ST.

MARY’S UNIVERSITY
SCHOOL OF GRADUATE STUDIES
FACULTY OF BUSINESS

ASSESSMENT OF THE SERVICE QUALITY DIMENSIONS AFFECTING

CUSTOMER SATISFACTION: A CASE STUDY OF AWASH

INTERNATIONAL BANK S.C

BY
HENOK YILMA

JUNE, 2017

ADDIS ABABA, ETHIOPIA

1
ASSESSMENT OF THE SERVICE QUALITY DIMENSIONS AFFECTING
CUSTOMER SATISFACTION: A CASE STUDY OF AWASH
INTERNATIONAL BANK S.C

BY
HENOK YILMA

A THESIS SUBMITTED TO ST. MARY’S UNIVERSITY SCHOOL OF

GRADUATE STUDIES IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS
ADMINSTRATION

JUNE, 2017

ADDIS ABABA, ETHIOPIA

4
 St. MARY UNIVERSITY
School of Graduate Studies

ASSESSMENT OF THE SERVICE QUALITY AFFECTING CUSTOMER

SATISFACTION:

A CASE STUDY ON AWASH INTERNATIONAL BANK S.C.

BY

Henok Yilma

Approved by Board of Examiners

Dean,Graduate Studies Signature Date

Research Advisor Signature Date

External Examiner Signature Date

Internal Examiner Signature Date

4
 Declaration

I ,the under signed, declare that this thesis is my original work, prepared under the guidance of
Tesfaye Wolde (Phd.) I further confirm that the thesis has not been presented for any academic
purpose in any other university and all sources of material used for the thesis have been dully
acknowledged.

Name Signature and Date

4
 Endorsement

This thesis is submitted for examination with my approval as university advisor of the candidate.

Tesfaye Wolde (PhD) Signature & Date

June, 2017

4
Acknowledgements
First of all my greatest and heartfelt thanks go to my advisor Dr. Tesfaye Wolde for his scholarly
comments and unreserved guidance on critical issues underlying this research activity. His
friendly approach, his kindness and assistance are his remarkable characters which I never
forget. I would also like to extend my heartfelt thanks particularly for Managers, senior officers,
staffs and Customers of AIB for their willingness and support during data collection of this
study.

Finally, my appreciation and special thanks goes to my family and my wife Hiwot Dabi for her
contribution and encouragement for carryout and accomplish this thesis work.

i
List of Abbreviations/ Acronyms

AIB Awash International Bank

SERVQUAL Service Quality

SERVPERF Service Performance

ii
List of Tables and Figures

Figure 2.1 Conceptual frameworks, ................................................................................................... 26

Table 4.1: Response Rate ................................................................................................................... 32

Table 4.2 Gender and Age composition ............................................................................................ 33

Table 4.3: Educational Level and Marital Status of the Respondents ............................................... 34

Table 4.3: Mean Score for Reliability of AIB ................................................................................... 36

Table 4.4: Mean Score for Responsiveness ....................................................................................... 37

Table 4.5: Mean Score for Assurance ................................................................................................ 38

Table 4.6: Mean Score for Empathy .................................................................................................. 39

Table 4.7: Tangibility of AIB ............................................................................................................ 40

Table 4.8 Frequency and Descriptive Analysis of Customer Satisfaction......................................... 41

Table 4.9 Regression Analysis of the Service Quality Dimension .................................................... 42

Table 4.10 Model Summary of Service Quality Dimensions ............................................................ 43

Table 4.11ANOVA for service quality dimensions and customer satisfaction ................................. 44

iii
 Abstract

The purpose of this paper was assessing the service quality affecting customers’ satisfaction in
Awash International Bank. Accordingly, descriptive survey design was used to conduct the study
using SERVPERF model of Cronin and Taylor’s (1992). By using convenience sampling 400
participants were included in the study. Accordingly; 400 questionnaires were distributed for
study participants. The quantitative data gathered through questionnaire was analyzed and
interpreted using appropriate statistical tools like percentage, mean, and regression analysis.
The findings of data analysis indicated that among the five service dimensions: Reliability,
Empathy and Tangibility were with higher mean value than other dimensions. This indicates that
the level of quality of service delivered by AIB for its customers were better in the dimensions of
Reliability, Tangibility and Empathy in relation to other dimensions. Hence; other dimensions
Like Assurance and responsiveness needs some improvement. Moreover, the overall predictive
powers of the three service dimensions were higher than the other two dimensions. Since
reliability has 3.3 beta value to predict customers satisfaction. Similarly, Empathy has 3.291beta
value to predict on customers satisfaction and tangibility has 3.189 beta values to predict on
customers satisfaction. The conclusion of the study indicated that the dimensions; Reliability,
Tangibility and Empathy have higher mean value which indicates better satisfaction and
dominantly affect customers satisfaction in Awash International Bank Whereas, some
improvement is needed for Responsiveness and assurance dimensions. Based on the findings and
conclusions of the study; the following recommendations are forwarded for concerned bodies; it
was found that among all service dimensions Responsiveness and assurance needs some
improvement. Therefore, Awash International Bank should try to improve Responsiveness and
assurance dimensions by improving the rate of the service by responding promptly to customer
service requests on time with minimal waiting hour. Similarly, the bank has to improve
assurance dimension which relates to the capability of the service provider to deliver the output
specifically in terms of the knowledge, politeness and trustworthiness of the employees to
customers’ of the Bank.

Key Word: Service Quality, Customer satisfaction, Service performance

iv
 Table Contents

Contents Page

Acknowledgements ............................................................................................................................... i

List of Abbreviations/ Acronyms......................................................................................................... ii

List of Tables and Figures................................................................................................................... iii

Abstract ............................................................................................................................................... iv

Table Contents ..................................................................................................................................... v

CHAPTER ONE .................................................................................................................................. 1

INTRODUCTION ............................................................................................................................... 1

1.1.Background of the study ............................................................................................................ 1

1.2. Statement of the problem .......................................................................................................... 3

1.3. Research Questions ................................................................................................................... 5

1.4. Objectives .................................................................................................................................. 6

1.4.1 General Objective ................................................................................................................ 6

1.4.2 Specific Objectives .............................................................................................................. 6

1.5. Scope of the Study..................................................................................................................... 6

1.6. Significance of the Study .......................................................................................................... 7

1.7. Organization of the Study ......................................................................................................... 7

CHAPTER TWO ................................................................................................................................. 8

REVIEW OF RELATED LITERATURE ........................................................................................... 8

2.1. Conceptual review ..................................................................................................................... 8

2.1.1. Definition of Bank .............................................................................................................. 8

2.1.2. Definition of Service .......................................................................................................... 9

2.1.3. Definition of Service Quality ............................................................................................. 9

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 2.1.4. Characteristics of Services................................................................................................ 10

2.1.5. Definition of Customer Satisfaction ................................................................................. 11

2.1.6. Customers‟ Expectation of Service Quality ..................................................................... 13

2.1.7. Customers‟ Perception of Service Quality ....................................................................... 13

2.1.8. Dimensions of Customer Perceptions............................................................................... 14

2.1.9. Managing Service Quality ................................................................................................ 14

2.1.10. Customer satisfaction and service quality in banking industry ...................................... 15

2.1.11. Improvement of Service Quality .................................................................................... 16

2.1.12. Sources of Complaints .................................................................................................... 17

2.1.13. Relationship between Service Quality and Customer Loyalty ....................................... 17

2.2 Empirical Review ..................................................................................................................... 18

2.2.1Quality Vs Service Quality ................................................................................................. 18

2.2.1.1 Quality ............................................................................................................................ 18

2.2.1.2 Service Quality ............................................................................................................... 19

2.3 Service quality Model .............................................................................................................. 20

2.3.1. Tangibles .......................................................................................................................... 21

2.3.2. Reliability ......................................................................................................................... 21

2.3.3. Responsiveness ................................................................................................................. 22

2.3.4. Empathy ............................................................................................................................ 22

2.3.5. Assurances ........................................................................................................................ 23

2.4 Customer Satisfaction ............................................................................................................. 24

2.5 Summary of Literature ............................................................................................................. 25

2.6. Conceptual Framework ........................................................................................................... 26

CHAPTER THREE ........................................................................................................................... 27

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RESEARCH DESIGN AND METHODOLOGY ............................................................................. 27

3.1. Research Design ...................................................................................................................... 27

3.2. Population and Sampling Technique....................................................................................... 27

3.4. Source of Data and Data collection tools ................................................................................ 30

3.5. Data Collection Procedures ..................................................................................................... 30

3.6 Method of Data Analysis.......................................................................................................... 31

3.7. Reliability and Validity ........................................................................................................... 31

3.8 Ethical Considerations.............................................................................................................. 31

CHAPTER FOUR .............................................................................................................................. 32

DATA PRESENTATION, ANALYSIS AND DISCUSSIONS ....................................................... 32

4.1 Response Rate .......................................................................................................................... 32

4.2. Background Information of the Respondents........................................................................ 32

4.3 Descriptive Analysis of Service Quality .................................................................................. 35

4.3.1 Reliability .......................................................................................................................... 35

4.3.2 Responsiveness .................................................................................................................. 37

4.3.3 Assurance........................................................................................................................... 38

4.3.4 Empathy ............................................................................................................................. 39

4.3.5 Tangibility ......................................................................................................................... 40

4.4. Overall Customer Satisfaction Rating ..................................................................................... 41

4.8: Frequency and Descriptive Analysis of Customer Satisfaction .............................................. 41

4.4 Regression Analysis of the Service Quality Dimension on Customer Satisfaction ................. 42

4.7 Overall Regression analysis ..................................................................................................... 43

CHAPTER FIVE ............................................................................................................................... 45

SUMMARY OF MAJOR FINDINGS, CONCLUSIONS AND RECOMMENDATIONS…….…45

vii
Introduction ........................................................................................................................................ 45

5.1 Summary of Major Findings .................................................................................................... 45

5.2 Conclusions .............................................................................................................................. 46

5.3 Recommendation...................................................................................................................... 47

5.4 Implications for Further Research ............................................................................................ 48

References

Appendix A: Questionnaire English

Appendix B: Questionnaire in Amharic

Appendix C: Reliability Statistics

viii
 CHAPTER ONE

INTRODUCTION

This introductory part of the paper consists of the background of the study, problem statement,
research questions, objective, significance, scope, limitation, delimitation and organization of the
study.

1.1. Background of the study

In the current volatile business world in order to be competitive, service providers‟ organizations
must provide quality service to their customers. Moreover, understanding and meeting
customers‟ expectations and subsequently being different from competitors are important in
order to survive for any business organizations.

According to Stafford (1996) Financial services in general, particularly banks; compete in

marketplace with generally undifferentiated services and products, thereby service quality
becomes a key competitive weapon. Angur. (1999) pointed out that, banking organization can
only differentiate itself from competitors by providing high quality services. Structural changes
have resulted in banks to perform a greater range of activities, and enabling them to become
more competitive with non-bank financial institutions.

Presently, technological advancements are causing banks to revise their strategies for services
offered to both individual and commercial customers. Furthermore, banks that excel in quality
services can have distinct marketing edge since improved levels of service quality are related to
higher revenue, higher customer retention, higher cross-sell ratios (Bennett & Higgins, 1993),
and increased market share (Bowen & Hedges, 1993). In addition, the banks understand that
customer will be loyal if they can produce greater value than their competitors (Dawes &
Swailes, 1999). Moreover, higher profits will be earned by banks if they can position themselves
better than competitors within a specific market (Davies et al., 1995).

