The Effect of Service Quality on Customer Loyalty at the Bank’s Branch Level: A Case of The City Bank Limited

This study aims to investigate how service quality and customer satisfaction affect The City Bank’s customer loyalty. The sample size was 100 respondents who were selected by the convenience sampling method (The City Bank Limited and customers). Descriptive analysis was carried out for the demographic information of the respondents and multiple linear regression analysis is done to find out the impact of the different dimensions of service quality on customer satisfaction and further analysis is conducted to find out the effect of customer satisfaction on customer loyalty. The results of this study showed that tangibility and responsiveness have positive and significant impact on customer satisfaction. Moreover, there is also a significantly positive impact of customer satisfaction on customer loyalty. Therefore, it can be said that the customers of this bank prefer consistent facilities and response of the employees to their problems and needs are most important for them. And due to these reasons customers are satisfied, hence they show their loyalty for this bank.


INTRODUCTION
The banking industry is highly competitive in Bangladesh and given that customers in the banking sector possess a strong bargaining position. Moreover, Customers 'continuous demand for better quality service has increased this competition among banks (Karim, 2019). Financial institutions are now trying to be competent so that they can provide quality services to their customer to satisfy them and can gain their loyalty towards them in return.
One of the prominent methods that have been adopted by the banks to keep customers both satisfied and loyal is to deliver them high level of services (Perng, 2007). Ha and Jang (2009) argued that service failure occurs when a customer perception does not meet with customer expectations and as a result customers switch the bank and move to its competitors and lead to a destroyed relationship between the customer and organization. In this acute competition, service quality is one of the vital success factors that influence the competitiveness of the organization. The customer is the focus of the study and customer service is the differentiating factor (Guo et al., 2008). Customers can be satisfied if a bank meets customer's needs and provide services according to their expectations and demand. This customer satisfaction influences customer's repurchase intension and make them loyal customer for the bank as the key to customer retention is customer satisfaction (Kotler & Armstrong, 2010).

Objectives of the Study
The objectives of the study are: • To determine the impact of service quality of the city bank limited on customer satisfaction. • To determine the customer satisfaction on customer loyalty.

Malaysian Journal of Business, Economics and Management
journal homepage: https://mjbem.com.my/ This study aims to investigate how service quality and customer satisfaction affect The City Bank's customer loyalty. The sample size was 100 respondents who were selected by the convenience sampling method (The City Bank Limited and customers). Descriptive analysis was carried out for the demographic information of the respondents and multiple linear regression analysis is done to find out the impact of the different dimensions of service quality on customer satisfaction and further analysis is conducted to find out the effect of customer satisfaction on customer loyalty. The results of this study showed that tangibility and responsiveness have positive and significant impact on customer satisfaction. Moreover, there is also a significantly positive impact of customer satisfaction on customer loyalty. Therefore, it can be said that the customers of this bank prefer consistent facilities and response of the employees to their problems and needs are most important for them. And due to these reasons customers are satisfied, hence they show their loyalty for this bank.

Rationale of the Report
Arashi et al., (2005) argued that banks are expanding across borders, offering a diverse range of competitive services and restructuring their services in order to make use of rapid technology and to meet the changing needs of customers. Premium service quality plays a major role for customers in evaluating the performance of a service provider, particularly in banking sector and is the key to gain customer satisfaction and customer loyalty (Khan & Fasih, 2014). The rapidly changing and highly competitive environment which banks are forced to operate within are pushing them to rethink their attitude towards customer satisfaction and optimization of service quality (Arashi, et al., 2005). Therefore, it is important to work on this topic so that the point of view of the customers can be noted and services can be improved as per their satisfaction level.

Service Quality
Service quality is a measure of how an organization delivers its services compared to the expectations of its customers. Customers purchase services as a response to specific needs. They either consciously or unconsciously have certain standards and expectations for how a bank's delivery of services fulfill those needs. A bank with high service quality offers services that match or exceed its customers' expectations. The four alternative measures of service quality (SERVQUAL, importance weighted SERVQUAL, SERVPERF, and importance weighted SERVPERF) were tested by taking the 22 expectation and performance measures from the SERVQUAL scale (Parasuraman et al., 1988). These performance items measure perceptions regarding five factors are believed to be important for service quality.

