SERVICE QUALITY

2.2.1 Concept of service quality

Service quality has several different definitions depending on research subject and environment of research. Understanding service quality is the foundation to deploy measures with the aims to enhance service quality of enterprises. Therefore, defining service quality not only plays an important role in building development targets but also gives enterprises ways to exploit their strengths fully.

2.2.2 The relationship between service quality and customer satisfaction

Service quality is the factor that has the most influence on customer satisfaction (Cronin and Taylor, 1992; Yavas et al, 1997; Ahmad and Kamal, 2002). If a supplier brings customers the best products which satisfy their demands, then that enterprise firstly makes customers satisfied.

Therefore, in order to enhance customer satisfaction, suppliers must improve service quality respectively. In other words, service quality and customer satisfaction have close tight relationship (positive relationship). Of which, service quality is the thing to be created firstly and decides the level of customer satisfaction. Cause and effect relationship between these two factors is the core matter in most researches on customer satisfaction. In the research on the relationship between these two factors, Spreng and Mackoy (1996) also pointed out that service quality is the initial step leading to customer satisfaction.

Figure 2.1: The relationship between service quality and customer satisfaction(Spreng and Mackoy, 1996)

Needs to be

2.2.3 Service quality models in retail banking 2.2.3.1 SERVQUAL model (Parasuraman, 1988)

This is the most common and most applied research model in marketing research. By Parasuraman, service quality cannot be identified generally but it must depend on customer feelings towards this service. This feeling is considered on the ground of several factors.

SERVQUAL model is built based on the conception that the feeling of service quality is the comparison between expectationsand perception.

SERVQUAL examines two main aspects of service quality including service outcome and service process which are researched through 22 scales of five following criteria:reliability, responsiveness, tangibles, assurance and empathy.

Reliability

Reliability reflects the ability to provide service exactly, timely and prestigiously. It requires the consistency when providing services, respecting commitments as well as keeping promises with customers. In banking sector, this criterion is measured by the following scales:

The Bank conducts right service at the first time.

The Bank provides servicesat the time that they made promise.

The Bankconducts services exactly without mistakes.

Employees of the Bank are willing to serve customers.

The Bank always has consultant staffs at the front desk to help customers.

The Bank sendsbank statements regularly and promptly.

Responsiveness

This is the criterion to measure the ability to solve problemquickly, handle complaints effectively, help customers and meet their demands willingly. In other words, service efficiency is the responses from suppliers towards what customers want, namely:

Employees of the Bank are eager to help customers.

The Bank provides services quickly and timely.

The Bank positively responds to the requirements of customers.

The Bank has hotline to serve customers 24/24.

The Bank always makes efforts to solve customers’ difficulties.

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Tangibility

Tangibility is the outward appearanceof facilities, devices, machines, attitude of employees, materials, manuals and communication system of the Bank. Generally, all that customers can see and feel directly by their naked eyes can influence this factor:

The Bankhas adequate facilities.

The Bank has modern equipment and machines.

Employees of the Bank look professional and well-dressed.

The Bank arranges transaction counters, timetables and material shelves in the scientific and convenient way.

Assurance

This is the factor formulating customer belief which is felt through professional service manner, advanced qualifications, courteous attitude and good communicating skills; thanks to them, customers feel secured when using bank services.

Employees of the Bank serve customers courteously.

Transaction documents are clear and easy to understand.

Employees of the Bank always provide necessary information to customers.

Employees of the Bank exactly and clearlyrespond to customer questions.

Empathy

Empathy is the thoughtful attention and care given to customers, which give them best attention, helpingthem feel as “esteemed customers” of the Bankand be treated well everytime and everywhere. Human factor is the core part which creates this success.The more the Bankcare about its customers, the more the sympathy increases:

Employees of the Bank pay attention to needs of each customer.

Customers do not need to wait in line to be served.

The Bank Banks has convenient transaction locations for customers.

The Bank has modern ATM system which is easy to use.

Employees of the Bank always treat customers courteously.

2.2.3.2 SERVPERF model (Cronin and Taylor, 1992)

SERVPERF model is developed on the ground of SERVQUAL model but it measures service quality upon the evaluation of performance-based service quality, not the gap between expected quality (expectation) and perceived quality (perception).

