An executive summary for managers can be
A dimension-specific
analysis of performance-
only measurement of
service quality and
satisfaction in China’s
retail banking
Lianxi Zhou
The author
Lianxi Zhou is Associate Professor in the Department of
Marketing and Consumer Studies, University of Guelph, Guelph,
Canada.
Keywords
Customer services quality, Customer satisfaction, Measurement,
Banking, China
Abstract
This study examines specific dimensions of the performance-only
measurement of service quality (SERVPERF) as determinants of
consumer satisfaction and subsequent behavioral intentions
associated with banking services in mainland China. Empirical
support for the predictive ability of context-dependent service
quality dimensions is presented. Our results extend and enhance
the validity of the performance-only approach to service quality
through the focus on the multidimensional facets of the
SERVPERF scale, a direct link between context-dependent
dimensions of service quality and consumer satisfaction, and its
application in an international setting. Strategic issues in
managing service quality with retail banks in the Chinese market
are identified and discussed.
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Journal of Services Marketing
Volume 18 · Number 7 · 2004 · pp. 534-546
q Emerald Group Publishing Limited · ISSN 0887-6045
DOI 10.1108/08876040410561866
534
found at the end of this article.
Introduction
Performance-only measurement of service quality
(SERVPERF) as identified by Cronin and Taylor
(1992) among others (Babakus and Boller, 1992),
has received significant conceptual and empirical
support in services research (e.g. Boulding et al.,
1993; Brown et al., 1993; Lee et al., 2000; Teas,
1993, 1994). In a more recent study, Brady et al.
(2002) replicated and extended Cronin and
Taylor’s (1992) work and further confirmed the
superiority of SERVPERF as a more appropriate
method for measuring service quality. Brady et al.
(2002) specifically maintained that SERVPERF
outperforms SERVQUAL (a gap-based
comparison of the expectations and performance
perceptions of consumers) in terms of capturing
the variance in consumers’ overall perceptions of
service quality and validating the
conceptualization of service quality as an
antecedent of consumer satisfaction. However,
there are still two important issues that deserve
further research.
First, in spite of the theoretical foundation and
empirical support documented in the literature,
the SERVPERF scale has only been
operationalized as a summed index (derived by
averaging the distinctive dimensions of service
quality) with regard to its predictive value in
relation to other outcome constructs such as
satisfaction and behavioral intentions. Cronin and
Taylor (1994) indicated that although the
aggregation of the SERVPERF dimensions is
useful for the purpose of comparative analysis
across alternative models and service industries,
“great care should be exercised by managers of
service firms in attempts to derive more specific
information from data derived using the
SERVPERF scale for strategic decision-making”
(p. 130). We believe that the strategic value of
using SERVPERF can be better addressed through
a focus on specific dimensions of service quality,
especially with respect to their relevance to
satisfaction and outcome variables.
In the context of services research, a
conceptualization of the direct link between
specific service quality dimensions and satisfaction
is a recent phenomenon (Oliver, 1993). However,
in the product category, some researchers have
noted that overall consumer satisfaction (i.e. post-
consumption experience) is a function of attribute-
level evaluations of product performance (LaTour
and Peat, 1979; Mittal et al., 1999). The premise is
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
that attribute-level evaluations can capture a
significant amount of variation in overall
satisfaction. Our research position is exemplified
by the same conceptualization, and advocates the
use of specific SERVPERF dimensions as opposed
to a summed index for the purpose of strategic
significance for managing service quality.
Moreover, a dimension-specific model of
service quality and satisfaction is more likely to
reflect consumers’ mental representations of
consumption experiences (Mittal et al., 1999;
Oliver, 1993). Thus, managers would be most
interested in linking those specific service
dimensions to overall satisfaction (Griffin and
Hauser, 1993). This kind of analysis can provide
specific insights to enrich managers’
understanding of diagnostic usefulness about
antecedents of satisfaction, and to increase the
specificity and actionability of satisfaction
management (Mittal et al., 1999). In view of the
two most prevalent and widely accepted
perspectives on service quality evaluations (i.e.
SERVPERF versus SERVQUAL), the
conceptualization of dimension-specific elements
of service quality as antecedents of consumer
satisfaction should be compared empirically.
The second issue concerns the applicability of
SERVPERF in an international service setting.
Because the superiority of SERVPERF has
primarily been validated in the Western service
context, and due to cultural differences, it is likely
that the cultural orientation of consumers will
influence its applicability. In fact, in a cross-
cultural environment, it has been argued that the
ways in which consumers evaluate service quality
and its purported relationships with other
constructs such as satisfaction and behavioral
intention tend to differ considerably (Furrer et al.,
2000; Smith and Reynolds, 2001; Winsted, 1997).
Thus, whether the performance-only model is an
adequate basis for use in the measurement of
service quality in international markets needs to be
addressed. The growing trend towards
internationalization of service industries requires
such knowledge for service quality improvement
worldwide. From a theoretical point of view, such
an issue should not be underestimated because the
SERVQUAL scale and its modified versions have
been widely used for studying service quality
across international markets (e.g. Gerrard and
Cunningham, 2001; Sureshchandar et al., 2002;
Yavas et al., 1997; Zhao et al., 2002). This suggests
that “a consensus has not been reached relative to
the superiority of performance-only measures of
service quality” (Brady et al., 2002, p. 18).
