Factors influencing customer satisfaction in the retail banking sector in Pakistan.

Article from: International Journal of Commerce and Management | June 22, 2003 | Jamal, Ahmad; Naser, Kamal| Copyright inShare0 6 Customer satisfaction is a significant issue for most marketers. Previous research has identified various factors that determine customer satisfaction in retail banking sector in Western countries. The current paper reports findings from a survey, which looked into determinants of customer satisfaction in the retail banking in Pakistan. A total of 300 questionnaires were randomly distributed to customers of a specific bank in Pakistan. Results indicate that there was a strong relationship between service quality and customer satisfaction. There was, however, no relationship between customer satisfaction and tangible aspects of the service environment. The paper discusses implications for hank management. INTRODUCTION Customer satisfaction is an important theoretical as well as practical issue for most marketers and consumer researchers (Churchill and Suprenant, 1982; Moutinho and Goode, 1995; Naser et al., 1999; Piercy, 1994). Customer satisfaction is a major outcome of marketing activity whereby it serves as a link with various stages of consumer buying behavior. For instance, if customers are satisfied with a particular service offering after its use, then they are likely to engage in repeat purchase and try line extensions (East, 1997). Customer satisfaction is widely recognised as a key influence in the formation of consumers' future purchase intentions (Taylor and Baker, 1994). Satisfied customers are also likely to tell others of their favourable experiences and thus engage in positive word of mouth advertising (File and Prince, 1992; Richens, 1983). This positive word of mouth advertising is particularly useful in collectivist Asian cultures like that of Pakistan where social life is structured in a way to improve social relationships with others in the society (see Hofstede, 1980; Hall and Hall, 1987). Dissatisfied customers, on the other hand, are likely to switch brands and engage in negative word of mouth advertising. A recent study conducted by Levesque and McDougall (1996) confirmed and reinforced the idea that unsatisfactory customer service could lead to a drop in customer satisfaction and willingness to recommend the service to a friend. This would lead to increase in switching by customers. So, the significance of customer satisfaction and customer retention in strategy development for a 'market oriented' and 'customer focused' firm cannot be underestimated (see Kohli and Jaworski, 1990 for further discussion). Customer satisfaction can be considered as the essence of success in today's highly competitive world of business. Customer satisfaction is increasingly becoming a corporate goal as more and more companies strive for quality in their products and services (Bitner and Hubbert, 1994). In this context, an understanding of 'determinant of customer satisfaction' (Churchill and Suprenant, 1982; Levesque and McDougall, 1996) is of great significance to marketers. The current paper reports findings from a recently conducted study which looked into the significance and importance of various determinants of customer satisfaction in retail banking in an Asian country--Pakistan. LITERATURE REVIEW Determinants of Customer Satisfaction Customer satisfaction is generally described as the full meeting of one's expectations. Customer satisfaction is the feeling or attitude of a customer towards a product or service after it has been used. A review of the existing literature indicates that there can be potentially many antecedents of customer satisfaction, as the dimensions underlying satisfaction judgements are global rather than specific (Taylor and Baker, 1994; Patterson and Johnson, 1993; Rust and Oliver, 1994). The customer satisfaction literature has paid a great deal of attention to the confirmation paradigm, which concerns the comparison of product or service performance expectations and evaluations (Goode and Moutinho, 1995). The confirmation model treats satisfaction as a meeting of customer expectations (East, 1997; Oliver 1989) and is generally related to habitual usage of products (East, 1997). However, research on customer satisfaction has moved towards the disconfirmation paradigm which views satisfaction with products and brands as a result of two cognitive variables: prepurchase expectations and disconfirmation (Churchill and Surprenant, 1982; Peter and Olson, 1996). According to Peter and Olson (1996), "prepurchase expectations are beliefs about anticipated performance of the product; disconfirmation refers to the differences between prepurchase expectations and post-purchase perceptions" (p.509). In an earlier study, Churchill and Surprenant (1982) reported that disconfirmation positively affected satisfaction. That is, when subjects perceived the product performing better than expected, they were more satisfied (Churchill and Surprenant, 1982). Further empirical research supports the notion that satisfaction is caused by expectations

