ASSESSING THE LEVEL OF CUSTOMER SATISFACTION IN CREDIT SERVICE: THE CASE OF CONSTRUCTION AND BUSINESS BANK
ABSTRACT
The main purpose of this study is to assess the level of customer satisfaction at Construction and
Business Bank based on the perception of credit customers. Five dimensions in service quality (servqual) such as Tangibility, Reliability, Responsiveness, Empathy, and Assurance were considered as the base for this study. A structured questionnaire with 5 point Likert scale has been used to collect the data by conducting survey. 140 credit customers were taken as sample size and chosen on a convenient basis from10 branches located in Addis Ababa City. Data has been analyzed by using SPSS software (version: 20) and Excel program. Thefindings of the study revealed that some majority of customers (slightly above average customers) are satisfied with bank’s quality of credit service delivery; this implies that there is undeniable number of customers who get dissatisfied with the bank’s credit services delivering. Among those factors that caused customer dissatisfaction are loan documentation process, period for loan approval and disbursement, lack of modern technology, margin of finance and system of credit service delivery process. Besides, among the five service quality dimensions, reliability and assurance are where thehighest gap observed. The bank should understand and respond to expectations of customers when judging the quality of its service offering. Hence, it should be conscious on the reliability of its current service delivery process, employ improved technology like internet and mobile banking, proper customer service training should be given to employees and regular research should be conducted to find out expectation about the various service aspect, and the current credit procedure and service delivery standard time better be reviewed. Credit, SERVQUAL, Customer satisfaction, Customer-Expectation, Customer Perception
This chapter introduces the phenomenon understudy. It consists of the background of the study, problem statement, research questions, and objectives of the researcher in carrying out the study and the importance of the study to the organization in which the study is conducted and to other researchers on the topic. Besides, it addresses scope and limitation of the study, definition of key terms. The chapter finally outlines the structure of the thesis.
1.1 Background of the Study
Service is a form of product that consists of activities, benefits, or satisfactions offered for sales that are essentially intangible (Papasolomous&Vrontis, 2006).
Service quality of the service industries globally remains a critical one as businesses strive to maintain a comparative advantage in the marketplace (Hossain& Leo, 2009) and service quality becomes a primary competitive weapon (Stafford et al., 1996). Bank industries should focus on service quality as a core competitive strategy (Chaoprasert&Elsey, 2004). Banking service provides financial service that accepts deposits and channels those deposit into lending activities, either directly or through capital markets (Shelton et al., 1995).
In order to achieve customer satisfaction, a good service quality provided is fitting specifications, stage where consumer specifications are met, fair exchange of a value at a price and potential for utilization to achieve customer satisfaction in service (Collier et al, 1994).
Customer satisfaction in banking service is a measure of how services delivered by a company meet or surpass customer expectation. Customer expectation could be revealed in terms of reasonable service price, delivering quality service per standard time, procedures of service delivery, the way employees handle them etc. It is important for company to get more profitability and achieve the profit target margin.
Verhoef et al., (2002) emphasized that companies need to be heavily focused on Customer relationship development and management. The development of effective customer relationships is acknowledged as an essential component of marketing strategies in service industries (Chaniotakis et al, 2006).
Customer dissatisfaction can affect an organization in various ways. First, customer who experiences an unsatisfactory service encounter may never revisit that particular service provider again. Second, the customer may not only want to have been rectified that incident, but may request that the damage done to their interpersonal relationship with the provider be repaired (Krapfel, 1985, Patterson & Johnson, 1995), thereby incur costs to the organization.
According to Mitchell (1995), there are possibilities of increasing the customer profitability three times over by extending the relationship with them over a period of five years. Murphy (1996), added that banks must wait an average of six years in order to recover the initial cost of acquiring individual customers. Finally, perhaps the most damaging to the organization is the tendency for an unsatisfied customer to engage in negative word-of-mouth communication (Richins, 1983). At this point the organization must worry about losing potential customers as well as current ones. The organization need to be able to differentiate between the numerous variables that influence the consumer's selection of exact coping strategies, thereby enabling them to respond in the most appropriate fashion and to be aware that specific coping strategies may influence what consumers perceive to be satisfactory service outcomes.
Construction and Business Bank S.C. (CBB) is a wholly government–owned public enterprise and successor of the Housing and Savings Bank (HSB) which was formed in 1975 through the merger of two financial institutions namely, Imperial Savings and Home Ownership Association, and Savings and Mortgage Corporation of Ethiopia which were nationalized at the on-set of the socialist era of Ethiopia.