The current research adds to the growing body
of the service literature and provides further
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Volume 18 · Number 7 · 2004 · 534-546
validation for the SERVPERF approach. We
extend and validate the performance-only model
of service quality through a focus on:
(1) multidimensional facets of the SERVPERF
scale;
(2) a direct link between specific dimensions of
service quality and consumer satisfaction and
behavioral intentions; and
(3) its application in an international setting.
Since satisfaction has generally been understood in
the extant literature as the outcome of a
confirmation-disconfirmation judgment
pertaining to the difference between expectations
of the service and perceptions of the actual service
(Churchill and Surprenant, 1982; Oliver, 1980,
1993; Tse and Wilton, 1988), the predictive ability
of performance-only based SERVPERF
dimensions on satisfaction should be better
examined relative to that of the gap-based
SERVQUAL aspects.
Background and research model
The continuous rise in the use of SERVQUAL has
been arguably attributed to a practical usefulness
in diagnostic analysis for improving service quality,
especially when it is applied in an international
service setting (Kassim and Bojei, 2002; Newman,
2001; Sureshchandar et al., 2002; Zhao et al.,
2002). According to Parasuraman et al. (1993), the
diagnostic application of SERVQUAL dominates
commercial use of the instrument and is one of its
primary advantages. In their argument, the
SERVQUAL measurement has more diagnostics,
and therefore more practical implications than has
the performance-only measurement. However,
many researchers have questioned the reliability
and validity of the difference score measures in
SERVQUAL (for a review, see Buttle, 1996).
More recently, Page and Spreng (2002) present a
compelling account of why difference scores
exhibited by the SERVQUAL scale are
conceptually unsound. The authors specifically
invalidate the implicit assumption inherent in
SERVQUAL that the performance-expectation
components have equal and opposite effects on the
dependent variables such as consumer satisfaction.
As they argued (p. 190), “if managers simply look
at the attributes with the largest gap between
performance and a standard [either expectation or
desire], they may not be focusing on important
attributes. That is, just because there is a large gap
(the diagnostic approach) does not mean that the
attribute is important”. The authors further
suggest looking at the relationship of the attribute
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
with an overall dependent measure as one way to
assess the importance of the attribute (i.e. the
predictive use). They call for further research on
this issue. Thus, using specific dimensions of
service quality as predictors of consumer
satisfaction could enhance the diagnostic value of
service quality models. Related to the
performance-only model, such a focus would
provide a useful extension to the previous testing of
the SERVPERF approach at an aggregate level of
analysis (Brady et al., 2002; Cronin and Taylor,
1992, 1994).
Linking specific dimensions of service quality
to satisfaction
Inherent in the SERVQUAL scale (Parasuraman
et al., 1988), the conceptualization and
measurement of the service quality construct are
multidimensional. In its original structure, service
quality consists of five dimensions:
(1) the tangibility aspects of the service;
(2) the reliability of the service provider;
(3) the assurance provided by the service
provider;
(4) the responsiveness of the service provider; and
(5) the service provider’s empathy with
customers.
These multidimensional facets form the
cornerstone on which a great deal of subsequent
research has been built. Despite significant
variations of the dimensionality reported across
different research settings (Babakus and Boller,
1992; Carman, 1990), the service quality
construct generally involves distinct facets of
service dimensions (Llosa et al., 1998). Such
characteristics would not suggest the use of a
summed index to operationalize the service quality
construct. Rather, context-dependent dimensions
of service quality would be desirable, especially in
relation to the consumer satisfaction construct. As
satisfaction can result from any of the dimensions
of service quality (Rust and Oliver, 1994; Taylor
and Baker, 1994), a dimension-specific analysis of
the relationship between service quality and
satisfaction is likely to provide more diagnostic
value for improvement of service quality.
The focus on dimension or attribute-level
determinants of consumer satisfaction is not new.
In the context of product category, Swan and
Combs (1976) postulated that consumers make
judgments on a set of product attributes, some of
which are relatively important in determining
satisfaction. Relevant to the service setting,
Cadotte and Turgeon (1988) undertook an
analysis of the content of consumers’ written
comments provided by both restaurant and hotel
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owners in the US, and focused on consumer
satisfaction versus dissatisfaction and complaining
behavior in relation to the performance or absence
of desired service features. Their study revealed a
direct link between consumers’ evaluations of
specific service attributes and satisfaction/
dissatisfaction with respect to restaurant or hotel
services. They further identified some of the
service attributes that seemed to be more relevant
to consumer satisfaction or dissatisfaction and
subsequent complaining behavior. Similarly,
Mersha and Adlakha (1992) attempted to identity
the attributes of good versus poor service quality
across different service settings, including retail
banking, and related the attributes to the state of
satisfaction or dissatisfaction of consumers.
