19

Service touches our lives of every person every day. These are absolutely
essential for the economy to function and to enhance the quality of human life. The
service sector has playing very important role in the economics and non-economic
activities in the country. For example, telecommunication, tourism, hotel, transport,
insurance, banking etc. especially the importance of a banking industry to collect
deposits, transfer funds, availed credit to agriculture, industry and service and trade
sector. The Government also plays a critical role in providing services such as security,
legal services, public education, health care, public transport, drinking water, clean air
etc. In the service sector, it is very essential to asses‟ customers‟ satisfaction for further
business growth. Today, marketing has become an important word for business sector
the world over. Those who understand the significant of marketing and adopt
appropriate strategy will be the one who flourish in a highly competitive business
environment. In the service organization quality services is good indicator of success in
the market. The concept of marketing begins with customers‟ satisfaction approach
because all efforts of marketing lead to satisfaction and customers‟ retention process.
The customers‟ satisfaction and retention are closed related concepts.
2.1 Conceptualization of customer satisfaction
Customer satisfaction is buzzword today, once here everyone using this
customer‟s satisfaction is affected by the importance placed by the customers on each
of the attitudes of the product/ service. Customer satisfaction measurement allows an
organization to understand the key drivers that create satisfaction or dissatisfaction; and
what is really driving their satisfaction during a service experience. Customer
satisfaction is the state of mind that customers have about a company when their
expectations have been met or exceeded over the lifetime of the product or service
(Kevin Cacioppo, 1995). It is also feeling or attitude of a customer towards a product or
service after it has been used. According to Oliver (1980) satisfaction appears to
mediate changes between pre-exposure and post-exposure attitudinal components. It is
a major outcome of marketing activity whereby it serves as a link between the various
stages of consumer buying behaviour (Jamal & Nasser, 2002). When customers pay
money to buy a service he has some minimum expectations from the transaction. These
expectations from the purchase have to be met substantially, if not entirely for the
customer to become a loyal customer of the service (Aneja 1993). These expectations
are fulfilled of a promises- quality, fair price, availability, after sale services,
complaints handling process, information, and variety etc. the customers are demanding

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high quality of services and low prices or charges. Better quality for the same cost is
the motto of the customers. Sometimes they are prepared to overlook inconveniences
also to avail better services at a low cost. Various empirical researches show that there
is significant and positive relationship in service quality and customer satisfaction.
Berry (1990) mentioned that there are ten 'Quality Values' which influence satisfaction
behaviour i.e. Quality, Value, Timeliness, Efficiency, Ease of Access, Environment,
Inter-departmental Teamwork, Front line Service Behaviour, Commitment to the
Customer and Innovation. Rueangthanakiet Pairot, (2008) defined Customer‟s
satisfaction as the company's ability to fulfill the business, emotional, and
psychological needs of its customers. However, customers have different levels of
satisfaction as they have different attitudes and experiences as perceived from the
company.
2.1.1 Transaction-specific and cumulative satisfaction
Yi and La (2004) realized concept „satisfaction‟ into two conceptualizations as
transaction-specific customer satisfaction and cumulative customer satisfaction.
Transaction-specific satisfaction is a customer‟s evaluation of customers experience
and reactions to a particular service encounter (Cronin and Taylor, 1992). It is generally
considered to be a post-choice evaluative judgment of a specific purchase and
consumption experience (Parasuraman, Zeithaml and Berry 1994). Cumulative
satisfaction refers to the customer‟s overall evaluation of the consumption experience.
It reflects the customer‟s feelings about multiple experiences, encounters, or
transactions with the service organization (Smith et al 1998). Homburg et al (2005)
suggested that, customer satisfaction should focus on cumulative satisfaction rather
than on transaction-specific satisfaction because their results of study indicates that
long-term, cumulative satisfaction is more relevant because it is the stronger driver of
customer behavior. Study conducted by Jones, and Suh, (2000) also realized that
overall satisfaction has a direct influence on repurchase intentions as well as a
moderating influence on the transaction-specific satisfaction/repurchase intentions
relationship. When overall satisfaction is high, transaction-specific satisfaction has little
impact on repurchase intentions, but when overall satisfaction is low, transaction-
specific satisfaction has a positive influence on repurchase intentions. Andronikidis,
Andreas and Bellou, Victoria(2010) strongly mentioned that performance-only
measurement scales (SERVPERF) should be employed when assessing the overall
service quality of a firm or making quality comparisons across service industries

