MEASURING THE SERVICE QUALITY OF UNITED

BANK S.C. AND ITS RELATIONSHIP WITH CUSTOMER

SATISFACTION

By: Deborah Mammo

ID No. GSE/0785/04

ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE

Advisor: Dr. Getie Andualem (PhD)

A Research Project Submitted to Addis Ababa University, School of Commerce

Department of Marketing Management, in partial fulfillment of the requirements
for the Degree of Master of Arts in Marketing Management.

June, 2014
Addis Ababa, Ethiopia
 Statistics

Gender of Age of Marital Status of Education level

respondents Respondents respondents of respondents

N Valid 303 303 303 303

Missing 0 0 0 0

Gender of respondents

Cumulative
Frequency Percent Valid Percent Percent

Valid Male 207 68.3 68.3 68.3

Female 96 31.7 31.7 100.0

Total 303 100.0 100.0

Age of Respondents

Cumulative
Frequency Percent Valid Percent Percent

Valid 18-29 144 47.5 47.5 47.5

30-39 108 35.6 35.6 83.2

40-49 42 13.9 13.9 97.0

>=50 9 3.0 3.0 100.0

Total 303 100.0 100.0

Marital Status of respondents

Cumulative
Frequency Percent Valid Percent Percent

Valid Single 162 53.5 53.5 53.5

Married 132 43.6 43.6 97.0

Other 9 3.0 3.0 100.0

Total 303 100.0 100.0

1
 Education level of respondents

Cumulative
Frequency Percent Valid Percent Percent

Valid Elementary 6 2.0 2.0 2.0

High School 36 11.9 11.9 13.9

Certificate or Diploma 102 33.7 33.7 47.5

First Degree 147 48.5 48.5 96.0

Second Degree and Above 12 4.0 4.0 100.0

Total 303 100.0 100.0

One-Sample Statistics

N Mean Std. Deviation Std. Error Mean

Tangability 303 16.5612 2.21553 .22380

Reliability 303 17.4184 1.98927 .20095

Responsiveness 303 21.5258 2.89789 .29424

Empathy 303 20.2105 2.83179 .29054

Assurance 303 17.9794 1.88734 .19163

One-Sample Test

Test Value = 0

95% Confidence Interval of the

Difference

t df Sig. (2-tailed) Mean Difference Lower Upper

Tangability 73.999 97 .000 16.56122 16.1170 17.0054

Reliability 86.682 97 .000 17.41837 17.0195 17.8172

Responsiveness 73.158 96 .000 21.52577 20.9417 22.1098

Empathy 69.563 94 .000 20.21053 19.6337 20.7874

Assurance 93.823 96 .000 17.97938 17.5990 18.3598

2
 Level of Customer Satisfaction

Cumulative
Frequency Percent Valid Percent Percent

Valid somewhat dissatisfied 6 2.0 2.0 2.0

somewhat satisfied 141 46.5 46.5 48.5

very satisfied 156 51.5 51.5 100.0

Total 303 100.0 100.0

Correlations
Level of Customer
Satisfaction Tangability Reliability Responsiveness Empathy Assurance
** ** ** ** **
Level of Pearson Correlation 1 .374 .328 .538 .523 .404
Customer
Sig. (2-tailed) .000 .001 .000 .000 .000
Satisfaction
N 303 98 98 97 95 97
** ** ** ** **
Tangability Pearson Correlation .374 1 .511 .471 .421 .488
Sig. (2-tailed) .000 .000 .000 .000 .000
N 98 98 95 95 92 94
** ** ** ** **
Reliability Pearson Correlation .328 .511 1 .585 .525 .591
Sig. (2-tailed) .001 .000 .000 .000 .000
N 98 95 98 94 92 95
** ** ** ** **
Responsiveness Pearson Correlation .538 .471 .585 1 .585 .544
Sig. (2-tailed) .000 .000 .000 .000 .000
N 97 95 94 97 91 93
** ** ** ** **
Empathy Pearson Correlation .523 .421 .525 .585 1 .584
Sig. (2-tailed) .000 .000 .000 .000 .000
N 95 92 92 91 95 92
** ** ** ** **
Assurance Pearson Correlation .404 .488 .591 .544 .584 1
Sig. (2-tailed) .000 .000 .000 .000 .000
N 97 94 95 93 92 97
**. Correlation is significant at the 0.01 level (2-tailed).

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate
a
1 .374 .140 .131 .571

a. Predictors: (Constant), Tangability

3
 ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 5.081 1 5.081 15.569 .000a

Residual 31.328 96 .326

Total 36.408 97

a. Predictors: (Constant), Tangability

b. Dependent Variable: Level of Customer Satisfaction

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients Collinearity Statistics

Model B Std. Error Beta t Sig. Tolerance VIF

1 (Constant) 2.759 .437 6.307 .000

Tangability .103 .026 .374 3.946 .000 1.000 1.000

a. Dependent Variable: Level of Customer Satisfaction

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate

1 .328a .107 .098 .582

a. Predictors: (Constant), Reliability

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 3.913 1 3.913 11.560 .001a

Residual 32.495 96 .338

Total 36.408 97

a. Predictors: (Constant), Reliability

b. Dependent Variable: Level of Customer Satisfaction

4
 a
Coefficients

Standardized
Unstandardized Coefficients Coefficients Collinearity Statistics

Model B Std. Error Beta t Sig. Tolerance VIF

1 (Constant) 2.711 .521 5.207 .000

Reliability .101 .030 .328 3.400 .001 1.000 1.000

a. Dependent Variable: Level of Customer Satisfaction

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate

1 .538a .289 .281 .520

a. Predictors: (Constant), Responsiveness

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 10.457 1 10.457 38.609 .000a

Residual 25.729 95 .271

Total 36.186 96

a. Predictors: (Constant), Responsiveness

b. Dependent Variable: Level of Customer Satisfaction

5
 a
Coefficients

Standardized
Unstandardized Coefficients Coefficients Collinearity Statistics

Model B Std. Error Beta t Sig. Tolerance VIF

1 (Constant) 2.023 .398 5.081 .000

Responsiveness .114 .018 .538 6.214 .000 1.000 1.000

a. Dependent Variable: Level of Customer Satisfaction

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate
a
1 .523 .274 .266 .527

a. Predictors: (Constant), Empathy

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 9.752 1 9.752 35.058 .000a

Residual 25.869 93 .278

Total 35.621 94

a. Predictors: (Constant), Empathy

b. Dependent Variable: Level of Customer Satisfaction

a
Coefficients

Standardized
Unstandardized Coefficients Coefficients Collinearity Statistics

Model B Std. Error Beta t Sig. Tolerance VIF

1 (Constant) 2.164 .392 5.521 .000

Empathy .114 .019 .523 5.921 .000 1.000 1.000

6
 Coefficientsa

Standardized
Unstandardized Coefficients Coefficients Collinearity Statistics

Model B Std. Error Beta t Sig. Tolerance VIF

1 (Constant) 2.164 .392 5.521 .000

Empathy .114 .019 .523 5.921 .000 1.000 1.000

a. Dependent Variable: Level of Customer Satisfaction

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate

1 .404a .163 .154 .565

a. Predictors: (Constant), Assurance

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 5.908 1 5.908 18.538 .000a

Residual 30.277 95 .319

Total 36.186 96

a. Predictors: (Constant), Assurance

b. Dependent Variable: Level of Customer Satisfaction

Coefficientsa

Standardized
Unstandardized Coefficients Coefficients Collinearity Statistics

Model B Std. Error Beta t Sig. Tolerance VIF

1 (Constant) 2.111 .552 3.825 .000

Assurance .131 .031 .404 4.306 .000 1.000 1.000

a. Dependent Variable: Level of Customer Satisfaction

7
 Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .635a .404 .365 .501

a. Predictors: (Constant), Assurance, Tangibles, Responsiveness, Empathy, Reliability

ANOVAb

Model Sum of Squares df Mean Square F Sig.

a
1Regression 13.276 5 2.655 10.558 .000

Residual 19.616 78 .251

Total 32.893 83

a. Predictors: (Constant), Assurance, Tangibles, Responsiveness, Empathy, Reliability

8
 Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .635a .404 .365 .501

9
 a
Coefficients

Unstandardized
Coefficients Standardized Coefficients Collinearity Statistics

Toleranc
Model B Std. Error Beta t Sig. e VIF

1 (Constant)
1.404 .600 2.340 .022

Tangibles .034 .029 .125 2.169 .014 .672 1.487

Reliability .032 .040 .193 2.196 .003 .545 1.834

Responsive
.079 .025 .373 3.098 .001 .528 1.896
ness

Empathy .075 .027 .324 2.738 .008 .547 1.827

Assurance .073 .041 .218 2.837 .011 .525 1.905

a. Dependent Variable: Satisfaction Level of Customer Satisfaction

10
 Addis Ababa University School of Commerce Graduate Studies MA Program

Measuring Service Quality of United Bank S.C. and its Relationship with Customer Satisfaction

By: Deborah Mammo

Approved by Board of Examiners

____________________________ _______________

Name Signature

____________________________ _______________

Name Signature

____________________________ _______________

Name Signature
 Statement of certification
This is to certify that Deborah Mammo Adera has carried out her research work on the topic
entitled Measuring Service Quality of United Bank S.C. and its relationship with customer
satisfaction. The work is original in nature and is suitable for submission of the award of
Masters Degree in Marketing Management.

______________________

Advisor: Getie Andualem (PHD)

Date: _____________________
 Statement of Declaration

I herby declare that Measuring Service Quality of United Bank S.C. and its Relationship with
customer Satisfaction project is wholly the work of Deborah Mammo. I have carried out the
present study independently with the guidance and support of the research advisor Getie
Andualem (PHD). Also any other contributors or sources have either been referenced in the
prescribed manner or are listed in the acknowledgement together with the nature and the
scope of their contribution. And the study has not been submitted for award of any Degree or
Diploma program in this or any other institution. It is in partial fulfillment of the requirement of
the program Master’s Degree in Marketing Management.

_______________________

Deborah Mammo

Date: __________________
 ACKNOWLEDEMENTS
First, I would like to thank God for providing me the resources to do this research. Second I
would like to extend my appreciation and thanks to my advisor Dr. Getie Andualem (PhD) for
the guidance and assistance he provided. Third, I would like to thank United Bank S.C. staff
members for their assistance in the distribution and collection of questionnaires. I would also like
to thank United Bank S.C. for their approval to the research to be conducted on the company.
Finally, I would like to thank my family and friends for their support and encouragement.

I
 TABLE OF CONTENT

Description Page no.