Pursuant to the market-based economic policy of the country initiated by the government in 1992, HSB was reconstituted as CBB in September 1994 by regulation No. 203/94 with an authorized capital of Birr 71.8 million.
The regulation gave CBB the mandate to provide universal banking services. In line with this, CBB has ventured into commercial banking operations stage by stage maintaining construction financing as its core business.
In September 2000 CBB is converted to share company in accordance with the Ethiopian Commercial Code with a capital of Birr 79.0 million. Currently, the bank with a vision “To be the best performing bank in Ethiopia by 2020” has 108 branches out let throughout the country and provided all banking services(http//www.cbb.com& Internal source).
The goal of this paper is to assess the level of customers’ satisfaction in CBB identifying gaps, potentials and constraints based on the information collected from Credit customers of the ten Addis Ababa City branches. The SERVQUAL model was the effective methodology for measuring the customers’ perception, expectation and satisfaction in banking industry. As quality service becomes the primary competitive weapon in today’s service industries, particularly in banking industry, customer satisfaction should be a measure of how services delivered by a company meet or surpass customer expectation.
Therefore, the result of the study would help to alarm CBB’s management about the Bank’s current level of performance in relation to the quality of service and customer satisfaction so that they extend their efforts to retain existing customers’ as well as to attract potential customers.
1.2 Statement of the Problem
Customers’ satisfaction towards the service includes the core products along with supplementary services. In case of bank, the core services are the products and features (deposits and credits) but supplementary services are the procedure of getting the services, speed of service providing, the physical environment and also the attitude of personnel (Lovelock, 2001).
Customer satisfaction in banking service is a measure of how services delivered by a company meet or surpass customer expectation. Due to their centrality and importance; customers perceive that they have the power to demand high quality service (MacDonald, 1995). Besides, customers are now aware of the products and the range of financial services available to them (Akan, 1995).
According to Padilla (1996), exemplary businesses treat customer satisfaction in order to determine how to increase customer base, customer loyalty, revenue, profit, market share and survival in monitoring businesses.
Banks now understand that delivering quality service to customers is essential for success and survival in today’s global and competitive banking environment (Wang et al, 2003). This is due to banking service provides financial service that accepts deposits from customers and channels those deposit into lending activities, either directly or through capital markets (Shelton et al., 1995). The key for providing superior service (benefits) is to understand and respond to expectations when judging the quality of a firms’ service offering (Parasursaman et al,1988).The ability of banks to deliver these benefits on continuous bases has a significant important on the level of customer satisfaction.
CBB, a government owned commercial bank is delivering full-fledged commercial banking services to the public (http//www.cbb.com).Among those commercial banking services, credit service is one of the major banking services it is providing to customers. In the pursuit to improve its services, retain and attract customers, CBB has taken different measures like extending its business hours, spreading branch networking throughout the country, and integrating all branches with core banking technology, setting standard servicedelivery time; providing trainings to employees and Management members in relation to credit service are among others. Despite these efforts which aim at bringing satisfaction to the customers, customers’ preferences and expectations seem not to match up with the bank’s initiatives. There are ceaseless complaints in relation to credit service delivery of the bank. Among others, this is reflected by sooner the loan approved and disbursed to credit customers, majority of them have immediately transferred the disbursed loan amount to other competitors’ banks and their intention to further transact the bulk of their business’ sales transaction with CBB is not satisfactory. This highly affected the deposit performance of the bank and the bank’s deposit performance declined by 40% (Internal report, 2015). Besides, and to the best of my knowledge, customer satisfaction research has not been conducted in particular to credit service area of the bank.
The emergingsituation, therefore, calls for the assessment of the level of customer satisfactions in relation to the quality of credit service delivery and come up with findings of the study to recommend possible solution for the improvement of credit service quality.
Research question:
- To what extent are CBB’s credit customers satisfied with the quality of service?
- Which factors of service quality dimensions caused customer dissatisfaction in CBB?
- Which of the five dimensions of service qualitythat CBB lacks to perform towards customers’ expectation?
- What are the mechanisms for improving service quality in CBB?
1.3 Objectives of the Study
1.3.1 General Objective
The aim of the study is to assess the level of customer satisfaction atCBB in credit service by identifying gaps, potentials and constraints for the improvement of credit service quality.
