Chapter One b

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Customer satisfaction is generally described as the full meeting of one’s expectations.

Customer satisfaction is the feeling or attitude of a customer towards a product or

service after it has been used. Kotler (2000) has been described as satisfaction is a

person’s feelings of pleasure or disappointment resulting from comparing a product’s

perceived performance (or outcome) in relation to his or her expectations.

Satisfaction is very important factor to the any organization. Especially it is important

to the government bank like BOC. Because as a service supplied institution, any

banks’ main target is the customer. The working of the customer’s mind is a mystery

which is difficult to solve and understanding the nuances of what customer

satisfaction is, a challenging task. That’s why there are many expectations in the

customers’ mind from the bank. If can’t recognize the expected expectations of

customers bank can’t achieve their targets, then customer can easily switch from one

service provider to another provider, at low cash.

At present market become a competitive market. And also there are large number of

banks are situated in Sri Lanka. But government banks are situated too low. Among

those banks BOC is the one of the main government bank in the Sri Lanka. As a main

government bank of BOC, people are expected better service from this bank.

Customers are expected the quality of product from the product supplied organization.

Although customers are expected a quality of service from the service organization,

sometime they cannot provide quality of service. However Customer Satisfaction

depends on the service quality of the any organization. If satisfy the customers, firstly

should be provide high quality service to the customers. It is also same to the BOC in

Pambahinna.

In service oriented industry well trained employees, convenience of the branch

location, attractive physical facilities and new technologies are highly affected. In this

1

branch space of the branch is not sufficient. As well there are other weaknesses in this

branch when consider about the customer satisfaction. Then it is important study on

customer satisfaction with reference to Pampahinna branch. Because of high customer

satisfaction and loyalty give an organization a better base than its competitors and

allows it to flourish in the industry.

1.2 Research Problem

Do service quality dimensions have an impact on the level of customer

satisfaction about Pambahinna BOC branch?

1.3 Research Objectives

Major Objective

To determine whether there is a relationship between service quality

dimensions and customer satisfaction.

Specific Objectives

To investigate the level of customer satisfaction about Pambahinna BOC

branch.

To investigate most important factors influence on customer satisfaction.

To investigate the expectations and requirements of the customers.

Research Questions

What is the level of customer satisfaction?

What are the important factors that influence on customer satisfaction?

What are the expectations and requirements of the customers?

1.4 Significance of the study

Customers are the life blood of the banking sector. Therefore retaining the current

customers and attracting new customers is very essential for survival of the banking

sector. For that reason, they should identify the customers’ requirements and

expectations by studying the customer satisfaction of banking sector.

As a government own financial institution, BOC, directly participate in the

development of the country. They provide more than 50% of financial contributions 2

to government for launch giant, development project customers’ investments are very

important for that. Therefore bank can attract more customers by delighting them. To

delight customers this study finding may useful for bank.

Studying the prior researches provide great support for other researches. Because

going through the prior studies they can identify the gap and similarities between

them and new comers who enter to this field, they can gather basic knowledge

regarding the prior research.

1.5 Hypothesis

1) H0 – There is not a relationship between customer satisfaction and service quality

dimensions.

H1 – There is a relationship between customer satisfaction and service quality

dimensions.

2) H0 – The level of service in BOC is not high.

H1 – The level of service in BOC is high.

3) H0 -Service features are not a most important factor impact on customer

satisfaction about Pambahinna BOC branch.

H1 – Service features is the most important factor of customer satisfaction about

Pambahinna BOC branch.

4) H0 – Tangible is not the most important factor of customer satisfaction about


H2 - Tangible is the most important factor of customer satisfaction about


5) H0 – Responsiveness is not the most important factor of customer satisfaction

about Pambahinna BOC branch.

H3 - Responsiveness is the most important factor of customer satisfaction about


6) H0 - Assurance and Reliability is not the most important factor of customer


3

H4 - Assurance and Reliability is the most important factor of customer


7) H0 – Empathy is not the most important factor of customer satisfaction about


H5 - Empathy is the most important factor of customer satisfaction about


1.6 Methodology

1. The data collected from both primary and secondary sources was used in this

research for achieving the research objectives.

2. A standard questionnaire was used as the instrument in collecting primary data

for measuring level of Customer Satisfaction about Pambahinna branch and

collects the secondary data from various methods such as, Articles published

in the news papers and the internet, web sites of Bank of Ceylon, Annual

reports of BOC, relevant text books, research articles, journals and magazines.

3. A standard questionnaire was used as the main research instrument in

collecting primary data for measuring level of customer satisfaction about

Pambahinna branch. This questioner divide into three section and its

questions are created on the model of customer satisfaction.

4. The population of the research consists of the entire customers of the BOC

Pambahinna branch. Among this population as the sample unit of the study

was selected the customers of BOC Pambahinna branch in university of

Sabaragamuwa.

5. The data gathered with the use of the questionnaire was analyzed using SPSS

analysis (tabular and graphical analysis), bi- variety and multivariate analysis

(Pearson’s Correlation analysis, reliability test – Chronbatch’s Alpha value

and multiple linear regression analysis).

1.7 Limitation of the study

4

Information was collected only from 25 customers of BOC. So could not get

all the users’ feedback. Therefore couldn’t make 100% accuracy decisions.

The most of customers they are not prefer to give the actual information and

the information which collected from questioner are not sufficient, because

misunderstand of questions.

In this research study to show the relationship between service quality factors

and customer satisfaction, the researcher had used only five service quality

factors. (features, Tangible, Responsiveness, Assurance and Reliability and

Empathy) But there Research was conducted only limited sample and

researcher had no opportunity to cover population.

The study was based on the assumption that the respondents will always be

truthful and correct.

The study depends upon responses of the respondents, who are believed to be

giving the right information. Thus the accuracy of the survey and its findings

depends a lot on the respondents and their responses.

The study was confined to the Pambahinna village, so the results may not be

the same in other parts of country which are having different market

conditions.

1.8 Disposition of the Thesis.

This thesis is composed of five chapters.

Chapter One: This chapter presents a brief background of the study, problem

statement, research objectives, and research questions. Finally significance of the

study, hypotheses of the study, limitations of the study are presented.

Chapter Two: This chapter presents a Literature review explains various authors’

findings and finally Conceptualization and Operationalization of the research.

