RIFT VALLEY UNIVERCITY

SIDST KILO CAMPUS

DEPARTMENT OF BUSINESS ADMINSTRATION
MBA--PROGRAM
THESIS PROPOSAL ON
THEEFFECTOFSERVICEQUALITYONCUSTOMERSATISFAC
TION OFWEGAGENBANKS.C
By: AberhameRedaBerhe
ID.No. RUSKDMBR/0047/19

Advisor: TesfayeaHirpasa (PHD )

April 30, 2021 G.C

Addis Ababa
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Table of Contents
CHAPTERONE.............................................................................................................................................................3
INTRODUCTION.......................................................................................................................................................3
1.1 Background of the Study..................................................................................................................................3
1.2 Statement of the Problem.................................................................................................................................4
1.3 Research Questions..........................................................................................................................................2
1.4 Objectives of the Study..........................................................................................................................................2
1.4.1 GeneralObjective.............................................................................................................................................2
1.4.2 Specific Objectives..........................................................................................................................................2
1.5 Significance of the Study........................................................................................................................................2
1.6 Scope andLimitations.............................................................................................................................................3
1.7 Organization of the Research.................................................................................................................................3
CHAPTERTWO............................................................................................................................................................4
REVIEWOFRELATEDLITERATURES...................................................................................................................4
2.1 Theoretical LiteratureReview.................................................................................................................................4
2.1.1 Service Quality................................................................................................................................................4
2.1.2 Customer Satisfaction......................................................................................................................................7
2.1.3 The relationship between ServiceQuality and Customer Satisfaction..............................................................9
2.2 EmpiricalLiterature Review.................................................................................................................................10
2.3ConceptualFramework..........................................................................................................................................13
CHAPTERTHREE......................................................................................................................................................15
RESEARCHMETHODOLOGY...............................................................................................................................15
3.1Research Design....................................................................................................................................................15
3.2Source andtypes of Data........................................................................................................................................15
3.3Sampling Technique and Sample Size...................................................................................................................15
CHAPTER FOUR........................................................................................................................................................16
4. Research Work plan and Budget...............................................................................................................................16
4.1 Research work plan..............................................................................................................................................16
4.2 Research budget...................................................................................................................................................17
References.................................................................................................................................................................... 18

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 CHAPTERONE

INTRODUCTION

1.1 Background of the Study

Thepremiseof“servicequality”asatoolforgainingcompetitiveadvantageandleadinamarket-
drivensystemhasbeenwellrecognizedbythefinancialinstitutions.However in current
highlycompetitivecorporateenvironmentithasbecomeincreasinglyimportanttonotonlybecome the
market leader but also to maintainthat top position(Zeithamlet al.,
1996).Researchersallovertheglobeclaimthatofferingqualityservicesgiveasustainablecompetitiveadv
antage toany business.Itenablesthemtofulfill notonlythepresentneedsof
theircustomerssatisfactorily but also toanticipatetheirfuture needs.This ability to anticipate the
future needs of
customersallowsthemtodelighttheircustomersthroughqualityservicesonconsistentbasis.Subsequentl
yitenhancescustomersatisfactionandcustomerloyaltyleveltowardstheseorganizations (Wisniewski,
2001; Naik et al., 1988; Zeithaml,
1988).Banksmustconsidervariousantecedents(tangibles,reliability,responsiveness,assuranceandem
pathy)ofservicequalityinordertohavedelightedcustomers
(B.Sharp,&A.Sharp,1997)andtoenhancetheirperformanceandprofitability(Hackletal.,2000;Andere
sonetal.,1994;Lewis, 1993).Customersatisfactionisconsideredimportantindefiningorganizational
performance.Enhancingcustomersatisfactioniscriticalbecauseitisakeytobusinesssuccessofanybanki
ng
institutions.Inthecompetitiveeconomy,customer‟ssatisfactionhascomeunderalimelightduetostiffco
mpetitionwhereorganizationsaretryingtotakecompetitiveadvantagethroughthehumanfactorandcust
omers(Singhet,al.,2011).Businessenvironmentindevelopedanddevelopingcountrieshaschangedduet
oglobalizationandfreetradeandglobalcompetitionisincreasing with
exploding.Becausesuchreasons,tostayincompetitiveenvironmentanddeliver
acceptablefinancialreturns,managersmustknowhowtohandlechangeswhichareunexpectedby
cementing on customer satisfaction (Naseemetb al, 2011).

