BUSINESS RESEARCH METHODS

FINAL REPORT
SECTION-K SEMESTER II MENTOR - Prof . Saurabh Bhattacharya

Topic of Research: Validation of Service Gap 5 in Banking Sector

Group members: AJAY PAL (9) AVANISH TIWARI(21) HARSH AGARWAL (37) NIKHIL Kr. ILWADIA (35) SHASHWAT KAR (27)

EXECUTIVE SUMMARY
Indian Banking system: The Indian banking system is significantly different from most of the Asian nations as well as nations of other continents because of the countrys distinct geographic, social, economic & demographic factors. Large population, diverse culture & extreme income equalities are few of the other factors which contribute to the different system which prevails in our country. India is still in that era where going to a bank to avail different services is not new & therefore these services are treated the same way any other service is treated. In order to fulfill the consumer satisfaction level, any bank needs to keep itself updated in order to reduce the bridge/gap between what a consumer expects & what he actually gets in order to retain a customer. Lesser the gap size more is the satisfaction level.

Problem Identification: As a customer, when I am paying for any form of service/product, I expect a return from it. This return can be in the form of tangible output or intangible output, depending on what mode i have chosen . for a banking service , the output is usually in the form of diverse services which it can offer me at the best possible interest rates/charges , in the form of what level of comfort they can provide me when they are communicating with me , in the form of how prompt are they when they are dealing with any query I put up etc. the mentioned services are the major areas when a customer looking during a banking service. If he is able to get all this under one roof he becomes a lifelong customer , if not then he looks for another bank which can fulfill his banking needs in the way he wants. Since the economic crisis, banks have experienced huge challenges with their customer relationships. How can banks create higher customer satisfaction and loyalty? Banking industry is a service industry and with high demographic and economic changes the customers have become more aware and more inclined towards their preferences. The purpose of our research is to locate all the important factors which a customer looks into when he wants to get associated to a bank & at the same time the same factors also tell us the reason why he switched to other bank. These factors will help us in identifying the basis of customer loyalty in respect to banking services.

To understand the actual meaning of the word SERVICE & how it is percieved by any consumer on a broader prospect, we went thorugh the literary research on the topics Servqual and Servpref. The following papers guided us for our further work : A conceptual model of service quality & its implications for Future Research - Parasuraman , Zeithmal , Leonard Berry SERVQUAL A multiple-item scale for measuring consumer perceptions of service quality - Parasuraman , Zeithmal , Leonard Berry

SERVPERF Versus SERVQUAL J. Joseph Cronin, Jr. & Steven A. Taylor

LITERATURE SURVEY
Service quality involves a comparison of expectations with performance .The main reason to focus on quality is to meet customer needs while remaining economically competitive at the same time. The criterion for service quality is the comparison between the perceived service and expected service by the customer. Factors which influence the appearing of gap between perceived and service were found by Parasuraman, Zeithaml and Berry in 1985. The determinants of service quality are: 1) Competency- Possession of the required skill and knowledge to perform the service. 2) Courtesy-Politeness, respect and friendliness of the contact person. 3) Credibility-Trustworthiness, honesty 4) Security-Freedom from danger, risk or doubt, confidentiality 5) Access-Services easily accessible, convenient location. 6) Communication-Keeping customer informed in the language they understand. 7) Understanding-understanding the customers need. 8) Tangibles-Physical evidence of service. 9) Reliability-Ability to perform the promised service. 10) Responsiveness-Willingness or readiness of employee to help customers.

SERVICE GAP MODEL:

A self explanatory service gap model .

