METTU UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ECONOMICS
PROPOSAL ON
DETERMINANTS OF SERVICE QUALITY ON
CUSTOMER SATSFACTION
(THE CASE OF AWASH BANK)
SUBMTED BY: AJAIBA SHAAFI
ID NO 0221/2013
February 2025
Mettu Ethiopia
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ACKNOWLEDGMENT
I would like to express my deepest thanks to my advisor Mr. Shuremu.T in Economics and
fayinance Department, at Mettu University for his continuous support by giving building ideas
and comments while doing this thesis proposal and also I will greatly like thanks to my institute
department head and to all other instructors for their continuous support by giving an idea assist
me next to my advisor.
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ABBREVIATIONS
CSQ: Customer Satisfaction Questionnaire
SERVQUAL: Service Quality
SQQ: Service Quality Questionnaire
SPSS: Statistical Package for Social Sciences
AB: Awash bank s.c
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ABSTRACT
This research examined effect of service quality on customer satisfaction in Awash bank. Service
quality has been defined as a degree and direction of discrepancy between customers' service
perception and expectations. Customer satisfaction is defined as the customer‟s subjective
evaluation of a consumption experience, based on some relationship between the customer‟s
perceptions and objective attributes of the product. To achieve the objectives of this study, data
will collected through questionnaire from a sample of customer of the bank. These respondents
were selected using simple random sampling method. The data collected from the questionnaire
were analyzed using Statistical tools such as mean, standard deviation, correlation, and multiple
regression analysis. The results of this study indicate that, except reliability the four service
quality dimensions (tangibility, assurance, empathy and responsiveness) have positive and
significant relationship with customer satisfaction. The finding of this study also indicates that
customers were most satisfied with the empathy dimensions of service quality.
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Contents
ACKNOWLEDGMENT ...................................................................................................................................... I
ABBREVIATIONS ............................................................................................................................................ II
ABSTRACT..................................................................................................................................................... III
INTRODUCTION ............................................................................................................................................. 1
1.1. BACKGROUND OF THE STUDY....................................................................................................... 1
1.2. Statement of the Problem ............................................................................................................ 3
1.3. Research Questions ...................................................................................................................... 4
1.4. Objectives of the Study ................................................................................................................. 4
1.4.1. General Objective ..................................................................................................................... 4
1.4.2. Specific Objectives .................................................................................................................... 4
1.5. Scope of the Study ........................................................................................................................ 4
CHAPTER TWO .............................................................................................................................................. 6
LITERATURE REVIEW ..................................................................................................................................... 6
2.1. Theoretical Review........................................................................................................................ 6
2.1.1. Definitions of Customer Service................................................................................................ 6
CHAPTER THREE ............................................................................................................................................ 8
RESEARCH DESIGN AND METHODS .............................................................................................................. 8
3.1. Research Design ................................................................................................................................. 8
3.2. Research Approach ............................................................................................................................ 8
3.3. Population Sample size and Sampling technique .............................................................................. 9
3.4. Data Source and Collection Method .................................................................................................. 9
3.5. Procedure of Data Collection ............................................................................................................. 9
3.6. Methods of Data Analysis ................................................................................................................ 10
3.7. Financial Requirement (Cost Break Down) ................................................................................. 11
3.7.1. Budget required for the study ................................................................................................ 11
Time Scheduling ...................................................................................................................................... 12
Conclusion ............................................................................................................................................... 13
Reference .................................................................................................................................................... 14
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INTRODUCTION
1.1. BACKGROUND OF THE STUDY
After the over throw of the military regime Dergue and new economic policy announcement by
the EPRDF, Awash Bank was established in 1991 which is pioneer private commercial bank in
Ethiopia. It was established by 486 shareholders, who are considered as founders, with a paid-up
capital of birr 24.2million. After having licensed on 10 November 1994, the bank started its
operation on 13 February1995. The bank‟s total deposit during 2017 financial year has reached
over birr 32.78 billion (Annual report 2016/2017).