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Thereisstrongrelationshipbetweencustomersatisfactionandprofitabilityoftheorganization
(Hill,etal.;2007).Customersatisfactionisconsideredasthemeasureofsuccessofmany
Organizations.Soitbecamethekeyoperationalgoalsforseveralcompanies.Theyaddedthat
“customersatisfactionisameasureofhoworganization’stotalproductperformsinrelationtosetof
customers‟ requirements.AccordingtoCochran(2003),profitsandrevenuearenothing
morethantheresultsoffulfillingcustomers‟expectationandneeds.Customer
satisfactionmayimpacttheupcomingreactionofcustomerssuchasreadinesstorepurchase,willingnesst
oreferand willing to paymore price without searching cheaper
suppliers.Incommercialbanks,customersatisfactionisregardedasprimarycriterionusedtoassesstherel
ationshipofbankswiththemarket(Munariet.al.2013).In addition, customer satisfaction
isimportantdriverinbanksbecausehighercustomersatisfaction meanslowerintentionfor
customerstoswitchtobanks(HoqandAmin,2010).The achievement ofhigh degree of
bankingcustomersatisfactionrepresentsanimportantfieldofbankingmanagement.Customersatisfacti
onisacomplexofvariousaspectswhichoperateinacoherentmannerandform
attitudesofcustomerstothebank.Therefore,thisstudywasfocusedontheimpactofservice
quality on the customer satisfaction thereby organizational performance.

1.2 Statement of the Problem

Servicequalityandcustomersatisfactionareverycrucialconceptsandthustheyhavebeen
highlyconsideredanddiscussedinthemarketingenvironment.Various marketing researchers
havepointedoutthefactthat,satisfiedcustomersandservicequalityareimportantfactorsfor
Organizational competitive benefit (Ruyter,
1997).Intheliterature,therelationshipbetweenservicequalityandcustomersatisfactionis a
debatableissue.Theideathattheconceptsofservicequalityandcustomersatisfactionareextremely
relatedisverycommoninresearchers.Althoughservicequalityandsatisfactionareclosein meaning,
they are nonetheless
distinct.Servicequalitywasexplainedasoverallevaluationofaproductorservice,whilecustomersatisfa
ctionwasconsideredasspecificevaluation (Tan et
al.,2014).Inordertocopewiththecompetitionandsurviveinthemarketfurthermoretoincreasebank‟sper
formance,customersshouldbeacenterofallservicesandproducts.Zairi(2000)agreedon

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 thisprinciplebyhissayingthatcustomersbecomeace
nterforallbankingactivitiesdueto increasedcompetitionforgreatermarketshare.Focusing on
customers‟ satisfactionhas been the keytoincreasingservicequality according to customers‟
expectation the banking sector” (Zairi,
2000).Hanson(2000)suggestedthatthelevelofservice qualityisanindicationofthe
Organization‟s ability to meet customers’‟ desire and demands.So organizationsmustbettertheir
services to meet customers’‟ need and
requirement.Customerservicestrategyplaysanimportantroleinorganization‟sabilitytosatisfycustom
erstherebygenerateincomeandrevenue.Ontheotherhandcustomerdissatisfactionleadstheorganizatio
nfailinordertoreachitsobjectives.Toavoidthisdissatisfactionofcustomers‟
businessorganizationshouldconsidereffectivecustomerservice strategy.Sothereisastrong
tendencyforaresearchertomeasuretherelationshipbetween customer satisfaction and different
measurement of performance.
Bankinginstitutionsacrosstheglobehaverecognizedtheimportanceofcustomers‟satisfaction
anddevelopingandmaintainingenduringrelationshipwiththeircustomersastwocrucial
Parametersleadingtoincreasedbusinessprofits.Atthesametime,severalbankinginstitutions
areexperiencingincreasinglevelofretailcustomers‟dissatisfaction(Mistry,2013).However,
whetheranyofthesereallyholdstrueandtheextenttowhichservicedeliverystrategies
contributefortheobtainedcustomersatisfaction/dissatisfactionisnotknown.Moreover,there
maybeothercauseswhichareoutoftheabovelistofpossiblecausesbutnonehasbeen established.
Banksarecompetingintenselyinahighlycompetitiveenvironmenttoofferqualityoriented
servicesaccordingtocustomers‟ expectations.In developing countries customer satisfaction has
become important to business success of banking institutions.Suggestedreasonsfortheapparent
trendincludeflexible employment,highermobilizedandcompletioninbankingindustry(Panda, 2003).
Thus,understandingcustomers‟ satisfactioninbankingindustryisimportantnotonlyfrom
economicperspectivebutalsofromimagebuildingintheindustry.Ethiopia banking sector has gone to
significant changes after the liberalization of banking sector domestically.