SERVQUAL:
Servqual is a scale which is used to measure the service quality and it is based on 22 items which were the clubbed into 5 main variables which are: R-reliability A-assurance T-tangibility E-empathy R-responsiveness Service quality scale was constructed by-Parsuraman, Zeithaml and Berry. First they collected the data which was based on the 97th items representing 10 dimensions .The total numbers of respondents were 200.each of whom was current user of one the following services like banking, credit card etc. They then purified the scale by analyzing pooled data. The pooling of data was deliberate and appropriate. Purification began with computation of Cronbachs alpha. They came down to the 34 item representing 7 dimensions. The first data set resulted in 34 instruments with 7 dimensions was reanalyzed after deleting the 12 items that dropped out during the second stage of scale purification. They then evaluated servquals reliability and factor structure and re- analysed the original data pertaining to 22 items to verify the scales internal consistence and dimensionality and at last they finalized one five dimension scale. Servquals high reliability and consistent factor structure across several independent samples provide support for its trade validity. Servqual is concise multiple item scale with good reliability and variability which retailers can use to better understand service expectations and perceptions of consumer. Servqual can be used by multiunit retail companies to track the level of service provided by each store in the chain. The servpref is the latest measurement tool in recent days. Servpref measures have greater validity because of their content and discriminant validity. Servpref has greater construct validity. Servqual fails to exhibit construct validity.

The objective of our study is to determine: 1. The impact of service gap 5 (difference in customer perception and customer expectation) on customer loyalty.

HYPOTHESIS : Null hypothesis : Customer expectation & perceived quality does not effects the overall customer satisfaction & loyalty.

Alternate hypothesis : Customer expectation & perceived quality effects the overall customer satisfaction & loyalty

RESEARCH DESIGN
The data has been collected from various sources : Barry and Zeithmal Public survey The variables that we are considering are : Customer perceived value. Loyalty. Exploratory research data for factor analysis.

RESEARCH ANALYSIS

FIELD WORK
The variables /questionnaire were formed taking into consideration the 5 factors of service gap.3 questions from each factor was designed in order to match our study & its goals. The questions included the factors which a consumer feels are important to him when they are dealing with a bank, his perception & his association with the bank. The questionnaire follows a 5-point Likert Scale. The rough draft of the questionnaire is as follows:

QUESTIONNAIRE
Which banks services you prefer the most? __________________________________________ How many bank accounts do you have? _____________________________________________ What kind of services do you generally avail from the banks? ____________________________ How frequently do you avail bank services? o Less than once a month o 1-2 times a month o 3-4 times a month o More than 4 times a month

How would you rate the following factors with respect to your experience with the bank? Strongly Agree The infrastructure of the bank is good. Employees look well dressed and professional The bank uses advanced technology The bank is accurate and fair in its dealings The bank maintains records properly. The bank is punctual of its timings Agree Neutral Disagree Strongly Disagree

Strongly Agree The bank mails the transaction details immediately The bank responds quickly to any query The bank provides prompt service The bank provides security in transactions. The banks policies are clear and easy to understand The employees of the bank are well informed and experienced The working hours of the bank are convenient The Branches of the bank are easily accessible The Bank provides online/mobile services

Agree

Neutral

Disagree

Strongly Disagree

Given your overall experience described in the above scale, please evaluate your experience of your preferred bank relative to other banks on the following: Very good Services received relative to charges paid Quality of service Overall value from the services received Good Neutral Bad Very bad

Given your overall banking experience, what is the likelihood that you would Very likely 1 Recommend the bank to others Choose to stay associated with the bank in future Very unlikely 5

Name: ___________________________________________ Occupation: Self employed Professional Student Others (please specify)____________ Income per annum: Below 5 Lakhs 5 lakhs 10 lakhs 10 Lakh 15 Lakh Above 15 lakhs

SAMPLING TECHNIQUE Random Sampling (our aim was to target people above the age of 30, but our respondents do include few students who have had bank experience). SAMPLE SIZE

120 respondents Statistical Technique:

FACTOR ANALYSIS: Factor analysis is a technique used primarily used for data reduction & summarization. It is used to check if a certain set of variables are linearly related to other small variables under certain conditions , so that they can be few underlying factors. It is an interdependence technique where interdependence of each factor is checked with other factor in order to explain their correlation, identify new or smaller set of underlying factors. Factor analysis is a best tool for market segmentation, pricing studies (price sensitivity factors), to identify the attributes which affect a consumers choice/preference.

