Improving customer services and satisfaction a case study of HSBC, vietnam master project in business administration

TRƯỜNG
NG ĐẠII HỌC
TR
H C MỞ
M TP. HCM

UNIVERSITY LIBRE DE BRUXELLES

HO CHI MINH CITY OPEN UNIVERSITY

SOLVAY BRUSSEL SCHOOL

MBAVB3

LUU CAM HOA

IMPROVING CUSTOMER SERVICES
SERVICES AND SATISFACTION
A CASE STUDY OF HSBC, VIETNAM

MASTER PROJECT
MASTER
MASTER IN BUSINESS ADMINISTRATION
(PART – TIME)
Tutor: Dr. Nguyen Minh Kieu

Ho Chi Minh City
(2010)


STATEMENT ORIGINAL OF AUTHORSHIP

I certify that the substance of this thesis has not been already submitted to any degree
and is not currently being submitted for any other degree

I also certify that to the best of my knowledge any assistance received in preparing this
thesis, and all sources used, have been acknowledged and referenced in this thesis.

Signed: _______________________________
LUU CAM HOA

i

Date: _______________________


ACKNOWLEDGEMENTS
I would like to express my gratitude to Dr. Nguyen Minh Kieu who has guided and
supported me during the time I complete this project.
My other thanks to all Professors, Tutors and Coaches who spent their great time to
teach and inspire me to learn and complete the program.
Also, my thanks to my classmates, who by different means, have worked, exchanged,
supported and shared knowledge and experiences during the past time.
Finally, I wish to express my gratitude and love to my family for their unreserved love,
support and encouragement. The love they reserved for me has made my life so
wonderful and meaningful.

ii


COMMENTS OF TUTOR

February 24
24, 2011
TO WHOM IT MAY CONCERN
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Dr. Nguyen Minh Kieu
Date: ……../………./ 2011

iii


ABSTRACT
Recently banking industry has become severely competitive environment than ever
before. When the banking products are easy to imitate, then the services quality
becomes more important and significant for banks to increase their competitive
advantage. This research therefore, focused on measuring customer satisfaction level
of existing customer in HSBC Vietnam and from result of the findings analysis the

recommendation are elaborated to improve the services quality and customer
satisfaction level.

The research was conducted based on data collected from existing SME customers
which are considered as the main driven in Vietnam economic in future. There are 125
respondents was collected from 200 questionnaires sent out to customers. The collected
data was analyzed by using SPSS 16.0 with main analyses were reliability with
Cronbach’s Alpha, exploratory factors analysis and multiple linear regression.

The result addressed that the key satisfactions of SME customers in HSBC Vietnam
were assurance, reliability, pricing, empathy and tangible dimension. The factor of
responsiveness was not significant impact to the research model.

Accordingly, the recommendations have been elaborated for the board of management
of HSBC Vietnam to focus on key factors for improving services quality and customer
satisfaction level.

iv


Table of Contents
ABSTRACT

............................................................................................................................. iv

LIST OF TABLES .........................................................................................................................................................................................V

LIST OF FIGURES ................................................................................................................................................................................................................. Vi
ABBREVIATION ...........................................................................................................................................................................................Vii

CHAPTER 1: INTRODUCTION TO THE RESEARCH ............................................................................... 1

1.1.

GENERAL BACKGROUND .................................................................................................. 2

1.2.

RATIONALE OF THE RESEARCH

1.3.

STATEMENTS OF THE PROBLEM.......................................................................................... 4

1.4.

RESEARCH QUESTIONS .................................................................................................... 4

1.5.

RESEARCH OBJECTIVE ..................................................................................................... 5

1.6.

SCOPE OF THE RESEARCH ................................................................................................ 6

1.7.

ORGANIZATION OF THE RESEARCH

CHAPTER 2: LITERATURE REVIEW

2.1.

.......................................................................................... 3

..................................................................................... 6

................................................................................................ 8

BANKING SERVICES AND PRODUCTS .................................................................................... 8

2.1.1.

