Service quality, customer satisfaction and loyalty: Measuring relationship among these with regard to the banking sector in Bangladesh

Abstract

This study focuses on measuring the relationship among service quality, customer satisfaction and loyalty in the context of the Banking Sector in Bangladesh. Despite the critical role of service quality to develop customer satisfaction which in turn develops customer loyalty towards the firm from which they buy, the matter is insufficiently addressed in the academic literature. Moreover though during last two decades, the importance of antecedents of loyalty which is a precursor of long-term relationship was studied mainly in the Western markets. Previous studies focused mainly on brand loyalty or goods loyalty and loyalty to service offerings or service firms has not been discussed that much. Little attention has been devoted to measure the relationship among customer satisfaction and different dimensions of loyalty. Despite growing importance of information technology for developing customer satisfaction few studies have considered this as a dimension of service quality. In view of this gap, this study investigates the relationship among service quality, customer satisfaction and loyalty in the banking sector in Bangladesh. The objectives of the study are to examine the role of different dimensions of service quality in developing customer satisfaction; to examine the impact of customer satisfaction on different dimensions of loyalty; and to verify the hypothesised relationship between service quality and customer satisfaction and between customer satisfaction and loyalty in the context of Bangladesh market. A good number of prior research studies on service quality, customer satisfaction, loyalty, service marketing and relationship marketing between the years 1960 to 2016 are reviewed with a view to prepare this study. Based on a comprehensive literature review six dimensions of service quality (tangibles; reliability; responsiveness; assurance, empathy, information technology), overall customer satisfaction and three dimensions of loyalty (behavioral loyalty; attitudinal loyalty; and cognitive loyalty) are considered to measure the relationships among these variables for this study. This conclusive research is based upon the empirical findings of a quantitative research where primary data is collected by surveying a structured questionnaire. Convenience type non-probability sampling technique is applied and data are collected from account holders of different banks’ branches of greater Dhaka city by using in-store intercept interview technique. A total of 469 valid responses are received following which hypotheses are tested and relationships among the variables have been examined in the banking sector in Bangladesh. Bivariate correlation analysis, multiple regression analysis, and structural equation modeling (SEM) by using analysis of moment structures (AMOS) have been used to examine causal relationship among variables and to assess measurement model validity. The results of bivariate correlation analysis demonstrate that though the associations between all service quality dimensions and customer satisfaction are positively significant but the study reveals that information technology (IT) is the most important dimension of service quality and hence IT has emerged as a vital precursor of customer satisfaction. Out of 5 SERVQUAL dimensions, only reliability is strongly associated with customer satisfaction and the relationships between other dimensions of service quality and customer satisfaction are medium. The relationship between customer satisfaction and behavioral loyalty is strong whereas the relationships between customer satisfaction and attitudinal loyalty and between customer satisfaction and cognitive loyalty are not found strong. The findings of the multiple regression analysis reveal that IT made the strongest unique contribution (beta coefficient +0.423) to explain the dependent variable customer satisfaction, when the overlapping effects of all other variables are strictly removed whereas the contributions of tangibles and responsiveness to explain customer satisfaction were not statistically significant. Fundamental concept that service quality develops customer satisfaction and customer satisfaction develops loyalty is well supported in this study. The result of structural equation modeling by using analysis of moment structure (AMOS) illustrates that overall fit of the hypothesized model is good. Values of all concerned indices of AMOS analysis remained within the acceptable range. The study has practical implications for marketers concerned with the Bangladesh market. The findings help improve their understanding about the effects of different dimensions of service quality on customer satisfaction which in turn develops loyalty specifically in the context of banking sector of Bangladesh. The study extends a direction for new researchers and concludes with suggestions for further research in the context of Bangladesh or any other developing economy and suggests managers in the banking sector of Bangladesh to focus on developing all key service attributes as these play significant role in developing customer satisfaction which in turn develops loyalty. Specifically findings of the study highlights that managers in the banking sector of Bangladesh should apply advanced information technology to enhance customer satisfaction in order to develop loyalty in their relationship marketing strategy. Reliability dimension of service quality is also strongly significant factor to be considered by the marketer in the banking sector of Bangladesh to develop customer satisfaction and loyalty in order to gain sustainable competitive advantage.