The Impact of Service Quality on Customer Loyalty: A Study of Bank Mali in Seakale City, Guilin, Iran

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1 International Research Journal of Applied and Basic Sciences 2012 Available online at ISSN X / Vol, 3 (10): Science Explorer Publications The Impact of Service Quality on Customer Loyalty: A Study of Bank Mali in Seakale City, Guilin, Iran Maryam Talebi 1,MA Dadashi 2, K Ezzatdoust 3, K Farajy 3 1. Faculty member at Guilan Research Center for Agriculturaland Natural Resources 2. Master of Education, Guilan Province 3. Expert at Guilan Research Center for Agricultural and Natural Resources M.A in statisticsshaid Chamran University of Ahvaz Corresponding author maryam talebi@yahoo.com ABSTRACT: The speed of development, intense competition in different fields, technological developments, development of competition, globalization, and confrontation with complex and dynamic environments have led to a survival challenge for organizations. Incremental changes in the banking system of the country, and then try of private competitors in to the field of banking services, have caused bank executives to increase each customer s share and to maintain their customers for a long time to earn higher incomes. The necessity of customer retention and turning customers into permanent and loyal ones depend on customer satisfaction with the quality of banking services, in a way that customer loyalty can increase profitability, continually reduce the cost of recruiting and advertising, be the key to business success and make it possible to address new opportunities. Service quality of the banking system and performance of the bank splay a major role in the economic development of the country. Given the importance of this issue, this study explores the impact of service quality on customer loyalty for Bank Melli, branch Siahkal, aiming toim prove the quality of banking services and customer loyalty. The statistical society of the research comprises the customers of Bank Melli, Siahkal city, and the sample is drawn from among these customers using non probability/ available sampling method. Using the collected data, research hypotheses were tested through the SPSS software; correlation coefficient and regression analyses were used to test the hypotheses; and the results indicated that there is a significant difference between the quality of banking services and customer loyalty to Bank Melli, Siahkal city. Keywords: quality, services, loyalty, customer In any organization, offering either services or products, the most important factor for its survival is the customers. If the organization is successful in eliciting satisfaction and, in particular, loyalty from its customers, it has paved its way for growth and long-term survival. Satisfied customers will remain longer with the organization, and by talking positively to others and to potential customers about the organization, they will increase interest in the use of the irproducts or services and will attract new customers for the organization. Furthermore, customer loyalty will improve profitability and gain competitive market share. In a banking system, the customer sare the main axis and in fact everything is done to satisfy and attract them. Thus, in a competitive environment a mong banks, those ableto make customers moreloyal are more successful. On the other hand, regarding the increasing customer sensitivity to services offered by the banks, customers increasingly want better and better services. According to statistics published by the Iranian Management and Planning Organization, and given low levels of customer satisfaction with various government agencies in cluding monetary and financial institutions such as banks, which enjoy the high est number of customers, especially in recent years, attention to the impact of banking services quality on customer loyalty can improve profitability, reduce the constant cost of advertising to attract customers, and make it possible to address new opportunities. Therefore, because of increasing changes in the banking industry, competition in the business market, and the heightening of customer expectations, banks should evaluate and analyze the quality of their services and, by understanding their points of strength and weakness, meet the growing expectations of their customers in order to ensure their survival, since no system can exist without customers. (Abbasi, 2002) believes that banks, in order to deal with competitors and tackle environmental changes, have to identify the needs and expectations of customers concerning market conditions so as to win the contest. (Abdolvand, 2002) believes that the realization of customer domination depends on several factors, among which are: considering customer demands; responding clearly to customer needs; providing a variety of new and innovative services;

