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Leadstar University College Faculty of

Business and Leadership Department of
Business Leadership

Specialization: Project
Management

The Effect of Customer Service Quality on Customer

Satisfaction at Awash Bank East Region.

Submitted by: Ashenafi Tiruneh

Id. No. DE/Grd/BA/6303/09/4

Advisor: Ato Obsa

A Thesis Submitted to the Department Business Administration, Leadstar

University College, in Partial Fulfillment of the Requirements for the Award of a

Master’s Degree in Leadership Specialization Project Management.

Julay, 2019

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1. Declaration………………………………………………………………………………………4

2. Approval………………………………………………………………………………………..5

3. Acknowledgment……………………………………………………………………………….6

4. Abstract…………………………………………………………………………………………7

CHAPTER ONE.................................................................................................................................8
1. Introduction………………………………………………………………………………………………………………………..8
1.1. Background of the Study......................................................................................................8
1.2. Background of the Organization
………………………………………………………………………………………………………
………………10

1.2.1. Awash Bank Vision and mission statement

………………………………………………………………………………………………12

1.2.2. Core Values

………………………………………………………………………………………………………
……………………………………………….13

1.2.3. Competencies …………………………………………………………………………………………………………..13

1.2.4. Human Capital ………………………………………………………………………………………………………..13

1.2.5. Major products and Services …………………………………………………………………………………..14

1.2.6. Major Distribution Chanel ………………………………………………………………………………………15

1.2.7. Customers Channel …………………………………………………………………………………………………16

1.2.8. Benefit of Banking with Awash Bank ……………………………………………………………………...16

1.3. Statement of the Problem.................................................................................................17

1.4. Objectives of the Study......................................................................................................18
1.5. Research Questions...........................................................................................................19
1.5. Research Hypotheses.........................................................................................................19
1.6. Significance of the study....................................................................................................19
1.7. Scope of the Study.............................................................................................................20
1.8. Limitations of the Study.....................................................................................................20
CHAPTER TWO..............................................................................................................................21

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2. Literature Review.....................................................................................................................21
2.1. Profile of the Company......................................................................................................21
2.1.1. History and achievements...........................................................................................21
2.1.2. Vision and mission statements and core values..........................................................23
2.1.3. Competencies and human capital...............................................................................23
2.2. Definitions and Concepts...................................................................................................24
2.2.1. Customer service........................................................................................................25
2.2.2. Service quality.............................................................................................................25
2.2.3. Characteristics of services...........................................................................................30
2.2.4. Service quality dimensions..........................................................................................33
2.3. Multiple Customer Listening Tools....................................................................................35
2.4. Customer Satisfaction........................................................................................................37
2.5. Distinction between Service Quality and Customer Satisfaction.......................................39
2.6. Previous Studies.................................................................................................................40
2.7. Conceptual Framework......................................................................................................41
CHAPTER THREE............................................................................................................................43
3. Research Design and Methodology.........................................................................................43
3.1. Research Design.................................................................................................................43
3.2. Population and Sample......................................................................................................43
3.3. Data Source and Collection Method..................................................................................43
3.4. Procedure of Data Collection.............................................................................................44
3.6. Data Analysis......................................................................................................................45
CHAPTER FOUR.............................................................................................................................46
4. Data Analysis and Discussion of Results ……………………………………………………………………………….46

4.1. Introduction………………………………………………………………………………………………………………………46

4.2. Data Analysis …………………………………………………………………………………………………………………….46

4.3. Decoction of results…………………………………………………………………………………………………………..55

CHAPTER FIVE...............................................................................................................................57
5.1. Summary …………………………………………………………………………………………………………………………..57

5.2. Conclusion …………………………………………………………………………………………………………………………58

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5.3. Recommendations …………………………………………………………………………………………………………….59

5.4. References ………………………………………………………………………………………………………………………..62

5.5.Budget ……………………………………………………………………………………………………………………………..63

Declarations

I Belaynesh Teshome, RegistrationNumber/ID DE/Grd/BA/6303/09/4,

do hereby declare that this thesis is my original work and that it has

been submitted partially; or in full, by any other person for an award of

a degree in any other university/ institutions.

Name Ashenafi Tiruneh Signature.................. Date................

This Thesis has been submitted for examination with my approval as

UniversityCollege supervisor.

Name of Advisor Ato Obsa Signiture......................Date..............

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APPROVAL

The undersigned certify that they have read and hereby recommended

to the leadstar University College to accept the Thesis submitted

byBelaynesh Teshome and entitled "The effect of Customer

Service quality on Customer Satisfaction at Awash bank East

Region" in partial fulfillment of the requirement for the award of a

Master’s Degree in Business Administration

Specialization Project Management.

Name of supervisor........................................ Signature........................

Date...............................

Name of Internal Examiner............................ Signature.......................

Date...............................

Name of External Examiner........................... Signature.....................

Date.................................

Name of Head of Department......................... Signature....................

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Date.................................

ACKNOWLEDGMENTS

First, I do thank THE ALMIGHTY GOD for giving me the bravery, patience,
dedication and other uncountable things. Then I would like to thank my
families and for helping me shape my future.

I am also greatly indebted to my advisor Ato obsa for this countless

suggestions, assistance and invaluable advice . A great thank and special
gratitude is addressed to Awash bank East Regionmanagers of Chiro Br.,
Bedessa Br., Mechara Branch, Gelemso Branch and Hirna Branchgiving
me cooperation to providing the data ,I was demanding conduct my research
paper.

Those of you who are not mentioned here but who have helped me directly
or indirectly are thanked so much.

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Abstract
This research examined the effect of customer service quality on customer satisfaction at
Awash Bank East Region. 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 was collected through questionnaire from a
sample of 259 bank customers. These respondents were selected using stratified 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 responsiveness the four service
quality dimensions (tangibility, assurance, empathy and reliability) have positive and
significant relationship with customer satisfaction. The finding of this study also indicates
that awash bank customers were most satisfied with the assurance dimensions of service
quality. On the contrary, customers were less satisfied with reliability and empathy
dimensions of service quality.