and requires considerable cognitive effort on the part of customers (Bearden and Teel, 1983; Moutinho and Goode, 1995; Cadotte et al., 1987). Customer Satisfaction and Service Quality In the service literature, strong emphasis is placed on the importance of service quality perceptions and the relationship between customer satisfaction and service quality (see for example Bitner and Hubbert, 1994; Cronin and Taylor, 1992; Taylor and Baker 1994; Rust and Oliver, 1994). Service quality has been described as a form of attitude that results from the comparison of expectations with performance (Cronin and Taylor, 1992; Parasuraman et al., 1985). Gronroos (1982) argued that customers, while evaluating the quality of a service, compare the service they expect with perceptions of the services they actually receive. It has been argued that the quality of service is not a unidimensional construct. Rather, service quality incorporates various dimensions that relate to both core and augmented service offerings (Bitran and Lojo, 1993; Gronroos, 1984; Lewis, 1993). Parasuraman et al. (1985; 1988) initially described five dimensions of service quality: reliability, tangibles, responsiveness, assurance and empathy. Parasuraman et al. (1991a) argued that reliability was mainly concerned with the outcome of service whereas tangibles, responsiveness, assurance and empathy were concerned with the service delivery process. The customers not only judge the accuracy and dependability (i.e. reliability) of the delivered service but they also judge the other dimensions as the service is being delivered (Parasuraman et al., 1991a). Customer satisfaction can thus be based not only on the judgement of customers towards the reliability of the delivered service but also on customers' experiences with the service delivery process. On the basis of their review of service quality literature, McDougall and Levesque (1994), however, argued that there were two overriding dimensions to service quality. The first one being the core or outcome aspects (contractual) of the service, and the second being the relational or process aspects (customer-employee relationship) of the service. It is generally accepted that customer satisfaction often depends on the quality of product or service offering (Anderson and Sullivan, 1993; Levesque and McDougall, 1996). For this reason, research on customer satisfaction is often closely associated with the measurement of quality (East, 1997). Thus, both service quality and customer satisfaction share a close relationship, though they are normally conceptualise as unique (or separate) constructs (Bitner and Hubbert, 1994; Cronin and Taylor, 1992; Patterson and Johnson, 1993; Taylor and Baker, 1994). There is some empirical evidence suggesting that service quality is a causal antecedent of customer satisfaction (see for example, Cronin and Taylor, 1992; Woodside et al., 1989). However, there is very little empirical research demonstrating the importance of service quality dimensions in determining customer satisfaction (Fisk et al., 1993; Levesque and McDougall, 1996). In a recent study, Levesque and McDougall 1996 found that the performance of the service provider on core and relational dimensions of service was an important driver for customer satisfaction in retail banking in the UK. However, in a nonWestern context, the link between core and relational dimensions of service and customer satisfaction is yet to be established empirically. The current paper aims to fill this gap in the literature. Moreover, the literature dealing with services outlines some major characteristics of service that make them unique and different from physical products (Bitran and Lojo, 1993; LeBlanc and Nguyen, 1988; Parasuraman et. al., 1985; Zeithaml and Bitner, 1996). Services are often characterized by their intangibility, inseparability, heterogeneity, and perishability. The implications of these characteristics are that it is often difficult for customers to evaluate services at preconsumption, consumption and post consumption stages of the consumer decision-making (Legg and Baker, 1996). Because of the intangible nature of services, it becomes difficult for an organization to understand how its customers perceive and evaluate the quality of its services (Parasuraman et. al., 1985; Zeithaml, 1981). Customers, however, make inferences about the service quality on the basis of tangibles (the buildings, the physical layout etc.) that surround the service environment. Support for this argument comes from empirical evidence suggesting that the tangible, physical surroundings of the service environment can have a significant impact on customers affective responses and their behavioural intentions (Wakefield and Blodgett, 1999). Dabholkar et al. (1996) reported similar findings that the tangible aspects of department stores do influence customers' perceptions of service quality. Hence, there are reasonable grounds to assume that customer satisfaction is also related to customers' evaluation of physical surroundings of the service environment. Customer Satisfaction and Service Features Factors related to service offerings are also related to customer satisfaction (Levesque and McDougall, 1996). According to Levesque and McDougall (1996), convenience and competitiveness of the bank are two important factors which are likely to influence the overall

