The Effect of Service Quality on Customer Satisfaction; a Case Study

of Bunna International Bank Share Company Addis Ababa Head office.

BY:

ZENAW HAILEMARIAM

ID: GSR/0140/13

ADVISER GETIE ANDULEM (PHD)

A Thesis Submitted to
The Department of Business Administration
Presented in Partial Fulfillment of the Requirements for the Degree of Master
of Business Administration
Statement of the problem
objective of the study
Research Questions

Literature Review
Methodology
Data presentations and analysis

conclusion and recommendations

Background of the study
 A bank is a business enterprise that deals with providing simple
deposit accounts, loans, guarantees, and letters of credit for
importers that have been the traditional service offerings.
 Delivering quality service to customers is vital for success and
survival in today's competitive banking.
 Service quality has become a critical prerequisite for satisfying and
retaining valued customers in banks.
 service quality is determined through customer satisfaction every
banking institution should focus on service quality in order to
satisfy customer.
 Customer satisfaction is the best guarantee to create and
maintaining customer trust to face global competition.
 Company success to maintain customer satisfaction is affected by
many factors including; service quality was seen as a measurable
aspect for tangible products only.
Cont.…
 service provider industry is all about creating customer value
in terms of satisfaction and building profitable customer
relationships.
 The relationship between customer satisfaction and service
quality is very critical in service sector like banking industry.
 Service quality is particularly essential in the banking
services context because it provides high level of customer
satisfaction, and hence it becomes a key to competitive
advantage.
 For this reason, every banking institution should focus on
service quality in order to satisfy customer .
 Customer satisfaction is the best guarantee to create and
maintaining customer trust to face global competition.
 Statement of the problem
 The gap model explained the existence of five service quality gaps due
to differences between service quality sources. There are five gaps
included:
 (Gap 1)Customer expectations versus management perceptions about
customer expectation.
 Gap 2) Translation of perceptions into service quality specifications
versus management perceptions of customer expectations;
 (Gap 3) Service delivery versus service quality specifications;
 (Gap 4) knowledge gap
 (Gap5) policy gap
 According to Parasuraman et al. (1985), a conceptual gap model of
service quality was developed based on the difference between
expectation and experience or the so-called “perceived service quality”.
 Cont.’….
 Service provider companies are the key to business existence and success lies in their
ability to provide effective service and satisfy the customer. It is the quality of service
that brings new customers and holds on to existing customers as a result, customers buy
more and influence others to buy.
 In the Ethiopian banking industry, customers perceive very little difference in the
banking products offered by banks dealing in services as any new offering is quickly
matched by competitors. There are disappointments of customers over the service
offered and the available services don’t match the expectation of the customer (Mesay
et. al, 2012).
 Currently, the Ethiopian financial sector is becoming strong from time to time and
competition has increased through branch expansion in main towns and rural areas.
Therefore, delivering quality service and creating customer satisfaction is a window for
success as well as winning the competition. So, it becomes very important for banks to
meet or exceed the target customers’ satisfaction with the quality of services expected by
them.
 Above mentioned studies did not assess the effect of service quality on customer
satisfaction in Bunna International Bank. Therefore, insufficient studies have been
conducted on service quality on customer satisfaction in the case Bunna International
Bank . The study was fulfilled the theoretical and empirical gaps on effect of service
quality on customer satisfaction in the case Buna International Bank.
 Research questions
The researcher attempted to get answers to the following research
questions regarding the perceived service quality by the
customers and the effect on customers’ satisfaction:
1.What are the customers’ perceptions of the Bunna International
Bank (BIB) service quality in terms of the five service quality
dimensions?
2.What are the current levels of customer satisfaction in the
service they accept?
3.What is the relationship between the service quality dimensions
and customer satisfaction in Bunna International Bank BIB?
4.What is the effect of service quality on customer satisfaction?
5.Which dimensions of service quality need improvement in
Bunna International Bank share company (BIB)?
 Objective and Hypotheses of the Study
Objective of the Study
 General Objective of the Study
The main purpose of the study was to investigate the effect of service quality on
customer satisfaction in Bunna International Bank.
 Specific Objectives of the Study
The specific objectives of the study were:
1. To identify customers’ perceptions using reliability, responsiveness, assurance,
empathy, and tangibility dimensions in the case of Bunna International Bank.
2. To measure the current level of customer satisfaction at Bunna International
Bank.
3. To measure the effect of reliability, responsiveness, assurance, empathy, and the
tangible dimension of service quality on customer satisfaction at Bunna
International Bank.
4. To identify the effect of service quality on customer satisfaction at Bunna
International Bank.
5. To investigate the most dimension of service quality that needs improvement in
Bunna International Bank Share Company.
 Cont.’….
Hypotheses of the Study
 H1: Reliability has a positive and a significant effect on t
he customer satisfaction in Bunna international bank.
 H2: Assurance has a positive and significant effect on
the customer satisfaction in Bunna international bank.
 H3:Responsiveness’has a positive and a significant effect
on the customer satisfaction in Bunna international bank.

