A research paper on:-

THE ASSESMENT OF SERVICE QUALITY AND

CUSTOMERS SATISFACTION IN COMMERCIAL
BANK OF ETHIOPIA IN THE CASE STUDY LIDETA
BRANCH
PREPARE BY: -
1. Seble Yitagesu
2. Israle Mesele
3. Eden Bekele
4. Limenh Gemechu
5. Hadya Kozda

Submitted to: - Solomon G/meden

JUNE 2020
ADDIS ABABA, ETHIOPIA

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Acknowledgement
First and for most our deepest gratitude goes to our for giving us the strength to finish the
study successfully
Secondly, our thanks go to our Advisor MR Solomon G. for his dedicated interest, support
and unreserved guidance this throughout this work.
Thirdly, we would like to thank the manager, staff and customer of CBE, Lideta branch for
their full cooperation
Last but not least, we like to express our thanks to everyone who has supported us in this
study.

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Table of Content
Title Page
Acknowledgment ………………………………………………………………………....… i
Table of Contents …………………………………………………………………………... ii
List of table’s ……………………………………………………………………………… IV
List of Figures …..………………………………………………………………………….. V
Acronyms ………………………………………………………………………………..... VI
Abstract …………………………………………………………………………………… vii
CHAPTER ONE …………………………………………………………….…….……..… 1
1. INTRODUCTION ………………………………………………………………………..1
1.1. Background of the study ……………………………...……………………...… 1
2. Statement of the problem ………………………………………………………………... 2
3. Objective of the study …………………………………………………………………… 3
3.1 General Objectives ………………………………………………...…………… 3
3.2 Specific Objectives……………………………………………………...…….… 3
4 .Significance of study………………………………………………………………….….. 3
5. Scope/ Delimitation/ of study………………………………………………………….…. 3
6. Limitation of the Assessment……………………………………………………..…....… 4
7. Research Design and Methodology……………………………………………………… 4
7.1 Research Design ………………………………...………..…………………..… 4
7.2 Sample size …...………………………………………………………….……... 4
7.3 Data collection method …………………………………………………….…… 5
7.4 Data collection method ………………………………………………….……… 5
7.5 Method of data …………………………………………………………..……… 6
8. Organization of the study ……………………………………………………………...… 6
CHAPTER TWO ..……………………………………………………………………........ 7
2. LITERATURE REVIEW …………………………………………………………….….. 7
2.1. Definitions of services…………………………………………………………….… 7
2.2. Service Quality ……………………………………………………………………... 8
2.3. Definition of Customer Satisfaction …………………………………………….….. 8
2.4. Satisfaction and Quality ……………………………………………………………. 8
2.5. Models and Theories of Customer satisfaction …………………………………….. 9
2.5.1. Customer Satisfaction Model ……………...……………………..………… 10
2.5.2. The Gap Analysis Model …………...………………………………….....… 10
2.5.3. The Gaps of model service Quality ……………………………………...…. 12
2.5.4 SERVQUAL Scale of Measuring Service Quality ………………………..… 16
2.5.5. SERVPERF scale /performance only" Model ……………………………… 17
2.6. Classification of service ……………………………………………………..………. 18
2.7. Customer satisfaction (CS) ……………………………………………….…….......… 18
2.8. Customer satisfaction …………………………………………………….………..…. 18
2.8.1. Why customer satisfaction important to businesses? ……………………………. 19
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 2.8.2. Determinants of Customer satisfaction ……………………………………….…. 19
2.8.3. Determinants of CS using CS indexes ………………………………………….. 20
2.8.4. Sources of information ……………………………………………………..……. 21
2.8.5. Service Quality as a Determinants of customer Satisfaction ……….………….... 22
2.9. Customer satisfaction in banking practice …………………………………….……... 22
2.10. Customer Expectations and the Zone of Tolerance (ZOT) ……………………..…. 24
2.11. Effects of Customer Satisfaction and Behavioral Intentions ….……………………. 24
CHAPTER THREE ………………………………………………………………..……. 26
3. DATA PRESENTATION, ANALYSIS AND INTERPRETATION …………………. 26
3.1 Quality of data collected ………………………………………...……………... 26
3.1.1. Stay of respondent (Customers) in the organization …….…………. 26
3.1.2. Sexual make up of the respondent …………...………………...…... 27
3.1.3. Age of the employees ………...……………………………..…...... 27
3.1.4. Educational Back Ground of employees (respondent) ………......….. 28
3.1.5. Position held by employees (respondents) in the bank …….....……… 28
3.2. Types of service available in CBE ………………………………...…………...…... 29
3.3. Customer’s value attached to the banking service ………...……………………...... 30
3.4. Customer expectation analysis ………...………………………………………….... 31
3.5. Training program of banking and its impact of service delivery process ……...…... 32
3.6. Availability of source of training …………...……………………………….……... 32
3.7. Motivational factor of employee ………...………………………………......……... 33
3.8. Office layout ………...…………………………………………..………………..... 35
3.9. Customer complain management ………...………...…………………………..…... 35
3.10. Employee attitude towards their amount of salary compared with similar financial
institutions …………………………………………………………...…...……………... 36
3.11. Employees placement and service delivery ……………...…….…...……………... 38
CHAPTER FOUR …………...…………………………………………………………... 39
4. CONCLUSION AND RECOMMENDATION ………………………..……………... 39
4.1. Conclusion …………...………………………………………………..………... 39
4.2. RECOMMENDATION …………...…………………………….………..…...... 39
Bibliography …………...……………………...………...…………...…………….....…... 41
Declaration ……………………..………...…………...……………...........……………... 31

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List of table

Title page

Table 3.1.2 sex ratio of employee's respondents. _________________________________

27
Table 3.1.3 Age of employees._______________________________________________ 27
Table3.2 Types of banking service provided in Lideta branch_______________________29
Table3.3 Service delivery and standard, customer expectation and actual service________30
Table3.4 Meeting expectation._______________________________________________ 31
Table 3.5 Objective of training and development.________________________________32
Table3.6 Availability of training tool and equipment_______ 32
Table 3.7 Particular motivating factor provided by the bank 34
Table3.8 Office layout 35
Table3.9 Customer complains. 35
Table3.10 Comparative salary, 36

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List of figure
Title page
Fig. 2.1: A conceptual service quality framework model___________________________13
Figure3.1.1 Customer duration in Lideta branch as a customer.______________________26
Figure3.1.4 Level of education.______________________________________________28
Figure3.1.5 Current position.________________________________________________ 28
Figure3.4 Specific motivating factor that motivate a specific employee_______________33
Figure3.5 Importance of motivating factor ____________________________________34
Figure3.6 Areas of complain_________________________________________________36
Figure3.7 Working environment including location convenience____________________37
Figure3.8 Coordination between managers and employees_________________________37
Figure3.9 Position computable with educational level_____________________________ 38

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 ACRONYMS

ACSI = America Customer Satisfaction Index

ATM = Automatic Teller Machine

CBE = Commercial Bank of Ethiopia

CMT = Common Measurement Tool

CS = Customer Satisfaction

CSI = Customer Satisfaction Index

ECSI = European Customer Satisfaction Index

NBE = National Bank of Ethiopian

NGO = Non Government Organization

SERVQUAL = Service Quality

ZOT = Zone of Tolerance

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Abstract

Now a day’s most companies are adopting almost the same kind of technology and other
resources. The only option the organizations have in differentiating there from their
competitors in highly dependent on the given service. In addition to that differentiating is
very difficult in a service giving industry like hotel, hospital, bank and so on. The main
objective of this study is to evaluate the service quality and customer satisfaction in case of
CBE lideta branch: the studies discuss the key aspects of service quality and customer
satisfaction. Even if the bank provides different service, the research addressed loan
account, saving account, current account, foreign remittance and card banking that is given
by the bank as a part of methodology for collecting this information descriptive sampling
techniques was conducted. The questioners has been distributed to the selected group of
customers, among 160 customer quaternaries only 112 were collected and out of 31
employees questioner only 26 were returned. Based on this finding the conclusion is reached
and recommendation was made based on area that the bank provides its services to the
customer.

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 CHAPTER ONE

INTRODUCTION

Banks play an important function in the economy of any country. They are the main
intermediaries between those with excess money (depositors) and those individuals and
businesses with viable projects but requiring money for their investment (creditors). Banks
have at least the following functions: lending money, depositing others’ money, transferring
money locally or globally and working as paying agent. Commercial bank of lideta branch
was established 07/11/65G.C giving banking service.

1. Background of the Study

Banking is one of the oldest professions in human history, it also flourished with
civilizations. Since humans started using money bank services were in use throughout
history. Modern banking as we know it today was established in Italy and Greece in the 15th
century. Today, banks are one of the most important institutions for a modern economy to
work in any country (Gedey, 1990).
A broader definition of a bank is any financial institution that receives, collects, transfers,
pays, exchanges, lends, invests, or safeguards money for its customers. This broader
definition includes many other financial institutions that are not usually thought of as banks
but which nevertheless provide one or more of these broadly defined banking services.
These institutions include finance companies, investment companies, investment banks,
insurance companies, pension funds, security brokers and dealers, mortgage companies, and
real estate investment trusts (Encarta, 2009).
Banks play a very important role in the economic development of every nation. They have
control over a large part of the supply of money circulation. Banks are the main stimulus of
the economic progress of a country. The financial sectors contribution to growth lies in the
central role it plays in mobilizing savings and allocating these resources efficiently to the
most productive uses and investments in the real sector.
CBE has been playing a conspicuous role in economic development of the country for 68
year presence in all directions of the country. Despite the flourishing of private commercial
banks, the CBE has remained in the lead in terms of assets, deposits, capital, and customer
base and branch network.