1.3.2. Specific Objectives of the Study
- To assess the level of customer satisfaction with service quality in CBB
- To identify the major factors in the service quality measurement dimensions that brought customer dissatisfaction in CBB
- To identify the service quality measurement dimensions that CBB should work more to towards customers’ expectation
- To identifythe mechanisms for the improvement of service quality in CBB& provide feedback
1.4. Significance of the Study
The result of the study could provide an insight to the management of CBB to help them meet the needs and expectations of their customers to maintain their customers’ loyalty. The study also can create awareness to the bank’s management regarding the current level of performance in meeting customers’ needs there by helps the bank to examine its service procedure. The study may help as reference document for further studies in to the activities of banking industry on customer satisfaction.
1.5. Scope of the Study
The study focuses onlevel of customer satisfaction based on the quality of services towards banking by selecting credit service as line of banking service which includes overdraft facility, pre-shipment facility, short and medium term business loan.
The bank has branches in all region of the country; however, the study focused on selected ten branches of CBB located in Addis Ababa City. Only private individuals and companies that have credit account during February, 2015(during the distribution of questionnaires) are considered in the study. SERVQUAL model is used to identify the quality of service delivery and level of customer satisfaction. Descriptive statistic like mean, frequency and percentage will be used as statistical tools to undertake data analysis
For finding out the satisfaction level of customers, the study limits itself to a modified service quality dimensions which includes Responsiveness, Reliability, Assurance, Tangibility and Empathy.
1.6. Limitation of the Study
This study has resource (like time & money) limitation so that portion of the total population was taken and the sample size restricted to be 140 (one hundred forty) external customers. The study also limited only in 10 Addis Ababa city branches, which means it did not consider separate geographical location, hence different person with different expectation and perception towards customer services offered by the bank due to the difference in culture, level of education &other geographical factors. In such case, tolerance level of waiting to get service & familiarity for technology may be differing.
!"#
This sub topic contains operational definition of key terms and phrases that are related to the research topic. It includes, what are mean by SERVQUAL, Credit, Satisfaction, Customer satisfaction, Customer expectation, and customer perception.
- Credit is a “transaction between two parties which one (the creditor or lender) the future payment by other (the debtor or borrow)” (Basel committee on banking supervision, 1999).
- Satisfaction; satisfaction is a post-consumption experience which compares perceived quality with expected quality (parasuraman et al., 1985).
- Customer satisfaction is the customer’s evaluation of a product or service in terms of whether that product or service has met their needs and expectation (Zeithaml and Bitner, 2003).
- Customer Perception: is defined as customers’ judgment of how service or product fulfill their needs, wants, and desire (Cadotte et al., 1987).
- Customer Expectation: is what the customer feels the service provider should offer
rather than would offer or desires or wants of consumers.
- SERVQUAL: is an abbreviation derived from the term service quality.
- ASSESSING THE LEVEL OF CUSTOMER SATISFACTION IN CREDIT SERVICE: THE CASE OF CONSTRUCTION AND BUSINESS BANK
Attached Files
ASSESSING THE LEVEL OF CUSTOMER SATISFACTION IN CREDIT SERVICE (THE CASE OF CONSTRUCTION AND BUSINESS BANK.docx
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ASSESSING THE LEVEL OF CUSTOMER SATISFACTION IN CREDIT SERVICE: THE CASE OF CONSTRUCTION AND BUSINESS BANK
ABSTRACT
The main purpose of this study is to assess the level of customer satisfaction at Construction and
Business Bank based on the perception of credit customers. Five dimensions in service quality (servqual) such as Tangibility, Reliability, Responsiveness, Empathy, and Assurance were considered as the base for this study. A structured questionnaire with 5 point Likert scale has been used to collect the data by conducting survey. 140 credit customers were taken as sample size and chosen on a convenient basis from10 branches located in Addis Ababa City. Data has been analyzed by using SPSS software (version: 20) and Excel program. Thefindings of the study revealed that some majority of customers (slightly above average customers) are satisfied with bank’s quality of credit service delivery; this implies that there is undeniable number of customers who get dissatisfied with the bank’s credit services delivering. Among those factors that caused customer dissatisfaction are loan documentation process, period for loan approval and disbursement, lack of modern technology, margin of finance and system of credit service delivery process. Besides, among the five service quality dimensions, reliability and assurance are where thehighest gap observed. The bank should understand and respond to expectations of customers when judging the quality of its service offering. Hence, it should be conscious on the reliability of its current service delivery process, employ improved technology like internet and mobile banking, proper customer service training should be given to employees and regular research should be conducted to find out expectation about the various service aspect, and the current credit procedure and service delivery standard time better be reviewed. Credit, SERVQUAL, Customer satisfaction, Customer-Expectation, Customer Perception
This chapter introduces the phenomenon understudy. It consists of the background of the study, problem statement, research questions, and objectives of the researcher in carrying out the study and the importance of the study to the organization in which the study is conducted and to other researchers on the topic. Besides, it addresses scope and limitation of the study, definition of key terms. The chapter finally outlines the structure of the thesis.