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Althoughmuchempiricalevidencecouldbefoundintheliteratureworldwideinvestigatingthe
relationshipbetweenservicequalityandcustomersatisfaction,thisdomainhasnotbeenmuch
consideredinEthiopia‟scontext.Alotofresearchonservicequalityanditsassociationwith
customersatisfactionhavebeenconductedindevelopedcountries.Thereforethisstudycontributestothel
iteraturebystudyingthisphenomenoninthebankingsectorofadeveloping
countryi.e.Ethiopia.Therefore,thepurposeofthisresearchistoexaminetheimpactofservice qualityon
customer satisfactionin Wegagaen Bank S.C.

1.3 Research Questions

The basic research questions of the study are the following:
1.What is the current level of qualityof differentservices provided by Wegagen Bank S.C?
2.To evaluate the effect of service deliveryon customer satisfactionof Wegagen Bank S.C?
3.Which service quality dimensions may enhance customer satisfaction in a better way?

1.4 Objectives of the Study

1.4.1GeneralObjective
Theaimofthisresearchstudyistodeterminetheeffectofservicedeliveryonsatisfaction
bankingcustomers in Wegagen Bank S.C.

1.4.2Specific Objectives
The specific objectives of this study are listed as follows:
 To determine the level of quality of different services provided by Wegagen Bank S.C
 To evaluate the effect of service deliveryon customer satisfactionof Wegagen Bank S.C
 To find out which service quality dimensions may enhance customer satisfaction in a
betterway.

1.5Significance of the Study

Thepurposeofthisstudyistoextendboththeoreticalandpracticalunderstandingofcustomer
satisfaction and performance of the organizationaswell astheir relationship.To get benefit
fromthetheoreticalsideofthestudyoffersnewwayofunderstandingcustomersatisfactionand
organizationalperformancewithregardtothebankandthecurrentsituationinwhichbanksare
competinginEthiopia.Thesampledbankswilllearnabouttheleveloftheircustomer‟ssatisfaction
towards their services.
Regardingthepracticalsignificanceofthestudy,thestudywasofvalueadditiontothebankin
designingitsproductsandprovisionofitsproductsthattheybecustomeroriented.This
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studyalsohelpedthebanktoincreaseitscompetitivenesswhilemaintainingitscustomersbyincreasing
customer relationship.Thestudywasalsorelevanttootherfinancialorganizationin
improvingtheirspecificotherareasofperformance.Thiswillalsogiveinsightssoastotake measurement
actionsthatcanincreasetheirservices.Researchers and strategists will learn about
therelationshipbetweenservicequality,customersatisfactionandorganizationalperformance
andtheresultwillgivethemfurther insights about the area.Future researchers and scholars may also
use the study findings as a source of reference for further research in the same area.

1.6Scope andLimitations
Themainscopeofthisthesisistoanalyzetheeffectofcustomersatisfactiononthe
organizationalperformanceonWegagenBankS.C.Itstheoreticallyscopeisthelevelofcustomersatisfact
ion, qualityofservicedeliveryandtheeffectofcustomersatisfactionon
bank‟sperformance.Thestudydoesnotfocusotherfactorsofcustomersatisfactionand
performance.Sinceworkingstaffsplayanimportantroletocreatequalityservicestheresearch focused
on the customers and employees of the banks.
Regardingitsgeographicalscope,theresearchfocusedonfiveselectedbranchesofWegagen
BankS.C.ThesebranchesarefoundinthenortheasternpartofAddisAbaba.Therewere
variousconstraintsforthestudy;thetimeconstrainteventhoughnotshorttopresentbutthere were
various difficulties to handle it together with the office work.

1.7Organization of the Research

Thisresearchisorganizedinfivechapters.Thefirstchaptertellsabouttheintroductionpartof
thepaper.The second chapter gives review various related literatures.Chapter three gives details
of the research methodologyinvolved in the research.Chapterfourisaboutthedataanalysis and
interpretationsthatleadstodiscussionofresults.Thefinalchapterwouldgiveasummary,a
Conclusion and recommendation regarding the findings.

