ST.

MARY’S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

CUSTOMERS EXPECTATIONS AND PERCEPTIONS OF

SERVICE QUALITY
THE CASE OF COMMERCIAL BANK OF ETHIOPIA
ADDIS ABABA BRANCH

BY

FANTAYE KASSAW ZELEKE

JUNE, 2021
ADDIS ABABA, ETHIOPIA
 CUSTOMER’S EXPECTATIONS AND PERCEPTIONS OF
SERVICE QUALITY
THE CASE OF COMMERCIAL BANK OF ETHIOPIA
ADDIS ABABA BIRANCH

BY:

FANTAYE KASSAW ZELEKE

A THESIS SUBMITTED TO ST. MARRY’S UNIVERSITY, SCHOOL

OF GRADUATE STUDIES IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF THE DEGREE OF
MASTERS OF BUSINESS ADMINISTRATION

JUNE, 2021

ADDIS ABABA, ETHIOPIA

 ST. MARY’S UNIVERSITY

SCHOOL OF GRADUATE STUDIES

FACULTY OF BUSINESS

CUSTOMERS’ EXPECTATIONS AND PERCEPTIONS OF

SERVICE QUALITY:

THE CASE OF COMMERCIAL BANK OF ETHIOPIA ADDIS

ABABA BIRANCH

BY

FANTAYE KASSAW ZELEKE

APPROVED BY BOARD OF EXAMINERS

________________________ _________________
Dean, School of Business

Yibeltal Nigussie (Assistant Professor)

Advisor

Girma Tegene
External Examiner

______________________________ _____________________
Internal Examiner
 DECLARATION

I, the undersigned, declare that this thesis is my original work, prepared under the guidance of
Asst. Professor Yibeltal Nigussie. All sources of material used for the thesis have been duly
acknowledged. I further confirm that the thesis has not been submitted either in part or in full to
any other higher learning institution for the purpose of earning any degree.

The candidate:

Name: Fantaye Kassaw Zeleke Sig _________________ Date: _____________

St. Mary’s University, Addis Ababa June, 2021

 ENDORSEMENT

I attest that the works contained in the thesis entitled “Customer’s Expectations and
Perceptions of Service Quality The Case of Commercial Bank of Ethiopia Addis Ababa
Branch” are the original research works of Fantaye Kassaw and conducted under my
supervision.

Name of the Advisor Signature Date

Yibeltal Nigussie (Assistance Professor) 22/7/2021

St. Mary’s University, Addis Ababa

 Acknowledgements

First and foremost, I would like to express my gratitude to God for helping me to pass all the ups
and downs of my life, especially on the closing session of this thesis. I also express my sincere
appreciation to my advisor Asst Prof. Yibeltal Nigussie for his helpful advice during the whole
process of the study. Special thanks also go to all bank staffs and customers of CBE Addis
Ababa branch who involved in this study for their cooperation in responding to the questionnaire
and sharing information.

My sincere appreciation also goes to all my colleagues and friends who have provided me with
assistance at various occasions. Last but not least, a very special appreciation goes to my beloved
brother Alemu Kassaw Zeleke for his continuous support in my life.

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TABLE OF CONTENTS PAGES

Acknowledgements .......................................................................................................................... i
List of Tables ............................................................................................................................... viii
List of Figure.................................................................................................................................. ix
Abstract ........................................................................................................................................... x
CHAPTER ONE: INTRODUCTION ............................................................................................. 1
1.1 Background of the study ..................................................................................................................... 1
1.2. Statement of the Problem ................................................................................................................ 3
1.3. Objectives of the Study .................................................................................................................... 4
1.3.1. General Objective ....................................................................................................................... 4
1.3.2. Specific objectives ...................................................................................................................... 4
1.4. Significance of the Study ................................................................................................................. 5
1.5. Scope of the study ............................................................................................................................ 5
1.6. Limitations of the Study..................................................................................................................... 6
1.7. Operational Definition of Terms ........................................................................................................ 6
1.8. Organization of the Study ................................................................................................................ 7
CHAPTER TWO: REVIEW OF RELATED LITERATURE........................................................ 8
2.1. Theoretical Literature......................................................................................................................... 8
2.1.1 Definition of Service .................................................................................................................... 8
2.1.2. Customer Expectations of Service Quality ................................................................................. 8
2.1.2.1. Components of Customer Expectations ................................................................................... 9
2.1.2.2. Factors that Influence Customer Expectations ......................................................................... 9
2.1.3. Customer Perceptions of Service Quality ................................................................................. 10
2.1.3.1. Factors that Influence Customer Perceptions ......................................................................... 10
2.1.4. Service Quality.......................................................................................................................... 11
2.1.4.1. Understanding Service Quality .............................................................................................. 12
2.1.4.2. Measuring Service Quality..................................................................................................... 12
2.1.4.3. Dimensions of Service Quality .............................................................................................. 14
2.2. Empirical Review............................................................................................................................. 16
2.3. Conceptual Framework of the Study ............................................................................................... 18
CHAPTER THREE: RESEARCH METHODOLOGY ............................................................... 20
3.1. Research Approach .......................................................................................................................... 20
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 3.2. Research Design............................................................................................................................... 20
3.3. Population, Sample size and Sampling Techniques ......................................................................... 20
3.3.1. Research Population.................................................................................................................. 20
3.3.2. Sample Size ............................................................................................................................... 21
3.3.3. Sampling Technique ................................................................................................................. 21
3.4. Sources of Data ................................................................................................................................ 22
3.5. Data Gathering Instruments ............................................................................................................. 22
3.6. Pilot Testing ..................................................................................................................................... 22
3.7. Methods of Data Analysis ................................................................................................................ 23
3.8. Ethical Consideration ....................................................................................................................... 23
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION .......................................... 24
4.1. Response Rate .................................................................................................................................. 24
4.2. Respondents‟ Demographic Profile ................................................................................................. 25
4.3. Analysis of Collected Data .............................................................................................................. 28
4.3.1 Service Quality Gap Analysis .................................................................................................... 28
4.3.2. Customer‟s Response on SERVQUAL Dimensions................................................................. 29
4.3.2. Analysis of SERVQUAL Dimensions Service Quality Gap Score .......................................... 42
4.3.3. Analysis of Overall Service Quality ......................................................................................... 43
4.3.4. Analysis of Overall Customer Satisfaction ............................................................................... 45
4.3.5. Correlation Analysis ................................................................................................................. 45
4.3.6. Discussion ................................................................................................................................. 48
5.1. Findings............................................................................................................................................ 50
5.2. Conclusions ...................................................................................................................................... 51
5.3. Recommendations ............................................................................................................................ 52
References ..................................................................................................................................... 53
Appendix I: Questionnaire in English........................................................................................... 56

vi
ABBREVIATIONS AND ACRONYMS

AA Addis Ababa branch

CBE Commercial Bank of Ethiopia

OCS Overall customer Satisfaction

OSQ Overall Service Quality

SERVPERF Service Performance model

SERVQUAL Service Quality Model

SPSS Statistical Packages for Social Science

SQ Service quality

vii
List of Tables
Table 3.1.Classifications of Customers ........................................................................................ 21
Table 4.1.A. Demographic profile of Respondents ...................................................................... 25
Table 4.1.B. Demographic Profile of Respondents ...................................................................... 27
Table: 4.2. Descriptive Statistics on Tangibility Dimension ........................................................ 30
Table 4.2.1:Paired Samples Statistics Based on grand mean....................................................... 31
Table 4.2.2:Paired Samples Test for tangibility............................................................................ 31
Table: 4.3. Descriptive Statistics on Reliability Dimension ......................................................... 32
Table 4.3.1 Paired Samples Statistics for Reliability((based on grand mean) .............................. 33
Table 4.3.2 Paired Samples Test for Reliability(based on grand mean) ....................................... 33
Table: 4.4. Descriptive Statistics on Responsiveness Dimension................................................. 34
Table: 4.5. Descriptive Statistics on Assurance Dimension ......................................................... 35
Table 4.5.1 Paired Samples Statistics for Assurance .................................................................... 36
Table 4.5.2 Paired Samples Test for Assurance(based on grand mean) ....................................... 36
Table: 4.6. Descriptive Statistics on Empathy Dimension ........................................................... 37
Table 4.6.1: Paired Samples Statistics for Empathy ..................................................................... 38
Table: 4.7. Descriptive Statistics on Price Dimension .................................................................. 39
Table 4.7.1: Paired Samples Statistics for Price ........................................................................... 39
Table 4.7.2 Paired Samples Test for price (based on grand mean)............................................... 40
Table: 4.8. Descriptive Statistics on Accessibility Dimension ..................................................... 40
Table 4.8.1 Paired Samples Statistics for Accessibility................................................................ 41
Table 4.8.2 Paired Samples Test for Accessibility (based on grand mean) .................................. 41
Table: 4.9. Descriptive Statistics on SQ Gap Score...................................................................... 43
Table 10: Overall Service Quality ................................................................................................ 44
Table 11: Overall Customer Satisfaction ...................................................................................... 45
Table 12: The correlation analysis results for all variables under study....................................... 47

viii
List of Figure
Figure 2.1 Conceptual frameworks on the effect of the service quality on customer satisfaction .............. 19

ix
 Abstract
Commercial Banks of Ethiopia plays a significant role in the economy, making up one of the
biggest provider of services in Ethiopian economy. Hence, providing better quality is vital as
banks have to compete for customers. The purpose of this study is to evaluate the current level of
customers’ expectations and perceptions of service quality of CBE Addis Ababa branch. To
measure the service quality and customer satisfaction of bank service of CBE Addis Ababa
branch SERVQUAL model was used. The SERVQUAL instrument maintained seven dimensions
namely tangible, reliability, responsiveness, assurance, empathy, price and accessibility with a
total of 30 statements placed on a 5 – point likert type scale (1-being strongly disagree to 5-
being strongly agree). Furthermore, a sample of 100 respondents in CBE Addis Ababa branch
was drawn using a convenience sampling approach, and 100 completely filled questionnaires
were used in performing final analysis. The study was used both quantitative and qualitative data
collection approach and also descriptive research design was applied .Findings support that all
SERVQUAL dimensions of the service quality of CBE Addis Ababa Branch. Empathy was found
to be the most critical factor of service quality followed by, responsiveness, reliability,
assurance, accessibility and price, The main limitation of this study is that the data were gather
form Addis Ababa branch only with a small sample size. Both the overall service quality and
customer satisfaction were found to be reported above average, while still need improvement
therefore it can be conclude that CBE Addis Ababa branch has to do on attributes associated
with accessibility, empathy, responsiveness reliability, assurance and price in order to bring
higher the level of customer satisfactions.

Key words: expectation, perception, service quality, customer satisfaction, SERVQUAL model

x
 CHAPTER ONE

INTRODUCTION

This chapter introduces the general idea of the whole research area. It covers the background of
the study, statement of the problem, research questions, and objectives of the study, significance
of the study, scope and limitation and organization of the study.

1.1 Background of the study

In today‟s business world, competition has made it difficult for organizations to survive and
every day new products (services and goods) are coming to the market. In order to survive and
earn high profit and avoiding customer dissatisfaction companies need to work hard on their
service quality.

The current business environment is becoming competitive and challenging than before. With
multidimensional challenges and demand of globalization, the organizations are forced to
reengineer their products and systems to improve the service quality and remain competitive.
(Yasin et al., 2004; Rodie and Martin, 2001).

Customer service is considered as an integral part of any facet of industry and it defines the
future of any organization. The rapid advances in technology based systems related to internet
are leading to fundamental ways in how different organizations interact. This applies same for
relation of an organization with its customer. In different services industries the relationship
between customer satisfaction and service attributes have been difficult to identify because
services nature is intangible. Due to intangible nature of services it is difficult for the firms to
analysis how the customers perceive and evaluate the desired outcome of the service quality. As
customer evaluates their level of satisfaction by experimenting the service quality, satisfaction
with services is related to conformation or disconfirmation of expectations. The issue of highest
priority today involves understanding the impact of service quality on profit and other financial
outcomes of the organization (Hong, Goo et al., 2004; Nguyen and Leblanc, 2002).

Service quality refers the difference between customers‟ expectations for service performance
prior to the service encounter and their perceptions of the service received (Ananth et al., 2011).
In addition to this, service quality can be described as meeting customer needs satisfactorily by

1
 matching his/her expectations. Service quality in banking implies constantly anticipating and
satisfying the needs and expectations of customers (Ranjan et al., 2010).