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Gifts and sponsored trips for doctors matter more for sales of MNCs?(an application of censored regression)
Hasan, Dr. Syed Akif; Subhani, Dr. Muhammad Imtiaz and Osman, Ms. Amber Iqra University Research Centre (IURC), Iqra university Main Campus Karachi, Pakistan, IQRA UNIVERSITY 2012 Online at http://mpra.ub.uni-muenchen.de/37651/ MPRA Paper No. 37651, posted 26. March 2012 / 17:24

Published in
American Journal of Scientific Research (AJSR), 2012

Gifts and Sponsored Trips for Doctors matter more for sales of MNCs? (An Application of Censored Regression)
Muhammad Imtiaz Subhani Iqra University Research Centre-IURC , Iqra University- IU, Defence View, Shaheed-e-Millat Road (Ext.) Karachi-75500, Pakistan E-mail: drsubhani@yahoo.co.uk Tel: (92-21) 111-264-264 (Ext. 2010); Fax: (92-21) 35894806 Syed Akif Hasan Office of Vice President, Iqra University- IU, Defence View, Shaheed-e-Millat Road (Ext.) Karachi-75500, Pakistan E-mail: hasandrakif@gmail.com Tel: (92-21) 111-264-264 (Ext. 1513); Fax: (92-21) 35894806 Muhammad Ayaz University of Karachi, University Road, Karachi, Pakistan E-mail: mayaz@yahoo.com Tel: +92(21) 99261300 (Ext.2259) ; Fax: +92(21) 99261340 Hira Toufeeq Iqra University,

Defence View, Shaheed-e-Millat Road (Ext.) Karachi-75500, Pakistan E-mail: hira_toufeeq@hotmail.com Tel: +92(21) 111 264 264 (Ext. 2010) ; Fax: +92(21) 5894806 Amber Osman Iqra University Research Centre-IURC, Iqra University, Defence View, Shaheed-e-Millat Road (Ext.) Karachi-75500, Pakistan E-mail: amber.osman@yahoo.com Tel: +92(21) 111 264 264 (Ext. 2010) ; Fax: +92(21) 5894806 Abstract This study investigates and interrogates the impact of various marketing strategies on the sales of major multinational pharmaceutical companies in Pakistan; include Abbott, GSK and Aventis, while applying the censored regression. Besides interrogating the possible impacts of various marketing strategies which include the Promotional Gifts, Sponsored Trips, Differentiated Strategy, Un Differentiated Strategy, Product Development and Establishing the Brand, on the sales of outlined pharmaceutical MNCs, Objectively this study also focuses on the applications of Scaled OLS model (censored regression) in comparisons with the ordinary least square model. The findings reveal that, all of the outlined strategies do matter to the sales of stated MNCs but promotional gifts and sponsored trips they really work much than the rest of strategies considered, in long run only for Abbott Pakistan, while the differentiated and un-differentiated strategies for GSK and product development and establishing the brands for Aventis are revealed as the best most options for maximizing sales. Whereas, it is also found that the scaled OLS (censored regression) is the better and robust model in investigating the manifested proposition than the MLR. Keywords: Marketing Strategies, Sales, MNCs, Pharmaceutical Industry, Censored regression, Tobit model.

1. Introduction
Pharmaceutical industry is considered to be the worlds biggest industry and due to new demands form providers, manufactures and payers there have been major changes in these few years in Pharma industry. Similar to other industries, customers demand the same kind of convenience and choice form the Pharma industry as well. Number of pharmaceutical companies has been successful in planting various strategies to target and attract various types of customer, but due to dynamic nature of customers and business trends there are new opportunities and challenges that are to be tackled. There is a complex link between the healthcare and pharmaceutical industry. A physician prescriptions although have a direct impact on the sales of pharma products, but ultimately the patients are the ones who have to pay and bear the cost in terms of both health and money if prescriptions are just revenue oriented (Agarwal, Desai, Holcomb, & Oberoi, 2001).

