The Impact of Service Quality on Customer Satisfaction in Banking Sector

of Karachi

Abstract

In Pakistan, the banking sector after privatization has become highly competitive and it has

become a challenge for the banking sector to hold the existing customers and retain new ones.

This can only be achieved if the customers are highly satisfied with the service. In view of its

significance this study aims to measure the effect of Tangibility, Reliability, Responsiveness

Empathy, and Assurance on the Customer Satisfaction in the banking sector of Karachi. The

conceptual framework for this study was extended SERVQUAL model. The population for this

study is the customers in the banking sector, and the sample size is 403. After couple of pilot

tests the questionnaires were administered to the respondents through mall intercept method.

The developed model explained the effect of service parameters on Customers Satisfaction

which is

evidentfrom the following equation:Customer Satisfaction = .65 + .17 * Tangibility + .29 *

Reliability + .28 * Responsiveness + .26 * Empathy + .14 * Assurance + .13.

These factors individually, and together predicts Customer Satisfaction. It was also found that

the strongest predictor to reliability was Responsiveness (R2 =.53) followed by Reliability (R2

=.51), Tangibility (R2 =.48), Assurance (R2 =.44) and Empathy (R2 =.39).

Keywords:Service Quality, Customer Satisfaction, Tangibility, Reliability, Responsiveness

Empathy, Assurance.
1. CHAPTER 1: INTRODUCTION AND BACKGROUND

This chapters contains discussions on introduction, background, problem statement, research

questions and limitation of the thesis. This chapter thus gives an overview of the project and

helps the readers to what this project is all about. Based on this chapter scope for the literature

review and conceptual framework will be developed which will be discussed in Chapter 2.

Quality of service plays a significant role in conventional and service industry.Customers

satisfaction in service industry is based on quality of the service and their overall experiences

while obtaining the service. The key to maintainable competitive advantage in todays

competitive environment lies in delivering high-quality service that result in satisfied customers

(Arokiasamy & Tat , 2014). Banks are important players in monetary market places and have an

important role in running a countrys economy smoothly and efficiently. In todays vastly

competitive business environment, service quality is a vital component for enhancing customer

satisfaction and customer loyalty. These factors are very important in improving the credibility

of banks and in determining their achievement, i.e. better productivity and to capture a bigger

market share. Privatization of banking sector in Pakistan during the past few decades has

improved its service and customers expectation has also increased significantly. Thus now

customers demand high quality services banks, consequently the competition amongst the banks

have also increased significantly. The bank and financial institutions try to obtain competitive

advantage on high quality service which leads to customers satisfaction and loyalty. The

principle of service quality is used as a tool for achievement of competitive advantage and lead

in the market. Nevertheless in current highly competitive corporate environment it has become

increasingly essential to not only turn out to be the market front runner but also to maintain that

top place (Khan & Mariam , 2014).

Most of the leading service industry heavily rely on quality services, and it is also consider an

important tool for differentiation and have competitive advantage. In this context

SERVQUAL is extensively used by the marketers for measuring customers satisfaction

(Arokiasamy & Tat , 2014).

Researchers have found that quality services not only give competitive advantage to business

entity but it help the business in catering to customers existing and future needs which give

them ahead start. Consequently satisfaction leads to loyalty which affects retention and brand

image(Khan & Mariam , 2014).

Customer satisfaction is a psychological state, which compares the results of customer hopes

prior to purchase with performance observations after a purchase. Customers are satisfied when

they are happy with their purchase result, achieve their goals, and experience no trouble. It is

believed that satisfied customers keep contact with the company and purchase more products or

services more often than dissatisfied customers. Several studies found that quality plays a

Significant roleis influencing customer satisfaction and its worthiness (Loke, Taiwo, Salim, &

Downe, 2011). Service quality thus is the gap between customer expectation and performance of

the service provider. It is thus a key feature responsible for gaining competitive advantage and

maintaining pleasing relationships with customers. A high quality in services, as observed by

others leads to competitive advantage, satisfied customers and improved bottom line of the

company. Thus it is important that services delivered should be higher than customers

expectation. (Parasuraman & Zeithaml, 1988) developed a model containing five quality

dimensions including service quality involving Tangibility, Reliability, Responsiveness,

Empathy, and Assurance. This instrument is known as known as SERVQUAL five factor model

which is now commonly used for measuring service quality. The focal point of this model is that
service quality is in reality the gap between hopes and observations. (Paul, Mittal, & Srivastav,

2016).

Customer Satisfaction is a solid support between customers observed perceived quality and

customer loyalty. The three factors which effect the banks customer satisfaction are perceived

value, service quality and corporate image and all these factors are interlinked to gain the

customers loyalty. Service quality is an important factor to gain the competitive advantage and

also help in retaining the customers. The banks can increase customer satisfaction if they possess

a strong brand image. In Pakistani banking sectors, customers are characterized according to the

environment and location. The process for collecting cash or salary and retirement pension is not

up to the mark as the customer needs so the factor of customer satisfaction is not up to the

expected level in Pakistan. If company focuses on these factors it will results in high level of

customers satisfaction and loyalty in banking industry (Zameer, Tara, Kausar, & Mohsin, 2015).

1.1. Importance of Customer Satisfaction

From strategic point of view it is obvious that customers play an important role in organizational

process and they have the highest priority (Wallenburg, 2015). Thus in strategic planning process

firms select their target consumers and develop the value proposition on the requirements of the

selecting segments. Subsequently the firms than develop the products and uses appropriate

strategies to create awareness and induce trial leading to customers satisfaction.

Since customers tries to gain maximum satisfaction from the products/servicestherefore firms

can only have competitive advantage if they deliver superior value proposition and developand

maintain long term relationship with them (Kotler & Keller, 2009). Customer satisfaction thus

could only be measured by obtaining their feedback on the product/services provided to the
customers (Kotler & Keller, 2009). In view of its significant leading firms management

programs are mainly focused on quality of product/services since it has been established that

because it has been proven that quality positively influences product performance which then

positively affects, customers satisfaction (Kotler & Keller, 2009). Whether customers are fully

satisfied or not depend on Customers perceived quality and actual quality of services delivered to

them.

1.2. Reason for researching in this area

In view of customers importance firms always carry out research on them. They always felt that

the research on customers must be carry out in all three stages which are before, during and after

delivery of the value proposition.Additionally studies found consistently in quality will not only

affect loyalty but will increase the retention rate which will lead to customers loyalty(Kotler &

Keller, 2009). Thus companies focus are on retaining customers through brand loyalty, and

satisfaction. However, these are only possible if firms carry out research on all these aspects

perpetually.

Since customers are satisfaction maximizers therefore it is pertinent for the firm to continuously

measure there consumption pattern, so the firms may not the changes and act accordingly.

Besides service quality factors including price and product quality also affects customer

satisfaction but their effects increases or decreases by the quality of the services delivered. The

authors interest on the subject issue that is service quality has increased since it is a significant

factor service sector.Additionally, conventional and services sector realizing the importance of

this issue are consistently working on improving the quality of the services.
1.3. Problem Statement

It is very important for the firms to maintain the desired level of service quality to stay

competitive in the market. The accomplishment of financial institutions can be certain for the

success of an economy. In Pakistan the banking sector is facing the issues such as privatization

and liberalizations since the past few decades and it has become a big challenge for the banking

sector to hold the older customers and get new customers and be competitive in the market

(Kashif, Suzana , Shukran, & Rehman , 2015). Privatization of banking sector in Pakistan during

the former few decades has increased customers expectations. Now customers expect superior

quality services from banks and financial institutions. This high customers expectation has

forces the banking sectors to improve the quality in a sector which is highly saturated and

competitive (Khan & Mariam , 2014). The service organizations are measuring service quality

through outdated tools that are less applicable across different environments and circumstances.