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2. Statement of the Problem

Even though, the Ethiopian financial institutions have a far reaching history, the use of
money and coins in Ethiopia has a long history, and the introduction of modern banking is
nearly a century old. Despite the long history, which precedes the advent of modern banking
throughout most of Africa, the Ethiopian financial system has not progressed that much as
one expects and the problems that commercial banks face in Ethiopia are many.
The Ethiopian economy has yet untapped large potential for commercial banking and private
Banks in Ethiopia are in their infant stage. They are less in number and scope; however they
are playing a decisive role in the Ethiopian economy at the same time challenges exist in
their operations.
Since Ethiopia is a country which has no capital or stock markets more than 90 percent
financial saving is done by banks. The National Bank of Ethiopia also raised the saving
interest rate from 4 percent to 5 percent. (Biritu, 2011) and yet this is less than the rate of
inflation , and these problems call for extensive research that aims at assessing the impacts
of low level of saving rate which is lower than the rate of inflation on in banking sector .
But when we see the level of their development, the development of the financial sector was
constrained by the government takeover of the existing private banks in 1975. In the period
of a shift from a mixed to a state managed economy, the development of the financial sector
was stunted. Although the financial sector of Ethiopia has grown in the 1990’s, compared to
its state during the preceding decades, it is still in its infancy (Ayalew, 2009).
Some of the problems for both quality of customer satisfaction , use of weak like unstable
internet and network connections, lack of trained manpower, the non - performing loans
they carry, the dominance of the state owned banks in the market, sometimes the
government uses them to implement its vice an curses so on. The reason for the researcher
to conduct this study is the high level of problems related to commercial bank service
quality and customer satisfaction in Lideta Branch.

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This research answers to the following questions:
 How the customers get satisfaction from the service?
 What are the factors that affect service quality & customer satisfaction?
 How employees treat their customers?

3. Objectives of the study

3.1. General objective
3.2. Specific objectives
In order to achieve the general objective mentioned above, the following specific objectives
have been set:
 To assess customer satisfaction level
 To identify factors that affect service quality.
 To assess the treatment of employees to their customers.

4. Significance of the Study

This study majorly focuses on the quality service on customer satisfaction the case of
Commercial bank of Ethiopia Lideta Branch. As a result the findings of this study will be
used:-
 By the bank management body to enhance quality of service
 Besides, it may also necessitate farther study on related issues.
Academically, it were be a compliment on the existing knowledge of banking and customer
satisfaction in commercial bank of Ethiopia

5. Scope/Delimitation/ of the Study

This study was focus conceptually or quality of service and customer satisfaction in Lideta
branch of CBE. Specifically, saving account, credit facility (loan account), current account,
foreign remittance, trade service internet banking and card banking services were being the
area of interest. Accordingly the quality of these services and satisfaction of service user
were being sencronaized. Quality of service specifically assessed from Intangibility,
Perishable, Inseparability and Variability dimensions. Whereas customer satisfaction are
measured using variables: Customer expectation, service standard and survive provision
within the for maintained quality dimension.

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6. Limitation of the Assessment
In preparing this study we may face not do much more than what we have do done. These
limitations may arise from two sides limitation arise from the researcher side and limitation
arise from the organization side to start up from the organization level the company
employees can resist to give us some data to catch secrets of their organization hence the
topic is related to banking industry which is competitive more over the employee of the
organization is busy enough so can’t able to make interview and formal discussion of
respondents about the company
As much as needed on other hand we have some personal problems in doing the research for
instance because of transportation problem due to corona virus we can’t able to catch data
from hade office and other linked branches so that the sample group will be much more
narrowed. In addition to financial problem the researcher face time constraint that makes
hard so to undertake detailed and wide study with respect to the case. Other factors are:-
- Shortage of time as the side of respondents was a serious limitation of this study
- Lack of up-to-date literature in the area
- Lack of adequate recording system.
- The respondents was not interested to fill and return the quaternary
Despite the limitations the researcher faces the above stated problems the study has been
conducted by using the second alternative possible, while maintain the quality of research
kept good.

7. Research Deign and Methodology

1.7.1. Research Design
One of the objectives of this research is describing the general feature of service quality and
customer satisfaction in CBE. For this reason the researcher was use descriptive type of
research. The objective of descriptive research is “to portray an accurate profile of person’s
events or situation”.

1.7.2 Sample Size

The populations of this study are the customers using the bank and employees of the CBE
Lideta branch. Hence it’s impossible to address all of the population because of time and
cost constraint, it’s necessary to build sample group that represent the population.

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Accordingly researcher has used judgmental sampling that represents the population because
judgmental Sampling enables the researcher to pick out respondent that have close
information and knowhow with regard to service delivery. By way of selecting sample
group respondents is selected from the organizations which have different level of
experience, understanding and position. Based on these, 160 questionnaires were distributed
to employees and customers. The study were incorporated 130 sample respondents from
customers, from these, 35 of the customers are government customers, 32 of respondent
were trader customers, 38 of respondent were NGO customers and 25 of respondent were
other types of customers.

1.7.3. Data collection method

The study has used both qualitative and quantitative data as well as primary and secondary
data in gathering data for analysis
1. Primary data source: It was being the main type of data collection source. The
researcher interviewed and distributed questioner to staffs customers. Observation also the
other sources of data to collect the necessary information from the area.
2. Secondary data source: this data included sources like books, literatures related with the
topic and also some web pages that are associated with the study.

1.7.4 Data collection methods

Questioners the researcher use both open ended and close ended methods

1.7.5 Method of data analyses and Presentation

The data collected from primary and secondary sources first assessed for their Quality,
reliability and accuracy using bench marks selected. After the researcher satisfied him
selves on the quality of data collected the data will be tabulated, arranged and analyzed.
Accordingly strength noticed appreciated, weakness discovered commented, and
opportunities seen directed.
Based on the fining on discussion of the problems discovered the researcher will make and
point out possible suggestion and recommendations.

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8. Organization of the Study
The study was incorporated four major chapters. The first chapter dealt with background of
the study and company, Statement of the problem, objective, significance, delimitation,
methodology, and organization of the chapters. The second chapter discussed the different
literatures written on the subject matter. The third tried to present major analysis and
interpretation of the data. Finally, the paper drew the conclusion and recommendation of the
study that relay on finding analysis and interpretation.

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 CHAPTER TWO
2. LITERATURE REVIEW
This chapter presents an overview and critical analysis of relevant literature on the topic. It
covers customer satisfaction concepts, theories and models, service quality concepts and
models and customer behavioral intentions referral concepts and models.

2.1 Definitions of Service

Different scholars define service and its feature in different ways some of these are:
Services: are deeds, performances and processes provided or coproduced by one entity or
person for and with another entity or person (Zeithaml, 2009).
Service includes core service, products and product-service bundles provided a more
inclusive definition of service with the derived service perspective, suggesting that all
products and physical goods are valued for the inherent service (value derived) they provide
not the goods itself. Services differ from product due to their intangibility, heterogeneity,
simultaneous production and consumption and perish ability (Zeithaml, 2009), (Vargo and
Lusch, 2004).
It should precisely distinguish them on the basis of their attributes a good is a tangible
physical object or product that can be created and transferred; it has existence over time and
thus can be created and used later. A service is intangible and perishable. It is an occurrence
or process that is created and used simultaneously while the customer can’t retain.
(Earl ,Poul , and Daryl WyCkoff, 1978).
But, majority of them are agreed that service is a serious of activities of more or less
intangible nature that normally but not necessarily take place in interaction between
customers and service employees and, or physical resource or goods and, or system of the
service provider which are provided as solution to customer problems “most authorities
consider the services sector to include all economic activities whose output is not physical
product or construction is generally consumed at the time it is produced and provides added
value in the form of continence, amusement, timelines, comfort which are basically
intangible concerns of its purchaser.”(James Brain. Quinn, Jordan . Bruch, Penny,
Cushma1987).

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2.2 Service Quality
Service quality is made during the service delivery process. Each customer contact is
referred to as a moment of truth, an opportunity to satisfy or dissatisfy the customer.
Customer satisfaction with a service can be defined by comparing perception of service
perceived with expectations of service desired. When expectations are exceeded, service is
perceived to be of expectations are confirmed by perceived service, quality is satisfactory
(Powell, 1995).

2.3 Definition of Customer Satisfaction

Several definitions have been offered for customer satisfaction over the past three decades.
(Anderson, (1994) suggested two definitions of customer satisfaction, in accordance with
the two broad classes of customer experiences identified by the literature - transaction
specific experiences and cumulative experiences (Mittal , 1999 cited in Zeithaml , 2009).
With a transaction-specific experience, customer satisfaction is defined as the post-choice
evaluative judgment of a specific purchase occasion. Whereas a cumulative experience,
customer satisfaction is determined as a result of a customer’s evaluation of his or her total
purchase and consumption experience over time. Oliver (1997) cited in (Zeithaml, 2009)
defined satisfaction as “...the consumer’s fulfillment response. It is a judgment that a
product or service feature, or the product or service itself, provides a pleasurable level of
consumption related fulfillment”.
It is the ability of the service or product to meet the customer’s needs and expectations in
their CSI model defined customer satisfaction as a function of customer expectations,
perceived quality, and perceived value Fornell, (1996).