1.1 Background of the Study
Service is a form of product that consists of activities, benefits, or satisfactions offered for sales that are essentially intangible (Papasolomous&Vrontis, 2006).
Service quality of the service industries globally remains a critical one as businesses strive to maintain a comparative advantage in the marketplace (Hossain& Leo, 2009) and service quality becomes a primary competitive weapon (Stafford et al., 1996). Bank industries should focus on service quality as a core competitive strategy (Chaoprasert&Elsey, 2004). Banking service provides financial service that accepts deposits and channels those deposit into lending activities, either directly or through capital markets (Shelton et al., 1995).
In order to achieve customer satisfaction, a good service quality provided is fitting specifications, stage where consumer specifications are met, fair exchange of a value at a price and potential for utilization to achieve customer satisfaction in service (Collier et al, 1994).
Customer satisfaction in banking service is a measure of how services delivered by a company meet or surpass customer expectation. Customer expectation could be revealed in terms of reasonable service price, delivering quality service per standard time, procedures of service delivery, the way employees handle them etc. It is important for company to get more profitability and achieve the profit target margin.
Verhoef et al., (2002) emphasized that companies need to be heavily focused on Customer relationship development and management. The development of effective customer relationships is acknowledged as an essential component of marketing strategies in service industries (Chaniotakis et al, 2006).
Customer dissatisfaction can affect an organization in various ways. First, customer who experiences an unsatisfactory service encounter may never revisit that particular service provider again. Second, the customer may not only want to have been rectified that incident, but may request that the damage done to their interpersonal relationship with the provider be repaired (Krapfel, 1985, Patterson & Johnson, 1995), thereby incur costs to the organization.
According to Mitchell (1995), there are possibilities of increasing the customer profitability three times over by extending the relationship with them over a period of five years. Murphy (1996), added that banks must wait an average of six years in order to recover the initial cost of acquiring individual customers. Finally, perhaps the most damaging to the organization is the tendency for an unsatisfied customer to engage in negative word-of-mouth communication (Richins, 1983). At this point the organization must worry about losing potential customers as well as current ones. The organization need to be able to differentiate between the numerous variables that influence the consumer's selection of exact coping strategies, thereby enabling them to respond in the most appropriate fashion and to be aware that specific coping strategies may influence what consumers perceive to be satisfactory service outcomes.
Construction and Business Bank S.C. (CBB) is a wholly government–owned public enterprise and successor of the Housing and Savings Bank (HSB) which was formed in 1975 through the merger of two financial institutions namely, Imperial Savings and Home Ownership Association, and Savings and Mortgage Corporation of Ethiopia which were nationalized at the on-set of the socialist era of Ethiopia.
Pursuant to the market-based economic policy of the country initiated by the government in 1992, HSB was reconstituted as CBB in September 1994 by regulation No. 203/94 with an authorized capital of Birr 71.8 million.
The regulation gave CBB the mandate to provide universal banking services. In line with this, CBB has ventured into commercial banking operations stage by stage maintaining construction financing as its core business.
In September 2000 CBB is converted to share company in accordance with the Ethiopian Commercial Code with a capital of Birr 79.0 million. Currently, the bank with a vision “To be the best performing bank in Ethiopia by 2020” has 108 branches out let throughout the country and provided all banking services(http//www.cbb.com& Internal source).
The goal of this paper is to assess the level of customers’ satisfaction in CBB identifying gaps, potentials and constraints based on the information collected from Credit customers of the ten Addis Ababa City branches. The SERVQUAL model was the effective methodology for measuring the customers’ perception, expectation and satisfaction in banking industry. As quality service becomes the primary competitive weapon in today’s service industries, particularly in banking industry, customer satisfaction should be a measure of how services delivered by a company meet or surpass customer expectation.
Therefore, the result of the study would help to alarm CBB’s management about the Bank’s current level of performance in relation to the quality of service and customer satisfaction so that they extend their efforts to retain existing customers’ as well as to attract potential customers.