Chapter Three: The third chapter discusses about the methodology of the study.

Here includes the type of data that the researcher used, data sources, data collection

methods, data presentation and data analysis methods.

5

Chapter Four: The chapter four is about presentation, analysis and discussion of the

data that are collected by the researcher for the purposes of achieving preset

objectives.

Chapter Five: The chapter five comprises the summary of the entire research study

known as conclusion. Then recommendations included to it.

CHAPTER TWO

LITERATURE REVIEW

6

2.1 Literature

2.1.1 Customer

There are two distinct types of customers. They are external and internal. An external

customer can be defined in many ways, such as the one who uses the product or

service, the one who purchase the product or service, or the one who influence the

sale of the product or service.

An external customer exists outside the organization and generally falls into three

categories: current prospective and lost customers. Each category provides valuable

customer satisfaction information for the organization. Every employee in the

organization must know how their job enhances the total satisfaction of the external

customer. Performance must be continually improved in order to retain existing

customers and to gain new ones.

An internal customer is just as important. Every function, whether it is engineering,

order processing or production has an internal customer each receives a product or

service and in exchange, provides a product or service. Every person in a process is

considered a customer of the preceding operation. (Bester Field et al, 2005)

2.1.2 SatisfactionSatisfaction is the state felt by a person who has experienced a performance (or

outcome) that has fulfilled his or her expectations. Satisfaction is thus a function of

relative levels of expectation and perceived performance. Expectations are formed on

the basis of past experiences with the same or similar situations, statements made by

friends and other associates, and statements made by the supplying organization.

Satisfaction is a feeling of fulfillment of a need or requirement comparing with an

expectation. These are several level of satisfaction. Such as,

If the performance falls short of expectations. The customer is dissatisfied.

If the performance matches the expectation, the customer is satisfied.

If the performance exceeds expectations. The customer is highly satisfied or

delighted.

(Kotler & Keller, 2006)

7

2.1.3 Customer Satisfaction

Customer Satisfaction is the state of mind that customers have about a company when

their expectations have been met or exceeded over the life time of the product or

service. The achievement of customer satisfaction leads to company loyalty and

product repurchase. (http:en.wikpedia.org/wiki/customer-satisfaction)

2.1.4. Customer Satisfaction of Banking

The term bank is generally understood as “an institution that holds a banking license

granted by financial supervision authorities. Under the authorities, the bank conducts

the most fundamental banking services like accepting deposits and making loans and

other financial services” (Wikipedia)

The service quality has been widely used to assess the service performance of various

service organizations including banks (Cowling and Newman, 1995). There are 18

service quality attributes in banking. They are: access, aesthetics, attentiveness,

availability, care, tidiness, comfort, commitment, communication, competence,

courtesy, flexibility, friendliness, functionality, integrity, reliability, responsiveness

and security and all those are directs to the customer satisfaction. (Johnston 1995)

Customer satisfaction is also related to the service offerings. With retail banking, the

convenience and competitiveness of the provider’s offerings can be expected to affect

a customer’s overall satisfaction and ongoing patronage. The location is a major

determinant of bank choice (Anderson et al, 1976, Laroche and Taylor, 1988)

In retail banking there is an ongoing relationship between the service provider and the

customer. Hence, customer satisfaction is based on as evaluation of multiple

interactions. For this investigation, satisfaction is considered as a composite of overall

customer attitudes towards the service provider that incorporates a number of

measures. These frequently used measures are overall service quality, meeting

expectations and Customer Satisfaction. (Housknecht, 1990, Heskett et al, 1994,

Jones and Sasser, 1995)

2.1.5 Service Quality

8

Ghobadian et al (1994) posit that most of the service quality definitions fall within the

“Customer led” category. Juran (1999) elaborates the definition of customer led

quality as “features of products which meet customers’ needs and thereby provide

customer satisfaction.” As service quality relates to meeting customers’ needs, we

will be looking at “perceived service quality” in order to understand consumers

(Arnauld et al, 2002) Gronroos (1984) and Parasuraman et al (1985) look at perceived

quality of service as the difference between customers.”

2.2 Conceptualization and Operationalization

2.2.1 Conceptualization

The concept is created as follow to do this study. The conceptual framework based on

factors of service quality and those are related to the customer satisfaction. They are

service features, tangible, responsiveness, reliability and assurance and empathy. The

following conceptual framework has build prior to this study by considering above

factors of service quality.

Figure 2.1 Conceptual frameworks.

9

Service Features

Investment rates Deposits Loans

Service charges

Source: Constructed by a researcher.

Service quality measurements

It is generally accepted that customer satisfaction often depends on the quality of

product or service offering. (Anderson and Sullivan, 1993; Levesque and McDougall,

1996) For this reason, research on Customer Satisfaction is often closely associated

with the measurement of quality. (East, 1997). Thus, both service quality and

Customer Satisfaction share a close relationship, through they are normally

conceptualize as unique or separate constructs (Bitner and Hubbert, 1994, Cronin and

Taylor, 1992; Patterson and Johnson, 1993; Taylor and Baker, 1994) Levesque and

McDougall, (1996) identified service quality, service features and customer complaint

handling in measuring determinants of the Customer Satisfaction.

10

Tangible

Appearance Clean and pleasant place Location Space Technology Documents

Responsiveness

Speed Banking hours Well trained staff

Assurance and Reliability

Promised service Trust Confidence Accuracy

Empathy

Caring And listening Handling enquiries

Customer Satisfaction

Brand loyalty

Recommend to others Switch off to other banks

Frequency Number of accounts Number of years

After extensive research, Zeithamal, Parasuraman and Berry found five dimensions

customers use when evaluating service quality. They named their survey instrument

SERVQUAL. They are Tangibles, Eliability, Responsiveness, Assurance and

Empathy. All dimensions are important to customers, but some more than others.

Service providers need to know which are which to avoid majoring in minors. At the

same time they can’t focus on only one dimension and left the others suffer.

Sureshchandar, Rajendran, and Anantharaman, (2003) have identified five factors of

service quality from the customers’ perspective. Those are a) Core service or service

product, b) Human elements of service delivery, c) Systematization of service

delivery non-human element, d) Tangibles of service and e) Social Responsibility.

Parasuraman et al. (1985) identified 97 items or criteria in measuring service quality.