GENERAL ACTIVITIES OF COMMERCIAL BANKS .................................................................. 8

2.1.2.

HSBC VIETNAM BANKING SERVICES AND PRODUCTS ......................................................... ..9

2.2.

CUSTOMER SATISFACTION AND SERVICES QUALITY IN BANKING SECTOR ...................................... 11

2.2.1.

CUSTOMER SATISFACTION IN BANKING SECTOR ................................................................ 11

2.2.2.

SERVICES QUALITY DIMENSTION IN BANKING SECTOR ....................................................... ..11

2.3.

SERVICE QUALITY (SERVQUAL) ........................................................................................... 13

2.4.

THE GAP MODEL ............................................................................................................. 16

2.5.

PRICING DIMENSION ........................................................................................................ 19

2.6.

CUSTOMER SATISFACTION ................................................................................................ 19

2.7.

PREVIOUS RESEARCH MODEL

........................................................................................... 21

CHAPTER 3: RESEARCH METHODS ................................................................................................ 23

3.1.

RESEARCH MODEL AND HYPOTHESES STATEMENTS ................................................................ 23

v


3.1.1.

THE RELATIONSHIP BETWEEN SERVICE QUALITY AND CUSTOMER SATISFACTION........................ 23

3.1.2.

THE RELATIONSHIP BETWEEN PRICING DIMENSION AND CUSTOMER SATISFACTION................... ..24

3.1.3.

RESEARCH MODEL .................................................................................................. ..25

3.2.

RESEARCH DESIGN ......................................................................................................... 27

3.2.1.

PRIMARY AND SECONDARY DATA RESOURCES .................................................................. 27

3.2.2.

QUESTIONNAIRES

.................................................................................................. ..28

3.2.2.1.

QUESTIONNAIRES DESIGN .................................................................................. 28

3.2.2.2.

SENDING QUESTIONNAIRES

............................................................................. ..28

3.3.

MEASUREMENT SCALE ..................................................................................................... 29

3.4.

RESEARCH SAMPLE SIZE AND SCALE ................................................................................... 30

CHAPTER 4: DATA ANALYSIS AND FINDINGS .................................................................................... 31

4.1.

SAMPLE CHARACTERISTICS............................................................................................... 31

4.2.

DESCRIPTIVE STATISTIC ANALYSIS ...................................................................................... 33

4.3.

DATA ANALYSIS ............................................................................................................. 34

4.3.1.

RELIABILITY EVALUATION THROUGH CRONBACH’S ALPHA ..................................................... 34

4.3.2.

EXPLORATORY FACTOR ANALYSIS ................................................................................. 35

4.4.

REGRESSION ANALYSIS.................................................................................................... 37

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS ......................................................................... 42

5.1.

CONCLUSION ................................................................................................................. 42

5.2.

RECOMMENDATIONS

5.3.

RESEARCH LIMITATION

....................................................................................................... 44
.................................................................................................... 46

REFERENCE ........................................................................................................................... 48
APPENDIX 1 ............................................................................................................................ 52
APPENDIX 2 ............................................................................................................................ 59
APPENDIX 3 ............................................................................................................................ 60
APPENDIX 4 ............................................................................................................................ 65
APPENDIX 5 ............................................................................................................................ 72

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LIST OF TABLES
Table 1:

Summary of factors and scale ................................................................. 29

Table 2:

Overall customer satisfaction and scale .................................................. 30

Table 3:

Likert scale .............................................................................................. 30

Table 4:

Characteristics of the sample .................................................................. 32

Table 5:

Descriptive statistics of the sample ......................................................... 33

Table 6:

Cronbach's Alpha of the respondents...................................................... 35

Table 7:

Summary results from first step of factors analysis of items (SPSS) ..... 36

Table 8:

Model summary ...................................................................................... 38

Table 9:

Anova result ............................................................................................ 38