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 CHAPTERTWO

REVIEWOFRELATEDLITERATURES

2.1Theoretical LiteratureReview

2.1.1Service Quality
Qualitymeans“innateexcellence”accordingtothecommonviewandisviewedas“aprecise
andmeasurablevariable”inaproduct-basedapproach.Inthisapproachdifferencesinquality
meandifferencesinthequantityofsomeingredientorattribute.Sohigherqualitycanonlybe
obtained at higher cost.But on the other hand, quality is compared with the satisfaction in a user-
basedapproachandinthisapproachthehighestqualitymeansthebestsatisfactionof
consumers‟ preferences.Inamanufacturing-basedapproach,qualityisdefinedas“makingit
rightthefirst time”.Thisapproachissupplybasedandconcernedwithengineeringand
manufacturingissues.Qualityisdefinedintermsofcostandpriceinavaluebasedapproach
(Yarimoglu, 2014).Servicesareacontinuousprocessofon-
goinginteractionsbetweencustomersandservice
providerscomprisinganumberofintangibleactivitiesprovidedaspremiumsolutionstothe
problemsofcustomersandincludingthephysicalandfinancialresourcesandanyotheruseful elements
of the systeminvolved in providing these services (Grönroos, 2004).
Premiumservicequalityisakeytogainacompetitiveadvantageinservicesindustry.The
satisfactionlevelofcustomersisdependentontheir perception of service quality and the trust in
serviceprovider(Ismailetal.,2006;Aydin&Özer,2005;andParasuramanetal.,1988).Byprovidingbette
rqualityservicestocustomers,afirmrevivestheperceptionofcustomersabout quality of services.
Particularlyinbankingindustry,premiumservicequalityplaysapivotalroleforcustomersin
evaluatingtheperformanceofaserviceproviderandisthekeytogaincustomersatisfactionand customer
loyalty.Abankcangaincompetitiveadvantageandbuildlongtermrelationshipwith its customers by
providing premium quality services.

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Thefactthatthenatureofservicesisintangibleandgoodsaretangibleisoneofthemajor
differencesbetweenservicesandgoods.Serviceshavefourcharacteristicswhichdistinguish
themfromproducts:Intangibility thatisaservicecannotbetouchedortasted;inseparability,
thatisaservicecannotbeseparatedfromitsprovider;variability,thatisthequalityofaservice
isdependentonhowandwhenitisserviced;perishability,thatisservicesarenotstorablefor
Lateruse(AmstrongandKotler,2006).Measurement of service quality can be more complicated
becauseservicesareintangible.Service qualitymeasurementmeanshowmuchtheservice
Offeredmeets the customers‟
expectations.Customerexpectations,ontheotherhand,areformeddependingonvariousfactorssuchasth
eamountoftimetoorderandreceivetheservice,theconvenienceoftheusageoftheservice,pricingof the
service, and the after-sales assurances (Dunne and Lusch, 1999). Intheirfirstresearches,Zeithaml
et al.(1996) have referred to ten dimensions of service quality.
However,theyfoundastrongcorrelationbetweenthesedimensionsintheirfollowing
researches.Therefore,theygroupedthesedimensionsandnamedthemasReliability,
Responsiveness,Assurance,EmpathyandTangiblestomakeatoolfortestingtheservice
quality,alsoknownasSERVQUAL.
A brief explanation of these dimensions is given below:
I.Tangibles
Thosethingswhichhaveaphysicalexistenceandcanbeseenandtouched.In context of service
quality,tangiblescanbereferredtoasInformationandCommunicationsTechnology(ICT)
equipment,physicalfacilitiesandtheirappearance(ambience,lighting,air-conditioning,seating
arrangement); and lastly but notleast, theservicesprovidingpersonnelof the organization (Blery
etal.,2009).Thesetangiblesaredeployed,inrandom integration, by any organization to render
services to its customers who in turn assess the quality and usability of these tangibles.
II.Reliability
Reliabilitymeanstheabilityofaserviceprovidertoprovidethecommittedservicestruthfully
and consistently (Blery et al., 2009). Customers want trustable services on which they can rely.
III.Assurance
Assuranceisdevelopedbythelevelofknowledgeandcourtesydisplayedbytheemployeesin
renderingtheservicesandtheirabilitytoinstilltrustandconfidenceincustomer(Bleryetal.,
2009).
IV.Empathy
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Empathymeanstakingcareofthecustomersbygivingattentionatindividualleveltothem
(Bleryetal.,2009).Itinvolvesgivingearstotheirproblemsandeffectivelyaddressingtheir
concerns and demands.
V.Responsiveness
Responsiveness meanswillingness
tohelpcustomersandprovidepromptservice.Providingserviceinatimelymannerishighlyappreciatedby
customers.Goodserviceproviders
understandthisaspect(Iqbaletal.,2010).Furthermore, firms that value efficiency pay attention
totheservicesthattheyoffersothattheycanhaveanadvantageandusethistokeepoff

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 competitors(Karim&Chowdhury,2014).Bankcust
omerslookforbanksthatwillinglyhelp
themin their banking operations.