Johnston (1995) further asserted that specific
determinants of service quality are a source of
satisfaction or dissatisfaction. The empirical
evidence of his study, based on a convenience
sample of retail bank consumers in the UK,
depicted a list of quality determinants that resulted
in satisfaction or dissatisfaction. Specifically, it was
found that the most frequently mentioned sources
of satisfaction concern the intangible nature of the
service and correspond to Parasuraman et al.’s
(1988) reliability, empathy, assurance, and
responsiveness dimensions. In a more recent
study, Johns and Howard (1998) undertook a
similar analysis to Johnston’s (1995) work in the
service context of fast-food restaurants, and found
the relative importance of aesthetics, friendliness
and comfort to be sources of consumer
satisfaction. These attempts to relate service
attributes or dimensions to consumer satisfaction
are primarily exploratory in nature, and stem from
a consumer satisfaction improvement orientation.
The predictable basis of service attributes and
quality dimensions on satisfaction is yet to be
examined (Johns and Howard, 1998).
An attribute analysis of the predictive ability of
service quality determinants in relation to
satisfaction is found in a cross-cultural service
context. In particular, Winsted (1997) investigated
the relationship between quality dimensions of
restaurant services and satisfaction, and revealed
cultural differences in both the strength of the
purported relationship and the relevant set of
service indicators or dimensions. The resulting
dimensions of service quality (from a factor
analysis) were found to explain more than three-
quarters of the variance in consumer satisfaction
for the US sample, whereas only less than half of
the variance was explained in the Japanese sample.
These results led the author to conclude that
“there may still be other important factors or
dimensions not yet identified for Japanese
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
encounters” (p. 350). As further indicated by the
author (p. 354), “it is difficult to find a
generalizable set of service quality dimensions that
can apply across cultures, and also provide the
level of specificity that can make it managerially
useful”. This suggests the need to look at
dimension-specific determinants of service quality
for consumer satisfaction across different service
settings and cultural markets.
While much of the research has been focused on
a better understanding of the link between the
attributes or dimensions of service quality and
consumer satisfaction, little research has
specifically been conducted within the conceptual
model of SERVPERF or SERVQUAL. In
examining the validity of difference scores in
marketing research with specific reference to the
most pervasive use in the service quality research,
Page and Spreng (2002) conceptualize a direct link
between individual service/product attributes and
satisfaction. They tested alternative models,
including a difference score effect model (using
performance-expectation difference scores as
predictors) and a direct effect model (allowing the
separate effects of performance and expectations).
In both service and product settings, the authors
demonstrate that performance attributes are much
stronger predictors of satisfaction compared to
expectations, and further confirm the
performance-only model to be superior (at the
attribute level).
Thus, using individual SERVPERF dimensions
as predictors for consumer satisfaction reflects the
conceptualization of recent studies in the
literature. This conceptualization parallels the
long-held view in the product category that
consumer satisfaction is regarded as a function of
attribute-level evaluations of product performance
(LaTour and Peat, 1979; Mittal et al., 1999).
Relevant to the focus of the current study, we
propose and test the attribute determinants of
service quality in relation to consumer satisfaction
by comparing the dimension-specific SERVPERF
model with its counterpart, that is, the dimension-
specific SERVQUAL model. Given the
preponderance of support for the SERVPERF
model (at the aggregate level) as reviewed
previously, we hypothesize that the dimension-
specific SERVPERF model is likely to be
confirmed. Also, we expect to observe significant
variations regarding the effects of individual
service quality dimensions on satisfaction.
Behavioral intentions as the outcome of
satisfaction
Numerous studies on the relationship between
service quality and consumer satisfaction have
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Volume 18 · Number 7 · 2004 · 534-546
been conducted with the inclusion of behavioral
consequences. The most common finding has
been that consumer satisfaction has a significant
effect on behavioral intentions (Brady et al., 2002;
Cronin and Taylor, 1992; Oliver, 1993; Woodside
et al., 1989). The empirical evidence generally
shows that service quality precedes overall
satisfaction, which in turn determines behavioral
consequences including switching intentions. As
such, consumer satisfaction is viewed as an
intervening variable that mediates the relationship
between service quality judgments and behavioral
outcomes. The conceptual nature of the
relationship suggests that satisfaction is a more
relevant predictor of future loyalty or switching
intentions (Fullerton and Taylor, 2002). Indeed,
even under the interaction effects model proposed
by Taylor and Baker (1994), the results they
obtained indicate that the influence of satisfaction
on behavioral intentions was more important than
service quality judgments.
Different forms of behavioral consequences of
service quality and satisfaction have been
identified and examined in the service marketing
literature. These include customer retention,
voice, and repurchase intentions (Szymanski and
Henard, 2001; Zeithaml et al., 1996). While most
of the work in the area has focused on repurchase
intentions (Brady et al., 2002; Cronin and Taylor,
1992; Taylor and Baker, 1994), researchers are
now focusing on multiple consequences of service
quality and satisfaction in a single study. Among
them, significant variations in the effect of
satisfaction on different types of behavioral
outcomes have been observed (Fullerton and
Taylor, 2002; Szymanski and Henard, 2001). The
present research focuses on switching (retention),
yet with three distinct forms of switching
intentions:
(1) willingness to switch (“potential switchers”);
(2) decreased interactions with the target service
provider (“diminishing stayers”); and
(3) staying away from the target service provider
(“switchers”).
These are regarded as some of the typical forms of
switching behaviors in which consumers engage
(Rust and Zahorik, 1993), and are more relevant
to the strategic mandate of retaining satisfied
customers in today’s service markets (Ganesh et al.,
2000).