They argued that consumers used similar criteria irrespective of the type of service in

measuring service quality. They then group these criteria into ten key categories

which the labeled as “Service quality determinants” (P.48). The determinants are

reliability, responsiveness, competence, access, courtesy, communication, credibility,

security, understanding, knowing the customer and tangibles. Later in another

research (Parasuraman et al, 1988), they refined the dimensions into only five

dimensions, tangibles, reliability and assurances responsiveness, Service features and

empathy.

Service features

The competitiveness of provider’s offerings (competitive interest rates on loans,

reasonable service fees), (Levesque and McDougall, 1996)

H1: Service features are most important factor impact on Customer Satisfaction about

Pambahinna BOC of students in university of Sabaragamuwa.

Tangible

The physical appearance of the service facility (equipment, machinery, employee

appearance etc.) or the man – made physical environment, (Moller, 2007).Tangible

defines the appearance of the physical facilities and surroundings, the equipment,

11

personnel and of cause the way of communication. The tangible dimensions create the

first hand impression which the customers get and may in the future relate company

with. (http://www.bukisa.com/articles/289284_the-importance-of-the-dimensions-of-

service-quality)

H1: Tangible is most important factor impact on Customer Satisfaction about

Pambahinna BOC of students in University of Sabaragamuwa.

Responsiveness

The employees’ willingness to help the customers and provide prompt service like

Friendliness, being consistently courteous (Moller, 2007).Responsiveness means

Respond quickly, promptly, rapidly, immediately, instantly.

(http://www.serviceperformance.com/articles/33_Five_Service_Dimensions.php).Res

ponsiveness refers to the reaction time of the service. (Author: Elyse, PMP,

CPHIMS).Responsiveness defines the company’s willingness to help its customers

and provide it with a good, fast and quality service. Like all the other dimensions

responsiveness is also very important, the customers will with no doubt be able to feel

if they are valued customers and if they get the best quality service possible.

(http://www.bukisa.com/articles/289284-the-importance-of-the-dimensions-of-

service-quality)

H1: Responsiveness is most important factor impact on Customer Satisfaction about

Pambahinna BOC of students in University of Sabaragamuwa

Reliability and Assurance

Reliability

Reliability means the ability of employees to perform accurately and confidently

(Moller, 2007). Reliability refers to the dependability of the service providers and

their ability to keep their promises. (Author: Elyse, PMP, CPHIMS). Reliability

defines the ability of the company to perform and complete the promised service,

quality, accurately and on time. Reliability just as important as the first hand

impression, because every customer wants to know that their suppliers of what it may

be are reliable and give the service agreed including great quality within the given

timeframe without compromising on the quality.

12

http://www.bukisa.com/articles/289284-the-importance-of-the-dimensions-of-service-quality

http://www.bukisa.com/articles/289284-the-importance-of-the-dimensions-of-service-quality

http://www.serviceperformance.com/articles/33_Five_Service_Dimensions.php

http://www.bukisa.com/articles/289284_the-importance-of-the-dimensions-of-service-quality


(http://www.bukisa.com/articles/289284_the-importance-of-the-dimensions-of-

service-quality)

Assurance

Assurance refers to the level of certainty a customer has regarding the quality of the

service provided (Author: Elyse, PMP, and CPHIMS) Assurance defines the

employees of the company, that they are skilled workers which can gain the trust and

confidence of the customers. The employees must be able to give the customers

assurance in the products they are trying to sell. If the coming or current clients of the

company are not comfortable or feel safe dealing with the employees they are likely

not to continue doing business with your company. Assurance is a lot about keeping

and maintaining business relations. (http://www.bukisa.com/articles/289284_the-

importance-of-the-dimensions-of-service-quality)

H1: Reliability and Assurance is most important factor impact on Customer

Satisfaction about Pambahinna BOC of students in University of Sabaragamuwa

Empathy

Whether or not the employee was caring and provided individualized attention.

(Moller, 2007). Empathy is when a service employee shows that she understands and

sympathizes with the customer's situation. The greater the level of this understanding

is the better. Some situations require more empathy than others (Author: Elyse, PMP

and CPHIMS). Empathy defines a company who cares and gives individualized

attention to its customers so they feel special and valued as a customer. The first

dimension of empathy combines the second, third and fourth dimension to a higher

level, without they yet still can be compared, as they are all individual dimensions of

the service quality mix. It is very important to give the customers individualized and

quality attention, the more special and valued they feel the higher the chances are for

them to return to your company and continue doing business

(http://www.bukisa.com/articles/289284_the-importance-of-the-dimensions-of-

service-quality) Services can be performed completely to specifications. Yet

customers may not feel provider employees care about them during delivery. And this

hurts customers’ assessments of providers’ service quality.

(http://www.serviceperformance.com/articles/33_Five_Service_Dimensions.php)

13

http://www.serviceperformance.com/articles/33_Five_Service_Dimensions.php







H1: Empathy is most important factor impact on Customer Satisfaction about

Pambahinna BOC of students in University of Sabaragamuwa

Customer satisfaction

Customer satisfaction is defined as a business term, is a measure of how products and

services supplied by a company meet or surpass customer expectation.” But that

seems off when you look at the separate. (http:en.wikpedia.org/wiki/customer-

satisfaction)

Brand loyalty

Brand loyalty is a consumer’s preference to buy a particular brand in a product

category. It occurs because consumers perceive that the brand offers the right product

features, images or level of quality at the right price. This perception becomes the

foundation for a new buying habit. Basically, consumers initially will make a trial

purchase of the brand and, after satisfaction, tend to form habits and continue

purchasing the same brand because the product is safe and familiar. Brand loyalists

have this mindset. I am committed to this brand; I am willing to pay a higher price for

this brand over other brands; will recommend this brand to others.

(http://www.extension.iastate.edu/agdm/wholefarm/html/c5-54.html).So Recommend

to others and switch off to other banks can get under brand loyalty.

Frequency

Frequency is the number of occurrences of a repeating event per unit time. It is also

referred to as temporal frequency. The period is the duration of one cycle in a

repeating event, so the period is the reciprocal of the frequency.

(http://en.wikipedia.org/wiki/Frequency). So number of years and number of accounts

can get under frequency.