Hence, banks should focus on service quality as a core competitive strategy (Chaoprasert &
Elsey, 2004). Hossain & Leo (2009) sounds that customer satisfaction and service quality has

1
become the focal point of all banking institution. Therefore, Service quality and its measurement
have become an important research topic because of its apparent relationship to cost, customer
satisfaction, customer retention and profitability (Rust, Roland and Oliver L. Richard, 1994).
Service quality is regarded as a driver of corporate marketing and financial performance (Rust,
Roland and Oliver L. Richard, 1994).A sound measure of service quality is necessary for
identifying the aspects of service that need performance improvement, assessing how much
improvement is needed on each aspect and evaluating the impact of the improvement efforts.

The evaluation of quality service is more complex than for products because of their intrinsic
nature of hetrogeneneilty, inseparability of production and consumption, perish ability and
intangibility (Zeithaml, 1996). According to (parasuraman et al, 1988) service quality is a
function of pre purchase customer expectation, perceived process quality and perceived output
quality. Customer expectation is understood as „‟desires or wants of consumers‟‟ or „‟what they
feel the service provider should offer rather than would offer‟.

On the other hand, customer perception is defined as customer‟s judgment of how service or
product fulfill their needs, wants and desire (Armstrong & Seng, 2000). Perceived quality is the
consumer‟s assessment of an entity‟s overall excellence or superiority (Zeithaml1996).The
widely used instrument that helps to measure service quality was designed by (parasuraman
et.al,1988). This standard multiple survey instrument consists of five generic dimensions include
Tangibility, Responsiveness, Assurance, reliability and Empathy (A detailed discussion of
SERVQUAL model will be done in the literature review section of this paper).

Quality service has direct impact on performance and hence on customer satisfaction. Higher
levels of customer satisfaction sustain customers‟ confidence, which is essential for competitive
advantage (korter and Armstrong, 2001). Customer satisfaction produces real rewards for the
company in the form of customer loyalty and corporate image, customer business come again
and again because they know the quality of the service; they are also aware that they depend on
the people there, and they will get consistent service, which indicates they are satisfied with the
activities of the organization . (Denton, 1992)

Banking Service Quality is a key differentiator between the competing banks. It is especially
very critical in a highly competitive environment such as that of the Awash International Bank

2
S.C. Therefore, Service Quality improvement is key issue that determines the very survival of
the Awash International Bank S.C.

The gap-model of the (Parasuraman, Zeithaml and Berry, 1991) compares that the perception of
performance (P) to expectation (E), has been widely used in past studies in a variety of
industries. Moreover, different scholars try to indicate the gaps using the five dimensions in the
case of commercial bank and some other private banks and also many studies indicate the service
gap rather than explaining the effect of the service dimensions on customers‟ satisfaction.

Therefore, as indicated in Cronin and Taylor (1991) argument that only perception was sufficient
for measuring service quality and therefore expectations should not be included as suggested by
SERVQUAL. Hence; this study will attempt to use the SERVPERF measurement of Cronin and
Taylor (1992) to explain the effect of the five service dimensions in relation to customer
satisfaction in Awash International Bank S.C.

1.2. Statement of the problem

According to Collart (2000), one of the determinants of success of a firm is how the customers
perceive its service quality, as the perceived service quality is the key driver of perceived value
(Collart, 2000). It is the perceived value, which determines customer satisfaction. Many firms
including banking industries begin to track their customers‟ satisfaction through measuring their
level of service quality perceived by their customers (Collart, 2000).

Spreng and Olshavsky (1993) also stated that customer satisfaction or dissatisfaction is
considered to be the result of a comparison between the pre-use expectations that a customer has
about the product or service and the post-use perception of product or service performance.

Munusamy et al; (2010) sounds that, though the ultimate goal of every service giving industry
including banks is satisfying customers, more often, many of the service delivering organizations
are flailed to satisfy customers as a result of not understanding customers‟ interest well. Hence,
this dilemma creates job difficulty to most business organizations that focus on customer
relations (Munusamy et al; 2010).

3
According to Collart (2000), one of the determinant successes of a firm is how the customers
perceived the resulting service quality, as this is the key driver on perceived value. It is the
perceived value which determines customer satisfaction. Many firms including banking
industries begin to track their customers‟ satisfaction through measuring the level of service
quality by their customers.

Stafford (1996) also indicated that financial services, particularly banks, compete in the
marketplace with generally undifferentiated products, therefore service quality becomes a
primary competitive weapon.

Furthermore, those banks operating in Ethiopia are consequently put into lot of pressures as a
result of the increased competition in the industry. Since, in the last eighteen years the number of
banks had increased in Ethiopia i.e. in 1994 there were only two commercial banks in the
country. However, in 2011 the number of banks reached fourteen which creates a stiff
competition among banks in meeting customer service expectation and satisfaction (Beliyu
Girma, 2011).

In this regard Beliyu Girma (2011), in his study of assessment of quality services delivery and its
impact on customer satisfaction tried to see the relationship between service quality dimensions
and customer satisfaction in selected commercial banks in Addis Ababa and identified the most
important dimension of service quality for commercial bank customers. Also, he showed the
gaps between customer‟s expectation and perception on the quality of service delivery system in
the banks. The result of his study indicated that the overall service quality perceived by
consumers was not satisfactory meaning expectations exceeded perceptions and all the
dimensions showed higher expectations than perceptions of services. But he didn‟t address
specifically a single bank. In similar way Bethelehem Tesfaye (2015), in her study of impact of
service quality on customer satisfaction in the case of Comercial bank of Ethiopia, found that
among the five parameters responsiveness and reliability was better than the other three variables
such as empathy, tangibility and assurance. But she didn‟t address private banks of Addis Ababa;
hence, it is better to see the impact of these variables in private bank.

On the other hand, William & Susana (2011), in their study of assessment and analysis of service
quality and customer satisfaction with banking services at National Investment Bank of Gahana,

4
Kumasi. They analyzed using the five generic service quality dimensions (Tangibility, empathy,
assurance, responsiveness and reliability) and found that the variables of Tangibility, empathy
and assurance has much significance to affect customers satisfaction in the selected National
Investment Bank of Ghana.

Even though, these findings indicate these service quality dimensions impact customers‟ loyalty
negatively; if customers are not satisfied. With similar tone, Awash International Bank is not
different from similar business firm. Awash International Bank is the first among the private
banking industry in Ethiopia to open its doors in 1994 following the liberalization of the banking
industry in Ethiopia at the start of the 25-year tenure of the government led by the Ethiopian
Peoples‟ Revolutionary Democratic Front (EPRDF). AIB mission is articulated as; “provide
Innovative, Competitive and Diversified banking services accessible to the society with qualified
and committed staff in a profitable and socially responsible manner”

However; the mission statement is smart enough but didn‟t include customer satisfaction at the
heart of mission statement. Hence, customer satisfaction should be assessed in order to provide
service meaningfully. Hence; to overcome its challenges and attain its mission; it is important to
consider periodic evaluation and performance review of its service in order to retain its customer.
Within this view, this paper is intended to assess the service quality that affects customers‟
satisfaction.

1.3. Research Questions

In order to attain its objectives; this paper tried to answer the following basic questions:

 What is the level of quality of service provided by AIB?

 What is the level of customers satisfaction derived from the services of AIB?

 What dimensions affect the satisfaction of AIB customers?

 How do customers‟ perceptive each of the five dimensions of service quality?

5
1.4. Objectives

1.4.1 General Objective

The main purpose of this study was to assess and analyze the quality of service and the extent of
customers‟ satisfaction with the banking service at Awash International Bank.

1.4.2 Specific Objectives

The above general objective breaks down in to the following objectives. Hence, the specific
objectives of this paper were:

 To examine the level of quality of service provided by AIB.

 To assess the level of customer satisfaction in the services of AIB.

 To identify the factors that affects the satisfaction of AIB customers.

 To find out customers‟ perception of each of the five dimensions of service

quality.

1.5. Scope of the Study

Even though the Assessment and Analysis of Service quality and customer Satisfaction of every
bank was very important; but time and financial constraints bound the scope of this study.
Hence; in order to manageable; this study attempt to collect data questionnaire were distributed
to 400 respondents from 39 branches of AIB in Addis Ababa and the respondents were taken
using convenience sampling method since it is difficult to get all customers at a time. The paper
is intended to make an assessment of the service quality affecting customer satisfaction using
five genetic service quality dimensions (Tangibility, empathy, assurance responsiveness and
reliability) . The data was analyzed using linear regressions to explain the predictive power of
service quality dimensions on customers‟ satisfactions. The mean value was also computed to
see service quality perceived by customers.

6
1.6. Significance of the Study

The findings of this study would provide the following importance: The findings of the study
would enable Awash International Bank officials to understand their customers view with respect
to their service. It might also help the bank to identify actions to ensure high level of customer
satisfaction in their operations to meet the needs and expectations of their customers in order to
maintain customer loyalty. The findings of the study would also serve as a reference document
for further studies in the areas of the banking industry with regard to customer satisfaction.

1.7. Organization of the Study

This paper was compiled in to five chapters. The first chapter deals with introduction. It was
consist of the back ground, statement of the problem, objective of the study, research questions,
and significance of the study, limitation of the study and organization of the paper. The second
chapter focused on related literature and review of relevant sources based on the topic according
to the research questions. Research design and method presented in the third chapter. It also
provided details on the population, sample and sampling procedures as well as the instruments
used in collecting data for the study. It also discusses the data collection procedures and method
of analysis. Facts and figures obtained from both primary and secondary sources were presented
in the forth chapter which was analyzed based on research questions. In the last chapter; based
on the findings conclusions were drawn and based on the conclusions possible recommendations
were forwarded.

7
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

This chapter dealt with intensive review of related literature. It included assessment of major
related sources in relation to the topic under investigation. Accordingly both theoretical and
empirical sources were reviewed. Hence, the following area was assessed: services offered by
banks, factors that cause customer satisfaction and assessment of customer satisfaction,
dimensions of service quality, the service quality model and improvement of quality service
delivery by banks.

2.1. Conceptual review

2.1.1. Definition of Bank

Banking is the business of providing financial services to consumers and businesses. The basic
services a bank provides are checking accounts, which can be used to make payments and
purchase goods and services; savings and time deposits accounts for investment, precautionary
and speculative purposes, loans for consumer and capital goods as well as working capital and
basic cash management services such as check cashing and foreign currency exchange
(Johannes, 2005). Online banking and other electronic products like ATMs, VISA cards are
some of the latest and innovative electronic services offered by Ethiopian Banks. According to
Article 2(12) of the Monetary and Banking Proclamation No 83/1994, banking business means
any operation involving receiving money on deposit, lending money, receiving commercial
instruments on deposit, accepting, negotiating/ transferring, discounting commercial instruments
and other evidences of debt, and buying and selling of gold and silver notes and foreign
exchange.

Similarly, Article 2(2) of the Licensing and Supervision of Banking Business Proclamation No
84/1994 defines banking business as:

Any business involving acceptance of money on deposit, using such funds or

deposits, in whole or in part, for loans or investments on the account of and at the
risk of the person undertaking the business, purchasing, selling and deposit of

8
 negotiable instruments (shares, bonds and other securities/ and checks, bills and
notes, and buying and selling of gold and silver bullions and foreign exchange).

On the other hand, the term bank is defined, under Article 2(1) and (4) of the same proclamation,
as a share company whose capital is wholly owned by Ethiopian nationals and/or business
organizations wholly owned by Ethiopian nationals and which is registered under Ethiopian laws
and which has its head office in Ethiopia and licensed to undertake banking business by the
national bank of Ethiopia.

