RESEARCH PROJECT PROPOSAL

Student Name: Kamran Mukhtiar

Provisional Topic Title: A critical analysis of the factors, influencing customer
satisfaction and loyalty, in Pakistani retail banking sector.

1. Aims/objectives/Research Questions:
1a. Introduction
The concept of customer satisfaction has remained the topic of interest for both
academics and practitioners for more than three decades, in a view that customers are
the primary source of revenue generation for most firms (Sui, 2007). According to
Reichheld (2003), customer satisfaction is a necessary precondition for customer
loyalty, which in turn a key driver of profit growth and performance. The notion, why
customer satisfaction has been receiving the utmost attention, especially in the
banking is that customer satisfaction has been linked to customer loyalty and
retention, which is the key element in gaining competitive success (Smith and Wright,
2004).
Meanwhile, a study conducted by Jamal & Naser (2003), about the factors influencing
customer satisfaction in retail banking sector, argues that in the context of Pakistani
society, satisfaction means customers are more likely to tell their friends and family
about positive experiences. Smith and Wright (2004) argues that firms providing high
quality post-sale services achieve higher customer loyalty, which in return lead
toward better financial performance. Similarly, a study conducted by Kuusik (2007),
in a telecommunication company, analysed four factors (satisfaction, trustworthiness,
image and importance of relationship), which play different role on different levels of
customer loyalty. The finding of the study also shows that the foundation of any kind
of loyalty depends on satisfaction and importance of relationship (product).
The study will look into the significance and importance, of various determinants, of
customer satisfaction and loyalty, in Pakistani retail banking sector.

1b. Aims of dissertation

Banks in Pakistan are operating in a highly competitive market due to tense economic
situation, and for some times realized the benefits of retaining profitable customers.
The aim of this dissertation is to identify, the factors which influence most, to gain
satisfaction and loyalty Pakistani retail banking sector. Moreover, to enquire the
importance of customer satisfaction in relation with customer loyalty and retention in
order to provide a framework for branch managers to highlight the fact that customer
satisfaction and loyalty has the greatest impact on corporate performance.
1c. Objectives
The main objectives arising from the above mentioned aim can be summarised in the
following points:
1) To determine, the factors which influence customer satisfaction in relation to
the effects of customers demographic characteristics like, age, income,
education, expertise and length of relationship.
2) Analyzing all possible variables, which lead towards customer loyalty and
retention or defection.

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 3) To enable the bank managers, with final comments of what step should be
taken to improve particular customer satisfaction elements which could have
the greatest impact on customer satisfaction, loyalty and corporate
performance in Pakistani retail banking sector.

1d. Research questions

1. Is there any relationship between customer’s demographic characteristics
(age, gender, education, expertise, length of relationship) and customer
satisfaction-loyalty?
2. How strong relation does there exist between customer satisfaction and
frequent use of bank services?
3. Is there any relation between customer satisfaction and loyalty?
4. In how many ways, a satisfied and loyal customer can contribute in the
overall performance of a bank?

2. Methodology:
In this study both primary and secondary research will be incorporated in order to
provide adequate discussion for the readers, which will help them to understand more
about the issue and the different variables involve in it.

The primary data for the study will be represented by the help of ‘self-administered
questionnaire results’, which will be obtained from the respondents, especially, from
those who use banking services frequently. The selection behind self-administered
questionnaire is that, it has an advantage of obtaining data more efficiently in terms of
research time, energy and cost. The questionnaire might contain some simple but
brief close ended questions. In order to facilitate the respondents, it might also be used
Likert Scaling (strong agree to strong disagree and very satisfied to very dissatisfied),
for measuring respondents view on quality, satisfaction and loyalty level. While the
literature reviews will provide the basis for the study of secondary data.

The primary research method used, will be a quantitative data collection technique or
hypothetico-deductive. By this way hypothesis or theory would be set up and to test
these hypotheses some statistical techniques (e.g. Chi-square analysis) will be used for
the acceptance or rejection of results. To make calculations convenient and draw out
figures, help will be taken from computer programs like, SPSS or Minitab.