As pointed out Parasuraman et al, 1988 refined the dimensions into only five

dimensions, tangibles, reliability and assurances responsiveness, Service features and

empathy.

The relationship between service quality dimensions and customer satisfaction has

received considerable academic attention in the past few years. But the nature of the

exact relationship between service quality dimensions and Customer Satisfaction 14

http://en.wikipedia.org/wiki/Frequency

http://en.wikipedia.org/wiki/Reciprocal_(mathematics)

http://en.wikipedia.org/wiki/Turn_(geometry)

http://en.wikipedia.org/wiki/Time

http://www.extension.iastate.edu/agdm/wholefarm/html/c5-54.html

http://ericjacques.org/wp-content/plugins/wordpress-feed-statistics/feed-statistics.php?url=aHR0cDovL2VuLndpa2lwZWRpYS5vcmcvd2lraS9UZWNobmljYWxfdGVybQ==

http://ericjacques.org/wp-content/plugins/wordpress-feed-statistics/feed-statistics.php?url=aHR0cDovL2VuLndpa2lwZWRpYS5vcmcvd2lraS9CdXNpbmVzcw==

http://ericjacques.org/wp-content/plugins/wordpress-feed-statistics/feed-statistics.php?url=aHR0cDovL2VuLndpa2lwZWRpYS5vcmcvd2lraS9DdXN0b21lcl9zYXRpc2ZhY3Rpb24=

(especially in the way the two constructs have been operationalized) is still shrouded

with uncertainty. Even many researchers have operationalized Customer Satisfaction

by using a single item scale, Sureshchandar et.al (2002), they have operationalized

Customer Satisfaction as a multi dimensional construct.

Sureshchandar et.ai(2002), have identified in their research that people whose

perception of service quality dimensions are poor have poor satisfaction levels, people

whose perception of service quality dimensions are medium satisfaction levels, and

those who have ranked the service quality dimensions as high are highly satisfied with

the services of the organization. Therefore, there exists a great dependency between

service quality dimensions and Customer Satisfaction, an increase in one is likely to

lead to an increase in another.

The responsiveness service expectation dimension was found to consistently to be the

most important expectation across all countries. Thereafter, the relative importance of

subsequent service dimensions has been ranked as follows, Responsiveness,

Reliability, Tangibles, Assurance and Empathy. For most countries the core service

attributes of efficient staff, shorter queues, service reliability and convenient locations

are most important to customers. Furthermore, this attributer appeared to be

increasingly important over time. Any efforts to increase the speed of processing

information and customers are likely to have an important and positive effect on

Customer Satisfaction. The results suggest that core dimensions such as

responsiveness (driven by staff efficiency and shorter queues), and reliability

(performing dependably and accurately) are more important while relational issues

surrounding assurance and empathy are of less important.

Jamal and Nasar (2002) have investigated the determinants of Customer Satisfaction

in the retail banking in Pakistan. The report findings are from a survey, which found

about determinants of customer satisfaction in the retail banking in Pakistan. For that

purpose a total of 300 questionnaires were randomly distributer to customers of a

specific bank in Pakistan. According to their findings, they have emphasized that

there was a strong relationship between service quality dimensions and Customer

Satisfaction. There was however no relationship between tangible aspects of the

service environment.

15

2.2.2 Operationalization of independent variables

This study based on service quality and Customer Satisfaction in banking industry.

Data was collected using questionnaires (Appendix 1) from customers. The factors

and the related question on questioner were reflected by the following table.

Table 2.1 Dimensions and sub dimensions (Measures) of independent variables.

Dimensions Indicators Measures Elements /Sub dimensions

Variable 01

Service Features

1. Interest rates

Deposits (Q5)

Loans (Q6)

Liker scale BOC pay competitive interest rate on deposits than other banks

1. Completely dissatisfied

2. Dissatisfied

3. Neither satisfy nor dissatisfy

4. Satisfy

5. Very much satisfy

BOC charge competitive interest rate on loans than other banks


2. Dissatisfied


4. Satisfy


2.Service charges

(Q7)

Liker scale Charges for other services in BOC


2. Dissatisfied


4. Satisfy

16


Variable 02

Tangible

1. Appearance (Q8)

Liker scale Neat in appearance


2. Dissatisfied


4. Satisfy

5.Very much satisfy

2. Clean and pleasant place (Q9)

Liker scale Maintaining clean and pleasant, convenient working environment


2.Dissatisfied


4. Satisfy


3. Location (Q10)

Liker scale Convenience of the location of the branch

1.Completely dissatisfied

2. Dissatisfied


4. Satisfy


4 Space (Q11)

Liker scale There is a enough space in bank (Internal and External- vehicle park)


2. Dissatisfied


17

4. Satisfy


5.Technology (Q12)

Liker scale High Technology used by BOC (The computer system used, ATM……etc)


2. Dissatisfied


4. Satisfy


6.Documents (Q13)

Liker scale Readable and understandable bank statements


2. Dissatisfied


4. Satisfy


Variable 03

Responsiveness

1.Speed (Q14)

Liker scale Speed of the service(waiting time for having transactions)


2. Dissatisfied


4. Satisfy

5.Very much satisfy

2.Banking hours (Q15)

Liker scale Convenience of operating hours


2. Dissatisfied


18

4. Satisfy


3. Well trained staff

(Q16)

Liker scale Knowledge and experience of staff regarding the banking hours


2. Dissatisfied


4. Satisfy


Variable 04

Assurance and Reliability

1. Promised service

(Q17)

Liker scale Providing the service as promised by the bank


2. Dissatisfied


4. Satisfy


2. Trust (Q18)

Liker scale Trust and Security of transactions


2. Dissatisfied


4. Satisfy


19

3.Confidence (Q19)

Liker scale Confidentially of transactions


2. Dissatisfied


4. Satisfy


4. Accuracy(Q20)

Liker scale Accuracy of the transactions and documents (Error free records)


2. Dissatisfied


4. Satisfy


Variable 05

Empathy

1. Caring And listening (Q21)

Liker scale Response to complaints very friendly


2. Dissatisfied


4. Satisfy


2.Handling Liker scale Way of handling enquiries

20

enquiries

(Q22)


2. Dissatisfied


4. Satisfy


CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Research Design

The research design involves a series of decisions including the determination of type,

purpose, setting, sampling plan and time horizon etc. of the study. According to this

research here researcher identify who are the customers of Pambahinna BOC branch

as population of the study, from this population researcher selected 25 customers of

BOC Pambahinna branch as the sample to gather data. Also customers are selected

21

by using Random sample method. In here researcher use both primary and secondary

data and secondary data and to collect primary data researcher use questioner. For

obtain secondary data researcher use Internet, books and websites.

