Examining Service Quality Dimensions Amongst Malaysian

Banking Consumers: An Empirical Case Study on CIMB Bank.

By

Aidin Jodat Jo

Associated Professor

Dr. Abdul Rahman

Center for Postgraduate Studies and Professional DevelopmentLimkokwing University of Creative Technology

October 2013

Importance of this study• The present research intends to test whether the bank customers are

happy with the services provided to them, which will eventually lead to customer satisfaction. Malaysian CIMB Bank has been chosen for this research due to its services for customers.

• The importance of Quality in service is particularly for the development and growing of service sector business enterprise (Powell, 1995). It functions as an originator of customer's satisfaction (Ruyter and Bloemer, 1995).

• Nowadays, with growing significance of service sector in the business, the measurement of service quality became valuable.

• By providing high quality services banking businesses can differentiate themselves from their competitors. In fact, better structural performances have caused to implement a better variety of events, and let the banking business to become more competitive (Angur et al., 1999).

Previous studies• Based on observations on other studies, the correlation of service

quality in banking system and customer satisfaction are limited, but also some other studies on bank branches productivity do not explain on the changing role of bank branches (Portela & Thanassolis, 2006).

• Service quality and customer satisfaction are of greatest consequence in observing the functioning of bank branches, since their existence rely on their service quality levels they provide (Portela & Thanassolis, 2006).

• Customer satisfaction is the main achievement Good service, which is also the main goal of business, (Ehigie, 2006).

• quality services can provide clear marketing advantage for banks since value-added levels of service quality are associated to higher revenue, higher customer holding, higher selling ratios, and increased market share (Bennett & Higgins, 1993) (Bowen & Hedges, 1993).

Purpose of this study• The present paper, which is a case study, is about

theoretical framework purposes to examine the significance of service quality into the customer satisfaction.

• 5 factors will be examined in this research of service quality, which are:

• Tangibles• Reliability• Responsiveness• Assurance• Empathy

Problem statement (What is the problem?)• The previous studies are analyzing the perception on service quality

dimensions in other banks or other countries. There is no exclusive study on the impact of perception on customer's satisfaction under different demographic profile. Hence, a research models have been generated to fill up the research gap.

• Examining service quality dimensions amongst Malaysian banks and specially CIMB bank of Malaysia is new area on which has been limited studies before, and should be added to previous researches about the service quality and customer satisfaction in order to complete the results of previous studies.

• CIMB bank of Malaysia has been selected for this study to investigate its service qualities and its impact on customer satisfaction due to previous advises of other related researches and studies.

• Lack of superior customer service strategy forced businesses to review their strategies, because of increased quality standards of living, enlarged competitions in businesses and highly educated consumers.

• CIMB bank in Malaysia is competing with local banks and also with foreign banks to enlarge their market share in banking in Malaysia.

• Maintaining customer satisfaction is costly and market competition is strong.

Tangible

Responsiveness

Reliability

Empathy

Assurance

Customer Satisfaction

H1

H3

H2

H4

H5

This study followed the theoretical model that has been modified with Agus et al. (2007) and Caruana (2002) leading the examination of customer satisfaction on CIMB bank in Malaysia, five dimensions of service quality will be examined in this research which are: tangibles, reliability, responsiveness, assurance and empathy

Conceptual framework

Hypotheses

• H1.Tangibles has a positive and significant effect on customer satisfaction.

• H2.Reliability has a positive and significant effect on customer satisfaction.

• H3. Responsiveness has a positive and significant effect on customer satisfaction.

• H4. Empathy has a positive and significant effect on customer satisfaction.

• H5. Assurance has a positive and significant effect on customer satisfaction.

Objectives of this study • Is to find out the relationships between service quality

dimensions (tangibles, reliability, assurance, responsiveness, empathy) and customer satisfaction in the CIMB bank of Malaysia.

• To identify service quality dimensions and to find the strengths and weaknesses of CIMB Bank and its services in Malaysia.