Expectations are usually formed prior to the usage of a service but may occur where the
customer is actively involved in the delivery of a service. They reflect inclinations or beliefs as
to what will or should happen. Moreover, perceptions can also develop during a service.
Invariably materialize after usage. They represent customers‟ evaluation of the service,
particularly in relation to expectations (Peter and Angela, 2006, p.7). Service quality is
measured by SERVQUAL instruments. This instrument has been widely utilized by both
managers and academics (Safakli, 2009) to assess customers‟ perceptions of Service quality for
a variety of service e.g. Banks, credit card companies and repair and maintenance companies.
SERVQUAL is the most extensively used and accepted generic framework for measuring the
perceptual gap in service quality. Therefore, banks need focus on Service quality as a core
competitive strategy (Mohammed and Shirley, 2009). Moreover, banks all over the world offer
similar kinds of services, and try to quickly match their competitor‟s innovations.

Banks play a very important role in the economic life of a nation. Although the banking industry
is growing and offering various types of financial services to the public, the only existence of
banks do not do any good unless they deliver a quality service. There is no doubt that the
increasing level of competition has improved the quality of service to customers of the banking
industry. Banking industries in Ethiopia is consequently put into lot of pressures towards
increase in competition. Various strategies are formulated to retain the customer and the key of it
is to increase the service quality level. Being Commercial Bank of Ethiopia offers similar kinds
of services to its customers like other banks in the world, it is expected to deliver quality bank
services to its customers to be competent and also meets the customer‟s expectations on the
service and their perceptions on the service they received. Commercial Bank of Ethiopia has
been playing a noticeable role in economic development of the country. Today, the CBE has
aggressively expanded its presence in all directions of the country. Despite the increasing
number of Private Commercial Banks in Ethiopia, the CBE has remained in the lead in terms of
assets, deposits, and capital and customer base. Currently (January 12, 2021, it has 1,656

2
branches open the entire breadth and width of the country, of which 365 branches in Addis
Ababa reign (CBE Management Information System, January, 2021).
The main purpose of this study is to assess the current level of customers‟ expectations and
perceptions of banking service of CBE Addis Ababa branch in order to determine the associated
service quality and customer satisfaction.

1.2. Statement of the Problem

In the banking industry, offering quality services is very significant to create closer attachment
with the entire customers. The issue of quality service is becoming a global concern that
demands continuous improvement to fit the unbalanced environment and changing customer
needs. Commercial Bank of Ethiopia is the largest and the country‟s most important financial
sector. It plays a significant role in the economy, making up one of the biggest service providers
in Ethiopian economy. Hence providing better service quality is vital as banks have to compete
for customers. With stiffer competition among domestic banks, therefore, it is important for the
CBE to improve the quality of its services. Customer expectations about services tend to be
strongly influenced by their own prior experience as customers with a particular service provider
with competing services in the same industry, or with related services in different industries.
(Tahir and Bakal, 2007).

Customers‟ expectations may also vary from one industry to another reflecting industry
reputation and past experience. In many countries people have lower expectations of government
service provider than they do of private companies (Lovelock and Wright, 2002, p.81) and CBE
in this case is not exceptional because it is one of the public sector banks in Ethiopia.

Within this background, CBE has used various leading programs of customer service, in order to
offer an exceptional level of service to satisfy its customers. (www. combanketh.et).

Nevertheless, working as a senior branch manager in CBE, the researcher has noticed some
customers‟ complaints on the services quality level of CBE. Being CBE is one of service
offering institutions, the quality of the service offered by this bank is very crucial for its survival.
As most of the commercial banks in the banking industry of Ethiopia offer similar types of
products, the differentiation lies in the service quality offered. Banks operating in Ethiopia are
consequently put in to lot of pressures as a result of the increased competition in the industry.
Various strategies are formulated to retain the customer and the key of it is to increase the

3
service quality level. Such kind of research is so important to provide suggestion and improve
service quality, to increase customer satisfaction level and to retain customers of CBE
.Moreover; the output of this study is beneficial to identify the gap between customer perception
and expectation of service quality of CBE. Accordingly, CBE will improve its performance,
profitability and gain competitive advantage in the market by filling the gap.

Therefore the main interest of this study is to measure the perception and expectation of
customers concerning a service provided by the bank and attempts to ascertain current level of
expected and perceived service quality level of CBE Addis Ababa branch customers by raising
the following research questions:

1. What are the factors that influence the CBE Addis Ababa branch quality service
provision?
2. What is overall service quality and satisfaction level of customers at CBE Addis Ababa
branch.
3. What is the gap between customers‟ expectations and Perceptions of service quality of
CBE Addis Ababa branch?
4. What is the relationship between service quality dimensions and customer satisfaction?

1.3. Objectives of the Study

1.3.1. General Objective

The general objective of this study is to examine the current level of customers‟ expectations and
perceptions of banking service of CBE Addis Ababa branch in order to determine the associated
service quality.

1.3.2. Specific objectives

In assuring that the above general objective is achieved, there are few specific objectives that
need to be accomplished in the case of CBE Addis Ababa branch. These specific objectives are
the following:

4
  To identify the factors that influences the CBE Addis Ababa branch quality service
provision.
 To evaluate the overall service quality and satisfaction level of customers at CBE Addis
Ababa branch.
 To assess the relationship between service quality dimensions and customer
satisfaction.
 To identify the gap between the customers‟ expectations and perceptions of the bank
services.

1.4. Significance of the Study

The findings of the study are expected to be providing a more reliable understanding of the
current level of customer satisfaction along with customer-perceived service quality of the CBE
Addis Ababa branch. Therefore, it is assumed that the study gives an insight to the managers and
higher officials on the part of CBE about the customers‟ expectations and perceptions of their
service quality to determine the areas of resource allocation for service improvement and
ensuring satisfied customers. It will also serves for other researchers who would like to conduct
further research in the area of marketing of financial services specifically bank service quality
and customer satisfaction.

The research would more important if it would conduct on a wider scale of the country. Due to
time and financial constraints might not undertake exhaustive study involving all branches of
CBE. Thus, the study is confined to assess customer satisfaction with service quality of Addis
Ababa branch under North Addis Ababa district. The present study is on a small sample size of
Addis Ababa branch only; therefore the results of this study could not be generalized for the
whole branches of CBE.

1.5. Scope of the study

The research was focus on customer‟s expectations and perceptions of service quality in CBE
Addis Ababa branch under north district. The bank (branch) provides various types of services
such as saving accounts, checking accounts, loan, local and foreign money transfer, foreign
exchange, fixed deposit, safe deposit etc.

5
The main area of the study is investigate the gap between customers perceptions and
expectations of service quality, measure level of overall service quality and overall customer
satisfactions of the bank by using of seven SERVQUAL DIMENSIONS. In order to conduct the
study the researcher applied a methodology of standardized questionnaires and analyzed by using
of descriptive statistics ( mean and standard deviation). Finally, due to time and financial
constraints to make the data manageable the study delimited only Addis Ababa branch.

1.6. Limitations of the Study

The researcher encountered various limitations that were likely to hinder to access information.
The study would more important if it would conduct on a wider scale of the bank while due to
time and financial constraints might not undertake in depth study involving all branches of CBE
thus this study conducts Addis Ababa branch only. The next major limitation of the study
includes the sampling approach (convenience) to select the most representative respondents from
the targeted population which limits the generalizability of the research findings. The third
limitation relates to the sample size for primary data sources; the number of participants included
in the sample is small hence it may not be good representative of the population. Lastly the
employees of the organization are busy enough so they can not able to make interview and
formal discussion about the customers.

1.7. Operational Definition of Terms

The researcher used the following technical terms in the study as defined as follows:

 Customer: refers to a generic term that anybody who receives a service or product from
some person or group of people.
 Customer satisfaction: customer satisfaction is defined as the overall attitude regarding a
good/ service after its acquisition and use.
 Expectations: refer to the desires or wants of the bank customers.
 Perceptions: refer to what bank customers actually experienced with service quality of the
bank.
 SERVQUAL: refers to an instrument for measuring service quality from a customer‟s
perspective.

6
1.8. Organization of the Study
The study was incorporated five major chapters. The first chapter dealt with background of the
study, Statement of the problem, objectives of the study, scope and limitation of the study and
operational definition of terms. The second chapter discussed the different literatures written on
the subject matter. The third chapter presents in detail discussion of the research methodology
and chapter four presents major analysis and interpretation of the data. Finally, chapter five drew
conclusion and recommendation of the study that relay on finding analysis and interpretation.

7
 CHAPTER TWO

REVIEW OF RELATED LITERATURE

This chapter focuses on the review of literature related to customer service quality and its
measurement. For the purpose, customers‟ expectations and perceptions of service quality, gap
model of service quality by emphasizing the service quality dimensions, customer satisfaction,
measurement of customer satisfaction and the service quality dimensions influence the customer
satisfaction in the banking sector are described.

2.1. Theoretical Literature

2.1.1 Definition of Service

Services are economic activities that create value and provide benefits for customers at specific
times and places as a result of bringing about a desired change in or on behalf of the recipient of
the service. A service is an actor performance offered by one party to another. Although the
process may be tied to a physical product, the performance is essentially intangible and does not
normally result in ownership of any of the factors of production. According to Lovelock and
Wright (2002, p.6), services have traditionally been difficult to define because of their diversity.
The way in which services are created and delivered to customers is often hard to grasp since
many inputs and outputs are intangible. Most people have little difficulty defining manufacturing
or agriculture, but defining service can elude them. Here are two approaches that capture the
essence of the word.

2.1.2. Customer Expectations of Service Quality

Customer expectations may be described as the desires or wants of the customer. The crux is that
customer‟s expectations are what the customer expects from the organization and its range of
product or services, i.e. what customers feel the organization should offer them. These
expectations are, in most instances different from what the customer gets in real-life situations
from the organization. What is important here is to focus on the customer perceptions, rather
than on the reality of the performance (Brink and Berndt, 2005, p.59).

8
2.1.2.1. Components of Customer Expectations
According to Lovelock and Wright (2002, pp.81-82), customer expectations embrace several
different elements, including desired services, adequate services, predicted services and a zone of
tolerance that falls between the desired and adequate service levels.

Desired Services: the “wished for” level of service quality that a customer believes can and
should be delivered;

Adequate Service: the minimum level of service that a customer will accept without being
dissatisfied;

Predicted Service: the level of service quality that a customer believes about a firm will actually
deliver;

Zone of Tolerance: the range within which customers are willing to accept variations in service
delivery. The zone of tolerance can increase or decrease for individual customers depending on
factors like competition, price, or importance of specific service attributes. These factors most
often affect adequate service levels (which may move up or down in response to situational
factors), while desired service level tends to move up very slowly in response to accumulated
customer experiences.

2.1.2.2. Factors that Influence Customer Expectations

According to Peter and Angela (2006, pp.241-242), there are five key factors that influence a
customer‟s expectations: previous experience; word of mouth communication; personal needs;
explicit service communications; and implicit service communication.

Personal Needs: any customer or user of a service will have what they regard as a set of key
personal needs that they expect the service to address. These will vary from services to service
and from customer to customer. A clear understanding of these needs is necessary to design an
appropriate service.

Previous Experience: many will have had service encounters before. Their previous experience
will in part influence their future expectations of the service. This can include their past
experience of the service in question, but also of other service for public services, expectations
will be influenced by experience of similar private services.

9
Word of mouth Communications: Expectations will be shaped by communications from
sources other than the service provider itself. This can include family, friends and colleagues, but
more widely the media and other organizations.

Explicit Service Communications: statements from staff or from leaflets or other publicity
material can have a direct impact on expectations.

Implicit Service Communication: this includes factors such as the physical appearance of
buildings.

Research suggests that the most important of these factors in shaping expectations are the
customer‟s past experience of the service and what other people say about it (Peter and Angela,
2006).

2.1.3. Customer Perceptions of Service Quality

Perceptions are defined in various ways. According to Strydom et al. (2000, p.84) perceptions
are defined as the process of receiving, organizing and assigning meaning to information or
stimuli detected by the customer‟s five senses and opinion that it gives meaning to the world
that surrounds the customer. Perceptions are also described as the end result of a number of
observations by the customer. Customers perceive services in terms of quality of services
provided and the satisfaction level attained.

