ABSTRACT
This research work concentrated on the effect of service quality on customer satisfaction in first bank and access bank plc, Nigeria. The study examined the effects of service responsiveness on customer loyalty, service empathy on customer referrals, service reliability on customer satisfaction, service tangibility on customer retention and service assurance on consistent customer patronage. Survey method of research design was adopted and sample size of 398 was determined using Taro Yamane formula. The data collected through questionnaire were analyzed using descriptive statistics and simple regression. The findings show that service responsiveness has a significantly positive effect on customer loyalty (β = 0.067, t = 3.046, p<0.05), that service empathy has a significant positive influence on customer referrals (β = 0.060, t = 2.748, p<0.05), that the relationship between timely service reliability and customer satisfaction is strong and positive (r = .512, P<.05), that tangibility has positive and significant effect on customer retention with β = .987, and there is a positive relationship between service assurance and consistent patronage at 0.712. The study recommended Banks in the quest for better service quality should carry their customers along by considering their age, statuses and exposures and management of banks should continue in the training process of their employees to enable them manage customers grievances better and explain more to customers who are confused with their services.
TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION
1.1 Background of the Study 1
1.1.2 Historical background of first bank nigeria plc and access bank nigeria plc 2
1.2 Statement of the Problem 4
1.3 Objectives of the Study 5
1.4 Research Questions 5
1.5 Research Hypotheses 5
1.6 Significance of the Study 5
1.7 Scope of the Study 6
1.9 Definition of Operational Terms 7
CHAPTER 2: LITERATURE REVIEW
2.1 Conceptual Framework 8
2.1.1 Background and definition of customer satisfaction and service quality 8
2.1.2 Defining customer satisfaction 9
2.1.3 Defining service quality 11
2.1.4 Service quality model 13
2.1.5 Service quality dimensions 14
2.1.6 Concept of customer satisfaction 15
2.1.7 Customer satisfaction with service quality models 16
2.1.7.1 Disconfirmation model propounded by (Oliver R. L., 1980) 19
2.1.8 Effect of service quality on customer satisfaction 21
2.1.9. Factors effecting service quality and satisfaction 22
2.1.10 Relationship between service quality and customer satisfaction 23
2.1.11. Developing service improvement strategy in the organization 25
2.1.12 Managing the workforce in the organization 28
2.1.13. Closing gaps between firms’ perception and customer perceptions of quality 30
2.2 Theoretical Framework 31
2.2.1 Expectancy theory 31
2.2.2 Social exchange theory 31
2.2.3 Customer relationship management in banking industry 32
2.2.4 CRM theory and the art of profit 33
2.2.5 The traditional and modern theory of CRM 33
2.3 Review of Empirical Studies 34
2.4. Gap in Literature Review 43
CHAPTER 3: METHODOLOGY
3.1 Research Design 44
3.2 Area of the Study 44
3.3 Population of the Study 44
3.4 Determination of Sample Size 45
3.5 Sampling Technique 45
3.6 Methods of Data Collection 46
3.7 Validity of Instrument 46
3.8 Reliability of the Instrument 46
3.9 Methods of Data Analysis 46
3.10 Model Specification 46
CHAPTER 4: RESULTS AND DISCUSSIONS
4.1 Data Analysis and Presentation of Findings 49
4.1.1 Response rate 49
4.2 Data Analysis, Interpretation and Discussion of Findings 50
4.2.1 Restatement of Objectives 50
4.3 Discussion of Findings 60
CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary 62
5.2 Conclusion 62
5.3 Recommendations 63
5.4 Suggestion for Further Studies 64
5.5 Contributions to knowledge 64
REFERENCES
LIST OF TABLES
4.1: Response rate of respondents 49
4.2: Descriptive analysis of service responsiveness 51
4.3: Descriptive analysis on customer loyalty 53
4.4: Summary of simple regression analysis for effect of service responsiveness
on customer loyalty 54
4.5: Descriptive analysis of service empathy 55
4.6: Descriptive analysis of customer referral 56
4.7: Summary of simple regression analysis for effect of service empathy on customer
referral 57
4.8: Summary of simple regression analysis for effect of timely service reliability
on perceived quality 58
4.9: Summary of simple regression analysis for effect of tangibility on customer
retention 59
4.10 Summary of simple regression analysis for effect of service assurance on
consistent patronage 60
LIST OF FIGURES
2.1: Conceptual framework 10
2.2: The Integrated Gaps Model of Service Quality 13
2.3: Customer Satisfaction with Service Quality Model 17
2.4: McDougall & Levesque (2000) Customer Satisfaction with Service Quality Model 18
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Today, the world is growing in an increasingly rapid-changing environment. Business markets have become much more competitive. To compete in such overcrowded and interactive marketplace, banks must look beyond the traditional 4Ps of marketing strategy, which are no longer enough to be implemented for achieving competitive advantage. Service quality therefore, has become not only the rhetoric of every business enterprise, but also an important concept in service research (Portela & Thanassoulis, 2005).