The main constituent of the marketing strategy that are used for the marketing of the drugs to the physicians are Pharmaceutical representatives (medical representatives), while, the revenues which are generated from the annual productions of the pharmaceutical sector involves an amount of about 15 to 20 % as an expense which are incurred for the sales force and in implementing various sales and marketing strategies on average (Agarwal, Desai, Holcomb, & Oberoi, 2001). The cost of implementing various sales and marketing strategies heavily overburdened due the overwhelming sponsored trips of practioners on the expense of firms operating in the pharma industry. But for quite several times the various firms specifically MNCs enjoy the substantial portion of market share due to such strategy. This paper is an attempt to gauge the contributions of promotional gifts and sponsored trips to medical doctor as the marketing strategies in enhancing the sales of Pharmaceutical products in comparison with the various other outlined marketing strategies which include differentiated strategy, undifferentiated strategy, product development, and establishing brands. 2. Literature Review There are four traditional strategic Ps (product, price, place and promotion) and three extensions strategic Ps (people, process and physical evidence). In strategic marketing the traditional Ps are used for Goods and extensions are in Services. To manage these Ps marketers use four strategic Cs (customer solution, customer cost, convenience and communication). Strategic marketing is a holistic marketing concept where four Ps and four Cs are integrated. It focuses on customer, core competencies and collaborative network. Strategic marketing is a long term and pre-nurtured plan for contingency process (Blumberg & Perrone, 2001). Marketing strategy is the best fit of the organizational resources and strategies and the opportunities of growth in the marketplace. Marketing strategy maintains the profitability and strength of the products in the market; it maintains the standard and also shapes the organization. Four Ps are the tools for playing the marketing game which results in satisfaction for the customers and thus increases customer loyalty and profitability (Subhash, 2009). Various literature confirm that various marketing strategies are used by the all national and multinational pharmaceutical firms, which include differentiated strategy, undifferentiated strategy, product development, establishing the brands (Baker & Lutz, 2000),

along with the promotional gifts, sponsored trips. Subhash (2009) confirms that out of all various strategies, the promotional gifts and sponsored trips are found enormously fruitful in shooting the sales of pharma products in Pakistan. Aaker, Batra, andMyers (1992) also confirm, customer psyche as an important player in enhancing sales for health related products specifically, Aaker, Batra, and Myers (1992) further stressed that consumers of health related products if they are the medical doctors always react to the incentives which are offered in terms of promotional gifts to them and they actually make up their minds and decide when they are in a stage between getting a stimulus and reacting according to it. Marketers make an effort to identify the group of physicians that are expected to recommend a particular drug. Traditionally, it was done through taking into account the total prescriptions (TRx) and new prescriptions (NRx) written by every physician each week. The commercial traders then gather this data and depending on the pattern of prescription writing by the physicians, they are "deciled" in ten groups. Those physicians who fall in higher deciles are contacted more vigorously and the gifts and tours kinds of incentives are offered to them only (Scherer, Harhoff, & Kukies, 2000). Bagozzi (1988) has presented an updated theory of perception that the consumers show their interest where they are coordinated and interacted. Rust (1997) confirms that the input and output of business should be equal to the input and output of buyers interest towards that business. Buyers indeed are important for making sales for the item, and hence they are supposed to be satisfied. Fornell (2002) stated that the overall sales portion in a business is based upon a strong relationship with customers, which makes the way for organizations to formulate its various marketing strategies. Besides offering gifts to consumers (medical doctors) the pharmaceutical companies of both nationals and multinationals nature also mix and match the blend of modern and traditional strategies such as Corner and Hinton (2002) found undifferentiated strategy to enhance the sales in relations to the mass market for pharmaceutical products. Maynard (1995) found product development to modify or update organizations existing brand or adding a new product in the

