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RESEARCH QUESTION
What are the main factors that derive the customer selection criteria?
Why a customer used to adopt both banking sectors?
What is satisfaction level of both banking system?
What is quality of services that effect satisfaction of customer?
LITERATURE REVIEW
Customer satisfaction
Since the early 1970s some important developments in theory and research on consumer
satisfaction have been made by different studies including Olshavsky and Miller (1972) and
Anderson (1973). Major theoretical as well as empirical investigations during the 1970s supported
the idea that satisfaction is related to the size and direction of disconfirmation experiences, where
disconfirmation experience is related with the persons initial expectations (Churchill and Carol,
1982). Satisfaction, conceptually, may be considered as an outcome of purchase and use which is
the outcome of the customers comparison of the benefits and costs involved in acquiring any
product or service experience in relation to the expected outcomes, whilst, in operational terms,
satisfaction is similar to the attitude whereas it can be evaluated as the accumulated satisfaction
experiences with the different attributes of the product (Churchill and Carol, 1982). Later, in the
1980s, the addition of an emotional response to the experiences provided by, associated with
particular products or services purchased (Westbrook and Reilly, 1983; Westbrook and Oliver,
1981) set forth a new dimension for the research in customer satisfaction. However, further
developments in customer satisfaction research during the 1990s and also at the inception of the
year 2000, dominated by a model built on confirmation/disconfirmation paradigm to describe
customer satisfaction (Davis and Heineke, 1998; Woodruff et al., 1991). Here, satisfaction, or
dissatisfaction is determined by the difference between customer expectations of the product or
service and their actually perceived performance. If customer expectations are met, the result is
satisfactory and if not, dissatisfaction occurs (Vavra, 1997; Davis and Heineke, 1998; Szymanski
and Henard, 2001). Recently, Oliver (1997) in his book, Satisfaction: A Behavioral Perspective
on the Consumer defined customer satisfaction as:[...] satisfaction is the consumers fulfillment
response. It is a judgment that a product/service features, or the product or service itself, provided
(or is providing) a pleasurable level of consumption-related fulfillment, including levels of under-
or over fulfillment (Oliver, 1997).
Service quality
Service quality in banking Service quality is gaining more importance in the banking industry and
the value of improving service quality should be determined Berry and Thompson (1982) suggest
that developing strong relationships between customers and nancial institutions serve as
incentives for customers to remain loyal and thus provide nancial institutions with a source of
differential advantage. Similarly Teas (1993) nds that a centrally important aspect of a
commercial customers dealing with a bank is the quality of the long-term relationship that
develops with the bank. Several researchers models have provided a basis for many of the quality
initiatives adopted by nancial services companies (Boaden and Dale, 1994; Howcroft, 1993;
Kwan and Hee, 1994; Laroche and Taylor, 1988; LeBlanc and Nguyen, 1988; Lewis, 1989, 1991;
Lewis and Smith, 1989; Smith and Lewis, 1988, 1989; Teas and Wong, 1991; Tilston, 1989;
Wilkinson et al., 1991). Tilston (1989) believes that a few initiatives have had any signicant
impact, either on customer perceptions or on commercial results. Teas and Wong (1991)
developed a measure of concepts related to retail bank customers perceptions of retail bank service
delivery systems. The results of their research indicate four potentially important aspects of the
retail bank service delivery systems; general bank personal service, teller personal service, reaction
capacity, and location convenience. The research results support the hypotheses that retail bank
customers perceptions of these issues may be related to customer satisfaction and intentions to do
business with the bank in future. These include intentions to purchase additional products and
intentions to give the bank a larger percentage of the customer business. LeBlanc and Nguyen
(1988) focused on service quality in nancial institutions and discussed six factors that explain
perceived service quality: (1) degree of customer satisfaction; (2) contract personnel; (3) internal
organization; (4) physical environment and instruments; (5) corporate image; and (6) personnel-
customer interaction during the service encounter, contribute to service quality. Smith and
Lewis (1989) studied service quality programs and the way in which the customer care philosophy
permeated organizations from top management to customer contact staff in 31 major UK
organizations spanning nancial services, retailing, and leisure. One aspect of the research was to
identify what the management thought were the key elements which comprise good customer
service, i.e. what external customers expect from the company. The main suggestions related to
quality and knowledge of personnel, speed and efciency, systems and procedures, retail design,
technology, and product range. Finally, service quality theory was validated in an Asian banking
industry. For example, in Singapore (Kwan and Hee, 1994) examined measuring service quality
in Singapore retail banks using a SERVQUAL instrument developed by Parasuraman (1998). They
found the overall results indicated that performance as perceived by customer (P) was below their
expectations (E) across all service quality dimensions.
Ali & Zhou (2013) he studied about how service quality is perceived by customers of Pakistani
Islamic and conventional banks and also seeks to find out elements of service quality that are more
important for bank customers. The results indicate that customer perception is relatively highest
on the assurance dimension of Islamic banks and on the tangibles dimensional of conventional
banks; however customer perception is lowest in the technology and responsiveness area of Islamic
banks. There study also indicates that overall perception about service quality is highest in Islamic
banks. The study suggests that Islamic banks can improve their service quality by improving their
internet facilities and online services. Conventional banks can improve their services by
comprehensive training of employees.
Saad M Norma (2012) had studied that the Customer satisfaction has become a vital for banks
to exist in the competition why because the customer has become the ultimate source of income
for an organization [http://www.ccsenet.org/]. The conventional bank and Islamic banks act a as
competitor in the working industry of banking. If Islamic banks want to be there in competition
with Conventional banks then they have to give prior attention its main customers. Either an
Islamic bank or conventional banks introduce any products or services, its success depend only
on the customer satisfaction. His research observe the level of customer satisfaction of Islamic
banks as well as conventional banks in Malaysia
Sheikh et al., (2010) had also identified the level of customer satisfaction of Islamic banks
and conventional banks in Pakistan [http://www.ccsenet.org/]. They have concluded by saying
that customers are more satisfied by the product and service offered by both banks. Their research
reveals that the conventional banks are performing well in providing better facilities in
comparison to Islamic banks. Therefore the Islamic banks customer is less satisfied than
conventional banks. The purpose of Ali et al., (2011) research study was to focus on the customer
satisfaction towards Islamic banking in Pakistan based on the different factors including service
quality, product quality offered by Islamic banks, customer care level of Islamic banks, financial
benefits given to its customers, competition with conventional banks, religion and market
reputation. This study will help to understand the level of satisfaction of customers regarding
Islamic Banks. Their findings shows there is a constructive association between factors and
customer satisfaction in Islamic banking in Pakistan, although there is less awareness towards
Islamic products but overall reputation of this sector is vested on its interest free factor which is
prohibited in Islam. Moreover the trend of Islamic mode of banking is grooming due to the
Islamic republic in Pakistan. People are more reliable on conventional banks. In spite the
conventional banks are giving Islamic banking services to customers under a separate windows,
the customers are having less awareness about the Islamic banking. This research gives an idea
to Islamic banks to augment their image by conducting multiple awareness campaign about
products and services offered by Islamic banks.
Ergea & Arslan (2011) had identified the impact of the interest rates upon Islamic banks. This
has become the key factor to understand the contribution of such institutions to the financial
stability, designing monetary policies and devising a proper risk management. This studied
examine and evaluate the impact of interest rate shock upon the deposits and loans held by the
conventional and Islamic banks with particular reference to the period between December 2005
and July 2009 based on Vector Error Correction (VEC) methodology. It is very clear that the
Islamic banks will not be affected by the interest rates