2.1.2Customer Satisfaction
Wilson(2002)arguesthatcustomer satisfaction is ambiguous and complex in nature, and it often
consistsofvariouscomponentsthataremeasuredwithdifferentmethodsunder different
conditions.Basedonintensiveresearchthroughtime,twotypesofcustomer satisfaction
definitionshave emerged.Thefirsttypedefinescustomersatisfactionasanoutcome of a buying
experience(WestbrookandReilly,1983).Thesecondtypeofdefinition defines customer
satisfactionasabenchmarkbetweentherealpurchaseandthepurchaseexpectationsofthe
customer (Hunt, 1977).
Edvardsson(1996)arguesthatcustomersatisfactionisanindividualcategorysincethe customer
tacitlyunderstandsitinhisownuniqueway.Thismeansthatcustomersatisfactioncanbe
understoodasawebofpsychological,socialandphysicalvariables,whichcorrelatewiththe
notionofasatisfiedcustomer.Parasuraman,ZeithamlandBerry,(1988)andO‟NeillinPalmer
(2004)alsoseecustomersatisfactionasacognitiveconstructandasapsychologicalstate. Anderson,
Fornell, andLehman(1994)arguethat customersatisfactionisprimarily an emotional
stateandtheoutcomeofthelongtermrelationshipbetweencustomersandserviceproviders. Ning-
junZhangetal(2007)showthattheemotionaldependencyofemployeesfosterstheir efforts to satisfy
customers. Customersatisfactionisahighlypersonalassessmentthatisgreatlyinfluencedbyindividual
expectations.Somedefinitionsarebasedontheobservationthatcustomersatisfactionor
dissatisfactionresultsfromeithertheconfirmationordisconfirmationofindividualexpectations
regardingaserviceorproduct.To avoid difficulties stemmingfrom the kaleidoscope of customer
expectationsanddifferences, some experts urge companies to “concentrateonagoalthat‟smore
closelylinkedtocustomerequity.”Insteadofaskingwhethercustomersaresatisfied,they
encourage companies to determine how customers hold them accountable.
Onotherargumentisentailedascustomer satisfactionis an organization‟s abilitytoattractand
retaincustomersandtoimprovecustomerrelationshipovertime.Itisoftenseenasthe
satisfactionwithanorganization‟sproductsorservices.Furthermore,itisconsideredtobethe

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keytosuccessandlong-termcompetitiveness.Theknowledgeofcustomersatisfactionisthe
sourceforthefulfillmentofcustomerexpectations,theinformedsourceforgainingtheir
retentionandthesourceforstudyingorganizationaleffectivenessintheprocessofservice
delivery.Anorganizationcandecideontheactionsrequiredtomeetcustomerneedsifit
understands perceptions.Furthermore,itcanidentifyitsownstrengthsand weaknessesandchart
outthestrategyoffutureprogressandimprovementoftheworkpracticesandprocessesused
withinthe organization(Milanand Martina,
2008).Parasuraman,Zeithaml&Berry(1988)relatecustomersatisfactiontoqualitativeand
quantitativeelementsofthe service and see it as a relation between customer satisfaction, service
performance,andperceivedcustomerserviceperformanceexpectations(Oliver,1997).Zeithaml&Bitn
er(2000)proposeasimplerdefinitionofcustomersatisfactionbasedonthedegreeof
customerneedsandexpectationsatisfaction,whichdirectlyimpactsthedegreeofcustomer
dissatisfaction.
Customersatisfactioncanbedeterminedbyeithersubjectivefactors(e.g.customerneeds,
emotions)orobjectivefactors(e.g.productandservicefeatures).Applyingtothebankingindustry,thereh
avebeennumerousstudiesthatexaminedattributesthatclientsexpect regarding customer
satisfaction.This study willfocus on the objective factors.
Customersatisfactionisfrequentlyusedterm inbusinessliteraturewhich indicateshow products
andservicesofferedbyacompanymeettheexpectationofcustomers.Itisameasureofhowa
companyoffersitsserviceswhichmeetorexceedcustomers‟expectation.Customer
satisfactionismainly related to the whole consumption experience by the customer.
The different aspects of customer satisfaction mentioned by Oliver (1997) are:
 Satisfaction with the final outcomes
 Satisfaction with events that happen during consumption and
 Satisfaction with the level of received happiness