2.1.2. Definition of Service

Many of the writers perceive and define „service‟ in different ways: for example (kottler; 2003);
defined service as “any activity or benefit that one party can offer to another that is essentially
intangible and does not result in the ownership of anything. Its production may or may not be
tied to a physical product” (kottler; 2003). According to Rao (2007) any intangible actions that
are performed by person or machines or both to create good perception within users is called
service. Although services are performed by service providers it results in perception and value
assessment by the customer (Rao; 2007).

2.1.3. Definition of Service Quality

In today‟s increasingly competitive business environment, service quality is essential for the
success of any organization. Service quality is important aspect that affects the competitiveness
of business. Banks should increase the quality of service constantly since there is no assurance
that the current outstanding service is also suitable for future.

Accordingly, banks should “develop new strategy” to satisfy their customer and should provide
quality service to distinguish themselves from rivalries (Siddiqi; 2011). According to Jamal &
Naser (2002), Service Quality is multidimensional concept; it is defined differently interpreted
by different people (Benjaminton & Cummane, 1998 cited in JIBR 2008). Service is abstract
(Sureshchandar, Rajendran and Anantharaman, 2002). Consequently, service is difficult for
suppliers to explain and for customers to assess (Edvardsson et al., 1994).

9
Quality is also defined differently by different people Crosby (1979) defined quality as
“Conformance to requirements”. This definition implies that organizations must establish
requirements and specifications. Once these specifications are established, the quality goal of the
various functions of an organization is to comply strictly with them. Juran (1982) defined quality
as “Fitness for use”. Secondly, no global definition of quality has been established until the time
of speaking even though this has been the focus of discussions throughout history.

Rather, different definitions are accepted under different circumstances (Reevees & Bednar,
1994). The search for this definition carried out by Benjamin and Cummane (1998) showed that
quality has been defined variously as excellence (pirsig, 1974 & Kitto, 1951), value
(Feienbaum 1951 & Abbort, 1955), conformance to specifications (Levitt, 1972 &
Gilmore,1974), conformance to requirements (Crosby, 1979), fitness for use (Juran, 1974; 1988),
loss avoidance (Taguchi cited in Ross 1989) and meeting and or exceeding customers
expectation (Gronroos, 1982 cited in Parasuraman et el., 1988).

Quality is also defined as “a measure of the extent to which the service delivered meets the
customer‟s expectation” (Ghobadian, Speller & Jones, 1993) , which was supported by Harrison
(2000). Among many definitions, stated that, the most popular definition of quality was meeting
and or exceeding customers‟ expectations (Reeves & Bednar, 1994).

2.1.4. Characteristics of Services

According to Shostack (1981), the most important and distinguishing characteristic of services is
intangibility; i.e. it is not possible to taste, feel, see, hear, or smell services before they are
purchased. Many researchers argue that intangibility forces consumers to rely on external
indicators of quality such as the surroundings and equipment (Berry, 1980; Eigler, Langeared,
Lovelock, Bateson & Young, 1977; Grove & Fish, 1983; Shostack, 1977; Upah, 1982), service
personnel (Gronroos, 1981; Rathmell, 1974), and price (Berry1980; Booms & Bitner, 1981;
Zeithaml, 1981).Whereas goods are produced, sold, and consumed, most services are first sold,
and then produced and consumed simultaneously. The inseparability of production and
consumption means that the service provider is often physically present when consumption takes

10
place. Only direct distribution is possible in services that have to be delivered face-to-face
(Upah, 1980).

Consequently, marketing and production are highly interactive processes (Gronroos, 1978).
Indeed, services are often classified based on this interactive dimension. Chase (1978) argued
that services are differentiated on the extent of customer involvement. One of Lovelock‟s (1983)
multidimensional classification matrices also uses the service provider customer involvement
dimension to differentiate services.

Because of the intangibility, it is difficult for consumers to make a conscious evaluation and
comparison of the quality of various service offering. In the absence of tangible cues for
customer evaluation, the firm may find it difficult to understand how the consumers perceive and
evaluate their services (Zeithaml, 1981). The predominance of human contact in service
offerings also highlights the importance of the service experience. Parasuraman, Zeithaml, and
Berry (1985) found that 8 out of the 10 dimensions important in determining quality were
experiences drawn from the service encounter, such as friendly staff and speedy service. Their
results imply that the service provider takes a central role in communicating quality
(Parasuraman, Zeithaml, and Berry, 1985).

The involvement of both customer and service provider suggests that services that require high
customer contact are more difficult to control and standardized than those with low consumer
contact (Chase, 1978). The simultaneous production and consumption of services means that
quality occurs during the service delivery, usually in an interaction between the customer and
service provider. It is difficult to inspect the service prior to delivery to the customer. The
problems created by intangibility and inseparability highlight the need for a system of service
delivering to be built into the firm to ensure consistent quality delivery (Chase, 1978).

2.1.5. Definition of Customer Satisfaction

As indicated by Lovelock (2004) many researchers conceptualize customer satisfaction as “an

individual‟s feeling of pleasure (or disappointment) resulting from comparing the perceived
performance or outcome in relation to the expectation.”

11
Service companies have since recently focused on customers in order to improve
competitiveness. Customer satisfaction is one of the important outcomes of marketing activity
(Mick and Fournier; 1999). In the competitive banking industry, customer satisfaction is
considered as the fundamental of success. Satisfying customers is one of the main objectives of
every business. Businesses recognize that keeping current customers is more profitable than
having to win new ones to replace those lost. Management and marketing theorists emphasize
the importance of customer satisfaction for a business‟s success (Kennedy & Schneider; 2000).

Good customer satisfaction has an effect on the profitability of nearly every business. For
example, when customers receive good service, each will typically tell nine to ten people.
However, customers who receive poor service will typically relate their dissatisfaction to
between fifteen and twenty others (Naik:2010). Anderson and Zemke; 1998) stated that
“Satisfied customers improve business and dissatisfied customers impair business”. Therefore,
customer satisfaction is an asset that should be monitored and managed just like any physical
asset.

The satisfaction judgment is related to all the experiences made with a certain business
concerning its given products, the sales process, and the after- sale service. Whether the
customer is satisfied after purchase also depends on the offer‟s performance in relation to the
customer‟s expectation. Customers form their expectation from past buying experience, friends‟
and associates‟ advice, and marketers‟ and competitors‟ information and promises (Kotler;
2000).

Higher customer satisfaction leads to greater customer loyalty which in turn leads to higher
future revenue. As a result, many market leaders are found to be highly superior customer-
service orientated. They have been rewarded with high revenue and customer retention as well.
For that reason, organizations in the same market sector are forced to assess the quality of the
services that they provide in order to attract and retain their customers. Because satisfied
customers are key elements to long-term business success (Zeithaml et al., 1996).

12
2.1.6. Customers’ Expectation of Service Quality

Customer expectations are beliefs about a service that serve as standards against which service
performance is judged (Zeithaml et al., 1993); which customer thinks a service provider should
offer, rather than on what might be on offer (Parasuraman et al., 1988). This is influenced by
their prior knowledge, personal desires, word-of-mouth and service provides. Literature explains
expectation as predictions made by consumer about what is likely to happen from a transaction
(Parasuraman et al., 1988).

2.1.7. Customers’ Perception of Service Quality

Customers perception of performance is what they experienced (Parasuraman et al., 1988).

Literature maintains that customers total perception of a service is based on their perception of
the outcome and the process; where the outcome is either value added or quality and the process
is the role undertaken by the customer (Edvardsson, 1998).The customer‟s perception of quality
of service is based on the degree of agreement between expectations and experience
(Kandampully, 1998).

The result of this comparison is perceived service quality (Gronroos, 1982, 1984; Takeuchi and
Quelch, 1983; Parasuraman et al., 1985, 1988). Parasuraman et al, (1988) define perceived
quality as a form of attitude, related but not equal to satisfaction, and results from a consumption
of expectations with perceptions of performance. Therefore, having a better understanding of
consumers attitudes will help know how they perceive service quality in banking operations
(Parasuraman, et al, 1988).

The pivot to the concept of service quality is gap model, which stipulates that service quality is a
function of the difference scores or gap between expectations and perceptions (P – E). The gap
between expectation and performance can be positive (satisfactory), when performance exceeds
expectations or negative (dissatisfaction), when performance falls short of expectations
(Anderson, 1973). Service quality is low, if what is perceived is below expectation, and is high,
if what is perceived meets or exceeds expectation. The result of this comparison is perceived
service quality (Gronroos, 1982, 1984; Takeuchi and Quelch, 1983; Parasuraman et al., 1985,
1988).

13
2.1.8. Dimensions of Customer Perceptions

The customers‟ perceptions of the service process are separated into two parts these are the
process dimension or how the service process functions and the outcome dimension or what the
process outcome. According to Gronroos (1982), the two quality dimensions are termed
technical quality which indicates what the service process leads for the customer in the technical
sense and functional quality which show how the process functions. Customers perceive the
quality of the service in these two dimensions, what they get and how they get it (Gronroos,
1982).

Gronroos (1982) also indicated that; technical quality is a condition for good perceived quality,
but it is not often enough. Additionally, functional quality part of a service must be on a
satisfactory level. Gronroos (1982) also pointed out that, the perceived technical quality part of
the service become visible for customers as soon as it is good enough, and after that the
functional qualities aspect determine the level of perceive quality of service in the minds of
consumers (Gronroos,1990).

2.1.9. Managing Service Quality

One of the critical tasks of service companies is service quality management. It is commonly said
that “what is not measured is not managed’’ (Anonymous). Without measurement managers will
not be sure weather service gaps exist, let alone what types of gaps and where they exist. Many
organizations are eager to provide good quality services, but fall short simply because they do
not accurately understand what customers expect from the company. The absence of well-
defined tangible cues makes this understanding much more difficult than it would be if the
organization were making manufactured goods. Services organizations should ask the following
key question: - (Cole; 1995)

 What do customers consider the important features of the service to be?

 What level of these features do customers expect?

 How is service delivery perceived by customers?

14
In service marketing the quality of service is critical to a firm‟s success. Service providers must
understand two attributes of service quality: - first quality is defined by the customer not by
producer or seller. Second, Customer assesses service performed (Stanton; 1987). Consequently,
to effectively manage quality, a service firm should:

 Help customers formulate expectation Expectations are based on information from

personnel and commercial sources promises made by the service provider and
experience with the particular service as well as other similar services (Stanton; 1987).

 Measure the expectation level of target market A service firm must conduct research
to measure expectations. Gathering data on the target market‟s past behavior, existing
perceptions and believes and exposure of information can provide the bases for
estimating expectation and Strive to maintain consistent service quality at or above the
expectation level (Stanton; 1987).

2.1.10. Customer satisfaction and service quality in banking industry

Without any doubt, service quality is gaining more importance in banking industry (Munusamy
et al, 2010). Both the marketing and service management literatures suggest that there is strong
theoretical underpinning among customer satisfaction, customer loyalty and profitability
(Hollowell, 1996). Levesque & McDougall (1996) pointed out that customer satisfaction and
retention are critical for retail banks, and investigate the major determinants of customer
satisfaction (service quality, service features, situational factors and customer complaint
handling), and future intentions in the retail bank sector. Bloemer et al. (1998) explore how
image, perceived service quality and satisfaction determine loyalty in a retail bank. Armstrong &
Seng (2000) analyze the determinants of customer satisfaction in the banking industry (purchase
intentions, transactional paradigm, and fairness (equity). The study of Lassar et al. (2000)
examines the effects of service quality on customer satisfaction from two distinct methodological
perspectives – technical/functional quality and SERVQUAL.