1) Reliability
It means ability to perform the promised service accurately. In case of banking reliability is very important. From our survey we see that most of the customers choose City Bank Limited because they think it is reliable compared to others in case of providing various unique features (Bangladesh international). On the whole customers have a perception that City Bank Limited is capable to provide all the services they offered. So, in that case customers are satisfied, and they remain loyal to city bank.

2) Tangible
Tangibles are physical facilities, equipment etc used in the context of service company. Interior decoration, sitting arrangements, temperature of the room, cleanness odour everything controls the perception of customers about the quality of the service. City Bank Limited has confirmed well interior decoration in all their branches and they try keep the standard of their services cape same all over the world. Every customer deserved good environment, city bank making sure that the customers are satisfied with their interior decoration, and they are comfortable to coming back again in the bank which somehow means they are also loyal to the bank.

3) Empathy
To ensure better service, it is crucial for the employees to have empathy. Empathy means giving individual attention and taking extra care of the customer. City Bank Limited has young and energetic employees that interact with customers nicely and they continuously ask about their satisfaction and dissatisfaction of every individual. Because of the fast and good service, a lot of customers are being permanent and loyal customers of city bank.

4) Responsiveness
It is another vital factor that controls customers' perception about quality of service. It means willingness of the employees to help the customers. According to the perception of customers responsiveness is very important to increase the quality of the service. Even the customers ranked the importance of responsiveness in banking 7 out of 9. If employees do not response immediately to the need of the customers, valuable time of the customers will be spent unnecessarily. Even the customer may become frustrated whether he will get the service or not. The customers of City Bank Limited replied that City Bank Limited responses promptly.

5) Assurance
Encompasses the knowledge and friendliness of employees and their ability to create trust and confidence, courtesy, and trustworthiness that staff has, free from danger, risk, and doubt. It means the knowledge and ability of the employees to develop trust in the mind of the clients about the completion of the task properly and on time. Customers have a great perception about City Bank Limited that they perform according to their promise. Assurance has a great impact on the quality of the service because if promises are not kept customers may switch to another bank.

Customer Loyalty
Customer loyalty describes an ongoing emotional relationship between you and your customer, manifesting itself by how willing a customer is to engage with and repeatedly purchase from you versus your competitors. Loyalty is the by-product of a customer's positive experience with you and works to create trust. (Oracle).
Customer loyalty remains one of the most important factors in determining market competitiveness. According to Griffin, the conceptualization of customer loyalty leads more to a form of behaviour rather than a form of attitude. Griffin has argued that through the loyalty of front-line employees to the company will lead to a better quality of customer relationships. Front line employees represent a representative of the company's products and services. This can lead to the achievement of customer loyalty through their performance. The performance of front-line employees will be delivered through service quality to customers. Customer loyalty considered as backbone for firms as it is way for sustaining and increasing sales. As well as it plays important role for increasing profits, as it is obvious from previous research the cost of obtaining new customers is much higher than to serve current customers. An important statement which must be remarked is the distinction between customer loyalty and customer retention. According to Dick and Basu (1994), loyalty is a complex construction, which comprises both psychological and behavioural components; different loyalty types are supposed to form a combination of repeated purchasing and relative attitude towards business firms (Dick and Basu, 1994).

Customer Satisfaction
Key aspect in customer satisfaction is the way a customer can attain satisfaction or dissatisfaction with a company's service. If a company wants to satisfy its customers the first question it needs to answer is what it that satisfies customers is and, equally important, what it is that makes customers dissatisfied with the company and its products and services. Satisfying customers depends on the balance between customers' expectations and customers' experiences with the products and services (Zeithaml et al., 1990). When a company can lift a customer's experience to a level that exceeds that customer's expectations, then that customer will be satisfied. Since customers have ever increasing expectations, it is necessary for companies continuously to improve their quality and hence customers' experiences with the company. The issue is what should be improved to keep the customers satisfied. What customers experience is not just one simple aspect of a company but a whole range of aspects. Some of these aspects are concerned with the way customers experience the company itself, some are concerned with the way customers experience the physical product and, finally, some are concerned with the way customers experience the service the company offers.