• To study the most important dimensions of Quality services offered by CIMB Bank systems that affect the satisfaction level of customers in Malaysia.

• To provide recommendation to Bank Managers to improve CIMB bank.

How this study can help Industry, managers and customers

• As a manager of banking industry, it is relevant that all the components in a service quality be strictly respected and employed efficiently. Managers should not only focus on the bank’s objective of profits and gains, but must also look into the customer’s expectations. Furthermore, the Manager should recommend widespread customer relations preparation programs for all the frontlines and bankers.

• Managers from CIMB banks should continuously measure and improve the level of customer satisfaction in order to maintain competitive in the market place.

• Managers and decision makers of CIMB bank, need to pursue and increase the essentials of service quality that make the most significant assistances on customer satisfaction.

• Managers should examine customer’s reactions to the five dimensions of service quality used in this study.

Literature reviewService quality • Service quality defined as the degree of discrepancy between

customers’ normative expectation for service and their sensitivities of service performance (Parasuraman et al., 1985). The definition of service quality was further developed as “the overall evaluation of a specific service firm that results from comparing that firm’s performance with the customer’ s general expectations of how firms in that industry should perform (Parasuraman et al, 1988).

• The result of the comparison maintains that customers’ expectations about a service and their perception of the way the service has been performed are connected (Lehtinen & Lehtinen, 1982; Lewis & Booms, 1983, Gronroos, 1984; Parasuraman et al., 1985; 1988; Caruana, 2002).

Literature reviewCustomer satisfaction • Customer satisfaction was the customers' evaluation of

services after purchase as opposed to their expectation (Oliver, 1997; Zeithaml and Bitner, 2000).

• Satisfaction became a popular topic in marketing during the 1980s and was debated topic during both business expansions and recessions. Most discussions on customer satisfaction involved customer expectation (Shemwell,1998).

• Oliver (1997) defined satisfaction as “the consumer’s fulfillment response”, a post consumption judgment by the consumer that a service provided a pleasing level of consumption-related fulfillment, including under or over-fulfillment.

Literature review

Customer satisfaction and service quality in banking industry • Perceived service quality and satisfaction model developed by Spreng

and Mackoy (1996). This model is suitable to find the construct of service quality and customer satisfaction. Perceived service quality and satisfaction model is the modification model of service quality and service satisfaction model (Oliver, 1993).

• Sweeney et al. (1997) established retail service quality and perceived value model for measuring service quality and related factors in retail business. They proposed two models related with value perception of the customers.

• Zhu et al. (2002) proposed service quality model for IT related business. They Claimed that IT-based services have a direct impact on the reliability, responsiveness and assurance dimensions and an indirect impact on customer satisfaction and perceived service quality IT can help service providers achieve higher level of customer satisfaction. One important model to measure service quality of electronic business called Model of e-service quality (Santos, 2003).

• Philip and Hazlett (1997) developed PCP attribute model. There are three important attribute of this model named:

(1) the service environment peripheral attributes

(2) core attribute

(3) pivotal attributes. • An important characteristic of this model is it’s suitability

to measure in any field of service. Another necessary characteristic of PCP attribute model is it identifies the weak area of the service and where the service providers need to improve.

• The study on “Consumer Satisfaction: A Study of bank Customer retention in New Zealand.” By Cohen et al (2006), showing positive grades by the respondents as reasons that would influence their decision to stay with or leave their current banks. The most important hypothesis was customer satisfaction, followed by business image and switching obstacles. Results of this analysis shown that as the age of customers increases, so too does the propensity to stay with their current banks. Moreover, respondents with higher education are most probable to switch banks possibly because highly educated consumers tend to have greater opportunities of services. Gender and income appear not to have significant association with the respondent’s intention to stay with or leave their service providers.

Methodology

• In this section, sample and data collection will be discussing, procedures and operational measures of variables used in the study as well as the statistical tests will be using to evaluate the hypothesis.