Jamal & Naser (2002) suggest that customer satisfaction is based not only on the judgment of
customers towards the reliability of the delivered service, but also with customers‟ experiences
with the service delivery process.

15
Therefore, they report demographic differences (education, gender and income levels) in the
degree of customer satisfaction. Hence, customer satisfaction with commercial and retail banking
is composed of a wide variety of dimensions (Jamal & Naser, 2002).

Thus, customer satisfaction reveals the general evaluation of the actions carried out by a given
business in relation to expectations accumulated after various contact between the consumer and
business (Bitner & Hubber, 1994). If customers perceive that they are obtaining additional
benefits from their relationship with establishment employees, their satisfaction level with the
service provider will increase (Beatty et al., 1996).

Relational benefits can then be considered as important factors for customer satisfaction with
financial businesses. Therefore, relational benefits mean special treatment, social benefits and
confidence, which were investigated by Gwinner et al. (1998), would have a strong influence on
customer satisfaction with their habitual establishments.

2.1.11. Improvement of Service Quality

Complaints provide a very important tool in the overall assessment of customer satisfaction and
acts as a useful early warning sign. Cartwright and Green (1997)

An organization cannot benefit from complaints if there is no mechanism to handle them

effectively. An effective complaints management system should include the following elements:
a detailed policy for handling complaints, regular training and monitoring system in place for
dealing with regular or specific problems or complaints, a good recording and reporting system,
authority for action (as part of the policy and practice), systems for addressing the problem
which causes complaint, speedy and courteous response rate at the complaints, investigation and
solution stages, regular review of handling complaints, accessibility i.e. customers should not be
passed on from one department to the other before they can make their complaints, and solutions
should be designed to satisfy customers rather than satisfy internal interest (Ian, 1994).

Johns (1994) also suggested that in order to find out what is wrong, how often and how it should
be put right, customers should be encouraged to complain. For example, the organization should
make it easy for people to complain through free telephone lines and complaint forms and also

16
ask for complaints perhaps by selecting and approaching customers at random. They should
listen to the complaints of customers without becoming defensive. They should act quickly and
with goodwill to solve the problem for e.g. they should replace defective products immediately,
or repeat the service and take positive steps to prevent its recurrence (Johns, 1994).

2.1.12. Sources of Complaints

Customers tend to complain when they do not maximize utility from the product or service
consumed. A company may have one of the finest products or services in the market but if
customers cannot get value for their money, they complain and the survival of the company is at
stake. Companies should therefore constantly find ways of improving products or services to
ensure maximum utility for customers. One way of doing this is by constantly asking the
customers how the organization is doing and how it can get better (Dei-Tumi, 2005).

Furthermore, customers will always complain if it takes more time than necessary for products or
services to reach them. Companies should design time scales for delivering products or services
and if a particular product or service requires different timing standards, it is necessary to
communicate this timings to customers. It is important to note that if a competitor is able to serve
a customer faster, the customer will definitely think of switching to the competitor (Dei-Tumi,
2005).

2.1.13. Relationship between Service Quality and Customer Loyalty

In various studies the relationship between service quality and customer preference loyalty had
been examined (Boulding,Kalra, Staelin, & Zeithaml, 1993; Cronin & Taylor, 1992). In their
study Cronin and Taylor (1992) focused solely on repurchase intentions, whereas Boulding et al.
(1993) focused on the elements of repurchasing as well as the willingness to recommend. In the
study by Cronin and Taylor service quality did not appear to have a significant (positive) effect
on repurchase intentions (in contrast to the significant positive impact of satisfaction on
repurchase intention), whereas Boulding et al. (1993) found positive relationships between
service quality and repurchase intentions and willingness to recommend.

17
According to Clark (2001), long-term customer retention in competitive markets requires the
provider going beyond basic satisfaction to creating loyalty in order to guard against competitor
attack”. According to Day (1994) the identification and satisfaction of customer needs leads to
improved customer retention (Day, 1994).

2.2 Empirical Review

2.2.1Quality Vs Service Quality

2.2.1.1 Quality

Quality has been defined from diverse perspectives. Quality was primarily seen as a defensive
mechanism but it is seen as a competitive weapon for emergence of new markets as well as
growing market share (Davis et al, 2003). Quality can be defined as satisfying or exceeding
customer requirements and expectations, and consequently to some extent it is the customer who
eventually judges the quality of a product (Shen et al., 2000).

An extensive range of literature over the last 25 years has examined the concept of service and
acknowledged the intangibility of services as one of the problems allied with measurement
(Joseph et al., 2005). Furthermore, in the service sector, where production, delivery and
consumption can occur simultaneously, the concept of quality refers to the matching between
what customers expect and what they experience. Customers evaluate service quality by
comparing what they want or expect to what they actually get or perceive they are getting (Berry
et al., 1988). When it comes to the service sector in banks, it turned out to be that they propose
comparable kinds of services worldwide (Lim and Tang 2000), rapidly corresponding their
competitors innovations. Nevertheless, customers can perceive differences in the quality of
service. Banks have realized the significance of concentrating on quality of services as a
approach to increase customer satisfaction and loyalty, and to develop their core competence and
business performance (Kunst and Lemmink, 2000)

18
 2.2.1.2 Service Quality

Nowadays, with the increased competition, service quality has become a popular area of
academic research and has been acknowledged as an observant competitive advantage and
supporting satisfying relationships with customers (Zeithmal, 2000).

Service quality is concepts that has aroused substantial interest and argue in research. There are
difficulties defining and measuring it with no overall consensus emerging on either (Wisniewski,
2001). Service quality has been defined as the overall assessment of a service by the customers
(Eshghi et al., 2008), while other studies defined it as the extent to which a service meets
customers‟ needs or expectations. Service is assumed to be quality when it consistently conforms
to customer expectations (Asubonteng et al., 1996; Wisniewski and Donnelly, 1996).
Parasuraman et al. (1985) argues that service quality is the measure of service delivered as
against expected service performance.

Service quality is defined as customer perception of how does a service meets or exceeds their
expectations (Czepiel, 1990). Several practitioners define service quality as the difference
between customers‟ expectations for the service encounter and the perceptions of the service
received (Munusamy et al., 2010). Customer expectation and perception are the two main
ingredients in service quality. Customers judge quality as low if performance (perception) does
not meet up their expectation and quality as high when performance exceeds expectations
according to Oliver (1980).

Service quality consists of five dimensions: tangibles (appearance of physical facilities,

equipment, personnel and written materials), reliability (ability to perform the promised service
dependably and accurately), responsiveness (willingness to help customers and provide prompt
service), assurance (knowledge and courtesy of employees and their ability to inspire trust and
confidence), and empathy (caring and individual attention the firm provides its customers).
Reliability is considered the vital core of service quality. Other dimensions will matter to
customers only if a service is reliable, because those dimensions cannot compensate for
unreliable service delivery (Berry et al., 1994).

19
Perceived quality has been defined as a form of attitude, related but not equal to satisfaction, and
fallout from a consumption of expectations with perceptions of performance. Consequently,
having an improved understanding of consumers attitudes will facilitate knowing how they
perceive service quality in banking operations (Parasuraman et al., 1988).

In the changing banking scenario of 21st century, the banks had to have a vital identity to
provide excellent services. Banks nowadays have to be of world-class standard, committed to
excellence in customers‟ satisfaction, and to play a major role in the growing and diversifying
financial sector (Balachandran, 2005). There has been a remarkable change in the way of
banking in the last few years. Customers have also accurately demanded globally quality services
from banks. With various choices available, customers are not willing to put up with anything
less than the best. Banks have recognized the need to meet customers‟ aspirations. Consequently
service quality is a critical motivating force to drive the bank up in the high technology ladder.

The soundness of banking sector is of a dominant importance because it is a main component of

the financial sector, and as efficiency in the utilization of the savings of the depositors and the
banking sector resources is essential to improve the growth rate of the existent sectors of the
economy (Central Bank, 2003). The purpose of banking operations supposed to be to progress
the quality of life for the overall society not just the maximization of shareholders' wealth.

2.3Service quality Model

The SERVPERF model was carved out of SERVQUAL by Cronin and Taylor (1992);
SERVPERF directly measures the customer‟s perception of service performance and assumes
that respondents automatically compare their perceptions of the service quality levels with their
expectations of those services. Cronin and Taylor argued that only perception was sufficient for
measuring service quality and therefore expectations should not be included as suggested by
SERVQUAL (Baumann et al, 2007). Instead of measuring the quality of service via the
difference between the perception and expectation of customers as in SERVQUAL, SERVPERF
operationalize on the perceived performance and did not assess the gap scores as expectation
does not exist in the model. Thus, it is performance-only measure of service quality.

20
The model adopts the five dimensions of SERVQUAL and the 22 item scale is used in
measuring service quality. In the SERVPERF model, the results demonstrated that it had more
predictive power on the overall service quality judgment than SERVQUAL. (Cronin and Taylor
1994). Therefore; the researcher preferred to use SERVPERV model to undertake this study.

2.3.1. Tangibles

The tangibles involve the firms‟ representatives, physical facilities, materials, and equipment as
well as communication materials. Furthermore, Physical environmental conditions appeared as a
clear evidence of the care and attention paid for the details offered by the service provider
(Fitzsimmons & Fitzsimmons, 2001). Davis et al. (2003) summarize tangibles like the physical
confirmation of the service. More specifically, Parasuraman et al. (1985) define the tangibility
appearance of physical facilities, equipment, personnel, and written materials. Finally, in the
present research, tangibles are the facilities and the banking services offered by the providers of
the AIB as perceived by its customers. Such tangibles are measured using four items of the
tangible dimension of the 22-item SERVPERF. Moreover, Salman K., Babak M. et al., (2011),
in their study on Service Quality in Conventional Banking in Pakistan ; concluded that there is
moderate but positive (r = 0.461) relationship between tangibles and customer satisfaction in the
conventional banking sector of Pakistan. In contrast to this, scholars like Anber , M. and Shireen
Y. (2011), in their study on Commercial Banks of Jordan from their analysis the weakest
correlation was for tangibles and customer satisfaction (r = 0.17, P < 0.01).

2.3.2. Reliability

Reliability depends on handling customer service issues, performs the services right the first
time; offers services on time, and maintain a record of error-free. Moreover, Cronin and Taylor
(1992) define reliability as the most significant factor in conventional service. Reliability also
consists of the right order fulfillment; accurate records; accurate quote; right in the bill; Results
are more accurate than commissions; keep the promise of service. Cronin and Taylor (1992),
also mentions that reliability is the most significant factor in banking services. More specifically,
SERVPERF was applied to gather data in four different companies, including banks, credit card
companies, the company's maintenance services, and long-distance phone company. They found
high reliability in all four of these companies, with the possible exception of some of the values

21
associated with significant dimensions (Cronin and Taylor, 1992). Finally, reliability is defined
as the “ability to perform the promised service dependably and accurately” (Parasuraman et al.,
1988). In this research, reliability is the ability of banking service providers at a specific AIB
bank to execute the promised service as perceived by customers of AIB in Addis Ababa.