It is virtually impossible for a business organization to survive without building customer satisfaction and loyalty. Research has shown repeatedly that, service quality influences organizational outcome such as performance superiority, increasing sales profit (Kish, 2000; Duncan &Elliot, 2002) and market share (Fisher, 2001), improves customer relations, enhance corporate image and promote customer loyalty (Newman, 2001; Caruana, 2002; Ehigie,2006).
In recent times, the search for quality is debatably the most important consumer trend as consumers are now demanding higher quality in products and services than ever before. The banking industry in Nigeria has come under intense competition in the past ten years (Amoako, 2012). This is due partly to new entrants into the industry both local and foreign and enforcement of Central Bank of Nigeria regulations. High service quality is therefore required to differentiate offerings in the marketplace. Good customer service will only be defined by the experience of the bank customers (Chatura & Andy, 2003).
Despite the high number of banking service providers in Nigeria, complaints from customers with regards to their dissatisfaction of provided services have increased in recent times. The dissatisfaction of consumers has been attributed largely to poor quality service delivery. Most studies on service quality and customer satisfaction have been conducted in industrialized economies such as the United States, United Kingdom and Pakistan (Adams et al., 2004). There is a dearth of relevant literature on developing economies, and there is the need for a study to cover this literature gap. Despite the existence of some studies on service quality and customer satisfaction in the banking industry in some African countries, virtually there are still need for further studies on service quality and customer satisfaction for the banking industry in Nigeria. Thus, the purpose and motivation of this study is to investigate the effect of service quality on customer satisfaction in tow Commercial Banks in Nigeria (First Bank and Access Bank) using the SERVQUAL instrument developed by (Parasuraman, Zeithaml & Berry, 2015). The SERVQUAL instrument comprised of 10dimensions with 97 items and later reduced to 5 dimensions with 22 items. The dimensions are tangibility, reliability, responsiveness, assurance and empathy. To what extent does service quality influence customer satisfaction in the banking industry in Nigeria? How do customers rate in order of importance the service quality issues that need to be improved to increase customer satisfaction? The study attempts to find answers to these questions, thereby contributing to literature on service quality and customer satisfaction in the Nigerian banking industry.
1.1.2 Historical background of First Bank Nigeria Plc and Access Bank Nigeria Plc
First Bank of Nigeria Plc: This is a Nigerian multinational bank and financial services company headquartered in Lagos. It is the biggest bank in Nigeria by total deposits and gross earnings. It operates a network of over 750 business locations across Africa, the United Kingdom and representative offices in Abu Dhabi, Beijing and Johannesburg set up to capture trade-related business between geographies.
Historically, First Bank commenced business in 1894 in what was then the British colony of Nigeria, as the Bank of British West Africa. The bank originally served British shipping and trading agencies in Nigeria. The founder, Alfred Lewis Jones, was a shipping magnate who originally had a monopoly on importing silver currency into West Africa through his Elder Dempster shipping company. According to its founder, without a bank economies were reduced to using barter and a wide variety of mediums of exchange, leading to unsound practices. A bank could provide a secure home for deposits and also a uniform medium of exchange. The bank primarily financed foreign trade, but did little lending to indigenous Nigerians, who had little to offer as collateral for loans.
The bank specializes in retail banking and has the largest retail client base in Nigeria. In 2015, The Asian Banker awarded First Bank the Best Retail Bank in Nigeria award for the fifth consecutive year. The Nigerian banking business operates nationally, with an active customer base of over 10 million, and employs over 7,000 staff. First Bank operates along four key Strategic Business Units (SBUs) – Retail Banking, Corporate Banking, Commercial Banking and Public Sector Banking. It was previously structured as an operating holding company before the implementation of a non-operating Holding Company structure (FBN Holdings) in 2011/2012 (FBN Our History, 2018).
Access Bank Plc: Access bank received its license from the Central Bank of Nigeria in 1989, and listed on the Nigerian Stock Exchange in 1998. 2002: Access Bank was taken over by a core of new management led by Aigboje Aig-Imoukhuede and Herbert Wigwe.in 2007. Over the past 26 years, Access Bank Plc. has evolved from an obscure Nigerian Bank into a world-class African financial institution. Today, we are one of the five largest banks in Nigeria in terms of assets, loans, deposits and branch network; a feat which has been achieved through a robust long-term approach to client solutions – providing committed and innovative advice. Access Bank has built its strength and success in corporate banking and is now applying that expertise to the personal and business banking platforms it acquired from Nigeria’s International Commercial bank in 2012. As part of its continued growth strategy, Access Bank is focused on mainstreaming sustainable business practices into its operations. The Bank strives to deliver sustainable economic growth that is profitable, environmentally responsible, and socially relevant.