3.1.1. Type of the study

The type of the study is Explanatory and descriptive nature. The study can be

explanatory when the focus is on cause-effect relationships, explaining what causes

produce what effects (Yin, 1994).Explanatory type of research is grounded in theory,

and theory is created to answer why and how questions. In an explanatory study, the

researcher uses theories or hypotheses to account for the forces that caused a certain

phenomenon to occur.

3.1.2 Purpose of the Study

The purpose of this study is to fill the gap in the knowledge of the customer

satisfaction regarding banking sector .But researcher think research is not enough.

3.1.3 Study Setting

This study was conducted in the natural environment with less interference of the

researcher. As the type of this study is descriptive, the data were collected in the

natural setting under a field survey.

3.1.4 Time Horizon of the Study

The data for this study were collected at a single point of time (Zikmund, 1997;

Sekaran, 1999), thus, the study is single cross-sectional in time horizon. The period

chosen for the study is May-June 2011. Data were collected during this period.

3.1.5 Data Sources Used for the Study

Primary data

The study has been used primary data. The primary data has collected through

distributing questioners to selected dealers.

Secondary data

The researcher Collect the secondary data from various methods such as, Articles

published in the news papers and the internet, web sites of Bank of Ceylon, Annual

reports of BOC, relevant text books, research articles, journals and magazines.

22

3.1.6. Research Approach

In first step, to find out the variables, which affect, Customer Satisfaction a rigorous

literature survey was conducted. Secondly, a pilot survey was conducted to modify a

questioner. Finally, a field survey was conducted by using the refined questionnaire.

3.2 Sample Plan

The sample plan has been explained under the major areas of population, sampling

method, data collection method, and data analyzing method.

3.2.1 Population of the Study

The population of the research consists of the entire customers of the BOC

Pambahinna branch. Among these customers approximately BOC Pambahinna branch

has five thousand two hundred dealers in the University of Sabaragamuwa.

3.2.2 Sample Unit

Sample unit of the study was the customers of BOC Pambahinna branch in University

of Sabaragamuwa.

Table 3.1: Number of customers about BOC Pambahinna branch in University

of Sabaragamuwa, and the number of the selected customers for the study by

students in each year in University of Sabaragamuwa.

Faculties No. of customers No. of customers selected

First year 900 45

Second year 900 45

Third year 750 35

Fourth year 650 30

Total (SUSL) 3400 25

23

Source - http://www.sab.ac.lk/

3.2.3 Sample Frame

The list of customers in university of Sabaragamuwa which is available at the

Pambahinna BOC branch was taken as the sampling frame.

3.2.4 Sampling procedure

The researcher randomly selected as one student from each rooms in the hostel.

3.2.5 Sample size

Table 3.2: Testing the sample adequacy: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .721

Bartlett's Test of Sphericity

Approx. Chi-Square 30.571

df 10

Sig. .001

Source: Output of the analysis of survey data, 2011(Refer appendix …………………)

According to the tables 3.2, Kaiser-Meyer-Olkin Measure of Sampling Adequacy is

equal or more than 0.5. Therefore, it shows the sample adequately represent the

population of customers about BOC Pambahinna branch in University of

Sabaragamuwa Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy index

(value of 0.730) confirm the appropriateness of the data for exploratory factor

analysis (EFA).

3.3 Research instruments

A standard questionnaire was used as the instrument in collecting primary data for

measuring level of Customer Satisfaction about Pambahinna branch.

Questionnaire

24

Questionnaire, the main research instrument was comprised of three major sections.

Such as section A, B, C.

Section A:

Section A of the questioners includes the self- developed questions related to the

general information regarding the transactions of BOC Pambahinna branch. Under

that there are four questions.

Section B:

Section B of the questioner includes the self-developed questions related to the

conceptualization or model of the study. These questions relate to the each

independent variables or service quality dimensions. First one is the Service features.

Under that there are three questions for each indicator of Service Features. Second

one is the Tangible. Under that there are six questions for each indicator of Tangible.

Third one is the Responsiveness. Under that there are three questions for each

indicator of responsiveness. Fourth one is the Assurance and Reliability. Under that

there are four questions for each indicator of Assurance and Reliability. Fifth one is

the empathy. Under this there are two questions for each indicator of Empathy.

Finally there are eighteen questions under section B.

Section C:

Section C of the questioner includes the self-developed questions related to the

conceptualization or model of the study. These questions relate to the dependable

variables. Under this there are eight questions.

3.4. Analysis of data

The analysis was conducted in three steps. At the first step, descriptive statistical

measures such as mean, frequencies and categorical tables were used. Further, to

identify the relationships between the dependant and independent variables, cross

tabulations were employed. Then in the second step to test the reliability of the

questionnaire Reliability analysis was conducted. In the second step, hypotheses

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testing were conducted using One sample tests, Independent Samples T-tests,

Regression and correlations analysis.

3.4.1 Descriptive Statistics

Descriptive statistics were used to analyze each variable of the study. Frequency

distribution was counted to measure how many respondents have given the same

answer to the same question. Percentages were calculated to determine the fraction of

entrepreneurs who gave a particular response. The personal information of each

entrepreneur was collected only for confirming the identity of each entrepreneur of

the selected sample and to study their backgrounds.

3.4.2 Reliability of the questionnaire

The Cronbach’s alpha value method used to check whether the questionnaire

developed by the researcher especially for this research purpose, measures the

variables reliably. If the corresponding alpha value of a given set of questions is

greater than 0.7or closer to accepted minimum level 0.70 (Sekaran 2006; Malhothra

2004) the researcher can conclude that the set of questions used to measure a

particular variable is reliable.

3.4.3 Hypotheses Testing

The test statistics of determining the nature of Beta is important. Various methods of

determining the utility of the model as a predictor of the independent variable include

“t” test and “f” test for detecting the significant of the slope.

In statistical data analyzing, H0 is always called the null hypothesis and H1 is called

the formulated hypothesis, which is called the alternative hypothesis.