2.3.3. Responsiveness

Responsiveness is defined as "the willingness to help customers and provide prompt

service"(Parasuraman et al., 1988). Furthermore, Johnston (1997) defines responsiveness such as
speed and timeliness of service delivery. This consists of processing speed and service
capabilities to respond promptly to customer service requests, and wait a short and queuing time.
More specifically, responsiveness is defined as the willingness or readiness of employees to
provide services. It contains the timeliness of service (Parasuraman et al., 1985). It also contains
understanding the needs and requirements of the customer, easy operation time, individual
attention provided by the staff, attention to the problem and customers' safety in their dealings
(Kumar et al., 2009). Finally, in this research, responsiveness is the readiness of banking service
providers at a specific AIB bank Addis Ababa Branches to provide punctual services as
perceived by a specific AIB in Addis Ababa Branches banking customers.

2.3.4. Empathy

Parasuraman et al. (1985) defined empathy as a caring and individual attention that the firm
provides to its clients. It contains giving individual attention to employees who understand the
needs of their customers and customer facilities during business hours.

Furthermore, Ananth (2011) demonstrates empathy in their research of private sector banks,
provide individual attention and easy operation time; give personal attention, and understand the
specific needs of customers. Fitzsimmons and Fitzsimmons (2001) suggest that empathy
contains approachability, sensitivity, and efforts to understand customer needs. Also, Johnston
(1997) defined empathy as the ability to make customers feel welcome, especially by staff
contacts. Additionally, the SERVQUAL model indicates that satisfaction is related to the size
and direction of disconfirmation of a person‟s experience when he/she faces his/her initial
expectations (Churchill & Surprenant, 1982; Parasuraman, Zeithaml& Berry, 1985; Smith &

22
Houston, 1982).

2.3.5. Assurances

An assurance refers to the safety and security of customer transactions with the AIB including a
privacy policy. Dabholkar (1996) recommended adding the Assurance dimension to future
service quality research. An assurance is ensued when the service becomes safe, and the
customer information gets protection (Parasuraman et al., 2005; Zeithamlet al., 2002).

Angur et al (1999) examined the applicability of alternative service quality measure in the Retail
Banking industry in India. They conducted their research on the consumers of two major banks
in India. They use SERVQUAL model to measure the overall service quality. They found that all
the dimensions are not equally important in explaining variance in overall service quality. The
result indicated that responsiveness and reliability seem to be the most important dimensions
followed by the empathy and tangible dimensions; whereas, assurance appears to be the least
important dimension. Finally, they concluded that SERVQUAL is the best measure of service
quality in banking industry.

The applicability of the SERVQUAL measure is well established in the retail banking industry.
As mentioned earlier, Angur et al (1999) stated that SERVQUAL is the best measure of service
quality in the retail banking industry in the developing country. Most of the researchers use the
SERVQUAL measure or the modified SERVQUAL (SERVPERF) that is used in the retail
banking industry.

From the above discussion it can be concluded that SERVPERF is suitable as an assessment tool
to measure the service quality perceptions in the banking industry. Moreover, scholars like
Anber , M. and Shireen Y. (2011), in their study on Commercial Banks of Jordan from their
analysis of coefficient of determination (R 2) was 0.261, this showed that 26.1 percent of
customer satisfaction can be explained by the five independent variables of service quality
dimensions; their study also showed that there is statistical significance between the independent
variables(service quality dimensions) and the dependent variable (customer satisfaction) at p <
0.01. Similarly, Salman K., Babak M. et al., (2011), in their study on Service Quality in
Conventional Banking in Pakistan ; there is statistically positive and strong relation between the

23
independent variables (service quality dimensions) and the dependent variable (customer
satisfaction) at p < 0.01. William & Susana (2011) also showed on their study of assessment and
analysis of service quality and customer satisfaction; the dimensions: empathy, tangibles and
assurance were the most important service quality dimensions to the customers of NIB of
Kumasi in Ghana.

2.4 Customer Satisfaction

According to Oliver (2010), satisfaction is the consumer‟s execution response. It is a decision

that a product or service feature, or the product or service itself, provided (or is providing) an
enjoyable level of consumption-related fulfillment, including levels of under or over-fulfillment
(Oliver 2010). Furthermore, Zeithaml and Bitner (2000), showed customers‟ satisfaction as the
customers‟ evaluation of a product or service in terms of whether that product or service has met
their needs and expectations.

As per to Tse and Wilton (1998), customer satisfaction can also be defined as the “customer‟s
response to the evaluation of the perceived discrepancy between prior expectation and the actual
performance of the product as perceived after its consumption”.

On top of this, Jamal and Nazer (2002), argued that customer satisfaction is not only linked with
the view of customers but also on their experience with the service delivery process. With regard
to satisfaction reaction; Aborampah Amoah Mensah (2010), explained that, customer satisfaction
reflects the degree of a customer‟s positive reaction for a service provider in a bank context, it is
necessary for service providers (bank) to recognize the customer‟s dream. Hence, a high level of
customer satisfaction can have a positive impact on customer loyalty (Deng et al., 2010).

According to researchers Lee, et al., (2000), their mixed findings on the satisfaction and service
delivery showed that, regarding the casual direction between service quality and satisfaction;
customers‟ satisfaction lead to service quality or vice versa. Similarly, Yavas et al. (1997)
explained that although some studies interpreted service quality perceptions as an outcome of
satisfaction, recent studies have characterized service quality as an antecedent of satisfaction. We
except the position that customers can evaluate a service (be satisfied or dissatisfied) only after
they perceive it. Many authors who studied the relationship between perceived service quality

24
and customer satisfaction have shown that service quality determines customer satisfaction.
(Anderson et al, 1994).

As per to Edvardsson (1998), the concept of service should be approached from a customer
perspective. It is the customer‟s total perception of the outcome, which is “the service”. It forms
the perception of quality and determines whether a particular customer is satisfied or not.
Customers have different values and grounds for assessment; they may perceive one and the
same service in different ways.

Therefore; a bank must first find out the level of satisfaction of its current customers to improve
its customer satisfaction. One common way of measuring satisfaction is to ask customers first to
identify what factors are important in satisfying them and then to evaluate the performance of a
service provider and its competitors on these factors. Many firms use a five point scale to
measure customer satisfaction, with the following format:

1= very dissatisfied

2=somewhat dissatisfied

3=neutral

4= somewhat satisfied

5=very satisfied.

The result of the satisfaction surveys could be used to estimate the number of loyal customers a
bank has as well as how many are at risk of defecting Lovelock and Wright (1999).

2.5 Summary of Literature

Customer Satisfaction is one of the most important outcomes in the marketing literature. It
serves to link processes culminating purchase and consumption with post purchase phenomena
such as attitude change, repeat purchase, and brand loyalty (Surprenant and Churchill, 1982).
This definition is supported by Jamal and Naser (2003) and Mishra (2009).

According to Oliver (1980), the customer satisfaction model explains that when the customers

25
compare their perceptions of actual products/services performance with the expectations, then
the feelings of satisfaction have arisen. Any discrepancies between the expectations and the
performance create the disconfirmation.

2.6. Conceptual Framework

The conceptual framework indicates the crucial process, which is useful to show the direction of
the study. The study shows the relationship between the five service quality dimensions
(reliability, responsiveness, assurance, empathy and tangible) and customer satisfaction.
Customer satisfaction is a dependent variable which occurs when the services provided by AIB is
rated by customers as high quality and satisfactory.

The study shows that the quality of the services provided by the Bank determines the satisfaction
rate of customers with the bank. Based on the above literature the following conceptual
framework was drawn.

Independent Variable Dependent Variable

Assurance
Customer
Reliability Customer Customer
Satisfaction
Retention
Responsiveness
Perception
Empathy

Tangibles

Figure 2.1 Conceptual frameworks,

Source: Parasuraman et al., (1988)

26
 CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

This chapter dealt with research design, research methods, population, sampling techniques,
sources of data and the instruments employed in the data gathering as well as method of data
collection.

3.1. Research Design

The research is quantitative and data was collected on the service quality dimensions using
SERVPERF model. Descriptive study is used to explain the relationship between the
independent variables, (service quality dimensions) and the dependent variable (customer
satisfaction) in order to indicate the impact of independent variables on the dependent variable.

3.2. Population and Sampling Technique

In Addis Ababa there are 121 branches of Awash International bank with a total population of
702,508. Sarantakos (2005) stated that in social science, ten to thirty percent of the population is
assumed to be sample size for a given population. Hence, 36 branches were selected as sample
size for this study. Therefore, the target populations for this study were 321,090 customers in
these 36 branches.

Among 121 branches of AIB 36 branches were selected using researcher convenience; in order
to give equal chance for all Awash International Banks in Addis Ababa. Accordingly, customers
were selected from both saving and Current Accounts. Sarantakos (2005), stated that in social
science, ten to thirty percent of the population has to be assumed to be sample size for a given
population. Therefore; maximum sample size, i.e., Thirty percent of 121 branches which
constitutes 36 branches. Hence 36 branches were randomly selected and included in the study.
Furthermore, for appropriate sample size determination from sampled branch; statistical formula
developed by Yamane (1967) was used for sample determination. It was computed as follows:

27
Assumptions

At 95% confidence level, e = ±5% and Z= +1.96

n= will be used to select appropriate size of participants in the sample.

Where, n = required sample size,

N = No of population in a selected branch and

e2 = the level of precision (Sampling error)

Hence, the required sample size is calculated as: =400

From the total population of 321,090 customers in the selected 36 branches, 400 samples of
respondents were determined to be taken from 36 branches of AIB banks. Furthermore, from
selected branches; customers were selected by researcher‟s convenience and questionnaires were
distributed for the selected customers in each of the selected branch. Moreover, customers were
selected from both Current and saving Account holders.

28
 Table 3.1 Target population and Sample Size in each branch

Sample Taken from each Branch

S.N Branches (using convenience sampling)
Current Account Saving Account Total
1. Kottebe branch 7 43 50
2. Head office branch 15 37 52
3. 4 kilo branch 11 34 45
4. Goffa Sefer branch 13 25 38
5. Mahal Arada branch 5 23 28
6. Lagaher branch 2 24 26
7. Addis kettama branch 8 15 23
8. Gurd Shola branch - 1 1
9 Merkato K/Shaleka - 1 1
10 Mesalemia 1 - 1
11 Meskel Flower - 1 1
12 Mexico 3 - 3
13 Mikililand - 2 2
14 Milinium Akab. - 1 1
15 Mierab Merkato 1 - 1
16 Moenco 1 - 1
17 Nifas Silk 2 13 15
18 Olompiya 2 - 2
19 Piazza 1 4 5
20 Rufael - 1 1
21 Sidamo Tera 3 2 5
22 Salo Gora - 3 3
23 Sarbet Akababi - 2 2
24 Saris Addis Sefer 1 3 4
25 Saries 2 8 10
26 Sebategna Aka. 5 20 25
27 Sengatera - 1 1
28 Shala Akababi 1 - 1
29 Sheger - 3 3
30 Shegole - 2 2
31 Sidest Kilo - 1 1
32 Signal - 3 3
33 Stadium 4 21 25
34 Temenja Yaj 1 4 5
35 T/Haymanot 3 8 11
36 Torhayiloch - 2 2
Total 92 308 400
nd
Source: Awash International Bank 2016 2 quarter report.

29
3.3 Research Frame Work

The SERVPERF model was carved out of SERVQUAL by Cronin and Taylor (1992);
SERVPERF directly measures the customer‟s perception of service performance and assumes
that respondents automatically compare their perceptions of the service quality levels with their
expectations of those services. To this end, all the original 22 service quality item „as is‟
propounded by Parasuraman et al; were used.
To measure customer satisfaction the researcher use one scale adopted from Lovelock and
Wright (1999) with response ranging from „Highly Satisfied‟ to „Highly Dissatisfied‟. Then to
collect valid data using first hand information; 400 questionnaires were distributed and collected
to capture customers‟ response from all selected branches. Using descriptive statistics and
regression analysis the data was analyzed.

