THE EFFECTS OF SERVICE QUALITY ON CUSTOMER

SATISFACTION IN COMMERCIAL BANK OF ETHIOPIA: THE

CASE OF ADAMA BRANCH
By : Chaltu Lencho
Advisor Name : Dr. Temesgen Abiyo (PhD)

July ,2022
Adama,Ethiopia
Outlines or contents
Background of the Study
Statement of the Problem
Research Questions
Objectives of the Study
Significances of the Study
Scope of the study
Limitation of the study
Research Design and Methodology
Major findings
Conclusions
Recommendations
 Background of the study
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 customer’s needs or expectations.
customers are considered as the back bone of any organization (Robert,
2003).
According to Yoo and Park (2007), service quality is the firm’s ability to
create and sustain competitive advantage depends upon the high level
of service quality provided by the service provider.
Many globally dominant and successful banks have achieved their
current position by innovating and improving the service provision
through meticulous evaluation of service quality and customer
satisfaction (Koskosas, 1995)
Statement of the Problem
Customer satisfaction also leads organizations to gain loyalty and achieve the
desired objectives. Therefore, it is essential for organizations to satisfy their
customers promptly so that they can achieve what they plan. Banks as a business
organization should provide a great care for its customers‟ to attract, retain and
gain their loyalty.
Levesque and McDougall (1996) have confirmed and reinforced the notion that
consistent poor customer experience as a result of poor service quality leads to
a decrease in the levels of customer satisfaction and the chances of further
willingness to recommend the service (i.e., word-of-mouth advertising or
referrals) is lessened
This is true for commercial bank of Ethiopia, which is the leading bank in the
country. Even though CBE has been providing many kinds of banking services
since its establishment in 1942, it cannot go further in satisfying its customers.
Cont…
Many research was conducted on Effects of service quality on customer
satisfaction . Eg Kassa (2012) conducted a study on the effect of customer
service quality on customer satisfaction in selected private banks in Addis
Ababa and found that except responsiveness, all service quality
dimensions (tangibility, assurance, empathy and reliability) have positive
and significant impact on customer satisfaction, especially, indicated that
customers were most satisfied with the assurance dimensions of service
quality. On the contrary, customers were less satisfied with reliability and
empathy dimensions of service quality.
Yonatan (2016) also found that Commercial Bank of Ethiopia, Awash
International Bank and United Bank had a negative gap in all dimensions.
This implies that the customers’ perceptions falls short of their
expectations.
Cont…
 Even though many study was conducted on the effects of service
quality on customer satisfaction. There is no study conducted in Any
private and government bank in Adama City.
There fore these study was conducted to fill the gap of litrature on
selected title In Adama city. Therefore the study intended to
identifies the effects of service quality on customer Satisfaction of the
CBE in Adama. Branch. The purpose of this study is to determine the
effects of service quality on customer satisfaction.
 Research Question

Therefore the following guiding questions were used in this study to

get answer for the problem.
• To what Extent Customers are satisfied in the sampled Banks
• What are the major Factors affecting Customers satisfaction In the
sampled Banks
• What are possible strategies to increase a customer satisfaction in
the sampled banks
 Objectives of The Study
The general objective of this study was to assess the effects of service
quality on Customer Satisfaction in Commercial Bank of Ethiopia Adama
Branch.
The specific objectives of this study are the following:
• To identify the extent of service quality on customer satisfaction of the
banks
• To identify the major factors affecting customer satisfaction in the
sampled banks
• To Identify A possible strategies to increase a customer’s satisfaction in
the sampled banks
Significances of the Study
The finding of the study had some value to the concerned body such as:
 Managers
 Police makers
researchers and finally customers are benefited from the findings.
Scope of the study
• This Study Delimited to geographically Adama city, CBE Adama Branch.
This is because to make data that will be gathered more manageable.
• In terms of scope, despite the fact that, there are positive and negative
effects of service quality on customer satisfaction, the study was focus
on positive of service quality on customer satisfaction.
• Interms of concepts the was delimited to Service quality dimensions
such as reliability, responsiveness, assurance, empathy, and tangibles
any other aspects not specified here are outside the scope of this
study.
Limitation of the study
The study was limited by time and mainly by financial constraints to
extend the study to other banking institution than presently done. In
Adama City they are many Private banking and other CBE Branch.
Due to lack of time, financial resources and gap of conducting
extendable study is limited by all above factors.
 Research Methodology
Research Approach Qualitative and Quantitative Approach