Acknowledgments……………………………………………………….……………… I
Table of Contents ……………………………………………………….… …………… II
List of Tables……………………….………………………………….......................... III
List of Figures ………………………………………………………….......................... V
Abstract…………………………………………………………………... …………… VI
Chapter One: Introduction 1

1.1 Background of the study …………………………………………………………… 1

1.2 Statement of the problem…………………………………………………………… 3

1.3 Objectives of the study…………………………………………………………….. 4

1.3.1 Specific Objectives………………………………………………………… 4

1.4 Research Hypothesis……………………………………………………………….. 5

1.5 Definition of terms…………………………………………………………………. 6

1.5.1 Conceptual definition……………………………………………………… 6

1.6 Significance of the study………………………………………………………….... 7

1.7 Delimitation of scope……………………………………………………………….. 7

1.8 Organization of the research………………………………………………………… 7

II
Chapter Two: Literature Review

2.1 Introduction ………………………………………………………………………… 8

2.2 Service defined…………………………………………………………………….... 8

2.3 Service characteristics……………………………………………………………….. 8

2.4 Evidence of service………………………………………………………………….. 9

2.4.1 Process……………………………………………………………………... 9

2.4.2 People………………………………………………………………………. 10

2.4.3 Physical evidence………………………………………………………….. 10

2.5 Quality definition…………………………………………………………………... 10

2.6 Definition of service quality………………………………………………………… 11

2.7 Underlying principles of service quality……………………………………………. 12

2.8 Service quality dimensions………………………………………………………...... 12

2.9 The gap model……………………………………………………………………….. 13

2.10 The SERVQUAL model of measuring service quality………………………….. 15

2.10.1 Problems with SERVQUAL………………………………………………. 16

2.11 The SERVPERF model of measuring quality……………………………………. 16

2.12 Measuring customer satisfaction…………………………………………………. 18

2.13 Relationship between service quality and customer satisfaction………………… 18

2.14 The relationship between service quality and profitability……………………….. 20

III
 Chapter Three: Research Methodology

3.1 Introduction ………………………………………………………………………. 21

3.2 Research Design….………………………………………………………………… 21

3.3 Sample and sampling techniques……………………………………………………... 21

3.4 Procedure for Data Collection ………………………………………………………. 23

3.5 Source of data collection……………………………………………………............... 24

3.6 Instrument of data collection………………………………………………………… 24

3.7 Method of data analysis…………………………………………………………....... 25

3.8 Reliability and Validity…………………………………………………………….… 25

3.8.1 Reliability……………………………………………………………………. 25

3.8.2 Validity……………………………………………………………………... 25

3.9 Ethical considerations……………………………………………………………… 27

Chapter Four: Data Analysis

4.1 Introduction……………………………………………………………………….. 28

4.2 Reliability Analysis………………………………………………………………… 28

4.3 Validity Analysis…………………………………………………………………… 29

4.4 Respondent’s profile……………………………………………………………….. 29

4.5 Descriptive analysis of service quality measurement………………………………. 31

4.6 Customer Satisfaction……………………………………………………………… 32

4.7 Correlation analysis b/n service quality dimensions and customer satisfaction…… 33

4.8 Regression analysis………………………………………………………………… 35

IV
 4.8.1 Tangibles………………………………………………………………….... 35

4.8.2 Reliability…………………………………………………………………... 37

4.8.3 Responsiveness…………………………………………………………….. 38

4.8.4 Empathy…………………………………………………………………… 40

4.8.5 Assurance………………………………………………………………….. 41

4.9 Overall Regression Analysis……………………………………………………… 43

Chapter Five: Summery of Findings, Conclusions, Recommendation And

Limitation and Implications for Further Researcher

5.1 Finding……………………………………………………………………………... 46

5.2 Conclusion…………………………………………………………………………. 47

5.3 Recommendations…………………………………………………………………. 48

5.4 Limitation and Implications for further researcher………………………………… 49

References

Appendix A

Appendix B

Appendix C

V
List of Tables

Table 3.1: List of branches the questionnaire was distributed to …………………………. 24

Table 4.1. :Reliability Measure of service quality dimensions…………………………… 29

Table 4.2.: Customer Profile…………………………………………………………… 30

Table 4.3. One Sample Statistics………………………………………………………… 32

Table 4.4: Customer Satisfaction level ……...…………………………………………. 33

Table 4.5: Correlations…………………………………………………………………… 34

Table 4.8.1.(a): Model summary of tangibles…………………………………………… 36

Table 4.8.1.(b): Tangibles coefficients………………………………………………… 36

Table 4.8.1.(c) Tangibles ANOVA……………………………………………………… 36

Table 4.8.2. (a): Model summary of reliability…………………………………………. 37

Table 4.8.2. (b): Reliability coefficients……………………………………………….. 37

Table 4.8.2. (c): Reliability ANOVA………………………………………………… 38

Table 4.8.3. (a): Model summary of responsiveness…………………………………… 38

Table 4.8.3.(b): Responsiveness coefficients…………………………………………. 39

VI
Table 4.8.3.(c) Responsiveness ANOVA……………………………………………. 39

Table 4.8.4.(a): Model summary of empathy ………………………………………… 40

Table 4.8.4.(b): Empathy coefficients………………………………………………… 40

Table 4.8.4.(c) Empathy ANOVA…………………………………………………… 41

Table 4.8.5.(a): Model summary of assurance ……………………………………….. 42

Table 4.8.5. (b): Assurance coefficients……………………………………………… 42

Table 4.8.5.(c) Assurance ANOVA…………………………………………………. 42

Table 4.9:(a) Model summary for SERVPERF……………………………………... 43

Table 4.9.(b): Coefficients table for SERVPERF Model…………………………… 43

Table 4.9.(c): SERVPERF ANOVA…………………….………………………….. 43

VII
List of Figures

List of Figures

Figure 2.1: Evidence of service(Zeithaml and Bitner (1996:115)………..………………………9

Figure 2.2: The Integrated Gaps Model of Service Quality by Parasuraman et al. (1985)……14

Figure 2.3: A conceptual model for measuring the relations between the five service quality

measurement constructs (reliability, responsiveness, tangibles, assurance and empathy) has on

customer satisfaction.…………………………………………………………………………19

VIII
Abstract

In order to maintain the market share in this time of high competition, commercial banks
in Ethiopia need to provide a high quality of service to their customers. This paper
measures the service quality of United Bank S.C. and its relationship with customer
satisfaction. To do so it used the SERVPERF model of measuring service quality
developed by Cronin and Tailor in 1992, which used five dimensions (tangibility,
reliability, responsiveness, empathy and assurance). The instrument measured service
five dimensions of
performance by using twenty two indicators that belong to the
SERVPERF. The instrument was tested for reliability and validity before the
questionnaire was distributed to 385 customers of United Bank S.C., Addis Ababa
branches. In this quantitative survey, Hypothesis was tested to find out whether service
quality dimensions had a positive relationship with customer satisfaction. The results
indicated that all the dimensions had a positive correlation with service quality and also
the regression analysis indicated the two most dominant service quality dimensions
from among the five dimensions to be responsiveness followed by empathy. The finding
of this study is important to help managers focus their attention on the service quality
dimension that matters most to customers.

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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

CHAPTER ONE:

1. INTRODUCTION

Under this chapter background of the study, statement of the problem, objective of the study,
research hypotheses, definition of terms, significance of the study, limitation of the study and
organization of the paper will be discussed.

1.1.BACKGROUND OF THE STUDY

Modern banking in Ethiopia began in 1905 with the Bank of Abyssinia, a private company
controlled by the Bank of Egypt. In the years that followed, the fate of the banks varied with
the style of the government regime. In 1931 Bank of Egypt was liquidated and replaced by
the Bank of Ethiopia which was the bank of issue until the Italian invasion of 1936. In 1943,
the State Bank of Ethiopia was established, In 1963, the National Bank of Ethiopia (the
central and issuing bank) and the Commercial Bank of Ethiopia were formed. (Mauri, 1971).
In the period to 1974, several other financial institutions emerged. Then the shift to Marxist
government in 1975 brought several changes to the banking system, and saw the
nationalization of private banks and insurance companies. After the fall of the socialist
regime in 1991 the financial sector of the country witnessed a major shift of paradigm.
Numerous private banks, insurances and micro financial institutions were established.
(Deribie, 2012). Currently, the number of Ethiopian owned commercial banks has reached
nineteen, sixteen private owned and three government owned. And the national bank of
Ethiopia has the mandate to License, supervise and regulate the operations of banks,
insurance companies and other financial institutions. (www.nbe.gov.et)
This paper aims to measure the level of service quality offered by United Bank S.C. Addis
Ababa branches and its relationship with overall customer satisfaction level. United Bank
S.C. was incorporated as a Share Company on 10 September 1998.
(www.unitedbank.com.et.). As of December 31, 2013, it has 46 branches in Addis Ababa and
30 branches in outlaying areas in Ethiopia. In the fiscal year 2011/2012 it was the third
ranking bank in profits in Ethiopia from among the private commercial banks with a profit of
406,496,613. (Annual report 2012). In the period 2012∕2013 it made a profit of 374,162,288
before tax. (Annual report 2013).

Measuring the Service Quality of United Bank S.C. and its Relationship with Customer Satisfaction
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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

Before measuring the service quality, what is the definition of service? Kottler (2003)
defined service as any activity or benefit that one party can offer to another that is essentially
intangible and does not result in the ownership of anything. Its production may or may not be
tied to a physical product.
Parasuraman, Zeithaml, V.A., Berry, L.L., (1988) defined service quality and customer
satisfaction as “service quality is a global judgment, or attitude, relating to the superiority of
the service, whereas satisfaction is related to a specific transaction.
Since service is intangible its measurement becomes difficult than measuring the quality of
goods. Different models have been developed to measure the quality of service. The
SERVQUAL model by Parasuraman, A., Zeithaml, V.A. and Berry, L. (1985) is the generic
model of measuring service quality. The SERVQUAL model is developed to measure service
quality from the view point of the customer by comparing what the consumer expected prior
to the service and perceived level of service received. The model uses five measurement
dimensions: tangibles, reliability, responsiveness, assurance and empathy to measure service
quality Parasuraman et al (1988). Based on this generic model the SERVPERF model was
developed in 1992 by Cronin and Taylor & this model is a performance only measure of
service quality but uses all the dimensions of service quality in the SERVQUAL model. This
research uses the SERVPERF (performance only) model to measure the service quality of
United Bank S.C. and its relationship with customer satisfaction.

Measuring the performance of the service will help the company know its best service quality
dimensions and its weak service quality dimensions. Furthermore it will help the bank know
which dimension is more important to customers. This will in turn help the bank improve its
service quality then ultimately its customer satisfaction level and profit. Therefore these two
questions need to be answered by this study; what is the level of service quality that United
Bank S.C. offers in accordance to each service quality measurement dimension? Which
dimension of service quality matters more to customers and contributes more to overall
customer satisfaction?

With the emergence of new private banks in Ethiopia, competition is increasing. Therefore,
one way of offering value to customers is by offering quality service. The findings of the

Measuring the Service Quality of United Bank S.C. and its Relationship with Customer Satisfaction
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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

study will help United Bank S.C. improve the service quality or build on what it is currently
practicing to achieve the desired level of service quality.

1.2.STATEMENT OF THE PROBLEM

The number of banks in Ethiopia has now reached nineteen. Consequently competition
among them has become tense over the years. Banks being service providing firms can use
service as a competitive edge. Providing higher service quality that satisfies customers is one
way to win in this competition. Therefore finding out what the current level of service quality
is becomes essential for United Bank’s future as the competition intensifies. Most of the
private banks in the banking industry of Ethiopia offer similar types of products, therefore
the differentiation lies in the service quality offered. High quality of service will lead to high
customer satisfaction, ultimately profit will increase. (LeBlanc and Nguyen, 1988).
Therefore, to what extent the service rendered by United Bank S.C. satisfies customers and
ultimately maximizes profit is the focus to this study. The topic of the study is important for
United Bank S.C. because the company can use the data obtained for specific investment
purposes since the result of the study will focus the bank on areas of service quality
dimensions which are found to be more important. Even though much research is done on the
area of service quality in banks, it is still important for United Bank S.C. to measure its
specific service quality level. Since the bank can find its strongest and weakest service
quality dimensions, find which dimensions matter more to customers, find what level of
investment is required and act on the dimensions which are found to be most important.

BASIC RESEARCH QUESTIONS

The following are the basic research questions that the study will answer

i. What is the level of service quality offered by United bank S.C. when measured by using
the tangibles, reliability, responsiveness, assurance and empathy dimensions?
ii. What is the relationship between service quality dimensions and customer satisfaction?
iii. What is the dominant service quality dimension that has strong relation with customer
satisfaction in United Bank S.C.?

Measuring the Service Quality of United Bank S.C. and its Relationship with Customer Satisfaction
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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

iv. What actions must be taken by managers in order to improve service quality dimensions
and satisfy customers?

1.3.OBJECTIVES OF THE STUDY

The objective of this paper is to measure the service quality of UB and its relationship with
customer satisfaction, since service quality is a major factor that affects customer satisfaction
and the ultimate bottom line, profit. Avkiran(1996)

1.3.1. SPECIFIC OBJECTIVES

i. To measure the service quality of United Bank S.C. based on customers’ perception
of service quality that are measured by using the tangibles, reliability,
responsiveness, assurance and empathy dimensions.
ii. To investigate the relationship between service quality dimensions and customer
satisfaction.
iii. To identify the dominant service quality dimension that has strong relation with
customer satisfaction in United Bank S.C.
iv. To identify actions that must be taken by managers in order to improve service
quality dimensions and satisfy customers.

Measuring the Service Quality of United Bank S.C. and its Relationship with Customer Satisfaction
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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

1.4. RESEARCH HYPOTHESIS

H1o: Tangibles does not have a significant impact on customer satisfaction in United .
Bank’s branches in Addis Ababa.