At the end of 2017 financial year, the bank has registered a gross profit of birr 1.44 Billion,
which shows an increase of 44% as compared to 2016 financial year. More importantly, the
surge in the deposit level of the bank indicates the rise of public confidences on the bank on the
one hand and growing awareness of the general public to use modern banking services on the
other hand. As to expansion activities, so far, the bank has opened over 76 new branches during
2017 financial year. Some are located in Addis Ababa and others in various regional cities and
towns. As of June 2017, the total branch networks of the bank stood at 316. In 2017 fiscal year
alone, the bank has created permanent job opportunities for 769 citizens, which has raised the
total labor force of the bank to 6772 (Awash Bank Report, 2016/17).
On 5 July 2012, Awash Bank has launched modern electronic payment using Automated Teller
Machine (ABSTRACT) and Point of Sale (POS) terminals. Indeed, it has launched jointly with Nib
Bank And United Bank by deploying shared switch card payment system infrastructures.
Following The year in 2016 the bank launched mobile banking, internet banking, and agent
banking and linked its ATM service with all banks in Ethiopian. This is done through premiere
switch solutions. This all will enhance accessibility of the bank across the country, increase
service quality and which in the reverse will enhance customer satisfaction.
Nowadays, in developed countries that service industries are dominant. In competitive
environment the service quality is being a critical determinant for the successful survival of an
organization. Consumers become more awareness of rising level of service quality is standard
and it prompted by competitive trends.
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Service quality “has become as one of the key driving forces for business sustainability and is
vital for firms‟ accomplishment” (Rust and Oliver, 1994). “Customer service quality is a crucial
source of distinctive competence and often considered a key success factor in sustaining
competitive advantage in service industries” (Palmer, 2001). “Service quality in banking implies
consistently anticipating and satisfying the needs and expectations of customers” (Howcrof
1991). Parasuraman et al., (1985) and Zeithamletal., (1990) “noted that the key strategy for the
success and survival of any business institution is the deliverance of quality services to
customers.”Gefan (2002) “defined Service quality as the subjective comparison that customer‟s
make between the quality of the service that they want to receive and what they actually
get.”Bolton and Drew (1991) “described service quality as a form of attitude that results from the
comparison of expectations with performance.” Berry et al., (1990) “pointed out that since
customers are the “sole judge of service quality”, an organization can build strong reputation for
quality service when it can constantly meet customer service expectations.”Similarly, “customer
satisfaction is crucial in the banking sector because of the special nature of the financial services
which are characterized by intensive contacts with customers who have different needs and
require customized solutions” (Molina et al.,2007). “Customer satisfaction is known to be one of
the most important and serious issues towards success in today‟s competitive business
environment, as it affects company market shares and customer retention” (Ooi, et al., 2011).
According to Hansemark and Albinson (2004) “satisfaction is an overall customer attitude
towards a service provider, or an emotional reaction to the difference between what customers
anticipate and what they receive, regarding the fulfillment of some needs, goals or desire”.
“Customer satisfaction is a collective outcome of perception, evaluation and psychological
reactions to the consumption experience with a product/service” (Yi, 1990). “Customer
satisfaction leads to repeat purchases, loyalty and to customer retention” (Zairi, 2000). However,
“dissatisfied customers may try to reduce the dissonance by abandoning or returning the product,
or they may try to reduce the dissonance by seeking information that might confirm its high
value” (Kotler, 2000).Many empirical and conceptual studies have been done on customer.
service quality and customer satisfaction. The finding of Mohammad and Alhamadani (2011)
indicated that service quality is an important antecedent of customer satisfaction. Parasuraman et
al., (1985) “found that service quality is significant predictor of customer satisfaction by using
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SERVQUAL instrument.” Service quality and customer satisfaction “have been identified as key
elements of the service-profit chain” (Heskett et al., 1997).The successfulness of organization is,
therefore, determined partly by the customer satisfaction. Accordingly, Newman and Cowling
(1996) “believes that excellent service quality is vital to business profitability and survival.”