2.1.3.1. Factors that Influence Customer Perceptions

Service marketers must find out whether customers have experienced quality service and are
satisfied with the service. The evaluation of services differs from person to person, culture to
culture and situation to situation. There are four important factors that usually influence the
service perception of customers (Peter and Angela, 2006). They are:

Service Encounter: is a situation where the customer interacts with service provider. In some
services, there may be many service encounters and in some services there may be a few
encounters. The most vivid impression of a service interactions are important to the service
provider who should see opportunities to excel and create delight experiences for the consumers.

Evidence of Service: is another major factor that influences consumer perceptions. The
intangible character of a service creates doubts in the minds of the customer and they search for

10
evidence in every interaction they have with the organization. The image of an organization
influences the perceptions of the customer. A favorable image, either at corporate or local levels,
is an asset for any firm because it has an impact on customer‟s perceptions relating to the
operations and communications of the firm.

Image: image communicates expectations. A positive image makes people more open to
favorable word-of- mouth communications. A natural image may not cause any harm but a
negative image certainly affects the business of the organization.

Price: Consumers frequently rely on price as surrogate indicator to develop expectations and
perceptions of a service because services are intangible. Usually, a high price leads to high
quality expectations and a low price indicates low quality offerings.

2.1.4. Service Quality

Service quality is a concept that has aroused considerable interest and debate in the research
literature because of the difficulties in both defining it and measuring it with no overall
consensus emerging on either (Wisnieski, 2001). During the past few decades service quality has
become a major area of attention to practitioners, managers, and researchers owing to its strong
impact on business performance, customer satisfaction, customer loyalty and profitability
(Magesh, 2010).

Customer service can be described as the totality of what the organization does to add value to its
products and services in the eyes of the customer. Quality is described as the measurement of
how well the product or service of the organization conforms to the customer‟ wants and
expectations. Another way to look at this issue is to say quality is the ability of the organization
to meet or exceed customer Expectations (Brink and Berndt, 2005, pp.46-47).

According to Parasuraman et al. (1985, 1988), service quality is defined as the difference
between customer perceptions of the current service being provided by a given organization and
customer expectation of excellent service within that given industry. Service quality has become
an increasing important factor for success and survival in the banking sector. This means that the
provision of high quality service facilitates the achievement of the main targets relating to
customer satisfaction and loyalty, market share, gaining new customers, productivity, financial
performance and profitability (Cui et al., 2003, p.191).

11
2.1.4.1. Understanding Service Quality
According to Lovelock and Wright (2002, pp.265-266), after making a purchase, customers
compare the service expected to what is actually received. Customers decide how satisfied they
are with service delivery and outcomes, and they also make judgments about quality.

Although service quality and customer satisfaction are related concepts, they are not exactly the
same thing. Many researchers believe that customers‟ perceptions about quality are based on
long term, cognitive evaluations of an organization‟s service delivery, whereas customer
satisfaction is a short term emotional reaction to a specific service experience. Following service
encounters, customers may evaluate the level of satisfaction or dissatisfaction and may use this

information to update the perceptions of service quality. Customers must experience a service

before they can be satisfied or dissatisfied with the outcome. Beliefs about quality don‟t
necessarily reflect personal experience as people often make quality judgment about services that
were never consumed, basing these evaluations on comments by acquaintances or advertising
messages. Managing a business to optimize customer satisfaction is a strategic imperative at
many organizations, since the cost of mediocre service quality may be high as forty percent of
revenue in some service organizations. Most organizations realize that, by improving
performance on service attributes, customer satisfaction should increase. This increase should, in
turn, lead to greater customer retention and improved quality (Lovelock and Wright, 2002, pp.
266).

2.1.4.2. Measuring Service Quality

Edvardsen et al. (1994) states that always there exists an important question: why should service
quality be measured? Measurement allows for comparison before and after changes, for the
location of quality related problems and for the establishment of clear standards for service
delivery. According to Audrey (2003, pp.38-44), measurements need to take account of different
type of concepts and customers. Indeed, different measurement criteria are required for different
concepts such as service quality, customer satisfaction, customer perceptions, expectation and
loyalty. Assessment of these concepts will also entail the use of different measuring scales, and
scope of opinions, attitudes and behaviors.

12
Service companies spend substantial time and resources on measuring and managing customer
satisfaction, customer loyalty and service quality. The comparison of customers‟ expectations
with their perceptions of a service becomes a major focus of attention in the measurement of
service quality from the early 1980s until the present day.

In relation to these concepts many researchers have focused on developing on „scale‟ to measure
service dimensions and customers perceptions and expectations. After the development of the
SERVQUAL scale in the 1980s much of the subsequent research in services used this scale.
However other scales were developed to focus on different aspects of service quality, customer
satisfaction, customer loyalty and customer perceptions during the late 1980s and 1990s. As
markets become more competitive, companies are more likely to recognize the importance of
retaining current customers. Customer retention is considered to be a relatively easy to measure
and reliable indicator of superior performance. The most frequently used methods for measuring
and assessing service quality are SERVQUAL,SERVPERF, scales for measuring customer
satisfaction and loyalty, critical incidents technique, focus group discussions, and in-depth
interviews. For the purpose of this study, the researcher focuses on the SERVQUAL
measurement.

SERVQUAL was created to measure service quality and is based on the view that the customers‟
assessments of service quality are paramount. It is operational zed in terms of relationship
between expectations (E) and outcomes (O). If the outcome (O) matches the expectation (E),
then the customer is satisfied. If the expectation (E) exceeds the outcome (O), then customer
dissatisfaction is indicated. If outcome (O) exceeds expectations (E), then customers „delight‟
may be the result.

Service quality is considered as a multiple-dimensional construct and in the early phase of

development Parasuraman et al. (1985) identified ten service dimensions. In a further refinement
these ten were reduce to five dimensions: tangibles, reliability, responsiveness, assurance and
empathy (Parasuraman et al., 1988). These formed the core of the SERVQUAL measuring
instrument. The five dimensions are measured with an instrument using 22 items. Parasuraman et
al. (1988) established that a mismatch between expectations and perceptions of performance
causes dissatisfaction or a „performance gap‟. This overall performance gap is made up of five
gaps that contribute to the perception of service delivery.

13
There are a number of criticisms of SERVQUAL .Fundamentally the problems of measuring
expectations is used as a major criticism of the SERVQUAL scale. Some researchers think that
measuring expectations is unnecessary and that measuring service outcomes or perceptions of
outcomes should be enough.

Cronin and Taylor‟s work (1992) on measuring service quality attempted to offer an alternative
to SERVQUAL. They investigated the conceptualization and measurement of service quality and
the relationships between service quality, customer satisfaction and purchase intentions. Their
work focused on trying to overcome the „perceptions-minus-expectations‟ measurement focus of
SERVQUAL. Although the SERVQUAL encounters the above problems, it is mainly used in
banks to measure the service quality gap analysis.

It could be note that there is no one study that fully and completely measures service quality and
that there is a need to fill knowledge gaps with additional studies. While there have been many
different approaches or methods for measuring service quality, SERVQUAL instrument seems to
have the greatest potentials for the applicability in different industries and sectors (Ananth et al.,
2011).

2.1.4.3. Dimensions of Service Quality

The SERVQUAL scale is the principal instrument widely utilized to assess service quality for a
variety of services. Parasuraman et al. (1988 as cited in Ananth et al., 2011) have conceptualized
a five dimensional model of service quality such as: reliability, responsiveness, empathy,
assurance and tangible. Their measurement instrument is known as SERVQUAL, which has
become almost the standard way of measuring service quality. Further, each item of
SERVQUAL has been used twice: to measure expectations and perceptions of service quality.
The central idea of this model is that service quality is the function of difference in scores or
gaps between expectorations and perceptions. The five dimensions of SERVQUAL include the
following:

Tangibles: the appearance of physical facilities, equipment, personnel and communication

materials. All of these are used in varying degrees to project an image that will find favor with
customers. Tangibles will be of particular significance where the customer‟s physical presence at
a service facility is necessary for consumption to occur.

14
Reliability: the ability to perform the promised service dependably and accurately. It is regarded
as the most important determinant of perceptions of service quality. This dimension is
particularly crucial for services such as railways, buses, banks, building societies, insurance
companies, delivery services, and trade services.

Responsiveness: the willingness to help customers and to provide prompt services. This
dimension is particularly prevalent where customers have requests, questions, complaints, and
problems.

Assurance: the employees‟ knowledge and courtesy, and the ability of the firm and its
employees to inspire trust and confidence. This dimension may be of particular concern for
customers of health, financial and legal services.

Empathy: pertains the caring, individualize attention that the service provider provides to its
customers. Small service companies are better placed (though not necessarily better at) for
treating customers as individuals than their larger, invariably standardized counterpart. However,
relationship marketing is designed to offer a more individualistic approach for customers of large
organizations.

For the purpose of this study, the researcher adds the following two additional dimensions, based
on their specific roles as witnessed through the review of related literature associated with
banking sector.

Price: It is an additional dimension to reflect the customer expectations and perceptions of

service charges and interest rates offered by the bank (Joshua and Moli, 2005).

Accessibility: refers to the approachability, availability and ease of contract with the service
company. It will include the ease with which the service company may be reached telephone, or
email, the waiting time to receive or experience the service, the opening hours or hours of
operation and the location of the service (Audrey, 2003).

According to Brink and Berndt (2005), the organization and its employees must try to understand
the customers‟ problems and strive to execute activities with the customers‟ best interests in
mind. Lovelock and Wright (2002) stated that, of the first five dimensions, reliability has
consistently proven to be the most important factor in customers‟ judgment of service quality.
Reliability improvements lie at the heart of service quality enhancement efforts because

15
unreliable service implies broken promises on the attributes that customers care about the service
received. If the core service is not performed reliability, customers may assume that the company
is incompetent, and may switch to another service provider.

2.2. Empirical Review

Osei-Poku (2012) assessed the level of service quality delivery at Merchant Bank Ghana
Limited. The focus was on the four branches of Merchant Bank located in the Kumasi
metropolis. The outcome of the study will enhance the bank‟s competitive position in the
banking industry and ensure its survival. Convenient sampling technique was employed in the
study with Statistical Package for Social Scientist (SPSS) used in the analysis. The expectations
and perceptions of Merchant Bank customers were assessed under the five dimensions of
SEVQUEL. It was found that all the five dimensions contributed to quality of service delivery in
Merchant Bank. Comparison between the customer responses and service delivery revealed the
need for Merchant bank management should work towards enhancing customer relationship
management. Statistically using the Z test, there were no significant differences among the five
service quality dimensions. However, assurance and tangibility dimensions recorded significant
difference among the expectation and perception with a quality gap of 0.310 and 0.325
respectively. It can however be concluded from the analysis that customers were not satisfied
with service delivery of Merchant Bank. To ensure customer retention and improve on
competiveness, Merchant Bank should regularly assess service delivery.

Shanka (2012) measure the quality of service offered by private banks operating in Ethiopia.
Moreover, it tries to investigate the relationship between service quality, customer satisfaction
and loyalty. The five dimensions of SERVPERF model i.e. reliability, assurance; tangibility,
empathy and responsiveness were used to measure the quality of service offered by the private
banks. In order to achieve the aims, both primary and secondary sources of data were used. The
primary data were collected through administrating questionnaire. Convenient sampling
procedure was used to obtain 260 responses from customer of banking services in Hawassa city
on the 22 item SERVPERF scale measure perception regarding their respective banks service.
Correlation and multiple regressions were used to investigate the relationship between dependent
and independent variables. The correlation results indicate that there is a positive correlation
between the dimensions of service quality and customer satisfaction. The results of the

16
regression test showed that offering quality service have positive impact on overall customer
satisfaction. The research proves that empathy and responsiveness plays the most important role
in customer satisfaction level followed by tangibility, assurance, and finally the bank reliability.
The research findings also indicate offering high quality service increase customer satisfaction,
which in turn leads to high level of customer commitment and loyalty.

Hinson et al. (2006) investigate service quality perception of three top banks in Ghana: Barclays
bank, Standard Chartered bank and Ghana Commercial Bank. The purpose of the study is to
compare service quality across these three banks and to determine the most important factors
contributing to service quality. The study reveals that all the banks selected differ on the service
quality dimensions. BBGL provides better services in terms of the level of service quality
provided to client than the listed (GCB and SCB) banks. The study also reveals that the locally
owned bank (GCB) provides social services rather than the multinational banks. Interestingly,
the study reveals that clients expectation on all the service dimension have not been met by the
Ghanaian banks. The study revealed that all the service quality dimensions contributed
significantly to the prediction of service quality in Ghana with human element of service quality
being highly predictive of perceived service quality. Tangibility is the least predictive of
perceived service quality. The findings show that there is room for service quality improvement
provided in the main text.