Service Quality and Customer Satisfaction
According to Hunt (1991), satisfaction is an evaluation of emotion while Oliver (1981) identified satisfaction is a summary of psychological state originating when the emotion surrounding disconfirmed expectation is coupled with the consumer's prior feelings about the consumption experience. Thus, customer satisfaction generally means customer reaction to the state of fulfilment, and customer judgment of the fulfilled state (Oliver, 2000) and defined as overall positive or negative feelings about the net value of services received from a supplier (Barnes et al., 2004). In line with Wangenheim (2003), customer satisfaction as the outcome of a comparison between expected and perceived performance throughout the customer relationship while as per Rust & Oliver (1994), customer satisfaction reflects the extent to which a consumer believes that the possession or use of a service generate positive feelings. Over the past few years there has been a flourished emphasis on service quality and customer satisfaction in business and academia equally. The relationship between customer satisfaction and service quality has received a good deal of attention in the literature as well as found positive relationship between them (Budianto, 2019;Tseng, 2019;Aggarwal, 2019;Zameer et al., 2019;Afthanorhan et al., 2019;Karim & Chowdhury, 2014). The authors also stated that the key difference between service quality and customer satisfaction is that quality relates to managerial delivery of the service while satisfaction reflects customers experiences with that service. Satisfaction is a post consumption experience which compares perceived quality with expected quality, whereas service quality refers to a global evaluation of a firm's service delivery system (Anderson & Fornell, 1994). According to Jiang & Zhang (2016), service quality and customers satisfaction are closely related constructs, but these are not interchangeable, although both constructs include a comparison of actual quality of service provided and the expected level of service quality. In marketing literature, though service quality and customer satisfaction have been conceptualized as a distinct, but they are closely related constructs (Siddiqi, 2011). Most organizations observe their services quality on a regular basis to ensure maximum customer satisfaction and to improve customer retention and loyalty (Khan & Fasih, 2014). Through service quality, organizations can reach a higher level of service quality, a higher level of customer satisfaction, and can maintain a constant competitive advantage (Meuter et al., 2000).

Customer Satisfaction and Customer Loyalty
A considerable amount of service management literature has shown the link between customer satisfaction and customer loyalty (Kumar et al., 2013). Both the service management and the marketing literatures suggested that there is a strong theoretical foundation for an empirical exploration of the linkages between customer satisfaction and customer loyalty (Shanka, 2012). Numerous prior investigations (i.e., Schirmer et al., 2018;Chen et al., 2012;Donio et al., 2006) found a strong positive correlation between customer satisfaction and customer loyalty. Hart and Johnson (1999) considered total satisfaction as one of the conditions of true customer loyalty. Sondoh et al., (2007) stated that customer satisfaction is the most important driver and plays a vital role to enhance the customer loyalty. Besides, most of the researchers also found customer satisfaction as one of the significant predictors of customer loyalty (Faullant et al., 2008). Other several studies (such as, Shanka, 2012;Mensah, 2010;He & Song, 2009) have indeed found satisfaction to be a leading factor in determining loyalty. If a customer is satisfied, customer's loyalty will increase and hence customer's intention to switch banks will decrease in line with Hoq and Amin (2010). Moreover, past studies have indicated that customer loyalty significantly influences the customer intentions to revisit service organizations (Srivastava & Kaul, 2016). Consequently, retention of satisfied customers is also certain for the long-term sustainability of the services organizations (Izogo & Ogba, 2015). Furthermore, Oh and Kim (2017) revealed that by providing high product and service value and improving the satisfaction level of customer, organisations can easily make their customer loyal. Similarly, Wu and Li, (2018) mentioned that greater customer satisfaction can uplift the customer frequency of visits as well as will generate more loyal customers (Ford et al., 2015). Shanka (2012) asserted that high level of customer satisfaction will result in increased loyalty for the firm and is positively associated with repurchase intentions, positive words of mouth and profitability. Scholars in business research are of the opinion that long term customer loyalty is the real asset for services concerns, and it increase firm's value (Mostajer et al., 2014). Finally, as per the suggestion of Bowen and Chen McCain (2015), customer satisfaction is linked to loyalty and loyalty, in turn, is linked to the performance of service organizations.