• An empirical research method has been decided for the study. The service quality model has grown much significance over the last three decades to measure general service standard of the companies. Several scholars have accompanied research related to SERVQUAL model.

Research Design

The methodology trying to obtain information about customer satisfaction in banking via a survey conducted at a sample of the general consumer population. The survey questionnaire is distributed to target respondent randomly. Targeted respondents are the general public who are at the legal age to hold a Savings and/or Current Account in any of the CIMB banks in Malaysia.

Data Collection

In order to produce a realistic outcome for the research, the collation of data has to be distributed over a large population. Therefore, the survey questionnaires are designed to apply to a varied population, where targeted respondents come from the general open public (from difference genders, races, age, marital status, education, monthly salary and type of organization they are working). Due to the fact that different levels of the people have different expectations and requirements, thus, the idea of selecting respondents from different levels will most positively generate a more reliable outcome concerning Service Quality by CIMB bank.

Questionnaire Design

The questions are designed with multiple-choice selections for convenience. Respondents required the to rate the satisfaction level of the CIMB bank involved with into a five pre-defined level scale – 1-“Strongly Disagree”, 2-“Disagree”, 3-“Neutral”, 4-“Agree” and 5-“Strongly Agree”. The purpose is to collect the feelings of the respondents in respond to the importance of SERVQUAL in chosen a CIMB bank.

All data collected are fed into the Statistical Package for the Social Sciences (SPSS) for analysis. It is imperative that all information collated is strictly for the Term Paper research purpose only.

Population and Sampling

To collect enough data to test hypotheses, a survey will be conducted to collect data from sample. Around 200 questionnaires will be distributed randomly to customers of CIMB bank branches. Equal numbers of customers will be asked to fill the questionnaire for each chosen branch. Subjects were asked to assess their perceptions of various items representing service quality and customer satisfaction.

Data Analysis and Results

Reliability Analysis • The Cronbach α values for the five dimensions ranged

from 0.788 to 0.850.• These results are based on 168 respondents from 200

forms.

Correlation Analysis • Correlation analysis was conducted to measure the

strength of the linear relationship between the independent variables and the dependent variables.

Correlation Analysis Results of the Tangibles Dimension

• The analysis of the bivariate correlation between the tangibles dimension and the customer satisfaction variables reveal all positive figures.

• The reveal that Tangible is positively correlated to customer satisfaction (r = 0.767). These correlation coefficients suggest a moderate and positive linear relationship which is highly significant at p < 0.0001.

Correlation Analysis Results of the Reliability Dimension

• The analysis of the bivariate correlation between the reliability dimension and the customer satisfaction variables reveal all positive figures. The results reveal that efficiency is positively correlated to customer satisfaction (r = 0. 640). This correlation coefficient suggests a moderate and positive linear relationship which is highly significant at p < 0.0001.

Correlation Analysis Results of the Responsiveness Dimension

• The analysis of the bivariate correlation between the responsiveness dimension and the customer satisfaction variables reveal all positive figures. The results reveal that efficiency is positively correlated to customer satisfaction (r = 0. 764). This correlation coefficient suggests a moderate and positive linear relationship which is highly significant at p < 0.0001.

Correlation analysis Results of the Assurance Dimension

• The analysis of the bivariate correlation between the assurance dimension and the customer satisfaction variables reveal all positive figures. The reveal that efficiency is positively correlated to customer satisfaction (r = 0. 716). This correlation coefficient suggests a strong and positive linear relationship which is highly significant at p < 0.0001.

Correlation analysis Results of the Empathy Dimension

• The analysis of the bivariate correlation between the empathy dimension and the customer satisfaction variables reveal all positive figures. The results reveal that efficiency is positively correlated to customer satisfaction (r = 0. 764). This correlation coefficient suggests a moderate and positive linear relationship which is highly significant at p < 0.0001.