Ahmad (2015) Measuring Service Quality Expectation and Perception Using SERVQUAL .The
study was carried with the objective of understanding the level of gap exists between expectation
(excellent bank) and perception (experience bank) among the banking customer in Pakistan in
the content of service quality. This study is measuring service quality by using SERVQUAL- a
perceived service quality questionnaire methodology. SERVQUAL examines five dimensions of
service quality, responsiveness, assurance, empathy, tangible and Reliability. The finding of this
study showed there is very huge Gap exists between excellent bank (expectation) and account
holder experience (perception) bank in Pakistan with the regards of service quality. Finding of
this study is help to minimize the GAP that was exist between excellent bank and account holder
experience bank in Pakistan. This study used the word excellent bank because no bank in
Pakistan up to the expectation of the account holders.

17
Aihie (2013) investigates the role that service quality plays in the Ghanaian banking sector and
its impact on service delivery. A sample of 400 customers encompasses four major indigenous
and foreign banks. SERVQUAL dimensions of service quality were used to structure the
questionnaire. Data collected was analyzed using one sample T- test of the mean weighted
differences between perception and expectation of customers. This, in an attempt to determine
whether there is a significant gap between expectation and perception. Empirical findings from
this study show that gaps exist between customers‟ expectations and perceptions of service
delivery in all the banks even though the banks performed better on the tangibility dimension.
Despite this observation, the banks retained their customers.

Ladhari et al (2011) compared perceptions of bank service quality among Canadian (a developed
economy) and Tunisian (resource –challenged) customers. The study concluded that bank
priorities vary depending on the origin of their customers. For instance in Canada empathy was
identified as the most important dimension for predicting satisfaction and loyalty among
customers whilst „‟reliability” and “responsiveness” dimensions of service quality were
identified as the most important predictors of satisfaction and loyalty among Tunisian customers.
It can be deduced from these findings that marketing practitioners must identify the dimensions
of service quality that determine satisfaction and loyalty in their own country. Thus, it can be
argued that a standardized marketing strategy in environment characterized by different
economic, social and cultural environment is not appropriate. Ladhari et al (2011) further
acknowledge the contribution of internet banking as an alternative for developing, operating and
offering bank services and products. They however caution banks operating in resource –
challenged environment to consider the challenges posed by adopting internet banking as
internet users may have different demand expectations and needs from in-person customers.

2.3. Conceptual Framework of the Study

According to Botha (1989), conceptual frameworks (theoretical frameworks) are defined as “a
type of intermediate theory that attempt to connect to all aspects of inquiry (e.g., problem
definition, purpose, literature review, methodology, data collection and analysis)”.

Conceptual frameworks can act like maps that give coherence to empirical inquiry. Because
conceptual frameworks are potentially so close to empirical inquiry, they take different forms
depending upon the research question or problem.

18
In this study the perception minus expectation gap is assessed using seven service quality
dimensions, i.e. tangible, reliability, responsiveness, assurance, empathy, price, and accessibility.
Here is a conceptual framework designed for this study that helps to measure the gap scores of
the customers‟ expectations and perceptions of service quality of CBE (see Figure 2.1).
However, the next chapter explains the research methodology being used by the student
researcher to collect primary data, determining sample size, designing of data collection
instrument and approach to data analysis.

Figure 1Figure 2.1 Conceptual frameworks on the effect of the service quality on customer
satisfaction

Independent Variables

Components of SERVQUAL
Dimensions

Tangibility

Reliability Dependent Variables

Responsivenes
s

Assurance Customer Satisfaction

Empathy

Price

Accessibility

Source: adapted from SERVQUAL model

19
 CHAPTER THREE

RESEARCH METHODOLOGY

This chapter explains the research methodology used for the study. It begins with an explanation
of the research approach, research design, followed by population and determination of sample
size, designing of data collection instrument and procedures, and finally describes the data
analysis approach being used by the study.

3.1. Research Approach

The study was used both quantitative and qualitative data collection approach. This approach is
preferred as it enables to use a mixture of methods from both the quantitative and qualitative
approaches for data collection and analysis. This means, both quantitative and qualitative data
collection and analysis were carried out in parallel or side-by-side.

3.2. Research Design

For this study, the researcher has used descriptive type of research design. According to Kothari
(2004, pp.31-32) is “the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure.” In
fact, it is the conceptual structure within which research is conducted; it constitutes the blueprint
for the collection, measurement and analysis of data. Research design is needed because it
facilitates smoothly the operation of the researcher and it makes the research efficient and
effective to yield maximum information with minimum expenditure, time and money.

3.3. Population, Sample size and Sampling Techniques

3.3.1. Research Population

The populations of this study were the customers and Staffs of Addis Ababa branch under North
Addis Ababa District. Commercial Bank of Ethiopia has 1,656 branches that are distributed
across the country and currently it has more than 50 million customers in Ethiopia. Around 15
million of the total customers are found in Addis Ababa, from which 161,186 customers in Addis
Ababa branch. The reason that select Addis Ababa Branch as the sample population for our
study, it has more than 20 years‟ service experience in the bank industry, it has many customers
compared to other branches, and it gives different kinds of service which may not found in other
branches. In addition to this customers of Addis Ababa branch include all of the various

20
categories of customers like individual customers, business customers, governmental customers,
non-governmental customers and fixed time deposit customers etc. This makes that Addis Ababa
branch unique case for the study.

3.3.2. Sample Size

In Addis Ababa branch there are about 161,686 total customers as at January, 2021.
(Management Information Systems CBE). To determine the sample size, a previously proven
formula (Yamane, 1967) would be applied. As it is known Yamane 1967, formula is simple and
suitable to determine and manage the population sample size because it is difficult to conduct by
involving all the population of the study areas. That is the reason why the researcher was used
this proven formula.
That is,
n = N/ (1 + N (e) 2)
Where, n = is the sample size
N = is the population size,
e = is the level of sampling error = (10%)
n = 161,686/ (1 + 161,686 (0.1)2) = 99.98 =100
Thus, sample size of 100 customers is selected from the population of 161,686.00.
The customers or (respondents) were classifying four sub groups such as government, non-
government, individual and business.

Table 3.1.Classifications of Customers

Bank customers Male Female Total

Customers (Government employees) 12 13 25
Customers (Non-Government employees) 13 12 25
Individuals Customers 12 13 25
Customers (Business man) 13 12 25

3.3.3. Sampling Technique

Sampling is one of a very important aspect of marketing research. From a general perspective,
sampling involves selecting a relatively small number of elements (characteristics) from a large

21
defined group of elements and expecting that the information gathered from the small group of
elements will provide accurate judgment about the larger group (Paurav, 2008, p.55). For the
purpose of this study, a non-probability, convenience-sampling technique was used to select
respondents from the target population (Customers of Addis Ababa branch). A sample of
convenience is simply a potential source of participants that is easily accessible to the researcher.
As the name implies, convenience sampling is a method in which samples are drawn at the
convenience of the researcher often as the study is being conducted. The major aim of this
technique is to reduce cost and time consumption (Hair et al., 2002, pp.359-361).

3.4. Sources of Data

The researcher used both primary and secondary data sources. Primary data is collected using
structured questionnaires and these questionnaires are distributed to the chosen sample of 100
CBE Addis Ababa branch customers. Moreover, secondary data is collected from books,
academic journal articles, internet or the company web page and other secondary published
materials.

3.5. Data Gathering Instruments

The objective of data-collection is to get a good overall picture of how a process performs. It is
important that, before any study or process will be carried out. Though there are several methods
of collecting primary data, particularly in surveys based and descriptive researches (Hair et al.,
2002), some of the most important ones are: observation method, interview method,
questionnaires, schedules, and other methods. For this study, the researcher was used structured
questionnaires to collect primary data from the customers of Addis Ababa branch and also it was
conducted both structured types of interview for the employees of Addis Ababa branch who have
high customer contact.

3.6. Pilot Testing

The Cronbach alpha coefficient is an indicator of internal consistency of the scale. A high value
of the Cronbach alpha coefficient suggests that the items that make up the scale “hang together”
and measure the same underlying construct. A value of Cronbach alpha above 0.70 can be used
as a reasonable test of reliability. To meet the consistency reliability of instrument, the
questionnaire was first distributed to 30 respondents and the Cronbach alpha for the independent
variables (Tangibility, Reliability, Responsiveness, Empathy, Assurance, Accessibility and price)

22
was found to be 0.896. Therefore the dimensions of service quality were found to be high in their
internal consistency and thereby in measuring the dimensions of interest.

3.7. Methods of Data Analysis

After collecting all the necessary data, the researcher coded, edited and rephrased to eliminate
errors and ensure consistency. It involve categorizing, discussing, classifying and summarizing
of the data to each question in coding frames based on various responses. In order to analyze the
collected data for this study the researcher was use the descriptive statistics (frequency,
percentage, mean and standard deviation). Besides of this to identify the gap between the
perceptions and expectations of consumers‟ gap score analysis was applied.

3.8. Ethical Consideration

To accomplish the research, initial approval was get from the Sent Merry University and the
other concerned bodies. During gathering of data and conducting of the study, all of the
participants were asking in advance for their permission and assent. In the light of this, managers
of the bank as well as the concerned bodies were asked for co-operation. The researcher was
communicate with those mentioned bodies to aware or inform about the research work, study
area, objectives of the study and its importance of the society. After such discussion and
obtaining permission, the researcher started the study. Generally, the researcher give due respect
to the norm, value, tradition and other cultural aspects of the participants of the study and follow
the rules of research ethics.

23
 CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

This chapter involves presentation of the data gathered in the process of conducting the study
and includes the analysis made with the use of the output provided by the SPSS software version
20.00. The chapter includes that introduction, data Analysis, respondents‟ demographic
characteristics, service quality gap analysis, customer‟s response on SERVQUAL dimensions,
Analysis of SERVQUAL dimensions Service Quality Gap Score, analysis of overall service
quality and analysis of overall customer satisfaction.

The objective of this study is to examine the stated specific objective by analysis of primary data
that collected from the survey. Especially it focuses on responding the research questions that
include finding out how customers perceive service quality in CBE Addis Ababa branch and
whether they are satisfied with the service quality of the bank. This will lead to the objective of
the present study that describing the practical trend of CBE Addis Ababa branch with regarding
of service quality.

4.1. Response Rate

The primary focus of this study is to evaluate the current level of customers‟ expectations and
perceptions of service quality of CBE Addis Ababa branch. To measure the service quality and
customer satisfaction of bank service of CBE Addis Ababa branch SERVQUAL model was
used. The SERVQUAL instrument maintained seven dimensions namely tangible, reliability,
responsiveness, assurance, empathy, price and accessibility with a total of 30 statements placed
on a 5 – point likert type scale (1-being strongly disagree to 5-being strongly agree).
Furthermore, a sample of 100 respondents in CBE Addis Ababa branch was drawn using a
convenience sampling approach, and 100 completely filled questionnaires were used in
performing presentation, analysis and Interpretation of the questionnaire. The first part of the
questionnaire consists of demographic information of the respondents are presented at
subsequent tables and diagrams for the bank. The second part of the questionnaire presents the
average gap score for each of the 30 Expectation statements, and then the score for each of the
30 perception statements this information is used to calculate the Gap Score for each of the

24
statements where the Gap Score = Perception – Expectation. The last part of the questionnaire
deals with importance ranking of the five dimensions of service quality.

4.2. Respondents’ Demographic Profile

The questionnaire was designed to seek information about the gender, age, education, their
occupation and income.

Table 4.1.A. Demographic profile of Respondents

Variables Percent Cumulative

Percent
(%)

Female 58 58

Gender Male 42 100

Below 21 years 12 12

21 – 34 years 38 50

Age 35 -50 years 29 79

Over 50 years 21 100

Did not complete high school 8 8

Completed high school 17 25

Academic Completed college diploma 22 47

Status
Obtained a bachelor degree 35 82

Post graduate degree (Master‟s degree & Doctorate) 18 100

Government Employee 32 32

Private Employee 22 54

Self-employee 18 72

Occupation Student 11 83

Trader 17 100

Source: questionnaire

25
Table 4.1.A. shows that 58 percent of the respondents are male and 42 percent are female, among
different age groups, 38 percent of the respondents are in the age group of 21-34 years which is
the largest age groups of respondents and 29 percent of the respondents are in the age of 35-50
years which is the next largest group of the respondents, about21 percent respondents are from
the age group of greater than 50 years and the remaining12 percent of respondents are in the age
group of below 21 years. The analysis of different age groups indicates that majority of the
service users (customers) which are provided by Addis Ababa branch are matured enough.