Table 10: Multiple regression of the research model .............................................. 39

vii


LIST OF FIGURES
Figure 1:

Gap model of services quality by Parasuraman et al., 1985 ...................... 18

Figure 2:

Research model on retail banking sector ................................................... 21

Figure 3:

Research model in the Romanian banking sector ...................................... 22

Figure 4:

Proposed Research Model.......................................................................... 25

Figure 5:

Confirmed research model with Standardized Coefficient ........................ 39

viii


ABBREVIATION
CIEM

Central Institution for Economic Management

HSBC

Hongkong and Shanghai Banking Corporation

HCMC

Ho Chi Minh City

ILLSA

Institute Labor Science and Social Affairs

ISO

International Standardization Organization

MME

Middle Market Enterprise

SBV

State Bank of Vietnam

SEVQUAL

Service Quality

SMEs

Small and Medium-sized enterprises

SPSS

Statistical Package for the Social Sciences

Techcombank Vietnam Technological and Commercial Joint Stock Bank
WFOB

Wholly foreign-owned bank

WTO

World Trade Organization

ix


CHAPTER 1:
1: INTRODUCTION TO THE RESEARCH

1.1.
1.1. GENERAL BACKGROUND

Since the implementation of DOI MOI (renovation), which was initiated by the Vietnamese
Communist Party in 1986, the Vietnamese economy has gradually moved to the market of
economy and has swiftly become integrated into the regional and global economies. Its
main focus was removal of self-imposed barriers to progress and the utilization of various
market

oriented

measures,

including

liberalization

of

the

domestic

market,

acknowledgement of private sectors, encouragement of foreign direct investment and
reduction in subsidized to state owned enterprises.

These steps quickly brought positive results by impressive of high economic growth rate
that Vietnam has recorded in the 20 years. Vietnam recorded average annual economic
growth rate of 6.5% over that period, one of the highest rate among developing countries.
And with annual per capita income of USD 1,000 in 2008, Vietnam was removed from the
list of world least develop countries.

As a result of economic reform and opening, Vietnam financial market has been developed
very significantly in this period. To date, there are about 6 state owned banks, 37 private
commercial banks, 5 banks with 100% of foreign capital, 48 foreign bank branches and over
47 Representative offices of foreign bank operating in Vietnam (State bank of Vietnam).

In Vietnam, HSBC first opened an office in Saigon in 1870 (now Ho Chi Minh City). In
August 1995, HSBC opened a full-service branch in Ho Chi Minh City. In 2005, HSBC also
opened its second branch in Hanoi and established a representative office in Cantho.

HSBC has acquired 20% share capital of Vietnam Technological and Commercial Joint
Stock Bank (Techcombank), one of the largest joint stock commercial banks in Vietnam by
equity and became the first foreign bank in Vietnam to hold a 20% interest in a domestic
bank in 2008. In October 2009, HSBC signed an agreement to increase its shareholding in
1

Bao Viet Holdings to 18% from 10% for VND1.88 trillion (approximately US$105.3
million).

On 1 January 2009, HSBC started operating its locally incorporated entity and became the
first foreign bank to incorporate in Vietnam, after gaining approval from the State Bank of
Vietnam (SBV) to set up a Wholly Foreign-Owned Bank (WFOB) in Vietnam in September
2008. The new entity, HSBC Bank (Vietnam) Ltd., is headquartered at the Metropolitan
Building, 235 Dong Khoi Street, District 1 in Ho Chi Minh City. With a registered capital of
VND 3,000 billion, HSBC Bank (Vietnam) Ltd. is 100 per cent owned by The Hongkong
and Shanghai Banking Corporation Limited, the founding and principal member of the
HSBC Group.

HSBC is now the largest foreign bank in Vietnam in terms of investment capital, network,
product range, staff and customer base. HSBC’s history in Vietnam and knowledge of its
culture reflects its commitment to delivering excellence in customer service. However, the
competition in the banking industry is very aggressive recently because many local banks
have improved their services quality to retain existing customers as well as to complete
with foreign banks, especially in the retail banking sectors that most of the foreign banks
are intended to extend its business operation.