Access Bank is not new to merger and acquisition. Beginning 2011 and effectively in 2012, Access Bank took over the defunct Intercontinental Bank Plc. Although the integration was alleged to be riddled with controversies as reports said over a thousand staff of Intercontinental Bank were laid off during the process, the bank emerged stronger and bigger after the acquisition. With the new merger, both banks (Access and Diamond) hope to leverage on their distinct potentials to build a stronger bank. Access Bank boss, Herbert Wigwe, said both banks have complementary operations and similar values, and a merger with Diamond Bank, with its leadership in digital and mobile-led retail banking, could accelerate Access’ strategy as a significant corporate and retail bank in Nigeria and a Pan-African financial services champion.
1.2 STATEMENT OF THE PROBLEM
In the Nigerian banking industry, high customer satisfaction is hypothesized to be linked to high firm performance. Bankers consider customer satisfaction and loyalty as important to market share maintenance and profitability. As products and prices have become less important differentiators; the importance of service quality can no longer be overlooked and taken for granted (Ward and Dagger, 2007). It has thus become very necessary to find out how banks in Nigeria particularly, achieve customer satisfaction in the face of increased competition through service quality. Notwithstanding the existence of fierce competition in the banking industry in Nigeria and high customer churn, the debate as to what drives customer satisfaction is still rife, this is due to the fact that, complaints of poor service quality is on the increase. This could be that there is a general misconception and poor attitude towards the concept of service quality and Customer Satisfaction.
Hinson & Mensah, (2006) contends, in a competitive era, customer switching to other service providers is high especially when customers are dissatisfied with service provided. Thus customer defection due to dissatisfaction is a curious research subject to investigate. Since Service Quality is touted as the bedrock of every successful organization, its practice needs to be examined and measured. However, it appears that much studies has not really sought to ascertain how service quality practices could lead to customer satisfaction in banks within Nigeria.
1.3 OBJECTIVES OF THE STUDY
The broad objective of the study is to evaluate the “Effect of Service Quality on Customer Satisfaction – a study of First Bank and Access Bank Plc in Nigeria”. The specific objectives are to:
1. examine the effect of service responsiveness on customer loyalty
2. examine the effect of service empathy on customer referrals
3. evaluate the effect of service reliability on perceived quality
4. determine the effect of service tangibility on customer retention
5. examine the effect of service assurance on consistent customer patronage
1.4 RESEARCH QUESTIONS
1. What is the effect of service responsiveness on customer loyalty?
2. What is the effect of service empathy on customer referrals?
3. How does service reliability affect perceived quality?
4. What is the effect of service tangibility on customer retention?
5. What is the effect of service assurance on consistent customer patronage?
1.5 RESEARCH HYPOTHESES
Ho1: Service responsiveness has no significant effect on Customer loyalty
Ho2: Service empathy has no significant effect on customer’s referrals
Ho3: Service reliability has no significant effect on perceived quality
Ho4: Service tangibility has no significant effect on customer retention
Ho5: Service assurance has no significant effect on consistent customer patronage.
1.6 SIGNIFICANCE OF THE STUDY
The significance of this study can be viewed from those it will benefit and how it will benefit them. The study in this regard will benefit:
· Management
· Customer
· Researcher
· Government, Financial Regulators and Policy Makers
How it will benefit them:
· The study will edge the Nigeria’s banking industry in solidifying management decision making.
· The customer’s stands to benefit as the study will enable them to know exactly what to expect and when in order to assess service quality of banks. It will help them to make better comparisons based and take informed decision.
· The researcher will have gained a vast array of increased knowledge about banking and banking services geared towards customer satisfaction and stands a better chance to make useful recommendations for reference purposes.
· The findings of this study are a vital tool in assisting government and government agencies charged with the monitoring of banking operations and enforcement of regulatory frameworks in ensuring standardization in the banking industry generally.
1.7 SCOPE OF THE STUDY
The scope of this research work covers “Effect of Service Quality on Customer Satisfaction. The study was conducted in First Bank and Access Bank Plc, Umuahia, State. The study try to ascertain the effect of service responsiveness on customer loyalty, the study examine the effect of service empathy on customer referrals, the study evaluated the effect of service reliability on customer satisfaction, the study also attempt to determine the effect of service tangibility on customer retention and it also examine the effect of service assurance on consistent customer patronage.
1.9 DEFINITION OF OPERATIONAL TERMS
The following terms frequently used in this research are hereby defined for the purposes of clarity.
1. Service quality (SQ or SERVQUAL) – This is the situation where a service offer meets or exceeds customers‟ expectations or requirements at a given time.
2. 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.
3. Profitability – This refers to the ability to attain the level where there exists excess revenues over expenses expressed in monetary terms. The accountant views profit as the excess of revenues over costs while the economist’s view of profit includes indirect costs as well. The accountant’s view of cost is best suitable for the purposes of evaluating the profitability of an organization’s current business.
Financial Performance – This is a measure of how well a firm uses assets from its primary mode of operation to generate revenues. It is also used as a general measure of a firm's overall financial health or soundness over a given period of time which can be used to compare similar firms across the same industry or to compare industries or sectors in aggregatio
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