VARIABLES IDENTIFIED : These variable are defined in the research papers used by us . we have used 5 factors from them for our project work. They are as follows : R Reliability A Assurance T Tangibles E Empathy R- Responsiveness

FINAL ANALYSIS :
Reliability Statistics Cronbach's Alpha .879 N of Items 17

Cronbach's (alpha) is a coefficient of reliability used as a measure of the internal consistency or reliability Cronbach's > 0.7 is denoted as a preferred value for most of the tests. Since the cronbach alpha in our research is more than 0.7, so there is reasonable internal consistency.

KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity Approx. Chi-Square df Sig. .794 944.164 136 .000

KMO test : A test to verify the sampling adequacy . KMO > 0.5 is the required value. Since KMO is more than the required value, the sample size is adequate. Bartletts Test : this test is used to examine the hypothesis that the variables are uncorrelated in the population.

Communalities Rotated Component Matrix Component 1 VAR1 VAR2 VAR3 VAR4 VAR5 VAR6 VAR7 VAR8 VAR9 VAR10 VAR11 VAR12 VAR13 VAR14 VAR15 VAR16 VAR17 .628 .554 .843 .598 .653 .853 .647 .717 .408 .706 .538 .800 .716 .730 .809 .715 2 3 .445 4 5 .707 .890
a

Initial VAR1 VAR2 VAR3 VAR4 VAR5 VAR6 VAR7 VAR8 VAR9 VAR10 VAR11 VAR12 VAR13 VAR14 VAR15 VAR16 VAR17 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000

Extraction .789 .831 .817 .751 .606 .676 .640 .812 .643 .457 .478 .750 .572 .482 .775 .695 .710

Extraction Method: Principal Component Analysis.

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Rotation converged in 6 iterations

The Rotated Component Matrix represents the rotated factor loading which are the correlations of the variables with the new factors (the factors which are named). The factors are named as follows as per the correlation: 1 Ease of Access (VAR6, VAR11, VAR12, VAR13, VAR14) 2 Reliable (VAR4, VAR5, VAR10, VAR15) 3 Perceived Quality(VAR16, VAR17, VAR18) 4 Responsiveness (VAR7, VAR8, VAR9) 5- Physical Evidence (VAR1, VAR2) Communalities state how much of the variation in each variable is accounted for by the twofactor solution. They determine the extent to which the variance in the variables has been accounted for by the extracted factors. It contains the extractions sum-of-squared loadings which determine the components having Eigen Value more than 1 & their cumulative percentage of variance.

Scree plot is a plot of variance that is associated with each factor. This plot is used to determine how many factors should be kept .the elbow point defines the no. of factors to be kept for further research.

ANOVA Model 1 Regression Residual Total Sum of Squares 42.986 73.216 116.203 df

Mean Square 5 113 118 8.597 .648

F 13.269

Sig. .000
a

a. Predictors: (Constant), INDEPENDENT5, INDEPENDENT4, INDEPENDENT3, INDEPENDENT2, INDEPENDENT1 b. Dependent Variable: DEPENDENT

ANOVA helps us to identify if the factors used are significantly different or not i.e. are they used from a same distribution or different distribution.

Coefficients

Standardized Unstandardized Coefficients Model 1 (Constant) INDEPENDENT1 INDEPENDENT2 INDEPENDENT3 INDEPENDENT4 INDEPENDENT5 a. B -.014 .246 .402 .359 .082 .079 Std. Error .074 .074 .074 .074 .074 .074 .248 .405 .362 .083 .079 Coefficients Beta t -.190 3.317 5.430 4.848 1.110 1.061 Sig. .850 .001 .000 .000 .269 .291

Dependent Variable: DEPENDENT

In this the variables are entered & removed from the model are listed & the following goodness of fit statistics are listed. According to our research there are 3 independent factors which are significant to the study which are: 1 Ease of Access 2 Reliable 3 Perceived Quality The most pre-dominant factor is the second factor i.e. Reliable, as its Beta value is the highest, followed by Perceived Quality & Ease of Access respectively.