2.4 Satisfaction and Quality

Customer satisfaction is the outcome felt by buyers who have experienced a company
performance that has fulfilled expectations are met and delighted when their expectations
are exceeded “recently, discussion arose regarding whether satisfaction leads to quality or,
whether quality results in satisfaction. Many authors posit very clearly that service quality is
as antecedent of satisfaction. So, the satisfaction judgment is base on service quality. Others
conclude that the two concepts resemble each other quiet closely. Service quality is the
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key driver of usage rates and customer retention. Superior service quality leads to more
favorable behavioral intentions by customer to stay/remain which results in ongoing
revenues increased spending and referred customers. On the on the other hand, inferior
services quality will lead to unfavorable behavioral intentions by customers leading to
deceased spending, lost customers and additional costs to attract new customers
(Kottler,1998).

2.5 Models and Theories of Customer Satisfaction the principal models for
services quality

The debate about service quality, which dates back to the late seventies, has resulted in a
large body of research representing a multiplicity of approaches.
The concept of service quality was proposed by the Nordic school in the nineteen eighties
(Gummesson, 1979, Gronross, 1982) and picked up in North America (Parasuraman,
Zeithaml, Berry, 1985; Berry, Parasuraman, Zeithaml, 1988). Based on customer
perceptions, the concept of service quality took on the role of a tout court paradigm. The
idea of quality involving a customer satisfaction formula, spread from services to
manufacturing and even to relationships between governmental services and the citizen.
From this initial background a number of modelsfor quality in services were developed by
academics and consultants. A model is in this sense a logical construct used in an effort to
interpret and predict a real phenomenon (Simon, 1957) by breaking it down into a small
number of variables that make it possible to simplify, unravel and dismantle the
phenomenon so its component parts are visible for examination (Baccarani, 2010).
Quality: is defined as “degree and direction of discrepancy between customers’ service
perception and expectations” (Parasuraman, Zeithaml, Berry, 1985).
The first service quality analysis model was produced in the eighties being the total
perceived quality model, based on the individual’s perception of the quality of a service. The
customer compares his expectations with his experience of the service, i.e. technical quality
(that obtained by the user) and functional quality (how the service is provided), perceived
through the filter of the company’s image. (Gronross, 1983; Gronross, 1984)
This was followed by the Gap Analysis Model, developed from exploratory investigations
conducted by the North American scholars Parasuraman, Zeithaml and Berry (1985),
starting out from the supposition that the quality of a service is expressed according to a

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disconfirmation paradigm (Oliver, 1980; Churchill, Surprenant, 1982), that is to say the
discrepancy between the customer’s expectation and the customer’s perception of the
service.

2.5.1 Customer Satisfaction Model

Zeithaml , (2009) suggested a customer satisfaction model. This model has five factors that
drive customer satisfaction; they are service quality (SERVQUAL), product quality, and
price, situational and personal factors (such as emotions and moods).
The concept of product quality is similar to other models presented above. Personal factors
such as customer emotions affect satisfaction either in a positive or negative way advised
businesses to view customer emotions as a major differentiation factor contributing to
customer satisfaction, especially where customers are actively involved in the service
delivery (et al, 1995; Gremler , 2006; Liljander and Strandvik,1997), Shaw and Ivenple,
Price s (2002).

2.5.2 The Gap Analysis Model

Suggests a number of certain key factors (word of mouth communication, personal needs,
past experience and external communications) which influence customer expectations,
Identifies the determinants of service quality (reliability, response capacity, competence,
accessibility, courtesy, communication, credibility, security, understanding the customer and
tangible aspects), which are evaluated by the customer, Identifies failings in quality
perceived by the customer and the service provider’s internal gaps, to find an approach
capable of removing or at least reducing these failings. On the basis of these models, the
nineties saw the development of the synthetic model of perceived service quality
(Brogowicz, Delene, Lyth, 1990).
According to which perceived quality derives from the total service quality gap, i.e. the
technical quality gap and the functional quality gap, each of which is strictly connected to
the respective quality expectations.
The 4 Q model of offering quality (Gummesson, 1993) considers both goods and services.
This model compares customer expectations, experiences and company’s image and brand
to customer perceived quality. Perceived quality has two sources: design quality and
production and delivery quality. The results of production and delivery quality are relational
10
quality and technical quality.
The Gap Analysis Model is in its turn revisited and extended to embrace seven gaps (of
knowledge, of standards, of delivery, of internal communications, of perception, of
interpretation and of service), each of which can occur at any moment or stage in service
planning and performance (Lovelock, 1994).
If all of the models considered up to this point are characterized by their static nature, in
(1993 Gronross) highlighted the need to construct dynamic models to be able to come to a
real understanding of perceived service quality and, thanks also to the work of (Gummesson
1987; 1993), the approach which emerges is that of relational quality analysis, by which the
service company sets out to create value for the customer by collaborating with the customer
himself.
An early relational quality model carried out an analysis of the interactions in actions and
episodes between Service Company and customers By way of a comparative parameter, the
customer compares company performance over a series of episodes to determine the
relational quality (Liljander, Strandvik, 1995).
Following these studies, a relational grid was drawn up that also shows the sequences
(Holmlund, 1997) involved in the formation of the relationship itself. Communication plays
a particularly important role in this regard, not so much as a unilateral tool but rather as
interaction and dialogue between link together to solve any problems provider and customer
Ballantyne (1999-2000).This communication is based on the participation of both parties
Bohm (1996), and on their desire to establish and maintain reciprocal understanding Dichter
(1996) and to that arise (Gronross, 2007).

Finding that customer expectations of the service may change over time Reeves and Bandar
(1994) construct a dynamic expectations model, which broke down expectations into
indefinite, explicit and implicit expectations (Ojasalo, 1999). The service company must
always satisfy implicit expectations and understand the indefinite expectations so that they
can be made to emerge as explicit expectations. The provider of the service can then be sure
of having performed a service that satisfies the customer, also by transforming explicit but
unrealistic expectations into realistic expectations. For their part, over time the customers
learn to carry out the same conversions (dynamic non intentional effect). Where the
changing expectations are not satisfied, there is on the one hand a failure of the service
provision and on the other hand the customer may switch to another provider who will
11
satisfy his expectations (Nyquist, Bitner, Booms, 1985)

2.5.3 The Gaps model of service quality

Identified five service quality gaps that lead to poor quality of services delivered by an
organization the model suggests that service quality is the difference between customers’
expectations and customer perceptions of the actual service delivery, referring to this
difference as gaps - an obstacle to achieving quality (Zeithaml, 1985).
Gap 1 - The Listening Gap: difference between customer expectations and company
perception of customers' expectations
Gap 2 - The Service Design and Standards Gap: difference between the company perception
of customers' expectations and the customer-driven service designs and standards
Gap 3 - The Performance Gap: difference between customer-driven service designs and
standards and the service delivery
Gap 4 - The Communication Gap: difference between the service delivery and the external
communication to customers
Gap 5 - The Customer Gap: the difference between customer’s expectations and perceptions
of services provided by an organization.
The first four are known as the provider’s gaps which give rise to the customer gap (5). To
close the customer gap, providers must first close the first four gaps in the order presented
above. The understanding of this will enable service businesses to deliver a consistent level
of service that meets or exceeds customer expectation leading to customer repeat business
and profitability.

Researchers (Dabholkar , 2000; Gronroose, 1990; Teas, 1993) have raised concerns about
the definition and measurement of expectation in the gaps model. They stated that while
customer perceptions can be defined and measured in a straightforward fashion - as
customer’s experience the service, expectations on the other hand is subject to different
definitions and interpretations by different authors. The meaning of perceived service is
similar to the ones offered above. (Zeithaml 2009,) described customer perceptions as
“...subjective assessment of actual service experience”. Customer expectation will be
discussed further as the models above did not offer enough explanation.

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Fig. 2.1: A conceptual service quality framework model

SERVICE DELIVERY PROCESS

Client Expectations

When clients approach a service provider on either a voluntary or involuntary basis they do
so with a variety of expectations that originate from many sources. A service gap is defined
as the disparity between a client’s expectations of a service and their perception of the
service experience. It is logical to infer that the existence of a negative service gap (i.e.
when expectations exceed actual service delivery levels) leads to a less than satisfactory
service experience. Conversely, when expectations are lower than the level of service
delivery, a satisfactory service experience is realized. Thus, understanding the client
expectations at the onset of the service experience is crucial to addressing service
satisfaction.

Zeithaml’s model of Customer Assessment of Service Quality identifies four key factors
affecting a customer’s (client’s) expectations that are important for an organization to
consider in relation to service quality: word of mouth, personal needs, past experience, and
external communications by the service provider. For example, recent work on the creation
and communication of service standards by many public organizations will likely influence
expectations to a great degree. A thorough understanding of the expectations that clients
13
bring to the service experience will provide an organization with vital information to plan
for either managing expectations or targeting areas of improvement.