The results also indicate that unlike responsiveness the four service quality dimensions
(tangibility, empathy, assurance and reliability) have positive and significant effect on
customer satisfaction. Furthermore, the service quality dimensions (tangibility, reliability,
assurance and empathy) significantly explain 80% of the variations in customer
satisfaction in Awash Bank East Region. Based on the findings of the study, the
researcher forwards some recommendations to the bank management and suggestions for
other researchers

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CHAPTER ONE

CHAPTER ONE

1. Introduction

This study is organized in to three chapters. Chapter one contains background of the
study, statement of the problem, research objectives, hypothesis of the study, significance
of the study, justification of the study, and limitation and scope of the study. Chapter two
provides literature review informing the reader of what is already known in this area of
study. Chapter three discusses the methodology employed in the study, data source and
method, procedure of data collection and data analysis.

1.1. Background of the Study

Banks are key players in financial markets operations and play an important role in
keeping a country’s economy running efficiently. In today’s highly competitive
corporate environment, quality of services is an essential element for enhancing
customer satisfaction and customer loyalty. These are important factors in improving the
performance of banks and in determining their success, i.e. better profitability and a
bigger marketshare (Khan, 2014).

The economic liberalization of the financial sector started in 1991 laid a basis for the
establishment and expansion of private banks in Ethiopia (Hansson, 1995). This coupled
with rapid technological innovation and improved communication systems, have added to
the increasing integration and resemblance amongst banks in the financial sector. As a
result, banks are now faced with very high and intense competition (Harvey, 2010).

Banks operating inEthiopia is consequently put into lot of pressures due towards increase
in competition. Various strategies are formulated to retain the customer and the key of it
is to increase the service quality level. Service quality is particularly essential in the

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banking services contextbecause it provides high levelof customer satisfaction, and hence
it becomes a key to competitive advantage (Ahmossawi, 2001; Shanka, 2012).

Servicequalityhasbeendefinedin differentwaysby researchers. Greenrooms (1978)

suggestthat service qualityismade oftwocomponents–technicalqualityand
functionalquality.Technicalqualityrefers towhatthe service providerdeliversduringthe
service provision while functionalquality ishow theserviceemployee provides
theservice.Parasuramanetal.(1988)define servicequalityas adifferencebetweencustomer
expectationofserviceandcustomers’perceptions ofthe actual service. Kasper et al. (1999)
defines service qualityasthedegreetowhichtheservice offeredcan satisfytheexpectations
oftheuser. According tothese definitions,customersarethesole judges ofservice
quality.Iftheyperceive ittobegoodservice,thenitis. Theyassessthequalityof
servicebycomparingtheir expectationwithperception.

According to Balogun et al. (2013), customers satisfaction holds the potentials for
increasing an organization’s customer base, increases the use of more volatile customer
mix as well as the firm’s reputation, thereby resulting in competitive advantage secured
through intelligent identification and satisfaction of customer’s needs better and sooner
than competitors and sustenance of customer’s satisfaction through better
products/services.

Service qualities and customer satisfaction are closely related Researches have shown
that service quality is a necessary condition for customer satisfaction. Customer
satisfaction is crucial in the banking sector because of the special natural of the financial
service which is characterized by intensive contacts with customers who have different
needs and require customized solutions (Moiling et al., 2007).Customer satisfaction is
known to be one of the most important and serious issues towards success in today's
competitive business world.

Competence in business environment is vital as it affects company market shares and

customer retention. Competence in business is characterized as excellent customer
services, efficient technology and processes, robust enterprise risk management, and
highly knowledgeable, resourceful and motivated workforce (Ooi et al., 2011). According

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to Hansemark and Albinson (2004) ‘satisfaction’ is an overall customer attitude towards a

service provider or an emotional reaction to the difference between what regarding the
fulfillment of some needs, goals or desire.Customer satisfaction is a collective outcome
of perception evolution and psychological reactions to the consumption experience with a
product or service (Yi, 1990).
1.2Background of the Organization

The history of modern banking in Ethiopia dated back to 1905, when an agreement was reached
in between Emperor Minilik II and Mr. Ma Gillivray, representative of the British owned
National Bank of Egypt. A year later in February 16/1906, the Bank of Abyssinia was
inaugurated which marked the introduction of modern banking in Ethiopia. This led to the
establishment of the State Bank of Ethiopia in 1942.

The introduction of modern banking services in the country by attaining the following:

 Ensured sustainable profitability with strong support to the country's economic

growth.
 Expanded its branch network covering large geographical areas.
 Employed more than 34879 staffs.
 Substantially increased its customer base and capital size.
 Become one of the top African banks in terms of assets and capital size. (CBE
monthly bulletin Jan. 2014,volume 3)

A bank is an institution which collect surplus fund from the general public, safe guard them and
makes them available to true owner when required but also loans out sums not required by their
true owners to those who are in need of funds and can provide security as show in (Allen,
1969:141).The student researcher believe that banks role in the economy of any county is very
significant. Banks plan intermediation function to collect money from those who have excess and
lend it to other who needs it for their investment. Availing credit to borrowers is one means by
which banks contribute to the growth of the economies.

Lending represents the heart of the banking industry. Loans are the dominant asset and represent
50-75 percent of the total amount at most banks generate the largest share of operating income
and represent the banks greater risk exposure (MacDonald & Koch, 2006:132). Moreover, its
contribution to the growth of any country is huge in that they are the main intermediaries between

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depositors and those in need of fund for their viable projects (creditors) there by ensure that the
money available in economy is always put to good use. Therefore, managing loan in a proper
way not only has positive effect on the banks performance but also on the borrower firms and a
country as a whole. Failure to manage loans, which make up the largest share of banks assets
would likely lead to the episode of risk level of non-performing loan.