Linear Regression Analysis

The Relationship between Tangibles and Customer Satisfaction

• The regression model shows that the R-square is 0.585 with an F value of 236.783 and a significance level of p < 0.0001. It can be summarized that 58.5 percent of the variance in the customer satisfaction has been significantly explained by the fulfillment dimension. There is less than 0.0001 percent chance of this not holding true. In summary, the regression analysis concludes that the tangibles measure predicts customer satisfaction.

The Relationship between Reliability and Customer Satisfaction

• The regression model shows that the R-square is 0.406 with an F value of 115.119 and a significance level of p < 0.0001. It can be summarized that 40.6 percent of the variance in the customer satisfaction has been significantly explained by the fulfillment dimension. There is less than 0.0001 percent chance of this not holding true. In summary, the regression analysis concludes that the reliability measure predicts customer satisfaction.

The Relationship between Responsiveness and Customer Satisfaction

• The regression model shows that the R-square is 0.582 with an F value of 233.089 and a significance level of p < 0.0001. It can be summarized that 58.2 percent of the variance in the customer satisfaction has been significantly explained by the fulfillment dimension. There is less than 0.0001 percent chance of this not holding true. In summary, the regression analysis concludes that the responsiveness measure predicts customer satisfaction.

The Relationship between Assurance and Customer Satisfaction

• The regression model shows that the R-square is 0.512 with an F value of 174.170 and a significance level of p < 0.0001. It can be summarized that 51.2 percent of the variance in the customer satisfaction has been significantly explained by the fulfillment dimension. There is less than 0.0001 percent chance of this not holding true. In summary, the regression analysis concludes that the tangibles measure predicts customer satisfaction.

The Relationship between Empathy and Customer Satisfaction

• The regression model shows that the R-square is 0.570 with an F value of 222.762 and a significance level of p < 0.0001. It can be summarized that 57.0 percent of the variance in the customer satisfaction has been significantly explained by the fulfillment dimension. There is less than 0.0001 percent chance of this not holding true. In summary, the regression analysis concludes that the empathy measure predicts customer satisfaction.

Demographic characteristics of the Respondents

• Table above shows the sex distribution of the respondents the researcher’s questionnaires, which indicate that male respondents were 104 (61.9%), while female respondent were 64 (38.1%). This implies that there are more male respondents than female respondents.

Character Respondents Based on Age

• Results the characteristics of respondent age 18 to 29 years old are as many as 24 (14.3%) people. Respondents with 30 to 39 years old are as many as 54 (32.1%) people.

• Respondents with age of 40 to 49 years old are as many as 51 (30.4%) people. • Respondents with age of 50 to 59 years old are as many as 30 (17.9%) people. • And age of respondents 60 years old are and over as many as 9 (5.4 %) people. • So it can be concluded that the characteristics of respondents by age dominated by

respondents aged 30 to 39 years and 40 to 49 years old following it very closely.

Character Respondents Based on Education Level

There are 2 (1.2 %) of respondents have certificate.

Respondents with secondary diploma are 14 (8.3 %) customers. Respondents with higher secondary education are 38 (22.6%).

Bachelor Degree holders are the largest group of respondents comprising 71 (42.3%) of the respondents.

Holders of master respondents are 34 (20.2 %). There are 9 (5.4 %) of respondents has chosen PhD or Others education level.

Character Respondents Based on Income

The number of monthly income RM 1000 and below is 19 (11.3%) respondents.

The number of monthly income from RM 1001 to 2000 is 58 (34.5%) respondents.

The number of monthly income from RM 2001 to 3000 is 58 (34.5), and RM3001 to 4000 is 23 (13.7%) respondents.

There are only 10 (6 %) respondents who have an income more than RM 4000 in one month.

From the table we can find that the respondents who have a monthly income of RM1001 to 2000 and RM 2001 to 3000 are the largest group.

