International Conference on Business, Economics, Management and Behavioral Sciences (ICBEMBS'2012) Jan.

7-8, 2012 Dubai

SERVLOYAL Amongst Bank Customers Of Indore: An Exploratory Research

Nishant Joshi, Dr.KaruneshSaxena
Abstract- The Indian banking industry is going through turbulent times. With the lowering of entry barriers and blurring product lines of banks and non-banks since the financial sector reforms, banks are functioning increasingly under competitive pressures. Hence, it is imperative that banks maintain a loyal customer base. In order to achieve this and improve their market positions, many retail banks are directing their strategies towards increasing customer satisfaction and loyalty through improved service quality. Moreover, with the advent of international banking and innovations in the marketplace, customers are having greater and greater difficulty in selecting one institution from another. Hence, to gain and sustain competitive advantages in the fast changing retail banking industry in India, it is crucial for banks to understand indepth what customers perceive, to be the key dimensions of service quality and to evaluate banks on these dimensions. This is because if service quality dimensions can be identified, service managers should be able to improve the delivery of customer perceived quality during the service process and have greater control over the overall outcome. In the process a pre-tested and verified questionnaire has been administered on 220 respondents and both econometric and regression analysis has been applied for drawing model for analyzing dimensionality for future understanding future course. Keywords-Loyalty, Service Quality, Indore, Banking I. INTRODUCTION
EGULATORY, structural and technological factors are significantly changing the bankenvironment throughout the world. One factor that is spurring the growth ofthe service economy in India is liberalisation that has been ushered in, by thegovernment in the bank sector.The financial sector reform in India was designed to infuse greater competitivevitality in the system. To achieve this objective, the Narasimhan Committee,recommended the liberalisation of entry norms and suggested that new banks should bepermitted in the private sector provided they conformed to the minimum startupcapital and other requirements. The committee recommended too, a liberal policytowards allowing foreign banks to open offices in India. Since the reforms started, theinterest rate structure has been deregulated to a greater extent and banks have beengiven a great degree of freedom in determining their rate structure for deposits andadvances, as well as their product range. Banking has also become more competitivein respect of the location of points of sale, that is, the branch network. The final outcome is that market power is getting shifted from banks to their customers. Increased price competition, reduced regulation and reducing consumer loyalty has brought customer retention and customer relationship management in lime light. Customer satisfaction is now supposed to be a primary tool for retaining customers. Customer satisfaction has become standard with firms around the world to sustain customer loyalty and customer retention leading to profitability. But the current thinking is that the relationship between satisfaction and loyalty is more complex than was originally thought. A lot of evidence exists regarding how satisfaction influences repeat purchase (both volume and frequency) behavior, and pricesensitivity. The biggest advantages that a loyal customer gives are repeat business and promotion of the company through word of mouth.Withthe lowering of entry barriers and blurring product lines of banks and non-banks,the oligopolistic nature of Indian banking is fast changing and giving way to relatively freer market place. This leads to freedom of choice which banks' customers did nothave earlier, dueto standardised products and regimented interest rates(SubramanianandVelayudham, 1997).In other words, financial liberalisation has led to intense competition and consequently,banks are directing their strategies towards increasing customersatisfaction and loyalty through improved service quality. Retail banks arepursuing thisstrategy, in part, because of the difficulty in differentiating based onthe service offering. Typically, customers perceive very little difference in the servicesoffered by retail banks and any new offering is quickly matched by competitors.

II. CONCEPTUAL FRAMEWORK AND REVIEW OF LITERATURE

Lovelock (2010) opined that loyalty is an old-fashioned word traditionally used to describe fidelity and enthusiasticdevotion to a country, a cause, or individual. More recently, it has been usedin a business context, to describe a customers willingness to continue patronizing afirm over the long term, preferably on an exclusive basis, and recommending the firmsproducts to friends and associates. Customer loyalty extends beyond behavior and includespreference, liking, and future intentions. Loyal customer can be a consistent source ofrevenue over a period n therefore active management of the customer base andcustomer loyalty is required which often refersto Customer Asset Management.Today, in a marketing context,the term defection is used to describe customers who drop off a companys radarscreen and transfer their brand loyalty to another supplier. Reichheld and Sasser popularizedthe term zero defections, which they describe as keeping every customer the companycan serve profitably. Not only does a rising defection rate indicate that somethingis wrong with quality (or that competitors offer better value), it may also be a leadingindicator signaling a fall in profits. Big customers dont necessarily disappearovernight; they often may signal their mounting dissatisfaction by steadily reducingtheir purchases and shifting part of their business elsewhere. Service quality is an array of factors or determinants comprising of five dimensions of service i.e., quality, namely, tangibles, reliability,responsiveness, assurance and empathy and use these as the basis for their servicequality measurement instrument,