3.4. Source of Data and Data collection tools

In this study mainly primary data was used. It was gathered from the customers of Awash
International bank branches under study. Specially, from the selected branches namely; Kottebe,
Head office,4kilo, Goffa, Mahal Arada, Lagaher Addis kettama , Gurd Shola, Merkato
K/Shaleka, Mesalemia, Meskel Flower, Mexico, Mikililand, Milinium Akababy, Mierab
Merkato, Moenco, Nifas Silk, Olompiya, Piazza, Rufael, Sidamo Tera, Salo Gora, Sarbet
Akababi, Saris Addis Sefer, Saries ,Sebategna Aka, Sengatera, Shala Akababi, Sheger, Shegole,
Sidest Kilo, Signal, Stadium, Temenja Yaj, T/Haymanot and Torhayiloch branches.

3.5. Data Collection Procedures

In order to get first hand information from customers primary data was used in this study.
Likewise, to measure bank‟s services with respect to customers‟ satisfaction of AIB, The
questionnaire was designed in a five likert scale measurement. A 22 item measure was used to
indicate the customer‟s degree of agreement for the 22 performance statements, based on their
assessments of the service provided by the AIB adopted from SERVPERF model by Cronin and
Taylor‟s (1992). Moreover, Customer satisfaction was measured with one scale adopted from
Lovelock and Wright (1999) with response ranging from „Highly Satisfied‟ to „Highly
Dissatisfied‟.

30
3.6 Method of Data Analysis

The descriptive statistics was used to present demographic variables. Quantitative data from
questionnaire was analyzed. Furthermore; the statistical tools such as: frequency, percentage,
mean value and standard deviations were used for quantitative data analysis. To see the
relationship between service quality and customer satisfaction the data was analyzed using
linear regression.

3.7. Reliability and Validity

In order to check the reliability; the questionnaire was pilot tested before actual distribution.
Accordingly, 20 questionnaires were distributed to see the reliability of the items. Among the
distributed questionnaire 17 questionnaire were returned and the result showed cronbach alpha
(α=0.801) for Perception Items. Furthermore, validity issue was addressed through expertise value
judgments; hence the university advisor and my colleagues evaluated the items validity. After
doing these test the questionnaire were distributed to the participants in order to collect the actual
data.

3.8 Ethical Considerations

In collecting the valid data the researcher has followed the following procedures. Before
distributing the questionnaire official permission letter that was written from the university was
provided to the manager of AIB selected branches in Addis Ababa in order to get official
consent. Then after, objectives of the study and confidentiality of the data was explained for
study participants in order to get their attention and to encourage them for valid response.

31
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND DISCUSSIONS

This Chapter mainly focused on data presentation in more figurative manner using tables and
some statistical tools with detailed analysis following discussion of the findings from analysis of
the data gathered from the participants of the study through data collection instruments.

4.1 Response Rate

Among 400 sampled participants of Addis Ababa branch of AIB customers 381(95.25%) of the
questionnaires were filled and returned while 19(4.75%) of the questionnaires were not returned
after distribution

Table 4.1: Response Rate

Response Rate Frequency %

Questionnaires which were 381 95.25
filled and returned
Questionnaires which were 19 4.75
not Returned
Total 400 100
Source: From Field Survey (2016)

4.2. Background Information of the Respondents

The following section briefly presents the Background information of the respondents. It is
presented in a tabulated manner using descriptive statistics of frequency and percentages as
shown below:

32
Table 4.2 Gender and Age composition
Demographic Variables Response Rate
Frequency %
Male 231 57.8
Gender Female 150 37.5
Total 381 100
18-29 20 5
30-39 175 43.8
Age Category 40-49 103 25.8
50 & above 83 20.8
Total 381 100
Source: From Field Survey (2016)

As shown in the above table among the participants 231 (57.8%) the largest proportion of the
gender composition was male whereas 150(37.5%) of the respondents were female. Therefore,
this analysis of data indicates that there is slightly gender disparity in the customers of AIB in
Addis Ababa. Hence; even though there is promising figures that indicates the effort of the Bank
to narrow gender gap but still some work has to be done to minimize the gap.

On the other hand, among the demographic variable age compositions was also assessed. As a
result the larger group was categorized under the age group of 30-39 which constitutes about
43.8% out of total population. The second largest age group was 40-49 years, it constitutes about
25.8%. Furthermore, those who constituted about 20.8% were categorized above age group of 50
whereas 5% of the respondents were under age category of 18-29 years. This age statistics
indicated that the sampled respondents of AIB were adult enough to give genuine response
since majority of them were categorized at the age group of 30 and above ,so they are matured
enough to give valid response. Hence; wise analysis of this response leads to grasp the problem
at hand and consequently to come with strong and valuable recommendations.

33
Table 4.3: Educational Level and Marital Status of the Respondents

Response Rate
Demographic Variables Frequency %
Below grade 8 20 5
Grade 8 complete 10 2.5
Customers Educational Level Secondary school complete 61 15.3
First Degree 248 62
Second Degree 42 10.5
Total 381 100
Married 251 62.8
Marital Status Unmarried 130 32.5
Total 381 100
Source: From Field Survey (2016)

The third demographic variable was educational level of participants as shown in the above
Table 4.3 The majority 248(62%) of the respondents were first degree (BA/BSc) Holders. The
second largest groups in education level category were secondary school graduates they accounts
for 61(15.3%). Moreover, from the analysis of the data it was indicated that 5% of the
respondents were under grade eight , 2.5% of them were grade eight complete whereas 10.5% of
them were MA/MSc holders. From this educational statistics of the respondents most customers
of AIB in Addis Ababa are first degree holders. Therefore, the AIB should promote itself in
order to attract customers from all educational background.

34
The above Table 4.3 clearly indicated that the majority of the participants were married, it
constituted about 251(62.8%) whereas 130(32.5%) of the participants were unmarried. This
analysis indicates that married couples are better in saving than unmarried single ones.

4.3 Descriptive Analysis of Service Quality

To measure the customers‟ perception of the service quality provided by Awash International
Bank, SERVPERF model was used in this study. Accordingly, this section of the analysis mainly
tries to present the descriptive analysis of the data in all five service dimensions with respect to
customer perceptions of Awash International Bank in Addis Ababa Branches. As per to this
Cronin and Taylor (1992); SERVPERF directly measures the customer‟s perception of service
performance and assumes that respondents automatically compare their perceptions of the
service quality levels with their expectations of those services. Cronin and Taylor argued that
only perception was sufficient for measuring service quality and therefore expectations should
not be included as suggested by SERVQUAL (Baumann et al, 2007).

On the basis of this, for all the service quality dimensions (Reliability, Responsiveness,
Assurance, Empathy and Tangibility), the mean score have been computed. The table below
represents the results briefly.

4.3.1 Reliability

Reliability is the ability to perform the promised service dependably, accurately as well as
consistently. It is also providing the service right the first time. Moreover, it means that the firm
honors its promises. Reliability of service designates the bank‟s capability to supply the
promised output at the stated level.

35
Table 4.3: Mean Score for Reliability of AIB

Items Mean Value for Reliability Standard

Items dev.
Q1. When AIB promises to 1.11
do something by a certain 3.54
time, it does so.
Q2. AIB ensures effective 1.16
problem solution 3.72
Q3. AIB performs its 1.12
service right first time. 3.51
Q4. AIB provides its 1.14
services at the time it 3.70
promises to do so.
Q5. AIB insists on error- 1.12
free records. 3.50
Average 3.59 1.14

Source: From Field Survey (2016)

Accordingly to the table 4.6 the mean value of reliability is 3.59. The highest mean score is
obtained on questions no.2 thus respondents agree that the AIB ensures effective problem
solution for its customers and item no. 4 was also with highest mean value that respondents agree
on AIB that it provides its services at the time it promises to do so. The lowest mean score is
obtained on question no.5 which asks whether the bank‟s employees perform error free records
or not. Hence, this analysis showed that AIB is better in solving its customers‟ problem and it
provides service as it promises for its customer. On the other hand, the analysis indicated that the
employees of AIB are somewhat performed less in error free records.

36
4.3.2 Responsiveness

Responsiveness refers the prompt response to the service need of the customer and the readiness
of employees to provide service. It is the momentum and timeliness of service delivery. This
includes the rate of output and the ability of the service to respond promptly to customer service
requests, with minimal waiting and queuing time. When the customer is kept waiting for no
apparent reason creates unnecessary negative perceptions of quality. Conversely, the ability for
the bank to recover quickly when service fails and exhibit professionalism will also create very
positive perceptions of quality. This dimension focused on subjects as information about the
request by customers being authorized promptly, communication of new products to customers
and handling of customer professionally.

Table 4.4: Mean Score for Responsiveness

Items Mean Value for Standar

Responsiveness Items d dev.
Q6. AIB employees tell you 3.53 1.181
exactly when the service
will be performed.
Q7. AIB employees give 3.39 1.13
you prompt service.
Q8. AIB employees are 3.46 1.18
always willing to help
you.
Q9. AIB employees are 3.32 1.13
never too busy to respond
to your requests.
Average 3.43
1.16
Source: From Field Survey (2016)

37
As it is indicated in the above table the average mean score of responsiveness is 3.43. The
highest mean score 3.53 is obtained on question number 6 that is presented as; AIB employees
tell you exactly when the service will be performed and question number 8 which is presented as;
AIB employees are always willing to help you was also with higher mean value 3.46. This
indicates that majority of the respondents were agreed on that employees of AIB are always
helpful whereas the lowest mean score is obtained on question number 9; an item presented as
AIB employees are never too busy to respond to your requests. Hence, this analysis indicated
that employees in Awash International Bank somewhat seems to be busy to respond for
customers request even though they are helpful.

4.3.3 Assurance

Assurance is the knowledge and courtesy of employees and their ability to convey trust and
Confidence; so that the customer feels he or she is in polite, able and competent hands. It relates
to the capability of the service provider to deliver the output, specifically in terms of the
knowledge, politeness and trustworthiness of the employees to the customer of the Bank. This
dimension traces about the behavior and ability of the employees to instill/inspire confidence,
secure transactions, courtesy of the employees and the knowledge of the employees to answer
questions from customers.

Table 4.5: Mean Score for Assurance

Items Mean Value for Standard

Assurance Items dev.
Q10. The behavior of AIB employees 3.55 1.18
instills confidence in you.
Q11. You feel safe in your transactions 3.57 1.13
with AIB
Q12. AIB employees are consistently 3.68 1.18
courteous with you.
Q13. AIB employees have the knowledge 3.70 1.13
to answer your questions.
Average 3.56
1.16
Source: From Field Survey (2016)

38
Accordingly, the above Table 4.8 revealed, assurance has an average mean score of 3.56. The
highest contributor for this score is question 13, which is presented as; AIB employees have the
knowledge to answer your questions, where the majority of the respondents are of the same
opinion that they feel safe in transacting with Awash International Bank. Whereas the lowest
mean Score is 3.55; it is obtained on question 10. It was presented as; the behavior of AIB
employees instills confidence in you. Hence, this analysis indicated that, the employee
inspiration on their customers‟ seems to be less.

4.3.4 Empathy

Empathy is providing caring and individualized attention to customers to make them feel they
are receiving caring services and individualized attention. Service empathy characterizes both the
service provider‟s willingness and capability to respond to individual customer desires. This
means putting one‟s self in the shoes of the customer.