The research model
Figure 1 presents our research model. It highlights
the dimension-specific conceptualization of the
antecedents of consumer satisfaction within the
SERVPERF model. In line with the extant
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
Figure 1 The research model
literature, behavioral intentions are conceptualized
as the outcome of consumer satisfaction. Since
satisfaction is generally viewed as being a
disconfirmation judgment as to the difference
between service expectations and performance
perceptions of the actual service (Churchill and
Surprenant, 1982; Oliver, 1980, 1993; Tse and
Wilton, 1988), it is less conclusive on whether
performance evaluations on certain attributes are
more critical in determining overall satisfaction
than disconfirmation judgments on the same
attributes. Thus, the focal model here will be
compared with the dimension-specific
SERVQUAL model. Bearing in mind the need for
the extension of SERVPERF in an international
context, our research is conducted in mainland
China.
Method
Service context
Relevant to the second issue stated earlier, this
research was undertaken in the service context of
retail banking in China’s eastern province of
Zhejiang (adjacent to Shanghai). China, as the
largest developing and transition economy in the
world, presents a challenging yet promising arena
for testing marketing and management theories
developed in Western economies. Zhejiang was
selected as the study site partly because the
province is one of the most affluent regions in the
country. Moreover, Zhejinag has also been widely
considered as an exemplar of the market-based
Chinese economy. Pioneering opportunities for
foreign financial services exist in this region. Thus,
it is suitable to select this location as the field site
for this study. The banking sector was chosen
because it represents one of the typical service
sectors involved in previous services research.
There is also a practical significance in using such a
service context as China’s financial services sector
is now opening up for market-based competition,
especially in the post-WTO environment.
Nationwide financial institution reform has
been taking place in China since 1997. The
primary mandate of this reform has been to
encourage domestic banks to prepare for the new
challenges and opportunities that will present
themselves as domestic financial markets open up
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Volume 18 · Number 7 · 2004 · 534-546
to competition from foreign banks. One of the
major facets of the reform has been the
restructuring and commercialization of state-
owned banks into market-oriented for-profit
organizations from their previous status as
departments or institutions guided by the central
Chinese Government. The commercialized banks
now include the Industrial and Commercial Bank
of China, the China Construction Bank, the
Agricultural Bank of China, and the Bank of
China. All these banks have been forced to expose
themselves not only to domestic but also – and
more importantly – to global competition. To
prepare for outside competition, these banks have
started to adopt sophisticated technologies and to
procure innovative equipment and management
software developed in Western countries. The
growing popularity of ATMs, POS systems, and
e-commerce are some indicators of this
modernization trend in the banking industry
across China.
In addition to upgrading service facilities, most
domestic banks appear to have recognized the
importance of providing quality services to
maintain competitive advantage. Most Chinese
bank managers have recognized that superior
financial products can easily be imitated by
competitors, and thus are not enough to ensure
competitive advantage. Banks have come to accept
the view that it is the quality of service that may
better distinguish them over the long run.
However, most bank managers in China know
little about their customers, which hinders their
efforts to monitor and manage service quality
development. Such knowledge is becoming
indispensable not only for Chinese bank managers,
but also for international financial service
managers there. Thus, we choose Chinese retail
banking services as our research context.
Actual local banks were selected based on
accessibility. Through a series of formal and
informal communications, we succeeded in
gaining the support of the senior management of
one major domestic bank. We were given approval
to access five of its branches across three major
cities of Zhejiang – Hangzhou, Ningbo, and
Jinghua. These three cities represent different
levels of economic development in Zhejiang.
Hangzhou, as the capital city, is the economic and
political centre of the province, where all domestic
banks have branches. Ningbo is a coastal city with
rising economic power, and is relatively prosperous
as compared to Jinghua. The selection of bank
branches across a spread of different cities has the
purpose of enhancing the generalizability of the
findings.
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
Sample selection and procedure
Local business graduates trained in the mall
intercept technique worked as pairs and surveyed a
convenience sample of 373 customers in the
participating banks during business hours (11 am-
3 pm) over a period of one week. Among the
respondents who were contacted by exit intercept,
146 were from Hangzhou, 119 from Ningbo, and
108 from Jinghua. Because of the nature of
convenience sampling, we cannot rule out the
possibility of non-response bias. In general, most
customers were willing to assist in the project and
were eager to express their concerns about the
participating banking services. A small gift (a back
issue of a fashion magazine, a proven popular item)
was provided as a gesture of our appreciation.
The use of exit intercept survey has the
advantage of immediate retrieval and capturing of
customers’ experiences with the participating
banks. Given the specific focus of this study, the
exit intercept method was thought to be most
desirable. Upon approaching the customers, the
interviewers identified themselves and explained
that the study was an independent project initiated
by a local university. After obtaining their consent,
the respondents were asked to fill out a standard
questionnaire (to be described later) at the study
site. The sample consisted of a slightly high
proportion of female customers (53 percent), and
a fairly wide spread between age segments: 44.2
percent were in the range 20-30 years old; 27.9
percent were from the 31-40 age category; 15.8
percent were in the range 41-50 years old, and the
remaining 12.1 percent were 51 years old and
above. In terms of their level of education, a
significant majority of the respondents had a post-
secondary degree (74 percent). As for household
income, more than 65 percent of the respondents
had a monthly household income ranging from
4,000 yuan (approximately US$500) to 7,000
yuan (approximately US$870). Also, the sample
included people of various occupations, including
housewives, factory workers, civil servants, and
professionals. In general, the sample displays some
disproportion towards young, more highly
educated and higher income respondents. From a
marketing point of view, however, this segment is
perhaps more promising to be considered as the
target customers.