The secondary source of data collection will include academic journals and papers,
magazines, industry analysis offered by media, bank reports or some important census
of business and industry, publications and records available within the banking
organisations. Due to time and budget constraints and level of study, cross-sectional
approach in Pakistani retail banking study and its use will be discussed here.

The research will be presented in written form with the addition of data charts, which
would definitely be helpful in the result analysis of the study. Mainly, the pie charts
will be needed to illustrate some of the analysed data. However, this cannot be
confirmed, until the research data have been analysed.

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3. Brief Literature Review:
According to Anderson et al., (1994), in response to an increasingly competitive
marketplace, a growing number of organizations are actively using customer
satisfaction measures in developing, monitoring, and evaluating product and service
offerings. More and more research attention is also being devoted to factors
contributing to desirable customer outcome. An empirical study conducted by Hu et
al., (2009) indicates that by delivering high quality services and creating superior
customer value can result in achieving high customer satisfaction. It affects the firm’s
corporate image and ultimately leads towards customer retention.

A recent research by Cooil, et al., (2007) has focused on the relationship between
customer satisfaction and loyalty. Despite the expectations of both common sense and
research mentioned above, there is a growing school of thought (e.g. Naumann, et al.,
2009) who suggests that satisfaction is not a reliable predictor of buyer loyalty.
Similar thought presented by Reichheld, (2003) suggests that, it is possible to be a
satisfied buyer but not necessarily a loyal buyer. Thus, the primary point of emphasis
is that loyal customers are always satisfied but satisfied customers are not always
loyal (Al-Wugayanet al., 2008).

According to Cooil, et al., (2007), it should be logical that both satisfaction and
loyalty are positively related to market share and increases in satisfaction hopefully
lead to repeat purchases and positive word of mouth between buyers. But, in their
findings, Jamal & Naser, (2003) indicates that there exist strong demographic
differences, in the way respondent express their opinion, about service quality, service
features and satisfaction.

However, it has been found recently that customer characteristics moderate the
relationship between satisfaction and behavioural outcomes (e.g. Baumann, Burton
and Elliott, 2005). The Wesskirichen et al., (2006) had found in a study that easy
neighborhood access, a cheerful setting, and transparent terms and conditions are the
driving forces for customer satisfaction. Meanwhile, Lewis and Soureli (2006) also
identified some key factors like, speed of delivery, competence, friendliness,
reliability, responsiveness and trust.

Quality components also vary within the industry in some instances. For example, in
retail financial service, a study conducted by O’Loughlin and Szmigin (2006),
convenience was the most important factor. While, Olorunniwo et al., (2006) found
service quality, to be an important driver of behavioral intentions. Contradictory
results found by Jamal & Naser (2003), who concluded that convenience is not a
critical factor for all age, gender and income groups. As well as, competitiveness of
the bank was also not a critical factor for all education and occupation groups.

4. Resources/Data access:
A variety of information sources, such as Academic journals, like, Journal of Services
Marketing, Journal of Marketing Management, Journal of Consumer Marketing,
Journal of Retailing, Service Industries Journal, International Business Review,
Journal of Personal Selling and Sales Management, Journal of Marketing, Journal of
Banking and Finance, Journal of Financial Services Research and other data resources

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such as Mintel reports, Bankers Magazine, Review of Financial Studies etc., where
the data base, tables, portfolios and graphic presentations would be used to support the
customer services and loyalty activities in Pakistani retail banking sector.
Moreover, while taking into consideration the required skills, needed in order to make
the research more professional, authentic and reliable, all research tools and sources
will be used and it is also assumed that the questionnaires, in order to support as a
primary source of information would be those bank customers, who are saving
depositors, time depositors, foreign exchange handlers, commercial depositors, credit
users, utility payers, stocks and bond traders, remitters, credit card holders, insurance
policy payers, pensioners or benefit takers or any others who deal with bank branches,
at least couple of times in a month, either through ATM’s, telephonic, face to face or
through internet banking.