Analysis also shows that 35 percent of the respondents are those individuals who Bachelor
degree holders and 22 percent of the respondents are completed their college diploma.
Postgraduate degree especially Master‟s degree holders are 18 percent of the total respondents.
Whereas those respondents who completed their high school education and those who did not
complete their high school education account for 17 and 8 percent of the total respondents
respectively .Therefore, based on this information, majority of the respondents are educated.

Considering the occupation characteristics of the respondents, the highest numbers of the service
users are employed in government organizations 32 percent and followed by private
organizations 23 percent, self-employment 18 percent, trader 17 percent, and students 11 percent
respectively. The occupation category clearly indicate that majority of the users are government
employees.

26
Table 4.1.B. Demographic Profile of Respondents

Variables Percent Cumulative

Percent
(%)

Daily 18 18

Weekly 22 40

Frequency of Visiting the Branch Two times a month 24 64

Monthly 28 92

More than a month 8 100

Less than 1 year 7 7

1 – 5 years 21 28

Relationship with the Bank 6 – 10 years 22 50

10 – 15 years 26 76

More than 15 years 24 100

Under 1,000 Birr 4 4

1,000 – 2,000 Birr 11 15

Income Level 2,001 – 4,000 Birr 17 32

4001 - 8,000 Birr 22 54

Over 8000 Birr 46 100

Source: questionnaire

As shown the above table, customers are asked how frequently they visited the branch to get
service. Accordingly, their response shows that 18 percent of the respondents visited the branch
daily, 22 percent of the respondents weekly, 24 percent visited twice in a month, 28 percent of

27
respondents are visited monthly and 8 percent who visited the bank more than a month. The
highest number that visited the branch are customers who visited the bank monthly 28 percent
are assumed to be government employees and other customers who withdraw salary and money
transferred to or received from other places respectively.

By considering the number of years of relationship with the bank apart from all other things the
level of quality service can be seen by customers‟ loyalty. As shown in the above table 26
percent of customers are stayed in the bank for 10 – 15 years, 24 percent of customers stayed for
more than 15 years, 23 percent of the customers from 6 - 10 years, 20 percent of customer of the
bank for 1 – 5 years and the remaining 7 percent of customers have stayed in less than one year.
Thus, the large numbers of these respondents were customers who have lots of experience about
the service delivery quality of the bank and they can easily measure the level of service quality
and customer satisfaction of the CBE Addis Ababa Branch. However, as those who had lesser
year‟s relationship were not significant in number. Since there is tough competition in the market
the bank give attention for each service dimension attributes to retain this group as it is expected
to be the newly emerging economic power in the economy.

Analysis also shows that 46 percent of the respondents are in the income level of over 8,000 birr.
The next largest income level of the respondents is in the income level of 4,001 –8,000 birr 22
percent, the third largest income level of 17 percent are from the income level of 2,001 – 4,000
birr, lastly the remaining 11 percent and 4 percent of respondents are 1,000 – 2,000 birr and
under 1000 birr respectively.

4.3. Analysis of Collected Data

4.3.1 Service Quality Gap Analysis

This analysis is done in order to measure the gap between the customers‟ expectations and their
perceptions toward the quality of bank services in CBE Addis Ababa branch. Gap scores were
calculated by subtracting expectations from perceptions of bank customers. The basic
assumption underlying the SERVQUAL scale is that performance below expectation (obtaining
a negative score) leads to a perception of low service quality, while exceeding expectation
(obtaining a positive score) leads to a perception of high service quality. The gap scores with the
minus sign indicate that customers felt the service quality of CBE Addis Ababa branch is below
their expectations. A comparison of customers‟ actual perceptions of service quality with their

28
expectations indicated that there exist negative gaps across all the attributes/dimensions,
indicating that customers rated service quality of Addis Ababa branch as lower their
expectations. This implies that CBE Addis Ababa branch needs to examine its services and make
improvements for any shortfalls.

4.3.2. Customer’s Response on SERVQUAL Dimensions

According to Magesh (2010) the Average service gap which is measured by the difference
between perception mean score and the expected mean score on service quality greater than „1‟
in absolute value was considered to be highly critical area for the improvement of the
performance dimensions. Average service gap of less than 0.50 in absolute value was treated as
less significant and between of -0.50 to -1 was considered as critical and further needs for
improvements. In addition to a paired sample T-test is employed in this study. The aim was to
test whether or not the difference between perception mean score and expected mean score on
service quality statistically significant at 5% level of significance. Among the three commonly
used significance levels (i.e. .01 – highly significant, .05 – significant, and .01 – moderately
significant) then 5% level of significant was selected for this study.

Parasuraman (1988) proposed that customers‟ perception of service quality is based on the
comparison of their expectation of customers (what they feel service providers should offer) with
their perceptions of the performance of the service provider. In this study the gap score analysis
enables to find out how consumers perceive service quality in CBE Addis Ababa branch and
helps to identify what dimensions of service quality they are satisfied with. According to
Parasuramanet al., (1985) the higher (more positive) the perception minus expectation scores, the
higher the perceived service quality and thereby leading to a higher level of customer
satisfaction. In this regard, the gap scores are calculated based on the difference between the
customers‟ perceptions and expectations of services offered by CBE Addis Ababa branch. For
each dimension, the SERVQUAL scale provides a score for customer expectations and a score
for customer perceptions of service quality. The differences between the two scores on each
dimension are called gap scores.

29
Table: 4.2. Descriptive Statistics on Tangibility Dimension
Service Evaluation Statement Perception Expectation SQ
Dimension Score Score
Gap score

1 The bank has up-to-date equipment 3.9457 3.9721 -0.0264

and technology
2 The physical facilities (buildings, 3.9325 4.2730 -0.2743
chairs, tables, parking areas and
others) of Addis Ababa branch are
visually appealing.
Tangibility 3 Employees of Addis Ababa branch 4.2956 4.5375 -0.2419
are professional dressed.
4 The materials (pamphlets, 3.8596 4.4651 -0.6055
statements, magazines, brochures
and others) in Addis Ababa branch
are visually appealing
Average gap score of tangibles dimension -0.3170

Source: questionnaire

As stated in the literature review part tangibility means the appearance of physical facilities,
equipment, personnel and communication materials. All of these are used in varying degree to
project an image that will find favor with customers. It will be of particular significance where
the customer‟s physical presence at a service facility is necessary for consumption to occur.

As show in the above table, Addis Ababa branch has tangible average gap score of -0.3170. This
shows that the majority of the customers perceive less attracted with the materials associated
with the service. This implies that the tangibility attributes whose gap scores are below 0.5 can
be considered as less critical areas that may not need further improvement and may not influence
that much the quality of service in CBE.

30
Table 4.2.1:Paired Samples Statistics Based on grand mean

Mean N Std. Std. Error Mean

Deviation
Perception 4.0084 4 .19521 .09760
Tangi
Expectatio
bility 4.3254 4 .25121 .12561
n

Table 4.2.2:Paired Samples Test for tangibility

Paired Differences t df Sig. (2-

Mean Std. Std. 95% Confidence tailed)
Tangibility Deviatio Error Interval of the
n Mean Difference
Lower Upper
Pair 1 TP - TE -.31707 .24449 .12225 -.70611 .07196 -2.594 4 .081

Table 4.2.2 shows paired sample test result and mean gaps for tangibility. The result shows that
the significance value is (.08) which is greater than .05 at 5% level of significance so that null
hypothesis of “there is no significant differences or gaps between mean score of perception and
expectation” is not rejected and concluded that there is no significant gap between mean score of
perception and expectation on “tangibility” service quality dimension in CBE Addis Ababa
Branch. This implies that the tangibility attributes whose gap scores is 0.081 can be considered
as no significant for perception and expectation of service quality of CBE. This indicates that it
may not need further improvement and not influence that much the quality of service.

31
Table: 4.3. Descriptive Statistics on Reliability Dimension

Service No. Evaluation Statement Perception Expectation S Q Gap

Dimension Score Score score

1 Addis Ababa branch delivers on 3.9483 4.4132 -0.4649

promises in a timely manner.
2 The employees of Addis Ababa 3.9723 4.5382 -0.5659
Reliability branch are sympathetic to
solving customer problems.
3 Addis Ababa branch performs 3.9041 4.5684 -0.6643
services right the first time.
4 Services in Addis Ababa branch 3.8937 4.4329 -0.5392
deliver on time.
5 Addis Ababa branch insists on
error-free records. 3.9798 4.5371 -0.5573

Average gap score of Reliability dimension -0.5583

Source: questionnaire

Reliability: the ability to perform the promised service dependably and accurately. It is regarded
as the most important determinant of perceptions of service quality. This dimension is
particularly crucial for service giving company. As indicated in the above table the average gap
score of reliability service dimension has a gap score of -0.5583 Among the reliability attributes
the bank performs “services right the first time” and “the employees of Addis Ababa branch are
sympathetic to solving customer problems” have gap score -0.6643 and -0.5659 respectively.
Which are the highest gap score in this attributes which means that perceptions of customers
related to the level of service quality far from their expectations. This is an alarming message to
the management of the company and may imply that the officials of CBE will be expected to
spend most of their time to improve the reliability attribute.

32
Table 4.3.1 Paired Samples Statistics for Reliability ((based on grand mean)

Mean N Std. Std. Error Mean

Deviation
RP1 3.9396 5 .03914 .01750
Pair 1
RE1 4.4980 5 .06987 .03125

Table 4.3.2 Paired Samples Test for Reliability(based on grand mean)

Paired Differences t df Sig. (2-

Mean Std. Std. 95% Confidence tailed)
Reliability Deviatio Error Interval of the
n Mean Difference
Lower Upper
Pair 1 RP1 - RE1 -.55832 .07138 .03192 -.64696 -.46968 -17.489 4 .000

Table 4.3.2 shows paired sample test result and mean gaps for reliability (-0.55832). From the
result, there is no strong evidence to reject the null hypothesis which is formulated as “there is no
a significant difference or gaps between mean score of perception and expectation” at 5% level
of significance (the significance value (.000) is less than .05). Therefore, it is conclude that there
is a significant gap between mean score of perception and expectation on “reliability” service
quality dimension in CBE Addis Ababa Branch. This implies that the higher official of the bank
should give more attention for this attributes and they should have to see a mechanism to
increase the reliability of its customer perception.

33
Table: 4.4. Descriptive Statistics on Responsiveness Dimension

Service No. Evaluation Statement Perception Expectation SQ

Dimension Score Score
Gap score

1 Customers at Addis Ababa 4.1325 4.7310 -0.5985

branch are told exactly when
services will be provided.
Responsiveness 2 Employees in Addis Ababa 4.2584 4.7553 -0.4969
branch give prompt service
3 Addis Ababa branch employees 4.1253 4.6924 -0.5671
are always willing to help
customers.
Employees in Addis Ababa 3.9825 4.5325 -0.5500
4 branch are never too busy to
respond to customers‟ requests.
Average Gap score -0.5531

As stated in the literature review, responsiveness service dimension is concerned with the
willingness, readiness of employees and the preparedness of the firm to provide a service to
satisfy the needs and desires of customers. The result shows from the above table, responsiveness
has average gap score of -0.5531.The attribute “customers are told exactly when service will be
provided” has largest gap score (-0.5985) the next highest gap score is “Addis Ababa branch
employees are always willing to help customers” the remains attributes “Employees in Addis
Ababa branch are never too busy to respond to customers‟ requests and “Employees in Addis
Ababa branch give prompt service “gap score are (-0.5671and -0.4969) respectively. Based on
the above analysis, the responsiveness dimension of all attributes has large service quality gap
score. This implies that the bank should have to do more to improve the performance of this
attributes.