Measures
The paired 22-item performance and expectation
scales of service quality (Parasuraman et al., 1988)
were adopted in this study. The original items were
translated into Chinese, and their content validity
(wording and meaning) was checked carefully by
two Chinese experts. A pre-test was then
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Volume 18 · Number 7 · 2004 · 534-546
conducted with a group of bank customers, and
minor changes to the scales were made
accordingly. As in the original format, each item
was measured using a seven-point Likert scale.
Overall customer satisfaction was measured
using a single-item statement that identified how
satisfied a customer felt with regard to the
participating banking service provider. The item
was scaled from 1 (not satisfied at all) to 5 (very
satisfied). Three types of switching behavioral
intentions were measured:
(1) “I am willing to switch to another bank in the
near future”;
(2) “I have started to decrease business
interactions with the current bank”; and
(3) “I have already made up my mind to switch”.
Each of these items was scaled from 1 (not at all) to
5 (absolutely true). Finally, demographic
information was elicited from the respondents.
Results
Specific dimensions of SERVPERF
While the dimensionality of SERVPERF was not
the focal point in this study, the major issue
concerns the use of context-dependent dimensions
of performance-only scales of service quality to
predict customer satisfaction and subsequent
behavioral intentions. As described earlier, the
SERVPERF scale was operationalized as
unidimensional in Cronin and Taylor’s (1992)
study as well as in replication and extension
research (Brady et al., 2002). Here, we intend to
explore the multidimensional nature of the
SERVPERF scale, and more importantly, we
expect that overall consumer satisfaction will be
associated with specific, context-dependent
dimensions of the SERVPERF scale.
Exploratory factor analysis
An exploratory (principal component) factor
analysis was first conducted on the 22-item
performance scales (i.e. the SERVPERF
measures). The results are presented in Table I. As
shown, a three-factor solution was identified. It is
interesting to note that this factor pattern seems to
reflect a combined modification of the standard
five dimensions of the original scale (Parasuraman
et al., 1988). Specifically, the items loaded on the
first factor are mainly composed of those related to
the standard dimensions of empathy and
responsiveness from the SERVQUAL scale.
Similarly, the second factor contains most items
from the original dimensions of reliability and
assurance. The items loaded on the third factor are
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
Table I Results of factor analysis (performance-only perceptions)
Component
a
Empathy/responsiveness (employees) , a 5 0.9343
Reliability/assuranceb, a 5 0.9125
Tangibilityc, a 5 0.8465
Note: The factor pattern and item loading on the gap-based service quality (SERVQUAL) are similar to the results presented in this Table; avariance
explained ¼ 27:628 percent; bvariance explained ¼ 24:941 percent; cvariance explained ¼ 13:618 percent
tangibles, representing the tangibility dimension of
the SERVQUAL scale. As such, the observed
factor pattern of SERVPERF is considered
meaningful, namely empathy/responsiveness,
reliability/assurance, and tangibility factors.
We further reviewed the internal consistency of
the items loaded on each respective factor. In
accordance with the original scale items on the
relevant dimensions of service quality, we deleted
those items that are not supposed to belong to their
loaded factor. Turning to the factor pattern on the
performance-only measures (Table I), items 9 and
17 were taken out from empathy/responsiveness, and
items 10 and 11 were dropped from reliability/
assurance. A re-run of factor analysis on the
remaining 18 items resulted in the same three-
factor solution, with a more consistent item
structure. The factor loadings were similar to those
reported in Table I. It was shown that the
Cronbach alphas were 0.93 for empathy/
responsiveness, 0.90 for reliability/assurance, and
0.85 for tangibility. The variances were 53.46,
7.75, and 7.35 percent, respectively.
Confirmatory factor analysis
The structure pattern of the remaining items was
then evaluated through a confirmatory factor
analysis using LISREL 8. The items were
restricted to loading on their respective factors.
Journal of Services Marketing
Volume 18 · Number 7 · 2004 · 534-546
Initial variables Loading
20. Employees give customers personal attention 0.792
22. Employees understand the specific needs of customers 0.784
18. Give customers individual attention 0.783
21. Customers’ best interests are at heart 0.772
19. Operating hours are convenient to all customers 0.742
12. Employees are always willing to help 0.714
13. Employees are never too busy to respond to requests 0.587
9. Insist on error-free records 0.569
17. Employees have knowledge to answer questions 0.538
8. Provide their service as promised 0.749
15. Customers feel safe in their transactions 0.736
16. Employees are consistently courteous 0.724
7. Perform the service right the first time 0.679
5. Keep promises 0.632
6. Show sincere interest in solving customer problems 0.629
11. Employees give prompt service 0.573
14. Employee behavior instils customer confidence 0.540
10. Inform exactly when services will be performed 0.525
2. Visually appealing physical facilities 0.855
1. Modern-looking equipment 0.825
4. Visually appealing materials associated with the service 0.670
3. Employees are neat in appearance 0.556
However, the model fit was not adequate. An
examination of the modification indexes of the
specific estimates revealed that several items for l
loaded on different exogenous factors. These
included items 3 and 4 for tangibility, items 6 and
14 for reliability/assurance, and items 12 and 13 for
responsiveness/empathy (Table I). Among these
items were those that coincide with the unclassified
items in the cluster analysis of the 22-item
measures of service quality (Llosa et al., 1998).