TOTAL VARIANCE EXPLAINED

Extraction Sums of Squared Initial Eigen Values Comp onent 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Total 6.204 1.475 1.415 1.311 1.077 .920 .896 .682 .585 .474 .455 .364 .296 .285 .238 .223 .099 % of Variance 36.496 8.677 8.324 7.711 6.338 5.413 5.268 4.013 3.442 2.788 2.674 2.143 1.740 1.678 1.399 1.314 .584 Cumulative % 36.496 45.172 53.496 61.207 67.545 72.958 78.226 82.239 85.681 88.469 91.143 93.286 95.026 96.703 98.102 99.416 100.000 Total 6.204 1.475 1.415 1.311 1.077 Loadings % of Variance 36.496 8.677 8.324 7.711 6.338 Cumulative % 36.496 45.172 53.496 61.207 67.545 Total 2.721 2.693 2.200 2.127 1.741 Rotation Sums of Squared Loadings % of Variance 16.007 15.840 12.942 12.514 10.241 Cumulative % 16.007 31.847 44.789 57.304 67.545

Extraction Method: Principal Component Analysis.

The Total Variance Explained shows the proportion of total variation in the data which is explained by two-factor solution. From this table we see how many factors have Eigen Value more than 1 & the percentage of variance explained by these factors. This helps us to determine the no. of factors which we should retain. In our research, we are getting 5 factors with Eigen value more than 1 & total variance explained by them is 67.545% which is good enough to continue the research.

CORRELATIONS
DEPENDEN INDEPENDE INDEPENDE INDEPENDE INDEPENDE INDEPENDE T Pearson Correlation DEPENDENT INDEPENDEN T1 INDEPENDEN T2 INDEPENDEN T3 INDEPENDEN T4 INDEPENDEN T5 Sig. (1-tailed) DEPENDENT INDEPENDEN T1 INDEPENDEN T2 INDEPENDEN T3 INDEPENDEN T4 INDEPENDEN T5 N DEPENDENT INDEPENDEN T1 INDEPENDEN T2 INDEPENDEN T3 INDEPENDEN T4 INDEPENDEN T5 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 119 .196 .500 .500 .500 .500 . .185 .500 .500 .500 . .500 .000 .500 .500 . .500 .500 .000 .500 . .500 .500 .500 . .003 .003 . .000 .500 .000 .500 .185 .500 .196 .500 .079 .000 .000 .000 .000 1.000 .083 .000 .000 .000 1.000 .000 .362 .000 .000 1.000 .000 .000 .405 .000 1.000 .000 .000 .000 1.000 .248 NT1 .248 1.000 NT2 .405 .000 NT3 .362 .000 NT4 .083 .000 NT5 .079 .000

CORRELATION MATRIX

From the Correlation Matrix we get the idea which variables are highly correlated & would form a part of same factors among the various factors. Here we consider correlation values between the variables above the diagonal.

INCOME DISTRIBUTION AMONG THE RESPONDANTS:

CONCLUSION IN RELATION WITH BANKING INDUSTRY :

According to our research there are 3 independent factors which are significant to the study which are: 1 Ease of Access 2 Reliable 3 Perceived Quality Therefore from this we can conclude that when a consumer is easily able to get access to the services he needs , when the services provided to him are from a source which he is assured of that it is from a reliable source & the quality which he gets meets the benchmarked quality in his mind, the service gap is reduced to a great extent. At the same time he becomes a customer who wants to stay associated with his choice of bank but if at later stages the bank is unable to meet his requirements, then he is bound to switch to other banks which can cater to his needs. Other factors of Responsiveness & physical evidence are important but not as important as the other 3. So we can say, that this research helped us to identity all the major factors which help in reducing the gap between the services provided by a bank & the services perceived by a customer.