Thus, from the finding of Newman and cowling, the researcher understands that if service quality
is going down in the organization, it will have negative effects on the organization‟s profitability.
Thus the intention of this paper is to assess service quality dimension in Awash Bank and to
ascertain what changes in service quality dimension will have on customer satisfaction and
profitability of the firms.
1.2. Statement of the Problem
Nowadays, in developed countries that service industries are dominant. In competitive
environments the service quality is being a critical determinant for the successful survival of an
organization. Consumers become more awareness of rising level of service quality is standard
and it prompted by competitive trends.
The banking industry can make an economy strong and they are just in economy as there is
backbone in human body. Modern banks are playing lots of new roles and making life of
common consumer as well as business men easy. In the past decade, the banking sector has
undergone radical changes, resulting in a market place, which is characterized by intense
competition, little growth in primary demand and increased deregulation. The government of
Ethiopia increased deregulation, in order to encourage the investors to participate in the banking
sectors, as a result the number of bank has been increased which further raises the competition
and difficulty among the banks. In this competitive environment, each bank wants to attract the
customers. This can be achieved through providing quality services to its customers.
Several studies have been done on service quality and customer satisfaction in service
organization in Ethiopia. However, most of these studies were conducted on non-banking service
organization (Electric Power Corporation, insurance, hotels). Only a few studies have been done
on banks, but the studies were conducted in four selected private bank namely Nib International
Bank, Wegagen Bank, United Bank and Buna international Bank (Tizazu 2012). It is not
sufficient to give generalization about banks with four bank. So, the researcher wanted to see the
effects of customer service quality on customer satisfaction in Awash Banks either to approve
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previous research or to reject. For example, Workashe (2006) conducted research on the
assessment of customer satisfaction and loyalty in banking sector: The case of Abyssinia Bank.
The results indicate that the service quality positively affects customer satisfaction. Levesque
and McDougall (1996) “confirmed and reinforced the idea that unsatisfactory customer service
leads to a drop in customer satisfaction and willingness to recommend the service to a friend.”
This would in turn lead to an increase the number of customer‟s shifts to competitors. this study
examine the effect of customer Service quality on customer satisfaction and differentiating
factors of banks how Awash Bank provide their services and treat customers based on service
quality dimension suggested by parasuraman.
1.3. Research Questions
The questions being raised in this study are:-
1. What are the effects of service quality dimension have on customer satisfaction?
2. What influence do the five service quality dimensions have on customer satisfaction?
1.4. Objectives of the Study
1.4.1. General Objective
The main objective of this study was to examine effects of service quality dimensions on
customer‟s satisfaction in Awash Bank S. C.
1.4.2. Specific Objectives
To identify the effect of tangibility dimension of service quality on customer‟s
Satisfaction of Awash Bank;
To examine the effect of five service quality dimensions on customers‟ satisfaction of
the Bank;
1.5. Scope of the Study
Scope refers to the coverage aspects related to the particular study area/geographical boundary.
The study is limited to a section of the impact of customer service quality on customer
satisfaction measures in awash banks. Besides, the study helps as a guideline for those who
conduct their study on similar topic and it gives brief information for the shareholders,
prospective customers and creditors of a firm regarding service quality dimension. Due to time
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and financial constraints in taking large sample size, it is difficult and unmanageable to include
all branches of awash bank. Thus, the study was delimited to collect primary data from Awash
Bank considering Mettu branch by using questioner. Methodologically, the study employed
stratified random sampling technique. Finally, the study benefits the researcher to obtain new
knowledge about the problem under study and gives clear picture about the discipline called
research.
