International Journal of Business, Economics and Management Works

Kambohwell Publisher Enterprise

ISSN: 2410-3500 Vol. 6, Issue 3, PP. 24-30, March 2019
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Effect of Service Quality, Brand Image, Perceived Value on Customer

Satisfaction and Loyalty in the Chinese Banking Industry
Shahzad Anwar, Li Min, Gulam Dastagir

Abstract— The key objective of the research was to find retain customer loyalty?
relationships between service quality, brand image, perceived
The Chinese banking sector has experienced profound
value Customer satisfaction and customer loyalty in the changes due to adoption of economic and technological
Chinese banking industry. In order to collect the data globalization since last two decades. However, the entrance of
questionnaire was distributed among the general public of the private banks has made Chinese banking more competitive.
Nanjing, Jiangsu province in China living in different In the Chinese context, there is wide-range of service providers
locations. Total 170 responses were collected from the and the customers are capable to select their own service
respondent. Moreover, structural equation modeling was provider which offers convenience and better service quality.
utilized to test the proposed hypotheses. The findings revealed At the present time, banks are frequently introducing new
that perceived value, service quality and brand image have a products and services to satisfy and retain their existing
significant impact on customers satisfaction and loyalty, as customers. Due to increased competition in the market, banks
well as customer satisfaction had a positive relationship with are facing have come under great pressure to handle the
customer loyalty. With the purpose of making customers increasing demands and expectations of the customers. Due to
satisfied and loyal the organization must focus on offering this factor, it is very expensive and difficult to attract new
them the product on fair price, providing better service quality customer as compared to retaining existing customers.
and creating the better brand image. This research investigates Consequently, retaining customer is more important than
how people of Nanjing, China react to different kinds of attracting new customer. Thus, banking leaders are looking for
benefits provided by the organization on their purchase. This most effective factors of customer satisfaction and customer
study covers a residence of Nanjing living in different loyalty.
locations. In the future research a bigger sample size and Banking sector plays a significant role in any economy,
different geographical area should be focused. because it is considered as the key factor of economic growth,
stability and job creation [1]. Particularly, banks help business
Keywords— Customer Satisfaction, brand image, customer organizations providing gorgeous entrepreneurial opportunities
loyalty, perceived value, service quality, China. Banking which make a huge contribution to economic growth; although,
Industry this growth is mainly influenced through the improvement of
banking infrastructure, which is very crucial to supporting
entrepreneurial activity and new business startups [2,3].
I. INTRODUCTION Moreover, business organizations are dependent on banks for
Financial organizations such as banks are tremendously finance and loans, as these organizations offer cherished
adopting latest technologies. Accordingly, these organizations opportunities for commercial growth if a loyal customer
are facing extreme competition with their competitors because foundation is retained [4]. According to [5], business customers
of providing those services which have not been provided are gradually more demanding; and consequently, banks must
previously. Possibly this competition could be more emphasis on producing greater importance to the creation of
challenging in Chinese banking sector. How do banking greater value for micro-enterprises to increase a competitive
organizations endure under such intense situations? Ultimately, advantage and make sure customer retention. In order to
with the increasing market saturation, organizations have guarantee their continued survival in the financial sector, it is
realized that their performance can be enhanced through very important for banks to constantly observe customer
customer retention by focusing more on retaining customers satisfaction and loyalty, and to evaluate and modify their
than continuously acting in a conquest method. Such as the services accordingly.
Chinese market delivers a wide-range of opportunities for Marketing scholars and practitioners have discussed about
customers, how financial service providers such as banks can efficiently supervising customer service satisfaction and
fostering customer loyalty towards products and organization
Shahzad Anwar: School of Economics & Management. Nanjing University
of Aeronautics & Astronautics, [email protected]
[6,7]. Previous empirical researches revealed that greater
Li Min: School of Economics & Management. Nanjing University of customer satisfaction eventually leads to a superior customer
Aeronautics & Astronautics, [email protected] loyalty [8]. In highly competitive and modern business
Gulam Dastagir: School of Economics & Management. Nanjing University environment innovative products and their advertisement
of Aeronautics & Astronautics, [email protected] compel organizations to increase in competition in the