1.2 Statement of the Problem
Customers’ satisfaction towards the service includes the core products along with supplementary services. In case of bank, the core services are the products and features (deposits and credits) but supplementary services are the procedure of getting the services, speed of service providing, the physical environment and also the attitude of personnel (Lovelock, 2001).
Customer satisfaction in banking service is a measure of how services delivered by a company meet or surpass customer expectation. Due to their centrality and importance; customers perceive that they have the power to demand high quality service (MacDonald, 1995). Besides, customers are now aware of the products and the range of financial services available to them (Akan, 1995).
According to Padilla (1996), exemplary businesses treat customer satisfaction in order to determine how to increase customer base, customer loyalty, revenue, profit, market share and survival in monitoring businesses.
Banks now understand that delivering quality service to customers is essential for success and survival in today’s global and competitive banking environment (Wang et al, 2003). This is due to banking service provides financial service that accepts deposits from customers and channels those deposit into lending activities, either directly or through capital markets (Shelton et al., 1995). The key for providing superior service (benefits) is to understand and respond to expectations when judging the quality of a firms’ service offering (Parasursaman et al,1988).The ability of banks to deliver these benefits on continuous bases has a significant important on the level of customer satisfaction.
CBB, a government owned commercial bank is delivering full-fledged commercial banking services to the public (http//www.cbb.com).Among those commercial banking services, credit service is one of the major banking services it is providing to customers. In the pursuit to improve its services, retain and attract customers, CBB has taken different measures like extending its business hours, spreading branch networking throughout the country, and integrating all branches with core banking technology, setting standard servicedelivery time; providing trainings to employees and Management members in relation to credit service are among others. Despite these efforts which aim at bringing satisfaction to the customers, customers’ preferences and expectations seem not to match up with the bank’s initiatives. There are ceaseless complaints in relation to credit service delivery of the bank. Among others, this is reflected by sooner the loan approved and disbursed to credit customers, majority of them have immediately transferred the disbursed loan amount to other competitors’ banks and their intention to further transact the bulk of their business’ sales transaction with CBB is not satisfactory. This highly affected the deposit performance of the bank and the bank’s deposit performance declined by 40% (Internal report, 2015). Besides, and to the best of my knowledge, customer satisfaction research has not been conducted in particular to credit service area of the bank.
The emergingsituation, therefore, calls for the assessment of the level of customer satisfactions in relation to the quality of credit service delivery and come up with findings of the study to recommend possible solution for the improvement of credit service quality.
Research question:
1.3 Objectives of the Study
1.3.1 General Objective
The aim of the study is to assess the level of customer satisfaction atCBB in credit service by identifying gaps, potentials and constraints for the improvement of credit service quality.
1.3.2. Specific Objectives of the Study
1.4. Significance of the Study
The result of the study could provide an insight to the management of CBB to help them meet the needs and expectations of their customers to maintain their customers’ loyalty. The study also can create awareness to the bank’s management regarding the current level of performance in meeting customers’ needs there by helps the bank to examine its service procedure. The study may help as reference document for further studies in to the activities of banking industry on customer satisfaction.
1.5. Scope of the Study
The study focuses onlevel of customer satisfaction based on the quality of services towards banking by selecting credit service as line of banking service which includes overdraft facility, pre-shipment facility, short and medium term business loan.
The bank has branches in all region of the country; however, the study focused on selected ten branches of CBB located in Addis Ababa City. Only private individuals and companies that have credit account during February, 2015(during the distribution of questionnaires) are considered in the study. SERVQUAL model is used to identify the quality of service delivery and level of customer satisfaction. Descriptive statistic like mean, frequency and percentage will be used as statistical tools to undertake data analysis
For finding out the satisfaction level of customers, the study limits itself to a modified service quality dimensions which includes Responsiveness, Reliability, Assurance, Tangibility and Empathy.
1.6. Limitation of the Study
This study has resource (like time & money) limitation so that portion of the total population was taken and the sample size restricted to be 140 (one hundred forty) external customers. The study also limited only in 10 Addis Ababa city branches, which means it did not consider separate geographical location, hence different person with different expectation and perception towards customer services offered by the bank due to the difference in culture, level of education &other geographical factors. In such case, tolerance level of waiting to get service & familiarity for technology may be differing.
!"#
This sub topic contains operational definition of key terms and phrases that are related to the research topic. It includes, what are mean by SERVQUAL, Credit, Satisfaction, Customer satisfaction, Customer expectation, and customer perception.
rather than would offer or desires or wants of consumers.
Attached Files