Awash bank is the first Private commercial bank in Ethiopia after the introduction of
market oriented economic policy in 1991 Financial deregulation and the declaration of
market oriented economic policy. Licensed on November 10, 1994. in accordance with
the provisions of the commercial code of Ethiopia of 1960 and the licensing and
supervision of Banking Business proclamation No.592/2008.The Banks registered office
is at Awash Tower Ras Abebe Aregay Street Addis Ababa Ethiopia. It was established by
486 founding shareholders with a paid-up capital of Birr 24.2 million and started banking
operations on February 13, 1995. In May 2018, the number of shareholders and it’s paid
up capital increased to over 4,300 and birr 2.9 billion, respectively. The Bank have over
370 branches across the country as at end august,2018.since inception, the Bank has
expanded significantly.

Awash bank operates with its 370 branches, Scattered all over the country and all the
branches are interconnected through wide area network there by providing online
services out of the total branch networks, 165 branches are located in Addis Ababa and
the remaining 205 branches are located outside Addis Ababa.

Awash Bank is a bank that has thrived over 24 years in a rapidly evolving market and
economy. Having grown from humble beginnings with visionary intent, it’s the first
private bank in Ethiopia to exceed a billion profit marks in the history of Ethiopian
Private Banks in the financial year 2019 since inception; it have expanded through a
combination of substantial organic growth and an enhanced customer service experience.

Awash bank is the leading private bank in all parameters mentioned above i.e. Profit
maximization, in the review period, Awash Bank maintained its position as the most
profitable private bank in Ethiopia by registering an all-time high profit in the history of
private banks. Accordingly, Awash Bank has recorded a remarkable profit growth of birr
650 million (49 percent) over last year’s similar period, posting a gross profit before tax

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of birr 1.96 billion in 2017/18.this achievement was highly commendable against the
backdrop of challenging macro-economic environment, stringent regulatory
environment and stiff competition among local banks. Similarly, the Bank’s net profit
after tax rose to birr 1.49 billion in 1917/18 from birr 951million in 2016/17. As a result
of a remarkable growth in profits as compared (Birr 289 million) growth in the paid-up
capital of the Bank, earnings per share rose to 543 in 2017/18 from 388 in 2016/17 for the
par value of birr 1000 .

In terms of its Asset, total asset Awash Bank has shown an outstanding performance with
regard to asset growth. The asset size of the Bank has more than doubled and reached
Birr 55 billion as at end of June 2018, from Birr 15 billion (38percent) from birr 40
billion at the end of June 30,2017.

Loans and advance, Awash Bank continued to play a very key important intermediation
role in the Ethiopian economic through mobilization of resources and allocation of these
resources to different economic sectors .the total outstanding loans and advances of the
Bank markedly rose to Birr 31.3billion by the end of June 2018, up by birr 8.7 billion
(38%)over the preceding corresponding period, amidst the credit celling imposed on non-
export non-manufacturing sectors by the National Bank of Ethiopia(NBE).

The record growth rate was largely attributable to the strategy of the Bank to allocate
resources to the sectors that are waived from the credit cap, namely to the export and
manufacturing sectors indeed, the share of the export sector rose to 22.7 percent in
2017/18 from 10.7 percent of the total loans and advances from 8 percent a year ago. On
the other hand, loan and advance to the domestic trade and services slowed down to 26.5
percent compared with 31.3 percent in 2016/17,mirroring the vivid impact of the
government credit celling policy on the non-export non-Manufacturing sectors.

Paid up capital birr 2.6 billion.2016/2017. Awash bank has newly a strategic planning of
fully implementing its vision 2025 transformation project and its operation in a very
successful in all parameters. But awash bank has to be more challenges to providing
service quality to customers, as unable to give assurance of service quality and customer

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satisfaction that is deliver banking services via wide range of service delivery channel, all
tailored to the demands and performances of customers.

1.2.1Awash bank vision and mission statements

Vision

“To be the first choice world class Bank"

Mission statement

“To provide innovative, competitive and diversified banking services accessible to the
society with qualifies and committed staff in a profitable and socially responsible
manner." (Awash Newsletter)

1.2.2CORE VALUES

A- Accessibility
B- W- Wisdom
C- A- Accountability
D- S- Socially Responsible
E- H- Honesty

1.2.3Competencies

Awash Banks discriminating competencies are: - Excellent Customer Services, Efficient

Technology and Processes, Robust Enterprise Risk Management, Highly Knowledgeable,
Resourceful and Motivated Workforce.

Strong Asset Positions are:- Head office Building,Lideta,Hawassa,Adama,Gimbi,Harer

Leka, Jimma, Adda’a Shashemene & Agro.The Bank operate in own headquarter at the
hub of the Ethiopian financial district. Construction of offices at different towns will
continue in the future. The Bank operate in own headquarter at the hub of Ethiopian
Financial District. Construction of offices at different towns will continue in the future.

1.2.4 Human Capital

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The sustainability of Banks business depends largely on staff/employee. The Bank focus
on building a strong, diverse and capable workforce by providing a workplace that
stimulates and rewards distinctive performance. In order to maintain its leading position
Awash Bank has been investing a lot on Human Development and staff competence.

The bank added value contributing to society, macro-economic stability and the
environment. For AB, sustainability is about building our businesses to ensure, we have
positive impact on the economic and social progress of communities and on the
environment. Awash bank support various charity organizations and individuals through
our CSR program.

1.2.5Major Products and Services

1. Deposit Service

- Current account
- Time deposit
- Saving deposits
- Special Saving Accounts

2.Interest Free Banking

- Interest Free saving

- Interest Free Financing
- Interest Free Services

3. Digital Service

- ATM
- MasterCard
- Union Pay
- VISA
- POS
- Internet

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- M-Wallet

4. Lending Service

- Credit Facility
- Issuance of Guarantees
- OD facility

5.Safe Box Services

- Safety deposit box services

- In areas where he have buildings.