Accordingly, if null hypothesis (H0) reject then can conclude that at least one of the

independent variables significantly contribute to the prediction of the dependent

variable. If H0, reject it demonstrates that any of the independent variables (or

combination of them) not explain the behaviors of the dependent variable.

The aforesaid ‘F’ test and p values are used to determine which of the independent

variables useful predictors are.

26

The importance of the ‘F’ values is that, if the computed ‘F’ value exceeds the table

value, we can reject the null hypothesis (H0) and be able to conclude that at least one

of these independent variables is a significant predictor of the dependent variable.

Therefore, H0 is rejected if computed ‘F’ value > table ‘F’ value

Thus, if a b value is not rejected, that particular b (Beta) value has a significant ‘F’

value. Therefore, this implies a need to the hypothesis, which is attributed to that b.

considering the effects on the dependent variable ‘F’ distribution, is used to compare

two population variances.

The ‘F’ values can be obtained using a computer statistical package that provides an

exact ‘F’ statistics giving the computed ‘F’ value and corresponding degree of

freedom. This is the use of the table value of ‘F’.

For this study ‘P’ value is used (instead of the table value) to come to a conclusion.

The predictive ability of the regression analysis could be designed by both ‘F’ value

and the ‘P’ value of the regression model. The ‘P’ value is the value of significance at

which the hypothesis test procedure changes the conclusion. 'α'(Alpha value) is the

significant value at which the hypothesis test procedure changes conclusion. If;

(Alpha value) is the smallest value for ‘α’ for which one can reject the null hypothesis

(H0) that is the point at which the test is significant. Therefore ‘P’ value is often called

the observed ‘α’ or ‘observed significant level. Here, the analysis uses α = 0.05 as

the minimum level ‘α’ and if the observed ‘α’ value is more than 0.05 it fails to reject

the null hypothesis (H0).

Therefore, this can be symbolically presented as follows:

If p – value <; then, reject H0

If p – value >; then, accept H0

Thus;

The smaller the p –value, the higher the significance

When using p – value in this manner, the procedure in our study is,

Reject H0, If p – value < α (0.05) and,

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Accept H0, If p – value > α (0.05).

Measure of location

To measure the location within a data set the, mean or average value has selected for

this study. Measures of central tendency describe the centre of the distribution.

If, Service Features ≤ 2.49 (The answer of the respondent is Strongly dissatisfy or

Dissatisfy), then the independent variable being measured takes low values and hence

does not drive them for their customer satisfaction.

If, Service Features = 2. 5 - 3.49(The answer of the respondent is neutral), then the

independent variable being measured takes average value and hence marginally

influence their customer satisfaction.

If, Service Features ≥ 3.5 (The answer of the respondent is Very much satisfy or

Satisfy ), then the independent variable being measured takes high values and hence

does drive them for their customer satisfaction. Similarly, the customer satisfaction of

the BOC Pambahinna branch measured using the Liker five-point scale; from strongly

dissatisfy to very much satisfy. In that manner;

If, the answer of the respondent ≤ 2.49 then the level of customer satisfaction and

Service features are low.

If, the answer of the respondent = 2. 5 - 3.49 then the customer satisfaction and

service features of them is average.

If, the answer of the respondent ≥ 3.5 then the customer satisfaction and service

features of them is high.

Likewise for each independent variable can measure one by one.

One Sample T-test

The One-Sample T Test procedure tests.

To test the hypothesis 3.5 midpoint value of 5-point scale used. A significance level

of α= 0.05 is selected.

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Pearson’s Co-efficient of Correlation Analysis

Pearson’s Co-efficient of Correlation make out the degree of linear relationship that

exists between two variables

If the Pearson’s coefficient of correlation is close to 1 (> 0.5) with a high significant

level (F< 0.05) then, there is a strong positive relationship between the two variables.

If the Pearson’s coefficient of correlation is close to -1 (> - 0.5) with a high significant

level (F< 0.05) then, there is a strong negative relationship between the two variables.

If the Pearson’s coefficient of correlation is close to 0 (<-0.5 or –0.5) with a high

significant level (F< 0.05) then, there is a positive or negative relationship between

the two variables, but not so strong.

Regression analysis

Correlation analysis provides a research only with the type of relationship between

two variables. But in multiple regressions analysis the whole set of variables will be

used to predict the dependent variable. Hence to identify the most important

dimensions of two variables, step-by-step regression analysis was conducted.

The inclusion of variable will be done according to the highest weight age with the

dependent variable in the correlation analysis. Therefore, in this analysis it was

assumed that the independent variable could be represented as a linear relationship

with the other variables.

It must be emphasized here that the multiple regressions could be used to conduct the

omitted parameter test to assess the direct and indirect effects of the independent

variables on the dependent variable. Only multivariate model could include all the

variables at the same time in an analysis. It must be mentioned here that the multiple

regression analysis is the only one of the multivariate methods, which uses more than

one variable in an analysis. One purpose of using the regression analysis is to arrive at

a method for predicting a value for the dependent variable.

Correlation analysis provides only a significant relationship between each

independent variable. In other words, the regression model always indicates by how

29

much (Beta value) each independent variable could affect the dependent variable.

Thus, the technique of multiple linear regressions explains the behavior of a

dependent variable using more than one predictor (independent/exploratory) variable

simultaneously.

The regression model is given below.

Y= b0 + b1 + b2 + b3

According to the sequence of ‘r’ value of variables, the multiple regressions are given

below.

Customer satisfaction = b0+b1 (Service features) +b2 (Tangible) +b3 (Responsiveness)

+b4 (Assurance and Reliability) + b5 (Empathy) +E

Y = b0 + b1(X1) + b2 (X2) + b3 (X3) + b4 (X4) + b5 (X5) + E

Where,

Customer Satisfaction = Y

Service Features = X1

Tangible = X2

Responsiveness = X3

Assurance and Reliability = X4

Empathy = X5

Beta (b0) is the intercept of the sample regression line and is the estimate of the

population intercept examining the estimate of the slope (b1, b2, b3,, bk,)

This model provides information on the nature of the relationship. Considering the

population slope (b): when, b=0, the population line is perfectly horizontal.