Acknowledge that customer services and customer satisfaction are the key element for the
bank growth in coming years, HSBC has conducted many activities to improve services
standard and increase customer satisfaction level. Mr. Tom Tobin (The CEO of HSBC
Vietnam) had stressed that customer services and customer satisfaction are the main focus
that HSBC would like to base on for business expansion, especially in SMEs segmentation
given its dynamic and potential growth in Vietnam economy (HBSC source). According to
the present survey which was conducted in joint coordinated by Central Institution for
Economic Management (CIEM), Institute Labor Science and Social Affairs (ILLSA) and

Copenhagen University (Denmark), SMEs segment in Vietnam has been considered as the
main driven of the Vietnam economy. This segment has accounted about 95% of total
enterprise entity, employed 50% of labor force of Vietnam. And therefore, Vietnamese
2


government has been implementing a number of measures and policies to encourage and
support SMEs sector.

1.2.
1.2. RATIONAL OF THE RESEARCH
RESEARCH

Vietnam banking industry has gained a significant growth in recent years a long with the
developing of the economic. Many banks have expanded business operation by setting up
branches, products and services to attract new customers. As the result, local banks have
made significant investment to improve its customer services for improving customer
satisfaction of existing customers.

There are about 500,000 SMEs in nationwide and this segmentation has been considered as
the key driven for Vietnam economy. For the long term development, therefore, HSBC has
established SME division inside of Commercial Department to targeting this segmentation.
At the time being, there are nearly 3,000 of SME have maintained bank account at HSBC
and the target for next 3 years is 15,000 SME. Therefore, improving customer satisfaction
by deliver excellent customer services is the key role for management team because the
expense of acquiring customer is incurred only in the beginning stages of the relationship
(Reichheld and Kenny, 1990). Beside that, longer-term customers buy more and, if
satisfied, may generate positive word-of-mouth promotion of the bank. Hence, this is the
opportunity as well as challenging period for the bank to enhance its quality services and
improve customer satisfaction to attract more customers.

With the long term commitment to Vietnam market, HSBC has implemented many
activities to delivery international standard services to SME customers such as customer
appreciated day event, customer feed back survey, customer’s complaints log system,
Welcome customer onboard program (HSBC source). However, these activities are for the
whole bank level and not specify for SME customers. Therefore a full study of the
perception of SME customer is very essential and necessary for the bank to improve
service quality and customer satisfaction. This is also in line with the slogan of HSBC to be
“The World Local Bank”.
Bank”
3


1.3.
1.3. STATEMENT
STATEMENT OF THE PROBLEM

In the banking industry products, services are easy to duplicate or modify by other bankers.
Therefore, competition between bankers is fiercely and key element for competition is
delivery excellent services to satisfy existing customer as well as to attract new one.

Customer satisfaction is influenced by main factors such as price, products quality, services
quality, personal factor and situation factor (V.Zeithaml, M.Bitner, and D.Grembler ,2006).
According to Lewis (1993), service quality is one of the effective means in building a
competitive position in services industry. So banks have to differentiate themselves by
delivering quality service and maintain customer satisfaction is essentially an effective tool
that banks can use to gain a strategic advantage and survive in today banking environment.

According to Abratt and Russell (1999) the key factors influencing customer’s selection of a
bank include the range of services, rates, fees and price charged. Hence, it is apparent that

superior services alone are not sufficient to satisfy customers. Prices are essential, if not
more important than service and relationship quality. Further more, services excellent,
meeting clients needs, and providing innovative products are very essential to succeed in
the banking industry.

This study is to test the relationship between the services quality and the pricing element
with the customer satisfaction regarding SME segmentation. And from that, HSBC could
have a sound understanding to adjust or revise its customer services to improve customer
satisfaction level.