Copyright © 2019 KWP Journals. This is an open access article distributed under the Creative Commons Attribution License,
which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
marketing of products has forced companies to ponder peculiar B. Customer loyalty
strategies for attracting and retaining customers. Among the According to [16] customer loyalty is one of the main
differentiation strategies that have been used by companies is factors that help the organization to sustain its long-term goals
the personalization of products to meet customer needs. and achievements. [17] defines customer loyalty as the
The main purpose of this study will be to analyze the consumer’s attachment and commitment to the brand or
effects of service quality, brand image, perceived value and product seller. [17] describes customer loyalty as the
customer demographics on customer satisfaction and loyalty. propensity of the customer to use the same brand’s product to
The research will also examine the association between fulfill their needs. Some of the researchers divided customer
customer satisfaction and customer loyalty, in addition to loyalty into behavior and attitude loyalty [18]. Behavior loyalty
perceived service quality, brand image, price fairness and mainly emphasizes on the future purchase decisions of the
demographic characteristics in explaining customer loyalty in customer that will buy the same brand product, on the other
China's banking industry, to the extent that we can understand hand attitudinal loyalty puts emphasis on brand
this topic has not been extensively studied in the Chinese recommendations.
banking sector context. It is shown in the previous researches that satisfaction leads
The key objective of this research is two folded. First is to to increased chances of repurchasing, recommending and
find the relationship between price fairness, service quality, loyalty to the brand. One of the researches shows that
brand image, perceived value of customer satisfaction and satisfaction is positively linked with the loyalty and repurchase
another objective of this research is to find the relationship [19]. [20] concluded that loyalty is evidenced by a positive
between the customer satisfaction and customer loyalty. We behavior of the customer regarding that brand and their repeat
have to find out the perspective of Chinese customers in the purchases. Moreover, it has been suggested that a customer that
banking industry about how these factors affect their has a relative lower or negative behavior regarding the brand
satisfaction and influence their loyalty towards the specific and will not prefer to buy the brand product repeatedly shows
organizations. Following the example. Some components, such the absence of the loyalty.
as multi-leveled equations, graphics, and tables are not H1: Customer satisfaction has a positive impact on customer
prescribed, although the various table text styles are provided. loyalty.
The formatter will need to create these components,
incorporating the applicable criteria that follow. C. Perceived service quality, Customer satisfaction and
customer loyalty
II. LTERATURE REVIEW
However, product quality can be judged empirically
A. Customer Satisfaction through tangible concept of product superiority, product
Customer satisfaction is basically the customer’s behavior durability and faults in the product, whereas, service quality is
towards the brand or the service provider, it also includes the a mental and intangible concept of the distinctive service
emotional reaction to the difference between what the features of intangibility, immaterialness, heterogeneity, and the
customers perceives will get and what actually receives [9]. inseparability [21]. In this regard, perceptions of service quality
Customer satisfaction is basically the person’s affiliation with are usually described as customers’ overall findings or attitudes
the brand or with the experience he/she had with the product about a superior ample service received at the certain time [22].
and the brand [10]. [11] customer satisfaction is basically an The relationship between customer satisfaction and service
organization’s capability to fulfill the expectations of their quality has got a great attention by the researchers in the
customers. The customer is not satisfied if the product they got literature of service marketing [23]. There is extensive
is not up to their expectations in relation to quality, price, and literature exist to support the relationship between perceived
value [12]. According to the research of [13] the satisfaction quality service, customer satisfaction and loyalty [24, 25, 15].
has a strong positive relationship with the loyalty of the Furthermore, the conceptual framework proposed in this
customer. research point out the positive link between customer service
Some of the researchers reveal that customer satisfaction is quality, customer satisfaction and customer loyalty [15], and
one of the key factors that make the customers loyal to only a there is lack of research that analyze the association between
single brand or a single service provider [14,15]. The past two dimensions of customer service quality such as, technical
researches have clearly shown that the satisfaction of the quality, functional quality and customer satisfaction [26].
customers also helps in building the long-term relations with [24] stated that organizations an increase customer
the customers and help organizations to sustain competitive satisfaction by improving the service quality. According to the
advantage [16]. However, it is a bit expensive to generate loyal researcher service quality is basically the ability of a firm to
and satisfied customers, but they may sometime benefit the deliver the services, which fulfills the expectations of the
organization in the long term. Hence, the firms must customers purchasing the product and services [24]. The
concentrate on improving the service quality and all other expectation is basically the gap between the customer’s wants
factors that lead to the customer satisfaction and loyalty of the and desires, and the customers feeling after they have
customers [13]. purchased the product offered by the firm [24]. [27] describe
that good service quality results in customer satisfaction and