existing product line and to approach the sales target. On the other hand Guru (2005) convinced that establishing the brand plays a pivot role in generating lucrative business in pharama. Fjermestad & Romano (2004) ranked Innovative strategy the best most strategy in achieving the target sales among multinational pharmaceutical firms. 3. Research Method 3.1 Descriptions of Data and Sampling Method To investigate the application of censored regression when various marketing strategies effects the sales of pharmaceutical industry, non parametric data of various proxies of marketing strategies which include Promotional Gifts, Sponsored Trips, Differentiated Strategy, Un Differentiated Strategy, Product Development, Establishing The Brand, have been collected through using the unrestricted nonprobability sampling. 300 responses for the outlined proxies/ constructs from the various product and marketing managers of all major multinational pharmaceutical firms (i.e. Abbott, GSK, and Aventis) have been interrogated to conclude the findings. 3.2 Econometrical Methodology As mentioned already that the censored regression has been employed to investigate and confirm the impact and effect of outlined various marketing strategies on the sales of pharmaceutical industry. The log-likelihood for the censored regression model can be explained as: ln _ = _ 1 2 log2__ + ln__ + __ x_ ___ __ _ ___ _ + _ __ 1 _ x_ _ _ __ __ _ The log likelihood is a nonstandard type, since it is a mixture of discrete and continuous distributions. But Amemiya (1973) confirmed that, despite the complications, proceeding in the usual fashion to maximize log L would generate an estimator with all the familiar desirable properties attained

by MLEs. The log-likelihood function is rationally involved when the data is censorable, but Olsens (1978) re-parameterization fairly explains the simplifications of censored regression. When, ! = _/_ and # = 1/_, the log-likelihood is ln _ = _ 1 2 $ln 2__ + ln #_ + #__ x_ !__% ___ _ + _ __$1 &x_ !'% __ _ 4. Findings and Results There are several constructs which effect and explain the increase in sales of pharmaceutical MNCs. This study is an attempt to interrogate and confirm the effects of various outlined marketing strategies on the sales of MNCs of pharmaceutical industry, when censored regression is used the gauge the propositions. As revealed in table 1, that Scaled OLS model (Censored regression/ Tobit model) is a better and robust model in comparisons of Multiple linear regression (OLS) in explaining the effects of various outlined marketing strategies on MNCs sales, include the sales of Abbott, GSK and Aventis, as the for all outlined MNCs the Adj. R squared and their respective F statistics for scaled OLS/ tobit model are found huskier than the OLS/ MLR. In table 1 the findings of Tobit model also show that the marketing strategies which include promotional gifts and sponsored trips are the most effective contributors in enhancing the sales of Abbott Pakistan then the all rest of the strategies Abbott deploys (as beta= 132.23 at t= 13.54 for predictor= promotional gifts; beta= 32.07 at t= 3.96 for predictor= sponsored trips). Table 1: Censored Regression (Tobit) Estimates of Sales Equation in comparison of OLS Estimates. PREDICTORS ABBOTT GSK AVENTIS Scaled OLS (Tobit) Coefficients

OLS Beta Scaled OLS (Tobit) Coefficients OLS Beta Scaled OLS (Tobit) Coefficients OLS Beta Constant 1123.54 235 984.03 217 876.05 -46.87 (24.99) (0.99) (9.68) (0.63) (8.08) (-4.01) Promotional Gifts 132.23 17.02 123.45 111.11 56.12 34.43 (13.54) (3.91) (11.14) (6.06) (3.97) (1.50) Sponsored Trips 32.07 20.78 22.59 17.29 29.66 4.99 (3.96) (2.88) (4.73) (0.82) (4.01) (0.90) Differentiated Strategy 45.65 21.23 86.39 7.98 79.03 0.09 (6.66) (4.73) (10.07) (2.19) (9.65) (2.94) Undifferentiated Strategy 15.48 1.17 21.83 1.24 17.23 0.41 (3.87) (0.92) (5.31) (2.05) (6.43) (1.72) Product Development 117.23 0.08 76.76 5.22 156.82 43.00 (15.25) (1.32) (3.88) (1.55) (16.77) (1.78) Establishing The Brand 7.08 4.00 14.09 0.03 31.13 15.70 (5.67) (0.95) (7.11) (1.61) (4.09) (2.03) Adj. R Squared 0.79 0.11 0.83 0.51 0.69 0.49 F- Statistics 2354.02 12.07 1019.99 342.03 596.98 222.72 Sample size 1000 1000 1000 While, both the differentiated and un-differentiated strategies are more effective players in increasing the sales of GSK (as beta= 86.39 at t= 10.07 for predictor= differentiated strategy; beta= 21.83 at t= 5.31 for predictor= un-differentiated strategy) and for Aventis the product development and