1.2.6 Major Distribution Channel

 Branches

Awash Bank rich 370 branches as at end August, 2018.All branches are connected with
our modern CORE banking system.

 Agent Banking

Focus on small towns with large populations and lower income levels. Partner with
retailers and fuel stations.

 Mobile Banking

Easy with USSD based platform and enable users to access account, payments, balance
enquiry, fund transfer, receive instant notification.

 Online Banking

Offer simple online banking experience which is safe and secure.

 ATM/POS

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More than 250ATMs excluding 60ATMs jointly with PSS member Banks and 500POS
under deployment and fuel stations.

 ET-Switch and Others

All AB card Holders can use their cards through ATM and POS of the Ethio Switch
member banks.

 International Card

AB’s ATM machines and POS terminals accept and process international cards such as
Master Card, visa card and China union pay

 International Money Transfer Agents

The total number of international money transfer agencies working with AB has reached
seventeen. The bank established strong financial link and SWIFT arrangement with more
than 300 reputable international banks all over the world.

1.2.7Customers Channel

- Public and private Enterprises

- Bilateral Organizations and NGOs
- Individual Customers
- NGOs
- Big Companies
- Exporters
 -High quality banking solution to corporate, institutional and private clients
provide high touch personalized service.
 -Balanced business model with good business depth and breadth.

1.2.8 Benefit of Banking with Awash Bank

-Banking with not only the pioneer but also the leading private commercial Bank in
Ethiopia

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-Banking with a dependable and reputable private Bank with strong Capital base

-Banking with a Bank that has proven track record of sustainable and significance

-Growth in all operational and financial areas almost for the past 23 years.

-Accessing full-fledged Banking service through a wide network of Branches coupled

with state of the art technologies throughout the country.

-Banking with a Bank that has established strong financial link Swift arrangement with
more than 300 reputable international Bank all over the world.

The goal of Awash bank is environed strategy to becoming: -

“One of the top ten private commercial Banks in East Africa by 2025"

The bank newly established Regional offices based on the new organizational structure of
the bank. The following city and outlying regional were established, four city regional
offices in Addis Ababa region name North Addis Ababa Region, South Addis Ababa
region, East Addis Ababa Region and West Addis Ababa Region and four regions in
outlying Branches out of Addis name Adama Region, East Region, South Region and
North West Region.

The establishment of more regional offices is believed to enhance and strength the
efficiency of the respective branches breath each regional office through providing
necessary managerial supports. The study tried to assess the effect of customer service
quality on customer satisfaction of awash bank under East region.

1.3Statement of the Problem

The subject of service quality has been studied and debated over the past three decades.
The importance of management’s ability to understand what constitutes service quality
and how to appropriately measure it in order for subsequent actions to be taken so as to
make improvements and increase value to customers. Substantial work has been done to
understand the nature and dimensions of service quality and customer satisfaction across
many different service settings in the past.

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According to the research by Caruana (2002), Butcher, Sparks, and O’Callaghan (2001),
Ehigie (2006) and Lam and Burton (2006), the overall satisfaction of the customers has a
mediating effect on the service quality dimensions (tangibles, reliability, responsiveness,
empathy and assurance).

Despite existing research, little attention has been paid to the study of service quality in
the Ethiopia banking industry. While a great deal of research has been conducted
regarding service quality, to date few studies have been conducted relative to the
dimensions of service quality in the context of the Ethiopian banking industry. In order to
address the exiting research gap, this study aims to identify various dimensions of service
quality from the customers’ perspective and to establish the relationship between service
quality and customer satisfaction in the private banking sector.
1.4Objectives of the Study

General objectives

The main objective of this study was to examine the effect of customer service quality on
customer satisfaction in Awash bank branches under East Region.

Specific objectives

The specific objectives of the study are

 To identify the effect of assurance on customer satisfaction,

 To determine the effect of responsiveness on customer satisfaction of the bank,
 To determine the effect of reliability on customer satisfaction of the bank,
 To identity the effect of tangibility on customer satisfaction of the bank, and
 To determine the effect of empathy on customer satisfaction of the bank to
identify the customers level of satisfaction.

1.5. Research Questions

In this study, there are few questions have been generate to answer the following
questions about the service quality dimension (SERVQUAL) and customer satisfaction.

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The research study will be guided by the following research question for the
investigations as follows:

 What is the relationship between the service tangibility and customer satisfaction
in the bank?
 What is the relationship between the service reliability and customer satisfaction
in the bank?
 What is the relationship between the service responsiveness and customer
satisfaction in the bank?
 What is the relationship between the service assurance and customer satisfaction
in the bank?
 What is the relationship between the service empathy and customer satisfaction in
the bank?

1.6. Research Hypotheses

The hypotheses of the study are:

H1: Assurance will have a positive and significant effect on customer satisfaction

H2: Responsiveness will have a positive and significant effect on customer

satisfaction

H3: Reliability will have a positive and significant effect on customer satisfaction

H4: Tangibles will have a positive and significant effect on customer satisfaction.

H5: Empathy will have a positive and significant effect

1.7. Significance of the study

Customer satisfaction is becoming one of the most essential objectives which any
business organization seeking for long-term relationship with customer considers as the
top priority. In banking sector where the contacts with customers are one of the most core
business processes, customer satisfaction is becoming the key for successful business
performance. Increasingly intense competitiveness and fundamental changes in the
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business environment nowadays are forcing firms to implement a customer-focused

strategy which raises the importance of customer-related constructs such as customer
satisfaction and service quality in explaining a firm’s performance.