International Journal of Business, Economics and Management Works Vol. 6, Issue 3, PP. 24-30, March 2019
ISSN: 2410-3500
loyalty and it induces positive post purchase intentions of the Perceived value is the valuation of the usefulness of the
customers. good or service, which is basically created on the perception of
what the customer receives, and which benefit in the form of
H2: Service quality has a positive impact on customer product/service is given to him. According to [37] perceived
satisfaction. value is considered to be related to the service quality and the
H3: Service quality has a positive impact on customer loyalty. satisfaction of the customer. Furthermore, quality of service is
D. Brand Image, customer satisfaction and loyalty one of the most important factors that influences the perceived
value. The service quality and the perceived value have a
According to [28] brand image is basically the collection of positive relationship with customer satisfaction and loyalty
customer’s beliefs, attitudes and the customer’s behavior [27,31, 37,38].
toward an organization. [27, 29] describe that brand image
plays an important role in an organization as the quality of the
services provided to the customers have a significant impact on H6: Perceived value has a positive impact on customer
the brand image and this thus in turn has an influential effect satisfaction.
on the customer satisfaction and loyalty. According to [30] the H7: Perceived value has a positive impact on customer
image can help the customers in generating value, loyalty.
differentiating the brand and can also give customers the
positive feelings. To generate and preserve the image of the
brand is considered as one of the most important factors in the
firm’s program regarding marketing strategy and strategies
related to branding [31].
[32] suggest that a brand that has a positive image help the
customer’s in identifying the needs that the brand can satisfy
and also helps in differentiating the brand from its competitors
in the market, moreover it also enhances the possibility that the
customers will buy the product of that brand. [33] suggested
that an organization that constantly holds a positive brand
image is able to get a better rank in the market and is also able
to get a competitive advantage, moreover the empirical
findings also show that a brand that has positive image leads to
customer satisfaction and customer loyalty [27,31,34]. [35] Fig.1 Hypothesized research framework
describe the importance of brand image, which positively
affect the customer satisfaction, loyalty and post purchase
behavior when the customers fail to find much detail about the F. Method
attributes of services provided by the brand. In this empirical research survey data collected from
H4: Brand image has a positive impact on customer customers and employees in public and private sector banks in
satisfaction. Jiangsu Province, China. This research was conducted over a
H5: Brand image has a positive impact on customer loyalty. 2-month time period from Nov-Dec 2018 in different public
and private sector banks. Before distributing the questionnaire,
E. Customers perceived value, customer satisfaction and it was translated into Chinese and then back into English by the
customer loyalty procedures. A pilot test of this translation was carried out and
On the basis of social exchange theory (SET) (Blau, 1964), some minor changes were made to the final Chinese
customer perceived value is resulting from mutual exchange questionnaire. Customers and employees were selected
relationships comprising an “exchange ratio” of tangible and randomly in each organization and thus requested to take part
intangible actions [36]. [17, 27] proposed a framework to in the survey. All the participants were given 60 minutes to
measure the perceived values of the customers regarding the complete the questionnaire assessing brand image, customer
product in order to know the perceived value of the product. quality, perceived value, customer loyalty, customer
They described the three value dimensions that include satisfaction and demographic characteristics. All participants
economic, emotional and social values. The economic value is were ensured that their responses would remain confidential
basically related to the economic benefits that the customers and anonymous. 170 questionnaires were returned out of the
receive from the products. Most of the scholars came to know total of 300 questionnaires distributed. A response rate of
that customers perceived financial value has a substantial role 56.66% was obtained based on the returned questionnaire.
in customer satisfaction and the decisions that customer is From the questionnaire survey, 55.8% of the respondents were
going to make in the future [14]. The emotional value includes male and 44.2% were female. Moreover, most of the
benefits that are regarding the emotional state that a product respondents were between 26-35 years of age, which represents
creates in the customer [37]. Social value is basically useful 49.6%. 62% of the respondents had a university education. One
that comes from the good’s capability to increase the social third of the province's population worked in the service
self-concept [38]. industry. As a result; it has a greater percentage of a service
industry than other provinces, making it a perfect place for this