Character Respondents Based on Occupation

In the research, 31 (18.5%) of respondents worked as self-employer. There are 63 (37.5%) customers who are private sector. About 43 (25.6%) of respondents work on public sector. And also have 31 (18.5%) respondents who are chose others answer. This table implied that the largest groups are private sector in this research.

Results Analysis

Hypothesis 1

Results show evidence those customers satisfaction are positive and significantly affected by tangibles. Tangibles appear contributing variable towards satisfaction level (r = 0.767, R2 = 0.585, F = 236.783). This hypotheses is supported and accepted as it has confirms that there is positive correlation between tangibles and customer satisfaction. Agus (2007) found that tangibles are important factor related to customer satisfaction.

Results Analysis

Hypothesis 2

Examines the impact of reliability towards customer satisfaction. Result infers that reliability has positive and significantly impact on customer satisfaction (r = 0.640, R2

= 0.406, F = 115.119). This hypothesis is supported and accepted, as there is a positive association between reliability and customer satisfaction. Gelade (2005) and Jamal (2003) also found that reliability was positively related to the use of banking.

Results Analysis

Hypothesis 3

Customer satisfaction is positive and significant influenced by the assurance (r = 0.716, R2 = 0.509, F = 174.170). Thus, the hypothesis is supported and accepted. This finding implied that, assurance has the positive and significant relationship with customer satisfaction. Chang (2007) found that there is a positive and significant relationship between assurance and customer satisfaction.

Results Analysis

Hypothesis 4

Results shows that customer satisfactions were found have positive and significant impact on the responsiveness perception (r = 0.674, R2 = 0.582, F = 233.089). This hypothesis is supported and accepted. Festus (2006) found that responsiveness was positively related to customer satisfaction on customers using banks.

Results Analysis

Hypothesis 5

Customer satisfaction is positively and significantly influenced by empathy. Empathy is the predictor of customer satisfaction (r = 0.757, R2 = 0.570, F = 222.762). As a result, hypothesis 5 is thus supported and accepted. The study of Ladhari (2009) also found that empathy is positively related to customer satisfaction. Kumar et al. (2010) supported this relationship as well.

Summaries of Hypotheses Testing

Conclusion• The highest correlation is between Tangible and customer

satisfaction (r= 0.585; p<0.01),• Followed by between Assurance and customer

satisfaction (r= 0.582; p<0.01),• After that between empathy and customer satisfaction

(r= 0.570; p<0.01),• And between responsiveness and customer satisfaction

(r= 0.509; p<0.01),• The weakest association is between Reliability and

customer satisfaction (r= 0.406; p<0.01).

1. Tangible:

Tangible was found to have a significant relationship with customer satisfaction. Referring to the definition of Tangible by Parasuraman et al. 1988; “physical facilities, equipment and staff appearance”. The appearance of the Bank depends on the bank display, which was the “arranging” in this respect. An attractive presentation that makes the bank suitable for customers to move around and get the things they need, can make them happy; furthermore, the highest percentage given as reason for satisfaction came from “Tangibility”.

2. Assurance:

The findings show a significant relationship between assurance and customer satisfaction and in-line with previous research including Ndubisi (2006), et al. maintaining the interaction is clearly a strong indicator of overall satisfaction and important source of customer satisfaction in the Malaysia CIMB bank.

If the staffs are not well informed and considered, or they suffer from lack of knowledge, they would not be able to transfer information to the bank customers.

3. Empathy:

Empathy has significant positive relationship with customer satisfaction. This indication is supported by the conclusions by Ndubisi (2006), Butcher (2001) and Ehigie (2006).

As recommended by Butcher (2001), friendship between customers and particular service employees has a major influence on the development of customer satisfaction.

This is aligned with the findings of this research that empathy has positive impact on customer satisfaction.

Welcoming staff is very necessary and important because if the customers are not well treated, or if customers have any damaging feelings about the staff, there is a possibility that they will not come back next time and they will swap the Bank.