5. Project Schedules

Steps Description Due

date
1 Week-1-2: Area of interest identified Done
2 Weeks 3-4: Topic selected/form submitted Done
3 Weeks 4-5: Topic refined to develop dissertation Done
proposal
4 Weeks 5-8: Proposal written and submitted 15th
Nov,
2011
5 Stage 1: Chapters 1-3 completed 30th
Nov,
2011
6 Stage 2: Collection of data and information 30th
Dec,
2011
7 Stage 3: Chap 4 & 5 (Analysis, Discussion and 30th
conclusions) Jan,
2012
8 Stage 4: Writing up 15th
Feb,
2012
9 Stage 5: Final project draft prepared 15th
March,
2012
10 Submission of Project 25th
March,
2012

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References
Al-Wugayan, A., Pleshko, L.P. and Baqer, S.M. (2008) An investigation of the
relationships among consumer satisfaction, loyalty, and market share in Kuwaiti loan
services. Journal of Financial Services Marketing, 13(2), pp.95-106.

Anderson, E.W., Fornell, C. and Lehmann, D.R. (1994) Customer Satisfaction,

Market Share, and Profitability: Findings from Sweden. Journal of Marketing, 58(3),
p.53.

Baumann, Chris, Suzan Burton, and Greg Elliott (2005), “Determinants of Customer
Loyalty and Share of Wallet in Retail Banking,” Journal of Financial Services
Marketing, 9 (3), pp. 231–48.

Cooil, B., Keiningham, T.L., Aksoy, L. and Hsu, M. (2007) A Longitudinal Analysis
of Customer Satisfaction and Share of Wallet: Investigating the Moderating Effect of
Customer Characteristics. Journal of Marketing, 71(1), pp.67-83.

Hu, H.-H., Kandampully, J. and Juwaheer, T.D. (2009) Relationships and impacts of
service quality, perceived value, customer satisfaction, and image: an empirical study.
Service Industries Journal, 29(2), pp.111-125.

JAMAL, A. & NASER, K. (2003) FACTORS INFLUENCING CUSTOMER

SATISFACTION IN THE RETAIL BANKING SECTOR IN PAKISTAN.
International Journal of Commerce & Management, 13, 29-53.

Kuusik, A. (2007) Affecting customer loyalty: do different factors have various

influences in different loyalty levels? Mõjutades kliendi lojaalsust: kas erinevatel
teguritel on erinevatel lojaalsustasemetel erinev mõju?, (58), pp.3-29.
Lewis, B. R. and Soureli, M. (2006) The antecedents of consumer loyalty in retail
banking. Journal of Consumer Behaviour, 5, pp.15–31.

Naumann, E., Williams, P. and Khan, M.S. (2009) Customer satisfaction and loyalty
in B2B services: directions for future research. Marketing Review, 9(4), pp.319-333.

O’Loughlin, D. and Szmigin, I. (2006) Emerging Perspectives on Customer

Relationships and Loyalty in Irish Retail Financial Services, Journal of Consumer
Behaviour, 5(2), pp. 117-129.
Olorunniwo, F., Hsu, M.K., and Udo, G.J. (2006) “Service Quality, Customer
Satisfaction, and Behavioral Intentions in the Service Factory,”. Journal of Service
Marketing, 20, 59-72.

Reichheld, F. F. (2003) The One Number You Need to Grow, Harvard Business
Review, 81(12), pp. 46–55.

Smith, R.E. and Wright, W.F. (2004) Determinants of Customer Loyalty and
Financial Performance. Journal of Management Accounting Research, 16, pp.183-
205.

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Sui-Hua, Y. (2007) "An Empirical Investigation on the Economic Consequences of
Customer Satisfaction". Total Quality Management & Business Excellence, 18(5):
555-569.

Wesskirichen, C., Vater, D., Wright, T., DeBucker, P., Detrick, C. (2006) The
customer-led bank: converting customers from defectors into fans, Strategy &
Leadership, 34(2), pp. 10-21.