Thus, we re-ran the confirmatory factor analysis
model by deleting the seemingly confusing items,
which eventually resulted in a good fit. The
model’s overall goodness-of-fit indicators were:
x2 ¼ 159:83, df ¼ 51, p ¼ 0:000, AGFI ¼ 0:90,
CFI ¼ 0:96, TLI ¼ 0:96, and RMR ¼ 0:091.
While the x2 statistic was significant, it was within
the rule of 2.5-3 times the number of degrees of
freedom suggested by Bollen (1989). In addition,
the suitability of the model fit and its parsimony
were supported, since all the other values obtained
for the different (sample-size insensitive) indices
were within the generally accepted limits (see
Bollen, 1989; Mueller, 1996). Furthermore, all
the t-values of the estimated parameters were
significant (p , 0:001), and the average variance
extracted for each factor was greater than 0.50,
suggesting convergent validity (Fornell and
Larcker, 1981). A comparison between the average
540
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
variance extracted by each of the constructs and
the shared variance indicates discriminant validity
(Fornell and Larcker, 1981). We found that the
average variance extracted for each factor (or
dimension) was larger than the variance shared
between them (squared correlation), suggesting
that the obtained dimensions of SERVPERF were
distinct enough.
Structural equation analysis
This is the main part of our analysis. As stated
previously, we were most interested in linking
specific SERVPERF dimensions to overall
satisfaction for determining behavioral intentions.
In view of the wide support for the SERVPERF
model at an aggregate level, we expect that the
dimension-specific model of SERVPERF is more
appropriate in determining overall satisfaction and
subsequent behavioral intentions as compared to
the dimension-specific model of SERVQUAL.
Figure 2 presents the tested model, which
depicts the context-dependent dimensions of
SERVPERF as determinants of overall customer
satisfaction, and the effect of satisfaction on the
three types of switching behavioral intentions. A
competing model was also examined in which the
observed SERVPERF factors were replaced with
the respective factors of SERVQUAL. In this case,
the gap scores were used as measures for the
corresponding exogenous factors. The alternative
model was developed to test the context-
Figure 2 Context-dependent dimensions of SERVPERF as determinants of overall satisfaction and behavioral intentions
541
Journal of Services Marketing
Volume 18 · Number 7 · 2004 · 534-546
dependent dimensions of SERVQUAL as
determinants of overall satisfaction. In addition,
each of the two models was also compared with its
respective benchmark model – the standard five
dimensions of service quality (tangibility,
reliability, responsiveness, assurance, and
empathy). The purpose was to demonstrate the
validity of the use of content-dependent
dimensions of service quality in predicting
customer satisfaction as well as behavioral
intentions.
We tested these alternative models using
LISREL 8. We found that the two benchmark
models do not fit well (SERVPERF:
x2 ¼ 1145:40, df ¼ 282, p ¼ 0:000,
AGFI ¼ 0:78, CFI ¼ 0:88, TLI ¼ 0:86,
RMR ¼ 0:12; SERVQUAL: x2 ¼ 738:59,
df ¼ 282, p ¼ 0:000, AGFI ¼ 0:83, CFI ¼ 0:89,
TLI ¼ 0:89, and RMR ¼ 0:16). The findings
suggest that the standard five dimensions of service
quality are not good determinants of satisfaction
and behavior intentions, regardless of whether the
SERVPERF or SERVQUAL scales were used. In
contrast, the two models based on the context-
dependent dimensions of service quality
demonstrated reasonable fit, with x2 ¼ 194:47,
df ¼ 96, p ¼ 0:000, AGFI ¼ 0:91, CFI ¼ 0:96,
TLI ¼ 0:96 and RMR ¼ 0:07 for the SERVPERF
model; and x2 ¼ 178:18, df ¼ 96, p ¼ 0:000,
AGFI ¼ 0:92, CFI ¼ 0:96, TLI ¼ 0:96 and
RMR ¼ 0:12 for the SERVQUAL model. In
addition, a comparison of the overall goodness-of-
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
fit indices between the two focal models and their
respective benchmark models further confirms the
superiority of the context-dependent models of
service quality. More importantly, when
comparing the overall goodness-of-fit indices
relating to the two context-dependent models
(SERVPERF versus SERVQUAL), there does not
appear any significant difference except that the
root mean square error of approximation (RMR)
indicates a slightly higher parsimony in the
SERVPERF model (RMR ¼ 0:07 versus
RMR ¼ 0:12).
Table II presents the standardized parameter
estimates of the two structural models. It is shown
that only g2 (reliability/assurance-satisfaction) is
statistically significant in these two models,
although all the g values are in the expected
direction. These results indicate that the specific
dimensions of service quality are not equally
important contributors to the satisfaction of
Chinese bank customers. As evident in our
findings, the reliability/assurance factor seems to
be the most relevant to the target markets, while
the other two dimensions of service quality
(empathy/responsiveness, and tangibility) are less
important. As for the relationship between
satisfaction and switching behavioral intentions, all
of the bs (b1, b2, b3) are significant and in the
expected direction across the two models. The
coefficients indicate that lower levels of overall
satisfaction are more likely to result in potential
and actual switching behaviors as compared to
behavior involved in decreased business
interactions (i.e. “diminishing stayers”).