4. Responsiveness:

Results from hypotheses testing also demonstrate that responsiveness found to have positive relationship with customer satisfaction. This is in connection with Glaveli et al. (2006) who underlined the promptness of service delivery enhanced perception of service quality while Joseph et al. (2005) indicated that “no waiting time” increased customers’ satisfaction level.

5. Reliability:

Moreover, There is a significant and positive relationship between reliability and customer satisfaction.

Reliability had a significant relationship with service quality and customer satisfaction at CIMB bank.

Referring to the Parasuraman et al., 1988, definition of reliability “the ability to perform the promised service dependably and accurately”, then to the characteristics that were relieved for reliability in the several service sectors; “time conscious staff and accurate service and less queue ” for CIMB Bank.

This could explain why reliability according to this research has significantly related to customer satisfaction for CIMB Bank. This finding proves that customers see reliability as a obligatory characteristic to choosing their Banking.

MANAGERIAL IMPLICATIONS AND RECOMMENDATIONS OF SERVICEQUALITY

This study can help bank managers in managing customer satisfaction. It is obvious that assurance and empathy primarily motivates customer satisfaction and bank staffs (especially frontline staffs) have a serious impact on the most interesting service dimension when targeting customers.

The importance of this research for managerial decision-making processes• Banks managers are looking to improve their customers’

satisfaction levels in their strength to increase profitability, maintain rates and magnetize new customers

• They may be able to make advantage by the information about the effect of individual dimensions of service quality on customer satisfaction,

• Bank managers should focus on high quality services, and improve service quality efficiently.

The main expectations refer to the following study:

1) The willingness of the staff to help customers (responsiveness).

2) The genuine interest in providing solution when customers have a problem (reliability).

3) The ability of the Bank to deliver what it promises (reliability).

4) The ability of the Bank to provide its services at the time it promised to do so (reliability).

5) The behavior of the employees, which convey confidence to customers (assurance).

6) The feeling of safety during the visit of customers in the Bank (assurance).

7) The ability of employees to provide prompt service (responsiveness).

Other expectations :

1) The well-ordered appearance of the staff (tangibles).

2) The feeling of safety during the visit of customers in the Bank (assurance).

3) The willingness of the staffs to help customers (responsiveness).

4) The honest interest of the staff to provide clarifications when customers have a problem (reliability).

5) The ability of the Bank to perform service right at the first time (reliability).

6) The dependable kind behavior of the staff towards customers (assurance).

7) The visual appeal of the Bank’s physical facilities (tangibles).

The research findings suggest that service quality, referring to a customer’s judgment about a bank’s superiority, should be regarded as a source of competitive advantage in the CIMB bank, as it establishes the main driver of customer satisfaction.

Service quality can be perceived as a competitive advantage, because in difference to service range that can easily be simulated, the service quality dimensions are more difficult to imitate and may represent a maintainable advantage.

While improving service quality is undoubtedly a challenging task for bank managers to take on, it is well worth the trouble, since it can bring great benefits to the banks in the short and long run.

LIMITATIONS OF THE STUDY

• The lack of attentiveness of respondents may affect the results.

• This study did not take into account the possible differences in customers’ culture.

• The sample in this study will be distributed in small numbers and it will be limited to customers living in Kuala Lumpur city, but not the whole Malaysia.

• Respondents will answer to the questionnaire, according to customers of CIMB bank of Malaysia, and the expectations may vary from other CIMB Banks of other countries.

• The study did not include all potential dimensions of service quality that affect customer satisfaction towards CIMB Bank.

Future Research

It is recommended for further researches to :• Extend the study • Develop the scope of this research • The model should be improved by searching for additional

dimensions • Adding CIMB banks of other countries to the research• Study other Malaysian banks and compare the results with

current or previous results

in order to get more accurate results from service quality and customer satisfaction and to improved and following that, managers would be able to have stronger and clearer perspective of service quality and customer satisfaction about CIMB Bank.

Thank you for your attention