Framework and Hypotheses Development
Service quality in banking sector, customer satisfaction, relation between service quality and customer satisfaction, customer loyalty and relation between customer satisfaction and customer loyalty were explained. From the above discussion, the following framework is proposed to attain the objectives of the present study: H2: There is a positive relation between tangibility and customer satisfaction.
H3: There is a positive relation between empathy and customer satisfaction.
H4: There is a positive relation between responsiveness and customer satisfaction.
H5: There is a positive relation between assurance and customer satisfaction.
H6: There is a positive relation between customer loyalty and customer satisfaction.

RESEARCH METHOD
A quantitative survey was used as the primary strategy to achieve the needed information for the study. The research design of this study is a type of conclusive research which has its key objective of describing something.

Sampling Technique and Sample Size
This study is executed using convenience sampling technique. Respondents are the customers of the "The City Bank Limited" and this bank is chosen as I have done my internship from here and it is convenient for me to collect data from this bank. Respondents are chosen convenience as everybody had equal chance to be chosen and there was neither any partiality nor any referral procedure was adapted to conduct the survey. A total of 100 questionnaires were distributed to the respondents in the selected bank and the number of the final respondents is 100 customers.

Procedure of Collecting Data
For this study, structured questionnaire was used to gather data through survey. The questionnaire has two parts. The first part is demographic which involves four questions on gender, age, education and occupation to understand the respondent's profile and the second part comprises 27 main research questions that were segmented into seven sections including, tangibles, reliability, responsiveness, assurance, empathy, customer satisfaction and customer loyalty.

Measurement and Scaling
The independent variable of this study is service quality which has five dimensions i.e., reliability, tangibility, responsiveness, assurance and empathy. Reliability has four items, tangibility has four items, responsiveness has four items, empathy has four items and assurance has three items. The dependent variables of this study are customer satisfaction and customer loyalty. The dependent variable, customer satisfaction is measured by the same dimensions of service quality with the help of SERVQUAL, which was developed by Parasuraman et al., (1988). The other dependent variable was customer loyalty which was measured by four items and adapted from Zeithaml et al., (1996). All these items were scaled in a five-point Likert scale starting from Strongly Agree (5), Agree (4), Neutral (3), Disagree (2) and Strongly Disagree (1).

Data Analysis
Data were analysed using STATA version 14.2. Descriptive statistical tools were used to illustrate the demographic and other sample characteristics of the participants. Reliability test was done by calculating Cronbach alpha. Multiple regression analysis was used to investigate the significant relationships among selected variables and the dependent variables.  Table 1 depicts are demographic profile of the respondents. This part consists of four questions such as Gender, Age, Occupation and Education. Respondents consisted of 74 males and 26 females which indicate that in the banking sector customers are male dominated. By age, most of the respondents are 36-45 years old (40%). 43% of them are businessperson and students are only 10% of the entire sample. Based on the level of education, the most the respondents have completed their bachelor's degree (45%), hence it indicates that they are competent enough to judge bank's service quality and their loyalty will be for those banks that capable to satisfy their customers with their high-quality service.

Reliability Test
The study data is considered poor if the Cronbach alpha is less than 0.60 and it is acceptable at 0.70, moreover, if the value is over 0.80 then data is more reliable (Karim, 2019). In this study, the study the scale reliability coefficient is0.806 that means the data is highly reliable as the value is more than 0.70.