H1a: Tangibles has a significant impact on customer satisfaction in United Bank’s .

branches in Addis Ababa.

H2o:Reliability does not have a significant impact on customer satisfaction in United

Bank’s branches in Addis Ababa.

H2a: Reliability has a significant impact on customer satisfaction in United Bank’s .

branches in Addis Ababa

H3o: Responsiveness does not have a significant impact on customer satisfaction in United
Bank’s branches in Addis Ababa.

H3a: Responsiveness has a significant impact on customer satisfaction in United Bank’s

branches in Addis Ababa.

H4o: Empathy does not have a significant impact on customer satisfaction in United .
Bank’s branches in Addis Ababa.

H4a: Empathy has a significant impact on customer satisfaction in United Bank’s .

branches in Addis Ababa.

H5o: Assurance does not have a significant impact on customer satisfaction in United .
Bank’s branches in Addis Ababa.

H5a: Assurance has a significant impact on customer satisfaction in United Bank’s .

branches in Addis Ababa.

H6a: SERVPERF dimensions do not have a significant impact on customer satisfaction in

United Bank branches in Addis Ababa.

H6o: SERVPERF dimensions have a significant impact on customer satisfaction in United Bank
branches in Addis Ababa.
Measuring the Service Quality of United Bank S.C. and its Relationship with Customer Satisfaction
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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

1.5.DEFINITION OF TERMS
1.5.1. CONSEPTUAL DEFINITION- definition of terms concepts or variables from the
theoretical perspective.
- Service is defined as activity or benefit that one party can offer to another that is
essentially intangible and does not result in the ownership of anything. Kotler (2003)
- Quality is defined as the totality of features and characteristics of a product or service
that bears on its ability to satisfy given needs. Jones and Lockwood, (1989). Quality is
defined as fitness for purpose. Jones and Lockwood, (1989)
- Service quality vs Customer satisfaction is a global judgment, or attitude, relating to
the superiority of the service, Parasuraman, Zeithaml, V.A., Berry, L.L., (1988).
Customer satisfaction is related to a specific transaction. Parasuraman, Zeithaml, V.A.,
Berry, L.L., (1988)
- SERVQUAL is a model developed to measure service quality from the view point of the
customer by comparing what the consumer expected prior to the service and perceived
level of service received. Parasuraman, A., Zeithaml, V.A. and Berry, L. (1985)
- SERVPERF is a model of measuring service quality developed in 1992 by Cronin and
Taylor and it is a performance only measure of service quality which uses the
dimensions of SERVQUAL model.
- Definition of service quality measurement dimensions according to Parasuraman et al.
(1988)
o Reliability. This dimension refers to the ability to perform the service
dependably and accurately.
o Responsiveness. This dimension refers to the willingness to help customers and
provide prompt service.
o Tangibles. This dimension refers to the Physical facilities, equipment, and
appearance of personnel.
o Assurance. This dimension refers to employee’s knowledge, courtesy and ability
to convey trust and confidence.
o Empathy. This dimension refers to the level of caring and individual attention
provided to customers.

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1.6.SIGNIFICANCE OF THE STUDY

The study will have the practical significance of helping management of United Bank S.C.
improve the service quality dimensions that are found to be weak and build on those that are
found to be strong. This study, its methodology and service quality measurement style can
also be used for other researchers who want to measure service quality of commercial banks
in Ethiopia since the environmental factors are different in different countries and the
constructs are measured for their validity, it can also be used for similar measurements
performed in similar situations.

1.7.DELIMITATION OR SCOPE
Due to financial limitations this study is limited to United Bank branches found in Addis
Ababa only. In addition the time assigned to complete this study is not sufficient for the
researcher to make a thorough investigation in this area within this short period of time.

1.8.ORGANIZATION OF THE RESEARCH

This paper has have five chapters. The first chapter deals with of background of the
study, statement of the problem, objective of the study, research hypotheses, definition of
terms, significance of the study, limitation of the study and organization of the paper. The
second chapter deals with review of literature. The third chapter discusses the methodology.
The fourth chapter is the presentation, analysis, interpretation and summary of major
findings. The fifth chapter is the finding, conclusion, recommendation and further area of
study.

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CHAPTER TWO

2. LITRATURE REVIEW
2.1. INTRODUCTION

This paper is about measuring service quality and its relationship with customer satisfaction so
the chapter starts by defining what service is & its characteristics, then it explains in detail how it
can be measured and its relationship with customer satisfaction and profit.

2.2.SERVICE DEFINED
Different authors defined service in different ways Kottler (2003) defined service as any activity
or benefit that one party can offer to another that is essentially intangible and does not result in
the ownership of anything. Its production may or may not be tied to a physical product.

A service is also defined as an act or performance offered by one party to another. Although the
process may be tied to a physical product, the performance is essentially intangible and does not
normally result in ownership of any of the factors of production.

Services are economic activities that create value and provide benefits for customers at specific
times and places, as a result of bringing about a desired change in—or on behalf of—the
recipient of the service. (Lovelock and Wright, 1999)

According to Valerie A & Mary Jo.(2000) Services are deeds, processes, and performances.
Services are not tangible things that can be touched, seen, and felt, but rather are intangible deeds
and performances.

2.3. SERVICE CHARACTERISTICS

Service possesses four inherent characteristics not found in goods: intangibility, perish ability,
inseparability, and variability.

i. Intangibility: lack of tangible assets of a service, which can be seen, touched, or smelled
prior to purchase.
ii. Perish ability: inability of a service to be inventoried or stored.
iii. Inseparability: simultaneous production and consumption of a service.

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iv. Variability: unwanted or random levels of service quality customers receive when they
patronize a service firm. Because of the variability characteristic of service,
standardization is more difficult. (Clow & Kurtz, 2003)

2.4. EVIDENCE OF SERVICE

Because services are intangible, customers not only rely on price to evaluate service quality, but
also seek for evidence of service in every interaction they have with an organization to build an
impression of service perceptions. Zeithaml and Bitner (1996:113) discover three elements of
evidence experienced by the customer: process, people, physical evidence (shown in Figure 2.1).

2.4.1. PROCESS: Refers to a series of activities or steps in the service delivery process, the
level of flexible function and technology of the service performances, which influence
the service perceptions of customers (Lovelock 2001:39).

Source: Zeithaml and Bitner (1996:115)

Figure 2.1. Evidence of Service

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2.4.2. PEOPLE: Refers to the persons in service transactions including the personnel in service
transactions, customers themselves and other customers within the interaction setting
(Zeithaml & Bitner 1996:114). Customers share the service environment with other
customers as they consume the service. Fellow customers can either enhance or detract
from a customer’s perception of quality (Wu 2007:1519).
2.4.3. PHYSICAL EVIDENCE: Assists customers in service evaluation because the
intangibility of the service often makes it difficult for customers to evaluate service
perceptions. Physical evidence consists of facility exterior, facility interior and tangibles.
Facility exterior includes the exterior design, parking, landscaping and the surrounding
environment; facility interior includes the interior design, equipment used to customers
and air quality; tangibles are tangible cues such as business cards, stationery, receipts and
brochures (Hoffman & Bateson 2006:225).

2.5. QUALITY DEFINITION

Quality is defined as the totality of features and characteristics of a product or service that bears
on its ability to satisfy given needs. The modern concept of quality is characterized by fitness for
purpose, that is, it shifts the evaluation of quality from the provider to the consumer. The service
provider therefore has to be aware of the consumers’ attitudes and perspectives in order to be
able to provide quality services (Jones and Lockwood, 1989). This is coupled with the fact that
customers are becoming increasingly sensitive to quality (Augustine and Ho, 1998). Similarly,
many authors concur with the modern concept of quality where the ultimate goal of quality is
about meeting the needs and exceeding the expectation of customers ( Juran, 1979; Oakland,
1989; Owen and Malkovich, 1995). In this aspect, service quality is an integral part in satisfying
customers who possess certain characteristics or features that are unique to one another, thus
leaving the challenge to the producers of services to understand true customer needs and translate
these into services that will satisfy those needs.

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2.6.DEFINITION OF SERVICE QUALITY

Parasuraman, A., Zeithaml, V.A. and Berry, L. (1985) defined service quality as “the degree and
direction of discrepancy between consumer’s perceptions and expectations in terms of different
but relatively important dimensions of the service quality, which can affect their future
purchasing behavior.’’ After making a purchase, customers compare the service they expected to
get with what they actually receive. They decide how satisfied they are with service delivery and
outcomes, and they also make judgments about quality. Following a service encounter,
customers may evaluate their levels of satisfaction or dissatisfaction and may use this
information to update their perceptions of service quality.

They must, of course, experience a service before they can be satisfied or dissatisfied with the
outcome. But beliefs about quality don't necessarily reflect personal experience. People often
make quality judgments about services they have never consumed, basing these evaluations on
comments by acquaintances or on advertising messages.(Lovelock and Wright, 1999).

Therefore customers can have expectations of how the service will be eventhough they have not
experienced the service however they have to experience the service to know the performance.
Service quality has truly presented a significant influence on customers to distinguish competing
organizations and contribute effectively to customer satisfaction (Parasuraman et al., 1985).
Since the number of private banks is increasing in the Ethiopian banking industry, customers will
use service quality to distinguish between the competing banks. And the banks should work to
satisfy the customers better than the competition.

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2.7.UNDERLYING PRINCIPLES OF SERVICE QUALITY

When discussing the concept of service quality, three underlying principles should be kept in
mind.

a. Service quality is more difficult for the consumer to evaluate than the quality of good.
b. Service quality is based on consumers’ perceptions of the outcome of the service and
their evaluation of the process by which the service was performed.
c. Service quality perceptions result from a comparison of what the customer expected prior
to the service and the perceived level of service received.
The process used by consumers in evaluating service differs from the process used for goods.
Service tends to be high in experience and credence qualities while goods tend to be high in
search qualities. Search qualities are attributes that consumers can evaluate prior to
purchasing a service or good. Experience qualities are attributes that consumers can evaluate
only during or after the consumption process. Credence qualities are attributes that customers
have difficulty evaluating even after the consumption is complete.(Clow & Kurtz, 2003)

2.8.SERVICE QUALITY DIMENSIONS

Parasuraman et al. (1985) have originally identified ten determinants of service quality generic to
the service industry. These determinants were tangibles, reliability, responsiveness, competence,
courtesy, credibility, security, access, communication, and understanding the customer.

At a later stage, Parasuraman et al. (1988) developed a 22-item instrument, recognized as

SERVQUAL, that has become widely used as a generic instrument for measuring service
quality. The instrument items represent the five dimensions explained below:

a. Reliability. This dimension refers to the ability to perform the service dependably and
accurately.

b. Responsiveness. This dimension refers to the willingness to help customers and provide
prompt service.

c. Tangibles. This dimension refers to the Physical facilities, equipment, and appearance of
personnel.
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d. Assurance. This dimension refers to employee’s knowledge, courtesy and ability to convey
trust and confidence.

e. Empathy. This dimension refers to the level of caring and individual attention provided to
customers.

Of these five dimensions, reliability has consistently proven to be the most important factor in
customers' judgments of service quality. Reliability improvements lie at the heart of service
quality enhancement efforts because unreliable service implies broken promises on the attributes
that customers care about. If the core service is not performed reliably, customers may assume
that the company is incompetent and may switch to another service provider. (Lovelock and
Wright, 1999)

2.9.THE GAP MODEL

Parasuraman et al. (1985) proposed that service quality is a function of the differences between
expectation and performance along the quality dimensions. They developed a service quality
model based on gap analysis. The various gaps visualized in the model are:

Gap 1: Difference between consumers’ expectation and management’s perceptions of

those expectations, i.e. not knowing what consumers expect.

Gap 2: Difference between management’s perceptions of consumer’s expectations and service

quality specifications, i.e. improper service -quality standards.

Gap 3: Difference between service quality specifications and service actually delivered i.e. the
service performance gap.

Gap 4: Difference between service delivery and the communications to consumers about
service delivery, i.e. whether promises match delivery?

Gap 5: Difference between consumer’s expectation and perceived service. This gap depends on
size and direction of the four gaps associated with the delivery of service quality on the
marketer’s side.