Nishant.Joshi is Assistant Professor with Prestige Institute of Management and Research, Indore, Madhya Pradesh, India (Phone: +91-9893301006; (email: nishant_joshi@pimrindore.ac.in). Dr.KaruneshSaxena is Professor in Faculty of Management Studies, Mohan LalSukhadiya University, Udaipur, Rajasthan, India (e-mail: karuneshsaxena@gmail.com)

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International Conference on Business, Economics, Management and Behavioral Sciences (ICBEMBS'2012) Jan. 7-8, 2012 Dubai

SERVQUAL (Parasuramanet al., 1988; Zeithaml et .al., 1990). The result was development of the SERVQUAL instrument, basedon the gap model. The central idea in this model is that service quality is a functionof the difference scores or gaps between expectations and perceptions. An importantadvantage of the SERVQUAL instrument is that it has been proven valid andreliable across a large range of service contexts. However, while the SERVQUALinstrument has been widely used, it has been subjected to certain criticisms as well.The contention that service quality consists of five basic dimensions (Parasuramanet al., 1988) is according to some researchers questionable and they have suggestedthat SERVQUAL's dimensions are contextual and not universally applicable ( Ekinci and Riley, 1999; Brown et al., 1993; Cronin and Taylor, 1992; Teas, 1993; Bouman and Van der Wiele, 1992; Gagliano and Hathcote, 1994). Instead, the number andcomposition of the service quality dimensions are probably dependant on the servicesetting (Brown et al., 1993; Carman, 1990). It has been suggested that for some servicesthe SERVQUAL instrument needs considerable adaptation (Dabholkaret al.,1996) and that items used to measure service quality should reflect the specific servicesetting under investigation, and that it is necessary in this regard to modifysome of the items and add or delete items as required (Carman, 1990). Moreover,research suggests that culture may play a fundamental role in determining howconsumers perceive what constitutes service quality. Szymanski et al. (2001)explored that satisfaction influences repeat purchase(both volume and frequency) behavior and pricesensitivity.The biggestadvantages that a loyal customer gives arerepeat business and promotion of thecompany through word of mouth.But customer loyalty is much more thanrepeat purchases or increased volume of purchases. While it has been argued that loyalty does not mean anyone who buys repeatedly from the same company,Reichheld (2003) contradicted that not purchasing frequently can be due to changed circumstances or customer may have reduced his or her requirements for the companys products and services. Going by this logic, repeat purchases or increased numbers of purchases may not be true indications of customer loyalty.Reinartz and Kumar (2002) opined that positive word of mouth publicity generated by loyal customers can be one of the ways of advocating a companys offerings to friends, colleagues and family. A customer puts his own reputation at stake when he recommends a company; this act of recommendation should be considered the best indicator of customer loyalty. They further suggested that loyal customers are considered as the key to survival and success in many service businesses, especially in the hospitality, insurance and financial sectors. According to Pullman and Gross (2003), a slight change in the percentage of loyal customers can bring about a huge change in profits and the overall value of the firm.Heskettet al., (1990) narrated that companys path to profit and growth may lie in its ability to make its loyal customers market it. Many researchers feel that competitive differentiation can no longer be achieved along the traditional dimensions of corporate performance. Ascommoditisation of many service offerings continues, a new source of competitive differentiation/advantage will come from focusing on the management of customer experiences. Loyalty is so very important to the survival and profitable growth of a company, thus measuring customer loyalty is the prime concern (Pine and Gilmore, 1998).

The importance of the study at this juncture, it is important to also study branches of banking institutions based in developing cities. As branches in such cities in India provide mature, lessons may be learned from their experiences in developing cities. Banking has becomes more and more globally integrated. Thus, there exists a service gap on how consumers evaluate service quality in contexts and cultures very different from the developed countries, and no prior research has attempted to explore this area.

1.

IV. OBJECTIVES To determine the impact of dimensions affecting service loyalty in banking services in Indore city. V. HYPOTHESIS
There is no significant impact of Attitude, Cognitiveness, Behavior and Trust on Service Loyalty.

