27919525 Customer Satisfaction in Banking Sector Research Proposal

CUSTOMER SATISFACTION IN BANKING SECTOR Research Proposal Submitted To: Submitted By:

Dr. Ashraf Muhammad Naveed

Roll No. Class. Section. Subject. Date.

8273 MBA 3rd (Morning) B Business Research Method 12-05-2009

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INTRODUCTION____________________________________________ Banking retailers recognize that customer satisfaction (CS) plays a key role in a successful business strategy. What is unclear is the exact nature of that role, how precisely satisfaction should be managed, and whether managerial efforts aimed at increasing satisfaction lead to higher score in sales. Today, managers in the banking sector undertake substantial efforts to conduct CS surveys. Yet it appears that in most cases the data are used to simply monitor specific attributes, and especially overall satisfaction, over time. Unless the impact of customer satisfaction on revenues is assessed, managers have little basis for allocation of resources. The concept of customer care is concern with customer satisfaction putting the customer first, anticipating needs and problems, tailoring the product and services to meet needs and being nice to customers it also includes service to the customer, delivery operation, employee relationship with customer and internal relationship between employee and management. In developing customer care strategies and programs, financial services organizations are managing products and services, delivery systems, environment and people so as to provide an efficient and caring service, getting things right the first time and maintaining standards. Organizations are increasingly interested in retaining existing customers while targeting non-customers; measuring customer satisfaction provides an indication of how successful the organization is at providing products and/or services to the marketplace. Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and product/service to product/service. The state of satisfaction depends on a number of both psychological and physical variables which correlate with satisfaction behaviors such as return and recommend rate. The level of satisfaction can also vary depending on other options the customer may have and other products against which the customer can compare the organization's products. Because satisfaction is basically a psychological state, care should be taken in the effort of quantitative measurement, although a large quantity of research in this area has recently been developed. Work done by Berry, Brodeur between 1990 and 1998.defined National University of Modern Languages Islamabad

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ten 'Quality Values' which influence satisfaction behavior, further expanded by Berry in 2002 and known as the ten domains of satisfaction. These ten domains of satisfaction include: Quality, Value, Timeliness, Efficiency, Ease of Access, Environment, Interdepartmental Teamwork, Front line Service Behaviors, Commitment to the Customer and Innovation. These factors are emphasized for continuous improvement and organizational change measurement and are most often utilized to develop the architecture for satisfaction measurement as an integrated model. Work done by Parasuraman, Zeithaml and Berry between 1985 and 1988 provides the basis for the measurement of customer satisfaction with a service by using the gap between the customer's expectation of performance and their perceived experience of performance. This provides the measurer with a satisfaction "gap" which is objective and quantitative in nature. Work done by Cronin and Taylor propose the "confirmation/disconfirmation" theory of combining the "gap" described by Parasuraman, Zeithaml and Berry as two different measures (perception and expectation of performance) into a single measurement of performance according to expectation. According to Garbrand, customer satisfaction equals perception of performance divided by expectation of performance. Berry, Brodeur 1998. Objectives of the study There are following objectives of this study will be: To explore, study, and analyze critically services being provided by the BANKS to their customer. To study the impact of customer satisfaction on BANKS.

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LITERATURE REVIEW______________________________________ It appears that what consumers are saying is that they expect good products and services from their bank and that what is important to them is to have courteous and professional employees whom they can trust to explain them; and correct problems when they happen. In the product arena, by far the most important issues surround the checking account. Of importance to consumers is not only the account itself, but the format of the monthly statements which they receive. They expect more from their accounts and want this increased functionality presented in an understandable way. Also, consumers are more sensitive to the pricing of this product, as the "gap" between the importance of the pricing of a checking account and customer’s satisfaction is comparatively high. While banks have had the checking product pretty much to themselves in the past, the emergence of internet based banks, and the "creep" of large non-banks into the checking business should be an alarm bell for banks who want to improve customer satisfaction. Other "alarm bells" emerging from the study are such attributes as: Rates on Savings/CDs; Fees and Service Charges; ATMs; and Hours of Operation. These are among the attributes where banks score the lowest or where the gap between "importance" and "satisfaction" is the highest. Additional charts tables showing this detail may be seen on the site...clientsatisfaction.com "Loyalty" measures the strength of a customer's satisfaction. But it goes beyond, and also indicates the "action ability" of that loyalty. The ABA Financial Client Satisfaction Index measures loyalty in three areas.... Deposit Services... Loans... and Investments. This is done by asking clients whether they would consider the bank for their next service in these three areas. Of course, results will vary by both bank and customer, but it is interesting to note that on an overall industry basis, clients are more likely to consider their bank for their next deposit account than for either their next loan of their next investment. And in the case of investments, the score is much lower (3.33 on a 5.00

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scale). Or viewed differently, while 75% would consider their bank for their next deposit account, only 45% would consider it for their next investment. In a way, there is some probability that the loyalty score also measures the degree of competition (or alternative choices, from a customer's perspective) in that particular product marketplace. The key with this measure is that it be improving over time It has been observed by such experts in customer satisfaction as J.D. Power & Associates that "consumer expectations are growing faster than industries can meet them". And the explosive growth of the Internet is shifting the power of information to the consumer. Since customer service expectations are growing and are influenced by customer experience with others, The ABA Financial Client Satisfaction Index measures a customer's overall satisfaction with his/her bank as compared with other financial providers they use, and with other companies, in general. The idea here is for a bank's overall satisfaction scores to keep up with, or exceed, those in other areas. Power, J.D and Associates, 1999. Fredrick Reichheld (1996) expanded the loyalty business model beyond customers and employees. He looked at the benefits of obtaining the loyalty of suppliers, employees, bankers, customers, distributors, shareholders, and the board of directors. A model by Kay Storbacka, Tore Strandvik, and Christian Gronroos (1994), the service quality model, is more detailed than the basic loyalty business model but arrives at the same conclusion. In it, customer satisfaction is first based on a recent experience of the product or service. This assessment depends on prior expectations of overall quality compared to the actual performance received. If the recent experience exceeds prior expectations, customer satisfaction is likely to be high. Customer satisfaction can also be high even with mediocre performance quality if the customer's expectations are low, or if the performance provides value (that is, it is priced low to reflect the mediocre quality). Likewise, a customer can be dissatisfied with the service encounter and still perceive the