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AccordingtoOliver(2010)Satisfactionistheconsumers‟fulfillmentresponse.Itisajudgment
thataproductorservicefeatureortheproductorserviceitself,provided(orisproviding)a
pleasurablelevel of consumption related fulfillment including level of under-or over- fulfillment.
Customersatisfactionistheoutcomeofhisorherneedsandexpectationswhichinfluencethe
interactionwithserviceprovidersandothercustomers.Thequalityofthisinteractionimpacts
customerdecisionstorepurchasetheservice,hisretentionandtheintentionofthecustomerto
recommendtootherpotentialcustomersandfinallytopassonusefulinformationaboutthe
service quality and delivery.Customer satisfaction is relatedtodifferentwaysofinteractingwith
the environment.Apositiverecommendationisasocialinteraction,whichispositivelyrelated to
customer retention,reducestransactioncostsandincreaseslong-termprofitability(Jamieson,
1994, Mackey,
2005).Wordofmouthhasgreatcommunicationpowerbecauseitisadirecttransmissionofcustomer
satisfactiontootherpotentialcustomers.Weinberger,AllenandDillon(1981)andHerretal
(1991),areconvincedthatwordofmouthismoreimportantthaninformationaboutservice
generatedbymarketingactivities.Thecommunicationpowerofwordofmouthismanifested
whentheserviceproviderfailstomeetthecomplaintsofthecustomerorhisreactionsarenot
congruentwiththecustomerdemands.Thehighestimportanceofwordofmouthiswhen
customerreactiontotheserviceproviderisnegative(Richins,1983).Theresultofnegative
perceptionsisadissatisfiedcustomer,whorarelydecidestorepurchasetheservicefromthe
sameprovider(NewmanandWerbel,1973).Theworstcaseiswhenacustomerrefusestobuy
anotherservicefromthesameprovider (FitzgibbonandWhite,2007).Word ofmouthisclosely related
to the customer intentions to repurchase the service (Gupta and Zeithaml, 2007).

2.1.3The relationship between ServiceQuality and Customer Satisfaction

Inbankingindustry,servicequalityisoneofthemostimportantaspectsofthepremium
customer experience.Mostorganizationsmonitortheirservicesqualityonaregularbasisto
ensuremaximumcustomersatisfactionandto improve customer retention and
loyalty.Customersatisfactionisattainedbyproperlymeetingthecustomerdemandsandexpectationsand
providingserviceswhichareuptothemarketstandards(Gitomer,1998).Apositive
consumptionexperienceofthecustomerensuresthatoverallhisfeelingsfortheproductsor

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servicesconsumedarepositive.Howevercustomersatisfactiondoesnotguaranteerepurchase,
customer retention, or loyalty.
Severalevidencesfoundinliteratureestablishthatthereisasignificantcorrelationbetween
servicequalityandcustomersatisfaction(Sureshchandaretal.,2002;Bouldingetal.,1993;and Bitner,
1990).WhileSprengandMackoy(1996)provided evidence of the significant correlation between
service quality and customer
loyalty.Servicequalityhasbeensuggestedasastrongpredictorofcustomerretentionandcustomer
satisfactionbymanyorganizational researchers.Service qualityisadriveofthecustomer
satisfaction that impacts customer loyalty (Cronin et al., 2000).Servicequalityisakeyfactorfor
customer satisfaction.Itisanimportanttoolforbanksforaugmentingtheirincomeandmarket
share (Muyeed,2012)
TheSERVQUALmodel(Parasuraman,Ziethaml&Berry,1988)suggeststhatthedifferences
betweencustomers‟expectationsabouttheperformanceofageneralclassofserviceproviders
andtheirassessmentoftheactualperformanceofaspecificfirminthatclassresultsin perceptions of
quality.Sothatthefirststepinsatisfyingcustomersistodeterminethelevelof customer service through
service quality assessment.Butisthereaconsensusamongresearchers,
astheyargueoverwhetherhighdegreeofservicequalityalwaysbringsaboutsatisfaction.The
workofBitneretal(1990)proposedanalternativemethodanddefinedservicequalityasthe
customer‟soverallimpressionofthe relative inferiority/superiorityofafirmanditsservice
offerings.Antreas(1997)foundthatserviceproviderperceptionsaboutcustomersatisfaction are a
function of perceived service quality.

2.2EmpiricalLiterature Review
JabnounandAl-Tamimi(2003)foundthatbankswithbetterambienceenhancecustomer
satisfactioninabetterway.Associationbetweenservicequalityandcustomersatisfactionin
bankingsectorofSwedenisexaminedbyZineldin(2005).He found that by combining tangible
andintangibleattributesofpremiumqualityinproductsandservicesprovidedbybanks,they
may create a strong and long-term relationship with their customers.

