THE EFFECT OF SERVICE QUALITY ON CUSTOMER SATISFACTION AND CUSTOMER LOYALTY: THE CASE OF SELECTED COMMERCIAL BANKS IN ETHIOPIA

Abstract

The purpose of this study was to examine the effect of bank service quality on customer satisfaction and loyalty among commercial banks in Ethiopia. The study was guided by the following research questions: How do customers perceive the quality of bank service offered by different banks? How does bank service quality relate to its customer satisfaction? The objective of the study was to investigate the relationship between bank service quality practices and customer loyalty among commercial banks in Ethiopia. The research used a descriptive cross sectional research design and explanatory research design. This research design was appropriate for this study since it seek to provide an overall picture of the extent to which bank service quality dimensions affect customer loyalty among commercial banks. Primary data was collected from bank customers using a Likert type scale questionnaire. The finding was that most of the commercial banks in Ethiopia use the ServQual dimensions to some extent. Demographics data was analyzed by descriptive statistics while the relationship between service quality and customer loyalty was analyzed using regression model. There was significant relationship between ServQual dimensions (reliability, assurance, tangibility, service portfolio, price and Access) and indicators of customer loyalty. Therefore, this study recommends that management should pay attention to service quality and other factors which may lead to customer loyalty.