establishing new brands are the better tools and strategic options in maximizing the sales (as beta= 156.82 at t= 16.77 for predictor= product development; beta= 31.13 at t= 4.09 for predictor= establishing new brands). It is also note able in the findings that the players which are so to speak as the most effective contributors for increasing the sales of theses outlined MNCs, as revealed by Tobit model are found have the long term associations with the revenue generations for these MNCs. 5. Discussion and Conclusion In pharmaceutical industry the end users are not the ultimate buyers as consumer is not in the direct contact with the salesman. Here doctors or medical practitioners act as a customer and decide what medicine should be consumed in what quantity and for how long that medicine should be continued. Indeed, there are various factors which influence consumers/ customers behaviors. And out of various factors firms also formulate and deploy their tested strategies to win the market share and to maximize sales. This paper is an attempt to enumerate some of those strategies as outlined and their affect and impact in explaining and contributing the MNCs sales in Pakistan. Categorically it was found that different MNC has the different key factors and deployed strategies while going for to compete in market with competitors. Results revealed that the all outlined MNCs though working in the same cultural environment and surrounded by the same psychographic constraints but they all have nonidentical strategies to get the identical goals. It has also been concluded that censored regression/ Tobit model is found as a comparative robust model in gauging the propositions. 6. Policy Implications This paper is a point to ponder for the marketers of all non performing local and MNCs of pharmaceutical industry to revisit to their deployed strategies. The firms similar to Abbott should confirm Abbotts strategies (as revealed in this paper) in their marketing ventures to maximize the sales. Similarly the firms similar to GSK and Aventis should opt those strategic options which are found successful for these two MNCs while trying to enhance their sales. This paper is also a point to ponder for Abbott that this MNC never endeavored to deploy other strategic options in their marketing ventures except of deploying second

rate options which include promotional gifts and sponsored trips for medical doctors/ physicians in order to win their medical prescriptions for patients. References [1] Aaker, D., R. Batra & J.G., Myers. (1992). Advertising Management, London: Prentice-Hall International, 12-14. [2] Agarwal, S., S., Desai, M., Holcomb & A., Oberoi. (2001). Unlocking the value of Big Pharma. The McKinsey Quarterly, 2, 65-73. [3] Amemiya, T. (1973). Regression analysis when the dependent variable is truncated normal, Econometrica (The Econometric Society), 41 (6): 9971016, doi:10.2307/1914031. [4] Bagozzi, R., P. (1988), Marketing as an Organized Behavioral System of Exchange. Journal of Marketing. [5] Baker, W.E., & R.J., Lutz. (2000). An Empirical Test of an Updated Relevance-Accessibility. Model of Advertising Effectiveness. Journal of Advertising, 29, (1), 1-14. [6] Blumberg, D. & Perrone, F. (2001). How much are Marketing and Sales Capabilities Really Worth? A European Study on How the Capabilities Drive Performance, The European Study, Accenture [7] Corner, I. & M., Hinton. (2002). Customer relationship management systems: implementation risks and relationship dynamics. Qualitative Market Research: An International Journal, 5 (4), 239 251. [8] Fjermestad, J. & Romano, N. (2004). Electronic customer relationship management. Revisiting the general principles of usability and resistance an integrative implementation framework. Business Process Management Journal. [9] Fornell, C. (2002). Consumer spending should rebound as customer satisfaction holds steady in manufacturing durables and e-business. ACSI Press release, August 19 (http://www.theacsi.org/press_release/0802q2.pdf). [10] Guru, C. (2005). Customer-Centric Strategic Planning: Integrating CRM in Online Business Systems Information technology and management. [11] Maynard, R. (1995). Launching Your Product Nation's Business. Retrieved August, 2011 from http://findarticles.com/p/articles/mi_m1154/is_n8_v83/ai_17305960/ [12] Rust, J. (1997). Using Randomization to Break the Curse of Dimensionality. Econometrica, Econometric Society, 65(3), 487-516. [13] Scherer, F., D., Harhoff & J., Kukies. (2000).Uncertainty and the size of distribution of rewards from innovation, Journal of Evolutionary Economics, 10, 175-200. [14] Subhash, J.C. (2009). Marketing Planning and Strategy, publisher: South Western College, 23-27. [15] Zeneca, A. (2001). AstraZeneca Approach to E-Business, presentation to analysts, New York.