Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836

Vol.2 (2), February (2013)

Online available at indianresearchjournals.com

A STUDY OF FACTORS AFFECTING CUSTOMER SATISFACTION IN

PRESENT HIGHLY COMPETITIVE BANKING INDUSTRY
PRERNA DAWAR
ASSOCIATE PROFESSOR & HEAD
DEPARTMENT OF MANAGEMENT STUDIES
N.C.COLLEGE OF ENGINEERING ISRANA,PANIPAT

_____________________________________________________________________________________

ABSTRACT
The main objective of this paper is to identify all the main factors that influence the customer
satisfaction in banking at the present contemporary global and highly competitive economy. In
this study a comparative research design has been chosen to explicate the determinants of
Customer Satisfaction. The research method will help in examining the various factors those
results in satisfaction in Retail Banking. Factor Analysis is the statistical tool that has been used
for data analysis.
In analysis part initially KMO (Kaiser-Meyer-Olkin) and Bartlett's Test was applied to the
collected data. Kaiser-Meyer-Olkin Measure of Sampling Adequacy test shows the value of
.814.The Principal Component Analysis extraction method was used to analyze the data with
Varimax Rotation Method. The extracted communalities ranged from 0.477 to 0.777. For clarity
of the factor definitions, factor loadings of more than 0.400 were considered. The factor analysis
yielded 6 factors in all which explaining 63.369 percent of total variance.
Applicative value:
Implications of this research work will help the bankers of small town banks can identify that
what are the various factors that can affect their customer satisfaction the most in the present
competitive market. May be they can use these factors to drive Customer loyalty out of customer
satisfaction.
KEYWORDS:
_____________________________________________________________________________________

INTRODUCTION
In the contemporary global and highly competitive economy it is fatal for a business organization
to be non-customer-oriented. Indeed, to survive organizations need to produce products and
services of very good quality that yield highly satisfied and loyal customers (Fecikova, 2004).
For many years customer satisfaction has been a major goal of business organizations, since it
has been deemed to affect customer retention and companies market share (Hansemark and
Albinsson, 2004).
During the last four decades, satisfaction has been considered as one of the most important
theoretical as well as practical issues for most marketers and customer researchers (Jamal, 2004).
Overall Consumer Satisfaction thus reveals The general evaluation of the actions carried
out by a given business in relation to expectations accumulated after various contact
between the consumer and business (Bitner and Hubber, 1994).
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After reviewing the literature on satisfaction, Giese and Cote (2000, p. 15) conclude that the
wide variation in defining the construct of Satisfaction is best reconciled in their definition of
Satisfaction as A summary affective response of varying intensity with a time-specific point
of determination and limited duration directed toward focal points of product acquisition
and consumption.
If customers perceived that they are obtaining additional benefits from their relationship with
establishment employees, their satisfaction level with the service provider will increase (Beatty
et al., 1996). Relational benefits can then be considered as an important factor for satisfaction
with financial businesses. Therefore, relational benefits meaning special treatment, confidence
and social benefits, which were identified by Gwinner et al. (1998), would have a great influence
on customer satisfaction with their habitual establishments.
On one hand, within literature on services marketing, satisfaction has traditionally been defined
as a cognitive-based phenomenon (Westbrook, 1987). Cognition has been studied mainly in
terms
of
the
expectations/disconfirmation
paradigm;
also
known
as
the
confirmation/disconfirmation paradigm, which states that expectations originate from the
customers beliefs about the level of performance that a product/service would provide (Oliver,
1980). Also, various models and theories that have been developed to this end (Oliver, 1980;
Swan and Trawick, 1980; Tse and Wilton, 1988;
Anderson and Sullivan, 1993; Patterson et al., 1997), indicate that customer satisfaction is related
to the size and direction of disconfirmation, which is defined as the difference between the
post-purchase and post-usage evaluation of the performance of the product/service and the
expectations held prior to the purchase (Sharma and Ojha, 2004).
In the service industry, a long-term relationship with customers (Gronroos, 1994; Berry,
2002) is the key success factor that is enormously increasing with the electronic channels. The
proliferation of new channels and the high demand for differentiated products has presented
customers with a wide choice in terms of which service to use in order to profitably interact with
the bank. The extended portfolio does not only offer benefits to customers, but also to banks.
Banks have now the opportunity to capitalize on the beneficial characteristics of the various
products and channels, for example while electronic channels help to reduce the costs of
interaction with the customer by substituting labor intensive operations with automated sales
processes (Campbell, 2003), the interactivity of a face to face consultation provides various
cross-sell opportunities (Clemons et al., 2002). In era of intense competition, service
organizations attempt to differentiate themselves from their competitors. By providing
exceptional services that will benefit its target market, service organizations are likely to achieve
differentiation . (Kotler, Bowen, and Makens 1999). However, mistakes and failures are frequent
occurrences in service businesses (Babakus et al. 2003). Therefore, service firms seek to provide
all the things which can make customer satisfied and that is the leading edge for the organization
to its competitor.