1.

VI.
6.1 The Study:

RESEARCH METHODOLOGY

The research was exploratory in nature. The main objective behind this research was to identify service loyalty amongst bank customers of Indore. 6.2 Independent Variable Attitude, Cognitiveness, Behavior and Trust 6.3 Dependent Variable Service Loyalty 6.4 The Sample The data was collected through convenience sampling method. A sample of 220 respondents was taken from scheduled banks like state bank of India, Punjab National bank, CanaraBank,HDFC, ICICI, IDBI etc. These were customers of the various above listed banks. 6.5 Tools for Data Collection Primary Data has been collected from 220 respondents based on a Lickert four point scale. The questionnaire has been adapted from the service loyalty scale of Sudhahar,Israel, Britto and Selvam (2006) published in the American Journal of Applied Sciences. The questionnaire was divided in four sections and each section represents a dimension namely Behavioral, Attitudinal, Cognitive and Trust. 6.6 Tools for Data Analysis The data was collected and Dimensional averages were drawn. In order to form a model firstly the data was subjected to augmented dickey fuller test for stationary. Upon finding the data being stationary it was subjected to multiple regression using SPSS17.0. In the process Durbin and Watson test was also applied to finally test the applicability of multiple regression.

.
VII. RESULTS
The computed ADF test-statistic as per table 01 for series01 (behavioral), series02 (Attitudinal), series03 (cognitive) and series04 (Trust) as per table 01 are (-7.692029, -5.608724, -5.619938 and 7.622569respectively) are smaller than the critical values - "tau" at 10%, 5%, 1% significant level. It means that that the series collectively and individually are not having unit root problem and are stationary series at 1%, 10% and 5% significant level. Upon testing Durbin-Watson test d= T t=2 (e t -e t-1 )2/ T t=2 (e t )2 we find the value of d= 1.956633, 2.01, 1.919288 and 2 respectively for the four
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III.

RATIONALE

Research on service quality has been in the developed countries (Herbig and Genestre, 1996), even though services are among the fastest growing sectors in emerging countries (Malhotraet al, 1993). In fact, the bulk of the research on service quality in banks has been in the context of US and European banking institutions. Today, Madhya Pradesh in general and Indore in particular has become the face of central India and the long stopped development has triggered.

International Conference on Business, Economics, Management and Behavioral Sciences (ICBEMBS'2012) Jan. 7-8, 2012 Dubai

series which arevery close to 2 or either 02 and according to the original paper of Durbin and Watson (1951) the value of the test closer to 2 or 2( d < 2) shall mean nearly zero, this confirms level of autocorrelation hence supports the ADF results. The dimensional averages of 220 respondents when subjected to linear regression using the enter method. The resulting synthesized and tabulated dimensional data thus drawn is having one dependent and four independent variables. In the first stage three independent variables namely behaviour, attitude, cognitiveness is subjected to multiple regression using SPSS 17.0. The model summary generated as per table 02 shows correlation between the observed and predicted values of the dependent variable produced by the regression procedure generally range from 0 to 1. Table 02 shows larger values of R indicating stronger relationships.R squared is the proportion of variation in the dependent variable explained by the regression model.The values of R squared ranges from 0 to 1.The R squared values also optimistically estimate that models arefitting the population. The Durbin- Watson test value is also very close to 2 indicating strength. The output for Regression ANOVA as per table 03 displays information about the variation accounted for by the model.The output for Residual displays information about the variation that is not accounted for by the model.And the output for Total is the sum of the information for Regression and Residual.As the model is having a large regression sum of squares in comparison to the residual sum of squares indicates that the model accounts for most of variation in the dependent variable.The mean square is the sum of squares divided by the degrees of freedom. The F statistic is the regression mean square (MSR) divided by the residual mean square (MSE).The regression degrees of freedom is the numerator df and the residual degrees of freedom is the denominator df for the F statistic. The total number of degrees of freedom is the number of cases minus 1.The significance value of the F statistic is small (smaller than 0.05) thus it can be stated that the independent variables do a good job explaining the variation in the dependent variable.As per table 04 the model equation would be: Loyalty = 0.2+ 0.365(Behaviour) + 0.387(Attitude) + 0.167 (Cognitiveness)Eq. 1 (1) For drawing the second equation the fourth independent variable Trust is regressed with dependent variable loyalty using enter method of regression. As per table 05 the model summary generated shows correlation between the observed and predicted values of the dependent variable produced by the regression procedure generally ranging from 0 to 1. Table 05 shows larger values of R indicating stronger relationships.R squared is the proportion of variation in the dependent variable explained by the regression model.The values of R squared ranges from 0 to 1.The R squared values also optimistically estimate that models arefitting the population. The Durbin- Watson test value is a little higher than 2 but still in vicinity indicating strength. Table 06 generated is the regression ANOVAdisplaying information about the variation accounted for by the model.The output for Residual displays information about the variation that is not accounted for by the model.And the output for Total is the sum of the information for Regression and Residual.As the model is not having a large regression sum of squares in comparison to the residual sum of squares indicates that the model might not accounts for most of variation in the dependent variable, but as the Durbin Watson test is indicative of a good result we can proceed.The mean square is the sum of squares divided by the degrees of freedom. The F statistic is the regression mean square (MSR) divided by the residual mean square (MSE).The regression degrees of freedom is the numerator df and the residual degrees of freedom is the denominator df for the F statistic. The total number of degrees of freedom is the number of cases minus 1.The significance