Conducting this study on the private bank Awash is important because:

 It will help to provide relevant information for decision makers such that they can
use this as a spring board to develop strategies and plans to deliver quality service
and maintain customers’ satisfaction to ultimately remain profitable and sustainable
in business environment, and
 The results of this study will be documented such that academicians and
practitioners would use it for various purposes.

1.8. Scope of the Study

This study is mainly focused on examining the effect relationship between the service
quality and its effect on customer satisfaction by taking the five branches (i.e., Chiro,
Bedessa, Gelemso, Mechara, and Hirna) of Awash bank under East region. The
independent variables of the study are; tangibles, reliability, responsiveness, assurance
and empathy with the identified dependent variable; customer satisfaction.

1.9. Limitations of the Study

Due to limitation with finance and time the sample size of the study is small (i.e.,
customers in five branches the bank under East region) which may inadequately represent
the whole population or the whole customers in all branches in the country so that the
generalization that could be made from the study will limited to the conditions prevailing
in the East region. The data and information related with the topic may not be easily
available. The bank’s policy of not disclosing some sensitive data and information for
obvious reason may pose an obstacle to achieve our objective to some degree.

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CHAPTER TWO

2. 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. In this study, the contribution will be
reviewed to show the effect of customer service quality on customer satisfaction in
Awash bank.

2.1.Profile of the Company

2.1.1. History and achievements

Awash bank is the first private commercial bank in Ethiopia that established after the
introduction of market oriented economic policy in 1991, which was just after the
financial deregulation and the declaration of market oriented economic policy. The bank
was licensed on November 10, 1994 in accordance with the provisions of the commercial
code of Ethiopia of 1960 and, with the licensing and supervision of Banking Business
Proclamation No. 592/2008. The Bank’s registered office is located at Awash Tower
which located at Ras Abebe Aregay Street in Addis Ababa. It was established by 486
founding shareholders with a total paid-up capital of Birr 24.2 million, and started
banking operations on February 13, 1995. In May 2018, the number of shareholders has
reached over 4300 and it’s paid up capital has reached to birr 2.9 billion. The Bank has

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over 370 branches across the country at the end of August,2018. Since its inception, the
Bank has expanded significantly.

Awash bank operates with its 370 branches, scattered all over the country and all the
branches are interconnected through wide area network there by providing online
services. Out of the total branch networks, 165 branches are located in Addis Ababa and
the remaining 205 branches are located outside Addis Ababa.

Awash bank is the leading private bank in parameters such asthe first to inter in the
private banking sector with the highest number of shareholders and branches, and in
profit maximization. In the review period, Awash Bank maintained its position as the
most profitable private bank in Ethiopia by registering an all-time high profit in the
history of private banks. Accordingly, Awash Bank has recorded a remarkable profit
growth of birr 650 million (49 percent) compared to the previous year the same period,
reflecting a gross profit before tax of birr 1.96 billion in 2016/17. This achievement was
highly commendable against the backdrop of challenging macro-economic environment,
stringent regulatory environment and stiff competition among local banks. Similarly, the
Bank’s net profit after tax rose to birr 1.49 billion in 1917/18 from birr 951million in
2016/17. As a result of a remarkable growth in profits as compared (Birr 289 million)
growth in the paid-up capital of the Bank, earnings per share rose to 543 in 2017/18 from
388 in 2016/17 for the par value of birr 1000.

In terms of its asset, total asset Awash Bank has shown an outstanding performance with
regard to asset growth. The asset size of the Bank has more than doubled and reached
Birr 55 billion at the end of June 2018, which is about Birr 15 billion (38percent)
overtothat of birr 40 billion recorded at the end of June 2017.

Awash Bank continued to play a very important intermediation role in the Ethiopian
economic growth through mobilization of resources and allocation of these resources to
different economic sectors. The total outstanding loans and advances of the Bank
markedly rose to Birr 31.3billion by the end of June 2018, which was up by birr 8.7
billion (38%)over the preceding corresponding period, amidst the credit celling imposed
on non-export non-manufacturing sectors by the National Bank of Ethiopia(NBE).

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The record growth rate was largely attributable to the strategy of the Bank to allocate
resources to the sectors that are waived from the credit cap, namely to the export and
manufacturing sectors.Indeed, the share of the export sector rose to 22.7 percent in
2017/18 from 10.7 percent of the total loans and advances from 8 percent a year ago. On
the other hand, loan and advance to the domestic trade and services slowed down to 26.5
percent compared with 31.3 percent in 2016/17,mirroring the vivid impact of the
government credit ceiling policy on the non-export non-Manufacturing sectors. Its paid
up capital was birr 2.6 billion in 2016/2017.

Awash bank has a new strategic plan to fully implement its vision 2025 transformation
project and its operation in a very successful manner in all parameters.During the review
period the bank has been working hard and committed to assuring service quality and
customer satisfaction by delivering banking services via wide range of channels, all
tailored to the demands and performances of customers.

2.1.2. Vision and mission statements and core values

Vision:“To be the first choice world class Bank”

Mission statement:“To provide innovative, competitive and diversified banking services

accessible to the society with qualifies and committed staff in a profitable and socially
responsible manner”

Core values: A-W-A-S-H

F- Accessibility, W- Wisdom, A- Accountability, S- Socially Responsible, H- Honesty

2.1.3. Competencies and human capital

Competencies

Awash Banks discriminating competencies are: excellent customer services, efficient

technology and processes, robust enterprise risk management, highly knowledgeable,
resourceful and motivated workforce.

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Strong Asset Position includes Head office buildings found at

Lideta,Hawassa,Adama,Gimbi,Harer, Leka, Jimma, Adda’a, Shashemene and Agro.The
Bank operate in its own headquarter at the hub of the Ethiopian financial district.
Construction of offices at different towns will continue in the future.

