An Integrated Framework for Service Quality, Customer Satisfaction and Behavioral Responses in Indian Banking Industry-A Comparison of Public and Private Sector Banks

By Bedi, Monica | Journal of Services Research, April 1, 2010 | Go to article overview

An Integrated Framework for Service Quality, Customer Satisfaction and Behavioral Responses in Indian Banking Industry-A Comparison of Public and Private Sector Banks


Bedi, Monica, Journal of Services Research


INTRODUCTION

The Indian banking has seen momentous changes in the postindependence era. It has witnessed a remarkable shift in its operating environment during the last decade. Various reform measures, both qualitative and quantitative, were introduced with an objective to revitalise Indian banking sector and to meet the future challenges. Every aspect of the functioning of the Indian banking industry, be it a customer service, resource mobilisation, credit management, asset-liability management, investments, human resource development, and forex management are under going dramatic changes with the reforms gathering the momentum and speed. Several innovative IT-based services such as Automated Teller Machines (ATMs), electronic fund transfer (EFT), anywhere-anytime banking, smart cards, internet banking etc. are no longer alien concepts to Indian banking customers (Rawani and Gupta, 2000). The market has changed drastically and has become largely customer centric. From sellers market the banks have been forced to operate in the buyer's market. The change has made the customer a king. The customer, in future, will continue to demand new and better products, will switch to new providers quickly, will find information easily, and may even do more and more of 'legwork' personally. All of these factors mean more buying power for the consumer. The key to success in the changed environment will be one's ability to reach the client at his doorsteps, and providing products and services in a customised manner. Thus, with these changes customers' expectations and perceptions of service quality are bound to change. Today's customer is not going to settle on anything less than his/her expectations. To compete, successfully, with each other, banks are using different marketing strategies to live up to the customers expectations and stay ahead in the league. Banks have focused to develop strategies to differentiate themselves from their competitors and providing their customers with high quality banking services and highly technology innovative products. It is within this rapidly changing environment that service quality and customer satisfaction is compelling the attention of all banking institutions (Angur et al.,1991). Banking institutions are acknowledging that unless customer needs are taken into account in designing and delivering services, technical superiority will not bring success (Zeithaml and Bitner 1996). New marketing concepts and strategies (Ennew et al., 1993), are paying greater attention to identifying customer needs and expectations (Morgan, 1989), and offering high service quality to customers (Thwaites and Vere, 1995; Lewis, 1993). As argued in literature (Lewis et al., 1994, Gronroos, 1990; Zeithaml, et al., 1990; Brown and Swartz, 1989), it is probably the effective measurement, management and improvement of service quality which will enable banking institutions to achieve a differential advantage over their competitors (Lewis, 1991). Service quality, therefore, has become a critical prerequisite for satisfying and retaining valued customers in banks (Taylor and Baker, 1994; Cronin and Taylor, 1992). The interest is largely driven by the realization that high service quality results in customer satisfaction and loyalty with the product or service, greater willingness to recommend someone else, reduction in complaints and improved customer retention (Danaher, 1997; Levesque and McDougall, 1996; Magi and Julander, 1996; Zeithaml et al., 1996). Further, a satisfied customer is likely to be a loyal customer who will give repeating business to the bank (Heskett et al., 1997). More importantly, the cost of retaining existing customers by improving product and services is perceived to be significantly lower than the cost of winning new customers. Because of the importance of the service quality and customer satisfaction as a route to competitive advantage and corporate profitability in banking, it has become difficult to identify a single bank which has not initiated some kind of service quality improvement drive (Newmann, 2001; Soteriou and Stavrinides, 2000). …

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