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overall quality to be good. This occurs when a quality service is priced very high and the transaction provides little value. The final link in the model is the effect of customer loyalty on profitability. The fundamental assumption of all the loyalty models is that keeping existing customers is less expensive than acquiring new ones. It is claimed by Reichheld and Sasser (1990) that a 5% improvement in customer retention can cause an increase in profitability between 25% and 85% (in terms of net present value) depending upon the industry. However, Carrol and Reichheld (1992) dispute these calculations, claiming that they result from faulty cross-sectional analysis. Schlesinger and Heskett , 1991.

THEORATICAL FRAMEWORK________________________________ Variables: Dependent Variable: 

Customer Satisfaction

Independent Variable: 

Service quality  Competence  Credibility  Responsiveness  Communication  Security  Online banking

In relation to the above, the variables are identified on a general basis. There are severalother variables that affect the Customer Satisfaction level, but only a few are considered for this in order to avoid complexity.

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We are here not considering the internet banking, we are just focusing on the online banking which includes ATM cards, DEBIT cards, CREDIT cards. Justification is that the internet banking is itself a very vast topic which is not possible to cover it in our objective, it has its own security issues etc. We will ask from the customers that they are satisfied with the ATM cards DEBIT cards etc or not. This is the hypothesis which we will test.

METHODOLGY______________________________________________ Now the question comes that by which method we sill conduct the research? OR What would be our methodology? SCALE Scale is the very first thing in methodology that which type of scale is suitable for us. So by the consent of all the group members and literature review we have decided that we will use the LIKERT SCALE. We will may be able to reduce the biasness by using this scale. Hypothesis to be tested The key questions being posed or hypothesis tested in the research. In this study we are going

to

frame

the

following

hypothesis:

Following are the null hypothesis (Ho) H1: It is expected that Customers are satisfied with the competency of bank. H2: It is expected that Customers are satisfied with the credibility of bank. H3: It is expected that Customers are satisfied with the responsiveness of bank

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H4: It is expected that Customers are satisfied with the communication of bank. H5: It is expected that Customers are satisfied with the security of bank. H6: It is expected that Customers are satisfied with the online banking (ATM cards, DEBIT cards, CREDIT cards etc). Research Design The primary data will be used to examine relationship between bankers and customers satisfaction. It will also examine the impact of customer satisfaction towards the Banks. The study will be conducted in two phases. Phase-1 will consist of try out study in which we will screen out the potential respondents of this study, while Phase-2 will constitute the main study and consist of hypothesis testing. Instrument The questionnaire will be used and administered to the respondents directly. The available instruments concerning related variables will be explored for proper reliability and validity. This will help us to know the facts that where the banks are going down in their services and at a result their customers are getting unsatisfied from them. And in what way they will be getting maximum satisfaction. A total sample size of 300 to 500 customers will survey randomly. Data Analysis After data collection and coding, the appropriate data analytic techniques including descriptive and multivariate analysis will be carried out keeping in view the objective of the study by using latest available version of SPSS or as per our instructor’s advice (Kashif saeed).

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REFERENCES_______________________________________________ 

J.D. Power & Associates 1999 Investors Business Daily, July 9, 1999



Berry, Brodeur 1998 ten domains of satisfaction,1990 to 1998



Buchanan, R. and Gilles, C.

1990

Value managed relationship: The key to

customer retention and profitability", European Management Journal, vol 8, no 4, 1990. 

Buckinx W., Geert Verstraeten, and Dirk Van den Poel 2007 Predicting customer loyalty using the internal transactional database," Expert Systems with Applications, 32 (1).



Carrol, P. and Reichheld, F. 1992 The fallacy of customer retention", Journal of Retail Banking, vol 13, no 4, 1992.



Dawkins, P. and Reichheld, F

1990

"Customer

retention

as

a

competitive

weapon", Directors and Boards, vol 14, no 4, 1990. 

Fornell, C. and Wernerfet, B.

1987

"Defensive marketing strategy by customer

complaint management : a theoretical analysis", Journal of Marketing 

Moloney, Chris X.

2006

"Winning Your Customer’s Loyalty: The Best

Tools, Techniques and Practices" AMA Workshop Event(s). Misc. materials distributed related to event(s). San Diego, 2006. Chris X. Moloney 

Reichheld, F.

1996

The Loyalty Effect, Harvard Business School Press,

Boston, 1996. 

Reichheld, F. and Sasser, W.

1990

Zero defects: quality comes to services",

Harvard Business Review, Sept-Oct, 1990, pp 105-111 

Schlesinger, L. and Heskett, J.

1991

"Breaking the cycle of failure in service",

Sloan Management Review, spring, 1991, pp. 17-28. 

Stieb, James A

2006

"Clearing Up the Egoist Difficulty with Loyalty", Journal

of Business Ethics, vol 63, no 1Storbacka, K. Strandvik, T. and Gronroos, C 1994 "Managing customer relationships for profit", International Journal of Service Industry Management, vol 5, no 5, 1994, pp 21-28.

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