Human capital

The sustainability of Banks business depends largely on its staffs or employees. The
Bank focus on building a strong, diverse and capable workforce by providing a
workplace that stimulates and rewards distinctive performance. In order to maintain its
leading position Awash Bank has been investing a lot on human development and staff
competence.

Awash bankhas established eight Regional offices based on the new organizational
structure it owned. Four of the regional offices are found in Addis Ababa and named as
North Addis Ababa Region, South Addis Ababa region, East Addis Ababa Region and
West Addis Ababa Region.The bank also has four regional offices out of Addis Ababa,
named as Adama Region, East Region, South Region and North West Region offices.

The establishment of more regional offices is believed to enhance and strength the
efficiency of the respective branches breath each regional office through providing
necessary managerial supports. The study tried to assess the effect of customer service
quality and customer satisfaction of Awash bank under East region.
2.2.Definitions and Concepts

2.2.1. Customer service

According to Robert (2005) customer service is defined as the ability of knowledgeable,

capable and enthusiastic employees to deliver products and services to their internal and
external customers in a manner that satisfies identified and unidentified needs and
ultimately result in positive word-of-mouth publicity and return business. Customer
service is concerned establishing, maintaining and enhancing relationships between
and/or among relevant business parties in order to achieve the objective of the relevant
parties (Osuagwu, 2002).

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2.2.2. Service quality

In goods sector, quality research was established long before it was established in the
service sector (Gummesson, 1991). Bandyopadhyay (2003, pp. 187-188) definedthe
quality in goods sector as the product’s fitness for its intended use and how well the
product meet the needs and the expectations of its customers. Garvin (1983) referred the
product oriented quality approach as ‘objective quality’ (Clemes et al., 2007). However,
Parasuraman et al.(1985,pp. 42) asserted that understanding quality in goods sectoris
inadequate for understanding service quality, because of the fundamental difference
between the two terms. These authors also suggest that service quality is performance
based rather than objects, therefore precise manufacturing specifications concerning
uniform quality can rarely be set.

Hong and Goo (2004) argued that service quality is more difficult for consumers to
evaluate than product quality; this is due to a lack of tangible evidence associated with
the service. In the past decades, researchers (Carman, 1990; Garvin, 1983; Parasuraman
et al., 1985, 1988) have defined and measured service quality by examining the attributes
of service quality, while others (Oliver and DeSarbo, 1988;Oliver, 1993; Bitner and
Hubert, 1994; Iacobucci et al., 1994; Parasuraman et al., 1994 as cited in Wei 2010)
focused on the application in services to conceptualize the relationship between service
quality and customer satisfaction. Therefore, combinations of the service quality and
customer satisfaction literatures have formed the foundation of service quality theory
(Clemes et al., 2007; Parasuraman et al., 1985, 1988 as cited in Wei, 2010).

The concept and measurement of service quality is one of the most debated topics in
service marketing literature (Brady and Cronin, 2001). Several researchers pointed out
that service quality is difficult to measure as it is an elusive and abstract construct
(Carman 1990; Garvin 1983; Parasuraman et al., 1985, 1988 as cited in Wei 2010).
Shostack (1977) describes that the intangibility of service that can only be rendered or
experienced but not change the physical ownership after consumption.Parasuraman et al.,
(1985) argue that service quality involves not only the outcome but also the delivery
process. Other authors also add that service quality relates to satisfaction but the two are

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not the same (Cronin and Taylor, 1992; Parasuraman et al., 1985). In addition, other
researchers defined service quality in different ways. Lovelock and Wright (1999) define
quality as the degree to which a service satisfies customers by meeting their needs, wants
and expectations.”

Bitner and Hubert (1994) define service quality as the customers’ overall impression of
the relative inferiority or superiority of the organization and its services. Gronroos (1984)
identified service quality as the evaluation process outcome, in which customers are
involved and where a certain experience is always compared to the perceived service
received. The subjective definition for service quality was given by Kwortnik
(2005)stating that service quality is not objectively measured according to some technical
standards but is subjectively felt by customers and measured relative to customer
determined standards. Berry et al., (1990) also defined service quality as the discrepancy
between customers’ expectations or desire and their perceptions.

The previous literature suggests that the evaluation of quality in services is more difficult
than goods (Parasuraman et al., 1985) and that delivering quality services is increasingly
recognized as the key to success for service providers (Cronin and Taylor, 1992 as cited
in Wei 2010). But, perceived service quality has confirmed to be a complex concept to
understand (Brady and Cronin, 2001, pp.34). Therefore, Rust and Oliver (1994) propose
that it is essential for companies to develop the awareness of customers’ perceptions of
service quality.

According to Robert W.L. (2005) “customer service is defined as the ability of

knowledgeable, capable and enthusiastic employees to deliver products and services to
their internal and external customers in a manner that satisfies identified and unidentified
needs and ultimately result in positive word-of-mouth publicity and return business.”
“Customer service is concerned establishing, maintaining and enhancing relationships
between and/or among relevant business parties in order to achieve the objective of the
relevant parties” Osuagwu (2002).
2.2.1Customer- indicated that historically, the word customer is derived
from”Custom” meaning “habit a customer was someone who frequented a particular
shop, who made it a habit to purchase goods there, and with whom the shopkeeper had to

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maintain a relationship to keep his or her “custom” meaning expected purchases in the
future.
The WWW.dictionary referce.com (2011) define a customer as person who purchases
goods or services from suppliers, or a person with an interest to deal with.Rust et.al
(2000) described it commonly used to refer to end –users of a product. Customer
expectations are influenced by cultural values, advertising, marketing, and other
communications, both with the supplier and with other sources.
2.2.2 Bank-The awash bank customer account transaction service/CATS, 2016
define bank as Bank as lawful organization, which accepts deposits that can be
withdrawal on demand. It also lends money to individuals and business houses that need
it.it was established to perform the major banking functions, including Accepting for
deposits, providing short, medium and long term loans, Buying and selling foreign
exchanges, Buying and selling negotiable instruments and securities issued by the
government, private organizations or any other person.
2.2.3.Service Quality