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CHAPTER TWO
LITERATURE REVIEW
This chapter is based on the introduction given lately and the research problem presented in the
introduction and the previous studies that have been done within these constructs. It provides the
reader with a literature review concerning the research area. Large number of studies has been
conducted in the field of service quality and customer satisfaction. There are useful contributions
expressed by so many authors about service quality dimensions, tangibles, reliability,
responsiveness, assurance, and empathy as important factors of quality service delivery. The
definitions of customer service, service quality, characteristics of service, dimensions of service
quality, multiple customer listening tools, customer satisfaction, and distinction between service
quality and customer satisfaction literature will be discussed.
2.1. Theoretical Review
2.1.1. Definitions of Customer Service
Kotler (2000) defined satisfaction as: “a person‟s feelings of pleasure or disappointment resulting
from comparing a product‟s perceived performance (or outcome) in relation to his or her
expectations”. Philip Kotler defined customer satisfaction as benefits – costs + competitive
advantage = customer satisfaction. Customer satisfaction directly ties into a customer retention
definition. According to Hansemark and Albinsson (2004), “satisfaction is an overall customer
attitude towards a service provider, or an emotional reaction to the difference between what
customers anticipate and what they receive, regarding the fulfillment of some need, goal or
desire”. In order to achieve customer satisfaction, organizations must be able to satisfy their
customers‟ needs and wants (La Barbera and Mazursky, 1983). Customers‟ needs state the felt
deprivation of a customer (Kotler, 2000). Whereas customers‟ wants, according to Kotler (2000)
refer to “the form taken by human needs as they are shaped by culture and individual
personality”.
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Figure 1: Factors that affect customer satisfaction.
Source: Parasuraman et al., (1988).
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CHAPTER THREE
RESEARCH DESIGN AND METHODS
This chapter presents details of the research design and methodology. This includes the research
design, sample size and sampling technique, data source and collection method, procedure of
data collection, questionnaire and reliability test. At the end the method of data analysis was
presented.
3.1. Research Design
Causal research, also known as explanatory research is conducted in order to identify the extent
and nature of cause-and-effect relationships. Causal research can be conducted in order to assess
impacts of specific changes on existing norms, various processes etc. Causal studies focus on an
analysis of a situation or a specific problem to explain the patterns of relationships between
variables. Experiments are the most popular primary data collection methods in studies with
causal research design. This means that if changes in service quality what will happen on
customer satisfaction and also testing the relationship between service quality and customer
satisfaction. Checking that they have positive relationship or negative relationship and to what
extent.
3.2. Research Approach
The research is conducted by using different methods, techniques and guidelines. However, the
most appropriate method of conducting a research is qualitative and quantitative approach.
Qualitative Approach analyzes, interprets and collects data by studying people‟s behavior, the
way they act and response (Creswell, 1994). It is considered as an inductive approach in which
interviews and case study methods are used to collect and analyze data. As Garson ( 2002) said,
“qualitative research design strive for in-depth understanding of subjects, through such
techniques participant observation or narrative analysis, or they may strive for in-depth
understanding of texts through such methods as exegesis or deconstruction”. The qualitative
research approach is non statistical and it is used to understand the motivations and reasons in a
qualitative way (Creswell, 1994).
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3.3. Population Sample size and Sampling technique
The sample size of banks has been determined by using simple random sampling method. The
total number of branches in Ilu Aba Bor Zone was 13. Among this, three branches were selected
namely Gore branch, Hurumu branch and Mettu branch. The three branches were selected on the
assumption that they could represent the all Awash Bank branches. banks. The selection of those
banks were one from grade one branch, one from grade two branch, and one from grade three
branches. In selecting the research subjects, stratified random sampling was used. Under
stratified sampling the population of the study was divided into two: customer service officers
(front line staff) and customer of the bank (any person who uses the service of the bank). For the
purpose of the study the strata were formed on the basis of common characteristics of the items
to be put in each stratum. Thus, strata were purposively formed on the basis of personal
judgment of the researcher.