H0 = b1 = b2 = bk = 0

H1 = at least one b ≠ 0

30

Coefficient of determination (R2) is another method of examining how well the model

provides estimates that fit the sample data. When any additional variables are

included, the predictive ability of the model should be significantly improved with the

addition. The less the error term, the higher the predictability can identify of the

regression analysis.

.

CHAPTER FOUR

DATA PRESENTATIONAND ANALYSIS

4.1 Sample Profile

4.1.1 General Information reason for use BOC Pambahinna branch

4.1.1.1 The ways of get information about BOC Pambahinna branch

31

When people going to join with a bank as a customer do their transactions first they

should know about the bank, location, its services and advantages can get after join

the bank. They can know about these things by getting information in various ways.

These ways can be, from other persons, Printed media, electronic media and others.

For BOC Pambahinna branch is as follows.

Table 4.1: The ways of get information about the BOC Pambahinna branch

Ways of get information Percentage

From other persons 80%

From printed media 4%

From electronic media 0%

Other 16%

Source: Survey Data 2011

Figure 4.1: The ways of get information about the BOC Pambahinna branch.


4.1.1.2: The reason for select BOC Pambahinna branch to do transaction

People select bank to do transaction upon several reasons. They are may be

government bank, closeness of the bank, Special offers from the bank, banking from

longtime and quick service and hospitality of the staff. For BOC Pambahinna branch

is as follows.

Table 4.2: The reasons of select the BOC Pambahinna branch

Reason for select the bank Percentage32

Government bank 16%

Closeness of the bank 72%

Special offers from the bank 4%

Quick service and hospitality of the staff 8%


Figure 4.2: The reasons of select the BOC Pambahinna branch


4.1.1.3: The services get from BOC Pambahinna branch

Normally people use bank to get some services. There are may be Personal bank

services (Saving accounts, Fixed accounts), Current account services, Pawning

services, Loan facilities and Foreign money exchange. These some services also can

get from BOC Pambahinna branch.

Table 4.3: The services get from the BOC Pambahinna branch 33

Services get from bank Percentage

Personal bank services 100%

Current account services 0%

Pawning services 0%

Loan facilities 0%

Foreign money exchange 0%


Figure 4.3: The services get from the BOC Pambahinna branch


4.2 Validation of Measurement Properties

Properties of the measurement should be assessed at least through ensuring content

validity and construct validity (Sekaran, 2003). Hence, the validations of

measurements used in the study are discussed in the following sections.

4.2.1 Content Validity

34

Content validity ensures that the measure includes an adequate and representative set

of items that tap the concept. The more the scale items represent the domain or

universe of the concept being measured, the greater the content validity. To put it

differently, content validity is a function of how well the dimensions and elements of

a concept have been delineated (Sekaran, 2003).

4.2.2 Construct Validity

Construct validity testifies to how well the results obtained from the use of the

measure fit the theories around which the test is designed (Sekaran, 2003). Factor

analysis is a multivariate technique that would confirm the dimensions of the concept

that have been operationally defined, as well as to indicate which of the items are

most appropriate for each dimension (establishing construct validity) (Sekaran, 2003).

Table 4.4: Construct validity of Service Features, Tangible, Responsiveness, Assurance and Reliability, Empathy and Customer Satisfaction

Construct Dimensions Cumulative %

Service Quality Service features 53.786

Tangible68.372

Responsiveness 80.691

Assurance and Reliability 90.205

Empathy 96.301

Customer Satisfaction 100.000

Source: Output of the analysis of survey data, 2011 (Refer Appendix………….)

4.3 Reliability of the Constructs

It is very important to the researchers to ensure the reliability of the questionnaires

developed by themselves for a particular research purpose. The reliability of a

questionnaire is that the question items of a particular questionnaire measure the

variables being studied reliably.

Table 4.5 Summery of the reliability analysis

35

Source: Output of the analysis of survey data, 2011

Key: The table 4.5 shows that the reliability of the variables is closer to or greater

than the accepted minimum level 0.70 (Sekaran 2006; Malhothra 2004)

4.4 Level of Customer Satisfaction

The first objective of the study is to investigate the level of customer satisfaction

about Pambahinna BOC branch.

Hence the decision Criteria is to investigate the level of customer satisfaction is if

Mean value is equal or less than 1.0-2.49 on five point scale and standard deviation

less than 1.0 could consider as the level of Customer Satisfaction is low and if Mean

value is equal or less than 2.5-3.49 on five point scale and standard deviations less

than 1.0 could consider as the level of Customer Satisfaction is Moderately low. On

the other hand if Mean value is equal or greater than 3.5- 5.0 on five point liker scale

and standard deviation less than 1.0 could consider as the level of Customer

Satisfaction is high.

To test whether the population mean conform to a given hypothesis one-sample t test

for a single mean conducted. So test the hypothesis that the mean level exceeds 3.5,

the midpoint value on a 5-point scale and significance level of α= 0.05 are selected.

Further if the value of the calculated t statistics are larger than the critical value (test

value 3.5), reject Ho. If the calculated t value is smaller than the critical value, do not

reject Ho.

Based on the objective one, the hypothesis 1 was derived after reviewing the relevant

literature as follows.

Level of Customer Satisfaction

36

The data given in the table 4.6 shows the key descriptive statistics of the different

scales measuring the Customer Satisfaction.

Table 4.6 Descriptive Statistics of Customer Satisfaction

N Minimum Maximum Mean Std. DeviationRecommend to others 25 0 1 .68 .476

Switch off to the bank 25 0 1 .72 .458

Number of accounts 25 0 1 .84 .374

Number of years 25 1 2 1.12 .332

Valid N (likewise) 25


According to the table 4.6, it is noticeable that the four indicators namely recommend

to others, Switch off to another bank, Number of accounts and Number of years from

Q 27-30 are above the scale’s mid-point, 3.5 on a 5-point scale. From the results, it

may be seen that the mean value of all are above 0.68 and less than 1.12 on a 5- point

scale. And standard deviation without number of years for other every question item

takes values less than 1.0 by further supporting the idea by providing evidence. Hence

the level of Customer Satisfaction is less within the selected sample of Customers in


To test whether these results are statistically significant, a Single sample test was

performed. The result of the tests is given in the table 4.7

Table 4.7 One-Sample T- Test of Customer Satisfaction

Test Value = 0

t df

Sig. (2-

tailed)

Mean

Difference

95% Confidence Interval

of the Difference

Lower Upper

37

Recommend to others 8.660 24 .000 2.00 1.52 2.48

Switch off to another bank 8.660 24 .000 2.00 1.52 2.48

Number 0f accounts 6.928 24 .000 1.60 1.12 2.08

Number of years 12.101 24 .000 2.24 1.86 2.62


The results given in the table 4.7 disclose that t values at 3.5 midpoint value are

significantly difference from estimated mean values Q 27to Q30. The t values are

ranged from 8.660- 12.101. And they are statistically significant at 0.0001% (99%)

level of significance. Further test values are positive at 95% confidence interval of the

difference. Hence, the results suggest that there is significant difference exists in

indicators of Customer Satisfaction and they are statistically significant.