value of the F statistic is small (smaller than 0.05) thus it can be stated that the independent variables do a job explaining the variation in the dependent variable. As per the result generated the equation is as follows Loyalty = 1.23 + (0.460) Trust Eq.02 Simplifying Eq01 and 02 Eq. 01+ Eq. 02 L= (1.43 + 0.365B + 0.387 A+ 0.167 C + 0.46 T)/ 2 L= 0.715 + 0.1825 B + 0.1935 A+ 0.0835 C + 0.23 T (3) (4) (2)

Here L is loyalty, B is Behaviour, A is attitude, C is Cognitiveness, and T is trust. Upon testing both the hypothesis we can found that the hypothesis is rejected.

VIII.

CONCLUSION

It can be concluded that there is positive impact of dimensions affecting service loyalty. In order to retain the customers trust has to be maintained along with proper behaviour and attitude towards them followed by Cognitiveness expressed by bank employees. Trust is the key to all banking activities the name bank itself is synonymous of trust. But trust alone cannot be the key to customer retention. Services are very sensitive and according to berry, the human factor has high degree of responsibility towards customer satisfaction behaviour and attitude towards customers in the banking sector shall enable banks to retain them followed by a cognitive eye towards them shall make them feel delighted. In words of Keller, Delighted customers is yours forever, till delighted, the author expressed the concern that in global business formats the customers have choices so he shall remain with the service provider till he is delighted. The banking reforms in India have brought foreign banks into India increasing competition in the sector the model suggested above shall enable the banks to retain old customers and add new customers.

IX.

IMPLICATIONS

The descriptionpresent here simply betokens the need for developmentof SERVLOYAL for use in the service marketingresearch. The robustness of the measurement of itemsin terms of relationship among latent variables canalways stand improvement. Therefore, future researchcan be conducted to continuously refine this measurementscale and corroborate the findings of this empiricalstudy. The effect of psychological and geneticpredispositions to Service Loyalty has yet to beinvestigated and the same could also be attempted asa future study. The Dimensionality has been conducted to only take further the study and delimit the existing research material. This also indicates that the Impact of the four dimensions is very high in the universe of the research and banking organizations working in the area can really build and retain more number of customers. The act of maintaining long-term relationship withcustomers has been proving to be beneficial for thecorporate of any rung, be it profitability or loyalty,irrespective of the sectors they belong to. In todays competitive environment, organizations shouldprotect the long-term interest of the customers andhence should seek the ways through which the customerloyalty toward the organizations will be forged.

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International Conference on Business, Economics, Management and Behavioral Sciences (ICBEMBS'2012) Jan. 7-8, 2012 Dubai

APPENDIX
TABLE 1 tStatisti c Augmented DickeyFuller test statistic SERIES01(behavioral) SERIES02(Attitudinal) SERIES03(cognitive) SERIES04 (Trust) Test critical values: Prob.*

TABLE 4- COEFFICIENTS

-7.69 -5.60 -5.62 -7.62 1% level 5% level 10% level

0.000 0.000 0.000 0.000 -3.469 -2.878 -2.575 -3.467 -2.877 -2.575 -3.46 -2.87 -2.57 -3.46 -2.87 -2.57
UNSTANDARDIZ ED COEFFICIENTS STD. ERRO R .064 .032 .052 .018 .019 .050 .019 .018 .021 .505 .514 .215 .606 .575 .749 STANDARDIZ ED COEFFICIENT S

TABLE 2 MODEL SUMMARY Model R R Square Adjusted R Std. Error of the Durbin-Watson Square Estimate .558 .869 .898 .30024 .16361
2 MODEL

SIG .