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Thisservicequalitydimensioncomprisesofbankambience,serviceequipment,human
resources(staff)andthemeansofcommunication.Insimplewordstangiblesareaboutcreating
foremostimpressions.Allorganizationsdesirethattheirconsumersgetanexceptionaland
positiveforemostimpression.Focusingonthisparticulardimensionwillhelpthemtogain
maximum benefit.(Swar&Sahoo, 2012).Ladharietal.,
(2011)conciselyexplaintheideaoftangiblesroleinbankingsector.Service
qualityiskeytooltoachievecustomer‟sattention.Varying behaviors and attitudes of customers
demand high service quality to attain their perception of service.
Servicequalityhaslinearrelationshipwithsuccess and profitability of business.GeneralElectric
(GE)hasinvestedheavilyinqualityserviceandinreturntheyearnedhugeprofitseveryyear.
GEconsideredbothtangibleandintangibleaspectsofservicequalityequallyimportantinthe success of
organization (Tax & Brown, 2012).
Environmentandcultureofdifferentareasserveasaguideforbusinessesonhowtoadapttheir
policiesinglobalperspectiveforaparticulararea.Theyhavetomakechangesinthesetupof
theiroutletsandbranches.Banking industry mostly follows identical office ambience setups and
installssimilarserviceequipmentallovertheglobetomaintainastandard.Butadapting
accordingtoculturalneedsofparticularareasuptosomeextentwillmakecustomersfeelmore
comfortable and loyal (Ganguli& Roy,
2011).Theassociationbetweendimensionsofservicequalityandcustomersatisfactionwas
investigatedbyIbáñezetal.(2006).They found a significant relationship between reliability
ofservices on the satisfactionlevel of customers.
Theliteraturerevealsanincreaseddegreeofpositiverelationshipbetweenservicequality,
customersatisfactionandperformance(bothfinancialandnon-financial)whereface-to-face dealing
between customer and employee is the only focus.Technology expansion has had a great
impactonthechoiceofservicedeliverystandardandservicesmarketingstrategies.

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Inadditiontotangibles,reliabilityandresponsiveness;assurancehasbeenidentifiedasa
significantdimensionofservicequalitybyParasuramanetal.(1988).Theyproposethatallof
these dimensions significantly enhance customer satisfaction.Itisbelievedthatiftheemployees
offinancialinstitutionsdisplaytrustworthybehavior,thesatisfactionlevelofcustomerscanbe
enhancedsignificantly.Itmayalsopositivelyinfluencerepurchaseintensionofcustomers
(Ndubisi, 2006; and Ndubisi&Wah,
2005).Apositiveandsignificantrelationshipisfoundbetweenempathyandcustomersatisfactionby
IglesiasandGuillén(2004).Itwasproposedinanotherresearchstudy,thatcustomersmay
remainunsatisfiedwithservicequalityifagapisleftinempathy.ItwasalsoestablishedbyAl- Marrietal.
(2007)thatcustomersatisfactionissignificantlyimpactedbyempathy.Itmakes
customerscontendedandinthelong-runservesasanimportantpredictorinimprovingthe financial
performance of the organization. Wiesekeetal.
(2012)empiricallyinvestigatedtheroleofempathyinservicequalityandits impact on customer
satisfaction.Itwasestablishedthatcustomerstreatedemphaticallyaremore
oftenvisitorsandproneforgiveanymistakesthatmayoccur.Empathycreatesanemotional relationship
with customer, providing customer atouchofimportance forbusiness.Thisleadsto retention and
creation ofnew customer‟s pool.
Juneja(2011)hasalsostudiedthecorrelationbetweenservicequalitydimensionsandcustomer
SatisfactioninBangladeshbankingindustry.Itwasfoundthatcustomerloyaltycanbewon through
empathy.Empathycanplayroleinimprovementofservicequality,customerloyalty andfinally
satisfactionKaratepe(2011)exploredtheserviceenvironmentimpactwithempathyandreliability
onsatisfaction.Empathyworksasamoderatorbetweenqualityandcustomersatisfaction.Empathycan
change the behavior of customer ultimately.