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because of its psychometric soundness. Still, when identifying the areas of a firm‟s
service-quality shortfalls for managerial interventions, managers should prefer the
SERVPERF scale because of its superior diagnostic power.
2.1.2 Confirmation and disconfirmation theory of customer satisfaction
According to confirmation and disconfirmation theory customers expectations
about services and service perception experience has plying vital role in customer
satisfaction. Early satisfaction research defined satisfaction as a post-choice evaluative
judgment concerning a specific purchase decision and satisfaction as an outcome of
disconfirmation (Parasuraman et al, 1985; 1988). The expectation disconfirmation
theory suggested that satisfaction is determined by the intensity and positive or
negative direction of the gap between expectations and perceived performance.
Customers‟ expectations are beliefs about service delivery that function as
standard or reference point against which performance is judged. Customers compare
their perceptions of performance with their expectations and reference point when
evaluating service quality (Zeithaml and Bitner 2003). Parasuraman et al. (1988)
defined expectation as „desires of wants of customers‟ the expectations component was
designed to measure customers normative expectations and it is similar to the ideal
slandered in customer satisfaction and dissatisfaction. Expectations serve as standards
with which subsequent experiences are compared; it is result of previous experience
about service also. There are five types of expectations: Ideal expectations (desired by
customer according to their need and hopes), Normative „should‟ expectations (is
normal expectations it should be fulfill by service provider), Experience based
expectations (this expectation is based on former experience and knowledge about
particular service), Acceptable expectations (It is expectation that can be fulfilled by
service providers naturally and adequate level) and Minimum tolerable expectations (it
is minimum level of expectations, there is very low level of zone tolerance in
expectation and perception).
Customers perception is one another element which plying significant role in
the determination of customers satisfaction. Satisfaction will influence by perception of
service quality, price, and other personal expectations regards to service. It is a
judgment that, a product or service feature, or the product or service itself, provides a
pleasurable level of consumption related fulfillment (Oliver, 1994). Moreover,
disconfirmation of expectations may have an asymmetrical effect, such that negative
disconfirmation is more impactful than positive disconfirmation. However, customer

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satisfaction is based not only on the judgment of customers towards the reliability of
the delivered service, but also on customers‟ experiences with the service delivery
process. In other words, customers who appreciate the core and relational dimensions
of service quality provided by a service provider are likely to be satisfied with the
services offered by that service provider (Jamal and Naser, 2002).

Figure 2.1 Confirmation and Disconfirmation Process

Source: - Adopted from Boshoff, C‟s (1997) „An experimental study of service recovery options‟ International
Journal of Service Industry Management, Vol. 8 No.2

A customer satisfaction is strongly linked to impressions of performance,

satisfaction and switching barriers are assumed to be the most important antecedents of
repurchase behaviour, or the intension to repurchase a good or service (Sharma, 2008).
Smith and Houston (1982) mentioned that satisfaction with services is related to
confirmation or disconfirmation of expectations and satisfaction is related to the size
and direction of the disconfirmation experience where disconfirmation is related to the
person's initial expectation. However, the satisfaction of consumers depends not only
on how the service provider performs, but also on how the consumer per- forms. By
contributing information and physical and mental effort, consumers contribute directly
to their own satisfaction (Bateson, 2002).
2.2 Service quality and customer satisfaction
Increase in service quality of the banks can satisfy and develop attitudinal
loyalty which ultimately retains valued customers (Kumar et al. 2010). There is very
strong relationship between quality of service and customer satisfaction (Parasuraman
et al, 1985). The higher level of perceived service quality results in increased customer
satisfaction. When perceived service quality is less than expected service quality

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customer will be dissatisfied (Jain and Gupta, 2004). Parasuraman, Zeithaml and Berry
(1988) posited that if there is expected quality of service and actual perceived
performance is equal or near about equal there is customers can be satisfy, while a
negative discrepancy between perceptions and expectations a „performance-gap‟ as
they call it causes dissatisfaction, a positive discrepancy leads to consumer delight.
The relationship between expectation, perceived service quality and customers
satisfaction have been investigated in a number of researches (Zeithaml, et al, 1993).
An expectation is minimum requirement of service quality by service providers to the
meet customers wants and needs. According to Parasuraman et al (1985, 1988)
perceived service quality is viewed as the degree and direction of discrepancy between
customers' perceptions and desires. As per American Customer Satisfaction Index
(ACSI) relation between service quality expectation and perception is given below in
figure 2.2

Figure 2. 2 ACSI Model of Customer Satisfaction

Source- Adopted from American Customer satisfaction Index (ACSI)
However, according to Cronin and Taylor (1992) satisfaction super ordinate to
quality-that quality is one of the service dimensions factored in to customer satisfaction
judgment. Subsequent to this effect satisfaction may reinforce quality perception, but
only indirectly. Customer satisfaction can be obtainable with low quality, whenever
one‟s expectations in a given situation are low and performance is adequate to the task.
Emergency situation fit this scenario well. Similarly, dissatisfaction with high quality
can ensue when some element of the service delivery is not up to personal expectations.
Thus we conclude that, service quality as effecting service satisfaction at the encounter
specific level and aggregation level plays a critical role in customers‟ satisfaction. An
obtained „Value‟ of service or product also one of the most important factors affecting
on customers satisfaction. There are close relationship between service value and
customers satisfaction. Value may be conceptualized as arising from both quality and