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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836

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RESEARCH METHODOLOGY
Objective of the research paper:
The main objective of this paper is to identify all the main factors that influence customer
satisfaction in retail banking.
For any viable research it is necessary to follow a proper research method. The research method
should be able to explain the techniques appropriate for conducting the proposed study.
Identification of factors that affect Customer Satisfaction is the main objective of the research .In
this study a comparative research design has been chosen to explicate the determinants of
Customer Satisfaction. The research method will help in examining the various factors those
results in satisfaction in Retail Banking. The universe of the study was all Retail Banking
customers who have an account in bank.. To meet the objective a sample of 100 Retail Banking
Customers were randomly selected. Data was collected with the help of questionnaire as a tool
having twenty-three variables on the basis of which satisfaction of customers was calculated. .

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RESEARCH METHODOLOGY Figure No. 1

Exploratory
Interviews

Review of Literature

Recognition of
Services Quality
Dimensions

Designing
Survey
instrument

Data collection from

Bank customers

Data Analysis

Scale Reliability
Pre-testing of Instruments by
Academicians Through pilot Survey

KMO Test
Exploratory Factor Analysis
Validity Assessment
Face Validity

Pretesting of instrument through

pilot survey

Modification & finalization of

instrument

Content Validity
Criterion Related Validity

Final Scale
Development
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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836

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Factor Analysis is the statistical tool that has been used for data analysis .In analysis part initially
.KMO (Kaiser-Meyer-Olkin) and Bartlett's Test was applied to the collected data. Kaiser-MeyerOlkin Measure of Sampling Adequacy test shows the value of .814 and has been found
significant as shown in Table 1. And it was found out after the test that Factor Analysis can be
applied
on
the
data
.The
KMO
Test
detail
are
as
follows:

KMO and Bartlett's Test

Kaiser-Mey er-Olkin Measure of Sampling
Adequacy .
Bart let t's Test of
Sphericity

Approx. Chi-Square
df
Sig.

.808
1318.229
300
.000

TABLE: 1
The researchers to identify significant and smaller numbers of factors as the respondents were
asked for twenty-three observed variables related to customer satisfaction have used the factor
analysis technique. The Principal Component Analysis extraction method was used to analyze
the data with Varimax Rotation Method. The extracted communalities ranged from 0.477 to
0.777.
For clarity of the factor definitions, factor loadings of more than 0.400 were considered. The
factor analysis yielded 6 factors in all which explaining 63.369 percent of total variance as
explained in Table-2. Which shows that 63.369 percent of total variance is explained by
information contained in the factor matrix.
Analysis gives an overview of component matrix and rotated component matrix wherein
Principal Component Analysis extracts the six components and the rotation method of Varimax
with Kaiser Normalization

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COMMUNALITIES
S.No.

Initial

Extraction

Courtesy and friendliness of the staff

1.000

.596

Information provided to you

1.000

.534

Knowledge of staff

1.000

.646

Willingness to answer your queries

1.000

.718

Equal treatment of all customers.

1.000

.583

Reliability of services

1.000

.615

Availability of staff

1.000

.596

Adherence to time limits .

1.000

.674

Quickness in the redressal of your complaints

1.000

.602

10

Promptness in correction of mistakes

1.000

.618

11

Amount charged for various banking services

1.000

.612

12

Timely intimation of changes.

1.000

.566

13

Infrastructure facilities to customers .

1.000

.457

14

Maintaining privacy and confidentiality .

1.000

.733

15

Response to your telephonic queries

1.000

.621

16

You can talk to customer service representative .

1.000

.760

17

Language & information

1.000

.799

18

E-channels improve the quality .

1.000

.710

19

Online banking helps to mange transformation.

1.000

.728

20

Is it easy to find all information from e-channels

1.000

.722

21

Information provided by e-channel is accurate.

1.000

.695

22

More formalities are required to get e-channels

1.000

.496

Note: Extraction Method: Principal Component Analysis.