Table 4.6: Mean Score for Empathy

Items Mean Value for Reliability Standard

Items dev.
Q14. AIB gives you 3.70 1.19
individual attention.
Q15. AIB has operating hours 3.72 1.12
convenient to you.
Q16. AIB has employees who 3.51 1.08
give you personal attention.
Q17. AIB has your best 3.52 1.09
interests at heart.
Q18. AIB understand your 3.67 1.14
specific needs.
Average 3.63 1.13
Source: From Field Survey (2016)

Based on the above Table 4.9 the average mean score for Empathy is 3.63. The majority of the
respondents agreed on that the bank‟s service hour is convenient and hence the highest mean
score is obtained there in for item 15 that was presented as; AIB has operating hours convenient

39
to you. While the lowest mean score is obtained on the item no. 16 which asks whether the banks
employees understand the banks service with regard to individualized attention. Therefore; the
descriptive analysis of the dimension empathy indicated that Awash international bank has a
convenient service hour to its costumers whereas with regard to employees individualized
attention for their customer seems low.

4.3.5 Tangibility

Tangibility refers to the appearance of physical facilities, equipment, personnel and

communication materials. Accordingly the table below briefly indicated the customers‟ view on
the service dimension tangibility.

Table 4.7: Tangibility of AIB

Items Mean Value for Responsiveness Standard

Items dev.
Q19. AIB has modern-looking 4.45 0.76
equipment.
Q20. AIB physical facilities are 4.38 0.79
visually appealing
Q21. AIB employees are well 3.71 1.17
dressed and neat in appearance.
Q22. Materials associated with 3.69 1.16
the service (such as pamphlets
or statements) are clear and
visually appealing at AIB
Average 4.06 0.97

Source: From Field Survey (2016)

In the above Table 4.10 the average mean value of tangibility is 4.06 and as it can be seen from
the table from the 4 questions asked under tangibility the highest mean score is obtained on item
19 that was presented as; AIB has modern-looking equipment. Hence, it indicates that, the bank
has up to date equipment and technology. Conversely, the lowest mean score is obtained for the
question number 22 which was asked as; Materials associated with the service (such as
pamphlets or statements) are clear and visually appealing at AIB. Hence, this analysis also

40
showed that the bank‟s service associated with pamphlets or statements are somewhat vague for
its customers.

4.4. Overall Customer Satisfaction Rating

As explained in the literature review, customer satisfaction involves the fulfillment of customers‟
expectation of the goods and services in the Bank. So, Customers become satisfied if the
performance of the good or service is equivalent to, or even surpasses, their expectation level.

Accordingly, assessing satisfaction level of customers is one of the research questions in this
study. The satisfaction level in this study is also categorized as; highly dissatisfied, Dissatisfied,
Neutral, Satisfied and Highly Satisfied. The table below presents in brief the overall level of
customer satisfaction.

4.8: Frequency and Descriptive Analysis of Customer Satisfaction

Table 4.8 Frequency and Descriptive Analysis of Customer Satisfaction

Level of Customers Satisfaction Frequency (N) Percent Mean Std. deviation

Highly dissatisfied 31 8.14
Dissatisfied 21 5.51
Somewhat satisfied 82 21.52 3.69 1.16
Satisfied 146 38.32
Highly satisfied 101 26.51
Total 381 100
Source: From Field Survey (2016)
In the above table 4.11, in order to see the overall customer satisfaction of Awash International
Bank service, respondents were requested to rate their feeling on Likert‟s 5 point Scale against
the service they provided. Accordingly, the overall satisfaction of the respondents indicated that
only 101(26.51%) of the customers‟ were said that they are highly satisfied and 146(38.32%) of
them were indicated as they are satisfied while 82(21.52%) of the customers were said that they
are somewhat satisfied. On the other hand, among the respondents 21(5.51%) of the participants
were responded as they are dissatisfied at the service they are provided by AIB and 31 (8.14%)
of them were rated as they are highly dissatisfied against the service provided to them by Awash

41
 International Bank. From this analysis one can observe that even though majority of the
respondents 64.83% of them were satisfied on the service they provided but about 13.6% of them
were rated as they are not satisfied on the service of Awash International Bank. Moreover, about
22% of the respondents were indicated they are somewhat satisfied .Furthermore, the mean score
of the satisfaction 3.69, this indicates that there is a need for improving the level of customer
satisfaction.

4.4 Regression Analysis of the Service Quality Dimension on Customer Satisfaction

Table 4.9 Regression Analysis of the Service Quality Dimension

Variables (service
Regression Standard Beta t Sig.
dimension)
weight(bi) error coefficient

Reliability(X1) 3.300 0.434 0.111 7.602 0.000*

Responsiveness 0.33 0.472 0.161 4.207 0.000*

(X2)

Assurance(X3) 0.178 0.085 0.097 9.681 0.000*

Empathy (X4) 3.291 0.397 0.142 8.293 0.000*

Tangible(X5) 3.189 0.426 0.145 7.483 0.000*

Source: From Field Survey (2016)

Constant =21.567, *P< 0.05

On the basis of data in table 4.9 the raw score regression the estimation model equation is

= 21.567+3.3X1 + o.33X2 + 0.178X3+ 3.291X4 + 3.189X5 the Y gap estimation model is

used to minimize standard error.

From the above table it is clearly indicated that on the coefficient table the beta value which
measures how strongly each independent variable influences the dependent variable. Thus a unit
increase in reliability leads to 3.3 increases in customer satisfaction other things being constant.

42
The bank should invest to enhance its ability to perform the promised service dependably and
accurately so that the satisfaction level of its customers increases. Similarly, from the above
coefficient table it is found that the beta value which measures how strongly each independent
variable influences the dependent variable indicates Empathy dimensions was significant impact
on customers‟ satisfaction. Thus a unit increase in empathy leads to 3.291 increases in
customers‟ satisfaction other things being constant. Therefore the more the bank gives care and
individualized attention to customers, the more will be customers‟ satisfaction. Among the
service dimensions; the other variable with highest beta value was Tangible service dimension.
Hence, a unit increases in tangible leads to 3.189 increases in customers‟ satisfaction other things
being constant. Therefore the more the bank invests on its physical facilities equipment,
technology and appearance of its personnel the more it satisfies its customers.

Even though the dimensions assurance and responsiveness seems to be less relative to other three
dimensions it has impact on customers‟ satisfaction. Since the beta value for responsiveness was
0.33 and for assurance was 0.178 respectively. Hence, this result revealed that a unit increase in
responsiveness will make 0.33 increments in customers‟ satisfaction. Similarly, a unit increment
in assurance will leads to 0.178 increments in customers‟ satisfaction. Therefore; the more the
bank invests on enhancing its employee‟s ability to help customers and be responsive to
customer‟s enquiry, the more will be customers‟ satisfaction. With the same token the more the
bank invests on enhancing its employee‟s knowledge, skill and on their ability to instill
confidence to serve customers, the more will be customers‟ satisfaction.

4.7 Overall Regression analysis

Table 4.10 Model Summary of Service Quality Dimensions

R R Square Adjusted R Square Std. Error of the

Model Estimate
.759 .577 .521 .85564

As it can be represented in the table below there is a positive and strong statistically significant
relationship between the independent variables (tangibility, reliability, responsiveness, empathy
and assurance) and the dependent variable (customer satisfaction) since coefficient of correlation
43
r=0.759. Moreover, coefficient of multiple variation R 2 = 0.577(57.7%) of variation on
customers‟ satisfaction is explained by the five service dimensions independent variables
(tangibility, reliability, responsiveness, empathy and assurance).

Table 4.11ANOVA for service quality dimensions and customer satisfaction

Model Sum of df Mean F Sig

square square

Regression 335.022 45 7.614

10.40 0.000
Residual 245.991 336 0.732

Total 581.013 381

More over for service quality dimension the analysis of variance indicates that (F = 10.400) at
P<0.05 at df =45,336) it indicates that there is statistically significant difference on customers
satisfaction because of improvement in service quality dimension at 95% confidence interval
level.

44
 CHAPTER FIVE

SUMMARY OF MAJOR FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5. Introduction

This chapter tried to present the major summary of the paper in brief. Following these findings,
conclusions are drawn and recommendations are forwarded for the concerned stake holders
based on the findings.

5.1 Summary of Major Findings

The main purpose of this study was to assess the quality of service affecting customers‟
satisfaction with the banking service in selected branches of Awash International Bank of Addis
Ababa. Accordingly, this paper tried to see the most important service quality dimensions for
Awash International Bank of Addis Ababa .SERVPERF model was the instrument employed in
the study to measure the service quality perception in Awash International Bank. Among the
distributed 400 questionnaires 381 were collected and analyzed. After detailed analysis of the
information gathered through questionnaire the following measure findings were obtained.

 As the above findings indicated the level of quality services delivered by Awash
International Bank to its customers was better in the dimension of Tangibility. Whereas;
the service delivered in the remaining dimensions need some improvement.

 The overall level of customer satisfaction from the service of AIB in Addis Ababa
branches of mean value of 3.69 indicates; there is a need for improvement of service
quality.

 Relatively among the five service quality dimensions; Tangibility, Empathy and
Reliability was the dimensions those dominantly affect customers‟ satisfaction.
Moreover, there predictive power was also higher than the other two dimensions. Since
Reliability has 3.3, Empathy has 3.291 and Tangibility has 3.189 predictive powers
respectively. Therefore; one can notice that these dimensions could dominantly affect
the satisfaction of customers in Awash international Bank.

45
  Among the mean score analysis for perception items in all five dimensions; Tangibility
was with highest mean value following this Empathy was also higher mean value
similarly, responsiveness and assurance was relatively with low mean value Even
though as indicated by coefficient of multiple variations about 57.7% of the variation in
customer satisfaction is accounted for by variability in all service quality dimensions.
Therefore, the bank should collect periodic assessment about these dimensions in order
to satisfy customers need.

5.2 Conclusions

The intention of this paper was to assess the major factors associated with service quality of AIB
branches found in Addis Ababa City. Accordingly, based on the above analysis and major
findings the following conclusions were drawn.

As the above findings indicated the level of quality services delivered by Awash International
Bank to its customers was better in the dimensions; Tangibility, Empathy and Reliability
respectively. Whereas; the service delivered in the dimensions of Responsiveness and Assurance
needs some improvement.

Moreover; the above findings lead to some conclusions as follows; first, evidence supports in the
conclusion that, the overall level of customer satisfaction from the service of AIB in Addis
Ababa branches was low which about 3.69 is. Likewise, from the mean result of all dimensions
we can say that customers of Awash International Bank S.C are not satisfied with the bank‟s
service. Accordingly when we look at the overall regression result 57% of variation in customer
satisfaction is explained by all five service quality dimensions.

Second, the findings of the study underpin the conclusion of scholars like, Salman K., Babak
M. et al., (2011), that in their study on Service Quality in Conventional Banking in Pakistan ;
concluded that there is moderate but positive (r = 0.461) relationship between tangibles and
customer satisfaction in the conventional banking sector of Pakistan. Similarly, the analysis of
this study; confirms that the Awash International Bank has excelled in three out of the five
dimensions (Tangibility, Empathy and Reliability) of service quality dimensions that are
important to the customers in Awash international Bank. Whereas responsiveness and

46
Assurance; needs a rigorous improvement. Hence; this finding adds validity to the SERVPERF
model and hints of its international applicability. It suggests that customers everywhere on the
globe have the same or similar expectations from their clients/Bank. Indeed, globalization has
made the world a global village rendering customers cosmopolitan in behavior.