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price or from what one gets and what one gives (Zeithml, 1998). Value increases as
quality increases and as price decreases.
Customer satisfaction represents a measure of organizations performance according
to customer needs; therefore, the measure of customer satisfaction provides a service
quality measure. Customers express their points of view about the services by
providing judgments on some service aspects. In the SERVQUAL instrument of
measuring service quality consists dimensions of reliability, responsiveness,
competence, curtsey, credibility, security, access, communication, and understanding
the Customer (Parasuraman, Zeithml and Berry, 1985, 1988). We have conceptualized
customer satisfaction as an individual‟s feeling of pleasure or disappointment resulting
from comparing a quality of service perceived in relation to his or her expectations.
2.3 Brand reputation and customer satisfaction
The branding is considered as the procedure of creating a brand image which keeps
consumers. It is what separates identical products from each other, or its competitors.
Marketing literature including NCSI and ACSI literature examined positive of the link
between the satisfaction and the brand image, the brand reputation (Wafa et al 2009)
and indicates that, the nature and amount of a consumer's experience with an evoked set
of brands. Brand reputation has significant impacts on customer satisfaction (Woodruff
et al 1983). A consumer's beliefs about these brands are derived from personal use
experience, word-of-mouth endorsements/criticisms, and/or the marketing efforts of
companies. Perceived brand performance which is above or below the norm, but within
the indifference zone, leads to confirmation. Positive or negative disconfirmation
results when perceived brand performance affects customer satisfaction (Woodruff et al
1983). Some of the marketing research shows that the brand loyalty achieved through
the satisfaction with brand performance. Brands that are high in brand equity are
organization powerful assets. They can lead to customer satisfaction and customer
loyalty. Wafa M‟Sallem et al (2009) and Sondoh et al,(2007) Some of the empirical
researches shows that there are two brand image benefits, i.e. appearance enhances and
functional have significant impacts on satisfaction and loyalty intention.
2.4 The distinction between service quality and customer satisfaction
Service quality and customer satisfaction are important concepts to marketing
literature. Available marketing literature indicates that success of the business is
depends upon product/ service quality and customer satisfaction. However, it found that
both concepts are used equivalent to understand customer‟s future intension to purchase

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product or service. A review of the recent literature suggests that there appears to be
relative consensus among marketing researchers that service quality and customer
satisfaction are separate constructs which is unique and share a close relationship
(Cronin and Taylor, 1992; Parasuraman et al, 1994, Oliver, 1993). According to
Parasuraman et al. (1988) both service quality and customer satisfaction involve a
comparison between expected and perceived service, but while satisfaction refers to the
predicted service (expectations of what the service is likely to be), service quality deals
with the ideal or desire (what the service should be). There should be note that product
or service quality is cause of customers satisfaction and satisfaction or dissatisfaction is
impact of quality (Ostrom and Grayson, 1995) Most researchers in the services field
have maintained that these constructs are distinct as below;
Figure 2.3: Service Quality and Customer Satisfaction

Source: Designed by Author

2.5 Conceptualization of ‘E-Customer’ and ‘E-satisfaction’
In changing era of e-commerce and online marketing environments concept of
customers has been changed today. There are two basic types of customers have found
in modernized markets, first is offline customer and another is e-customer. The term „e-
customer‟ refers to the online purchaser whether it is individual or corporate. As per e-
commerce and marketing literature we can define term e-customer as “e-customer is an
individual or corporate one who are using e-portals to purchase, ordering, receiving
information and paying price / charges of services/product purchased through various
types of e-channels” i.e. internet, e-mail, personal computer, ATM, POS, credit cards,
debit cards, cell phone, fax, phone and other electronic devises. Many financial
institutions have to focus on increasing customer satisfaction and customer retention
through improved quality of their services enabling factors that make it easy for the
customer to do business with the e-banking (Brimpong, 2008). The bank‟s ability to

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deliver these benefits on a continuing basis to its existing customers will probably
impact on customer satisfaction.
All of the market research shows that service quality has a significant impact on
customers‟ satisfaction, loyalty, retention and purchase derision. Traditionally the level
of customer satisfaction was determined by the quality of services, price and
purchasing process. Consequently, the level of e-satisfaction is also determined by the
quality of e-services, the price level and e-purchasing process (Ming Wang, 2003).
Literature on e-consumers satisfaction realizes that there are different factors of e-
customers satisfaction than formal customer, e-satisfaction are modeled as the
consequences of attitude toward the e-portals (Chen and Chen, 2009). According to
Schaupp and Bélanger (2005) there is three most important attributes for online
consumers satisfaction are technology factor (Privacy, Usability, Site Design and
Privacy), Shopping Factors (Convenience, usability, Trust and Trustworthiness
Delivery), and Product Factors (Merchandising, product quality, Product Value and
Product Customization). Adam (2004) has argued that e-satisfaction is influenced by
nine distinct consumer perceptions--Web design, price, promotion, merchandise
availability, on-time delivery, met expectations, return policy, customer service and
order tracking. These nine perceptions occur in two purchase phases: pre-order and
post-order. Schefter and Reichheld (2000) mentioned that, e-satisfaction is attitude of
the customers about quality it includes customer support, on-time delivery, compelling
product presentations, convenient and reasonably priced shipping and handling, and
clear and trustworthy privacy policies. As per study conducted by Marcel Gommans, et
al. (2001) e-customers loyalty depends up on Website & Technology (Speed, easiness,
Personalized features, Design, Language, Search Option, Server reliability, Content,
Quick shopping checkout), Value Proposition (Customized products, Large set of
choices, Product quality, Guarantees, Well-known brands, Pricing), Brand Building
(Brand image, Brand Community) Customer Service (Fast response to customer
inquiries, Easy to contact, Free online applications, Easy payment methods, Fast
delivery, Delivery options, Customer reward system), Trust & Security (Trust, Third
party approval, Privacy, Reputation, Reliability, Authentication and Non-repudiation).
Cho Yoon, and Joseph Ha (2008), analyzed movie related website service and its
influence on e-customer satisfaction. In their study they have used Information Factor,
Convenience Factor, Technology Factor, Community Factor, Entertainment Factor,
Price Factor and Brand Name Factor to assessed e-satisfaction of the users. According