34
 Table 4.4.1 Paired Samples Statistics for Responsiveness
Mean N Std. Deviation Std. Error Mean
RSP1 4.1247 4 .11278 .05639
Pair 1
RSP2 4.6778 4 .10027 .05013

Table 4.4.2 Paired Samples Test for Responsiveness(based on grand mean)

Paired Differences t df Sig. (2-
Mean Std. Std. 95% Confidence tailed)
Responsiveness Deviatio Error Interval of the
n Mean Difference
Lower Upper
Res.P –
Pair 1 -.55312 .04253 .02126 -.62079 -.48546 -26.014 3 .000
Res. E

Table 4.4.2 shows paired sample test result and mean gaps for Responsiveness (-0.5531). The
result shows that the significance value is (.000) which is less than .05 at 95% level of
significance so that null hypothesis of “there is no significant differences or gaps between mean
score of perception and expectation” is rejected and it is concluded that there is a significant gap
between mean score of perception and expectation on “responsiveness” service quality
dimension in CBE Addis Ababa Branch. This implies that the higher official of the bank should
have to see a mechanism to increase the responsiveness of its customer perception.

Table: 4.5. Descriptive Statistics on Assurance Dimension

Service No. Evaluation Statement Perception Expectation SQ
Dimension Score Score Gap score
1 The behavior of employees in A.A 4.2355 4.6872 -0.4517
branch encourages confidence in
Assurance customers.
2 I feel safe in all transactions of Addis 4.3568 4.7328 -0.3760
Ababa branch.
3 In Addis Ababa branch, employees 4.2748 4.7255 -0.4507
are consistently courteous with me.
Employees in Addis Ababa branch 4.7366 4.9258 -0.1892
4 have the knowledge to answer
customers‟ questions.
Average Gap score of Assurance -0.3669
Source: questionnaire
Assurance shows politeness of employees, customer feeling safe in their transaction, personal
behavior of employee and adequate knowledge of employee are satisfying assurance dimension

35
 of service quality. The above table indicated that the average gap score of assurance dimensions
is -0.3669. Among the attribute of assurance, “The behavior of employees in Addis Ababa
branch instills confidence in customers” has a largest gap score (-0.4517) which indicated that
the behavior of employees not encourages the confidence of customers and the attribute of
“employees in Addis Ababa branch have the knowledge to answer customers‟ questions” has the
least gap score(-0.1892).Based on the above analysis assurance service dimension has better
performance compared to other attributes while still its gap score is negative result which means
perceptions of customers is less than their expectation related to the bank service quality so it
needs slight improvement. This implies that the bank should give attention to improve the skills
of its employees by providing adequate training to update their knowledge with regard to how to
serve its loyal customers specially and also for new entrants to make them loyal to the bank.

Table 4.5.1 Paired Samples Statistics for Assurance

Mean N Std. Deviation Std. Error Mean

AS.P 4.4009 4 .22942 .11471
Pair 1
AS.E 4.7678 4 .10720 .05360

Table 4.5.2 Paired Samples Test for Assurance(based on grand mean)

Paired Differences t df Sig. (2-

Mean Std. Std. 95% Confidence tailed)
Assurance Deviatio Error Interval of the
n Mean Difference
Lower Upper
AS.P1 –
Pair 1 -.36690 .12366 .06183 -.56367 -.17013 -5.934 3 .010
AS.E1
Table 4.5.2 shows paired sample test result and mean gaps for Assurance (-0.3669). From the
result, there is enough evidence to reject the null hypothesis which is formulated as “there is no a
significant difference or gaps between mean score of perception and expectation” at 5% level of
significance (the significance value (.010) is less than 0.05) and it is concluded that there is a
significant gap between mean score of perception and expectation on “Assurance” service
quality of the bank. This implies that the management should give attention to emphasis on this
item to make its excellent.

36
Table: 4.6. Descriptive Statistics on Empathy Dimension

Service No. Evaluation Statement Perception Expectation SQ

Dimension Score Score
Gap score

1 Addis Ababa branch gives me 3.9567 4.5588 -0.6021

individual attention.
2 The operating hours of Addis Ababa 4.3268 4.6465 -0.3197
branch are convenient to all of its
customers.
Empathy 3 Employees of Addis Ababa branch 3.8586 4.4526 -0.5940
give their customers personal
attention.
Addis Ababa branch has a customer‟s 3.9825 4.6225 -0.6400
best interests at heart.
4

5 Addis Ababa branch employees 3.8560 4.5345 -0.6785

understand the specific needs of their
customers.
Average Gap score -0.5668
Source: questionnaire

As it is known, a service provider who tries to put himself in the position of its customers to
understand customers need, and then providing what they want in a convenient way have the
potential to satisfy its customers on empathy dimension of service quality. As illustrated in the
above table, the empathy dimension has average gap score of -0.5668. In the empathy dimension,
he largest SQ gap score is “Addis Ababa branch employees understand the specific needs of their
customers” -0.6785which indicated that the bank does not take in to account to understand the
specific needs of their customers and the smallest SQ gap score in this attribute is “the operation
hours of Addis Ababa branch are convenient to all of its customers” -0.3197 which indicated that
the majority of the customers ‟expectations near to their perception then customers are relatively
satisfied by the bank service hours. This implies that the management of the company should
give more attention and they will be expected to spend most of their time to improve this
attribute.

37
Table 4.6.1: Paired Samples Statistics for Empathy
Mean N Std. Deviation Std. Error Mean
Em.P 3.9961 5 .19341 .08650
Pair 1
Em.E 4.5630 5 .07670 .03430

Table 4.6.2 Paired Samples Test for Empathy (based on grand mean)

Paired Differences t df Sig. (2-

Mean Std. Std. 95% Confidence tailed)
Empathy Deviatio Error Interval of the
n Mean Difference
Lower Upper
Pair 1 TP1 - TE1 -.56686 .14220 .06359 -.74342 -.39030 -8.914 4 .001
Table 4.6.2 shows paired sample test result and mean gaps for Empathy (-0.566). The result
shows that the significance value is (.0010) which is less than .05 at 95% level of significance so
that null hypothesis of “there is no significant differences or gaps between mean score of
perception and expectation” is rejected and it is concluded that there is a significant gap between
mean score of perception and expectation on “Empathy” service quality dimension in CBE
Addis Ababa Branch. This implies that the higher official of the bank should have to see a
mechanism to increase the Empathy of its customer perception.

38
 Table: 4.7. Descriptive Statistics on Price Dimension
Service No. Evaluation Statement Perception Expectation SQ
Dimension Score Score Gap score

1
Addis Ababa branch gives 4.4265 4.5567 -0.1302
good explanations of service
Price fee to its customers.
2 Addis Ababa branch charges 4.5173 4.6225 -0.1052
reasonable fees for the
administration of the accounts.
3 Addis Ababa branch properly 4.6146 4.7385 -0.1239
balances amounts from which
service charges begin.
Average Gap score -0.1197
Source: questionnaire

The above table shows that price dimension has average gap score of -0.6590.At this service
dimension the highest SQ gap score is “Addis Ababa branch gives good explanations of service
fee to its customers” -1.1302, the next SQ gap score is “Addis Ababa branch properly balances
amounts from which service charges begin” -01239 the least gap score is “Addis Ababa branch
charges reasonable fees for the administration of the accounts “is -0.1052. Based on the analysis,
Addis Ababa branch has better performance related to this attributes because the customers‟
expectations of service quality is nearer to their perceptions while still its gap score is negative
result (customer perception of service quality is less than their expectation). This implies that the
Price attributes whose gap scores are below 0.5 can be considered as less critical areas that may
not need further improvement and may not influence that much the quality of service in CBE

Table 4.7.1: Paired Samples Statistics for Price

Mean N Std. Deviation Std. Error Mean

Price P 4.5195 3 .09407 .05431

Pair 1

Price E 4.6392 3 .09205 .05314

39
 Table 4.7.2 Paired Samples Test for price (based on grand mean)

Paired Differences t df Sig. (2-

Mean Std. Std. 95% Confidence tailed)
Price Deviation Error Interval of the
Mean Difference
Lower Upper
Price P –
Pair -.11977 .01300 .00751 -.15207 -.08747 -15.954 2 .004
Price E

Table 4.7.2 shows paired sample test result and mean gaps for Price (-0.1197). The result shows
that the significance value is (.0040) which is less than .05 at 5% level of significance so that
there is enough evidence to reject the null hypothesis of “there is no significant differences or
gaps between mean score of perception and expectation” and it is concluded that there is a
significant gap between mean score of perception and expectation on “price” service quality
dimension in CBE Addis Ababa Branch. This implies that the price service a dimension has
significant value on service quality of the bank thus the higher official of the bank should give
attention in order to improve this attributes.

Table: 4.8. Descriptive Statistics on Accessibility Dimension

Service Mean of Mean of

Dimension
No. Evaluation Statement Perception Expectation S.Q Gap score

1 Addis Ababa branch has sufficient 4.5259 4.6578 -0.1319

number of ATMs per branch.
2 Addis Ababa branch has 4.7196 4.8245 -0.1049
convenient branch locations.
3 In Addis Ababa branch, waiting a 4.5967 4.7325 -0.1358
Accessibility service is not too long.
Addis Ababa branch has extended 4.2355 4.6428 -0.4073
working hours to provide services
4 to its customers.

5 Addis Ababa branch has 4.5846 4.8568 -0.2722

convenient ATM locations.
Average Gap score -0.2104
Source: questionnaire

40
As shown to table 4.8 accessibility dimensions average gap score is -0.2104,the attribute “Addis
Ababa branch has sufficient number of ATMs around the branch” SQ Gap score is -
0.1319,“Addis Ababa branch has convenient branch locations ”SQ Gap score is -0.1049,“In
Addis Ababa branch, waiting a service is not too long ”.SQ Gap score is -0.1358,“Addis Ababa
branch has extended working hours to provide services to its customers ”SQ Gap score is -
0.4073 and lastly “Addis Ababa branch has convenient ATM locations ”SQ Gap score is -
0.2722. Based on the above analysis, each attributes of accessibility SQ gap score is better than
others because the respondents‟ expectation score result is closer to the perception score. This
implied that relatively the branch gives better service related to this attributes even if its average
gap score result is still negative. So it needs slight improvement to satisfy more its customers.

Table 4.8.1 Paired Samples Statistics for Accessibility

Mean N Std. Deviation Std. Error Mean

RSP1 4.5325 5 .18034 .08065
Pair 1
RSP2 4.7429 5 .09618 .04301

Table 4.8.2 Paired Samples Test for Accessibility (based on grand mean)

Paired Differences t df Sig. (2-

Mean Std. Std. 95% Confidence tailed)
Accessibility Deviatio Error Interval of the
n Mean Difference
Lower Upper
Pair 1 ACP1 - ACP2 -.21042 .12791 .05720 -.36924 -.05160 -3.678 4 .021
Table 4.8.2 shows paired sample test result and mean gaps for accessibility (-0.2104). From the
result, there is enough evidence to reject the null hypothesis which is formulated as “there is no a
significant difference or gaps between mean score of perception and expectation” at 5% level of
significance (the significance value (.021) is less than 0.05) and concluded that there is a
significant gap between mean score of perception and expectation on “Accessibility” service
quality dimension in CBE Addis Ababa Branch. This implies that the Accessibility service
dimension has significant value on service quality of the bank thus the higher official of the bank
should set different mechanisms in order to improve this attributes.