International Journal of Business, Economics and Management Works Vol. 6, Issue 3, PP. 24-30, March 2019
ISSN: 2410-3500
research. Nanjing is one of the biggest cities in Jiangsu Table 2: Descriptive statistics and correlation coefficients
province. Consequently, the development of the service sector amongst study variables (N = 170)
is at a suitably progressive level as compared to other cities, Variable M SD BI SQ PV CS CL
accounting for more than 44% of total GDP.
Brand Image 3.26 .899 .85
Table 1: Demographic profile of the respondent Service 3.30 .537 .517 .90
Demographic Variables Number Percentage quality **
Gender Perceived 3.28 .466 .403 .483 .88
Value ** **
Customer 3.69 .498 .339 * .415 .604 .92
Male 94 55% Satisfaction ** **
Female 76 45% Customer 3.55 .339 .450 .332 .515 .537 .81
Age Loyalty ** * ** **
18-25 84 49% Note: * and ** indicate significance at the 5% and 1% levels,
26-35 34 20% respectively. Numbers in parentheses are Cronbach’s alphas.
36-60 52 31%
Education
School / college 65 38%
III. ANALYSIS AND FINDINGS
University 105 62% The confirmatory factor analysis was done using the
structural equation model as implemented in the smart PLS in
order to find the reliability of the scales. The structural
G. Measures equation modeling (SEM) consists of a confirmatory factor
All variables were measured on a 5 point Likert scale analysis and the path analysis [42]). Moreover, those items
ranging from 5 =strongly agree to 1= strongly disagree except whose factor loading was not well regarding their respective
control variables in the research. constructs were taken out of the consideration. Regarding the
sample size for structural equation modeling [43] says that for
Service Quality was measured using 9 items developed by the structural equation modeling the sample size less than 200
[39]. Sample items included (The value-added service provided is rejected while on the other hand previous sayings suggests
by my brand provides appropriate content and The brand I use that the 100 participants may be acceptable for the structural
provides diversified value-added services). The Cronbach’s equation modeling [42]. The results from confirmatory factor
alpha for this scale was 0.90. analysis suggests that all the items used have a loading values
Perceived Value was measured using 6 items adapted from were greater than 0.7.
[38]. Sample items included (The product experience with my So, in accordance with the previous research done and the
brand is worth the money, and The overall value of my brand's literature regarding Confirmatory Factor Analysis, the research
product is high). The Cronbach’s alpha for this scale was 0.88. evaluated the model fit with the usage of Root Mean- Square
Brand Image was measured using 6 items developed by Error of Approximation (RMSEA), Goodness-of-Fit Index
[40]. Sample question included (I believe that my brand has a (GFI), chi-square test (∆ / χ²) (chi-square / degrees of freedom),
better image than its competitors, and I always have a good and the Tucker-Lewis Index (TLI). The rules regarding the
impression of my brand). The Cronbach’s alpha for this scale model fit say that the normal chi square can be from one and
was 0.85. three. Root Mean- Square Error of Approximation should be
under 0.8 in order to be justifiable or it should be under 0.05
Customer Satisfaction was measured using 6 items for a good fit, and all other indexes should be above 0.90.
developed by [41]. Sample items included (I think that I did the
right thing when I used this brand, and I believe that using this While doing the structural equation modeling analysis it is
brand is usually a very satisfying experience). The Cronbach’s considered compulsory to measure the validity and reliability
alpha for this scale was 0.92. of the conceptual framework that is going to be evaluated in
the CFA. In the same way the evaluation of validity of the
Customer Loyalty was measured using 6 items developed confirmatory factor analysis can also be measured to know
by [8]. Sample items included (I intend to continue using this how well the framework is. In this research done there are no
brand in the future, and I will encourage friends and relatives to issues regarding the validity. Moreover, the factor loadings, the
use with this brand). The Cronbach’s alpha for this scale was composite reliability, the factor loadings and the average
0.81. variance extracted are shown in the table given below. All the
factor loadings are above 0.7 and there isn’t a single value that
H. Control variables is greater than 1 [43]. All the values shown in the table are in
The control variables in the research were age and gender. between the 0.922 to 0.966 and all the values are above 0.7
The standard deviation, inter correlations and mean for all the which basically shows the reliability [44]. Moreover, all the
variables, including service quality, perceived value, brand values of the average variance extracted are more than 0.5 that
image, customer satisfaction and customer loyalty are given in is basically the threshold for the AVE [44]. So, the
the table below. measurements show that they have good validity and
reliability.