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to Taylor and Hunter (2003) e-satisfaction is generally defined as pleasurable

fulfillment and it is based on technology-mediated marketing relationships. It is unique
from other closely related concepts such as quality, loyalty and attitude. They
mentioned that e-satisfaction is closely related to value judgment, brand attitude, trust,
and resistance to change. The attentiveness, responsiveness care and friendliness as the
main sources of satisfactions (satisfiers) in banking services, and integrity, reliability,
availability and functionality as the main sources of dissatisfaction (dissatisfiers).
Another study conducted by Anderson and Srinivasan (2003) to understand the relation
between e-satisfaction and e-loyalty. According to their study Satisfaction is the
summary psychological state resulting and e-satisfaction is the contentment of the
customer with respect to his or her prior purchasing experience with a given electronic
commerce firm. After review of the literature we have defined e-satisfaction as “E-
satisfaction is the outcome of consumer perceptions of online convenience, trust,
security, customization, usability, easiness, price effectiveness and perceived value”.
Table 2.1: Reviewed Literature on E-customers Satisfaction
Author/s Applied for Attributes Used in the Study
1 Schaupp and Online Privacy ,Merchandising, Convenience, Trust
Bélanger (2005) Services ,Delivery ,Usability, Product Customization, Product
Quality and Security
2 Schefter and E-commerce Customer support, on-time delivery, compelling
Reichheld (2000) product presentations, convenient and reasonably
priced shipping and handling, clear and trustworthy
privacy
3 Marcel Gommans, E-loyalty Website & Technology, Value Proposition, Customer
Krish S. Krishnan, Service, Brand Building and Trust & Security
& Katrin B.
Scheffold (2001)
4 Cho Yoon, and Movie- Ease of use, Usefulness, involvement, information
Joseph Ha (2008), Related factor, Convenience, technology, Community Factor,
Websites Entertainment Factors, Brand Name, Price Factor
5 Anderson and e-Satisfaction convenience motivation, purchase size, inertia, trust
Srinivasan (2003) and perceived value
6 Szymanski and e-Satisfaction Convenience, Merchandising, Easiness, Information,
Hise (2000) Deign, Financial security

Source: Review of Literature

2.6 Instruments available for measurement of customer satisfaction
Available literature shows that, the customer satisfaction is measured via
service quality and service quality measured by various measurement tools and
instruments (shown in Table 2.2) developed by various researchers (Riscinto-Kozub,

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2008) and marketing consultancy organisations i.e. Gronroos‟s „Perceived Service

Quality Model, SERVQUAL, SERVPERF, SITQUAL, WEBQUAL, etc.
Table No. 2.2: Instruments and Scale Available to Assess Service Quality
S.N. Model/Scale Author/s Dimensions Method
1 Perceived Gronroos (1984) Technical service quality, Functional service Ordinal
Service quality and Corporate image (professionalism
Quality Model and skill, attitude and behaviour, accessibility
and flexibility, reliability and trustworthiness,
service recovery, serviscape and reputation
and credibility)
2 Kano’s Model Kano (1984) Must-be requirements, One-dimensional Ordinal
requirements, Attractive requirements,
Reverse Quality
3 SERVQUAL Parasuraman, Reliability, Responsiveness, Assurance, Likert Scale
Zeithaml and Empathy and Tangibles
Barry (1985;
1998)
4 SERVFERF Cronin and Reliability, Responsiveness, Assurance, Likert Scale
Taylor (1994) Empathy and Tangibles
5 WebQual Loiacono, Information fit to task, interactivity, trust, Likert Scale
Watson and responsiveness, design, intuitiveness, visual
Goodhue (2000) appeal, innovativeness, websites flow,
integrated communication, business process
and viable substitute, accessibility, speed,
navigability and site content.
6 SITEQUAL Yoo and Donthu ease of use, aesthetic design, processing Likert Scale
(2001) speed, and security
7 e-SQ and e- Zeithaml, efficiency, reliability, fulfilment, privacy, Likert Scale
Parasuraman, responsiveness, compensation, and contact
SERVQUAL and Malhotra
(2000)
8 E-S-QUAL Parasuraman, Efficiency Fulfilment, System availability, Likert Scale
and E-RecS- Zeithaml & Privacy, Responsiveness, Compensation and
QUAL Malhotra in Contact
(2005)
9 LibQUAL+™ Cook et al 2003 Reliability, Responsiveness, Assurance, Likert Scale
Empathy and Tangibles
10 DigiQual Association of Reliability, Responsiveness, Assurance, Likert Scale
Research Empathy and Tangibles
Libraries, 2005
11 GIQUAL Tsoukatos and Responsiveness, Assurance, Empathy, Likert Scale
Rand (2007) Tangibles and Reliability
12 BANKSERV Akiran (1994) polite, greet, help, promptness, neatness, Likert Scale
apology, concern, mistake, security,
informed, acctypes, advice, learn, know,
servwhen, teller and staff number
13 BANKZOT Nadiri, et al Desired, adequate, predicted and perceived Likert Scale
(2009) service quality
14 SOFTWARE Yang and Zhang Completeness, Security, Adequacy, Likert Scale
Quality (2009 Simplicity,
Self-descriptiveness, Functionality,
Reliability, Facility, Efficiency etc.
15 WEB-QUAL Barnes and Usability, Design, Information, Trust, Likert Scale
(Alternative) Vidgen (2002) Empathy
16 eTailQ Wolfinbarger Design, Personalization, Fulfillment, Likert Scale
and Gilly (2003) reliability, privacy/security, customer service
Source: Review of Literature