 H4:Empathy has a positive and a significant effect on the

customer satisfaction in Bunna international bank.
 H5.Tangibility has a positive and significant effect on the
customer satisfaction in Bunna international bank.
Literature Review
Among the models for measuring service quality,
the most acknowledged and applied model in the
diversity of industries is the SERVQUAL (service
quality) model developed by Parasuraman et.al.
The SERVQUAL model of Parasuraman et al.
(1988) proposed a five-dimensional construct of
perceived service quality tangibles, reliability,
responsiveness, assurance, and empathy as the
instruments for measuring service quality
(Parasuramanet et al., 1988; Zeithamlet et al.,
1990).
 Conceptual frame work
Figure 1: Conceptual Framework the study
Independent variable Dependent variable

Reliability

Responsiveness

Empathy
CUSTOMER
Assurance SATISFACTIONS
Tangibility
Methodology
The case area is in Bunna international Bank at
Addis Ababa head office.
The target populations of the study were all
customers of Bunna International Bank Share
Company, specifically under head office customers.
The researcher has designed both Descriptive and
explanatory research designs to describe the
relationship between service quality dimensions and
customer satisfaction and to describe the effect of
service quality dimensions and customer
satisfaction.
Cont.’…
 The sample size is 200
 convenience sampling method to select the sample.
 Both primary and secondary data collection methods
was used in this study
 To collect the primary data, questionnaires were
conducted with help of questionnaires planned but due
to different time zones.
 Secondary data were also collect through scholarly
articles for the literature review. The information was
mainly gathered from academic articles.
 The study analyses were collected data through
questioners by using SPSS version 26
Data presentations and analysis
 The descriptive statically analysis shows almost all the five
variables under service quality dimensions’ customers reply
show they are moderately satisfied with the four variables
except for the tangibility which customers of Bunna
International Bank Share Company.
 In general, from the correlation analysis it is found that,
all the five service quality dimensions were positively
correlated with customer satisfaction. The regression
analysis shows that all the five service quality
dimensions that were tangibility, reliability, responsiven
ess, & empathy has positive statistical significant but ass
urance has negative statistical significant effect on Custo
mer Satisfaction.
Cont.’…
 The finding of the research made by Tizazu (2013) titled
the effect of customer service quality on customer
satisfaction on private banks indicated that customers
were most satisfied with tangible (similar to the result of
this study) followed by access.
 There were a positive and significant correlation
between the four service quality dimensions (tangibility,
reliability, responsiveness and empathy) and customer
satisfaction. But, assurance showed negative and
significant correlation with customer service.
 It also indicated that all service quality dimensions have
positive and significant effect on customer satisfactions.
 Cont.’…
Tizazu Kassa (et al 5 dimensions Except Responsiveness, The four service quality
2012) of SERVQUAL dimensions including Tangibility, reliability,
(tangibility, reliability, assurance and empathy have
responsiveness, assuranc positive and significant effect on customer
e and empathy) satisfaction.

Rashed Al 5 dimensions of S The study also established that the

Karim( British ERVQUAL(tangi combination of tangibility,

bility, reliability, responsiveness,
2014 )
reliability, respons assurance and empathy together
iveness, assurance have significant effect on customer
and empathy) satisfaction. Tangible is having a
high Mean score and the bank
should concentrate on
Responsiveness as it has the least
mean score.
Cont’…
Niveen El 5 dimensions of The four dimensions of service
Saghier, quality(Empathy, Reliability, Respons
SERVQUAL(tan
Demyana Nathan iveness and Assurance) have a
gibility, reliabilit
(Dubai, 2013) significant and positive effect on
y ,responsivenes customer satisfaction.
s, assurance and However, the rest service quality dim
empathy) ensions (tangibility) have positive
relation and no significance impact
on customer satisfaction
Conclusion and Recommendations
 The data analysis reveals that tangibility has the p-value is
less than 0.05. This implies that, tangibility is statistically
significant, which means it, has not significant effect on
the customer satisfaction. The physical facilities, effective
relationships with customers & atmosphere of Bunna
International Bank Share Company were not significant
effect on the customer’s satisfaction. And also the
regression result revealed that the p-value of the banks
reliability in this study is less than 0.05. This implies that,
reliability is statistically significant, and it has positive
effect on customer’s satisfaction since p-value is more
than 0.05.
.
Cont.’…
The regression result revealed that
responsiveness has effect on customer
satisfaction since its p-value was less than 0.05.
This implies that, responsiveness has effect on
the customer satisfaction at Bunna International
Bank Share Company.
The data analysis reveals that assurance has the
p-value less than 0.05.This implies that,
assurance statistically significant, which means
it, has negative significant effect on the customer
satisfaction
 Cont.’..
 The regression result revealed that empathy has effect on customer
satisfaction since its p-value is less than 0.05.
o Based on the above conclusions of the study the researcher’s
forwarded the following recommendations for service quality
dimensions.
 the bank should be making physical facilities & atmosphere of the
bank to be visually appealing will increase their customer’s
satisfaction.
 product requested by the customers like ATM, produced at the
center, it’s difficult to decide the delivery time due to different
factors, so they have to keep their promise as much as possible or
communicate the status with customers if there is delay and give
individual attention.
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