Research Design  Descriptive research design

Sampling techniques  The sampling strategy used were probability sampling

techniques and stratified sampling techniques

Sampling Frames  Customers of the bank were classified in to different

groups based on their type. I.e. current account holder,
saving account holder and one time customer and
customers from each group were selected as a
respondent using random sampling technique. The
researcher takes a sample of 100 customer from saving
account holders, 20 customer from current account
holder, A total sample size of this research will be 120
customers.
Data Sources  Primary and Secondary sources of data were used
in generating relevant data

Data Gathering Tools  Questionnaire (open ended and closed ended ) prepared
for bank customer
 Quantitative data were measured by five point ikert type
scale.
 Interview were used to collect data from bank
representatives

Data Analysis  means, standard deviations ,Frequencies, tables,

numerical figures and Percentages were used as the
main techniques for analyzing and presenting of the
collected
 Pearson correlation and multiple regression were also
employed to see the relationship between dependent
and independent variable
 Summary of Major finding
The results of background information of respondents indicated that
majority of the total respondents (65.8 are male, (45.0) aged in the
range of 42-50 years, (52.5%) are degree holders, and (63.3%) of the
respondents are government employees.
The results of the descriptive statistical analysis also indicated that,
customers were most satisfied with the responsiveness dimensions of
service quality followed by tangibility, reliability. However, customers
were less satisfied with Assurance and empathy dimensions of service
quality.
The correlation result show that there is a positive and significant
relationship between tangibility and customer satisfaction, reliability
and customer satisfaction, assurance and customer satisfaction,
empathy and customer satisfaction
Cont..d
 However, the results indicate that, there is negative and insignificant
relationship between responsiveness and customer satisfaction.
The finding also indicates that the highest relationship was found
between tangibility and customer satisfaction, while the lowest
relationship was found between responsiveness and customer satisfaction.
Furthermore, the multiple regression results showed that except
responsiveness the four service quality dimensions (tangibility, reliability,
assurance and empathy) have positive and significant effect on customer
satisfaction.
The findings of this study also indicated that Responsiveness is the most
important factor to have positive effect on customer satisfaction, followed
by Tangibility and reliability.
 Conclusions
The study was conducted to examine the effect of customer service quality
on customer satisfaction in CBE of Ethiopia Adama Branch.
The finding of the study indicates that, customers were most satisfied with
the Responsiveness dimensions of service quality. However, customers were
less satisfied with Assurance and empathy dimensions of service quality.
The correlation result shows that, unlike Empathy, Assurance and Tangibility
the two service quality dimensions (Responsiveness and Reliability) are
positively and significantly related with customer Satisfaction.
The findings of this study also indicated that Responsiveness is the most
important factor to have a positive and significant effect on customer
satisfaction. In addition to this, except Assurance the four service quality
dimensions significantly explain the variations in customer satisfaction.
Recommendations
Based on the findings and conclusions of the study, the researcher forwards the following
recommendations to the management of the banks and suggestion for other researchers.
Empathy dimension was considered as one of the most important factors influencing
customer satisfaction.
However, the customers of CBE of Ethiopia were found less satisfied in terms of the
empathy dimensions. One way of addressing this could be by treating customer with
great respect, giving individual attention to customers, serving customers based on their
specific needs and treating customers in a friendly manner. This is to say, the bank
management should focus on this factor to maximize customer satisfaction.
Furthermore, reliability dimension was considered as one of the most important factors
influencing customer satisfaction. However, the customers of CBE of Ethiopia Adama
Branch were found less satisfied in this regard. One way of handling this problem is by
delivering its services at promised times, and handling customer’s complaints effectively.
Cont..d

The finding of the study also indicates that the most important strategies
to increase customer satisfaction is embracing new technology and
providing customer feedback with closed loop functionality.
Direction for Future Research
This study was conducted to examine the effect of customer service
quality on customer satisfaction in selected in commercial bank of Ethiopia
Adama branch. The sample was drawn from only CBE of Ethiopia Adama
Branch , thus this study may be limited in its generalisibility of the findings
to others private banks. So, future research should have to draw sample of
respondents on more number of private banks for the sake generalizing
the results of the study.
Cont…
 This study included only five factors, there could be some other
relevant factors that may be perceived as important by customers,
but those were excluded from this study.
 Future researches, therefore, may consider more factors, like
corporate image, location, price, staff attitude and other variables
which can influence customer satisfaction.
 Furthermore, conducting a replication study in other service
industries is also needed; for example in the hotel service,
telecommunication service, post office service and so on.
 #The End of presentation
Thank Your for Your attention

Julay ,2022
Adama ,Ethiopia