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2.7 National customer satisfaction indices

A number of national and international customer satisfaction barometers or
indices have been introduced in the last decade. These satisfaction indices are
embedded within a system of cause and effect relationships or satisfaction model
(Johnson et al, 2001). The first national customer satisfaction index was established in
Swedish in 1989. Later 1989 American Customer Satisfaction Index (ACSI) in 1994,
Norwegian Customer satisfaction Barometer (NCSB) and European Customer
Satisfaction Index (ECSI) etc. (see table no. ). The entire national customer satisfaction
index‟s are recently developed and modified based on ACSI (Johnson, et al 2001; Claes
,et al, 1996; Lee et al (2006)).
Table No. 2.3: National Customers Satisfaction Indices

Customers Satisfaction Index Year Dimensions Method

1 Swedish Customer 1989 Expectations, Service Quality, Likert
satisfaction Barometer Perceived Value Scale
(SCSB)
2 American Customer 1994 Price, perceived value, Likert
satisfaction Index (ACSI) customization, reliability, overall Scale
quality and repurchase intension
3 Norwegian Customer 1996 Price, perceived value, Likert
satisfaction Barometer customization, reliability, overall Scale
(NCSB) quality, Corporate image and
repurchase intension
4 European Customer 2000 Price, perceived value, Likert
Satisfaction Index (ECSI) customization, reliability, overall Scale
quality and repurchase intension
Source: Review of Literature

All of reviewed literature reveals that most of researchers have used service
quality as instrument to assess customer satisfaction in service sector and used ordinal
method to recording responses of the customers. Even national level customer
satisfaction indexes like SCSB, ACSI, NCSB and ECSI also using service quality and
Likert type responses recording method. However, Parasuraman et al, (1985; 1988;
2002; 2005) argued that customer satisfaction can be measured by Expectation-
Perception Method. While, Cronin and Taylor (1994) have developed SERVFERF
scale based on performance-only scale and they proved that it is superior method than
SERVQUAL (Kumra 2008; Godwin et al, 2008; Godwin, et al, 2008). SERVPERF
directly measures perception only to avoid the problem of an unambiguous
expectations measure. According to Dabholkar et al (2000) SERVPERF have grate
convergent and predictive validity as compared to SERVQUAL.

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In the reviewing the literature on service quality and e-service quality there is
debate about quality attributes and dimensions. Because of service intangibility, a firm
may find it more difficult to understand how consumers perceive services and service
quality. However, various scale and models used related study e.g. the Perceived
Service Quality Model, SERVQUAL, SERVPERF, WEBQUAL, E-SQ, E-S-QUAL,
GIQUAL and E-RecS-QUAL model, SNCB, ACSI, NCSB, ECSI reveals that there are
different dimensions of service quality e.g. Reliability, Responsiveness, Competence,
Access, Courtesy, Communication, Credibility / Trustworthiness, Security, Empathy,
Tangibles, Flexibility, Ease of Navigation, Efficiency, Price Knowledge, Site
Aesthetics, Customization/Personalization, Privacy, Fulfillment / System Availability,
Compensation, Contact, corporate image etc.
2.8 Conceptualization of alternative banking service quality
Alternative banking channels like ATM, Internet, telephone, and mobile phone
have been recognized as alternative delivery channels and there is a wide agreement
that electronic banking will have a significant impact on the future of financial
institutions. There have been many studies identifying the key service quality factors in
the traditional banking environment, where the interaction between employees and
customers is the main communication channel. However, there are very few studies that
have conducted e-banking or online banking service quality attributes. E-services can
be conceptualized as a subset of e-commerce. While we have reviewed some related
studies to identify service quality dimensions of alternative banking services.
Noel et al (2005) examined the level of service quality in internet banking in
Hon-Kong. They mentioned that the e-SERVQUAL model of Zeithaml et al (2002) is
one of the best models to measure service quality in internet banking. Four analytical
study they have used service quality dimensions credibility, efficiency, problem
handling and security. Findings of the study indicate that all dimensions except security
are found to be important in determining overall service quality perceptions in internet
banking. Credibility, problem handling and security have significant impact on
customer satisfaction. Moreover, security and efficiency are significantly associated
with future consumption behavior.
Avkiran, (2002) has examined the credibility and staff conduct and its relation
to the service quality in banking industry. In his study he has used BANKSERVE
model of Akiran (1994) with their six dimensions i.e. empathy, responsiveness, staff
conduct, access, communication and reliability. Their results indicate that if bank fails