“Quality research in the goods sector was established long before it was established in the
service sector” (Gummesson, 1991). Bandyopadhyay (2003, pp. 187-188) claimed that
quality in goods sectors is “commonly defined as the product’s fitness for its intended use,
which means how well the product meet the needs and the expectations of its customer”.
Garvin (1983) referred to “the product oriented quality approach as ‘objective
quality.”(Clemes, Gan, and Kao, 2007). However, “understanding quality in the goods
sector is inadequate for understanding service quality because of the fundamental difference
between the two terms” (Parasuraman, et al., 1985). (Parasuraman, et al., 1985, pp. 42)
“Suggest that service quality is performance based rather than objects, therefore precise
manufacturing specifications concerning uniform quality can rarely be set”.

2.2.3.1 “What is quality?”

Quality Customer Dimension high quality objectives are tightly connected to elements of a
firm’s mission and are relatively easy to measure and track over time.

The association between service quality and Customer Satisfaction

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Relationship between satisfaction and service quality is the key to measure user satisfaction
(pit et al, 1995).The service quality impacts customer satisfactionin many organizations and
maintaining customer satisfaction is the key to retaining customers and profitability.it an
important tool not only to attract new potential customers but also to maintain the existing
ones loyal. Therefore, the study on customer satisfaction has become a paramount
contribution for in the business of dimensions of quality for quality service,

Relationship between satisfaction and service quality is the key to measure user satisfaction.
The service the following seven dimensions of quality for quality service;

1. Time and timeliness:-How long must a customer wait for service, and is it completed on
time?
2. Completeness:-is everything the customer asked for provided?
3. Courtesy:-How are customer asked for provided?
4. Consistency:-is the same level of service provided to each customer each time?
5. Accessibility and convenience:-How easy is it to obtain the service?
6. Accuracy: is the service performed right every time? Is your bank or credit card statement
correct every month?
7. Responsiveness:-How well does the company react to unusual situations, which can
happen frequently in a service company?

Definition of Customer Satisfaction

There is growing managerial interest in customer satisfaction as a means of evaluating

quality. High customer satisfaction ratings are widely believed to be the best indicator of
company’s future profit. Satisfaction can be broadly characterized as a post-purchase
evaluation of product quality given pre-Purchase expectation.(Kotler & Philip,1991).

Customer satisfaction can be experienced in a variety of situations and connected to both

goods and services.it is highly personal assessment that is greatly affected to both goods
and services.it is a highly personal assessment that is greatly affected by customer
expectations.

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Satisfaction also is based on the customer’s experience of both contacts with the
organization and personal outcomes. some researchers define a satisfied customer within
the private sector as one who receives significant added value to his/her bottom line a
definition that may apply just as well to public services.(Hana, mack and karp,peter,1989).

In today’s competitive business environment marketing managers are more influenced from
customer expectation and meeting the demand for customer satisfaction is very important
for them. Every organization must define customer satisfaction regarding their market.

So customer satisfaction could not be defined only standard or quality of product. Customer
satisfaction is about relationships between the customer and product or service and the
provider of a product or service. Customer satisfaction is a highly personal assessment that
is greatly influenced by individual expectations. Some definitions are based on the
observation that customer satisfaction or dissatisfaction results from either the confirmation
or disconfirmationof individual expectations regarding a service or product.to avoid
difficulties stemming from the kaleidoscope of customer expectations and difficulties ,some
experts urge companies to- concentrate on a goal that’s more closely linked to customer
equity. Instead of asking whether customers are satisfied, they encourage companies to
determine how customers hold them accountable (nick wreden, 2004)

Customer satisfaction can be defined as situation when actual service meets or excel
customer’s expectation perceived(parasuraman et al,1985)

Service quality is “more difficult for consumers to evaluate than product quality; this is due
to a lack of tangible evidence associated with the service” (Hong and Goo, 2004). In the
past decades, researchers (Carman 1990; Garvin 1983; Parasuraman et al, 1985, 1988) have
defined and measured service quality by examining the attributes of service quality, while
others (Bitner and Hubbert 1994; Iacobucci, Grayson, and Ostrom, 1994; Oliver, 1993;
Oliver and DeSarbo, 1988; Parasuraman, Zeithaml, and Berry, 1994 as cited in Wei 2010)
focused on the application in services to conceptualize the relationship between service
quality and customer satisfaction. Therefore, a combination of the service quality and
customer satisfaction literature has formed the foundation of service quality theory (Clemes
et al., 2007; Parasuraman et al., 1985, 1988 as cited in Wei 2010).

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“The conceptualization and measurement of service quality is one of the most debated
topics in service marketing literature” (Brady and Cronin, 2001). Several researchers
pointed out that service quality is difficult to measure as it is an elusive and abstract
construct (Carman 1990; Garvin 1983; Parasuraman et al., 1985, 1988 as cited in Wei
2010). Shostack (1977) “described the intangibility of service that can only be rendered or
experienced but not change the physical ownership after consumption.”

Parasuraman et al., (1985) “argue that service quality involves not only the outcome but
also the delivery process. “And also, service quality relates to satisfaction but the two are
not the same” (Cronin and Taylor, 1992; Parasuraman et al., 1985).

In addition, other researchers defined service quality in different ways. Lovelock and
Wright (1999) “define quality as the degree to which a service satisfies customers by
meeting their needs, wants and expectations.”

Bitner and Hubbert (1994) “define service quality as the customers’ overall impression of
the relative inferiority or superiority of the organization and its services.” Gronroos
(1984) “identified service quality as the evaluation process outcome, in which customers
are involved and where a certain experience is always compared to the perceived service
received.” “Service quality is not objectively measured according to some technical
standards but is subjectively felt by customers and measured relative to customer
determined standards” (Kwortnik, 2005). Berry et al., (1990) also “defined service quality
as the discrepancy between customers’ expectations or desire and their perceptions.”