ANNEXURE

PRE-TEST ANALYSIS: Before proceeding with the main test, we opted for a pre-test to check the reliability statistics i.e. the cronbachs alpha . the value was 0.873 which was suitable to proceed with the main test & therefore we went to conduct the test on a large scale. The main study was conducted on the same lines that of the pre-test & the analysis of the main test has been concluded with the screenshots of the main test in the above pages.
KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity Approx. Chi-Square df Sig. .587 323.104 136 .000

Reliability Statistics Cronbach's Alpha Based on Cronbach's Alpha .865 Standardized Items .873 N of Items 17

Communalities Initial infra dress accuracy records punctual immediate response prompt service security clear policy experience emplyee convenient working hr location mobile/internet service vs charge service quality overall service 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Extraction .811 .704 .682 .768 .700 .571 .598 .740 .772 .870 .800 .659 .774 .699 .592 .746 .705

Extraction Method: Principal Component Analysis.

Total Variance Explained Extraction Sums of Squared Initial Eigenvalues % of Component 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Total 6.170 2.622 2.104 1.293 .997 .877 .589 .501 .455 .341 .319 .238 .166 .137 .094 .065 .031 Variance 36.294 15.426 12.376 7.607 5.866 5.162 3.465 2.945 2.675 2.008 1.878 1.400 .974 .807 .555 .382 .183 Cumulative % 36.294 51.720 64.095 71.702 77.568 82.730 86.195 89.139 91.814 93.822 95.700 97.100 98.074 98.880 99.435 99.817 100.000 Total 6.170 2.622 2.104 1.293 Loadings % of Variance 36.294 15.426 12.376 7.607 Cumulative % 36.294 51.720 64.095 71.702 Total 4.660 3.481 2.074 1.975 Rotation Sums of Squared Loadings % of Variance 27.409 20.476 12.200 11.617 Cumulative % 27.409 47.885 60.085 71.702

Extraction Method: Principal Component Analysis.

Rotated Component Matrix

Component 1 infra dress accuracy records punctual immediate response prompt service security clear policy experience emplyee convenient working hr location mobile/internet service vs charge service quality overall service .464 .677 .753 .721 .800 .730 -.851 .828 .876 .705 .708 .403 .692 -.421 .675 .747 .804 .753 .440 2 .597 .479 .458 3 4 .501 .574

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 6 iterations.

Variables Entered/Removed Variables Model 1 Entered REGR factor score 4 for analysis 1, REGR factor score 3 for analysis 1, REGR factor score 2 for analysis 1, REGR factor score 1 for analysis 1
a

Variables Removed Method . Enter

a. All requested variables entered. b. Dependent Variable: REGR factor score 1 for analysis 2

Model Summary Adjusted R Model 1 R .675

a

Std. Error of the Estimate

R Square .456

Square .369

.79449312

a. Predictors: (Constant), REGR factor score 4 for analysis 1, REGR factor score 3 for analysis 1, REGR factor score 2 for analysis 1, REGR factor score 1 for analysis 1

ANOVA Model 1 Regression Residual Total Sum of Squares 13.220 15.780 29.000 df

Mean Square 4 25 29 3.305 .631

F 5.236

Sig. .003
a

a. Predictors: (Constant), REGR factor score 4 for analysis 1, REGR factor score 3 for analysis 1, REGR factor score 2 for analysis 1, REGR factor score 1 for analysis 1

Coefficients

Standardized Unstandardized Coefficients Model 1 (Constant) REGR factor score 1 for analysis 1 REGR factor score 2 for analysis 1 REGR factor score 3 for analysis 1 REGR factor score 4 for analysis 1 a. Dependent Variable: REGR factor score 1 for analysis 2 .082 .148 .082 .555 .584 .189 .148 .189 1.284 .211 .570 .148 .570 3.862 .001 B 6.374E-17 .298 Std. Error .145 .148 .298 Coefficients Beta t .000 2.018 Sig. 1.000 .054