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rectify the mistakes and keep customer informed service quality will be evaluated as
poor. Although mentioned that there is need to modify the BANKSERVE according to
the research goals.
Khan, et al (2009) posited that „Privacy/Security‟ and „Fulfilment‟ are not
contributing significantly towards the overall service quality in the context of Indian
banking. They observed that customers are satisfied with the reliability of the services
provided by the banks but are not very much satisfied with the dimension „User-
friendliness‟.
Shergill and Li Bing (2006) investigated trust and loyalty problem in the
context of Internet Banking in New Zealand Banks'. They have used service quality six
dimensions i.e. trust, brand reputation, switching cost, shared value, communication,
and opportunistic behaviour control. The results of the study indicated that shared value
(Privacy Security Ethics) was the most critical factor impacting customers‟ trust in
Internet Banking, compared with two other important factors. They mentioned that to
improving satisfaction and loyalty among internet bank customers, trust, brand
reputation should be improved.
Nadiri, et al (2009) studied the zone of tolerance for young customers‟ service
expectations and determines the customer satisfaction level for banks in Turkey. For
this study they have used BANKZOT model to identify the zone tolerance, in this
model they have used „desired service‟ „adequate service‟ „predicted service‟ and
„perceived service‟ factors to identify the zone tolerance. The result shows that there is
largest gap found in tangibles and empathy dimensions of banking service quality.
They mentioned that young customers are also more in tune with the technology lead
service changes in the banking sector such as ATMs, credit cards, telephone banking,
online/Internet banking, etc. Therefore, young customers are expect future generation
of bank and hence this segment of the market is considered to be very important.
Pinar et al (2010) has examined service quality and possible areas of
improvement in bank service quality in Ankara city of Turkey. They have used Mystery
shopping method to collect data in order to the study. The result shows that foreign
banks are offering the best service quality bank services than Turkish private and state
owned banks. Turkish state banks provided the lowest quality bank services. They
mentioned that state banks are providing consistently poorer quality services in all areas
of banking, particularly in Building Rapport, Greeting, and Closing. In order to
compete with private and foreign banks, the state banks need to improve the quality of

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their services in all areas. Since service quality is important for customer satisfaction
and business performance.
Shamdasani, et al (2008) investigated that “if consumers are highly satisfied
with the quality of self service banking, so why banks branches are increasing in recent
years?” To address this question they have assessed the antecedents and consequences
of perceived service quality to predict continued customer interaction in the
technology-based self-service context of Internet banking. For the assessment of
service quality they have used constructs perceived risk, perceived value and perceived
satisfaction are modelled in this framework including easy to use, reliability, speed,
enjoyment and control dimensions are used. The results of this study indicate that
perceived speed of delivery, reliability and enjoyment also have a significant impact on
service quality perceptions. However, ease of use is found weak factor in internet
banking service quality, only those customers are using internet banking who having
comfortable with advanced technology.
Cockrill, et al (2009) assessed the role of role of perceived risk and trust in
determining customer satisfaction with automated banking channels. They concluded
their results as; both trust and perceived risk appear to play a pivotal role in
determining customer satisfaction for ATMs and this has very important implications to
the way banks manage and improve their ATM networks as any way to reduce
perceived risk and or increase trust will have a direct impact on customer satisfaction.
Although security did not appear to play a direct role in determining customer
satisfaction there are very strong indirect effects through perceived risk.
Choudhury and Koushiki (2007), explored the dimensions of customer
perceived service quality in the context of the Indian retail banking industry. He has
used SERVQUAL methodology with expectation and perception to understand the
service quality and it gap. The four dimensions of customer-perceived service quality
are: attitude, competence, tangibles and convenience including 15 items comprising the
various aspects of service quality in this study. He suggests that customers distinguish
four dimensions of service quality in the case of the retail banking.
Yu, Chian-Son (2008), evaluated service quality of internet banking industry in
Taiwan. He has used SERVQUAL measures to asses‟ service quality, he mentioned
that service quality of internet banking should be asses in two different way‟s first is
bank service quality (easy to use, competence, variety of service) and another is system
service quality (security, reliability and responsiveness). As per his study bank

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customer consistently choose security and reliability to be the two most significant
attributes of system service quality, while ease-of-use is the most important service
quality attribute of banking service quality. He also pointed that expectations and
perceptions regarding online banking service quality between customers of specific
banks and the general public are significantly different.
Kannabiran, and Narayan, (2005) mentioned that the emergence of new
private-sector banks, expansion by the foreign banks, the changing business model of
the nationalized banks compounded by the financial sector reforms. Internet banking
has comprehensive features and functionality offered by Internet banking enabled the
bank to provide world-class customer service, at the same time improving efficiency
and reducing the cost of operations. As per their review the banking system has to meet
the requirements of urban India, where Internet has become a way of life, particularly
among the professionals and employees in technology companies, all of whom have
easy access to the Internet at their workplace and, in most cases, from their homes as
well.
Bauer et al, (2004), proposed the three-dimensional service quality concept
related to e-banking portals, it consist Core service quality (Ease of use,
Comprehensiveness and Credibility trustworthiness , Security of payment and data
transfer ,Reliability of technical potentials/tangibles of IT systems), Additional services
quality (Offering branded financial products, Offering online loans, Experience quality
and entertainment) and Solution services quality (Variety , Offering non-bank products
and services, Providing individual advice (call back, personal adviser), Personalizing
information and conditions and Providing interactive decision support tools).
All above research indicates that researchers have used multi dimensional
service quality approach to study the problem of customer satisfaction and loyalty in
alternative banking era. A multi-attributive quality measurement allows service
provider to better monitor and facilitate changes in performance (Anderson and
Lehmann, 1994; Chakib Hamadi,2010; Wahab et al 2009; Yu and Lo, 2007; Allred and
Addams 2001; Hossain and Leo (2009; Sudhahar et al, 2006; Uslu, Yurtkoru and
Sipahi 2006). Review research realized that there are numbers of service quality
dimension can be use to assess service quality and customer satisfaction in alternative
banking e. g. Ease of use, Security, Privacy, Information Quality, system availability,
efficiency, accuracy, assurance, Cost-effectiveness, speed of services, customer
centricity, reliability and responsiveness, problem handling, compensation