41
4.3.2. Analysis of SERVQUAL Dimensions Service Quality Gap Score

Service Evaluation Statement Service Quality

Dimension Gap Score

The bank has up-to-date equipment and technology -0.0264

The physical facilities (buildings, chairs, tables, parking areas -0.2743
Tangibility &others) of AA branch are visually appealing.
Employees of Addis Ababa branch are professional dressed. -0.2419
The materials (pamphlets, statements, magazines, brochures and -0.6055
others) in Addis Ababa branch are visually
Average gap score of tangibility -0.3170
Addis Ababa branch delivers on promises in a timely manner. -0.4649
The employees of Addis Ababa branch are sympathetic to solving -0.5659
Reliability customer problems.
Addis Ababa branch performs services right the first time. -0.6643
Services in Addis Ababa branch deliver on time. -0.5392
Addis Ababa branch insists on error- free records -0.5573
Average gap score of reliability -0.5583

Customers at Addis Ababa branch are told exactly when services -0.5985
will be provided.
Responsive Employees in Addis Ababa branch give prompt service. -0.4969
Addis Ababa branch employees are always willing to help -0.5671
customers.
Employees in Addis Ababa branch are never too busy to respond -0.5500
to customers‟ requests.
Average gap score of Responsiveness -0.5531
The behavior of employees in A.A branch instills confidence in -0.4517
customers.
Assurance
I feel safe in all transactions of Addis Ababa branch. -0.3760
In Addis Ababa branch, employees are consistently courteous -0.4507
with me.
Employees in Addis Ababa branch have the knowledge to answer -0.1892
customers‟ questions.
Average gap score of Responsiveness -0.3669
Addis Ababa branch gives me individual attention. -0.6021
The operating hours of Addis Ababa branch are convenient to all -0.3197-
Empathy of its customers.
Employees of Addis Ababa branch give their customers personal -0.5940
attention.
Addis Ababa branch has a customer‟s best interests at heart. -0.6400
Addis Ababa branch employees understand the specific needs of -0.6785
their customers.
Average gap score of Empathy -0.5668

42
 Addis Ababa branch gives good explanations of service fee to its -0.1302
customers.
Price Addis Ababa branch charges reasonable fees for the admin. Of the -0.1052
accounts.
Addis Ababa branch properly balances amounts from which -0.1239
service charges
Average gap score of price -0.1197

Addis Ababa branch has sufficient number of ATMs per branch. -0.1319
Addis Ababa branch has convenient branch locations. -0.1049
In Addis Ababa branch, waiting a service is not too long. -0.1358
Accessibility Addis Ababa branch has extended working hours to provide -0.4073
services to its customers.
Addis Ababa branch has convenient ATM locations. -0.2722
Average Gap Score of Accessibility -0.2104
Table: 4.9. Descriptive Statistics on SQ Gap Score
The above table indicated that, the highest average gap score of the service dimension is empathy
(-0.5668), followed by responsiveness (-0.5531), reliability, (-0.5583), assurance (-0.3669),
tangibility (-0.3170) and the least attributes are accessibility and price dimensions (-0.2104) and
(0.1197) respectively. The analysis shows that, the result of all attributes of average gap score
have negative SQ gap score which means the difference between perceptions and expectations
are negative. This implies that there is no dimension on which customers perceptions is equal to
or greater than its expectation regarding service quality of the branch. Generally from the above
result actual customers perceived service quality less attractive compared to their expectations
thus CBE Addis Ababa branch needs improvement in all service dimensions in order to compete
successfully to other banks and to accomplish CBE‟s vision to become world commercial bank
in 2025.

4.3.3. Analysis of Overall Service Quality

In order to analyze overall service quality and overall customer satisfactions, here below a table
was produced showing the mean score of each factor. To describe the mean score of the
participants, mean score measurement used by Pihie (2009) was applied where mean score of
<3.39 considered as low, mean score of 3.4-3.79 as moderate and mean score of >3.8 as high.

43
Table 10: Overall Service Quality

_________________________________________________________________
Scale Percentage Mean std. dev
Strongly Disagree 4%
Disagree 14%
Neutral 19% 3.50 0.980
Agree 54%
Strongly Agree 9%
Total 100%
Source: Questionnaire

Respondents were asked to rate the overall service quality of CBE Addis Ababa branch. The
overall quality of the banking service on a five point Likert-type scale (5 being strongly agreed
and 1 being strongly disagreed) was rated by the respondents in terms of its excellence. As
shown in Table 4 below, 4 percent respondents were strongly disagreed, 14percent respondents
were disagreed, while 19 percent of the respondent‟s opinion was neither agreed nor disagreed.
The remaining 54 percent and 9 percent of the respondents were agreed and strongly agreed
respectively.

Using descriptive statistics the mean value of overall service quality was computed. The mean
value of OSQ was found to be 3.50 which is moderate value based on the mean score
measurement used by Pihie (2009). This indicates that the service quality level of Addis Ababa
branch shows better progress but still it needs improvement in order to achieve high mean values
to effectively compete with other private commercial banks .In general, based on the above
analysis, the overall service quality of CBE Addis Ababa branch needs further improvement.

44
4.3.4. Analysis of Overall Customer Satisfaction
Table 11: Overall Customer Satisfaction
__________________________________________________________________
Scale Percentage Mean Std. Deviation
Highly dissatisfied 8.0
Dissatisfied 13.0
Neutral 23.0 3.4 1.034
Satisfied 51.0
Strongly satisfied 5.0
Source: Questionnaire

The purpose of analyzing customer satisfaction in this study is to confirm the degree of
satisfaction or dissatisfaction as a result of superior or inferior service quality level. The
respondents were asked to rate statements based on their level of satisfaction; from 1 to 5 where
1= highly dissatisfied, 2= dissatisfied, 3= neutral, 4= satisfied and 5= highly satisfied. As shown
in Table 5 above, more than half of the respondents (51 percent) were satisfied, 23 percent of
respondents were neither satisfied nor dissatisfied (neutral), 13percent of the respondent‟s
opinion was dissatisfied; the remaining 8 percent and 5 percent of the respondents were highly
dissatisfied and highly satisfied respectively.

Using descriptive statistics the mean value of overall customer satisfaction was computed. The
above table indicates that the mean value of OCS was found to be 3.4 which is moderate value
based on the mean score measurement used by Pihie (2009). This implies that overall customer
satisfaction level of CBE AA branch needs attention by top management of the bank because in
today competitive environment recruiting new customer is more costly than retaining the existing
customer.

4.3.5. Correlation Analysis

In order to establish the relationships between variables bivariate correlation analysis was
conducted. Pearson correlation (r) was chosen for this purpose since it is best suited for the data
of the study and helps to determine the strengths and directions of the association between
dependent variable (Customer satisfaction) and independent variables ( Tangibility, Reliability,

45
Responsiveness, Assurance, Empathy, Price and Accessibility). Among the three commonly
used significance levels (i.e. .01 – highly significant, .05 – significant, and .01 – moderately
significant) 5% level of significant was selected for this study.

Cohen (1969) firstly introduced the specific criteria for categorizing the magnitude of linear
relationship and divided them into weak, moderate, and strong. According to his often-cited
publication the correlational values for Pearson approximately equal to r = ±.10 are considered weak;
r = ±.30 are considered moderate; and r = ±.50 are considered strong (Cohen, 1988). Weinberg and
Abramowitz (2002) confirmed the dispensation and wide usage of this scale as well as its appliance
for behavior science. Such wise, this classification has been used for correlation analysis.

Table 4.11 illustrates the correlation coefficients of the relationship between overall customer
satisfaction and service quality dimension (Tangibility, Price, Accessibility, Assurance
Reliability, Empathy and Responsiveness). From the correlation result it is found that
“Tangibility (r =0.647, p < 0.01), “price”, (r =0.564, p < 0.01), and “Accessibility” (r =0. 537, p
< 0.01) had a strong positive correlation with overall customer satisfaction while “Assurance”(r
=0.384, p < 0.01), Reliability (r =0.373, p < 0.01), “Empathy”(r =0.291, p < 0.01) and
“responsiveness” ”(r =0.343, p < 0.01) showed a moderate positive interrelation with customer
satisfaction.

46
Table 12. The correlation analysis results for all variables under study

OCS OSQ Tangibi Price Accessi Assura Reliab Empathy respons

lity bility nce ility iveness

Pearson Correlation 1

OCS Sig. (2-tailed)

N 100
Pearson Correlation .699** 1
OSQ Sig. (2-tailed) .000
N 100 100
**
Pearson Correlation .647 .906** 1
Tangi
Sig. (2-tailed) .000 .000
bility
N 100 100 100
** **
Pearson Correlation .564 .686 .730** 1
Price Sig. (2-tailed) .000 .000 .000
N 100 100 100 100
** ** **
Acces Pearson Correlation .537 .423 .440 .684** 1
sibilit Sig. (2-tailed) .000 .000 .000 .000
y N 100 100 100 100 100
** ** ** **
Pearson Correlation .384 .610 .647 .908 .632** 1
Assur
Sig. (2-tailed) .000 .000 .000 .000 .000
ance
N 100 100 100 100 100 100
** ** ** ** **
Pearson Correlation .373 .402 .430 .672 .864 .621** 1
Reliab
Sig. (2-tailed) .000 .000 .000 .000 .000 .000
ility
N 100 100 100 100 100 100 100
** ** ** ** ** **
Pearson Correlation .291 .423 .440 .684 1.000 .632 .864** 1
Empat
Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000
hy
N 100 100 100 100 100 100 100 100
** ** ** ** ** ** **
Respo Pearson Correlation .343 .644 .698 .887 .551 .764 .520 .551** 1
nsiven Sig. (2-tailed) .000 .000 .000 .000 .000 .000 .000 .000 .
ess N 100 100 100 100 100 100 100 100 100
Source: Questionnaire

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

47
4.3.6. Discussion
This study, aimed to deepen the understanding of customers‟ perception and expectation of bank
services, identify and examine the factors that influence the quality of bank services in CBE
Addis Ababa branch and their level of satisfaction with bank services.

The research on measuring service quality has focused primarily on how to meet or exceed the
customers‟ expectations, and has viewed service quality as a measure of how the delivered
service level matches customers‟ expectations.

The concept of measuring the difference between expectations and perceptions in the form of the
SERVQUAL gap score proved very useful for assessing levels of service quality.

The results of the survey would seem to suggest that respondents‟ perceptions of the quality of
bank services in all service dimensions is above „„average‟‟ (3.0 over a 5-point scale) except
empathy and reliability service dimensions. This implies that CBE provides good banking
services to its customers in general. However, customers‟ expectations of the quality of bank
services are more than (3.0 over a 5-point scale) their perceptions. This indicates that the gap
scores of the seven service quality dimensions are negative. The study indicates that the largest
negative gap score is obtained in empathy (-0.5668) service quality dimensions followed by
reliability (-0.5583), responsiveness (-0.5531), assurance (-0.3669), price (-0.1197) and
tangibility (-0.3170). The largest negative gaps combined with assessment of where expectations
are highest, facilitates prioritization of performance improvement. Equally, if gap scores in some
aspects of service do turn out to be positive, implying expectations are actually not just being
met but exceeded, then this allows managers to review whether they may be "over-supplying"
this particular feature of the service and whether there is potential for re-deployment of resources
into features which are underperforming. From this analysis the researcher infers that the
dimensions of empathy, reliability, responsiveness, assurance, tangibility, price and accessibility,
are to be used to improve the service performance of the bank. In addition, the analysis of the
data shows that the overall service quality has a mean value 3.32. This shows that the overall
performance measure of service quality of CBE is good while still needs higher performance, as
rated by the respondents of this study. The overall satisfaction level of customers was measured
using five point Likert scale ranging from highly dissatisfied (1) to highly satisfied (5). (51%)
of the respondents are satisfied,5% are strongly satisfied, and 23% are neither dissatisfied nor
satisfied. The remains 13% and 8% are dissatisfied and highly dissatisfied. There is also mean
48
value 3.32 that shows the overall customer satisfaction is above the average but it needs further
improvement to satisfy all the bank customers. The correlation analysis also shows that all
service quality dimensions were associated each other and also associated with overall service
quality and customer satisfaction, The service quality associated with empathy like giving
individual attention, having convenient operating hours, giving personal attentions to customers,
having best interests at heart, and understanding the specific needs of the customer are critical
points to evaluate the bank services in CBE Addis Ababa branch.
The service quality associated with reliability are delivery of bank services on promises in a
timely manner, performs services right the first time, checking whether employees are
sympathetic to solve customers‟ problem or not, delivering bank services on time, and
transacting error free records

The service quality associated with responsiveness like tell exactly when services are provided,
give prompt service, willing to help customers, not too busy to respond customers‟ request are
also critical points to evaluate the quality of banking service at CBE. In addition to this, the
service qualities associated with assurance like the behaviors of employees, feel safe in their
transaction with CBE, consistently courteous with customers, and knowledge to answer
customers‟ questions are another aspect that bank customers use to evaluate the service quality of
CBE Addis Ababa branch.

However, the next chapter draws the general findings and conclusion based on the questions
being raised by the present study. Additionally, certain recommendations are forwarded with an
objective to help improving the bank its service quality provisions and associated customer
satisfaction based on the conclusion drawn.

49
 CHAPTER FIVE

FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.1. Findings
The main objective of the study was to examine the current level of customers‟ expectations and
perceptions of bank service of CBE Addis Ababa branch.

The study was conducted by distributing 100 questionnaires to bank customers of CBE Addis
Ababa branch, all respondents were found to be completely filled and used for the purpose of
data analysis.

A comparison of customers‟ actual perceptions of service quality with their expectations

indicated that there exist negative gap across all the dimensions. All attributes has negative mean
scores indicating that customers rated service quality of CBE Addis Ababa branch as below their
expectations.