Perceptions of Experience: The Service Gap

It is important for the service provider to understand client perceptions of the experience in
order to identify potential areas of improvement. For example, the client views the service
staff as being unhelpful because they redirect them to another counter. The service staffs
perceive this response as helpful since the client has been redirected to the appropriate
service personnel. On one level, the problem in this situation is a difference in perception of
the same service experience. On another level, the problem may be with the actual service
delivery. By identifying client perceptions, the problem may be addressed by the service
agency. The organization may choose to clarify points of contact through communications
or they may redesign their service delivery process to decrease the number of contact
through communications or they may redesign their service delivery process to decrease the
number of contacts required by the client in order to receive the service needed. The
disparity between client expectations and the perceived experience will result in what
Zeithaml .have described as a service gap. Service gaps are directly related to the level of
satisfaction experienced by a client.

Level of Importance
The perceived importance of a service (or its elements) is an essential service variable on
two levels: as an antecedent of satisfaction and for planning purposes. As an antecedent of
satisfaction the client brings the level of importance to the service experience. As the client
experiences service delivery, levels of importance that ultimately results in a level of
satisfaction filter his or her perceptions of the experience. Frequency of use is also
considered to be a factor that influences the level of importance. The following example
may illustrate this logic.

A client visits a hospital to have a minor procedure conducted. The experience is perceived
as negative by the client due to the following factors: excessive wait time cold impersonal
staff, numerous forms to fill out that are redundant and confusing, and a medical procedure
which, by nature, is unpleasant. The client will never have to use this service again and sees
this experience as negative but unimportant. The satisfaction level is rated as “poor” and the
14
client is relieved the experience will never need to be repeated. Conversely, a client is
rushed to the hospital with an unexpected medical problem and finds all of the above
variables to be the same except that the level of importance and frequency differ. The
client’s condition is serious and time is of the essence. The client, after having this negative
experience, is informed that she/he will require a similar procedure at the same facility every
six months for the rest of her/his life. The client rates the satisfaction level as “extremely
poor” and she/he dreads the prospect of reusing the service. Service variables recognized by
the client in this example (timeliness, service staff Interactions and communication) were
perceived as negative, but the level o Importance can be isolated as specifically exacerbating
the poor service satisfaction rating.

Level of Satisfaction
Clients react to a combination of their expectations: the importance of the service to them,
and the actual service experience, resulting in an internalized response or Perception.
Satisfaction levels are a result of this perception and an internalized Assessment process.
Perception is an initial response and satisfaction is a judgment of that response in relation to
one’s needs.

Priorities for Improvement

Measurement of service quality must go beyond exploring satisfaction levels in order to be
useful for planning purposes. Information on how important the overall service and
Individual service items are to the client will promote well-informed planning decisions.
Cross analysis of satisfaction and importance variables will identify priorities for
improvements and thus promote efficient allocation of resources .However, frequently when
clients are asked to stipulate levels of importance they indicate that all or most service
elements are important which is unmanageable for planning purposes. By requesting that
clients select the top three (approximately) service priorities, a manageable portfolio can be
provided for planning purposes.

Customer satisfaction refers to how satisfied customers are with the products or services
they receive from your agency. This satisfaction is determined by the quality and type of
customer experience and by their expectations. Regardless of the type of public service
provided, there are some common ‘drivers’ that influence levels of customer satisfaction.
Drivers are those elements of service that account for a large proportion of satisfaction. Not
15
only it is possible to measure these and other drivers, but also such measurements can be
instrumental in assessing and improving overall levels of satisfaction. There are a number of
drivers that influence customer satisfaction, but some researchers have identified the
following eight drivers as being of key importance for customers. These are: overall
satisfaction, accessibility, timeliness, information, outcome, knowledge, extra mile/courtesy
and fairness which are measured by the eight core questions of common measurement tool
(CMT).We all know customer satisfaction is essential to the survival of our businesses. How
do we find out whether our customers are satisfied? The best way to find out whether your
customers are satisfied is to ask them. When you conduct a customer satisfaction survey,
what you ask the customers is important. How, when, and how often you ask these questions
are also important. However, the most important thing about conducting a customer
satisfaction survey is what you do with their answers.

2.5.4 SERVQUAL Scale of Measuring Service Quality

The SERVQUAL model was developed by Zeithaml (1988) to measures the quality of
service on five identified quality dimension. This scale is designed to measure the difference
between customers’ expectations and perception (gap 5) on a 22-item scale, representing
five service quality dimensions, explained below.
Reliability: how well can the company deliver on its promises dependably and accurately?
Assurance: knowledgeable and courtesy of employees and their ability to inspire trust and
confidence
Responsiveness: willingness to help customers and provides prompt service
Empathy: caring, individualized attention the firm provides its customers
Tangibles: appearance of physical facility, equipment and staff
Brady and Cronin (2001) classified service dimensions into: interaction (attitude, behavior
and expertise), physical environment (ambient, design and social factors) and outcome
quality (waiting time, tangible and valence).

The model is can be referred to as a diagnostic tool for identifying broad areas of a
company’s service quality strengths and weaknesses (Tan and Pawitra, 2001).Some of
benefits of the SERVQUAL methodology are summarized below. It gives customers the
opportunity to offer their views regarding service encounters. It enables management to look
at the perceptions from both business and customers’ perspective. By closing the gaps,

16
businesses can use the information generated to formulate strategies to ensure customer
expectations are fulfilled on a consisted basis (Tan and Pawitra, 2001).

According to (Tan and Pawitra 2001), SERVQUAL is limited as it addresses only

continuous improvement in a fast moving world where continuous improvement alone may
not ensure business success unless blended with service and product innovation. (Shen ,
(2000) emphasis the need for innovation as the key to becoming competitive in the global
economy (Brito , (2007) also suggested that the use of dimensions unlike the attribute they
are limited in giving “...specific guidance on where to act in the design or improvement of
service operation”.

2.5.5 SERVPERF Scale/ performance only” model

The SERVPERF scale, also known as “performance only” model, was developed by Cronin
and Taylor (1992) to address the issue with the measurability and definition challenges of
the SERVQUAL scale (as explained above) by eliminating the expectation construct of the
SERVQUAL scale and using only performance. It assumes that respondents providing their
ratings have already unconsciously compared performance perceptions with expectations
and measuring expectation again is redundancy. Evidence was gathered across four
industries (fast food, banks, pest control, and dry cleaning) to support the model. Although
the SERVQUAL has enjoyed wide application across different industries and countries than
this model, studies (Brady, 2002; Babakus and Boller, 1992) have suggested that the
SERVPERF scale showed superior results when applied in conjunction with the
SERVQUAL scale through the use of its single-item scale. On the other hand, research
conducted by (Quester and Romaniuk 1997) suggested that the SERVQUAL is a better
predictor of service quality than SERVPERF. (Carrillat , 2007) in their bid to end the years
long debate between the two models, suggested that both model are adequate and equally
valid predictors of overall service quality with the use of meta-analysis. This can be viewed
as the final stopper (hopefully) to more than a decade long debate.
It must however be emphasized that the two models are more complementary than
competing and that the key is adopting a particular model to the business needs. This study
would adopt the SERVQUAL methodology because of it wide usage. This would enable the
researcher to compare the results of this study to other researchers.

17
2.6 Classification of Services
Classified products into three categories using the works of economists;
Search qualities: attributes that consumers can determine before purchasing the product.
Search qualities include color, style, price, fit, feel, hardness and smell. Example of products
is clothing, automobile, furniture and jeweler.
Experience qualities: attributes that can be determined only after purchase or during
consumption. Examples include taste and wear ability and examples include vacation
packages and restaurant services.
Credence qualities: attributes that consumer may find very difficult to evaluate (mainly due
to insufficient technical knowledge) even after purchase and consumption. Examples
include wheel alignment (auto repair), medical operation, etc (Zeithaml, 2009).

2.7 Customer Satisfaction (CS)

Customer satisfaction emerged as a distinct area of inquiry in the 1970s (Churchill
&Surprenant, 1982), and companies both big and small have realized the strategic benefits
of service quality and customer satisfaction as competition become more intense and global.
The achievement of customer satisfaction has become a good business practice that
businesses strive to achieve.

2.8 Customer satisfaction

Customer satisfaction in general is the outcome of the evaluation the customer makes of any
specific transaction or experience. But quality is more generally conceptualized as an
attitude, the customer’s global evaluation of service offering. Quality is built up from a
series of evaluated experiences and, hence, is much less dynamic than satisfaction. More
importantly perhaps, quality is generally viewed as an attribute in consumer’s choice
process (Kottler, 1998).

18
2.8.1 Why is Customer Satisfaction Important to Businesses?
Customer satisfaction helps companies in many ways, some of which include: Customer
satisfaction information helps companies to evaluate their ability in meeting customers’
needs and expectations effectively (Zeithaml, 2009).
It also helps companies to analyses the performance of an offering to customers in order to
identify areas for improvements as well as what areas customers consider to be very
important to them (Zeithaml, 2009).
Companies can predict customer retention and loyalty as well as organizational profitability
through satisfaction surveys. Research has suggested that customer satisfaction leads to
company profitability (Bei&Chiao, 2001; Heskett, 1997). Studies have shown a positive
correlation between customer satisfaction and customer retention and loyalty (Zeithaml.,
1996; Heskett, 1997). Reichheld (1990) asserted that customer satisfaction accounted for
about 40% of customer retention. In the automotive service industry, customers who are
satisfied with a dealer might buy multiple vehicles as their income and status increase
(especially high value vehicles) and also keep going back to that dealer for every service
throughout their lifetime.
Customers who are satisfied with a company’s offering may tell others about it - positive
word- of-moth, just as dissatisfied customer also bad mouth the company to other.
Suggested that dissatisfied customers tell on average ten people about the company as
against people by satisfied customer also asserted that it cost five times to attract a new
customer than to maintain a current customer Therefore it is imperative for service
businesses to satisfied customer on a consisted basis (Goodman, 2009).