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2.9 Determinants of customer satisfaction in alternative banking

Customer satisfaction usually measures an overall psychological evaluation that
is based on the customer's service experience about service quality (Scott M. Smith,
2007). We have identified important service quality dimensions of alternative banking
services as a determinants of customers satisfaction as well determinates of overall
service quality of the alternative banking. A model is developed in order to understand
and predict relations between the antecedents and consequences of customer
satisfaction in alternative banking, as well as systematic differences in these relations in
private and public sector banks (See Figure 3.4). The model clarifies how customer
expectations of e-service quality interact with the actual experience of e-service quality
to generate satisfaction. As per E-S-QUAL and E-RecS-QUAL (Parasuraman et al.,
2005) there are seven determinants of e-service quality (Efficiency, Privacy,
Fulfilment, System availability, Responsiveness, compensation and contact). E-S-Qual
is the most valid and reliable instrument to measure e-service quality (Stiglingh M.,
2009, Wang and Wang 2006), it is extensively cited and tested in various context but
not in e-banking environment. Hence, we have customized this model in order to the
requirement of the present study. In this model all related consequences of satisfaction
are brought together in a single framework.
Service quality has become an increasingly important factor for success and
survival in the banking sector. The provision of high-quality service aids in meeting
requirements of customer satisfaction and loyalty. A poor-quality service will cause
dissatisfaction, while a good-quality service causes delight. An acceptable quality
confirmation rather than disconfirmation results in satisfaction. Many researchers
identified that there are very strong relationships exist between service quality and
customer satisfaction while emphasizing that these two are conceptually distinct
constructs from the customers‟ point of view (Parasuraman et al., 1985, 1988;
Ziethaml, 2000; Cronin & Taylor, 1992; Wang, Shieh, 2006).

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Figure 2.4: Conceptual Model of the Study

Source: Designed by Author Based on Review of Literature

There are a number of factors predetermining the consumer‟s attitude and

perceptions about e-banking. As per these reputed and well –known studies we have
developed research hypotheses required for this study. Study conducted by
Parasuraman et al (1985, 1988, 2002,), Zenithal et al. (2000, 2002), Cronin and Taylor
(1992) indicates that overall service quality influence the customer perception and their
satisfaction. Therefore, we have developed followings hypothesis for the study.
H2- Service quality significantly affects on customer satisfaction in alternative
services

Available literature of the service marketing and customers‟ satisfaction

assessment realised that the service quality of any service is key driver of the customer
satisfaction process. As a result we have identified quality dimensions of alternative
banking services with consideration of their speciality. Therefore, we have developed

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the eBankQual instrument and hypnotised 12 service quality dimensions (See Table
No.3.4 ) along with Brand perception and Perceived Value dimensions as given as
below:
Table No. 2.4: Service Quality Dimensions Used in eBankQual
Dimension Description
Up-to-date equipment and physical facilities- Full Branch
1. System
computerization, Core banking, ATM, POS, internet banking,
Availability
mobile banking, SMS alerts, credit card, EFT, ECS, E-bill pay
Scope of services offered, availability of global network,
2. E-Fulfillment
digitalization of business information, Variety of services
3. Accuracy Error free e-services through alternative banking channels
Speed of service (clearing, depositing, enquiry, getting
4. Efficiency information, money transfer, response etc.), immediate and quick
transaction and check out with minimal time.
Trust, privacy, believability, truthfulness, and security, building
5. Security customer confidence. freedom from danger about money losses,
fraud, PIN, password theft; hacking etc.
Problem handling, recovery of the problem, prompt service,
6. Responsiveness timeliness service, helping nature, employee curtsey , recovery of
PIN, password and money losses
Easy to use & functioning of ATM, Mobile banking, internet
7. Easy to use
banking, credit card, debit card etc.
Customized services, any ware and any time banking, appropriate
8. Convenience
language support, time saving
Price, fee, charges, - i.e. commission for fund transfer , interest
rate, clearing charges, bill collection and payments‟, transaction
9. Cost charges, charges on Switching of ATM, processing fees etc.etc
Effectiveness price, charges and commissions should be reduce and charges
taken by Telecommunication Company, devise designer
company, internet service providers
It refers to problem solving process regarding computerized
10. Problem
banking services
Handling
It refers to recover the losses regarding to problems and
11. Compensation
inconvenience occurred in using alternative banking channels.
Communication in bank and customer or customers to bank, Via
12. Contact e-mail, SMS, Phone, interactive website, postal communication,
fax
Source: Review of Literature

2.9.1 Brand perception – It is experience about brand reputation and actual perception
of promised or assumed level of service quality. Brand reputation has been defined as a
perception of quality associated with the brand's name. Brand reputation in banking
sector refers to the banks reputation and expiating place of bank in the banking industry
(Che-Ha and Hashim, 2007, Reynolds, 2007). It measures experience of the customer

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how he/she fill with this brand and their services. Perceived overall brand performance
is determined by some combination of beliefs about the brand's various performance
dimensions (Woodruff et al 1983). The bank might have spent millions of dollars to
creating reputation and popularity of the bank and customer are trying to attach with
good brand name. However, in the measurement of customer satisfaction it is necessary
to measure their performance according to the brand promise and actual service
delivery. The satisfied customer with brand will recommends that service to others
(Che-Ha and Hashim, 2007; Wafa M‟Sallem et al 2009) like friends, relatives,
collegiate etc. In the literature, however, brand reputation is seen more as a long-term
and overall evaluation of the product than customer satisfaction.