Level of Customer Satisfaction

The data given in the table 4.8 shows the key descriptive statistics of Customer

satisfaction (Comparing with independent variables).

Table 4.8 Descriptive Statistics of Customer Satisfaction

N Mean Std. Deviation Std. Error Mean

Service Features 25 1.5867 .81240 .16248

Tangible 25 1.8733 .59566 .11913

Responsiveness 25 2.2000 .64550 .12910

Assurance and Reliability 25 2.8300 .76960 .15392

Empathy 25 1.7000 .84163 .16833

Customer Satisfaction 25 1.4000 .36799 .07360


According to the table 4.8 it is noticeable that five dimensions of Service Quality

which are affecting to Customer Satisfaction are less than the scale’s midpoint, 3.5

on a 5 point scale. In addition, standard deviations of these dimensions take values

less than 1.0 by further supporting the idea by providing evidence. Hence, the level of

Customer Satisfaction is less within the selected sample of customers in Pambahinna

BOC branch.

38

To test whether these results are statistically significant, a Single Samples Test was

performed. The results of the tests of the tests are given in the table 4.9.

Table 4.9 One-Sample T- Test of Customer Satisfaction

Test Value = 0

t df

Sig. (2-

tailed)

Mean

Difference

95% Confidence

Interval of the

Difference

Lower Upper

Service Features 9.765 24 .000 1.5867 1.2513 1.9220

Tangible 15.725 24 .000 1.8733 1.6275 2.1192

Responsiveness 17.041 24 .000 2.2000 1.9336 2.4664

Assurance and Reliability 18.386 24 .000 2.8300 2.5123 3.1477

Empathy 10.100 24 .000 1.7000 1.3526 2.0474

Customer Satisfaction 19.022 24 .000 1.4000 1.2481 1.5519


Service Quality dimensions Influence to the level of Customer Satisfaction

Table 4.10 shows the influence of Customer Satisfaction and the dimensions of

Service Quality (Service Features, Tangible, Responsiveness, Assurance and

Reliability and Empathy) on the level of Customer Satisfaction.

Table 4.10: Correlations Customer Satisfaction

Service Features

Pearson Correlation .466(*)

Sig. (2-tailed) .019

Tangible Pearson Correlation .387


39

Responsiveness Pearson Correlation .702(**)


Assurance and Reliability Pearson Correlation .540(**)


Empathy Pearson Correlation .505(*)


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

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

Key: Strong positive relationship – Pearson coefficient of correlation > 0.5

Positive, not strong relationship – Pearson coefficient of correlation < 0.5

Source: Output of the analysis of survey data, 2011 (Refer Appendix………….)

Summary of Service Quality Influence to the level of Customer Satisfaction

1. Test statistics of Service Features

Pearson Correlation = .466

Significant level (2-tailed) = 0.019

P- Value < 0.001 < 0.005

The Pearson’s coefficient of correlation is = 0.466* (P=0.019); which is not very

much close to plus one. But the significant level is (P- value) 0.019 which is < 0.01

< 0.05. Therefore, researcher can conclude that though there is a positive correlation

between Customer Satisfaction and Service Features, it is not much strong.

2. Test statistics of Tangible



P- Value < 0.001 < 0.005

The Pearson’s coefficient of correlation is = 0.387 (P=0.056); which is not close to

plus one. But the significant level is (P- value) 0.056 which is < 0.01 < 0.05.

Therefore, researcher can conclude that though there is a positive correlation between

Customer Satisfaction and Tangible, it is not much strong.

3. Test statistics of Responsiveness



P- Value < 0.001 < 0.00540

The Pearson’s coefficient of correlation is = 0.702(**) (P=0.000); which is close to


Therefore, researcher can conclude that though there is a strong positive correlation

between Customer Satisfaction and Responsiveness.

4. Test statistics of Assurance and Reliability



P- Value < 0.001 < 0.005




between Customer Satisfaction and Assurance and Reliability.

5. Test statistics of Empathy



P- Value < 0.001 < 0.005




between Customer Satisfaction and Empathy.

4.5 Most important factor influence on Customer Satisfaction

The third objective of the study was to investigate most important dimensions influence on

Customer Satisfaction.

To cover this objective the hypothesis number three, four, five, six and seven were

derived.

Hypotheses 3: Service features is the most important dimension influence on

Customer Satisfaction of Pambahinna BOC branch.

41

To test above, firstly the researcher conducted the Correlation analysis under section

4.6 in order to find whether there are correlations exist among the dependent variable

(Customer Satisfaction) and each of the independent variables. Pearson’s coefficient

of correlation was used for the purposes of analyzing and interpretation.

The multiple linear regression analysis was carried out to investigate the relationship

between the dependent variable (Customer Satisfaction) with each independent

variable namely Service features, Tangible, responsiveness, Assurance and Reliability

and Empathy. The stepwise was applied to identify the most important variables in the

model.

Table 4.11 shows the model summery after applying the stepwise multiple regression

procedure. The final model includes the variable as Service Features. All the variables

are significant at 99% level of significance.

Table 4.11: The Model summery of the stepwise multiple regression analysis

Model R R Square Adjusted R Square

1 .702(a) .492 .470

A Predictors: (Constant), R


Table 4.12: The model developed through the stepwise multiple regression analysis

Model

Un-standardized

Coefficients

Standardized

Coefficients t Sig.

B Std. Error Beta

1 (Constant) .520 .194 2.682 .013

Reliability .400 .085 .702 4.723 .000

a. Dependent Variable: Customer satisfaction (Refer Appendix……….)


42

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