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TABLE :2
ROTATED COMPONENT MATRIX
Component
1
2
3
4
5
.265
.233
.473
.146
Courtesy and friendliness of the staff
.476
.160
.306
.249
.104
Information provided to you
.585
.160
.370
6.489E-02
Knowledge of staff
.550
.420
7.392E.343
.333
.331
Willingness to answer your queries
.612
02
7.283E.393
-6.976E-03
.150
Equal treatment of all customers .
.633
02
6.825E- 2.085E-02 6.636E-02 1.328E-02
Reliability of services
.778
02
.139 -6.513E-02 7.561E-02
.134
Availability of staff
.741
.345
3.507E.104
8.842E-02
Adherence to time limits .
.732
02
6.941E.347
.392
2.084E-03
Quickness in the redressal of your
.568
02
complaints
-2.554E.282
1.477E-02
Promptness in correction of mistakes
.574
.455
02
8.088E-02
Amount charged for various banking -2.610E-02 -5.053E- -2.152E-02
.776
02
services
.369
-.118
1.690E-02
.318
Timely intimation of changes.
.561
.216
.390
.103
.217
Infrastructure facilities to customers .
.447
.332
.285
.106
.334
Maintaining
privacy
and
.647
confidentiality .
.124
8.764E.231
6.501E-02
Response to your telephonic queries
.735
02
.231
-.209
2.117E-02
You can talk to customer service 1.135E-02
.814
representative .
.135
.171
.114
5.079E-02
Language & information
.858
-.190
.196
-9.158E-03
.434
E-channels improve the quality .
.669
3.004E-02 4.391E-02 5.346E-02
Online banking helps to mange 3.105E-03
.850
transformation.
.167
.124
Is it easy to find all information from
.823 -3.789E-02 6.120E-03
e-channels
.151
.174
-.111
5.343E-02
Information provided by e-channel is
.792
accurate.
.363
.137
3.394E-03
More formalities are required to get e- 8.412E-02
.582
channels
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser
Normalization.a Rotation converged in 6 iterations.

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TABLE: 3
First Factor Includes following Items (Reliability Factor)

S.No.

Items

Loading

Knowledge of staff

.550

Willingness to answer your queries

.612

Equal treatment of all customers.

.633

Reliability of services

.778

Availability of staff

.741

Quickness in the redressal of your complaints

.568

Promptness in correction of mistakes

.574

S.No.

Table :4
Second Factor Include following Items (Technology Factor)
Items
Loading

Infrastructure facilities to customers

.447

E-channels improve the quality.

.669

Online banking helps to mange transformation.

.850

Is it easy to find all information from e-channels

.823

Information provided by e-channel is accurate.

.792

More formalities are required to get e-channels

.582

E-channels improve the quality.

.669

TABLE: 5
Third Factor Include following Items (Empathy Factor)

S.No.

Items

Loading

Courtesy and friendliness of the staff

.476

Information provided to you

.585

Timely intimation of changes

.561

Response to your telephonic queries

.735

You can talk to customer service representative.

.814
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Asia Pacific Journal of Marketing & Management Review__________________________________________ ISSN 2319-2836

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TABLE: 6
Fourth Factor Include following Items (Commitment Factor)
S.No.

Items

Loading

Adherence to time limits

.732

Promptness in correction of mistakes

.455

Amount charged for various banking services

.776

TABLE: 7
Fifth Factor Include following Items (Privacy Factor)

S.No.

Items

Loading

Knowledge of staff

.420

Maintaining privacy and confidentiality

.647

Language & information

.858
TABLE: 8

The five factors of Customer Satisfaction in Banking Industry that are identified by factor
analysis are as follows :

Reliability
Technology
Commitment
Empathy
Privacy

Validity Analysis
Validity tests have been conducted to select and assess the final items of the construct that are
finally used for statistical testing. Among several; two types of validity tests namely, content and
criterion-related validity have been conducted in this study.
Content validity and Criterion- related validity
According to Rungtusanatham (1998), the content validity of a construct is termed as the degree
to which the measure spans the domain of the constructs theoretical definition. It represents the
adequacy with which a particular domain of construct was sampled (Nunnally, 1978; Ahir,
Golhar and Waller, 1996). Content validity is subjective and judgmental but is often based on
two standards as suggested by Nunnally: does the instrument contain a representative set of
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measures, and were sensible methods of scale construction used (Flynn, Sakakibara, Schroeder,
Bates and Flynn, 1990). For this study, the content validity of the instrument was ensured as the
service quality dimensions and attributes were included from an extensive review of related
literature and feedback of residential electricity customers obtained during exploratory
interviews. The selected attributes were thoroughly reviewed and approved by three professor
level academicians and two professionals from the related field. Nunnally (1978) proposed that
when a factor, external to the measurement instrument is correlated with the factor structure;
criterion-related validity is established or else not. This is due to fact that overall customer
Satisfaction is assumed to be the outcome constructs of the above identified variable.

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