1.4.
1.4. RESEARCH
RESEARCH QUESTIONS
QUESTIONS

The study will focus on customer services and customer satisfaction regarding HSBC
Vietnam banking services of SME customers. Therefore, it will address some identical
questions below
4


-

What are the most important factors in service quality in relationship with
customer satisfaction of SME customers in HSBC Vietnam?

-

What is the satisfaction level of pricing in relationship with customer satisfaction
of SME customers in HSBC Vietnam?

-

What changes in banking policies and services products are required to improve
customer satisfaction level of SME customers?

1.5.
1.5. RESEARCH
RESEARCH OBJECTIVES

The objective of the research is to gain a sound understanding of SME customers when
banking with HSBC Vietnam. And from that HSBC Vietnam could have a general view
about this segmentation. The study is to establish a methodology to measure and evaluate
the service quality and customer satisfaction of HSBC Vietnam because it is a necessary
step to have competitive advantages compared to other bankers. The study and
measurement are made based on popular methods used for service quality and customer
satisfaction evaluation: SERVQUAL (Parasuraman, et al., 1988) and Gap model (Zeithaml,
et al., 1988);

From the above method, the board of Management of HSBC Vietnam can adjust its
products, services and pricing so that to enhance customer satisfaction level of SME
customers. Over all, the objective of the research will be focused on these factors

•

To measure and evaluate the relationship between service quality and customer
satisfaction of SME customers

•

To measure and evaluate the pricing factor on the overall of SME customers
perception in banking with HSBC Vietnam.

•

To recommend the solution in order to improve the service quality and customer
satisfaction level of SME customers.
5


1.6
1.6. SCOPE OF THE RESEARCH

Due to the limitation of time and resource, the research will be conducted for existing
customers of SME segmentation who had experienced of HSBC products and services in
HCMC only. This is because HSBC in HCMC is the head office of HSBC Vietnam which
accounting 70% of total SME customers. The study focuses on this segmentation because
SME in Vietnam is represented for the key driven of Vietnam economic given it dynamic
and potential for long term development.

The research will not mention other department because these customer segmentations
have difference demand and services products.

1.7
1.7. ORGANIZATION
ORGANIZATION OF THE RESEARCH

The research will be organized by five chapters with following structure

Chapter 1:

1: INTRUDUCTION
INTRUDUCTION TO
TO THE RESEARCH
This is the introduction of the research. The chapter will describe the research problem, the
statement of the problem and the research objective. This part also covers the limitation of
the research as well as the organization of the research.

Chapter 2:
2: LITERATURE REVIEW:
REVIEW:
This chapter presents an overview of theories and previous research models. As the result
the author has proposed the research model to address the research problem.

Chapter 3: RESEARCH
RESEARCH MODEL AND RESEARCH DESIGN:
DESIGN:
This chapter will focus on the research model in details and from that hypothesis have been
presented. This chapter also addresses the research design as well as the methodology to
approach the research model.

6


Chapter 4:
4: DATA ANALYSIS AND FINDING:
INDING:
The chapter will present what have been found in the research model by using SPSS
(version 16) tool to analyzing the collected data.

Chapter 5:

5: CONCLUSION
CONCLUSION AND RECOMMENDATIONS:
RECOMMENDATIONS:
This chapter wills summary the entire research model. Then the author will conduct the
conclusion basing on the findings have been addressed in chapter 4. There are some
recommendations to improve services quality as well as customer satisfaction level of
HSBC Vietnam.

7


CHAPTER 2:
2: LITERATURE REVIEW
This chapter presents an overview of banking services and products of HSBC, the theories
and previous research models to address the research questions. Theories and models will
be addressed including: Service quality in banking sector, research model SERVQUAL and
GAP model, customer satisfaction and other factors affecting customer satisfaction.