Conclusion and discussion
The results of our study extend and support the
applicability of the dimension-specific model of
SERVPERF in an international service setting.
Compared to the “summed index” approach
(Brady et al., 2002; Cronin and Taylor, 1992), the
dimension-specific analysis does provide more
diagnostic value for the understanding of
Table II Standardized structural parameter estimates (n ¼ 373)
Structural parameters Performance-only-based model
Empathy/responsiveness – satisfaction (g1) 0.08 (1.69)
Reliability/assurance – satisfaction (g2) 0.27 (4.21)**
Tangibles – satisfaction (g3) 0.04 (0.91)
Satisfaction – consider to switch (b1) 2 0.50 (2 6.13)**
Satisfaction – decreased transactions (b2) 2 0.37 (2 5.76)**
Satisfaction – decided to switch (b3) 2 0.55 (2 7.66)**
Notes: For simplicity, only estimates of structural relationships are provided; all of the measurement items are statistically significant at the 0.01 level; the
t-values of the estimates are shown in parentheses; **significance at the 0.01 level
542
Journal of Services Marketing
Volume 18 · Number 7 · 2004 · 534-546
consumer satisfaction and behavioral outcomes.
We demonstrated that context-dependent
SERVPERF dimensions are appropriate
predictors of consumer satisfaction. In addition,
we found that there are significant variations
regarding the respective effects of these observed
dimensions on satisfaction, and that satisfaction
leads to different types of behavioral intentions.
Based on our results, providing reliable banking
transactions with promises of assurance seems to
be the most appealing service criteria to the target
consumers.
On the surface, it appears that the dimension-
specific model of SERVPERF is undifferentiable
from the case involved in the SERVQUAL
approach. The result, however, can be better
interpreted as being an even stronger support for
the SERVPERF approach as “the expectation
portion of the SERVQUAL scale adds no
additional information beyond that which is
obtained from performance perceptions alone”
(Brady et al., 2002, p. 19). One possible
explanation is that the performance-only measures
of service quality may reflect consumers’ mental
representations of the perception-expectation gaps
inherent in the SERVQUAL scale when
consumers form their satisfaction judgments
(Teas, 1993). In this case, performance evaluation
of a specific service quality dimension manifests
the position one has already taken in relation to a
standard point such as one’s expectations with
respect to the service dimension. An alternative
explanation relates to the assimilation effect of
expectations, in which expectations have a positive
influence on perceived performance (Spreng and
Mackoy, 1996; Page and Spreng, 2002). In our
result, the positive effect of expectations on
satisfaction can be considered as insignificant and
marginal, otherwise there would be a significant
difference between the two models tested.
According to Montfort et al. (2000), it may be that
consumers can hardly get a grip on all the facets of
the service, and thus their expectations may be less
explicit and useful in the formation of satisfaction.
Consequently, at least in our research context, it is
Perception-expectation gap-based model
0.01 (0.29)
0.32 (4.73)**
0.06 (1.72)
20.50 (26.13)**
20.37 (25.76)**
20.55 (27.66)**
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
reasonable to conclude that context-dependent
performance-only dimensions of service quality
can adequately determine the overall satisfaction
judgment.
Such an extension, especially in an international
service context, along with the widely reported
empirical evidence from the aggregate level of
analysis in the past (e.g. Brady et al., 2002; Cronin
and Taylor, 1992, 1994), can further enhance the
SERVPERF scale as a reliable and valid tool for
operationalizing the service quality construct and
identifying strategic areas (or service quality
dimensions) for decision-making. Our result also
confirms Oliver’s (1980) assertion that when
performance judgments tend to be subjective (as in
most services), expectations may play only a minor
role in the formation of satisfaction.
Managerial implications
We believe that the approach used in this study can
help bank managers gain useful insight regarding
the relative contribution of each of the specific
service quality dimensions to the management of
consumer satisfaction. As is evident here, the
service quality dimension of reliability/assurance
primarily drives the satisfaction of the target
markets, whereas the other dimensions remain
insignificant. As such, this study highlights the
distinct differences between specific service quality
dimensions in relation to consumer satisfaction.
Our results appear to reflect the nature of banking
services in general and the lack of trust perceived
by Chinese customers toward the local banking
service providers in particular. The empirical
evidence also suggests that Chinese customers
might not be sophisticated enough to appreciate
the complexity of banking services. Alternatively,
there seem to have been other important service
quality attributes that were omitted, yet were more
relevant to consumer satisfaction judgments.
An extension of the SERVPERF scale to
studying satisfaction and subsequent behaviors in
a transition economy like China can contribute to
a broader use and adaptation of a more direct
measure of service quality. In relation to the
SERVQUAL scale, empirical evidence has shown
that there are significant variations in consumers’
reported expectations and perceptions of service
quality across different cultural groups, including
Chinese consumers (Donthu and Yoo, 1998;
Mattila, 1999; Zhao et al., 2002). Our research
suggests that it would be more appropriate as well
as less cumbersome to focus primarily on direct
measures of service quality in an international
service setting.