Therefore, this has not helped much to the marketing strategy makers (Kashif, Suzana , Shukran,

& Rehman , 2015). As described before, service quality was found to effect the customer

satisfaction. This study measures the effects of service attributes on customer satisfaction (Al-

Azzam , 2015).

1.4. Purpose of the Study

Service sector is enjoying a rapid boom in Pakistan due to privatization and liberalization,

therefore it is becoming critical to gain and maintain their competitive advantages. The current

research is used to discover the effect of service quality on customer satisfaction in banking

sector of Karachi. The aim of this research is to determine the effect of service quality

dimensions i.e. Tangibility, Reliability, Responsiveness, Assurance, and Empathy on customer

satisfaction. The objective of this research study is to define the satisfaction level of banking
customers concerning quality of different services provided by their bank and their loyalty with

the banks.

1.5. Objective of the Study

Financial sector is like a backbone of every economy in the world. The objective of this research

is to identify the most important variables amongst Tangibility, Reliability, Responsiveness,

Assurance, and Empathy which have significant impact on overall customer satisfaction level

with respect to Banking Sector in Karachi (Paul, Mittal, & Srivastav, 2016). Mature competition

and global financial systems have been forced to investigate the significance of customer

satisfaction. Therefore, the research should shed light on the changing status of the banking

system and financial market dynamics. This study has used the model of service quality

(Parasuraman & Zeithaml, 1988) with five dimensions to evaluate its effect on the customer

satisfaction in the banking sector of Karachi.

1.6. Scope of the Study

This research has measured the influence of services on customers satisfaction in the domain of

banking sector of Karachi. Banking sector is a significant sector in Pakistans economy and has

seen unprecedented growth and raging competition during the last decade. Therefore this

research has been exactly conducted to look into this spectacle and seek empirical reasoning and

justification in this regard by considering service quality as the main contributing factor towards

service quality and customer satisfaction. The research population for this study are the

customers who have bank accounts in at least one bank in Karachi. The respondents will be

above 18 years old because as per Pakistans Law they are eligible to open a bank account. The

respondents will be selected from major areas of Karachi like Sharah-e- Faisal, North
Nazimabad, Gulshan-e-Iqbal, Garden etc. where the population of different ethnicities can be

easily approached.

1.7. Significance of the Study

This study will help in identifying those factors that strongly influences customer satisfaction in

the banking sector. With the identified factors the banking sectors will be able to improve the

services demand of the consumers.

1.8. Research Questions

The following research questions have been developed on the basis of the above discussion:

R1: What is the influence of Tangibility on Customer Satisfaction?

R2: What is the influence ofReliability on Customer Satisfaction?

R3: What is the influence of Responsiveness on Customer Satisfaction?

R4: What is the influence ofEmpathy on Customer Satisfaction?

R5: What is influence of Assurance on Customer Satisfaction?

1.9. Research Objectives

Based on the above research questions and hypotheses the following objectives are formulated

for this research:

1. To ascertain the influenceof Tangibility on Customer Satisfaction.

2. To ascertain the influenceof Reliability on Customer Satisfaction.

3. To ascertain the influence of Responsiveness on Customer Satisfaction.

4. To ascertain theinfluence of Empathy on Customer Satisfaction.

5. To ascertain the influence of Assurance on Customer Satisfaction.

 1.10. Hypotheses

Based on the conceptual framework the following hypotheses are formulated:

H1: Tangibility positively influencesCustomer Satisfaction.

H2: Reliability positively influences Customer Satisfaction.

H3: Responsiveness positively influences Customer Satisfaction.

H4:Empathypositively influences Customer Satisfaction.

H5:Assurancepositively influences Customer Satisfaction.

1.11. Gap Analysis

The recent researches on this topic are conducted in different other countries. The people of

different countries are different in term of thoughts, perception, likes, dislikes and preference

(Zameer, Tara, Kausar, & Mohsin, 2015) and thus applicability of same antecedents to other

population cannot be generalized. It requires replication of this study in different cultural setting.

(K, Oyerinde J. , & Eweoya , 2016). In Pakistan, services sector are facing many challenges to

satisfy the customer in the global competitive world, they are adopting western techniques to

respond to the rapid growth and changing culture demands. Thus, in view of this gap I want to

measure the influence of service quality on customer satisfaction (Zameer, Tara, Kausar, &

Mohsin, 2015).

1.12. Brief Methodology

The research design is of deductive in nature. Empirical testing will be done for all the hypotheses.

The sample size selected for the research study was of ninety-two respondents. The conceptual

framework, research questions, objectives and the hypotheses are created on the basis of the
literature review. The SERVQUAL model has been chosen over other models as one that has been

well used in assorted industries and also as one that could bring a status of research

validity.(Kaura, Prasad, & Sharma, 2015) . This research is a quantitative research and uses the

deductive approach. The research philosophy which will be used through the entire research will

be Pragmatism. Empirical testing will be done for all the hypotheses. Accordingly data were

collected from two sources including secondary data(literature for the development of the

hypothesis) and primary data for collecting the responses of the respondents in questionnaire, Five

Point Likert Scale was used and easy statements were given so that the respondents can understand

the meaning of the statements and provide us with the factual information. Moreover, the

respondents will be made sure that their demographical data will be kept confidential in order to

get honest opinion.

1.13.Definition of Terms

The subsequent definitions were applied to form the basis of this research.

A. Quality:(Kotler & Keller, 2009)states that "The quality is characteristic of a product or service

that relies on its ability to satisfy customers' needs are expressed or implied.

B. Service Quality:(Parasuraman & Zeithaml, 1988) have defined service quality as the ability of

the organization to meet or exceed customer expectations. It is the difference between

customer expectations of service and perceived service.

C. Satisfaction:(Kotler & Keller, 2009)defined satisfaction as: 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.

D. Customer Satisfaction:(Parasuraman & Zeithaml, 1988) have defined service quality as the

ability of the organization to meet or exceed customer expectations. It is the difference between

customer expectations of service and perceived service.

1.14. Structure of the Research

There are five chapters in the research study. Chapter 1 confer an overview of the problem of the

research it also contains background of the problem along with the research questions, objectives,

scope, gaps of the research to be worked on in the future and the main contributions that the

research brought forward. The second chapter is on Literature Review which discussed all the

variables of the research in detail and all the variables were critically evaluated using the

knowledge from the previous researchers already done. This literature was then used to formulate

the conceptual framework and hypotheses. The hypotheses formulated using the literature was

then tested in chapter 4. Chapter 3 is of Research Methodology, in this chapter the researcher has

discussed the type of research and philosophy has been selected to carry out the research. This

chapter also discusses the population, sample derived from the population, type of instrument

selected for the collection of data, through which means and process data was collected and the

tool used for the statistical analysis of the data. Chapter 4 contains the Results generated after the

statistical analysis of the data collected. Chapter 5 concludes that all the research questions raised

in the first chapter are answered and solved after being empirically tested. The answers reached

are also compared with the previous researches to analyze that the conclusion reached with this

research matches with the previous researches results or whether some new conclusion has been

reached upon. For the managers this chapter also includes, conclusions reached upon by the

researcher, their implications and recommendations made by the researcher to facilitate the
 managers. The chapter concludes with a discussion about the limitations of the research and the

scope for further research to be done in the future.

Chapter 2: LITERATURE REVIEW

2.1. Customer Satisfaction

Satisfaction is a feeling that surfaces from an evaluation process, i.e. when the consumer of a

good or service compares what is received against what is expected from the utilization of that

good or service (Kotler & Keller, 2009). Customer satisfaction is one of the best-studied areas

in marketing, because it has become a principal factor in achieving organizational goals, and

is considered a baseline standard of

performanceandapossiblestandardofexcellenceforanyorganization. The slogan the customer

is always right highlights a high priority and the importance of customer satisfaction.