2.8.2 Determinants of Customer Satisfaction

Several studies have identified the factors that influence customer satisfaction over the years
These factors are mostly similar in what aspect of customer satisfaction they are measuring;
some of them include customer’s expectation, perceived service quality, product quality,
perceived value, price, among others. Some of these studies will be looked at in detail,
examining their merits and demerits (Fornell., 1996; Yu et al 2005; Zeithaml, 2009)

19
2.8.3 Determinants of CS using CS indexes

Fornell,(1996) developed the American Customer Satisfaction Index (ACSI) based on the
Swedish Customer Barometer. The ACSI is an economic indicator based on modeling of
customer evaluations of the quality of goods and services produced and purchased in the
United States. Its main purpose according to Te-King Chein, (2003) is to gain an insight into
the interaction between the customers and businesses, to enable better planning and decision
making. The ACSI is a cause-and-effect model showing drivers of satisfaction on the left
side (customer expectations, perceived quality, and perceived value), satisfaction in the
centre, and outcomes of satisfaction on the right side (customer complaints and customer
loyalty, including customer retention and price tolerance).Each of these factors is explained
below in accordance with (Fornell, 1996).
Customer Expectations are customers’ anticipation of the level of quality they are to receive
from a company. They emphasis that the“...market's expectations represent both the served
market's prior consumption experience with the firm's offering - including non-experiential
information available through sources such as advertising and word-of-mouth - and a
forecast of the supplier's ability to deliver quality in the future”. Perceived they postulated
that customer expectations have a direct and positive influence on overall customer
satisfaction with an organization because of the on-going relationship with customer. It also
influences both perceived quality and perceived value as Quality is a customers’ measure of
the recent service interaction with the company. They stated that quality could be measured
in terms of how the product meets customer’s individual needs and error-free service
delivery - reliability. This is also said to have a direct and positive impact on overall
satisfaction. Perceived Value is a measure of quality relative to price paid - value for money
(Anderson, 1994).
They asserted that price has more impact on satisfaction in a customer’s first purchase
experience but a lesser impact on satisfaction for repeat purchases. Customer Complaints are
customers who have talked to the service provider about a service that they were not happy
within a specific time. They stated that satisfaction is negatively correlated to customer
complaints - the more satisfied the customers, the less likely they are to complain. Customer
Loyalty is customers’ likelihood to purchase their next service with the same organization at
20
a given price (price tolerance). Customer loyalty is the critical component of the model
because it equals profitability (Heskett., 1997; Reichheld and Sasser, 1990).
The European Consumer Satisfaction Index (ECSI) is also an adapted version of the
Swedish Customer Satisfaction Barometer and very similar to the ACSI. Unlike the ACSI
with six variables, the ECSI has seven variables with “corporate image” being the seventh
and optional variable (ECSI Technical Committee, 1998). It refers to the brand name and
what kind of associations the customers get from the product/company. Eklof (2000)
suggested that perceived quality can be distinguished into perceived product quality and
perceived service quality; where perceived service quality is the assessment of recent
consumption experience of associated services like customer service, range of services and
products, conditions of product display while perceived products quality relates to the
attributes of the core product and product (ECSI Technical Committee, 1998).

2.8.4 Source of Information

There are several sources for obtaining information about customer’s satisfaction. The
following list includes some possible sources:
Informal surveys: - Informal surveys can provide insights about what customers like and
dislike. May not e statistically measurable, but they can help businesses to better know their
customer.
Comment card: - The use of comment cards is one of the most popular methods of
determining a customer satisfaction they are easy to create and are frequently available for
company home office.
Verbal comments: - verbal comments are easy to collect, but they are often ignored. By
asking customers about their experiences, information can be obtained. To collect
information from verbal comments accurately, employees must be encouraged to document
comments on a customer log so that the comment are not lost or become hearsay.
Historical data: - With the use of computer I most work places; kit is easy to collect
historical data.
Discussions with internal customers: -internal customers frequently have information about
what customers like, don’t like and are interested in.
Toll-free telephone numbers: - By providing our customers with toll free telephone
numbers to reach our company or department easily, we can encourage them to contact us
when a question or problem arise. Toll-free numbers should be answered promptly by
21
knowledgeable employees who are well trained in answering customer questions and in
responding to customer concerns.
Corporate-generated surveys: -many corporations will generate surveys that are sent to
their customers. Corporate- generated surveys are usually more detailed than informal
surveys and the data that they reflect is usually statistically measurable (K. Harris, 1996).

2.8.5 Service Quality as a Determinant of Customer Satisfaction

The service quality models (both the gaps model and SERVQUAL) assume that customers
come into a service encounter with a prior expectation, this expectation is then matched with
the actual service experience to determine the service quality of that organization
(Zeithaml ,1985; Gronroos 1990).
The customer is satisfied if actual service experience meets expected service, he/she is
dissatisfied if actual service falls below expected service and delighted if actual service
exceeds expected service. Studies have agreed that service quality is an antecedent to
customer satisfaction, therefore adequate discussion of this topic is done here. For example
Rust and Oliver, 1994; Zeithaml, 1988; Boulding., 1993; Anderson and(Sullivan, 1993;
Fornell, 1996).

2.9 Customer Satisfaction in Banking Practice

Customer satisfaction is about consumer satisfaction (that is, user satisfaction), rather than
about buyer satisfaction (which may include non-users).
Second, satisfaction is a feeling. It is a short-term attitude that can readily change given a
constellation of circumstances. It resides in the user’s mind and is different from observable
behaviors such as product choice, complaining, and repurchase.
Third, satisfaction commonly has thresholds at both a lower level (insufficiency or under
fulfillment) and an upper level (excess or over-fulfillment). This means that a consumer’s
Satisfaction may drop if she/he “gets too much of a good thing.” Many people focus upon
the Lower threshold and neglect the potential for an upper threshold.
With this definition in mind, we move to the traditional macro-model of customer
satisfaction. This model underlies much of the research in customer satisfaction over the
past decade. Note the following:
S Perceived performance often differs from objective or technical performance, especially

22
when a product/service is complex, intangible, and when the consumer is unfamiliar with
the product/service.
S Comparison standards can come from numerous sources that can vary widely by
individual, by situation, and by product/service type.
S Perceived disconfirmation is the evaluation of perceived performance according to one or
more comparison standards. Disconfirmation can have a positive effect (generally implying
a satisfying result), a negative effect (generally implying a dissatisfying result), or a zero
effect.
S Satisfaction feeling is a state of mind, an attitude. The phrase “mixed feelings” applies
here, as a consumer may have different levels of satisfaction for different parts of a
product/service experience.
S Outcomes of satisfaction feelings may involve intent to repurchase, word-of-mouth (the
consumer’s communication with her/his network of her/his approval/disapproval for a
product/service), and complaints. These outcomes also are moderated by other variables.
For example, extreme dissatisfaction will not necessarily generate complaint behavior,
especially if the consumer believes complaining will be futile.
Banking is a service industry focused towards the customer’s money and its management.
An element that strongly drove the satisfaction of customers in the banking sector was the
conviviality factor related to the features of a bank and the attributes of its personnel. Rust
and Zahorik (1993), Krishnan et al (1999) conducted various studies and put forward that
satisfaction with perceived product quality was the prime driver of overall customer
satisfaction. Furthermore, their studies also found and recommended that the impact of
service delivery factors varies considerably on customer satisfaction. To further exemplify,
they became aware of the fact that for customers who traded heavily and had high invest-
able assets, the effect of an automated telephone service was elevated than that of the other
drivers of satisfaction improving customer satisfaction. The study (Johnston, (1997))
suggested that satisfaction or dissatisfaction with retail banking did not arise from the same
factors. To be more precise, some elements of service quality, if improved, enhance the
satisfaction levels of the customers, while on the other hand, other elements may not
improve satisfaction but simply function to keep dissatisfaction at bay or at best, reduce
dissatisfaction alone. This line of accepted wisdom stems from the hygiene factors of
Herzberg's motivation theory.

23
2.10 Customer Expectations and the Zone of Tolerance (ZoT)
Defined customer expectations as “...pre-trial beliefs about a product or service”. Churchill
& Surprenant (1982) stated that a customer’s expectations are: (1) confirmed when a
product performs as expected, (2) negatively disconfirmed when the product performs more
poorly than expected, and (3) positively disconfirmed when the product performs better than
expected based on the disconfirmation theory (Oliver, 1980).
Proposed three definitions of customer expectations the first is equitable performance - a
normative standard for performance based on implicit relationships between an individual’s
cost/investment and anticipated rewards. In this instance, expectations are likely to be
influenced by the price paid, the effort invested, and previous product experiences. The
second is ideal product performance - ideal product performance scenario from a customer’s
perspective, such that expectations may be based on previous product experiences, messages
gleaned from advertisements, or word-of-mouth communications. The third is expected
product performance - product’s most likely performance (Tse& Wilton, 1988).
Customer’s expected service can either be adequate (“minimum tolerable expectation”) or
desired (“should be” and “can be”) service and the amount of variation that customers are
willing to accept is known as Zone of Tolerance (Zeithaml, 1993). The more important a
customer deems a service encounter or dimension (for example, reliability) to be, the higher
the desired service and narrower the ZoT and vice versa. When service experience exceeds
the desired level, customers become delighted and are dissatisfied when service experience
falls below the adequate level.
Education making realistic promises, conducting market research, among others (Zeithaml,
2009).