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2.3ConceptualFramework
The framework for the study was adopted and modified fromtheempirical study by Dehghan, A.
(2006)depictedinFigure1.Thefigureillustratestherelationshipbetweenservicequalityand
customer satisfaction and the characteristics or variables that determines each of
them.Theframeworkindicatesthatperceivedqualityisconsideredanantecedentofcustomersatisfaction
(Woodsideetal.,1989;Reidenbach&Sandifer-Smallwood,1990;Cronin&Taylor,
1992;Fornell,1992;Anderson&Sullivan, 1993; Gotlieb et al., 1994; Spreng&Mackoy, 1996).
ItindicatesthatthequalityofservicemeasuredbytheSERVQUALvariablesmayleadto
customer satisfaction.Avastnumberofspecificconstructshavebeenusedinconceptual
discussionsandempiricalexaminationsofcustomersatisfaction,yettheyseemtohaveatleast
onethingincommon(ataveryhighlevelofaggregation):theyrefertothecustomer‟s
relationshipovertimetowardonespecificobject(avendor,abrand,aservicesupplier,etc.)
(Soderlund,2005).Inaddition,MittalandLassar(1998)foundthattherewasarelationship
between service quality and customer satisfaction.ElnanandAndersen(1999)provedapositive
relationshipbetweenservicequalityandcustomersatisfactioninthebusindustryinNorway.A
recentstudybyOjo(2010)inthetelecommunication industry showed that a positive relationship
existsbetweenservicequalityandcustomersatisfaction.Thesamerelationshipisdemonstrated
byCook(2008)andOyeniyiandAbiodun(2008).Fornelletal(1996)arguedthatperceived
quality,whichhadbeenexplainedastheservedmarket‟sevaluationofrecentconsumption
experienced,wouldhaveadirectandpositiveimpactonoverallcustomersatisfaction.In their
developmentoftheAmericanCustomerSatisfactionIndex(ACSI),theyconcludedthatoverall
customersatisfaction,especiallyforASCI,hasthreeantecedents,whichare:perceivedservice
quality, perceived value and customer expectation. In view of the literature discussed above, the
following research modelfor the study is formulated.
Thehypothesisforthisstudythuswas:Highlevelofservicequality exerts a strong influence on
customer satisfactionfor Wegagen Bank S.C.

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Figure 1: conceptual framework of the study

Service
Quality
Reliability

ResponsivenessCustomersatisfaction

Assurance
Empathy
Tangibility

Source: Developed by the researcher

14
CHAPTERTHREE

RESEARCHMETHODOLOGY

3.1Research Design
Theresearchdesignthatwasusedinthisstudywascross-sectionalsurveydescriptiveresearch
design.BrymanandBell(2011)defineadescriptiveresearchasonethatisusedtoobtain
informationtoportraytheparticipantsin an accurate way.It is usually concerned with describing
apopulationwithrespecttospecificvariables.Oneofthemainadvantagesofusingdescriptive
researchdesignisthatitprovidesarelativelywholepictureofwhatisoccurringatagiventime.
Italsoallowsthedevelopmentofquestionsforfurtherstudies.Asurveyisamethodof
collectingdatafromparticipantswhoanswerquestionsadministeredthroughinterviewsor
questionnaires. Thestudydesignofthisstudywascross-sectionaldesignonthebasisof time horizon
because it presentsa„snapshot‟ofresultsandcharacteristicsassociatedwithitataspecificpointoftime
ratherthanfollowingsamesampleovertimeandfrequentobservations.Thestudyisbasedon
quantitativemethodratherthanqualitativebecausestatisticalornumericalanalysiswasapplied
tosetuprelationshipbetween the variables.The chosen methods to gather the empiricalmaterialis
quantitative method in order to get the most factual and dependable information.

3.2Source andtypes of Data

Forthisstudyprimarydatawereused.Primarydatawereincludedthestatusof service quality
andcustomersatisfactionthatwerecollectedfromcustomersoftheselectedbranches.These
data were collected from customers of Wegagen Bank.

3.3Sampling Technique and Sample Size

Convenientsamplingwereusedtoselectasampleofcustomersbecauseofitishardtoaccess
Customer‟slist easily.Customerswhocametothebanksinthedatacollectionperiodwere
Consideredasthestudypopulation.Thecomingparticipantswereselectedbythedatacollector
based on their willingness.

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 CHAPTER FOUR
4. Research Work plan and Budget
4.1 Research work plan

Months
Feb march April may June July August Sept December Nov October January

Proposal preparation

Submission of final
Proposal
Proposal defense

Data collection

Processing of data

Progress report

Collection, interpreting
and Data analysis
Thesis writing

Submission of first draft

thesis to advisors
Finalization and
submission thesis to the
center
Thesis defense

4.2 Research budget

Budget category Days Rate /Day Amount (Birr) Remark

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 Personal 5 220 1600
Data collection 4 450 1500
Data analysis 2 _ 1200
Transport 5 100 500
Contingency 10% _ 1420
Mobile Card 10 20 200
Copy 2 200 400
Total 18 1370 6820

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17
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