2.1.
2.1. BANKING
BANKING SERVICES AND PRODUCTS

2.1.1. GENERAL
GENERAL ACTIVITIES OF COMMERCIAL BANKS
BANKS

A bank is a financial intermediary that accepts deposit and channels those deposits into
lending activities, either directly or through capital market. A bank connects customers with
capital

deficits

to

customers

with

capital

surpluses

(Wikipedia,

/>
Currently in most countries banks are regulated by government entities and require a
special bank license to operate on financial market. The requirements for the issue of a
bank license vary between jurisdictions but typically include following criteria: minimum
capital; minimum capital ratio; eligible and proper requirements for the bank’s controllers;
owners; directors or senior officers; an approval of the bank’s business plan as being
sufficiently prudent and plausible..

The banking law is based on a contractual analysis of the relationship between the banks
and the customers who defined as any entity for which the bank agrees to conduct an
account. Banks provide almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments.

There are many types of banks which are mostly based on the activities of its business. It
can be divided into retail banking, dealing directly with individuals and small businesses;
commercial banking, providing services to mid-market business; corporate banking,

directed at large business entities; Private banking, providing wealth management services
8


to high net worth individuals and families; and investment banking, relating to activities on
the financial market (Wikipedia,, />
In the banking industry, the commercial banking is the more popular to other type of
banking business. The commercial banks engage in the following business activities:
•

Processing of payments by way of telegraphic transfer, internet banking

•

Issuing bank drafts and bank cheques

•

Accepting money on term deposit

•

Lending money by overdraft, installment loans, un-secured loans, term loans, bridge
loans, syndicated loans

•

Providing documentary and standby letter of credit, guarantees, performance bonds,
securities underwriting commitments and other forms of off balance sheet exposures

•

Safekeeping of documents and other items in safe deposit boxes

•

Sale, distribution or brokerage with or without advice, of insurance, unit trusts and
similar financial products as a “financial supermarket”

•

Cash management and treasury services

•

Merchant banking and private equity financing

•

Traditionally, large commercial banks also underwrite bonds, and make markets in
currency, interest rates, and credit-related securities. Today large commercial banks
usually have an investment bank arm that is involved in the mentioned activities.

2.1.2. HSBC VIETNAM
VIETNAM BANKING SERVICES
SERVICES AND PRODUCTS

Following the route to join WTO, Vietnam financial and banking sector has been opened up
widely. To date, there have been five banks with 100 percent foreign capital and 48 foreign
bank branches and 47 representative offices of foreign banks. According to SBV, there are

dozens of applications from foreign banks waiting for permissions to open their branches
and 100 percent foreign-owned banks in Vietnam.

In 1/1/2009, HSBC Bank Vietnam has been established which was converted by HSBC
branch in HCMC. The bank was one of the first 100% owned by foreign bank in Vietnam.
9


Through an international network spanning over 88 countries and territories with over 9500
offices worldwide, HSBC has been considered as the leading financial institution in the
world. It is also has been considered as the biggest foreign bank in Vietnam. The company
has put diversified direction to expand business in Vietnam market and the commercial
banking department is the best team in the organization which was taking as the major role
in revenue generator. There are 2 teams in commercial department: SME banking team and
Middle Market Enterprise banking team (MME). The MME banking team will cover
enterprise that have annual turnover over USD10M and SME banking team will take
responsible and serve companies that have annual turnover less than USD10M.

Although the operating time of HSBC as a 100 percent foreign-owned bank in Vietnam has
been only one year, the profit of HSBC is already equal to that of a medium scale domestic
joint stock bank, which has been in operation for decades. In 2009, HSBC published
financial statement showed that after one year (2009) operating as a 100 percent foreignowned subsidiary bank in Vietnam, the total assets of HSBC Vietnam is 36.689 trillion
dong; profit before tax is 2.405 trillion dong; return on equity ratio is 19 percent; capital
adequacy ratio is 58 percent; and lending over mobilized funds ratio is 51.3 percent (HSBC,
2010).