2.11. Effects of Customer Satisfaction on Behavioral Intentions

Several studies (Zeithaml, 1988; Anderson et al., 1994; Cronin et al., 2000 ;( Saha and
Theingi, 2009) have linked customer satisfaction to customer behavioral intentions. Fishbein
and Ajzen (1975) defined behavioral intentions as a customer’s subjective likelihood of
performing certain behavioral act relative a business. These behavioral intentions when
managed well can increase a firm profitability and long term competitiveness.
Customer behavioral intentions include:
Word-of-mouth (both positive and negative)
Repurchase intention (repeat business)
24
Feedback to the service provider (usually in a form of complaints or compliments) (Saha
and Theingi (2009,) have described word-of-mouth as“...a flow of information about
products, services, or companies from one customer to another. As such, word-of- Mouth
represents a trusted external source of information by which customers can evaluate a
product or service”.
The information is trusted because of the difficulty in trying out a service prior to purchase
or returning a service after experiencing it unlike products. Therefore customers usually
depend on the experience of others before buying a service (most of the time). The
information shared could either be encouraging (positive) or discouraging (negative) other
customers from using a service or product of the firm that being talked about. Goodman
(2009) indicated that while satisfied customers tell on average 5 other people, dissatisfied
customer tell about 10 other people. Other researchers (Brown et al., 2005; Babin et al.,
2005; Saha and Theingi, 2009) have found a positive correlation between customer
satisfaction and word-of-mouth communication.
Plethora of studies (for example Jones and Suh, 2000; Bitner et al., 1990; Cronin and
Taylor, 1992) has linked customer satisfaction with repurchase intention of customer. For
the purposes of this study, only the first two customer behaviors will be investigated. The
net promoter scale and life time value of a customer literature will be reviewed to enable a
comprehensive understanding of these areas (UKEssays.com).

25
 CHAPTER THREE
3. DATA PRESENTATION, ANALYSIS AND INTERPRETATION
The entire objective of this chapter is to deal with the presentation and analysis of data
collected from the questionnaires distributed and interview made to customers and
employees of commercial bank of Ethiopia Lideta branch.

3.1 Quality of data collected

By way of identifying the population in which data collected one hundred sixty respondents
is selected from the bank and its customers which have different level of experience,
understanding and position. So before making the analyses it’s found vital for the researcher
to assess the quality of data collected. Accordingly three bench mark are prepared and filled
by the respondents. Specifically
3.1.1. Stay of respondent (Customers) in the organization
3.1.2. Sexual make up of the respondent
3.1.3. Age of the employees
3.1.4. Educational Back Ground of employees (respondent)
3.1.5. Position held by employees (respondents) in the bank

3.1.1. Stay of respondent (Customers) in the organization

Figure 3.1.1; Customer duration in Lideta as a customer

Source: Own computation, 2013

26
Figure 3.1, tries to show for how long the respondent served by the bank. Majority (around
53.5%) of respondent were responded as they are using Lideta branch for about 10-15 years
ago. whereas (2.5%) the least percentage of customer service use in the bank for 5-10 years.
The rest 3.5% and 4.5% of customers have less than 5 and above 15 service years with the
Bank respectively. Hence majority of customers respondent are more experienced and
served by the bank for more than 10 years, the data this customers give has better
credibility ,so with this respect the data collected has good quality and reliable for analyses.

3.1.2 Gender Make up of the respondent

Table 3.1.2; Sex ratio of employee’s respondent
Gender Frequency Percentage
Male 14 53.8%
Female 12 42.6%
Total 26 100%

Source: primary data own computation, 2013

Table 6 demonstrates gender proportion of the employees who fill the questionnaires. 42.6%
of them were females and the remaining 53.8% were male employees. The above data
shows that the number of male employees is greater than that of female employees, But the
difference is slight so the researcher can say the sample of the population represented better
with balanced sexual make up.

3.1.3 Age of Employees

Table 3.1.3: Age of employees

Age Frequency Percentage

< 21 - -
22 - 30 19 73.1%
31 - 40 5 19.2%
40 - 50 2 7.7%
>50 - -
Total 26 100%
Source: own
computation, 2013
27
Table 7 shows age of the employees and 73.1% of the employee accounts for the age
between 22 and 30, 19.2% are between 31-40 and the rest 7.7% of the employee are
between the age of 40 and 50. As its noticed most of the respondents are in the age of 22-30
years, Even though roughly thinking older people know better, considering most of the bank
employees are young employees the sample represented the branch well. So with this
respect it can be said the quality of data collected is satisfactory.

3.1.4 Employees Educational back ground

Figure 3.1.4; Level of education

level of education
12 completed 0% certificate & diploma 30.8%
BA degree 65% Masters or above 31%

Source: own computation, 2013

Figure 3.2 illustrates educational background of Commercial Bank of Ethiopia Lideta
Branch employees; employees who hold their first degree accounts for 69.2% and the
remaining employees who weight 30.8% is diploma holder. Hence 65% of the employees
have BA degree the data collected can be said best with regard to this bench mark.
Position Held by employees
Figure 3.1.5; Current position
current position 0 10 20 30 40
supervisor 15.4%
assistant manager 3.8%
Accountant 15.4%
secretary 3.8%
clerk 38.5%
auditor 23.1%
computer operator 23.1%

Source: own computation, 2013

28
 Figure 3.3, explains the current position of the employees and from all respondents; 15.4%
are supervisor, 3.8% are assistant managers, 15.4% are accountant, 38.5% clerk, 3.8% are
secretary and 23.1% of them have other position like an auditor, computer operator and so
on. Though there are different positions in CBE, as the data demonstrate every aspect of
sections and employees incorporated in the sample. Therefore with respect to the position of
the respondent the data collected can be said reliable hence its compressive of all banking
profession know how and skill.
Generally the data collected from CBE employees and customers is believed reliable and
enable the researchers to make planned suggestion and conclusion about the topic.

3.2 Types of service available in CBE, Lideta branch

Table 3.2; Types of banking services provided in Lideta Branch

Types of Banking service provided in Commercial Bank of Lideta Branch

Q. No. Types of banking service Frequency of population %
1 Saving Account 23 20.5
2 Current Account 16 14.4
3 Loan Account 13 11.6
4 Foreign Remittance 10 8.9
5 Card Banking 8 7.1
6 More than 1 service 42 37.5
Total 112 100

Source: Own computation, 2013

Table 3.2, demonstrates types of banking service provided in Lideta Branch. According to
data collected these, 20.5% of customers use saving account, 14.4%of the respondent rated
current account users, 11.6% of the respondent use loan account, 7.1%of the respondent use
card banking service, 8.9% of the customers using foreign remittance and 37.5% or majority
of customer were using more than 1 banking services. This data indicated that only less than
half of the customers visit the bank frequently for different services. Therefore the bank
should try to make its customers to know what kind of service are really provided, what
their benefits from the service and the way to use so as to maximize the number of
29
customers who makes the bank partner to their livelihood by visiting the branch for more
than 1 service.

3.3 Customer’s value attached to the banking service

Table 3.3; Service delivery and standard, customer expectation and Actual service
Service type Standard Customer expectation Actual time
time
<10mi 10 20 >30mi <10 10 20 >30
20mi 30mi mi 20 30 mi
mi mi
Saving Account 5-7mi - 31 34 47 5 19 49 39
Current Account7-10mi - 19 51 42 3 47 54 8
Loan Account 10-15mi - 20 27 65 - 41 56 15
Foreign 3-7mi 9 22 38 43 13 37 44 18
Remittance
Card Banking 3-5mi 13 28 31 40 22 38 41 11
Total 22 120 181 237 43 182 244 91
Source: filed survey and bank data, 2013

Table-4, measure the general feature of Service delivery and standard, customer expectation
and actual service with related to standards time that set by the bank which is reflect in
Lideta branch. According to customer response, even if there were late delivering of all
types of services to customers in the bank, there is good performance in delivering services
related to customer expectation and actual time. For instance, in saving account service;
customers were saving or withdraw money from the bank, in these process the bank
standard time set between 5 7 min. However, even if majority of customers were respond as
they expected the services can take >30min but, in actual time it was take 20-30min.
Similarly, in loan account and current account the bank were set to deliver the services
between 10-15 min. However, in actual time majority of respondent were agreed as both are
taking between 20-30min. For the last two services the bank was set less than 7 min to
deliver to its customers but, as the above services majority of respondent were respond as it
take 20-30 min. These data clearly indicated that there is a bottle neck in the process of
service delivery so it’s vital for the bank to identify the and improve its efficiency and
increase customers satisfaction.