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Gap five is the sum of gaps one through four and is the overall comparison of what consumers
expected from the service provider and their perception of the service they received from the
service provider and their perception of the service they received from the service provider. A
negative score indicates that the service did not meet the consumer’s expectation; a zero score
means the service met expectations and a positive score means the service exceeded the
customer’s expectations. (Clow & Kurtz, 2003)

Figure 2.2. The Integrated Gaps Model of Service Quality by Parasuraman et al. (1985)

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2.10. THE SERVQUAL MODEL OF MEASURING SERVICE QUALITY

Based on the gaps model, Parasuraman et al. (1985) have developed a generic method of
measuring service quality called the SERVQUAL model by calculating service quality by
subtracting a customer’s perceived level of service received from what was expected.
SERVQUAL model which was originally identified by Parasuraman et al. (1985) consists of
two sections. A 22-item section measuring the service quality expectation within a specific
sector and a corresponding 22-item section measuring the perception of service quality of a
particular company in that sector (Parasuraman et al., 1988, 1991). The SERVQUAL model
uses the 22 questions to measure the five dimensions of tangibles, reliability, responsiveness,
assurance and empathy. Parauraman et al. (1988, 1991) have consistently observed that
reliability had the strongest regression coefficient, assurance and responsiveness had the next
strongest coefficients, and empathy and tangibles had the weakest coefficients. These
observations were, however, not verified statistically. Through this model firms can measure
customers’ evaluations of their service performance. For example if customers consistently
give a firm low scores for one dimension, such as reliability, then the firm’s management can
take steps to improve that particular dimension for their service offering. (Clow & Kurtz,
2003).

According to Parasuraman et al. (1985), service quality is a function of perception and

expectations and can be modeled as:

SQ=∑k j-1 (Pij- Eij)

where:

SQ= overall service quality; k = number of attributes.

Pij=Performance perception of stimulus i with respect to attribute j.

Eij=Service quality expectation for attribute j that is the relevant norm for stimulus i.

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2.10.1. PROBLEMS WITH SERVQUAL

Although SERVQUAL is an excellent instrument for measuring service quality, managers must
be aware of potential problems with the instrument, as well as with the gap theory methodology
on which it is based. An understanding of these problems may prevent service companies from
misinterpreting the result and developing inappropriate marketing plans. The SERVQUAL
instrument has three potential problems. First, SERQUAL measures customers’ expectations of
the ideal firm in a particular service industry. This may or may not be relevant to the capabilities
of a particular service firm of the set of service firms available to a customer. The second
problem is its generic nature. Since it is not industry specific, it does not measure variables that
may be important to a particular industry. The third problem with the SERVQUAL deals with
the gap theory methodology used for measuring the level of service quality. Measuring consumer
expectations after a service has been provided will bias consumers’ responses. If customers had a
positive experience at Blockbuster, they will tend to report lower scores for their expectations, so
there is a measurable gap between what they expected and the actual service they received.
(Clow & Kurtz, 2003).

2.11. THE SERVPERF MODEL OF MEASURING SERVICE QUALITY

The SERVPERF model of measuring service quality was developed by Cronin and Taylor in
1992. Although the base for the SERVPERF model is the SERVQUAL model which is
explained above, Cronin and Taylor (1992, 1994) argue that measuring service quality using a
performance-minus expectations (SERVQUAL) basis is inappropriate and suggest that
performance-only (SERVPERF) measurement is a better method. SERVPERF is composed of
the 22 perception items in the SERVQUAL scale, and therefore excludes any consideration of
expectations. The authors investigated the conceptualization and measurement of service quality
and its relationship with consumer satisfaction and purchase intentions. They compared
computed difference scores with perception to conclude that perceptions only are better predictor
of service quality. They argued on the framework of Parasuraman et al. (1985), with respect to
conceptualization and measurement of service quality and developed performance only

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measurement of service quality called SERVPERF by illustrating that service quality is a form of
consumer attitude and the performance only measure of service quality is an enhanced means of
measuring service quality. They argued that SERVQUAL confounds satisfaction and attitude.
They stated that service quality can be conceptualized as “similar to an attitude”, and can be
operationalized by the adequacy-importance model. In particular, they maintained that
Performance instead of “Performance-Expectation” determines service quality.

Service quality is evaluated by perceptions only without expectations and without importance
weights according to the formula:

SQ = ∑kJ-1 Pij

where:

SQ = overall service quality;

k = the number of attributes;

Pij = performance perception of stimulus i with respect to attribute j.

Even though, Parasuraman et al., 1994 contend that the SERVQUAL scale using the
expectations/performance gaps method is a much richer approach to measuring service quality
and augment their earlier assertion (e.g. Parasuraman et al., 1985, 1988, 1993) that service
quality is a multidimensional rather than a unidimensional construct, other researchers like
Carman, 1990; Van Dyke et al., 1997 have found that empirical problems of the instrument lie in
its dimentionality.

Cronin and Taylor (1992) have examined a performance-based measure of service quality, called
SERVPERF in four industries (banking, pest control, dry cleaning and fast food). They found
that this measure explained more of the variance in an overall measure of service quality than did
SERVQUAL. SERVPERF (performance-only) results in more reliable estimations, greater
convergent and discriminant validity, greater explained variance, and consequently less bias than
the SERVQUAL (Cronin and Taylor, 1992; Quester et al., 1995; Llusar and Zornoza, 2000).
Therefore this study uses the SERVPERF model to measure the quality of service in United
Bank S.C.

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2.12. MEASURING CUSTOMER SATISFACTION

To improve its customer satisfaction levels, a company must first find out how satisfied or
dissatisfied its current customers actually are. One common way of measuring satisfaction is to
ask customers first to identify what factors are important in satisfying them and then to evaluate
the performance of a service provider and its competitors on these factors. Many firms use a
five-point scale to measure customer satisfaction, with the following format:

1 = very dissatisfied

2 = somewhat dissatisfied

3 = neutral

4 = somewhat satisfied

5 = very satisfied

The results of these satisfaction surveys can be used to estimate the number of loyal customers a
firm has, as well as how many are at risk of defecting. Lovelock and Wright (1999).
[[[ [[

2.13. RELATIONSHIP BETWEEN SERVICE QUALITY AND CUSTOMER

SATISFACTION

Understanding satisfaction and its relation to service quality have been recognized as significant
for building service improvement strategies (Gill and White, 2009). Parasuraman et al (1988)
defined service quality and customer satisfaction as “service quality is a global judgment, or
attitude, relating to the superiority of the service, whereas satisfaction is related to a specific
transaction”. The bond between service quality and customer satisfaction has been addressed in a
number of studies where it commonly trusted that higher degrees of service quality lead to higher
degrees of customer’s satisfaction (Gotlieb J.B., Grewal, D. and Brown, S.W., 1994; Kang and
James, 2004; Oliver, 1997). Furthermore Parasuraman, Zeithaml and Berry (1994) deem that
satisfaction is a result of service quality.

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Others believe that service quality is a vital antecedent of customer satisfaction (Cronin and
Taylor, 1992). In turn, customer satisfaction is believed to affect post purchase and perception
and future decisions. Therefore we can conclude that if banks can offer higher service quality,
their customers will be satisfied. Most companies realize that by improving performance on
service attributes, customer satisfaction should increase. This should, in turn, lead to greater
customer retention and improved profitability. (Lovelock and Wright, 1999)

- CONCEPTUAL MODEL
This study is conducted on the hypothesis that the five service quality measurement
dimensions contribute positively to customer satisfaction as depicted below.

Reliability

Responsiveness

Customer
Tangibles
Satisfaction

Assurance

Empathy

Fig. 2.3. A conceptual model for measuring the relations between the five service quality
measurement constructs (reliability, responsiveness, tangibles, assurance and empathy) has on
customer satisfaction. (Cronin and Taylor, 1992)

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2.14. THE RELATIONSHIP BETWEEN SERVICE QUALITY AND PROFITABILITY

The relationship between service quality and profitability is typically not easy to track for a
variety of reasons. Service quality benefits accumulate over time rather than being experienced
in the short term. This makes them difficult to measure using traditional market research
techniques. Another complicating factor is that many variables contribute to corporate profits
(including pricing, distribution, advertising, and competition); it's hard to isolate the effects these
individual factors have on the bottom line. Lovelock and Wright (1999) however some studies
have proved that service quality was a major determinant of profit. For instance in the case of
banks, the relative similarity of the products offered by different banks has led to an increased
emphasis on service quality in the highly competitive retail banking sector. A large telephone
survey of bank customers identified poor customer service quality as the most frequent reason
for account closures. Analysis of the study results and bank branch profits indicated that
customer service quality was a major determinant of how well individual branches performed.
Avkiran(1996). According to a study by LeBlanc and Nguyen (1988), the cost of mediocre
service quality may be as high as 40 percent of revenues in some service industries. Since the
ultimate goal of service offering firms like commercial banks is profit, and this study have
proved that profit can be achieved by offering better service, Banks should make service quality
a top priority.

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CHAPTER THREE:

RESEARCH METHODOLOGY

3.1.INTRODUCTION

In this chapter, the methodology of the research is discussed. It consists the research design, the
sample and sampling techniques, procedure used to collect data, method of data analysis and
reliability and validity.

3.2.RESEARCH DESIGN

This study is quantitative since it collected quantitative data on the service quality measurement
dimensions by using SERVPERF model. (Cronin and Taylor, 1992) The model offers five
dimensions to measure service quality. These five dimensions are the independent variables
which are tangibles, reliability, responsiveness, assurance and empathy used to measure service
quality. The effect of the independent variables on the dependent variable customer satisfaction
is measured by this study.

3.3.SAMPLE AND SAMPLING TECHNIQUES

The researcher wants to measure the quality of service in United Bank S.C. from the view point
of the customers in accordance with the SERVPERF model of measuring service quality.
Therefore, the population under study are all customers of United Bank S.C. The sampling frame
is all the account holders of the Addis Ababa Branches i.e 244,257 saving, special, current and
fixed account holders as of December 30, 2013.

Sample size is 385 customers from a population of approximately 244,257 customers as of

December 31, 2013 according to company data. The sample size to this study is determined by
using the formula developed by Cochran (1963:75). Sample size from the customers is calculated
as follows:
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no= Z2pq
e2
Where: n0 = the sample size
Z2 = the abscissa of the normal curve that cuts off an area α at the
tails (1 - α equals the desired confidence level, i.e. 95%)
e = the desired level of precision
p = the estimated proportion (standard deviation) of an attribute that
is present in the population, and q is 1-p.
The value for Z is found in statistical tables which contain the area under the
normal curve.
no=(1.96) 2 (0.5)(0.5)= 385.
(0.05) 2
The above sample size is the representative sample proportion at 95% confidence level and
±5% precision when the population is large and unknown.
If the population is small, then the sample size can be reduced slightly. This is because a
given sample size provides proportionately more information for a small population than for
a large population. As a result, the sample size (n 0 ) can be adjusted (Cochran 1963:75).
Since the population for this study is finite, the sample size (n 0 ) can be adjusted as follows:
𝑛0
𝑛=
(n0 − 1)
1+ N

Where n is the sample size and N is population of the study.

n = 384.8236384 ≈ 385

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3.4.PROCEDURE FOR DATA COLLECTION

Regarding the sampling technique, a proportional stratified sampling of 9 branches

(approximately 20% from each strata of 46 branches) is selected to distribute the questionnaire.
Then 43 customers who walked in to each of these branches & who are willing to fill out the
questionnaire were asked to fill out the questionnaire. A total of 387 questionnaires were
distributed to potential respondents. However, the total amount of usable questionnaires obtained
were 303, that is a response rate of 78.7%. The sample is representative because a rule of thumb,
a sample size of 200–300 should be considered to be adequate for a proper analysis. (Gaur A.
and Gaur,2009)

The questionnaire was distributed to the following nine branches of United Bank Addis Ababa
Branches (see table 3.1.). The branches of United Bank S.C. are grouped as A, B & C in
accordance to their performance. The researcher used proportional stratified sampling method, to
select 20% of branches from each strata. The researcher took 20% from each strata due to time
and financial constraints. The proportional stratified sampling method was used to make every
strata represented in the study. As of December 2013, when this study started, United Bank S,C.
had 19 Grade A branches, 17 Grade C branches and 10 B grade branches.