BETA

1 2 3

.749 .933 .948

.561 .870 .899

CONSTANT BEHAVIO CONSTANT BEHAVIO ATTITUDE

1.245 .542 .357 .438 .433 .200 .365 .387 .167

19.55 .00 16.67 .00 6.84 .00 23.96 .00 22.74 .00 3.981 .00 19.63 .00 21.76 .00 7.89 .00

.14446

1.925

MODEL 1

TABLE 3 REGRESSION ANOVA SUM OF MEAN DF SQUARES SQUARE REGRESSION RESIDUAL TOTAL 25.062 19.652 44.714 38.905 5.809 44.714 40.206 4.507 44.714 1 218 219 2 217 219 3 216 219 13.402 .021 19.453 .027 25.062 .090

CONSTANT BEHAVIO

SIG.

278.023 .000

ATTITUDE COGNITIV

REGRESSION RESIDUAL TOTAL

726.709 .000

TABLE 5 MODEL SUMMARY Model R R Square Adjusted R Std. Error of the Durbin-Watson Square Estimate .510 .31620 2.110

REGRESSION RESIDUAL TOTAL

642.231 .000

.716

.513

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International Conference on Business, Economics, Management and Behavioral Sciences (ICBEMBS'2012) Jan. 7-8, 2012 Dubai

TABLE 6 REGRESSION ANOVA Model Sum of Squares df Mean Square F Sig.

REFERENCES
[1]. Brown, TJ, GA Churchill and JP Peter (1993).Improving the measurement of service quality.Journal of Retailing, 69(1), 127-139. [2]. Carman, JM (1990). Consumer perceptions of service quality: An assessment of the SERVQUAL dimensions. Journal of Retailing, 66(1), 33-55. [3]. Cronin, JJ and SA Taylor (1992).Measuring service quality: A reexamination and extension.Journal of Marketing, July, 56, 55-68. [4]. Dabholkar, PA, DI Thorpe and JO Rentz (1996). A measure of service quality for retail stores: Scale development and validation. Journal of the Academy of Marketing Science, 24, 3-16. [5]. Ekinci, Y and M Riley (1999). Measuring hotel quality: Back to basics. International Journal of Contemporary Hospitality Management, 11, 287-293. [6]. Gagliano, KB and J Hathcote (1994).Customer expectations and perceptions of service quality in apparel retailing.Journal of Services Marketing, 8(1), 60-69. [7]. Heskett et al. (1990) op cit. [8]. Parasuraman, A, VA Zeithaml and LL Berry (1988). SERVQUAL: A multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, Spring, 64(1), 12-40. [9]. Pine, B. and Gilmore, J. (1998) Welcome to the experience economy, Harvard Business review, Vol. xx, pp. 97105. [10]. pp. 4654. [11]. Pullman, M. E. and Gross, M. A. (2003) Welcome to your experience: Where you can check out anytime youd like, but you can never leave, Journal of Business and Management, Vol. 9, No. 3, pp. 215232. [12]. Reichheld et al. (2003) op cit. [13]. Reichheld, F. F. (2003) The one number you need to grow, Harvard Business Review, Vol. 81, [14]. Reinartz, W. and Kumar, V. (2002) The mismanagement of customer loyalty, Harvard Business Review, Vol. 80, pp. 8694. [15]. Szymanski et al. (2001) op cit. [16]. Teas, RK (1993).Expectations, performance evaluation, and consumers' perceptions of quality.Journal of Marketing, 57(4), 18-34. [17]. Zeithaml, VA, A Parasuraman and LL Berry (1990).Delivering Quality Service: Balancing Customer Perceptions and Expectations.New York: The Free Press, a division of Macmillan, Inc.

Regression Residual Total

22.917 21.796 44.714

1 218 219

22.917 .100

229.212 .000

TABLE 7 COEFFICIENTS Unstandardized Coefficients Std. Error .071 .030 .716 Standardized Coefficients t Sig.

Model (Consta nt) TRUST

Beta

1.230 .460

17.39 .00 15.14 .00

577