H3a: Brand perception of the alternative banking services has significantly affects
on customer satisfaction
2.9.2 Perceived value – it the one of most important construct of the customer
satisfaction measurement, it is used to assess the actual benefits of the service.
Perceived value is compression between price or charges paid for the services by the
customer as sacrifice of the money and utility derived by service perception.

H3b Perceived value of the alternative banking services has significantly affects on
customer satisfaction
In this study we have assessed overall satisfaction also it can be say cumulative
satisfaction. It is overall perception and concluded remark of the customer regarding
alternative banking channel used by customers. The overall remark of the customer is
based on his/her expectations about various aspects of service quality and actual service
he/she perceived by the particular bank.
2.10 Attitude measurement and scaling techniques
Attitudes are generally positive or negative views of a person it is not directly
observable but rather are inferred from the objective, evaluative responses a person
makes. (Britannica Encyclopedia). An attitude is a mental and neural state of readiness,
organized through experience, exporting a directive or dynamic influence upon the
individual‟s response to all objects and situations with which it is related (Dwyer and
Evelyn E. 1993). The attitude investigators assess the behavioural aspects, opinions,

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responses, feedback etc. In the consumer research activity, scaling is the process of
measuring or ordering entities with respect to quantitative attributes. Scaling is the
instrument for find the attitude in numerical measurement that involves associates
qualitative constructs with quantitative metric units. Scaling is the assignment of
objects to numbers or semantics according to a rule. Scaling emerged from the social
sciences in an attempt to measure or order attributes with respect to quantitative
attributes or behaviour. Scaling provides a mechanism for measuring abstract concepts
(Tariq Ahmad, 2007). Most of researchers have used Likert type scaling to address
customer satisfaction issue and measurement of service quality issue. Hence, we have
adopted Likert scaling to conduct customer survey.
Likert scales were first developed as strict 5-point scales by Rensis Likert
(American Psychologist, University of Michigan) in1932, in order to assess subjects'
attitudes toward social issues. Likert scale received wide range of acceptance (David
Ockert, 2005) even there is no any alternative method to assess attitude. Likert scaling
technique have used in psychology, marketing, education, medicine, dentistry,
nutrition, sport, business ethics, marketing, library, operation research, pharmacy,
organizational behaviour, finance, and family study (Adrian Achyar, 2008). In the
marketing research Likert scale method has been mostly used by various researchers.
With the Likert scale, the respondents indicate their own attitudes by checking
how strongly they agree or disagree, satisfied or dissatisfied with carefully worded
statements that range from very positive to very negative towards the attitudinal object.
Respondents generally choose alternative to rate their response from five alternatives is
called “Five Point Rating Scale” e.g. Strongly agree, Agree, Neither Agree Nor
Disagree, Disagree, Strongly Disagree or Very satisfied, Satisfied, Neither Satisfied
Nor Dissatisfied, Dissatisfied, Complete Dissatisfied. There is used odd numbered
scaling (i.e. 5 point, 7 point, 9 point …….) because midpoint indicates neutral scale
(neither agree nor disagree or neither satisfied nor dissatisfied) (Raaijmakers, et al,
2000). Some researchers have used 7 point, 9 point 10 point and 11 point rating to
record attitudes of respondents. There is risk in use of more numbered scale because
respondent confused due to range of choices from 1 to 11 points. The usual respondent
can‟t identify the appropriate rating among the vast scale (Carifio and Perla 2007). The
Likert Scale is most suitable being analyzed by non-parametric procedures such as
frequencies, tabulation and chi-squared statistics etc.

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Figure 2.5 Example of 5 point Likert Scale

In this rating customers gives „5‟ rating to asked item it is indicates very
satisfied, if customers rate „1‟ it indicates the customers is very dissatisfied with the
item/thing and if he/she rate „3‟ it indicates that, the customer is neither satisfied or nor
dissatisfied he/she is in neutral situation.
Summary
In this chapter we have conceptualized service, service quality, e-services,
quality attributes of e-services, e-banking and various e-banking channels offered by
banks. Available literature shows that the e-services and alternative banking services
are different than traditional services. Hence, there is need to assess their service
quality and its impact on customer satisfaction by special instrument. According to
marketing literature SERVQUAL and SERVPERF are the well known models are used
to assess service quality and its influence on customer satisfaction. These are original
model and several applications of SERVQUAL and SERVPERF has been found.
However, there is no model or instrument available to assess service quality of
alternative banking services, hence; we have developed eBankQual as a special model
for the evaluation of the service quality of alternative banking. It is not only instrument
for assess the service quality of alternative banking it also useful to measurement of
customer satisfaction in alternative banking. In the eBankQual there are eight service
quality dimensions (System availability, e-fulfilment, efficiency, cost-effectiveness,
responsiveness, assurance, convenience and contact) and two other dimensions i.e.
perceived value and brand reputation have been established in the model. It is survey
based application and used „Five Point Likert Type Scale‟ to responses recoding. We
have hopes that, it is one of the best appropriate models and it can be use to assess
service quality and customer satisfaction of other e-services also.

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Chapter II- Reviews and Theoretical Background Kumbhar V. M.