International Journal of Business, Economics and Management Works Vol. 6, Issue 3, PP. 24-30, March 2019
ISSN: 2410-3500
 Table 3: Confirmatory factor analysis (CFA) customer
satisfaction
Construct measured Construct Average
H7 Perceived value -> 0.404 4.59 0.000 Supported
Reliability variance customer loyalty
(CR) extracted
(AVE) The one of the main objectives of this research was to
Service Quality .902 .511 examine the relationship between brand image, customer
Perceived Value .902 .542 satisfaction and customer loyalty. The results of this research
Brand Image .954 .748 are consistent with the previous research [48], they described
Customer Satisfaction .966 .826 that the brand that has a reputable image in the customer’s
Customer Loyalty .943 .733 mind helps the customers in differentiating the needs and wants
of the customers that the brand fulfills and the reputable brand
image also helps in differentiating the brand from the other
A. Results companies and its competitors and also it increases the
The figure given below indicates the estimated standardized customer performance over the brand. Thus, after this we came
path coefficients. Customer satisfaction found to be a to know that the brand that has a positive image in the
positively related to customer loyalty (β = 0.340, p <0.01). consumer’s mind satisfies the customer’s and help them to
Therefore, supporting the hypothesis 1. Service quality has a become loyal towards it. [20] suggest that the brand which
positive impact on customer satisfaction (β = 0.283, p <0.005) succeeds can create the awareness of the customers regarding
and customer loyalty (β = 0.449, p <0.001). Thus, supporting the dignity of the brand which further increases the satisfaction
the hypothesis 2 and 3. Moreover, the brand image has a of the customers regarding the product that they bought from
positive relationship with customer satisfaction (β = 0.450, p the same brand. [49] also concluded that brand image plays a
<0.001) and customer loyalty (β = 0.361, p <0.01). Thus, very significant positive role in satisfying the customers and
supporting the hypothesis 4 and 5. Finally, perceived value is their loyalty
positively related to customer satisfaction (β = 0.217, p <0.005) The research also evaluated the effect of the service quality
and customer loyalty (β = 0.404, p <0.001), Thus, supporting given to the customers by the particular brand on customer
the hypothesis 6 and 7. satisfaction. The findings of this study reveal that the service
B. Discussion and theoretical contribution quality has a significant positive relationship with the customer
satisfaction and customer loyalty. These findings are consistent
Our first hypothesis was to analyze the effect of customer
with the previous researches related to impact of service
satisfaction on the customer loyalty. The results revealed that
quality towards customer satisfaction and customer loyalty
customer satisfaction positively influences the customer
[50]. So, better and superior the service quality is given by the
loyalty. The previous studies stated that the customers are more
brand more the customer will be satisfied and remain loyal
likely to buy the same brand’s product and become loyal to the
towards the brand. Hence the brands and firms in order to
brand if they are satisfied with the offerings of the brand [45].
satisfy their customers should focus highly on providing the
If the customer is satisfied with the product which the brand
good service quality positively influences the customer
offers it will increase the loyalty of the customer and he will
satisfaction [50]. Moreover, if a firm or a brand wants to satisfy
buy the product of the same brand again and again as he is
their customers, then they must provide better service quality to
satisfied with the offerings of the brand. Moreover, our results
its customers (Bauer et al., 2006), which will compel the
are also consistent with the previous researches as they also
customers to become loyal towards the brands.
state that customer satisfaction has positively influenced the
customer loyalty [12,46,47]. When the consumers like the In this research findings revealed that customer perceived
brand’s product and are really satisfied with it, they are more value has a positive impact on customer satisfaction and
likely to buy the same brand’s product and become loyal to customer loyalty. These results are consistent with the previous
them [14,15]. research carried out on perceived value, customer satisfaction
and customer loyalty [51,27,31,37,38]. The similar result was
Table4: Path Coefficients & hypothesis tests proposed in the previous studies evaluating the relationship
Hypo Path β T P Result
thesis Value Value between perceived value and customer satisfaction [52,47].
H1 Customer 0.340 2.62 0.003 Supported This shows that the people of China have greater concern
satisfaction -> regarding the perceived value when they buy the product of
customer loyalty any brand. The more the value is provided by the brand to its
H2 Service quality -> 0.283 2.12 0.037 Supported customers more satisfied the customers will be. Brands should
customer focus on providing more value to their customers in order to
satisfaction
Service quality ->
get more satisfied customers and make their customer loyal to
H3 0.449 4.55 0.000 Supported buy their products again and again.
customer loyalty
H4 Brand image -> 0.450 3.77 0.000 Supported
customer
C. Managerial Implications
satisfaction The research also has implications for the organizations that
H5 Brand image -> 0.361 2.39 0.004 Supported are starting up or the organizations that want to have loyal and
customer loyalty satisfied customers. As this research have concluded that the
H6 Perceived value -> 0.217 1.99 0.046 Supported

International Journal of Business, Economics and Management Works Vol. 6, Issue 3, PP. 24-30, March 2019
ISSN: 2410-3500
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International Journal of Business, Economics and Management Works Vol. 6, Issue 3, PP. 24-30, March 2019
ISSN: 2410-3500