Companies recognize that keeping current customers is more protable than acquiring new

customers to replace those who have been lost (Hussain, Nasser, & Hussain, 2014). The

customer is the king. In any industry or services sector, this supreme ruler satisfaction decides

profitability and survival of the fittest. Consumer fulfillment has been considered the essence

of success in todays highly competitive banking industry. Customer satisfaction is the

consumers retort to the judgment of the perceived difference among preceding expectations

of the users and the actual performance of the product or services perceived by users, buyers

or consumers. The customer is the focal point and the customer service is the core competitive

strategy for the modern banking industry. Because, bank is a consumer inclined services

industry and depends on the consumers for continued existence in the fierce competitive
market. In order to satisfy its customers, banks are differentiating it services, operations from

its competitors by adopting services quality dimensions as a strategic options. The bankers

provide a high level of service quality which leads to a high level of customer satisfaction as

well as acquiring sustainable competitive advantage (Sureshbabu, Devasenathipathi, &

Anand, 2014). Customers satisfaction from other perspective is theoutcome and experience

of using the services. It is also refers as consumers feedback after utilizing the

services.(Bharwana, Bashir, & Mohsin, 2013).The literature shows that customer satisfaction

is important to get long-term business success. To protect market share / profit, organizations

need to overcome competitors through offering high quality products or services to ensure

customer satisfaction. Furthermore, it is indicated that customer satisfaction requires full

meeting customer expectations of products and services. When performance matches or

exceeds customer expectations for service, they are satisfied. If not, they are not satisfied.

Moreover, several studies generally define customer satisfaction and dissatisfaction as the

customers judgments concerning a businesss success or failure in meeting expectations.

When expectations are met, satisfaction results and unmet expectations lead to dissatisfaction.

It is indicated that the attitude of customer satisfaction resulting from what customers believe

should happen (anticipation) compared with the situation when what they believe is not the

case i.e. perceived performance (Al-Azzam , 2015). Satisfaction reflects consumer

consumption response while quality is consumers overall judgment on the quality aspects.

Quality depends on the gap between expected service and services delivered. The lesser the

gap the more satisfied the customers are (Hussain, Nasser, & Hussain, 2014).

As discussed by ACSI (American Customer Satisfaction Index) that customer satisfaction is

greater quality-pull than price-pull and value-pull. Researchers in this context believe that
satisfaction is consumers positive outcome after utilizing the goods and services(Bharwana,

Bashir, & Mohsin, 2013). In addition; satisfaction strengthens quality perception and leads repeat

purchases. More specifically, in the banking industry, a main element of customer satisfaction is

the nature of the relationship among customers and suppliers of products and services. Therefore,

both product and service quality usually are observed as an important condition and valuable factor

for retaining customer satisfaction. It is true that the delivery of high quality services to the

company customers offers an opportunity to differentiate them in the competitive market.

Additionally, it is found that tangibility, reliability and empathy are significant for customer

satisfaction, but responsiveness and assurance are more significant (Al-Azzam , 2015).

Satisfaction positively effects firms profitability as it is the foundation of customers loyalty,

repeat purchase, and word of mouth communication.Earlier studies while measuring the effect of

quality on satisfaction found that highly dissatisfied customer will not only stop using the product

or services but to bad word of mouthing. Whereas satisfied customers will not only do plosive

world of mouthing but will become their advocates as well.(Angelova & Zekiri, 2011).

2.2. Service Quality

Services besides being an on-going interactions of customers and service providers is inclusive of

intangibles such as providing betters solutions to customers problems. Thus companies can only

have competitive advantages if they have a high quality services. Besides actual service the

perception of consumers on the service is also important. If there is a gap between perception and

reality the company needs to change its strategy.

By providing better quality services to customers, a firm revives the perception of customers about

quality of services (Khan & Mariam , 2014). Quality of services in reality is the gaps between
consumers perception on important quality dimensions (Parasuraman & Zeithaml, 1988) identified

ten requirements useful for customers evaluation of the quality of services: reliability,

responsiveness, tangibles, communication, credibility, security, competence, courtesy,

understanding the customers and service accessibility. SERVQUAL scale thus is commonly used

for measuring quality of services. It has factors including: reliability, responsiveness, assurance,

empathy and tangibles. These factors were found to have a very high correlation in earlier studies.

Although other models for measuring services are available but generally researchers give

preference to SERVQUAL because of its simplicity in measuring the factors. (Paul, Mittal, &

Srivastav, 2016). Since banking sector has become highly competitive and margin of profits in this

sector is decreasing therefore banks heavily rely on building long term relationships, satisfaction

and loyalty through premium services.(Khan & Mariam , 2014).

Service depends on the gap between performance andexpectation. The SERVQUAL model is

commonly used to measure customers perceived satisfaction. This study uses five factors for

measuring satisfaction Reliability refers to company ability to deliver on time. Responsiveness is

companys promptness in addressing to the complaint. Assurance is the ability of the firm to

develop trust to customers. Empathy is the level of caring for the customers.And tangibility is the

tangible aspect used by the firms including facilities, personnel, and communication materials

(Kashif, Suzana , Shukran, & Rehman , 2015). Thus the companies try to attempt competitive

advantages by providing premium services.Thus factors such as perception on quality and trust

positively affect satisfaction level. By providing better quality services to customers, a firm revives

the perception of customers about quality of services (Khan & Mariam , 2014). Success of

conventional and banking sectors are highly dependent on the quality of services. Banks are fully

aware about the importance of the service thus all of them in their value proposition give
importance to the service aspects. Banks thus providing better services than their competitors are

faring betters. (Irfan, Ghafoor, Akhtar, Hafeez, & Rehman, 2014).

2.3. Theoretical Grounding of the Conceptual Framework

The conceptual framework developed is presented in Figure 1. The literature support for the

relationships in the conceptual framework is discussed in the following sections:

2.3.1. Service Quality and Customer Satisfaction

To remain competitive and grow the firms must understand the importance of services and its

impact on customer satisfaction. Thus, firms in highly competitive environment tends to rely on

high qualityservice for acquiring sustainable competitive advantage. Several studies found that

satisfaction affects loyalty, retention and finally organizations profitability (Angelova & Zekiri,

2011). Customers satisfaction depends on the acquired experience while utilizing the services,

therefore firms ensure that their consumers have memorable and delightful experience so that

they are fully satisfied with the firms. Some of the studies contrarily empathized that since

satisfaction depends on transactions therefore attitudes, towards the product will have more

enduring affect (Arokiasamy & Tat, 2014). Several studies while endorsing the effect of quality of

services on satisfaction suggest that this aspect is more significant than product and prices.

Increase in service quality of the banks can satisfy and develop attitudinal loyalty which ultimately

retains valued customers. Thus satisfaction is strongly influenced by service quality. Today, with

increased competition, service quality has become a popular area for academic studies and has

been recognized as a competitive advantage and supportive relationship with satisfied customers.

Also, quality of service has become an important tool in the service industry. Service quality is an

important concept in the service industry and is more important for financial service providers who
have difficulty in showing their customers product differentiation (Al-Azzam , 2015). When

perceived service quality is less than expected service quality customer will be dissatisfied. (Omar,

Saadan, & Seman, 2015). While exploring the effect of service quality on satisfaction, some

studies contrarily found that service quality does not affect satisfaction since it is antecedent to

satisfaction irrespective of it being cumulative or transaction-specific. A few studied while

exploring this relationship found customer satisfaction is the end result ofservice quality. In

banking industry, service quality is one of the most important aspects of the premium customer

experience. Firms perpetually measure and monitor their services quality with the purpose of

ensuring highest level of customer satisfaction and for customer retention and loyalty. If marketers

meet customers demands and expectations then they wont have any problem in having high level

of customer satisfaction. If the overall experience of the customers is plosive and delightful, it can

be safely assumed that customers are highly satisfied. In this context studies also found that

satisfaction may not guarantee repurchase, customer retention, or loyalty. While validating the

effect of Service quality on satisfaction some studies found that higher satisfaction level lead

towards higher retention and brand loyalty. So from bank perspective that have little margin to

play with because of competition and statuary regulations are entirely dependent on service

quality for retention of costumers, developing brand loyalty and higher profit and market share.