Regression Analysis
This part of the study tests the six hypotheses through regression analysis. The impact of the different dimension of the service quality [(reliability (REL), tangibility (TAN), empathy (EMP), responsiveness (RES), and assurance (ASS)] on customer satisfaction has been checked. And as the customer's loyalty depends on the satisfaction level of the customer, therefore, if the effect of customer satisfaction (CS) on customer loyalty (CL) has been verified. p-value (sig): < 0.01***, <0.05**, < 0.1* The above table 3 represents the result of direct hypotheses of this study. Tangibility and Responsiveness have direct and significant effect on customer satisfaction and these variables are significant at 5% and 1% respectively; on the other hand, Reliability, Empathy and Assurance don't have direct effect on customer satisfaction. It is also noticeable that customer satisfaction has direct positive effect on customer loyalty which is an indication that if customers are satisfied with the services, then they will be loyal to the bank. Moreover, F test can be assessed F count 15.00 with probability 0.0000and since the p-value < 0.05, the model is declared to have fulfilled the goodness of fit.
This study aims at exploring the impact of service quality dimensions on customer satisfaction and customer loyalty for the city bank limited, Bangladesh. Considering service quality dimensions, "Tangibility" and "Responsiveness" appear to be two of the most important variables in the model as they offer the significant effect on customer satisfaction This analysis is important, because it highlights how service quality dimensions are vital for customer satisfaction. And customer satisfaction leads to customer loyalty and the model shows that customer satisfaction has direct positive and significant impact on customer loyalty. Therefore, based on the results, it is recommended that banking sector should keep a standard service quality and improve continuously to be competitive and updated. To be competitive and updated, they should be more concerned to their physical facilities and equipment consistent with private banking sector. And for this, they should be more skilled in technology. Furthermore, they need to focus on their promised time frame. They require being more aware in dealing with their customers need. In addition, this sector needs to be more reliable, sympathetic, reassuring, and more dependable towards their customers.
The analysis also suggests customer satisfaction has a very significant effect on customer loyalty, it is needed to emphasize more on customer satisfaction to achieve customer loyalty because, a loyal customer is not only an asset for bank, but also a valuable way to spread positive word of mouth to existing and potential customers. Previous studies show that, if a customer is not satisfied, then customer will not be loyal to the bank and switch to its competitors. Along this line, customer might spread negative words about the bank which isa threat for the bank. By providing better quality of service, the banking sector may keep their customers satisfied which in turn lead to customer loyalty.
Finally, as tangibility and responsive effect most in customer satisfaction, they will keep it up and keep developing it more. Along with this, banking organization may pay attention to rest of the three dimensions including reliability, empathy and assurance which currently not affecting their customer satisfaction while these three dimensions are also crucial to increase service quality and should not be ignored.

Findings of the Study
The finding of the study concludes that there is a significant relationship between the service quality dimensions and customer satisfaction.
1) The findings of the study indicated that, the more the quality of service, the more customers are satisfied with bank and simultaneously, the more customers are satisfied; the more customers become loyal to the bank (Karim, 2019).
2) Tangibility and Responsiveness have direct and significant effect on customer satisfaction. Reliability, Empathy and Assurance don't have direct effect on customer satisfaction. Along with these, customers of this bank are especially; more concerned about how the employees respond to their problems and how they solve their respective problems, and therefore hypothesis six is supported.
3) According to the results, the customers of the city bank mostly care about updated equipment, consistent facilities, well dressed employees and appealing facilities.
4) The customer satisfaction has direct positive effect on customer loyalty which is an indication that if customers are satisfied with the services, then they will be loyal to the city bank limited.
The findings are important, because it highlights how service quality dimensions are vital for customer satisfaction. And customer satisfaction leads to customer loyalty and the model shows that customer satisfaction has direct positive and significant impact on customer loyalty.

Recommendations
Based on the analysis the following constructive recommendations were given to improve the service quality which will help to gain customer loyalty. These recommendations will also help for the future research.
1) This study only considered one bank private bank, so more private banks can be included to compare the impact service quality on customer loyalty.
2) In addition, public banks can also be included and research on the comparison of public and private bank can be carried out.
3) More dimensions of service quality can be added to have a vast idea in this area. 4) Furthermore, study can be done by collecting more samples.

5)
This study has not in corporate digital banking, I-banking use for customers. So, these features can be included in further research.
Therefore, further research can be conducted by incorporating the things that has not been explored in this report.

Conclusions
In conclusion, service quality is an essential factor in service sector that can help banks to be more competitive and hence they can survive the pool of huge competitors. It offers broader and greater scope to achieve customer satisfaction and thus make them loyal customer for the bank. Providing quality service has become a fundamental means in banking service sector because it is the way to make customer satisfied properly by fulfilling their needs and requirements and a satisfied customer often become loyal customer of the bank and have less tendency to switch to its competitors.