 36 states of Nigeria. Its capital and largest city, Port Harcourt, is economically significant as the centre of Nigeria's oil industry. Rivers State has higher literacy rate compared to most states in the South-South geopolitical zone. Thus the city of Port Harcourt houses all the branches of banks which are to be studied in this work.
1.8 DEFINITION OF TERMS
1.8.1 Customer service: Customer service is the direct one-on-one interaction between a consumer making a purchase and a representative of the company that is selling it. Most retailers see this direct interaction as a critical factor in ensuring buyer satisfaction and encouraging repeat business.
1.8.2 Quality: Combined features of a service that is able to bring satisfaction (Akbar & Parvez, 2009).
1.8.3 Customer loyalty: Deeply held commitment to repurchase particular brand overtime
1.8.4 Customer care responsiveness: Willingness to assist customers and offer quick service (Armstrong, 2012).
1.8.5 Service quality (SQ or SERVQUAL): This is the situation where a service offer meets or exceeds customers’ expectations or requirements at a given time.
1.8.6 Service performance (SERVPERF): This refers to the ability of service offer to measure up to an expected or desired need as viewed from the customer’s perspective.
1.8.7 Service reliability: Rendering services the right way without errors
1.8.8: Service failure recovery: Firms ability to redeem, compensate, apologize for a failed service without dissatisfying the customer.
1.8.9: Service atmosphere: According to Parasuraman et al. (1985), tangible evidence in most cases of service offerings are service provider’s physical facilities, equipment and personnel.
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