(Khan & Mariam , 2014).Although satisfaction and services are highly correlated but they are not

the same concepts. The former is a broader concept, whereas the later focuses specifically on

dimensions of service. Factors product and price though affects satisfaction but their affects are not

as stronger as service quality (Arokiasamy & Tat, 2014).

2.3.2. Tangibility and Customer Satisfaction

Those things which have a physical existence and can be seen and touched. In context of service

quality, tangibles can be referred to as Information and Communications Technology (ICT)

equipment, physical facilities and their appearance (ambience, lighting, air-conditioning, seating

arrangement); and lastly but not least, the services providing personnel of the organization. These

tangibles are deployed, in random integration, by any organization to render services to its

customers who in turn assess the quality and usability of these tangibles (Khan & Mariam , 2014).

Among different service quality dimensions, Tangible aspect of banking services play pivotal role

in satisfying all kind of customers of any bank. But banking is basically intangible in nature and

bankers are converting it into tangible with the help of physical facilities, equipment, personnel,

communication materials and etc. The banker who converts theses tangible factors well, reaching

successfully every customer, results customers satisfaction. But at the same time, several banking

is experiencing increasing customer dissatisfaction and resulted the customers switching behavior.

This dissatisfaction could be the cause of missing tangible options of the banks. Because, the toll

gate of customer retention and satisfaction highly depends on various tangible factors like bank

providing data, information, the modern looking equipments, staff appearances, bank providing

materials associated with services and visual appealing part of banks. This excellent tangible

service quality is major optional competitive strategy which may, or may not, be adopted to

differentiate one bank from another: today it is essential to customers satisfaction, profitability and

survival. Hence in this study, an attempt is made to know the customer satisfaction on various sub

factors of tangibility of banking services (Arokiasamy & Tat, 2014). Banks with better ambience,

enhance customer satisfaction in a better way. It was found that association between service

quality and customer satisfaction in banking sector by combining tangible and intangible attributes
of premium quality in products and services provided may create a strong and long-term

relationship with their customers. (Khan & Mariam , 2014). The tangibles involve the firms

representatives, physical facilities, materials, and equipment as well as communication materials.

Furthermore, Physical environmental conditions appeared as a clear evidence of the care and

attention paid for the details offered by the service provider. Tangibles like the physical

confirmation of the service. More specifically, (Parasuraman & Zeithaml, 1988)define the

tangibility appearance of physical facilities, equipment, personnel, and written materials. This

service quality dimension comprises of bank ambience, service equipment, human resources (staff)

and the means of communication.. He concisely explained the idea of tangibles role in banking

sector. Service quality is key tool to achieve customers attention. Varying behaviors and attitudes

of customers demand high service quality to attain their perception of service. (Khan & Mariam ,

2014). Finally, in the present research, tangibles are the facilities and the banking services offered

by the providers of the bank as perceived by the specific banking customers (Al-Azzam , 2015).

Service quality has linear relationship with success and profitability of business. General Electric

(GE) has invested heavily in quality service and in return they earned huge profits every year. GE

considered both tangible and intangible aspects of service quality equally important in the success

of organization. Environment and culture of different areas serve as a guide for businesses on how

to adapt their policies in global perspective for a particular area. They have to make changes in the

setup of their outlets and branches. Banking industry mostly follows identical office ambience

setups and installs similar service equipment all over the globe to maintain a standard. But

adapting according to cultural needs of particular areas up to some extent will make customers feel

more comfortable and loyal (Khan & Mariam , 2014).

2.3.3. Reliability and Customer Satisfaction

Reliability depends on handling customer service issues, performs the services right the first time;

offers services on time, and maintain a record of error-free. Moreover, they define reliability as the

most significant factor in conventional service (Parasuraman & Zeithaml, 1988). Customers thus

pay importance to this aspect as they prefer those firms that keep their promises and ensure them

explicitly and implicitly communicate the same to the consumers. For the banking industry,

reliability can be interpreted as on time service (Hussain, Nasser, & Hussain, 2014). Reliability

also consists of the right order fulfillment; accurate records; accurate quote; right in the bill;

Results are more accurate than commissions; keep the promise of service. He also mentions that

reliability is the most significant factor in banking services. More specifically, in a study by

(Parasuraman & Zeithaml, 1988) SERVQUAL was applied to gather data in four different

companies, including banks, credit card companies, the company's maintenance services, and long-

distance phone company. He found high reliability in all four of these companies, with the possible

exception of some of the values associated with significant dimensions (Al-Azzam , 2015).

According to some empirical studies, reliability is the most important dimension of service quality,

which is also an important dimension in the SERVQUAL scale. It is vital to make customers to

trust that the organization is going to perform what it promises to do. Reliability helps in

minimizing the risk factors associated with purchase of service (Kashif, Suzana , Shukran, &

Rehman , 2015). Finally, reliability is defined as the ability to perform the promised service

dependably and accurately. In this research, reliability is the ability of banking service providers

at a specific bank to execute the promised service as perceived by the specific banking customers.

(Al-Azzam , 2015). The literature reveals an increased degree of positive relationship between

service quality, customer satisfaction and performance (both financial and non-financial) where
face-to-face dealing between customer and employee is the only focus. Technology expansion has

had a great impact on the choice of service delivery standard and services marketing strategies.

This has yielded many prospective competitive advantages including augmenting of productivity

and enhanced revenue creation from new services (Khan & Mariam , 2014).

2.3.4. Responsiveness and Customer Satisfaction

Responsiveness means the willingness to help customers and provide prompt service.

Responsiveness is the degree to which customers perceive service providers readiness to assist

them promptly (Loke, Taiwo, Salim, & Downe, 2011). Responsiveness is the promptness with

which service provider responds appropriately to customers in online environment. It is described

as the willingness or readiness of employees. In this study, responsiveness is defined as speedy

response to customers request and speedy transactions. (K, Oyerinde J. , & Eweoya , 2016). It

contains the timeliness of service (Parasuraman & Zeithaml, 1988). It also contains

understanding the needs and requirements of the customer, easy operation time, individual

attention provided by the staff, attention to the problem and customers' safety in their

dealings. Finally, in this research, responsiveness is the readiness of banking service providers

at a specific bank to provide punctual services as perceived by a specific banking customers

(Al-Azzam , 2015). Furthermore, (Al-Azzam , 2015) defines responsiveness such as speed

and timeliness of service delivery. This consists of processing speed and service capabilities

to respond promptly to customer service requests, and wait a short and queuing time. More

specifically, responsiveness is defined as the willingness or readiness of employees to provide

services.
Responsiveness is defined as the ability to respond to customer requirements timely and flexibly. It

is stated that revolution of information technology has brought astonishing changes in business

environment which no other sector has been influenced by advancement in technology as much as

banking and financial institution. Banks have to adopt technology to deliver their services and at

same time reduce cost due to creation of value added services for customers. It is crucial for banks

to better understand the changing customers needs and adopt the latest information technology

system in order to compete more effectively with global organizations. Through technology, banks

are able to perform consistently and respond quickly in line with customers requirement that will

bring up the level of customers satisfaction. (Iberahim , N.K, A.S, & Saharuddin, 2016).