3.4. Data Source and Collection Method
For the proper achievement of the objectives of the study; the researcher was used primary data
source. Primary data was collected using close ended questionnaires. Questionnaires were
distributed to the customers of the banks. The variables were attitudinal and measured using
Likert scale with five response categories (strongly disagree, disagree, neither agree nor disagree,
and agree strongly, agree) and dichotomous with description under each category. “The Likert
scale method was preferred to make questions interesting to respondents and there by enhance
their cooperation, ultimately to ensure maximum response rate” (Robson Colin, 2002).The
questionnaire has two parts. These are: - Service Quality Questionnaire (SQQ) and Customer
Satisfaction Questionnaire (CSQ)
3.5. Procedure of Data Collection
Statistical Package for Social Science (SPSS) software for version 20.0 was employed to analyze
and present the data through the statistical tools used for this study, namely descriptive analysis,
correlation and multiple regression analysis.
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3.6. Methods of Data Analysis
Statistical Package for Social Science (SPSS) software for version 20.0 was employed to analyze
and present the data through the statistical tools used for this study, namely descriptive analysis,
correlation and multiple regression analysis.
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3.7. Financial Requirement (Cost Break Down)
A budget is a key element of most grant proposals and serves as a blueprint for spending the
project‟s funds. An effective proposal budget outlines the proposed project in fiscal terms and
helps reviewers to determine how the project will be conducted. Budget information about
activities planned and personnel who will serve on the project provides reviewers with an in
depth picture of how the project will be structured and managed. Budget details usually reveal
whether a proposed project has been carefully planned and may ultimately be feasible. Follow
the budget format provided and be sure to include cost estimates for all of the resources and
calculate all budgets in local currency.
3.7.1. Budget required for the study
No Items spesification Unit quantity Unit price Total price Remark
1 Paper A4 Pac 2 800 1600
2 Pen Bic (black) Pac 1/2 1000 500
3 pen Bic (blue) Pac 1/2 1000 500
4 DVDR Sony, 4.7 GB pcs 2 100 200
5 Agenda Book Sinner line pcs 2 200 400
6 Chart paper Sinner line Pac 1 400 400
7 Transparent Standard pcs 20 40 800
8 Hard cover fancy calaur pcs 20 40 800
9 Ring 8mm pcs 10 20 200
10 Laptop /pc/rent Hp pcs 1 1000
11 Flash disk SanDisk pcs 1 1200 1200
32GB
12 Transportation 7000
cost
13 Other cost 10000
Total cost 24600
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Time Scheduling
The Implementation Timeline chart to track major program activities, key tasks, and the Week in
which it will be accomplished.
No Activities/ Tasks Month
1 Visit industry & Identify problem Jan Feb Mar Ap Ma Ju
2 Select title
3 Submitted the selected title to department
4 Collecting literature review
5 Preparing proposal
6 Submitted finalized proposal
7 proposal defense
8 Selection of suitable measuring instruments
and control of bias in data collection:
9 Install experiment
10 Prepare questionnaire for collect data.
11 Collect Data:
12 Organizing and analysis of collected data.
13 Finalized thesis document
14 Binding completed thesis document
15 Submit finalized thesis paper
16 Prepare myself to defense
17 Present thesis paper
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Conclusion
The study will conducted to examine the effect of customer service quality on customer
satisfaction in Awash Bank. This research will use explanatory (causal and relational) Research
design. Quantitative and qualitative research approach was used in this research. Konfe, Rufael
and Gojam berenda branch was selected to draw sample and research subject was selected by
using stratified random sampling.
The finding of the study will indicates that customers of Awash bank were satisfied by the five
service quality dimensions (tangibility, reliability, responsiveness, assurance and empathy). The
finding of the study also indicates that, customers were most satisfied with the Empathy
dimensions of service quality. However, customers were less satisfied with reliability and
tangibility dimensions of service quality. The correlation result shows that, unlike reliability the
four service quality dimensions (tangibility, assurance, empathy and reliability) are positively
and significantly related with customer satisfaction.
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