2 providing services as fast as possible using modern equipment and facilities; dealing effectively with employees; and assuring customers. In the field of banking industry, banks which are able to satisfy customers are more successful. Kotler (2004) states that there is always a difference between customer expectation and the (perceived) quality of services they receive, which is also known as the gap theory. Reichheld and Sasser (1990) showed in their research thata 5%reduction in the number of customers results in an 85% loss in the earnings of insurance companies, while a 5% increase in customer retention will cause a 25% up to125% percent increase in bank profitability and a 75% increase in industrial profitability (Assadi, 2008). MATERIALS AND PROCEDURES Methodologically, this study is acorrelational research. In a correlation study such as this, the main purpose is to determine whether there is a relationship between two or more quantitative(measurable) variables and if there is, to determine how much and how strong it is. In this type of research (i.e., correlational)the focus is on exploring the effects of variableson each other, so as to clarify which variable, from among the experimental factors, has a connection to one or more variables/ factors(khaki,2003). The aim is to determine the coefficient of correlation between all the present variables. On the other hand, regarding research categorization, this research is considered to be a descriptive study in terms of its objectives (Bayan, 1996).In this study, the Correlation Coefficient and Regression Analysis are used to determine whether the quality of banking services has an impact on customer loyalty, and based on research questions and variables, what impact does each of the factors (diversity, good customer reception by the personnel, and assurance) have on customer loyalty, if at all. Regarding the degree of supervision and control, this research is afield study because the researche reexamines the variables in their natural state; and regarding the extent of application, this can be called an applied research. Statistical society, sample size and sampling method The statistical society is defined as a group of people (or elements) in a specific geographical scale (globalor regional), with one or more common characteristics(hafeznia, 2004). The statistical society of this study comprises the customers of Bank Melli, Siahkal city. During visits tothe bank office, interviews with the personnel and referring to the bank s documents, it came out that average customer visits to Bank Melli, branch Siahkal, which is the only branch in the city, is about 70. Based on the Krejcie&Morgan sample size table, a desired sample of 60 people was drawn randomly for the research. Data collection instrument To investigate the validity of the research, content validity method was used. Content validity ensures that the instrument has enough and appropriate questions to evaluate the concept under study. In other words, contentvalidity indicates the extent to which different dimensions and elements of aconcept are accurately covered (Sekaran, 2002,). To investigate the reliability of the research, the Cronbach's alpha coefficient was used because, in almost all cases, it can bequite use fulas an indicator of validity and internal consistency for application. After the final confirmation of counselors, a questionnaire of 60 items was administered to determine the Cronbach's alpha coefficient. It was then analyzed using the SPSS software. Results the of variable analysis affirmed reliability of the questionnaire. Regression analysis and significant correlation tests were used to test the hypotheses. Statistics used intesting hypotheses Pearson's correlation coefficient was used to produce statistics used intesting hypotheses: the null hypothesis in this test suggests that there is no correlation. Thisin dexis calculated by the following formula (Hashemiparast, 2007).

3 RESULTS Table1. The variety of services The variety of services variable has an average of6.73 and a standard deviation of1.64. Also, it has a minimum score of3 and a maximumof 9. Table 2. the variety of services Good customer reception by the personnel The good customer reception variable has an average of8.96 and a standard deviation of Also, it has a minimum score of3 anda maximumof 12. Table 2. an account of thegood customer reception variable Assurance The assurance variable has an average of9.66 and a standard deviation of Also, it has a minimum score of6 anda maximumof 12. Table 3. an account of the assurance variable Loyalty The loyalty variable has an average of9.13 and a standard deviation of Also, it has a minimum score of4 anda maximumof 12.

4 Table 4. an account of the loyalty variable Regression Analysis DISCUSSION Regression analysis is a statistical method which is used to explain and predict independent variables through the dependent variable. Thus, regression analysis is functionally used to explain and predict. Testing research hypotheses Testing the first hypothesis There is a significant difference between the variety of services and customer loyalty. H 0 : There is a significant difference between the variety of services and customer loyalty. H 1 : There is no significant difference between the variety of services and customer loyalty. Table 5. Correlation between the variety of services and customer loyalty As can be seen in the correlation Table 5, since the amount of significance is and is lower than α = 5%, H0 is rejected. It can be said that at the 0.01 level, there is a significant difference between the variety of services and customer loyalty, with a correlation coefficient equal to Testing the second hypothesis There is a significant difference between good customer reception by the personnel and customer loyalty. H 0 : There is a significant difference between good customer reception by the personnel and customer loyalty. H 1 : There is no significant difference between good customer reception by the personnel and customer loyalty.