Thomas Tobin, general director of HSBC Vietnam affirmed that HSBC considered Vietnam
as one of the strategic markets among the emerging markets in the region (HSBC, 2010).
The bank has provided comprehensive financial services for both retails banking and whole
sales services. Below is the list of these services

-

Personal transactional financial Services

-

Personal lending products

-

Credit card and debit card services

-

Automatic teller machinery

-

Commercial banking services

-

Trade and supply chain services

-

Payment and cash management
10

-

E-banking services

-

Global banking services

2.2. CUSTOMER
CUSTOMER SATISFACTION AND SERVICES QUALITY IN BANKING SECTOR

2.2.1
2.2.1.
.1. CUSTOMER
CUSTOMER SATISFACTION IN BANKING SECTOR

Customer satisfaction is an outstanding research topic of different areas and banking
industry is not an exception. Banking is one of numerous services in which customer
satisfaction has had an ever-increasing importance as they are becoming more and more
competitive. Banking sector are especially pursuing this strategy toward increasing
customer satisfaction and loyalty through improving services quality. It is essential because
of the difficulty in distinguishing services offered among bankers and the promptness in
matching a new offering by competitors. Rust and Zahorik, (1993) applied a mathematical
framework enables manager to determine the greatest influencing factors to customer
satisfaction in banking industry. Athanassopoulos, (2000) conducted a complete survey on
customer satisfaction in banking in Greece and suggested an instrument of customer
satisfaction containing services quality and other attributes. In general, the research in this
area suggests that services quality is an important indicator of customer satisfaction.
Services quality is also attractive to retail banks as a competitive differentiator (Newman,

2001).

2.2.2
.2.2.
.2. SERVICES QUALITY DIMENSTION IN BANKING SECTOR

There is no unique approach to services quality dimension applied for banking industry.
Parasuraman et al., (1998) found five attributes including reliability, responsiveness,
assurance, empathy and tangible factors.

Lewis, (1993) gave out dimension of services quality applied in other services sectors and
along with banking industry as follow

11


•

Technical dimension: The outcome of the services process comprising systems and
technology.

•

Functional dimension: The way the services are delivered includes inter-personal
interactions between staffs and customers such as appearance, personality and
approachability of staffs.

•

The corporate image dimension: It is about how customer perceived the firm,

technical and functional quality of services

Sureshchander et al., (2002) suggested that the services quality is based on five dimensions
which are relevant to banking sector:

•

Core services or services products

•

Human element of services delivery: It is mentioned to the bank services as
promised by the banking staffs, effectiveness the bank staff’s skill and ability for
action whenever a critical incident takes place, willingness of bank staff to help
customers and the readiness to respond to customer’s requests, making customer
feel safe and secure in their transaction, giving caring and individual attention to
bank customers by having customers best interest at heart.

•

Systematization of service delivery (non-human element): This element mentions to
a high standardized and simplified delivery process so that banking services are
delivered within a minimum time without any hassles or excessive bureaucracy,
enhancement of technological capacity to provide superior quality service to
customer more effectively.

•

Servicecapes (the environment in which the services are delivered and where the
firm and the customers interact): This element refers to the tangibles of services

12


ambient conditions, physical equipments, neat and professional appearance of
bank’s staffs.

Avkiran (1999) indentified the following four service quality factors in banking sector.

•

Staff conduct: responsiveness, civilized conduct and presentation of branch staff that
will project a professional image to customers

•

Credibility: maintaining customer trust to bank staff by rectifying mistakes and
keeping customer informed

•

Communication: fulfilling customer’s needs

by successfully communicating

financial advices and serving notices timely

•

Access to teller services: The adequacy of number of branch staff serving customer

throughout business hours and during peak hours

It is indicated that different authors have proposed diverse dimensions of services quality in
banking industry. All authors mentioned do not have the same opinion with every specific
element of quality dimension but most of them were used in banking industry to measure
services quality.