2.3.5. Empathy and Customer Satisfaction

(Parasuraman & Zeithaml, 1988) defined empathy as firm resolve in paying attention and care to

solve customers In services industry, particularly in banking sector, due to presence of tough

competition, the customer-base of loyal customer may not be broadened without giving individual

care and attention to customers. A positive and significant relationship is found between empathy

and customer satisfaction. It was proposed in another research study, that customers may remain

unsatisfied with service quality if a gap is left in empathy. Customer satisfaction is significantly

impacted by empathy. It makes customers contended and in the long-run serves as an important

predictor in improving the financial performance of the organization. (Khan & Mariam , 2014).

Furthermore (Al-Azzam , 2015) demonstrates empathy in their research of private sector banks,

provide individual attention and easy operation time; give personal attention, and understand the

specific needs of customers. A broader customer-base of loyal customers may be won if the
services delivery staff is strongly committed to providing premium quality services as well as is

able to effectively handle conflicts in a timely manner. In the end of this discussion of literature we

may conclude that by providing true value of money to customers, by offering premium quality

services to them according to their demands, the perceived sacrifice may be reduced. (Khan &

Mariam , 2014) while measuring the effect of empathy satisfaction, it was to be of the strongest

aspect from customer perspective. It was established that customers treated emphatically are more

often visitors and prone forgive any mistakes that may occur. The product or service offered must

be valuable and beneficial enough and fit customers perceptions in order to maximize their

satisfaction. Finally it can be suggested that in todays highly dynamic and competitive

environment, financial institutions can win the trust and loyalty of customers by offering premium

quality services as well as some other value-added offers at sometimes to ensure maximum

customer satisfaction and better financial performance (Khan & Mariam , 2014). Empathy contains

approachability, sensitivity, and efforts to understand customer needs. Also, empathy is the ability

to make customers feel welcome, especially by staff contacts. (Khan & Mariam , 2014) has also

studied the correlation between service quality dimensions and customer satisfaction in

Bangladesh banking industry. It was found that customer loyalty can be won through empathy.

Empathy can play role in improvement of service quality, customer loyalty and finally satisfaction.

They explored the service environment impact with empathy and reliability on loyalty. Empathy

works as a moderator between quality and customer satisfaction. Empathy can change the behavior

of customer ultimately. (Al-Azzam , 2015) defined empathy as the ability to make customers feel

welcome, especially by staff contacts. Additionally, the SERVQUAL model indicates that

satisfaction is related to the size and direction of disconfirmation of a persons experience when

he/she faces his/her initial expectations.

 2.3.6. Empathy and Customer Satisfaction

Assurance is the skill and knowledge related to a service which could make the clients trust and

believe that they will receive the best service. (Prachayaporn & Khanchitpol , 2014). Assurance is

the degree of courtesy of service providers workers and their ability to communicate trust to

customers. (Loke, Taiwo, Salim, & Downe, 2011). When employees extend courtesy while giving

services to the customers, employees indirectly are giving assurance to the customers about solving

their problems. (Khan & Mariam , 2014). Assurance is developed by the level of knowledge and

courtesy displayed by the employees in rendering the services. In addition to tangibles, reliability

and responsiveness; assurance has been identified as a significant dimension of service quality by

(Parasuraman & Zeithaml, 1988). They propose that all of these dimensions significantly enhance

customer satisfaction. Studies found that banks employees display trustworthiness then it will

increase the satisfaction level and may also positively influence repurchase intension of customers

(Khan & Mariam , 2014).

2.4. Effective Variables

Variables which are directly associated with the service quality and customer satisfaction are as

follows:

2.4.1. Dependent and Independent Variables

Dependent Variable:

1. Customer Satisfaction

Independent Variables:

1. Tangibility
2. Reliability

3. Responsiveness

4. Assurance

5. Empathy

2.5. Conceptual Framework

Independent Variables Dependent Variable

Tangibility
SERVICEQUALITY

Reliability
CUSTOMER
Responsiveness
SATISFACTION Empathy
Assurance

2.6. Derived Hypothesis

H1: Tangibility has a positive impact on Customer Satisfaction.

H2: Reliability has a positive impact on Customer Satisfaction.

H3: Responsiveness has a positive impact on Customer Satisfaction.

H4: Assurance has a positive impact on Customer Satisfaction.

H5: Empathy has a positive impact on Customer Satisfaction.

3. CHAPTER 3: METHODOLOGY

3.1. Research Design

The research design is a sequential and logical plan for connecting empirical data with research

objectives, which helps in drawing conclusion (Yin, 2007). The research design for this project is

quantitative and descriptive in nature.

3.2. Research Philosophy

The philosophical approach for this study is positivism. This philosophical approach is based on

the assumption that only factual knowledge, gained through observation including measurement,

is trustworthy. The role of researcher in positivism studies is restricted to data

collection and interpretation of observable and quantifiable (Saunders, 2010). Since this study
has objectivity and is based on the quantifiable data, therefore it falls in the category of

positivism.

3.2.1. Quantitative Research

In quantitative research, observed /collected data are numerically represented with the purpose

of describing and explaining the phenomena of the collected data. For quantitative research, a

survey researchwas carried to measure consumers satisfaction toward the banks. Survey

Research refers to collection of information on consumers attitude and behavior from one or

more groups of people (Ormrod 2005).

Descriptive research has two different forms, which are cross-sectional and longitudinal design.

The cross-sectional design is a snap shot of the sample or population. In cross sectional study

data is collected from a population or sub-set of the population at one specific point of time

(Bryman & Bell, 2005). On the other hand in longitudinal study the information /data is

collected from the same set of the respondents more than once. Generally, this design is used to

measure the changes of consumers on an issue over a period of time (Bryman & Bell, 2005).

Since the data from the respondents was collected once therefore, this study falls in the category

of cross sectional design.

3.2.2. Research Approaches

There are two research approaches, which are inductive and deductive research approach.

Inductive approach starts with observations/literature and based on it a theory is proposed as

conclusion, which are not empirically tested. Inductive research thus does not starts with a

theory or hypothesis, as they are built on observation (Kline, 2015).

Deductive approach starts with theories and literature. Based on theory or literature proposition

or hypothesis are developed which are empirically tested by collecting data through survey

method. Thus deductive approach is about deriving conclusion from premises or

proposition.(Goddard, 2004).

Since in this project a conceptual framework based on the literature and theory has been

developed which was than tested by collecting the responses of the respondent, and the

conclusion were drawn from the empirically tested hypotheses, therefore it falls in the category

of deductive approach.
3.3. Populationand Sample Size

In research, population refers to collection of individuals or objects that have similar

characteristics or traits. As the population is a large group of people or individuals and it is

difficult, time consuming and costly to reach all of them therefore a sample is drawn from the

population for collecting data (Malhotra, Baalbaki, & Bechwati, 2010). Population for this study

is all the account holders residing in Karachi. The sample size is a portion of elements drawn

from the population, which is analyzed with the assumption it will have the same characteristic

as the research population(Goddard, 2004). Sample size for this study has been calculated

through software Roa Soft. At 95% and 5% of error margin, the sample size for infinity

population is 384. We in this thesis have drawn a sample size of 403.

3.4. Sampling Technique

Sampling techniques are classified into two categories. One is probability and other is non-

probability sampling. In probability sampling technique, all the elements of the population have

known and equal chances of being selected (Greener, 2008). However for probability sampling

one of the requirement is sample frame, which is listing of each element of the population

(Sekaran, 2000). For large population like the one used in the study, it is impossible to have

sample frame therefore non-probability sampling has been used for this study. To be precise mall

intercept method has been used, which is a form of convenience sampling (Kline, 2015).
3.5. Instrument Development

The instrument used for this research study is based on the constructs, which have established

reliabilities. The questionnaire for this study comprised of two parts. The first part is

demographic section, which is based on nominal scale. The second part is related to the variables

used in this study, which are based on five Point Likert Scale. The summary of the constructs

used in this study is presented in Table 2.