Grand mean scores are computed on the basis of expectations, perceptions and gap scores for
each dimension. The grand mean scores of the SERVQUAL DIMENSIONS were obtained by
summing the data through SPP about each statement, and dividing by the number of items in
each dimensions. The results show that there are significant differences between expectations
and perceptions of all dimensions as indicated.

Empathy showed the highest gap score (-0.5668), followed by reliability (-0.5583),
responsiveness (-0.5531), assurance (-0.3669), tangibility (-0.317), accessibility (-0.2104) and
price (-0.1197).

The study results also showed that the overall service quality of CBE Addis Ababa branch mean
value is 3.5. This indicates that the performance of the bank needs improvement in related to
service quality to effectively compute in the banking industry. In addition to this, the overall
satisfaction level of the customers mean value is 3.4 this indicates that customers were slightly
dissatisfied with the serve provided by CBE Addis Ababa branch. From Paired sample T-test, the
study revealed is a significant gap between mean score of perception and expectation on
“Accessibility”, Price, Accessibility, Assurance Reliability, Empathy and “responsiveness:
service quality dimension in CBE Addis Ababa Branch while the mean score gap between

50
perception and expectation for “tangibility” service quality dimension is statistically
insignificant.

From the correlation analysis, it is found that “Tangibility (r =0.647, p < 0.01), “price”, (r
=0.564, p < 0.01), and “Accessibility” (r =0. 537, p < 0.01) had a strong positive correlation with
overall customer satisfaction while “Assurance”(r =0.384, p < 0.01), Reliability (r =0.373, p <
0.01), “Empathy”(r =0.291, p < 0.01) and “responsiveness” ”(r =0.343, p < 0.01) showed a
moderate positive interrelation with overall customer satisfaction.

Generally, the findings of the study indicates that empathy is the most significant service quality
dimension that influences overall service quality of CBE Addis Ababa branch followed by
reliability, responsiveness, respectively.

5.2. Conclusions
A comparison of customers‟ actual perceptions of service quality with their expectations
indicated that there exist negative gaps across all the attributes. The results of the study showed
that all dimensions had negative mean score. In general, the grand mean scores of the
SERVQUAL dimensions were negative this indicating that CBE Addis Ababa branch provided
lower overall service quality from customers‟ expectations.

Respondents were asked to rate their feelings towards the overall service quality of the bank
using five point likert – type scale. The study results showed that 54 percent respondents were
agreed, 19 percent of the respondent‟s neither agreed nor disagreed 14 percent of the respondents
were disagreed, lastly the remaining 9 percent and 4 percent of the respondent‟s was strongly
agreed and strongly disagreed respectively. In addition to this, the mean value of overall service
quality (3.5) shows that the quality of bank services in Addis Ababa branch still needs further
improvement. Similarly respondents were asked to rate their feelings towards the overall
customer satisfaction of bank services of CBE Addis Ababa using five point Likert-type scale.
The study results showed that more than half of the respondents (51 percent) were satisfied, and
23 percent of the respondents‟ opinion was neither satisfied nor dissatisfied with service quality
of CBE Addis Ababa branch ,13 percent of the respondents were dissatisfied and the remaining 8
percent and 5 percent) of respondents opinion were highly dissatisfied and highly satisfied
respectively. In addition to this, the mean value of overall customer satisfaction (3.4). This

51
indicates that customers were slightly dissatisfied with the service provided by the bank Addis
Ababa branch.

5.3. Recommendations
Based on the above conclusions, the following recommendations are drawn:

 In order to meet customers‟ perceptions and their expectations of bank service quality,
CBE Addis Ababa branch should work hard across all the service quality dimensions
being reported by the study empathy, responsiveness, reliability, assurance, and
accessibility based on the given sequence.
 The results of the research findings indicates that the quality of bank services in CBE
Addis Ababa branch needs further improvement and because of this reason all the bank
customers are not satisfied with the service provided by the bank. Thus, the bank (Addis
Ababa branch) should improve the quality of its services.
 In order to alleviate the problems associated with empathy focus should be assigned
sufficient number of lobby man, tellers and those staffs that concern these tasks, and
emphasis should be placed on selection and training of concerned employees in the bank.
 In order to minimize the problem associated with responsiveness, the bank should focus
on telling the customers exactly when services are provided, giving prompt service,
willing to help customers and not too busy to respond customer‟s request.
 The result of this study indicated that the bank should focus on performing the promised
services dependably and accurately.
 CBE Addis Ababa branch should be able to encourage its employees to inspire trust and
confidence about safe transaction and to answer customers‟ questions consistently and
courteously.
 The higher official of the bank should direct their attention towards the proper allocation
of ATM machines convenient to their customers, and emphasis should give proper
function of the ATM machines.
 The bank should be given good explanations about the services that will be charged, its
amount charge reasonable fees for administration and balance amounts from service
charges.

52
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55
 Appendix I: Questionnaire in English

St. Mary’s University School of Graduate Studies

Department of Master of Business Administration
Questionnaire for customers of Commercial bank of Ethiopia in Addis Ababa branch
Dear Participant
I am a post graduate Second year student at St. Mary‟s University in Business Administration
and conducting a survey study on Customers‟ Expectations and Perceptions of Service Quality in
Commercial bank of Ethiopia especially in Addis Ababa branch. Therefore, you are kindly
requested to participate in the survey intended to assess the level of service quality and customer
satisfaction of CBE in Addis Ababa Branch. The first section of the questionnaire is focused on
your personal profile; the second section of the questionnaire is focused on your expectation of
the service quality of your bank and the third part focuses on your perception of the service
quality of your bank. Please feel free to share your comments about any specific issues you think
and your level of agreement about the services that you expect and perceive from CBE in Addis
Ababa branch. The information is totally required for academic purpose and shall be kept strictly
confidential. I am Master‟s student of St. Marry University department of Business Administration.
Thank you very much in advance for your cooperation and time. Use the following responses
from 1 to 5 to answer, where, strongly Disagree to Strongly Agree. If you feel a feature is not at
all essential for excellent bank companies, make a “√” mark in number “1”. If you feel a feature
is absolutely essential, make a “√“in number “5”. If your feelings are less strong, select one of
the numbers in the middle.

Sincerely yours

Fantayekassaw
Post graduate student

56
 Section I

Respondent’s profile
Please circle one from each statement.
1. Please what is your gender?
A. Male B. Female
2. Please select your age group.
A. below 21 years B. 21 - 34 years C. 35 - 50 years D. over 50 years
3. Please indicate the highest level of education you have attained
A. Did not complete high school B. Completed high school C. completed college
diploma D. obtained a bachelor degree E. Post graduate degree (masters or
doctorate degree)
4. What is your Occupation?
A. Government Employee C. Self-employee
B. Private Employee D. Student
E. Trader F. Others
5. What is your frequency of visiting the branch to use its service?
A. Daily B. Weekly C. Two times a month D. Monthly E. More than a month

6. How long is the period, since you established relationship with the bank?
A. Less than 1 year B. 1- 5 years C. 6-10 years D. 10-15 years E. More than 15yrs

7. What is your monthly salary income?

A. under 1,000 birr B. 1,000 - 2000 birr C. 2001 - 4000 birr
D. 4001 - 8,000 birr E. Over 8,000 birr

57
Section II

Customer Expectation: it means what you require and what you hope to get.

Rating Scale
No. Service Dimensions and Strongly Agree Neutral Disagree Strongly
Statement of evaluation Agree Disagree
5 4 3 2 1
Tangibility
1 The bank has up-to-date equipment and
technology
2 The physical facilities (buildings, chairs,
tables, parking areas and others) of Addis
Ababa branch are visually appealing.
3 Employees of Addis Ababa branch are
professional dressed.
4 The materials (pamphlets, statements,
magazines, brochures and others) in Addis
Ababa branch are visually appealing.
Reliability
5 Addis Ababa branch delivers on promises
in a timely manner.
6 The employees of Addis Ababa branch are
sympathetic to solving customer problems.
7 Addis Ababa branch performs services
right the first time.
8 Services in Addis Ababa branch deliver on
time.
9 Addis Ababa branch insists on error-free
records.
Responsibility
10 Customers at Addis Ababa branch are told
exactly when services will be provided.
11 Employees in Addis Ababa branch give
prompt service
12 Addis Ababa branch employees are always
willing to help customers.
13 Employees in Addis Ababa branch are
never too busy to respond to customers‟
requests.
Assurance
14 The behavior of employees in A.A branch

58
 instills confidence in customers.
15 I feel safe in all transactions of Addis
Ababa branch.
16 In Addis Ababa branch, employees are
consistently courteous with me.
17 Employees in Addis Ababa branch have
the knowledge to answer customers‟
questions.
Empathy
18 Addis Ababa branch gives me individual
attention.
19 The operating hours of Addis Ababa
branch are convenient to all of its
customers.
20 Employees of Addis Ababa branch give
their customers personal attention.
21 Addis Ababa branch has a customer‟s
best interests at heart.
22 Addis Ababa branch employees understand
the specific needs of their customers.
Price
23 Addis Ababa branch gives good
explanations of service fee to its customers.
24 Addis Ababa branch charges reasonable
fees for the administration of the accounts.
25 Addis Ababa branch properly balances
amounts from which service charges begin.
Accessibility
26 Addis Ababa branch has sufficient number
of ATMs around its location.
27 Addis Ababa branch has convenient branch
locations.
28 In Addis Ababa branch, waiting a service
is not too long.
29 Addis Ababa branch has extended working
hours to provide services to its customers.
30 Addis Ababa branch has convenient ATM
locations.

59
 Section III

Customer Perception: it means what you expect from the organization.

Rating Scale
No. Service Dimensions and Strongly Agree Neutral Disagree Strongly
Statement of evaluation Agree Disagree
5 4 3 2 1
Tangibility
1 The bank has up-to-date equipment and
technology
2 The physical facilities (buildings, chairs,
tables, parking areas and others) of Addis
Ababa branch are visually appealing.
3 Employees of Addis Ababa branch are
professional dressed.
4 The materials (pamphlets, statements,
magazines, brochures and others) in Addis
Ababa branch are visually appealing.
Reliability
5 Addis Ababa branch delivers on promises
in a timely manner.
6 The employees of Addis Ababa branch are
sympathetic to solving customer problems.
7 Addis Ababa branch performs services
right the first time.
8 Services in Addis Ababa branch deliver on
time.
9 Addis Ababa branch insists on error-free
records.
Responsibility
10 Customers at Addis Ababa branch are told
exactly when services will be provided.
11 Employees in Addis Ababa branch give
prompt service
12 Addis Ababa branch employees are always
willing to help customers.
13 Employees in Addis Ababa branch are
never too busy to respond to customers‟
requests.
Assurance
14 The behavior of employees in A.A branch
instills confidence in customers.
15 I feel safe in all transactions of Addis
60
 Ababa branch.
16 In Addis Ababa branch, employees are
consistently courteous with me.
17 Employees in Addis Ababa branch have
the knowledge to answer customers‟
questions.
Empathy
18 Addis Ababa branch gives me individual
attention.
19 The operating hours of Addis Ababa
branch are convenient to all of its
customers.
20 Employees of Addis Ababa branch give
their customers personal attention.
21 Addis Ababa branch has a customer‟s
best interests at heart.
22 Addis Ababa branch employees
understand the specific needs of their
customers.
Price
23 Addis Ababa branch gives good
explanations of service fee to its customers.
24 Addis Ababa branch charges reasonable
fees for the administration of the accounts.
25 Addis Ababa branch properly balances
amounts from which service charges begin.
Accessibility
26 Addis Ababa branch has sufficient number
of ATMs around its location.
27 Addis Ababa branch has convenient branch
locations.
28 In Addis Ababa branch, waiting a service
is not too long.
29 Addis Ababa branch has extended working
hours to provide services to its customers.
30 Addis Ababa branch has convenient ATM
locations.

61
 General questions

Please state your level of agreement with each of the following statements. Please circle one
number for each statement.
31. The overall banking service quality of CBE is excellent.
a. Strongly Agree b. Agree c. Neutral d. Disagree e. Strongly Disagree
32. To what extent do you satisfy from the banking services of CBE?
a. Highly satisfied b. satisfied c. Neutral d dissatisfied e. Highly Dissatisfied

Thank you for your effort and time taken in fulfilling this questionnaire.

62