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Journal of Services Marketing
Volume 18 · Number 7 · 2004 · 534-546
Research with this focus reflects the recent
scholarly attention given to the importance of
sharing management knowledge in the process of
internationalization of services (Samiee, 1999).
With China’s recent entry to the World Trade
Organization (WTO), the imminent opening up of
the banking and other service sectors to foreign
participation offers both Chinese and foreign
banks an unprecedented opportunity to compete
for business (Chowdhury, 2000; Harner, 2000).
The political and social barriers to market access
will eventually give way to constraints dictated by
China’s retail customers (Leung, 2000). In order
to develop quality services that best meet the needs
of Chinese consumers, a closer look at Chinese
consumers’ perceptions of and responses to their
current domestic banking services may provide
baseline information for international bank
managers. This scrutiny would suggest service area
priorities that must be strategically addressed if
foreign banks operating in China are to achieve
competitive advantage.
In general, this study highlights that Chinese
consumers are more concerned with reliability and
assurance-related issues when dealing with local
banking services. Thus, bank managers in China
may be required to focus on strategic choices in
providing reliable and trustworthy services in
order to gain a competitive advantage. However,
given the limited nature of this study (convenience
sampling from a single region and restricted
measures for service quality and a single measure
for overall satisfaction), further investigation is
required before firm conclusions can be reached.
In addition, as the service experiences of Chinese
consumers continue to evolve, long-term strategic
options for local bank managers would need to be
developed with specific reference to broader
dimensions of service quality (Brady and Cronin,
2001) in combination with the need to include new
constructs such as consumers’ perceptions of
service convenience (Berry et al., 2002) and service
orientation of service providers (Homburg et al.,
2002).
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Further reading
Caruana, A. and Ewing, M.T. (2000), “Assessment of the three-
column format SERVQUAL: an experimental approach”,
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Executive summary and implications for
managers and executives
This summary has been provided to allow managers
and executives a rapid appreciation of the content of the
article. Those with a particular interest in the topic
covered may then read the article in toto to take
advantage of the more comprehensive description of the
research undertaken and its results to get the full benefit
of the material presented.
SERVQUAL and SERVPERF
SERVQUAL is a measurement of service quality
based on the difference between the customer’s
expectations of the quality of service he or she will
receive, and his or her perceptions of the service
received. SERVPERF, in contrast, is a
performance-only measurement of service quality.
SERVPERF has been put into operation only as a
summed index, derived by averaging the
distinctive dimensions of service quality. Zhou,
however, seeks to link SERVPERF’s specific
dimensions to overall consumer satisfaction and
subsequent behavioural intentions.
The importance of dimension-specific
analysis
Through research in an international service
setting, the author shows that the dimension-
specific analysis does provide more diagnostic
value than the summed index approach when it
comes to understanding consumer satisfaction and
behavioural outcomes. His research demonstrates
that context-dependent SERVPERF dimensions
are appropriate predictors of consumer
satisfaction. He also finds that there are significant
variations regarding the respective effects of these
observed dimensions on satisfaction, and that
satisfaction leads to different types of behavioural
intentions.
Retail banking in China
Zhou carried out his research into retail banking in
China’s eastern province of Zhejiang. Adjacent to
Shanghai, it is one of the most affluent regions in
the country and widely considered an exemplar of
 Service quality and satisfaction in China’s retail banking
Lianxi Zhou
the market based Chinese economy. Pioneering
opportunities for foreign financial services exist in
this region. With China’s recent entry into the
World Trade Organization, the imminent opening
up of banking and other service sectors to foreign
participation offers both Chinese and foreign
banks the chance to compete for business. The
political and social barriers to market access will
eventually give way to constraints dictated by
China’s retail customers.
Nationwide financial institution reform has
been taking place in China since 1997. Domestic
banks are being encouraged to prepare for the new
challenges and opportunities that will present
themselves as domestic financial markets open up
to foreign competition. A major facet of reform has
been to restructure and commercialize state-
owned banks into market-orientated, for-profit
organizations. To prepare for outside competition,
these banks have started to upgrade their facilities,
adopt sophisticated technologies and procure
innovative equipment and management software
developed in Western countries. Chinese bank
managers, who have hitherto known little about
their clients, increasingly recognize the importance
546
Journal of Services Marketing
Volume 18 · Number 7 · 2004 · 534-546
of customer focus and of providing quality services
to maintain competitive advantage.
In order to develop quality services that best
meet the needs of Chinese consumers, a closer
look at Chinese consumers’ perceptions of, and
responses to, their current domestic banking
services may provide baseline information for
international bank managers. This scrutiny can
suggest the main service areas to address if foreign
banks operating in China are to prosper.
What the results reveal
Based on the research results, providing reliable
banking transactions with promises of reliability/
assurance seems to appeal to the target customers
most, and the other dimensions are insignificant.
Bank managers in China should therefore focus on
furnishing reliable and trustworthy services, in
order to gain competitive advantage.
(A précis of the article “A dimension-specific analysis
of performance-only measurement of service quality
and satisfaction in China’s retail banking”. Supplied
by Marketing Consultants for Emerald.)