5 Table 6. Correlation between good customer reception and customer loyalty. As can be seen in the correlation Table 6, since the amount of significance is and is lower than α = 5%, H0 is rejected. It can be said that at the 0.01 level, there is a significant difference between good customer reception and customer loyalty, with a correlation coefficient equal to Testing the third hypothesis There is a significant difference assurance and customer loyalty. H 0 : There is a significant difference assurance and customer loyalty. H 1 : There is no significant difference assurance and customer loyalty. Table 7. Correlation between assurance and customer loyalty. As can be seen in the correlation Table 7, since the amount of significance is and is higher than α = 5%, H0 is accepted. It can be said that there is no significant difference assurance and customer loyalty. Testing the fourth hypothesis There is a significant difference between thequality of banking services and customer loyalty. H 0 : There is a significant difference between the quality of banking services and customer loyalty. H 1 : There is no significant difference between the quality of banking services and customer loyalty. Table 8) Correlation between the quality of banking services and customer loyalty. Regression

6 In order to test the fourth hypothesis, i.e., the relationship between the quality of banking services andcustomer loyalty, thestepwise regression methodis used. As can been seen in the above table, the regression analys is has only gone one stepforward. In other words, only the variety of services variable was put into the equation and the amount of its correlation(r) with the dependent variable is 0.62.The coefficient of determination(r2)in this step equals Given this coefficient of determination, 38.5 percent of the dependent variable, customer loyalty, is explained by the variety of services variable. Also, the amount of F in the ANOVA table is significant at the 99% level(sig=0/000), indicating significance of the regression. However,error rates for the other variable sare more than 0.05 and thus, they were not put into the equation. Based on the B value in the correlationtable, the regression equation can bewrittenas follows: Y (the variety of services) = 4/ /752 Based on the obtained beta for the variety of services variable, each unit of change in the standard deviation of the variety of services variable causes a change in the standard deviation of the dependent variable (customer loyalty). Table 8. Correlation between the quality of banking services and customer loyalty.

7 Table 8. Continue Suggestions In line With The Research Results Given the impact of banking services diversity on customer loyalty, it is suggested that the bank widens the scope of its services in terms of type and method in order to increase customer loyalty.the use of electronic banking practices such as internet,sms,mobileand telephone banking systems can be remedial. However, it should be kept in mind that variety should not be limited to the type of service delivery, but it should also include providing loans for, and paying interests to, the customers. Given the impact of good customer reception by the personnel on customer loyalty, it is suggested that bank personnel mainta in courtesy and sympathy with clients while receiving them, and act in a way that clients feel the personnel are trying to help them and solve their problems. It should also be noted that if all other factors and variable saffecting customer loyalty in a positive way are observed, but the personnel do not receive the clients in an appropriate way, there will be no good results. It can be said that proper customer reception by the personnel is the main condition for the bank to increase customer loyalty. REFERENCES Assadi A Factors Affecting Customer Loyalty. Engineering Management Journal, Issue 12. Hafeznia M R Introduction to Research Methods in the Humanities. Samt Publications, 1 st printing. Khaki G Research Methodology in Managing The Islamic Azad University. Elmi Publication Center Khaki G Research Methodology in Writing Dissertation. Tehran: Baztab Publications, 2 nd Printing. Kotler P Principles of Marketing. Translated by Dr. Ali Parsaeian. JahaneNoe Publications, 2 nd Volume. Kotler P Marketing Management: Analysis Planning and Control. Translated by Dr. Ali Parsaeian. Tehran: Termeh Publications, 1 st printing. Sekaran U Research Methods in the Humanities. Samt Publications.