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Table 3.1.List of branches the questionnaire was distributed to

S.No. Name of Branch Grade of Branch Number of sample
distributed

1 Beklo Bet A 43

2 Birr Amba A 43

3 Urael C 43

4 Etegue Taitu B 43

5 Kotebe C 43

6 Tekele Haimanott A 43

7 Addisu Gebeya B 43

8 Sidist Kilo C 43

9 Tana A 43

Total 387

3.5. SOURCE OF DATA COLLECTION

Primary data was collected from questionnaire. Secondary data was collected from books,
journals, internet, annual reports, and United Bank’s website.

3.6. INSTRUMENTS OF DATA COLLECTION

The instrument used was a Structured Questionnaire as instrument of data collection. The
questionnaire was designed for customers of the bank in five scale Likert measurement.
All the questions were positively worded to aid in the coding to SPSS then the Questionnaire was
translated into Amharic. The face validity was checked by pilot testing the questionnaire to staff
members of United Bank and some customers. A 22 Item Measure was used to indicate the
customers’ degree of agreement for the 22 performance statements, based on their assessments of
the services provided by the bank adopted from SERVPERF model by Cronin and
Taylor's(1992), a five-point rating scale was used to measure performance in which the
alternatives range from ``strongly agree'' to ``strongly disagree''. Customer satisfaction was
measured with one scale adopted from Lovelock & wright (1999) with response ranging from
‘very satisfied’ to ‘very dissatisfied’.

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3.7. METHOD OF DATA ANALYSIS

Descriptive statistics was used to interpret demographic variables of the respondents and to find
the mean sores of service quality dimensions whereas inferential statistics was used for
hypothesis testing using correlation and regression analysis via SPSS version 16. The dependent
variable is customer satisfaction and the independent variables are the service quality
measurement dimensions (tangibles, reliability, responsiveness, assurance and empathy).

3.8. RELIABILITY AND VALIDITY

The validity and reliability of the measurement dimensions of service quality have been checked;

3.8.2. RELIABILITY

The Cronbach alpha coefficient is an indicator of internal consistency of the scale. A high value
of the Cronbach alpha coefficient suggests that the items that make up the scale “hang together”
and measure the same underlying construct. A value of Cronbach alpha above 0.70 can be used
as a reasonable test of scale reliability. (Gaur A. and Gaur S., 2009)

Therefore all the five dimensions of measuring service quality were found to be high in their
internal consistency and thereby in measuring the dimensions of interest. (crombach alpha >0.7
good) (Nunally, 1978)

3.8.2. VALIDITY

The first step in assessing validity is called the face validity test. Face validity establishes
whether the measuring device looks like it is measuring the correct characteristics. The face
validity test is done by showing the instrument to experts and actual subjects and analyzing their
responses qualitatively. (Gaur A. & Gaur S. 2009) Therefore the researcher tested the face
validity of the instrument by showing it to United Bank S.C. managerial and non managerial
staffs and some customers. Afterwards some adjustments were made. In addition the researcher
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had to use some indicators which were adapted to the banking industry by referring to other
researchers’ constructs. This was done because one of the problems with the generic
SERVQUAL measures is it has to be adapted to the specific industry (Clow & Kurtz, 2003).
Some of the measurement instruments which have been tested for their validity and reliability
have been adopted from other researches to make the study industry specific. (Jabnoun &
Tamimi, 2003) to make the study more industry specific. By doing so the measure was adopted
to the banking industry.

Construct validity is one of the most commonly used techniques in social sciences. Based on
theory, it looks for expected patterns of relationships among variables. Construct validity thus
tries to establish an agreement between the measuring instrument and theoretical concepts. To
establish construct validity, one must first establish a theoretical relationship and examine the
empirical relationships. Empirical findings should then be interpreted in terms of how they
clarify the construct. (Gaur & Gaur, 2009) Internal validity, also called causality, examines
whether the observed change in a dependent variable is indeed caused by a corresponding change
in hypothesized independent variable, and not by variables extraneous to the research context.
(Bhattacherjee A., 2012). By using the Pearson correlation coefficient between the customer
satisfaction level and the five dimensions of service quality, the causality of independent variable
and dependent variable was established at 95% confidence level.

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3.9. ETHICAL CONSIDERATIONS

In order to keep the confidentiality of the data given by respondents, the respondents are not
required to write their name and assured that their responses is treated in strict confidentiality.
The purpose of the study is disclosed in the introductory part of the questionnaire. The
questionnaires were distributed only to voluntary participants. Lastly, approval was obtained
from the top management of the United Bank S.C. to access the necessary data.

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CHAPTER FOUR

DATA ANALYSIS

4.1 INTRODUCTION

In this chapter, the data collected from respondents has been analyzed and interpreted. A
structured questionnaire was distributed to 387 account holder customers of United Bank S.C..
Out of these, 303 questionnaires were collected and usable, that is a 78.70% response rate. SPSS
version 16 was used for the analysis.
The analysis had the objective of measuring service quality level of United Bank S.C. using the
SERVPERF model then establishing the relationship between service quality and customer
satisfaction. The hypothesis that, service quality measurement dimensions have a significant
impact on customer satisfaction have been tested. In order to proceed with the analysis the
reliability and validity of the construct was tested. Finally the study established a model United
Bank S.C. can use to prioritize from among the service quality dimensions by using regression
analysis.

4.2 RELIABILITY ANALYSIS

Reliability refers to the confidence we can place on the measuring instrument to give us the same
numeric value when the measurement is repeated on the same object. (Gaur & Gaur, 2009) The
dimensions for measuring service quality as explained in the literature are established by the
SERVQUAL model as tangibles, reliability, responsiveness, empathy and assurance. But the
scale has to be checked for its internal consistency or whether it measures what it set out to
measure. The Cronbach alpha coefficient is an indicator of internal consistency of the scale. A
high value of the Cronbach alpha coefficient suggests that the items that make up the scale “hang
together” and measure the same underlying construct. A value of Cronbach alpha above 0.70 can
be used as a reasonable test of scale reliability. (Gaur & Gaur, 2009)

Therefore all the five dimensions of measuring service quality were found to be high in their
internal consistency and thereby in measuring the dimensions of interest.

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Table 4.1. Reliability Measure of service quality dimensions

Dimensions No of Items Cronbach's Alpha

Tangibles 4 0.772

Reliability 4 0.701

Responsiveness 5 0.745

Empathy 5 0.781

Assurance 4 0.789

Collective reliability 22 0.747

Own survey, 2014

As can be seen from Table 4.1, all the dimensions have relatively the same Cronbach Alpha
results which are over 0.70. This implies that all the service quality measurement dimensions
have internal consistency. Assurance has the highest alpha result with a 0.789, followed by
Empathy 0.781, Tangibles 0.772, Responsiveness 0.745 and Reliability 0.701.

4.3 VALIDITY ANALYSIS

The empirical findings of this study conducted by using Pearson correlation have proven that
there is a relationship between service quality dimensions and customer satisfaction at p<0.05
coefficient level for all the five dimensions. Therefore the validity of the instrument is supported
at a high level of significance. (See correlation Table 4.5)

4.4 RESPONDENTS’ PROFILE

To find out background information about the respondents, the customers of United Bank S.C.
were asked their Gender, age, marital status and education level. Therefore, the results obtained
from the structured questionnaire of the 303 customers of United Bank S.C.is presented below.

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Table 4.2. Customer Profile

Sex Frequency Percent Valid Percent Cumulative Percent

Male 207 68.3 68.3 68.3

Female 96 31.7 31.7 100

Total 303 100 100

Age

Below 18-29 144 47.5 47.5 47.5

30-39 108 35.6 35.6 83.2

40-49 42 13.9 13.9 97

>=50 9 3 3 100

Total 303 100 100

Marital Status

Single 162 53.5 53.8 53.8

Married 132 43.6 43.6 97.4

Other 9 3 2.9 100

Total 303 100 100

Education level

Elementary 6 2 2 2

High School 36 11.9 11.9 13.9

Certificate or Diploma 102 33.7 33.7 47.5

First Degree 147 48.5 48.5 96

Second Degree and Above 12 4 4 100

Total 303 100 100

Own survey, 2014

Out of the 303 respondents, 207 (68.3%) were male and 96(31.7%) were female. which shows
the male dominancy of the bank customer. The highest percentage of respondents 144 (47.5%),
were between 18 to 29 years old, followed by 108 (35.6%), between 30-39 years old, 42 (13.9%)

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between 40-49 age group and 9 (3%) were above 50 years old. Marital status of the respondents
show a distribution of 162(53.5%) single, 132(43.6%) married and 9(3%) other category. With
regard to educational level of respondents, the highest number have a first degree comprising
147 (48.5%) of the respondents, followed by 102(33.7%) of the respondents who have certificate
or diploma, and 36(11.9)% who finished high school, 12(4%) who have a second degree and
above, and lastly 6(2.0%) who finished elementary education.

4.5 DESCRIPTIVE ANALYSIS OF SERVICE QUALITY MEASUREMENT

In measuring the perception of service quality customers have about the bank, they responded to
SERVPERF model 22 indicators on a five point Likert scale. The Mean scores and standard
deviation have been computed for all the dimensions categorized in their respective five service
quality dimensions. A brief description of the meaning of the dimensions is listed below;

a. Reliability. This dimension refers to the ability to perform the service dependably and
accurately.

b. Responsiveness. This dimension refers to the willingness to help customers and provide
prompt service.

c. Tangibles. This dimension refers to the Physical facilities, equipment, and appearance of
personnel.

d. Assurance. This dimension refers to employee’s knowledge, courtesy and ability to convey
trust and confidence.

e. Empathy. This dimension refers to the level of caring and individual attention provided to
customers. Parasuraman et al. (1988)

The five dimensions and their mean and standard deviation was calculated a one sample T test,
the result is presented on the table below. As shown in Table 4.3. all the service quality
dimensions have a high mean score, i.e., Tangability, Reliability and Assurance were expected to
have maximum aggregated score of 20, accordingly, their mean value is also approaching the
maximum score; 16.5612, 17.4184, and 17.9794 mean score respectively. Likewise, the mean of
the remaining dimensions of Responsiveness and Empathy are also approaching the expected
maximum scores of 25, which is 21.5258 and 20.2105 respectively. When the mean score of the

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results for each dimension is divided into the corresponding number of constructs, all dimensions
have a score of greater than four. Assurance has the highest mean of 4.49, followed by
Reliability 4.35, Responsiveness 4.31, Tangibles 4.14 & empathy 4.04.

Table 4.3. One-Sample Statistics

N Mean Std. Deviation Std. Error Mean Mean

Tangibles 303 16.5612 2.21553 .22380 4.14

Reliability 303 17.4184 1.98927 .20095 4.35

Responsiveness 303 21.5258 2.89789 .29424 4.31

Empathy 303 20.2105 2.83179 .29054 4.04

Assurance 303 17.9794 1.88734 .19163 4.49

Own survey, 2014

Therefore, with this analysis the quality of United Bank S.C’s service have been measured and
one can infer that United Bank S.C. is offering a high level of service quality. Thus the
researcher have answered the first research question of the level of service quality offered by
United Bank S.C.

4.6 CUSTOMER SATISFACTION

To see the levels of customer satisfaction in the United Bank Share Company, the researcher
used categorized satisfaction level i.e., ranges from highly dissatisfied, Dissatisfied, Neutral,
satisfied and, highly satisfied. This customer satisfaction variable is also used as dependent
variable in this study. Since service quality is a vital antecedent of customer satisfaction (Cronin and
Taylor, 1992), the researcher investigates the association and effect of service quality dimensions
with customer satisfaction. The table below shows the respondents for their level of satisfaction
for each predictor variables, assuming that 1,2,3,4 and 5 represent very dissatisfied, somewhat
dissatisfied, neutral, somewhat satisfied and very satisfied respectively. Besides the degree of their
correlation , the regressive effect is discussed on the coming pages.

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Table 4.4. Customer Satisfaction level

Frequency Percent Valid Percent Cumulative Percent
Valid 2 Somewhat Dissatisfied 6 2.0 2.0 2.0
4 Somewhat Satisfied 141 46.5 46.5 48.5
5 Very satisfied 156 51.5 51.5 100.0
Total 303 100.0 100.0
Own survey, 2014

The percentage value of satisfaction as can be seen it is very high with 46.5% somewhat satisfied
and 51.5% very satisfied and only 2% somewhat dissatisfied. Therefore, it can be inferred that
the bank is doing well.