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2.2.3.3 FSQ model and TSQ model(GrÖnroos,1984)

According to GrÖnroos, service quality is considered on the ground of two criteria including functional service quality (FSQ) and technical service quality (TSQ). In addition, service quality is greatly affected by corporate image. Therefore, GrÖnroos proposed three factors affecting service quality: functional service quality, technical service quality and corporate image (called as FTSQ sample in abbreviation)

What is service provision? How to provide services?

Figure 2.2: Service quality model of Gronroos

• TECHNICAL SERVICE QUALITY

This is the quality that customers received through the interaction with enterprises and it is felt important towards customers. In other words, technical service quality is the results of interaction process between enterprises and customers; of which, enterprises provide service (What?) and customers receive such service. There are five criteria to evaluate this factor:

Problem solving skills Qualifications skills Operational level Modern equipment

Information storage system

Measurement scales of technical service quality

Employees of the Bank have ability to make decisions promptly.

Employees of the Bank have ability to handle customer complaints reasonably.

Expected quality

+ Marketing activities (PR, sales off, advertisement…)

+ External factors: lifestyle, word of mouth, habits,

Technical service

Employees of the Bank have good qualifications.

Employees of the Bank conduct services exactly and promptly.

Employees of the Bank have full-time training regularly.

Employees of the Bank respond to customer questions effectively.

The Bankprotects confidential information about customers and transactions.

The Bank always informs to customers about the process as well as transaction results.

The Bank gives full attention to customer needs.

The Bankhas modern equipment such as backup system to make sure the quick and accurate bank operations.

The Bankhas modern ATM system which is convenient for customers.

The Bank hasclear transaction documents and related documents without mistakes.

The Bank hasbroad and easy-to-use communication system.

The Bank provides information about account balance and transaction account promptly.

• FUNCTIONAL SERVICE QUALITY

Functional service quality depictsthe process to conduct service of enterprises, reflecting the way service is provided (How?). In the correlation between two above aspects of quality, functional quality plays more important role that is represented through the following seven criteria:

The convenience in transaction Behaviors

Measurement scales of functional service quality

The Bank has convenient transaction locations for customers.

The Bank has broad dealer network.

The Bank hasreasonable and convenient operating time.

Information access system is easy to use.

Employees of the Bank win the credibility and trust of customers.

Employees of the Bank are willing to serve customers.

Employees of the Bank courteouslyhelp customers.

Employees of the Bank are tactful and consideratetowards customers.

Employees of the Bank are willing to listen tocomments of customers.

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Leaders have a strong attachment to employees of the Bank.

The Bank always cares about employee benefits and has reasonable compensations.

Employees of the Bank always contact customers regularly.

The Bank always organizes thank-you party to customers at the end of each year to recognize their contributions.

Employees of the Bank answer telephone promptly.

The Bank has nice interior design.

The Bank hasfascinating documents, books and images of services.

Transaction documents are designed scientifically and they are easy to understand.

Employees of the Bank dress politely and impressively.

The Bank placescustomers’ benefits at the top.

The Bank has flexible policies because of customer requirements.

The Bank always correctly performs its commitments to customers.

• CORPORATE IMAGE

Corporate image is seen as feeling/general impression of customers towards enterprises;

by this way, if they create good image for their enterprisesthen it is easy for customer to skip mistakes happened when using services. GrÖnroos stated that corporate image is the invaluable property of enterprisesthat has positive effect on customerevaluation of service quality, value of product and their satisfaction.

Moreover, corporate image will also help customers trust more in enterprises and become loyal customers (Andreassen & Lindestand, 1998). Therefore, corporate image influences and is influenced by service quality and customer satisfaction as well. It is also noted that customers who use services frequently will have more accurate feeling about corporate image compared to other customers (Johnson, Fornell, Andreassen, Lervik, and Cha, 2001).

Corporate image is also seen as a “filter” which helps the relationship between customers and enterprises become better and more stable. Besides, customers evaluate whether corporate image is good or not through their feelings towardsenterprises and compare this corporate image with that of other competitors. However, level of influence is subject to each specific enterprise.

2.3 THE UNDERSTANDING OF PRICE