2.3
2.3. SERVICE
SERVICE QUALITY (SERVQUAL)

Customer service is one of the crucial factors deciding the success of any business
nowadays. A fierce competitive environment forces companies to continuously improve the
quality of services they provide (Dawkins and Reichheld, 1990; Parasuraman et al., 1985;
Reichheld and Sasser, 1990; Zeithaml et al., 1990). An enterprise can apply many
promotion campaigns or slash prices to attract customers as much as possible, but the need
of customer service policy is still necessary to retain customers otherwise that business will

13


not achieve long- term profitability. That is why service quality has attracted researchers
around the world for years.

What is service and service quality? According to International Standardization
Organization (ISO), service is a part of the total production process, the added value of the
product and assessed on the market economy in which customer choices play a crucial role
(Edvardsson, 1998). Each customer has a different perception and evaluation of service.
Their expectations and perceptions will affect to the outcome of the service showing
whether they are satisfied or not (Edvardsson, 1998). While definition of service quality is

that, it needs to correspond to and meet customer expectation in order to satisfy customer
demand (Edvardsson, 1998). This definition is based on the customer perspective, but does
not mean that service providers always meet the requirements and wishes of customers.
Ultimately, the decision maker of good or bad service is the customer but it does not mean
their requirements are always right and reasonable.

Other researchers give different definition of service quality. Lehtinen and Lehtinen,
(1982) gave that service quality must be judged on two aspects, (i) the service providing
process and (ii) the results of the service. Gronroos, (1983) described service quality in both
technical and functional aspects, in which technical quality is what customers get and
functional quality is how the service are provided. In this case, the customer directly
evaluates the company reputation. Once it got a good reputation, minor mistakes made
through servicing can be considered acceptable as temporary (Gronroos, 1983).

Townsend and Gebhart, (1986) gave two aspects of quality: quality in fact and quality in
perception. Quality in fact means that the specific requirements of the service are not met.
Meanwhile, quality in perception means that customer’s quality expectations are met.
Accordingly, if the quality in perception is not met, the quality in fact would not been
achieved either.

However, when mentioning quality service, we must mention the significant contribution of
Parasuraman, Zeithaml, and Berry, (1988, 1991). They are among the best-known
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researchers about the service quality. They have conducted the research on customer
service quality in four different service sectors: banks, stockbrokers, credit card companies
and electrical appliance trading companies Parasuraman, Zeithaml, and Berry (1988, p. 17)
defined service quality as "the difference between expectation towards service customers
received and their perception of the outcome of services”. The authors initiated and used

qualitative research and quantitative expertise to build and scale components of quality of
service called SERVQUAL (Parasuraman, et al., 1988).

SERVQUAL is a service quality framework that has been studied and developed by many
different authors. Nyeck, et al. (2002) showed that SERVQUAL as a measuring tool
“remains the most complete attempt to conceptualize and measure service quality”. The
primary benefit of SERVQUAL is to measure and evaluate various service industries such
as education, healthcare, tourism, banking and financial service (Nyeck, et al. 2002).

SERVQUAL scale is adjusted and verified by many different types of services. Originally,
it was measured and based on ten aspects of service quality: reliability, competence,
responsiveness, access, courtesy, communication, credibility, security, knowing or
understanding customer and tangibles. Finally, SERVQUAL has been improved through
including 22 variables to measure five components of service quality that is called acronym
RATER: reliability, responsiveness, assurance, tangibles, and empathy (Parasuraman. et
al.,1998).

Parasuraman et al. (1991) stated that SERVQUAL could be applied to all types of different
services. However, each service has specific characteristics. Many other researchers have
also tested this scale for many types of services as well as in many other countries. In
which, Gagliono and Hathcote (1994) tested and supported SERVQUAL by presenting a
model with four corresponding factors: Personal Attention, Reliability, Tangibles and
Convenience. Bakakus and Mangold (cited in Brown et al, 1989) has found the independent
factor as applied SERVQUAL into hospital sector.

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