4.7 CORRELATION ANALYSIS BETWEEN SERVICE QUALITY DIMENSIONS AND

CUSTOMER SATISFACTION

To determine the existence and level of association, the researcher used bivariate correlation
from which Pearsons correlation coefficient is considered. Pearsons correlation coefficient falls
between -1.0 and +1.0, indicates the strength and direction of association between the two
variables. (Field, 2005) The Pearson´s correlation coefficient (r) was used to conduct the
correlation analysis to find the level and direction of the relationships between the dimensions of
service quality and customer satisfaction. It was also used to rank the variables that have the
strongest associations with customer satisfaction. The classification of the correlation efficient (r)
is as follows: 0.1 – 0.29 is weak; 0.3 – 0.49 is moderate; and > 0.5 is strong. (Field, 2005) The
bivariate correlation of a two-tailed test confirm the presence of statistically significant
difference at probability level p<0.05 i.e. assuming 95% confidence interval on statistical
analysis.

The Pearson correlation Analysis shown the service quality indicator variables were significantly
(statistically) and positively correlated with Overall customer satisfaction. Accordingly,
Responsiveness followed by empathy have the strong positive relationship with customer
satisfaction at (r=0.538) & (r=0.523) respectively. The rest of the dimensions; Assurance,
Tangibels & Reliability have a moderate positive correlation with customer satisfaction of ;
(r=0.404), (r=0.374) & (r=0.328) respectively. That means, all the service quality indicators have
positive correlation effect upon the level of customer satisfactions though there degree of effect
vary.
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Table 4.5. Correlations

Responsi
Satisfaction Level Tangibles Reliability veness Empathy Assurance
Satisfaction Level Pearson
1
Correlation
Sig. (2-tailed)
N 303
Tangability Pearson
.374** 1
Correlation
Sig. (2-tailed) .000
N 98 98
Reliability Pearson
.328** .511** 1
Correlation
Sig. (2-tailed) .001 .000
N 98 95 98
Responsiveness Pearson ** ** **
.538 .471 .585 1
Correlation
Sig. (2-tailed) .000 .000 .000
N 97 95 94 97
Empathy Pearson
.523** .421** .525** .585** 1
Correlation
Sig. (2-tailed) .000 .000 .000 .000
N 95 92 92 91 95
Assurance Pearson
.404** .488** .591** .544** .584** 1
Correlation
Sig. (2-tailed) .000 .000 .000 .000 .000
N 97 94 95 93 92 97
**. Correlation is significant at the 0.01 level (2-tailed).
Own survey, 2014

Hence, in all the cases as the correlation statistics confirms the presence of positive relationships
to customer satisfaction which is significant even at the p<0.01 level. From this we can infer that
an improvement in any of the service quality dimensions by the bank will result in the increase in
customer satisfaction. Moreover, the inter-correlations between service quality dimensions also
show a positive and significant relationship. Therefore when the bank makes changes to one
service quality dimension the association is likely to positively motivate other service quality
dimensions positively too. The highest inter-correlation exists between reliability and assurance
(r=0.591), responsiveness and reliability (r=0.585) and responsiveness and empathy (r=0.585).
With this the researcher found out that all the dimensions have a positive relationship with
customer satisfaction and answered the second research question of whether there was a
relationship between service quality dimensions and customer satisfaction. This has the
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implication for the bank to focus on the dimensions with the highest correlation, that is
responsiveness and empathy. But does not exactly inform the bank on the exact amount of
investment it has to make to acquire a desired amount of change in customer satisfaction. Hence,
regression analysis was done to assist management of the bank and also prove the hypothesis
made.

4.8 REGRESSION ANALYSIS

The researcher tested the five hypothesis set out to be tested at the beginning based on the
regression analysis. The researcher believes that the bank can use the result of the regression
analysis for future decision making via identifying which service quality dimension got the
highest effect on customer satisfaction. This will answer the third research question of this study.
‘What is the dominant service quality dimension that has strong relation with customer
satisfaction in United Bank S.C.?’

Collinearity test was performed, Collinearity Statistics gives two values—Tolerance and VIF
(variance inflation factor). As one can see Tolerance is just the inverse of VIF. In social sciences
re- search, a VIF value as high as 10 is considered to be acceptable. In turn, tolerance values
greater than 0.1 have very serious collinearity effects. (Gaur & Gaur, 2009) Therefore, variables
like Tangibles, Reliability, Responsiveness, Empathy, and Assurance were selected and included
in the regression analysis.(see appendix 3)

4.8.1. TANGIBLES

The result of regression analysis on the independent variable (tangibles) with the dependent
variable (customer satisfaction) indicates existence of positive and statistically significant
relationship between them. Table 4.8,1.(a) depicts that the independent variable tangibles alone
explain 14.00% (R2 = .140) of variation in the customer satisfaction. This shows that there are
other variables which can influence the customer satisfaction level of United Bank S.C.

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Table 4.8.1. (a) Model summary of tangibles

Model R R Square Adjusted R Square Std. Error of the Estimate

a
1 .374 .140 .131 .571

a. Predictors: (Constant), Tangibles

Own survey, 2014

Table 4.8.1. (b) Tangible Coefficients

Standardized
Un-standardized Coefficients Coefficients
Model B Std. Error Beta T Sig.
1 (Constant) 2.759 .437 6.307 .000

Tangibles .103 .026 .374 3.946 .000

a. Dependent Variable: Satisfaction Level of Customer Satisfaction
Own survey, 2014

The beta value on the coefficient table indicate, the more the bank spent on the tangible
dimension, to improve the Physical facilities, equipment, and appearance of personnel, the more
the customer is satisfied. Hence, if assumed other things being constant and tangibles increased
by one unit, it increases customer satisfaction by 0.103.

HYPOTHESIS TESTING (H1)

H1o: Tangibles does not have a significant impact on customer satisfaction in United .
Bank’s branches in Addis Ababa.

H1a: Tangibles has a significant impact on customer satisfaction in United Bank’s .

branches in Addis Ababa.

Table 4.8.1.(c) Tangible ANOVA

Model Sum of Squares Df Mean Square F Sig.
1 Regression 5.081 1 5.081 15.569 .000a
Residual 31.328 96 .326

Total 36.408 97

a. Predictors: (Constant), Tangibles

b. Dependent Variable: Satisfaction Level of Customer Satisfaction

Own survey, 2014

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Since the significance result on the ANOVA table is 0.000 which is p< 0.05, the regression
analysis proved the presence of positive/ direct association between Tangibles and customer
satisfaction. Therefore, the regression outcome agreed to accept the alternative hypothesis
“Tangibles have a significant impact on customer satisfaction in United Bank’s branches in
Addis Ababa” and lead to the rejection of the null hypothesis.

4.8.2. RELIABILITY

The result of regression analysis on the independent variable (reliability) with the dependent
variable (customer satisfaction) indicates existence of positive and statistically significant
relationship between them. Table 4.8.2.(a)depicts that the independent variable explain 10.70%
(R2 = .107) of variation in the customer satisfaction.

Table 4.8.2.(a) Model summery for Reliability

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .328a .107 .098 .582

a. Predictors: (Constant), Reliability
Own survey, 2014

Table 4.8.2.(b) Reliability Coefficients

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 2.711 .521 5.207 .000

Reliability .101 .030 .328 3.400 .001

a. Dependent Variable: Satisfaction Level of Customer Satisfaction

Own survey, 2014

The beta value on the coefficient table indicate, the more the bank spent on the reliability
dimension, to improve the ability to of employees to perform service dependably and accurately,
the more the customer is satisfied.. Hence, if assumed other things being constant and reliability
increased by one unit, it increases customer satisfaction by 0.101.

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HYPOTHESIS TESTING (H2)

H2o: Reliability does not have a significant impact on customer satisfaction in
United Bank’s branches in Addis Ababa.

H2a: Reliability has a significant impact on customer satisfaction in United Bank’s .

branches in Addis Ababa.

b
Table 4.8.2(c) Reliability ANOVA

Model Sum of Squares df Mean Square F Sig.

a
1 Regression 3.913 1 3.913 11.560 .001

Residual 32.495 96 .338

Total 36.408 97

a. Predictors: (Constant), Reliability

b. Dependent Variable: Satisfaction Level of Customer Satisfaction

Own survey, 2014

Since the regression result on the ANOVA table is p= 0.001 which is p < 0.05, the regression
analysis proved the presence of significant positive/ direct association between Reliability and
customer satisfaction. Therefore, the regression outcome agreed to accept the alternative
hypothesis “Reliability has a significant effect on customer satisfaction in United Bank’s
branches in Addis Ababa” and lead to the rejection of the null hypothesis.

4.8.3. Responsiveness

The result of regression analysis on the independent variable (responsiveness) with the
dependent variable (customer satisfaction) indicates existence of positive and statistically
significant relationship between them. Table 4.8.3.(a) depicts that the independent variable
explain 28.9% (R2 = .289) of variation in the customer satisfaction. This shows that
responsiveness have a high level effect on customer satisfaction.

Table 4.8.3. (a) Model summery for Responsiveness

Model R R Square Adjusted R Square Std. Error of the Estimate

a
1 .538 .289 .281 .520

a. Predictors: (Constant), Responsiveness

Own survey, 2014

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Table 4.8.3.(b) Responsiveness Coefficients

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) 2.023 .398 5.081 .000

Responsiveness .114 .018 .538 6.214 .000

a. Dependent Variable: Satisfaction Level of Customer Satisfaction

Own survey, 2014

The beta value on the coefficient table indicate, the more the bank spent on the ability of
employees to provide prompt service and be willing to help customers, the more the customer is
satisfied. Hence, if assumed other things being constant and responsiveness increased by one
unit, it increases customer satisfaction by 0.114. The result show that human aspect of interacing
is more important to customers.

HYPOTHESIS TESTING (H3)

H3o: Responsiveness does not have a significant impact on customer satisfaction in United
Bank’s branches in Addis Ababa.

H3a: Responsiveness have a significant impact on customer satisfaction in United Bank’s

branches in Addis Ababa.

Table 4.8.3.(c) Responsiveness ANOVA

Model Sum of Squares Df Mean Square F Sig.

a
1 Regression 10.457 1 10.457 38.609 .000

Residual 25.729 95 .271

Total 36.186 96

a. Predictors: (Constant), Responsiveness

b. Dependent Variable: Satisfaction Level of Customer Satisfaction

Own survey, 2014

Since the significance result on the ANOVA table is 0.000 which is p< 0.05, the regression
analysis proved the presence of positive/ direct effect that responsiveness has on customer
satisfaction. Therefore, the regression outcome agreed to accept the alternative hypothesis
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“Responsiveness has a significant impact on customer satisfaction in United Bank’s branches in

Addis Ababa” and lead to the rejection of the null hypothesis. Responsiveness has the highest R2
from all of the dimensions.

4.8.4. Empathy

The result of regression analysis on the independent variable (empathy) with the dependent
variable (customer satisfaction) indicates existence of positive and statistically significant
relationship between them. Table 4.8.4 (a) depicts that the independent variable explain 27.40%
(R2 = .274) of variation in the customer satisfaction. This shows that empathy has a high effect
on customer satisfaction and that the bank should invest more on the indicator variables of this
dimension.

Table 4.8.4. (a) Model summery for Empathy

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .523a .274 .266 .527

a. Predictors: (Constant), Empathy

Own survey, 2014

Table 4.8.4. (b) Empathy Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta T Sig.

1 (Constant) 2.164 .392 5.521 .000

Empathy .114 .019 .523 5.921 .000

a. Dependent Variable: Satisfaction Level of Customer Satisfaction

Own survey, 2014

The beta value on the coefficient table indicate, the more the bank improve on the empathy
dimension, to improve the caring and individual attention provided to customers, the more the
customer is satisfied. Hence, if assumed other things being constant and empathy increased by
one unit, it increases customer satisfaction by 0.114.

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HYPOTHESIS TESTING (H4)

H4o: Empathy does not have a significant impact on customer satisfaction in United .
Bank’s branches in Addis Ababa.

H4a: Empathy has a significant impact on customer satisfaction in United Bank’s .

branches in Addis Ababa.