Table 1: Constructs Adopted

Construct No of Items Author

Customer Satisfaction 4 (Felix Kombo,2015)
Tangibility 4 (Kashif, Suzana , Shukran, & Rehman , 2015)
Reliability 4 (Kashif, Suzana , Shukran, & Rehman , 2015)
Responsiveness 4 (Loke, Taiwo, Salim, & Downe, 2011)
Empathy 4 (Loke, Taiwo, Salim, & Downe, 2011)
Assurance 4 (Kashif, Suzana , Shukran, & Rehman , 2015)

3.6. Pretest (Pilot Test)

Pretests are commonly used in social sciences to improve the ambiguity and reduced the errors

related to survey. Pilot tests/ pretests are administered to 10 to 50 respondents. In this study two

pilot tests were carried out.

3.6.1 Pilot Test 1

Pilot Test 1 was carried out on seven respondents. The purpose of this pilot test was to ascertain

whether the wording and content of the questions in the questionnaire conveying the same

meaning as intended. The respondent did not have any problem in understanding the wording

and content of the questions.

3.6.2. Pilot Test 2:

Another pilot test was carried out on 30 respondents to measure the internal consistency of the

constructs used in the study. The summarized results of the reliability analysis are presented in

Table 2.

Table 2: Reliability of Pretest

Construct N0.of Cronbachs Standardized Mean SD

Items Alpha Cronbachs
Alpha
Customer Sat.(CS) 4 .908 .912 4.50 1.35
Tangibility (TN) 4 .870 .870 4.26 1.49
Reliability (RL) 4 .903 .905 5.31 1.04
Responsiveness (RS) 4 .647 .618 4.81 1.44
Assurance (AS) 4 .596 .598 4.49 1.28
Empathy (EM) 4 .887 .882 4.41 1.38
Overall 24 .931 .933 4.63 1.33

Table 2 shows that customers satisfaction (Mean=4.5, SD=1.35) has the highest reliability

(=.912), and assurance (Mean=4.49, SD=1.28), has the lowest reliability (.589). Overall

reliability of the constructs (Mean=4.63, SD= 1.33) is (=.931). Thus based on the reliability

analysis it can be safely assumed that the questionnaire could be administered in final project.

3.7. Model developed and to be tested

The models developed and to be tested are as follows:

3.7.1. Multivariate model

Y = + X+ X+ 3 X3 + 4 X4 + 5 X5 + 6 X6. + nXn +

Where:
Y= Customer Satisfaction (Dependent Variable)

X= Tangibility

X= Reliability

X3 =Responsiveness

X4 =Empathy

X5 =Assurance

3.7.2. Simple Regression Models

Model 1: Y = + X+

Model 2: Y = + 2X2+

Model 3: Y = + 3X3+

Model 4: Y = + 4X4+

Model 5: Y = + 5X5+

Where:

Y= Customer Satisfaction (Dependent Variable)

X= Tangibility

X= Reliability

X3 =Responsiveness

X4 =Empathy

X5 =Assurance
3.8. Data Analysis Method

After coding of the data, identifying missing variables, the following analysis techniques were

used to meet the objectives of the study. These analysis techniques are discussed in the following

section.

3.8.1. Normality of Data.

Normality of the data was ascertained two ways. Initially all the items were converted to

standardized Z scores. Since the standardized Z-Score for all the items ranged between 2.5

therefore it can be safely assumed that that the data are normally distributed. Subsequently,

Univariate normality of the constructs was measured through Skewness and Kurtosis Analyses.

Since values of the Skewness and Kurtosis also ranged between 2.5 therefore the data fulfill

the requirements of Univariate normality.

3.8.2. Reliability

Reliability of the constructs used in the study was measured through Cronbachs alpha. It is an

appropriate test for measuring the internal consistency of the instrument. Additionally it also

reduces the biasness and errors in the data set (Sekaran, 1992). Responses homogeneity are also

tested through reliability analysis. Standardized coefficient ranging between 0.6-0.70 are

considered acceptable on the other hand standardized coefficient above 0.8 are considered to be

good (Litwin 1995, Salant & Dillman 1994).

 3.8.3. Validity

Validity is the confirmation of whether the construct is measuring what it indents to measure. In

plain word it is a confirmation whether the tool (questionnaire) adopted for the study is correct or

not. It helps in establishing a linkage between concepts and theoretical framework. There are

different types of validity tests. In this study, we have used construct validly which is inclusive

of convergent and discriminant validity (Bryman & Bell, 2007).

Convergent and discriminant validity are sub-types of construct validity. Construct validity is a

test that measures a particular construct (i.e. intelligence). Convergent validity takes two are

more measures (items) that are measuring the same construct and shows they are related.

Discriminant validity shows that the constructs used are distinct and unique (unrelated).

3.8.4. Exploratory Factor Analysis (EFA)

EFA is a technique used to reduce the data set to smaller set of summary variables for

understanding theoretical structure of the phenomena. It is used to identify the structure of the

relationship between the variable and the respondents. The two commonly used method for

exploratory factor analysis are Principal component factor analysis and common factor analysis.

Principal component factor analysis is used for deriving minimum numbers of factors, and

explaining variance of the original value. Common factor analysis is used when the nature of the

factors to be extracted and common variance errors are not known` (Hair J., 2010). In this

project, principal component factor analysis is used.

3.8.5. Descriptive Statistics

Descriptive analysis gives a summary of the data set. Descriptive Analysis reports mean, median,

central tendency range, variance and standard deviation (Miller et. al., 2002). In this study the
descriptive analysis is used for reporting mean, standard deviation, Skewness, and Kurtosis

(Christensen et. al., 2010).

3.8.6. Correlation Analysis

Correlation analysis measures the strength and degree of association between two variables. The

relationship between two variables is commonly explained trough Karl Pearson r (Malhotra,

2010). Pearson r values range between 1. In addition, (+1) is considered as strongest positive

relationship, and (-1) is considered as strongest negative relationship, whereas zero indicate no

relationship. (Bryman & Bell, 2005).

3.8.7. Regression Analysis

Regression analysis is used for measuring a relationship between variables. It also helps

researcher to know whether a relationship exists between two or more variables. It also tells the

strength, structure and form of relationships. The difference between the correlation and

regression analysis is that former determines correlation- ship or association of two variables,

whereas later describes how an independent variables is numerically related to dependent

variable. Correlation shows liner relationship between two variables, whereas regression gives

best line fit and estimates effect of one variable on other. Thus in correlation there is no

independent and dependent variables, whereas in regression there is at least one independent and

one dependent variable (Malhotra, 2010).

CHAPTER 4: RESULTS AND DISCUSSION

4.1. Introduction

Based on literature review (Chapter 2) a conceptual was developed shows Tangibility,

Reliability, Responsiveness, Empathy and Assurance, individually and jointly effects Customer

Satisfaction. In Chapter 3, the methodology in detail was discussed that depicted how the

objective study will be achieved. These chapters deals with the sequential steps for reaching the

aim of the study. It starts with the results of Descriptive Analysis, Reliability Analysis,

Correlation Analysis,Exploratory Factor Analysis followed by Convergent Validity and

Regression Analysis.

4.2. Descriptive Statistics

Kurtosis and Skewness analysis was undertaken for measuring the Univariate normality.

Summarized results are presented in Table 1.