30
3.4 Customers Expectation Analysis
Table 3.4; Meeting expectation
Type of services Did you get your expectation Frequency %
correctly
Saving Account Yes 22 19.7
No 12 10.7
Current Account Yes 16 14.3
No 11 9.8
Loan Account Yes 13 11.6
No 8 7.1
Foreign Remittance Yes 10 8.9
No 6 5.4
Card Banking Yes 9 8
No 5 4.5
Source: own computation, 2013
Total results: Yes = 70(62.5%) No = 42(37.5%)

Customers have different expectation with respect to different types of service they get.
Table 3.5, illustrate whether customer expectation is met or not; according to the results of
total customers respond 70(62.5%) of the respondent were found their expectations but the
rest 42(37.5%) of the respondent did not get their expectation. The above data illustrate that
even though majority of the customer met their expectation, there is still a huge gap between
actual service delivery process and customer expectation hence 37.5% of the respondent are
not satisfied with the service. As it’s investigated during interview time especially in the
areas like foreign remittance 10(8.9%), and card banking service types 9(8%) were the
services that have huge gap in delivering the required or expected services to their
customers. Therefore it’s a must to do what it takes to narrow the gap in between. On the
other side, saving account 22(19.7%), current account 16(14.3%), and loan account
13(11.6%) of the respondent were agreed on the better performance of the bank in
delivering expected services to their customers. This data indicated that the bank customers
mainly used saving account, current account, and loan account, which the bank is relatively,
has better performance.

31
3.5. Training Program of the bank and its impact on service delivery
process
Table 8; Objective of training and development
Objective Frequency Percentage
To acquire knowledge regarding service quality 10 38.5
To develop my skill and performance in banking area 13 50.0
I have simply got the chance to participate 3 11.5
Total 26 100
Source: own computation, 2013

Table 8 tries to clarify the objective of training and development program and the result
shown 38.5% of the employees have the objective of acquiring knowledge regarding service
quality, 50% to develop their own skill and performance in banking area and 11.5% of the
employees have no specific objective but they participate because they have got a chance to
participate. More than half of the employees involve themselves in training and
development practice in order to improve their own skill and performance and the remaining
uses this opportunity for other purpose. Unless otherwise employees believed and well
understood the importance of the training program, just running training program just
merely is meaningless. According to the data collected 11.5% of employees have no
specific objective but they participate in training program because they have got a chance to
participate Hence the number seems small it’s a loss for the bank and employees as well
such kind of trend. So it’s necessary to amend the way of delivering training as to improve
service delivery.

3.6. Availability of resource for training

Table 3.6: Availability of training tool and equipment
Availability Frequency percentage
Strongly agree 6 23.1%
Agree 18 69.2%
Disagree 2 7.7%
strongly disagree - -
Total 26 100%
Source: own computation, 2013

32
Table 9, explains the availability of training tool and equipment in the center; 23.1% of the
respondents strongly agree, 69.2% just agree and 7.7% of them disagree with the availability
of training tool. The majority of the employees responded that there is available tool and
equipment for training. This implies that, customers can get quality service from qualified
employees.

3.7 Motivational Factor of employees

Figure 3.4; Specific motivating factor that motivates a specific employee

Figure 3.4, illustrate of all the respondents 11.5% are motivated by salary increment, 15.9%
by bonus, 3.9% by allowance, 15.4% by promotion, 11.7% by recognition, 10.8% by
training and the other 30.8% of the bank employees motivated by better working
environment. Even though the motivating factors differ from employee to employee,
Majority of the employees are more motivated by better working environment, so the bank
as to see once again its policy of motivational activities.

33
Table 3.7 Particular motivating factor provided by the bank

Particular motivating factor that provided by Frequency Percentage

the bank
Salary increment 7 26.9%
Bonus 4 15.8%
Allowance - -
Promotion 6 23.1%
Recognition 3 9.7%
Training 2 8.7%
Better working environment 4 15.8%
Total 26 100%
Source: own computation, 2013

On the other hand the bank employees are provided with 26.9% of salary increment, 15.8%
of bonus, 23.1% of promotion, 9.7% of recognition, 8.7% of training and the remaining
15.8% of the employee are provided with better working environment. From the different
motivating factors that are provided, the bank majorly focused on salary increment in order
to keep the employees motivated.
Figure 3.5; Importance of motivating factor

Figure 3.5, tries to clarify the extent to which the motivating factor is important to give
quality service and satisfy customer and by one voice they agree on the importance of
motivating factor.

34
3.8 Office layout
Table 3.8; Office layout
Office layout Frequency Percentage
Very suitable 3 11.5
Suitable 17 65.4
Unsuitable 6 23.1
Total 26 100
Source: own computation, 2013

Table 11, explain that only 23.1% of the CBE employees feel that the office layout of the
bank is not suitable to work cooperatively with each other and the other 76.9% (11.5% -
very suitable, 65.4% - suitable) are highly recommended that it’s suitable in combination
with comfort. Majority of the employees has responded that the office layout is suitable to
them. This implies that employees perform well and it can enhance the quality of the service
provided by the bank.

3.9 Customer complain Management

Table 12; Customer complain
Have you ever encounter Frequency Percentage
any Complaint?
Yes 19 73.1%
No 7 26.9%
Total 26 100%
Source: own computation, 2013

When we look at the employees experience towards facing customer’s complaint almost all
of them encounter a problem. Table 12, clarifies 19(73.1%) of the respondents said “yes”.
This indicates that employees encounter customer compliant that is emerge from different
customers while they are performing their job.

35
Figure 3.6: Areas of complain

Areas of complain
H customer handling H working hour ‘- i employee appearance h speed of delivery

Source: own computation, 2013

Figure 3.6, demonstrate the specific areas of complain encountered by customers in CBE.
The figure shows 42.4% of the respondents have complain with customer handling, 42.9%
working hour and the remaining 6.8% and 7.9% of the respondents encounter a problem
regarding employee’s appearance and speed of delivery. This implies that almost half of the
customers have complained on the area of customer handling and working hour of the bank.
So it will be better if the bank extend its working hour including evening time so as to
increase customer satisfaction.
3.10 Employee attitude towards their amount of salary compared with similar financial
institutions.
Table 13: Comparative salary
Comparative salary frequency Percent
Higher 2 7.7%
Medium 19 73.1%
Lower 4 19.2%
Similar - -
Total 26 100%
Source: own computation, 2013

Table13 illustrates the employee attitude towards their amount of salary that the employees

36
earn in compared with similar financial institutions, the respondent responds 7.7% of them
believes that the salary is higher than other, 73.1% of them feel its medium. On the other
side 19.2% of the employees consider that their salary is lower than other financial
institution. This data gave you an idea about the largest part of salary paid to employees’ lies
under medium range as compared with similar institutions. So it would be wise for the bank
to balance the way of salary increment so as to maintain moral of employees which
indirectly affect service delivery.

Figure 3.7: Working environment including location convenience

Source: own computation, 2013

Figure 3.7, describe the working environment including the convenience of location and
they rated as follow; 3.8% of them are strongly agree, 50% of them are agreed on the
working environment and 30.8% of them are neutral. On the reverse, 11.5% of them are
disagree and they think that the working environment including site convenience are not
good, In contrast 3.8% of the employees are strongly disagree with the above statement.
Although most of the employees agree on suitability of working environment there are
employees who disagree therefore, the bank has to investigate areas of dissatisfaction with
this regard including major factors like working hour, company policy, and so on.
Figure 3.8; Coordination between managers and employees

50 -good
40
30
20
10
0
-Excellent - Very good –Poor
37
 □ Coordination between managers and
employees

38
Source: own computation, 2013
Figure 3.8 express the coordination between managers and employees in different
department and they rated as follow; 19.2% and 26.9% of the respondents believed that their
coordination is excellent and very good respectively. 50% of the respondents respond its
good and the remaining3.8% of the respondent thought that there coordination is poor. This
implies managers and workers work cooperatively in order to satisfy their customers and
keep service quality.

3.11 Employees placement and service delivery

Figure 3.9: Position compatible with Educational level

Strongly agree neutral disagree

Source: own computation, 2013

Figure 3.9, deals with the position compatibility of employees with their educational level
and working capacity. Therefore the respondents’ response shows as; 23.1% are strongly
agree, 53.8% agree, 11.6% neutral and disagree respectively. This indicates that more than
half of the positions are compatible with educational level. So it’s better for the bank to have
the right employees for the right position so as deliver better service.

39
 CHAPTER FOUR
4. CONCLUSION AND RECOMMENDATION
4.1 Conclusion
The main intention of this study is to identify the service quality and status of customer
satisfaction in CBE, Lideta Branch. In order to meet the above objective the researcher had
been collected primary (questioner, interview and observation) and secondary written
documents. Based on the response of customers, employees and managers and data gained
from documents the following conclusions were drowning.
Commercial bank of Lideta branch was established in 07/11/65 G.C since their year the
bank give five types of service to its customer’s .There are; saving account, loan account,
current account, foreign Remittance and card banking. The customers who took their service
from the branch is mainly governmental organization, trader, NGO and other types of
customer even if majority of sample customer were agreed on the good performance of the
bank in delivery qualified services to their customer, but also the do not quit to exposed as it
is weak compared with the standards that set by the bank. As the 112 customer response
indicated, averagely the deliverance of each bank services took 20-30minits.That is way
majority of customers were agreed on the good level of service performance of the branch.
In addition to customers response 26 employees also agreed that as there is gap in delivering
of qualified service to their customer .According to them at different time customers were
raise complain related to delivery of qualified service Thus the bank leaders trying to solve
their problems the frequently. However, the problem still not should stand together in
improving their awareness by taking different work shop, training and seminars. Similarly,
the bank leaders also give training and incentive to employees, like salary increment, bonus,
allowance, promotion, recognition, conducive working environment and the like.