ANOVAb

Model Sum of Squares Df Mean Square F Sig.

1 Regression 9.752 1 9.752 35.058 .000a

Residual 25.869 93 .278

Total 35.621 94

a. Predictors: (Constant), Empathy

b. Dependent Variable: Satisfaction Level of Customer Satisfaction

Own survey, 2014

Since the significance result on the ANOVA table is 0.000 which is p< 0.05, the regression
analysis proved the presence of a significant positive/ direct association between empathy and
customer satisfaction. Therefore, the regression outcome agreed to accept the alternative
hypothesis “Empathy has a significant impact on customer satisfaction in United Bank’s
branches in Addis Ababa” and lead to the rejection of the null hypothesis.

4.8.5. Assurance

The result of regression analysis on the independent variable (assurance) with the dependent
variable (customer satisfaction) indicates existence of positive and statistically significant
relationship between them. Table 4.8.5(a) depicts that the independent variable explain 16.30%
(R2 = .163) of variation in the customer satisfaction.

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Table 4.8.5. (a) Model summery for Assurance

Model R R Square Adjusted R Square Std. Error of the Estimate

a
1 .404 .163 .154 .565
a. Predictors: (Constant), Assurance
Own survey, 2014

The beta value on the coefficient table indicate, the more the bank spent on the employee’s
knowledge, courtesy and ability to convey trust and confidence, the more the customer is
satisfied. Hence, if assumed other things being constant and assurance increased by one unit, it
increases customer satisfaction by 0.131.

Table 4.8.5. (b) Assurance Coefficientsa

Standardized
Unstandardized Coefficients Coefficients

Model t Sig.
B Std. Error Beta

1 (Constant) 2.111 .552 3.825 .000

Assurance .131 .031 .404 4.306 .000

a. Dependent Variable: Satisfaction Level of Customer Satisfaction

Own survey, 2014

HYPOTHESIS TESTING (H5)

H50: Assurance does not have a significant impact on customer satisfaction in United
Bank’s branches in Addis Ababa.

H5a: Assurance has a significant impact on customer satisfaction in United Bank’s .

branches in Addis Ababa

b
ANOVA

Model Sum of Squares Df Mean Square F Sig.

a
1 Regression 5.908 1 5.908 18.538 .000

Residual 30.277 95 .319

Total 36.186 96

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ANOVAb

Model Sum of Squares Df Mean Square F Sig.

1 Regression 5.908 1 5.908 18.538 .000a

Residual 30.277 95 .319

Total 36.186 96

a. Predictors: (Constant), Assurance

b. Dependent Variable: Satisfaction Level of Customer Satisfaction

Since the regression result on the ANOVA table is 0.000 which is p < 0.05, the regression
analysis proved the presence of positive/ direct association between Assurance and customer
satisfaction. Therefore, the regression outcome agreed to accept the alternative hypothesis
“Assurance has a significant effect on customer satisfaction in United Bank’s branches in Addis
Ababa” and lead to the rejection of the null hypothesis.

In conclusion all the dimensions of SERVPERF have a statistically significant impact on

customer satisfaction. Hence, all the alternate hypothesis are accepted. The R2 result is the
highest for two of the dimensions is Responsiveness 0.289 and empathy (0.279). followed by
Assurance (0.163), Tangibles (0.140) and Reliability (0.107)

4.9. OVERALL REGRESSION ANALYSIS

The result of regression analysis on the independent variables (tangibles, reliability,

responsiveness, empathy and assurance) with the dependent variable (customer satisfaction)
indicates existence of positive and statistically significant relationship between them. Table 4.9
(a)depicts that the independent variables all together explain 40.40% (R2 = .404) of variation in
the customer satisfaction.

4.9.(a) Model Summary for SERVPERF

Model R R Square Adjusted R Square Std. Error of the Estimate

a
1 .635 .404 .365 .501

a. Predictors: (Constant), Assurance, Tangibles, Responsiveness, Empathy, Reliability

Own survey, 2014

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4.9.(b) Coefficients table for SERVPERF MODEL

Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) 1.404 .600 2.340 .022

Tangibles .034 .029 .125 2.169 .014

Reliability .032 .040 .193 2.196 .003

Responsiveness .079 .025 .373 3.098 .001

Empathy .075 .027 .324 2.738 .008

Assurance .073 .041 .218 2.837 .011

a. Dependent Variable: Satisfaction Level of Customer Satisfaction

Own survey, 2014

Therefore, regression equation from Table 4.9.(b) for the SERVPERF model will be

Y= a + bx1 + bx2+ bx3…

CS = 1.404 + 0.034TAN + 0.032REL+ 0.079RES + 0.075EMP + 0.073ASS

Where
CS= Customer satisfaction
TAN= Tangibles
REL= Reliability
RES = Responsiveness
EMP= Empathy
ASS= Assurance
HYPOTHESIS TESTING (H6)
H60: SERVPERF dimension does not have a significant impact on customer satisfaction in United
Bank’s branches in Addis Ababa.

H5a: SERVPERF dimension has a significant impact on customer satisfaction in United Bank’s
branches in Addis Ababa.

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 ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

4.9.(C) SERVPERF MODEL ANOVAb

Model Sum of Squares df Mean Square F Sig.

a
1Regression 13.276 5 2.655 10.558 .000

Residual 19.616 78 .251

Total 32.893 83

a. Predictors: (Constant), Assurance, Tangibles, Responsiveness, Empathy, Reliability

a. Dependent Variable: Satisfaction Level of Customer Satisfaction

Since the regression result on the ANOVA table is 0.000 which is p < 0.05, the regression
analysis proved the presence of positive/ direct association between SERVPERF dimension and
customer satisfaction. Therefore, the regression outcome agreed to accept the alternative
hypothesis “SERVPERF dimensions have a significant impact on customer satisfaction in United
Bank’s branches in Addis Ababa” and lead to the rejection of the null hypothesis.

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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

CHAPTER FIVE
FINDING, CONCLUSION AND RECOMMENDATIONS

5.1. FINDING
This study used the SERVPERF model by Cronin and Taylor,1992 to measure the service
quality perception of the United Bank S.C. and its relationship with customer satisfaction.
Pearsons bivariate correlation found that all the service quality measurement dimensions have
positive association with customer satisfaction. Responsiveness showed the highest positive
correlation with customer satisfaction(r=0.538) and empathy demonstrates the second highest
positive correlation (r=0.523) with customer satisfaction. Whereas, reliability reveals the least
positive correlation with customer satisfaction as compared to the other dimensions (r=0.328).
The other variables Assurance and Tangibles had correlation coefficient of r=0.404 and r=0.374.

To test the hypothesis and also find the dominant service quality dimension, the researcher
performed a regression analysis. The result of this analysis found that the regression R2 result
which showed the variance explained by each dimension demonstrated that responsiveness
explains the highest variance in the customer satisfaction R2 = 0.289 or 28.9%. Followed by
empathy 27.4%, assurance 16.3%, , tangibility 14% and reliability 10.7%. The beta value which
explains how much customer satisfaction would increase when there is a one unit increase in ;the
independent variable, also shows the beta results in the above order. Followed by this, the overall
SERVPERF model regression resulted in a R2 =40.40% which implies the model explained
40.4% of the variance in customer satisfaction. In addition the ANOVA result found that all the
service quality dimensions had a positive impact on customer satisfaction, hence all the alternate
hypothesis were accepted.

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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

5.2 CONCLUSION

Through using the SERVPERF this performance only measure of service quality, this study
successfully ascertained that there is a positive relationship between the service quality
measurement dimensions of the SERVPERF model and customer satisfaction. In addition, it
found out that the regression model indicated that the five dimensions of SERVQUAL
(tangibles, reliability, responsiveness, empathy, and assurance) explain 40.4% of the variance in
customer satisfaction. Responsiveness is the most dominant service quality dimension that
affects customer satisfaction. This dimension refers to the willingness to help customers and
provide prompt service. The bank customers of the United Bank S.C. believe that the bank
employees are responsive to their needs (mean score >4), and this responsiveness is very
important to the customers since it has a very profound effect on their satisfaction. It has the
highest beta value on the regression model of and also the highest positive correlation with
customer satisfaction. The descriptive analysis mean score shows that the mean scores for the
dimension is > 4. Therefore the bank is currently doing well on this dimension & should make an
effort to maintain it for the future too. Moreover the inter correlation showed that responsiveness
is the dimension with the strongest association score with other SERVPERF dimensions. When
the bank makes changes to one service quality dimension the association is likely to positively
motivate other service quality dimensions positively too. One of the highest inter-correlation
exists between responsiveness and reliability (r=0.585) and responsiveness and empathy
(r=0.585). Therefore a reduction in the level of responsiveness will result a considerable
consequent decline in empathy and reliability. Hence the bank should keep the level of
responsiveness as high as possible. The next dominant factor in service quality measuring
dimensions is empathy. This dimension refers to the level of caring and individual attention
provided to customers. Service customers often have expectation with regard to the extent to
which the service providers appear to understand and be concerned about their individual needs
and wants. The more the service providers can see things from the customer's points of view, the
better. The core concept of empathy is to understand the needs of customers and provide
individual attention. Data shows that empathy is the second dominant service quality dimension.
The third largest R square result goes to Assurance, followed by Tangibility and Reliability.
Empathy had the lowest mean compared to the other dimensions. However it has the second

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ADDIS ABABA UNIVERSITY SCHOOL OF COMMERCE 2006/2014

highest correlation and regression result. Therefore, the bank has room for improvement that
could be rewarding.

The mean results of all the dimensions shows that the customers of United Bank S.C. are
somewhat satisfied or satisfied with the bank but when the regression model was computed, the
service quality explained only 40.4% of the variance therefore this implies that there are other
factors outside of service that affect the satisfaction of customers.

5.3. RECOMMENDATIONS

This study has shown the relationship among the service quality dimensions and customer
satisfaction of United Bank S.C.. Since the study confirm the five dimensions of service quality
are positively correlated with the bank customer satisfaction, the bank should give strong
emphasis to all the service quality dimensions in maintaining and improving the service quality
the bank provides.

However, among these service quality dimensions, responsiveness shows the highest positive
correlation with customer satisfaction in the current study. Hence the bank should work on all the
indicators in this dimension i.e. increase the number of employees, be as prompt as possible, tell
customers when service will be performed and be willing to help customers & answer their
questions. The management can use training programs to train employees act on this indicators.
The second dominant factor is empathy. Since the mean score shows the lowest from all the
dimensions, while it has high R square results show high result. The customers are not getting
what they want therefore the bank can make improvements on this are via giving individual
attention to customers’ and be attentive to their needs on areas of branch accessibility,
convenience of operating hours and generally look at things from the customers point of view.
The bank should also look at all the other dimensions along with their respective measurement
indicators to improve and work on the current level of satisfaction.

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5.4. IMPLICATIONS FOR FURTHER RESEARCH

This study measured the overall service quality of United Bank S.C and its relationship with
customer satisfaction. However, the SERVPERF dimensions explained only 40.4% of the
variance while the customer satisfaction level frequency results show the customers are highly
satisfied. Therefore, the reasons for their satisfaction must be due to other factors. Further
research on these area might find other customer satisfaction factors not covered by this study. A
possible suggestion of other factors the customer satisfaction might be determined by are the
loan and international banking operations.

Measuring the Service Quality of United Bank S.C. and its Relationship with Customer Satisfaction
49
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4
 Appendix A

(Amharic Questionnaire)
 አዲስ አበባ ዪንቨርስቲ ንግድ ስራ ት/ቤት የገበያ ስራ አመራር ክፍል

የ አገልግሎት አሰጣጥ ጥራት እና ከ ደንበኞች እርካታ ጋር ያለውን ግንኙነት የሚለካ ጥናት

ይህ ጥናት በአዲስ አበባ ዪንቨርስቲ ንግድ ስራ ት/ቤት በገበያ ስራ አመራር የድህረ ምረቃ ዲግሪ ማሟያ ነው፡
ጥናቱ ለትምህርት ጉዳይ ብቻ የሚውል ነው፡፡ የመጠይቁ አላማ ሕብረት ባንክ አ.ማ. የሚሰጠውን አገልግሎት
ጥራት መለካት እና ከ ደንበኞች እርካታ ጋር ስላለው ግንኙነት ማጥናት ነው፡፡ ስለሆነም ይህችን አጠር ያለች
ከ 10 ደቂቃ በላይ የማትፈጅ መጠይቅ ገለልተኛ የሆነ ምላሽዎን በመስጠት እንዲሞሉልኝ በትህትና
እጠይቃለሁ፡፡ የሚሰጡት ምላሽ ሚስጥራዊነት እንደሚጠበቅ ላረጋግጥሎት እወዳለሁ፡፡

ስለ ትብብሮ ቅድሚያ አመሰግናለሁ.