Third, among the mean score analysis for perception items in all five dimensions; Tangibility,
Reliability and Empathy were dominantly affect customer satisfaction in Awash International
Bank. It was also noticed that; from coefficient of multiple variations about 57.7% of the
variation in customer satisfaction is accounted for by variability in all five service quality
dimensions. Therefore, the bank should collect periodic assessment about these dimensions in
order to satisfy customers need and retain them.

In sum, customers‟ of Awash international bank; perceive the service quality dimensions
inadequately except Tangibility. It was also noted that the service quality dimensions
significantly correlated with customer satisfaction at r=0.77. Moreover, about 57.7% of
customers‟ satisfaction level associated with variability in the dimensions of (Assurance,
Reliability, Responsiveness, Empathy, and Tangiblity). Hence; these dimensions could affect
negatively the level of customer satisfaction if the officials neglect to improve the service quality
handling.

5.3 Recommendation

Based on the above analysis and conclusions of this study the following recommendations are
forwarded for concerned bodies.

It was found that, among all service dimensions; except Tangibility dimension remaining four
dimensions need some improvement. Therefore, Awash International Bank should improve the
service in these dimensions through different mechanisms; such as providing regular training for
its officers, collecting feedback from its customers about its service and respond promptly to
customer service requests with minimal waiting time; this will contribute for service
improvement in order to satisfy its customer.

47
Furthermore, periodic assessment about service quality dimensions is better to oversee customers
need and to improve immediately if there is any discomfort for customers in any dimensions.
Hence, it is better if the bank officials use this mechanism to see the service quality dimensions
with respect to customers‟ satisfaction. Therefore; it needs regular training and monitoring
system in place for dealing with regular or specific problems in relation to customer satisfaction.
It also recommended if there is a good recording and reporting system, authority for action (as
part of the policy and practice), systems for addressing discomfort of customers.

5.4 Implications for Further Research

This Study was bounded only in Addis Ababa branches of Awash International Bank. Hence; it
may not be large enough but it can contribute as a bench mark for further study on quality of the
banking service in relation to their customer satisfaction. Therefore, it might be better for any
forthcoming researcher who wants to carry out the same study by including all other branches of
the bank with the consideration of newly opened branches of the bank with considerable sample
size. It would be very important if it represent the entire branches of the bank in the country.

48
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New Jersey: Prentice Hall.

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 Appendix A
St. Mary University
School of Graduate Studies
Department of Masters of Business Administration
Background of respondents
Dear Respondent,
The purpose of this questionnaire is to collect primary data for conducting a study on the topic,
"Assessment and analysis of service quality and customer satisfaction" for the partial fulfillment
of the Masters of Business Administration (MBA) Program at St. Mary University. This
questionnaire has been designed to collect data for academic purposes only. Any information
provided will be treated with the strictest confidence it deserves.
Thank you in advance for your cooperation!
N.B
 No need to write your name
 Put (X) inside the box or table for an alternative you think is right.
Part I. Personal information

1.1 Gender Male Female

1.2 Age 18-29 years old 30-39 years old

40-49 years old 50 years old and above
1.3 Marital Status Single Married
1.4 Educational level Primary school Secondary school
High school First degree
Second degree and above

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Part II. Customers Perceptions

Directions: Please indicate the extent to which you agree with the following statements that you
believe Awash International Bank S.C has the feature described by the statement. Please circle
the appropriate rating based on your experiences as a customer of the bank.

Undecided

Strongly
S.No Statements to evaluate

disagree

disagree
Disagree
Strongly

Agree
.

I Reliability
1. When AIB promises to do something by 1 2 3 4 5
a certain time, it does so.
2. AIB ensures effective problem solution 1 2 3 4 5
3. AIB performs its service right first time. 1 2 3 4 5
4. AIB provides its services at the time it
promises to do so.
5. AIB insists on error-free records. 1 2 3 4 5
II Responsiveness
6. AIB employees tell you exactly when 1 2 3 4 5
the service will be performed.
7. AIB employees give you prompt service. 1 2 3 4 5
8. AIB employees are always willing to 1 2 3 4 5
help you.
9. AIB employees are never too busy to 1 2 3 4 5
respond to your requests.
III Assurance
10. The behavior of AIB employees instills 1 2 3 4 5
confidence in you.
11. You feel safe in your transactions with 1 2 3 4 5

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 AIB
12. AIB employees are consistently 1 2 3 4 5
courteous with you.
13. AIB employees have the knowledge to 1 2 3 4 5
answer your questions.
IV. Empathy
14. AIB gives you individual attention. 1 2 3 4 5
15. AIB has operating hours convenient to 1 2 3 4 5
you.
16. AIB has employees who give you 1 2 3 4 5
personal attention.
17. AIB has your best interests at heart.

18. AIB understand your specific needs. 1 2 3 4 5

V. Tangibility
19. AIB has modern-looking equipment. 1 2 3 4 5
20. AIB physical facilities are visually 1 2 3 4 5
appealing
AIB employees are well dressed and 1 2 3 4 5
21. neat in appearance.
Materials associated with the service 1 2 3 4 5
22. (such as pamphlets or statements) are
clear and visually appealing at AIB

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 Part III. Level of Customer Satisfaction

Direction: the following statement describes your feeling about Awash International Bank S.C.
Please respond by choosing the number which best reflect your own perception.

 My feeling about Awash International Bank S.C service delivery can be best described as

1. Highly dissatisfied

2. Dissatisfied

3. Somewhat satisfied

4. Satisfied

5. Highly satisfied

Thank You for Taking Your Time to Fill This Questionnaire!

56
 Appendix B
ቅድስት ማርያም ዩኒቨርሲቲ
የቢዝነስ አስተዳደር ት/ቤት
የቢዝነስ አስተዳደር ትምህርት ክፍል
ይህ መጠይቅ የተዘጋጀበት ዓላማ የቢዝነስ አስተዳደር የአዋሽ ባንክ አገልግሎት አሰጣጥ ጥራት እና
የደንበኞች እርካታ ግምገማና ምርመራ በሚል ርዕስ ሇሚደረግ ጥናት የመጀመሪያ ደረጃ መረጃ
ሇመሰብሰብ ነው፡፡ የሚሰጡት መልስ የሚውሇው ሇዚህ ጥናት አላማ ብቻ ሲሆን የሚሰጡት ምላሽ
በከፍተኛ ሚስጥር የሚጠበቅ ይሆናል፡፡
መጠይቁን በመሙላት ሇሚደረግልኝ ትብብር በቅድሚያ አመሰግናሇሁ፡፡
መመሪያ፡
 ስምዎን መጥቀስ አስፇላጊ አይደሇም፡፡
 ትክክል ነው የሚለትን መልስ በተዘጋጀው ሳጥን ውስጥ (X) በመስጠት ያመልክቱ፡፡
ክፍል አንድ
1.1 ፆታ ወንድ ሴት

1.2 ዕድሜ ከ18-29 ዓመት ከ30-39 ዓመት ከ40-49 ዓመት

50 ዓመት በላይ

1.3 የጋብቻ ሁኔታ ያላገባች/ች ያገባ/ች

1.4 የትምህርት ደረጃ አንደኛ ደረጃ ሁሇተኛ ደረጃ ሰርተፍኬት

ዲፕሎማ የመጀመሪያ ዲግሪ እና በላይ

57
ክፍል ሁሇት
ስሇ አዋሽ ኢንተርናሽናል ባንክ ያሇዎትን አመሇካከት ከቀረቡት አማራጨች ከ1-5 ውስጥ
በመክበብ እባክዎት ያመልክቱ

1. አዋሽ ባንክ ዘመናዊ የሆኑ መሳሪያዎች አለት፡፡ 1 2 3 4 5

2. የአዋሽ ባንክ መገልገያ መሳሪያዎች ሇአይን 1 2 3 4 5
የሚስቡ ናቸው፡፡
3. የአዋሽ ባንክ ሰራተኞች በደንብ የሚሇብሱና 1 2 3 4 5
ንፅህናቸውን የሚጠብቁ ናቸው፡፡
4. በአዋሽ ባንክ ውስጥ ከአገልግሎት ጋር የሚያያዙ 1 2 3 4 5
እቃዎች ወይም ማስረጃዎች (አነስተኛ
መፅሔቶች የመሳሰለት) ሇአይን ማራኪ ናቸው፡፡
5. አዋሽ ባንክ አንድ ነገር በተወሰነ ጊዜ ውስጥ 1 2 3 4 5
ሇማድረግ ቃል ከገባ የገባውን ቃል ይፇጽማል፡፡
6. አዋሽ ባንክ ችግር በሚገጥምዎ ጊዜ ችግርዎን 1 2 3 4 5
ሇመፍታት ያሇውን ፍላጎት በቅንነት ያሳያል፡፡

58
7. አዋሽ ባንክ አገልግሎቱን ከመጀመሪያ ጀምሮ በትክክል 1 2 3 4 5
ይተገብራል፡፡
8. አዋሽ ባንክ አገልግሎቱን ቃል በገባበት ሰዓት 1 2 3 4 5
ይፇጽማል፡፡
9. አዋሽ ባንክ አገልግሎት አሰጣጥ ከስህተት የጸዳ መረጃ 1 2 3 4 5
ላይ የተመሰረተ ነው፡፡
10. የአዋሽ ባንክ ሰራተኞች በመን ሰዓት አገልግሎት 1 2 3 4 5
እንደሚሰጥዎት ይገልፁሎታል፡፡
11. የአዋሽ ባንክ ሰራተኞች ፇጣን አገልግሎት 1 2 3 4 5
ይሰጥዎታል፡፡
12. የአዋሽ ባንክ ሰራተኞች ሁል ጊዜ እርስዎን ሇመረዳት 1 2 3 4 5
ፇቃደኞች ናቸው፡፡
13. የአዋሽ ባንክ ሰራተኞች ጥያቄዎን ሇመመሇስ ጊዜ 1 2 3 4 5
አያጡም፡፡
14. የአዋሽ ባንክ ሰራተኞች ባህርይ በእርስዎ ላይ 1 2 3 4 5
መተማመንን ይፇጥራል፡፡
15. ከአዋሽ ባንክ በሚያገኙት አገልግሎት ላይ የመተማመን 1 2 3 4 5
ስሜት አሇዎት፡፡
16. የአዋሽ ባንክ ሰራተኞች ሁሌም ሇእርሶ ትሁት ናቸው፡፡ 1 2 3 4 5
17. የአዋሽ ባንክ ሰራተኞች ጥያቄዎን ሇመመሇስ 1 2 3 4 5
የሚያስችል ዕውቀት አላቸው፡፡
18. አዋሽ ባንክ ሇደንበኞቹ ትኩረት ይሰጣል፡፡ 1 2 3 4 5
19. የአዋሽ ባንክ የስራ ሰዓት ሇእርሶ ምቹ ነው፡፡ 1 2 3 4 5
20. አዋሽ ባንክ ሇእርስዎ ትኩረት የሚሰጡ ሰራተኞች 1 2 3 4 5
አለት፡፡
21. አዋሽ ባንክ የደንበኞቹን ፍላጎት ያውቃል፡፡ 1 2 3 4 5

22. የአዋሽ ባንክ ሰራተኞች የርስዎን ፍላጎት ይረዳለ፡፡ 1 2 3 4 5

59
 Appendix C
Reliability Statistics

Cronbach's No of
Alpha Items
.801 22

60