Table 1: Descriptive Statistics

Construct Mean Std. Dev. Skewness Kurtosis

Tangibility 3.58 1.25 -0.54 -0.94
Reliability 3.91 1.07 -0.80 -0.51
Responsiveness 3.91 1.09 -0.83 -0.37
Empathy 3.79 1.14 -0.69 -0.65
Assurance 3.85 1.00 -0.64 -0.44
Customer Satisfaction 3.65 1.13 -0.43 -0.93

Table 1 shows that Responsiveness with a (Mean=3.91, SD= 1.09) has a highest Skewness

(SK=-0.83) and Customer Satisfaction with a (Mean=3.65, SD= 1.13) have the lowest Skewness
(-0.43). The highest Kurtosis (KT=--0.94) is for Tangibility with a (Mean = 3.58, SD=1.25) and

the lowest Kurtosis is (KT=-0.44) for Customer Satisfaction (Mean=3.65, SD= 1.13). Since all

the constructs adopted for this study are within the range of 1.5 therefore, all of them fulfil

Univariate normality requirements (Flick, 2015).

4.3. Reliability Analysis

Internal consistency of the constructs for this project were worked out through Cronbachs

Alpha. The results are depicted in Table 2.

Table 2: Reliability Analysis

Standardized
Cronbachs Standard
Construct Cronbachs Mean
Alpha Deviation
Alpha s
Tangibility .88 .88 3.58 -0.94
Reliability .79 .79 3.91 -0.51
Responsiveness .82 .82 3.91 -0.37
Empathy .82 .82 3.79 -0.65
Assurance .73 .73 3.85 -0.44
Customer Satisfaction .80 .80 3.65 -0.93

The reliability values as shown in Table 2 varies between ( =0.88 to = 0.73). The lowest

reliability is for assurance (=.73, Mean=3.85, SD=-0.44) on the other hand the reliability for

tangibility is highest (=.88, Mean=3.51, SD= -.09). All the Standardized Cronbachs Alpha

values are greater than 0.7, indicating acceptable reliability (consistency)(Leech, Barrett, &

Morgan, 2015).
 4.4. Correlation Analysis

Correlation analysis was carried out for ascertaining multicollinearity and ensuring whether the

constructs used in the study are unique and distinctive. Refer to Table 3 for the summarized

results.

Table 3: Correlation

Construct TN_T RL_T RS_T EM_T AS_T ST_T

Tangibility 1.00
Reliability 0.57 1.00
Responsiveness 0.63 0.56 1.00
Empathy 0.51 0.53 0.50 1.00
Assurance 0.51 0.53 0.50 1.00 1.00
Customer Satisfaction 0.50 0.50 0.57 0.47 0.48 1.00

The highest correlation (r=.89) is between the pairs Responsiveness (Mean= 3.91, SD=.99) and

Tangibility (Mean= 3.58, SD=-.94). And the lowest correlation(r=.47) is between the pair

Customer Satisfaction (Mean=3.65, SD=-.93) and Empathy (Mean=3.79, SD=-.65). All the pairs

are between the ranges of .30 and .90 indicating there is no issue with multi-collinearity and all

the constructs are distinctive.

4.5. Exploratory Factor Analysis (EFA)

The relationship between latent variables and the constructs were ascertain through Varimax

Rotation Table 4 contains the summarized results of the test.

Table 4: EFA for the Constructs

Kaiser-Mayer- Bartletts Cumulative Items

Construct Olkin Test Sphericity Test Factor loading
(P<0.05) Test
Tangibility .827 899.584 74.78% 4
Reliability .784 446.434 61.43% 4
Responsiveness .773 586.647 64.92% 4
Empathy .783 577,538 65.25% 4
Assurance .704 344.073 55.66% 4
Customer Satisfaction .773 485.294 62.46% 4

Factor loadings for each construct aregreater than 0.6, which is acceptable (Hair J. , Black,

Babin, Anderson, & Tatham, 2006).

4.6. Convergent Validity

For convergent validity, the variance explained for each variable should be greater than 0 .40 and

the reliability should be higher than .70. The results (summarized) is in Table 5, which confirms

that the data converges or fulfil convergent validity requirements.

Table 5: Convergent Validity

Cronbachs Variance Standard

Construct Mean
Alpha Explained Deviation
Tangibility .88 .74 3.58 -0.94
Reliability .79 .61 3.91 -0.51
Responsiveness .82 .64 3.91 -0.37
Empathy .82 .65 3.79 -0.65
Assurance .73 .56 3.85 -0.44
Customer Satisfaction .80 .62 3.65 -0.93

Table 4 shows that variance explained is as high as (V=.74) for Tangibility (Mean=3.58, SD=-

.94), and as low as (V=.61) for Reliability (Mean=3.91, SD-.51). The lowest reliability is for

Assurance (=.73, Mean=3.85, SD=-0.44) on the other hand the reliability for Tangibility is

highest (=.88, Mean=3.51, SD= -.09). Since variance explained for all the construct is greater

than 0.40, and reliably is at least .73, therefore it can be safely assumed that the constructs

measures what it intend to.

4.7. Testing Overall Model

The overall model stating predictors (Tangibility, Reliability, Responsiveness, Empathy, and

Assurance) have combined effect on satisfaction was measured by multiple regression analysis.

Summary of results is depicted in Table 6.

Table 6: Summarized Regression Results

Unstandardized Standardized Collinearity

Coefficients Coefficients Statistics
Std. Tolerance VIF
Model B Error Beta T Sig.
1 Customer Satisfaction -0.65 0.13 -5.04 0.00 .510 1.962
Tangibility 0.17 0.03 0.18 5.29 0.00 .549 1.822
Reliability 0.29 0.04 0.28 8.24 0.00 .483 2.072
Responsiveness 0.28 0.04 0.27 7.49 0.00 .615 1.627
Empathy 0.26 0.04 0.23 7.17 0.00 .590 1.696
Assurance 0.14 0.03 0.14 4.25 0.00 .510 1.962

Dependent Variable: Customer Satisfaction, R2= .76, Adjusted R2=.70, F= (5, 396) =246.43,

p=0< 0.05.

The results shows that the predictors (Tangibility, Reliability, Responsiveness, Empathy, and

Assurance) aggregately explains 76.of the variance F (5, 396) =246.43, p=0< 0.05. It was also

found that Reliability ( = .28, p<.05) significantly influence Customer Satisfaction, followed by

Responsiveness ( = .27, p<.05); Empathy ( = .23, p<.05); Tangibility ( = .18, p<.05) and

Assurance ( = .14, p<.05). The developed model explains the effect of service parameters on

Customers Satisfaction, which is evident form the following regression equation: Customer

Satisfaction=.65+.17*Tangibility+.29*Reliability+.28*Responsiveness+.26*Empathy+.14*Assu

rance+.13.

4.7.1 Hypothesis 1A: Tangibility and Customer Satisfaction

The hypothesis Tangibility significantly affects Customer Satisfaction was worked out by Simple

Regression analysis.Results in summarized form are shown in Table 7.

Table 7: Summarized Results (Simple Regression)

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 Customer Satisfaction 1.417 .123 11.515 .000
Tangibility .623 .032 .707 19.205 .000

Dependent Variable: Customer Satisfaction, R2= .488, Adjusted R2=.478, F (5, 396) =368.832,

p=0< 0.05.

Regression results shows Tangibility explains 47.8% of the variance (R2=.478, F (5,396) =

368.832, p<.05). It was also found that Tangibility ( = .707, p<.05) significantly influence

Customer Satisfaction which as per Leech et.al. (2015) is a large effect.

The regression equation is: Customer Satisfaction= 1.417 + .623*Tangibility +.123.