4.2 Recommendation
From the summary of findings and conclusion the researcher would like to recommend the
quality service and status of customer satisfaction in CBE, Lideta branch as the following.
In order to be a competitor in the banking industry and to serve its customers properly the
bank need to practice or bring different technologies such as ATM, VISACARD, internet
banking.

40
Since CBE is a service providing organization and there are also many competitors, the bank
must improve the quality of service more than it is practiced now.
The use of suggestion box is not familiar to most of the customers therefore, the bank need
to give more attention to this problem in creating awareness.
The bank should assess customer’s satisfaction regularly.
Even if the bank gave priority to salary increment as a motivating factor but employees are
highly motivated conducive working environment so the bank need to work to match the
employees need with its policy.
Even if there are adequate human resource the training department has its own weakness.
Therefore the company can solve this problem in the following ways. For example the
department can give training by discussing with the trainer and also it is important to follow
up either the training program achieved it target or not.
Connection of one branch with the other branch is one of the backbones to deliver qualified
and speed full services to customer. However, most of the time customers raise complain in
the breakdown of network. So, the bank should have to give attention to solve this problem.
Finally, the general performance of CBE Lideta branch in delivering qualified services and
customer satisfaction are very well but if all members of the organization work in
cooperative and collaborative ways they can be success more than the current status.

41
Bibliography
Bitner, M.J., Nyquist J.D., Booms B.H. (1985). The Critical Incident Technique
forAnalyzing the Service Encounter, Chicago: American Marketing Association
Bohm, D. (1996). On Dialogue.London:Routledge.
Churchill, G.A. Surprenant C.(1982) “An Investigation into Determinants of Customer
Satisfaction”, Journal of Marketing Research, vol. 19, N November.
Dichter, E. (1996). How Word of Mouth Advertising Works. Harvard Business Review, vol.
44, November -December.
Gedey B. (1990). Money, Banking and Insurance in Ethiopia. Addis Ababa:
Berhanenaselam Printing Press.
Holmlund, M. (1997), Perceived Quality in Business Relationships, Finland: Hanken
Swedish School of Economics.
Lewis, R.C., Booms B.H. (1983), The Marketing Aspects of Service Quality, Chicago:
American Marketing Association.
Liljander, V., Strandvik T. (1995), the Nature of Customer Relationships in Services,
Greenwich: JAI Press Inc.
Powell, TC (1195). Total Quality Management as Competitive Advantage; A Review and
Empirical study strategic Management. Greenwich: JAI Press Inc.
Rust, R.T. Oliver R.L. (1994) Service Quality: Insights and Managerial Implications from
the Frontier, England: Sage Publications.
Strandvik, T. (1994), Tolerance Zones in Perceived Service Quality. Finland: Swedish
School of Economics

42
GAGE COLLAGE
DEPARTMENT OF MANAGMENT
Questionnaire to be filled by Commercial bank of Ethiopia Customers Dear Respondent
We are students in gage collage and we are carrying out a research entitled an assessment of
service quality and customer satisfaction the case of Commercial bank of Ethiopia Lideta
Branch.
Your views are very important for the success of the research therefore, you are urging to
express your opinions and experiences as openly as possible.
Please put a tick "V” mark for those questions that are followed by choices do not write your
name.
THANK YOU FOR GIVING US YOUR TIME AND ENERGY TO ANSWER THESE
QUESTIONS!
A General bio data
Customers segmentation based on organization
J__J Government Employee customers J___J NGO Employee customers
J__J other types of customers J___J Trader's customers
The service type the customer receives?
J___J Saving account /current account foreign remittance
J___J Loan account J___J card banking
For how long you become a customer in this bank
J___J Less than 5 years J___J 10 - 15years
J___J 5 - 10 years J___J above 15 years
B. Research related question
About how many minutes did it take you to receive banking service?
J___J Less than 10 minutes J___J 20 to 30 minutes
J___J 10 to 20 minutes J___J above 30 minute
In your opinion what is acceptable amount of time you think to receive the required service?
J___J Less than 10 minutes J___J 20 to 30 minutes
J___J 10 to 20 minutes J___J above 30 minutes
How many contacts did it take with employees of the bank to get the service?
J___J 1 times J___J 3 times J___J 4 times J___J
times more than 5 times
J___J 2
In your opinion what is the acceptable contact required to get the service?
J___J 1 times J___J 3 times J___J more than 5
times
J___J 2 times J___J 4 times
What type of technology does the bank use to increase its quality service?
J___J ATM J___J VISA card J___J Internet banking J___J Never used other
If your answer is different from "never used” how do you rate the role of technology?
J___J Excellent J___J very good J___J good J___J poor
What was your expectation before you become customer of Commercial bank of Ethiopia?
J___J Very high J___J high J___J medium J___J low

43
If your answer is yes, what aspects of your expectation are met?
__________________________________________________________________________
__
If no what expectation are not yet met?
__________________________________________________________________________
__
13. Do you positively publicize your bank to the others?
J___J Yes J___J No

14. What is your suggestion based on the quality aspect of the service?
Write the Value you attach for service quality and status of customer satisfaction in the table
below (use V)
Description Strongly Agree Dis AgreeStrongly
Agree Dis-agree
14 Quick service
15 Quality service
16 Office layout
17 Convenience of branch location
18 Staff courteous and patience
19 Accurate and timely giving service
20 Waiting time(crowdedness queue)
21 Staff performance
22 Loan processing
23 Complaints handling
24 Branch networking
25 Ability to perform the promised service
dependably and consistently
26 Management quality
27 Availability of parking space
28 Overall performance of the bank

44
GAGE COLLAGE
DEPARTMENT OF MANAGMENT
Questionnaire filled by Commercial Bank of Ethiopia Lideta branch Employees
Dear Respondent
The objective of this study is for partial fulfillment of bachelor of art degree in accounting
and also to assess service quality and customs satisfaction and to find out problems
encountered in customer satisfaction, to forward possible suggestions for quality service.
Thank you in advance for your cooperation in filling the questionnaire. Please put a tick "V”
mark for those questions that are followed by choices.
A general bio data
1. Sex
J___J J___J Male
Female
2. Age J___J 22-30
J___J 21 J___J 40- 50 J___J 50and
or below above
J___J 31
- 40
3. What is your educational status?
J___J 12 completed J___J certificate J___J
diploma J___J BA degree
J___J Masters or above other specify
4. What is your current position?
J___J Supervisor J___J Assistant manager
J___J Accountant J___J clerk
J___J Secretary J___J other specify
B. Research related questions
5. What is your objective in training and development program?
J___J to acquire knowledge regarding service quality
J___J to develop my skill and performance in banking area
J___J I have simply got the chance to participate
J___J Other, please specify
6. The availability of training tools and equipment in the center is adequate.
J___J Strongly agree J___J Agree J___J Disagree J___J strongly
disagree
7. What kind of motivating factor can be influential?
J___J Salary increment J___J Bonus J___J Allowance J___J Promotion
J___J Recognition J___J Training J___J Better working environment other
specify
8. Which particular motivating factor were you provided with?
J___J Salary increment J___J Bonus J___J Allowance J___J Promotion
J___J Recognition J___J Training J___J Better working environment other
specify
9. To what extent the motivating factor is important to give quality service and satisfy
customers?
45
J___J Very important J___J Important
J___J Less important J___J no importance
10. Is the office layout suitable for the employees to work cooperatively?
J J Very Suitable J J suitable J J unsuitable
11. Have you ever encountered a customers' complaint?
J___J Yes J___J No
12. If you say yes, in which area they complain?
J___J Customer handling J___J Working hour J___J Employee appearance J___J
speed of delivery J___J other specify
13. The amount of salary the employee earn when compare with similar financial
institution?
J___J High J___J medium J___J lower J___J similar disagree
J___J Strongly disagree

14. If your answer for question number 14 is "disagreeing” what problems have you been
experiencing while performing your duties?
J___J Working Hour J___J Company's policies J___J office layout J___J Technology
J___J other specify
15. How do you rate the coordination between managers and employees in different
department?
J___J Excellent J___J very good J___J good J___J poor
16. Do employees participate in decision making?
J___J Yes J___J No
17. Is your position compatible with your education level and working capacity?
J___J agree J___J neutral J J disagree
J___J Strongly
J___J strongly
disagree

46
Declaration
We, the undersigned, declare that this senior essay is our original work, prepared under the
guidance of Mr. Abdu. All sources of materials used for the manuscript have been duly
acknowledged

Name: - signature
1. Seble Yitagesu ___________
2. Israle Mesele ___________
3. Eden Bekele ___________
4. Limenh Gemechu ___________
5. Hadya Kozda ___________

Place of submission ________Date of submission _____________

THIS PAPER HAS BEEN SUBMITED FOR EXAMINATION WITH MY

APPROVAL AS AN ADVISOR NAME: Solomon G/meden

SIGNATURE

DATE

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