ክፍል አንድ:
መመሪያ:
- ስምዎትን መጥቀስ አያስፈልግም
- ትክክል ነው የሚሉትን መልስ ያክብቡ

ሀ. ጾታ 1. ወንድ 2. ሴት

ለ. እድሜ 1. ከ 18-29 አመት 2. ከ 30-39 አመት

3. ከ 40-49 አመት 4. ከ 50 አመት እና በላይ

ሐ. የጋብቻ ሁኔታ
1. ያላገባ/ች 2.. ያገባ/ች 3. ሌላ

መ. የትምህርት ደረጃ
1. አንደኛ ደረጃ 4. የመጀመሪያ ዲግሪ
2. ሁለተኛ ደረጃ 5. ሁለተኛ ዲግሪ እና ከዛ በላይ
3. ሰርተፍኬት/ዲፐለኮማ

ክፍል ሁለት፡ የደንበኞች እይታ

1
መመሪያ: ከዚህ በታች የተዘረዘሩት ስለ ህብረት ባንክ የአገልግሎት ጥራት ያሎትን አመለካከት ይገልፃሉ፡፡
መልስ ሲሰጡ ከቁጥሮቹ አንዱን በማክበብ ይሁን፡፡
- 5 ካከበቡ በህብረት ባንክ የተባለውን አገልግሎት እንደሚያገኙ በጣም ይስማማሉ ማለት ነው፡፡
- 1 ካከበቡ በህብረት ባንክ የተባለውን አገልግሎት እንደሚያገኙ አይስማሙም (አገልግቱን አያገኙም)
ማለት ነው
በመሀከል ካሉተ ምርጫዎች አንዱን በመምረጥም የመስማማት ወይም ያለመስማማት ደረጃዎትን
ማሳየት ይችላሉ፡፡

Sl. የአገልግሎት ጥራት መለኪያ ዝርዝሮች

No በጭራሽ አልስማማም አስተያየት እስማማለሁ በጣም
አልስማማም የለኝም እስማማለሁ

1 ህብረት ባንክ አ.ማ. አገልግሎቱን ለመስጠት የጊዜውን

አዳዲስ ዘመናዊ የሆኑ የስራ መሳሪያዎች እና የጊዜውን
አዳዲስ ቴክኖሎጂዎች ይጠቀማል፡፡ 1 2 3 4 5
2 ህብረት ባንክ አ.ማ. መገልገያ እቃዎች ለአይን እይታ
ሳቢ ናቸው፡፡ 1 2 3 4 5
3 ህብረት ባንክ አ.ማ. ሰራተኞች ውብ እና ጽዱ አለባበስ
አላቸው፡፡ 1 2 3 4 5
4 በህብረት ባንክ አ.ማ. ውስጥ የሚሰጠው አገልግሎት
ባንኩ ካለው መገልገያ እቃዎች እና ካለው ቴክኖሎጂ ጋር
አብሮ ይሄዳል፡፡ 1 2 3 4 5

5 የህብረት ባንክ አ.ማ. ሰራተኞች አገልግሎትን ቃል

በገቡሎት ሰአት ይፈጽማሉ፡፡ 1 2 3 4 5
6 የህብረት ባንክ አ.ማ. ሰራተኞች ችግር በሚገጥምዎ ጊዜ
ለችግርዎ መፍትሄ እንዲያገኙ ጥረት ያደርጋሉ፡፡ 1 2 3 4 5
7 በህብረት ባንክ አ.ማ. በሚገለገሉበት ወቅት ሰራተኞች
ስህተት ብዙም አያጋጥሞትም፡፡ 1 2 3 4 5
8 ህብረት ባንክ አ.ማ. መረጃዎችን በ ትክክል ያስቀምጣል
(እስቴትማንት፣ የሂሳብ መጠን፣ አድራሻ)፡፡ 1 2 3 4 5

9 ህብረት ባንክ አ.ማ. እርስዎ በሚጠቀሙባቸው

ቅርንጫፎች ሁሉ ለፍላጎትዎ ምላሽ የሚሰጡ በቂ
የሰራተኞች ብዛት አለው፡፡ 1 2 3 4 5
10 የህብረት ባንክ አ.ማ. ሰራተኞች የአገልግሎት ማግኛ
ሰአት ይገልጹሎታል፡፡ 1 2 3 4 5
11 በህብረት ባንክ አ.ማ. ፈጣን አገልግሎት ይሰጦታል፡፡ 1 2 3 4 5
12 የህብረት ባንክ አ.ማ. ሰራተኞች ሁል ጊዜ እርሶን
ለመርዳት ፈቃደኞች ናቸው፡፡ 1 2 3 4 5
13 የህብረት ባንክ አ.ማ. ሰራተኞች ስራ ቢበዛባቸውም፤
ለጥያቄዎች መልስ ለመስጠት ተባባሪዎች ናቸው፡፡ 1 2 3 4 5
2
Sl. የአገልግሎት ጥራት መለኪያ ዝርዝሮች
በጭራሽ አልስማማም አስተያየት እስማማለሁ በጣም
No አልስማማም የለኝም እስማማለሁ

14 የህብረት ባንክ አ.ማ. ሰራተኞች ለእርሶ የተለየ ትኩረት

ይሰጣሉ፡፡ 1 2 3 4 5
15 የህብረት ባንክ አ.ማ. የስራ ሰአት ለእርሶ ተስማሚ ነው፡፡
1 2 3 4 5
16 የህብረት ባንክ አ.ማ. ቅርንጫፎች በአቅራቢያዎት ምቹ
በሆኑ ቦታዎች ላይ ይገኛሉ፡፡ 1 2 3 4 5
17 የህብረት ባንክ አ.ማ. ፎርሞች ለመረዳት ቀላል እና
ለመሙላት ጊዜ የማይፈጁ ናቸው ( ብር ማስገቢያ፤
ውጫ፤ አካውንት መክፈቻ፤ )፡፡ 1 2 3 4 5
18 የህብረት ባንክ አ.ማ. ሰራተኞች የእርሶን ፍላጎት
ይረዱሎታል፡፡ 1 2 3 4 5

19 እርስዎ የህብረት ባንክ አ.ማ. ሰራተኞች ላይ እምነት

ይጥሉባቸዋል፡፡ 1 2 3 4 5
20 በህብረት ባንክ አ.ማ. ላይ በሚያካሂዱት ማንኛውም
ገንዘብ ነክ እንቅስቃሴ ስጋት አይገባዎትም፡፡ 1 2 3 4 5
21 የህብረት ባንክ አ.ማ. ሰራተኞች ሁሌም ለእርሶ ትሁት
ናቸው፡፡ 1 2 3 4 5
22 የህብረት ባንክ አ.ማ. ሰራተኞች ስራቸውን የመከወን በቂ
እውቀት አላቸው፡፡
1 2 3 4 5

ክፍል ሶስት፡

መመሪያ: ስለ ህብረት ባንክ አገልግሎት ያሎት አጠቃላይ ስሜት ምን ይመስላል? መልስ ሲሰጡ ከቁጥሮቹ
አንዱን በማክበብ ይሁን፡፡
1. በጭራሽ አልተደሰትኩም
2. ብዙም አልተደሰትኩም
3. አስተያየት የለኝም
4. በመጠኑ ተደስቻለሁ
5. በጣም ተደስቻለሁ

ጊዜዎትን ወስደው ይህን መጠይቅ ስለሞሉ በጣም አመሰግናለሁ!

3
 APPENDIX B

(English Questionnaire)
 ADDIS ABABA UNIVERSITY COLLEGE OF COMMERCE MARKETING
MANAGEMENT DEPARTMENT

A SURVEY ON MEASURING SERVICE QUALITY IN RELATIONSHIP TO CUSTOMER

SATISFACTION

To be field by customers who have Account in Addis Ababa Branches of United Bank S.C.

Dear Respondents,
This study is part of a requirement for a Masters Degree in Marketing Management at Addis Ababa University
School of Commerce. It has academic purpose only. This questionnaire is designed to measure the service quality
of United Bank S.C. and its relationship to customer satisfaction. Therefore please give an honest answer to all the
questions. I assure you that the responses will be treated confidentially. This will only take less than 10 minutes
of your valuable time.

Thank you in advance for your cooperation. (The researcher)

Part One: Personal Information

Instruction:
- No need of writing your name
- Please circle the appropriate response category from the choices given.

A. Gender

1. Male 2. Female

B. Age

1. 18-29 years old 3. 40-49 Years old

2. 30-39 years old 4. 50 years old and above

C. Marital Status

1. Single 2. Married 3. Other

D. Education Level

1. Primary School 4. First degree

2. Secondary School 5. Second degree and more
3. Certificate/Diploma
Part Two: Customers’ Perception
Instruction: The following statement relates to your feeling about the service quality of United Bank S.C.
Please respond by circling the number which best reflects your own perceptions.
5 means you strongly agree that United Bank S.C. has that feature and
1 means you strongly disagree
You can choose any of the numbers in the middle that show how strong your feelings are.
Sl. Statements of Service Quality
N Strongly Disagree Neither Agree Strongly
o Disagree Agree Nor Agree
Disagree
TANGIBLES
1 United Bank S.C. has up-to-date equipment &
technology 1 2 3 4 5
2 United Bank S.C. physical facilities are visually
appealing 1 2 3 4 5
3 United Bank S.C. employees are well dressed and
appear neat 1 2 3 4 5
4 The appearance of the physical facilities &
technology of United Bank S.C.is in keeping with
the type of service provided 1 2 3 4 5
RELIABILITY
5 United Bank S.C. staffs provide service at the
time they promise to do so 1 2 3 4 5
6 When you have a problem, United Bank S.C.
employees shows a sincere interest in solving it. 1 2 3 4 5
7 United Bank S.C. employees perform service
right the first time 1 2 3 4 5
8 United Bank S.C. keeps its records accurately
(statements, account balance, and your contact
information) 1 2 3 4 5
RESPONSIVENESS
9 There are always enough number of staff to
respond to your needs at the branches of United
Bank S.C. 1 2 3 4 5
10 United Bank S.C. employees tell you exactly
when the service will be performed. 1 2 3 4 5
11 Employees of United Bank S.C. give you prompt
service. 1 2 3 4 5
12 Employees of United Bank S.C. are always
willing to help you. 1 2 3 4 5
13 Employees of United Bank S.C. are never too
busy to respond to your requests 1 2 3 4 5
Sl. Statements of Service Quality
No Strongly Disagree Neither Agree Strongly
Disagree Agree Agree
Nor
Disagree
EMPATHY
14 United Bank S.C. employees give you individual
attention. 1 2 3 4 5
15 United Bank S.C. has operating hours convenient
to you. 1 2 3 4 5
16 The branches of United Bank S.C. are easily
accessible to me 1 2 3 4 5
17 United Bank S.C. forms are easily
understandable (withdrawal, deposit, account
opening, money transfer, etc(face validity) 1 2 3 4 5
18 Employees of United Bank S.C. understand your
specific needs. 1 2 3 4 5
ASSURANCE
19 You can trust employees of United Bank S.C. 1 2 3 4 5
20 You feel safe in your transactions with United
Bank S.C. employees 1 2 3 4 5
21 Employees of United Bank S.C. are consistently
polite to you 1 2 3 4 5
22 Employees of United Bank S.C. always possess
the necessary information on the requested
services provided 1 2 3 4 5

Part Three: Overall satisfaction

Instruction: The following statement relates to your feeling about United Bank S.C. Please
respond by circling the number which best reflects your own perceptions.
My feelings towards United Bank S.C.’s services can best be described as,
1. Highly dissatisfied
2. Dissatisfied
3. Newtral
4. Satisfied
5. Highly satisfied

Thank you for taking time to complete this questionnaire!

 APPENDIX C

(SPSS OUTPUT)