4.7.2 Hypothesis 1B: Reliability and Customer Satisfaction

The hypothesis Reliability positively influences Customer Satisfaction was worked out by simple

regression analysis method. The results are depicted in Table 8 below:

Table 8: Summarized Results (Regression)

Unstandardized Standardized
Coefficients Coefficients
Model T Sig.
B Std. Error Beta
1 Customer Satisfaction .697 .148 4.698 .000
Reliability .755 .037 .718 20.642 .000

Dependent Variable: Customer Satisfaction, R2= .515, Adjusted R2=.515, F (1, 401) =426.075,

p=0< 0.05.
The results of the regression indicate that Reliability explains 51.5% of the variance Adjusted

R2=.515, F (1, 401) =426.075, p=0< 0.05. Also Reliability ( = .718, p<.05) significantly

predicts Customer Satisfaction.

The regression equation is:Customer Satisfaction= .697 + .755*Reliability +.148.

4.7.3 Hypothesis 1C: Responsiveness and Customer Satisfaction

The hypothesis Responsiveness positively influences Customer Satisfaction was worked out by simple

regression analysis method. The results are depicted in Table 9 below:

Table 9: Summarized Results (Simple Regression)

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 Customer Satisfaction .706 .144 4.920 .000
Responsiveness .703 .035 .728 21.628 .000

Dependent Variable: Customer Satisfaction, R2= .530, Adjusted R2=.531, F (1, 404) =452.334,

p=0< 0.05.

The results of the regression indicates that the predictor Responsiveness explains 53.10 % of the

variance, (Adjusted R2=.53.1, F (1, 404) =452.334, p=0< 0.05). It was also found that

Responsiveness ( = 0.728, p>0.05) significantly predicts Customer Satisfaction.

The regression equation is:Customer Satisfaction= .706 + .703*Responsiveness +.144.

4.7.4 Hypothesis 1D: Empathy and Satisfaction

The hypothesis Empathy positively influences Customer Satisfaction was tested through

regression analysis. The summarized results are presented in Table 10 below:

Table 10: Summarized Regression Results

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 Customer Satisfaction 1.278 .152 8.394 .000
Empathy .625 .038 0.630 16.242 .000

Dependent Variable: Customer Satisfaction, R2= .397, Adjusted R2=.396, F (1, 401) =263.819,

p=0< 0.05.

The results of the regression indicates that the Empathy explains 39.6% of the variance

(Adjusted R2=.396, F (1, 401) =263.819, p=0< 0.05). It was also found Empathy ( = 0.631,

p<.05) significantly predicts Customer Satisfaction. .

The regression equation is:Customer Satisfaction= 1.278+ .625*Empathy +.625.

4.7.5 Hypothesis 1E: Assurance and Customer Satisfaction

The hypothesis Assurance positively influences Customer Satisfaction was worked out by simple

regression analysis method. The results are depicted in Table 11 below:

Table 11: Summarized Results (Regression)

Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 Customer Satisfaction 1.293 .172 7.528 .000
Assurance .635 .039 .634 16.375 . 000

Dependent Variable: Customer Satisfaction, R2= .442, Adjusted R2=.440, F (1, 401) =316.638,

p=0< 0.05
The results shows that Assurance explains 44.42% of the variance (Adjusted R2=.440, F (1, 401)

=316.638, p=0< 0.05). ).It was also found Assurance ( = .634, p<.05) significantly predicts

Customer Satisfaction.

The regression equation is:Customer Satisfaction= 1.293+ .635*Assurance +.039.

CHAPTER 5: SUMMARY AND CONCLUSION

5.1. Summary

All the hypotheses were consistent with the earlier studies, and all of them answered the research

questions. The results of the hypotheses and their relevance in the light of previous studies and

research questions are discussed the following section.

The hypothesis stating that predictors (Tangibility, Reliability, Responsiveness, Empathy, and

Assurance) have combined effect on Customer Satisfaction was accepted (Refer to Table 6). It

answers the research question 1: What is the combined effect of Tangibility, Reliability,

Responsiveness, Empathy, and Assurance? This finding is consistent to earlier studies, which

also found that that Service Quality dimensions effects Customer Satisfaction.

The hypothesis stating that the predictor Tangibility positively effects Customer Satisfaction was

also accepted (Refer to Table 7). This answer to Research Question R1: What is the effect of

Tangibility on Customer Satisfaction? Tangibility helps in building competitive edge and

differentiation which is necessary for survival. Studies also found adding tangible aspect like

enhancing the decorum of the branches will lead to higher degree of customers satisfaction

(Arokiasamy & Tat, 2014). Ambiance enhances customers perception of satisfaction, which

leads to positive attitude towards the service providers. Studies found that service providers by

comingling combining tangible and intangible attributes could create a competitive value

proposition (Khan & Mariam , 2014).

The hypothesis stating that the predictor Reliability positively effects Customer Satisfaction was

also accepted (Refer to Table 8). This answer to Research Question R2: What is the effect of

Reliability on Customer Satisfaction? Earlier studies found a significant positive relationship

between Service-Quality and Customers satisfaction. This relationship was found to be true for

both financial and non-financial and non-financial transaction. Technology innovation and

diffusion provides an array of choices of service delivery standard and services marketing

strategies. It technology is adopted appropriately it will provide a competitive advantage and

increased productivity (Khan & Mariam , 2014).

The hypothesis stating that the predictor Responsiveness positively effects Customer Satisfaction

was also accepted (Refer to Table 9). This answer to Research Question R3: What is the effect of

Responsiveness on Customer Satisfaction? Service industry including banks have to utilize

technology to cater to the needs of the customers. If service industry is more responsive to the

customers complains and queries, it will lead to higher level of association between service

industry and customers. It is important that the bank stay abreast with customers changing needs

and adopt appropriate to cater to the needs of the customers. (Iberahim , N.K, A.S, &

Saharuddin, 2016).

The hypothesis stating that the predictor Empathy positively effects Customer Satisfaction was

also accepted (Refer to Table 10). These answers the Research Question R4: What is the effect

of Empathy on Customer Satisfaction? Studies have found correlation between Service Quality

dimensions and Customer Satisfaction (Khan & Mariam , 2014). Empathy is one of the services

factor for winning Customers loyalty. It improves service quality which consequently leads to

customers loyalty and satisfaction. Studies found services augmented with empathy and

reliability will lead to loyalty. Empathy not only changes customers attitude and behavior but it

also act as a moderator between the relationship of service- quality and customer-satisfaction.

(Al-Azzam , 2015)
The hypothesis stating that the predictor Assurance positively effects Customer Satisfaction was

also accepted (Refer to Table 11). These answers the Research Question R5: What is the effect

of Assurance on Customer Satisfaction? Assurance refers to level of service, courtesy provided

by the employees to customers (Loke, Taiwo, Salim, & Downe, 2011). Assurance depends on

service providers knowledge and their courtesy while interacting with the customers.(Khan &

Mariam , 2014). Several studies found a strong linkages between service factor assurance and

customers satisfaction (Loke, Taiwo, Salim, & Downe, 2011 (Khan & Mariam , 2014)

5.2. Limitations and Future Research

This research is limited to Karachi, Future research should be conducted throughout Pakistan.

This study has not considered the variations in customer satisfaction by demographic factors,

Future studies should consider demographic factor. The focus of this research was banking

sector, further research can be carried out in other service and non-service industries. Some

studies dont have support literature which should support the framework. This study was

restricted to one domain, future studies should could be comparative studies on two or more

domains. This study only focused on measuring customer satisfaction with selected variables.

Other variables (security, personalization, competence, access, courtesy, communication,

credibility, understanding the consumer etc.) were not included in the scope of the present

research.

5.3. Conclusion

The overall model extended successfully explained the effect of the predictors on Customer

Satisfaction. It was also found that the strongest predictor to reliability was Responsiveness (R2

=.53) followed by Reliability (R2 =.51), Tangibility (R2 =.48), Assurance (R2 =.44) and Empathy
(R2 =.39). All the hypotheses, answered to all the research questions and findings of the project

have validated earlier findings.