“The previous literature suggests that the evaluation of quality in services is more difficult
than goods (Parasuraman et al., 1985) and that delivering quality services is increasingly
recognized as the key to success for service providers” (Cronin and Taylor, 1992 as cited
in Wei 2010). But, “perceived service quality has confirmed to be a complex concept to
understand” (Brady and Cronin, 2001, pp.34). Therefore, Rust and Oliver (1994) propose
that it is essential for companies to develop the awareness of customers’ perceptions of
service quality.

2.2.2. Characteristics of Services

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1. According to Bitner et al., (1993) service has four characteristics:

intangibility, inseparability, heterogeneity and perish ability.
2. Intangibility of Services
3. Regan (1963) introduced the idea of services being activities, benefits or
satisfactions which are offered for sale, or are provided in connection with the
sale of goods. The degree of intangibility has been suggested as a means of
differentiating tangible products with services (Levitt, 1981). Most of the
time, services are explained as being intangible since their outcome is
considered to be an action rather than physical product (Johns, 1999). Darby
and Karni (1973) and Zeithaml (1981) as citied in Wolak et al. (1998)
highlight the fact that the degree of tangibility has implications for the ease
with which consumers can evaluate services and products. Other researchers
propose that intangibility cannot be used to differentiate clearly services with
all products. Bowen (1990) as citied in Wolak et al. (1998) suggests that the
intangible-tangible concept is difficult for people to grasp. Bowen (1990)
provides empirical evidence to support this view. Onkvisit and Shaw (1991)
feel that the importance of intangibility is over- emphasized.
4. Inseparability of Services
5. Inseparability is taken to reflect the simultaneous delivery and consumption of
services (Zeithaml et al., 1985; Bowen 1990; Onkvisit and Shaw, 1991) and it
is believed to enable consumers to affect or shape the performance and quality
of the service (Grönroos, 1978; Zeithaml, 1981 as citied in Wolak et al.,
1998).
6. Heterogeneity of Services
7. Heterogeneity “reflects the potential for high variability in service delivery”
(Zeithaml et al.,1985). This is a particular problem for services with high
labor content, as the service performance is delivered by different people and
the performance of people can vary from day to day (Rathmell, 1966; Carman
and Langeard, 1980; Zeithaml, 1985; Onkvisit and Shaw, 1991 as citied in
Wolak et al., 1998). Onkvisit and Shaw (1991) consider heterogeneity to offer
the opportunity to provide a degree of flexibility and customization of the

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service. Wyckham et al. (1975) suggest that heterogeneity can be introduced

as a benefit and point of differentiation.”
8. Perishability of Services
9. In general, services cannot be stored and carried forward to a future time
period (Rathmell, 1966; Donnelly, 1976; and Zeithaml et al., 1985 as citied in
Wolak et al., 1998). Onkvisit and Shaw (1991) suggest that services are “time
dependent” and “time important” which make them very perishable. Hartman
and Lindgren (1993) claim that the issue of perish ability is primarily the
concern of the service producer and that the consumer only becomes aware of
the issue when there is insufficient supply and they have to wait for the
service.
10. Intangibility of Services

Regan (1963) “introduced the idea of services being activities, benefits or satisfactions
which are offered for sale, or are provided in connection with the sale of goods”. The
degree of intangibility has been suggested as a means of differentiating tangible products
with services (Levitt, 1981). Most of the time, services are explained as being intangible
since their outcome is considered to be an action rather than physical product (Johns,
1999).(Darby and Karni 1973 and Zeithaml 1981 as citied in Wolak et al., 1998) highlight
the fact that the degree of tangibility has implications for the ease with which consumers
can evaluate services and products. Other researchers propose that intangibility cannot be
used to differentiate clearly services with all products. (Bowen 1990 and Wyckham,
Fitzroy and Mandry 1975 as citied in Wolak et al., 1998) suggest that the intangible-
tangible concept is difficult for people to grasp. Bowen (1990) “provides empirical
evidence to support this view.”Onkvisit and Shaw (1991) “feel that the importance of
intangibility is over- emphasized”.

Inseparability of Services
Inseparability is taken to reflect the simultaneous delivery and consumption of services

(Regan 1963; Wyckham et al1975; Donnelly 1976; Grönroos 1978; Zeithaml 1981;
Carman and Langeard 1980; Zeithaml et al.,1985; Bowen 1990 and Onkvisit and Shaw

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1991) and it is believed to enable consumers to affect or shape the performance and
quality of the service (Grönroos, 1978; Zeithaml, 1981 as citied in Wolak et al., 1998).

Heterogeneity of Services
Heterogeneity “reflects the potential for high variability in service delivery” (Zeithaml et
al., 1985). This is a particular problem for services with high labor content, as the service
performance is delivered by different people and the performance of people can vary
from day to day (Rathmell, 1966; Carman and Langeard, 1980; Zeithaml, 1985; Onkvisit
and Shaw, 1991 as citied in Wolak et al., 1998). Onkvisit and Shaw (1991) consider
“heterogeneity to offer the opportunity to provide a degree of flexibility and
customization of the service.” Wyckham et al., (1975) suggest that “heterogeneity can be
introduced as a benefit and point of differentiation.”

Perish ability of Services

In general, services cannot be stored and carried forward to a future time period
(Rathmell, 1966; Donnelly, 1976; and Zeithaml et al., 1985 as citied in Wolak et al.,
1998). Onkvisit and Shaw (1991) suggest that “services are “time dependent” and “time
important” which make them very perishable.” Hartman and Lindgren (1993) claim that
the “issue of perish ability is primarily the concern of the service producer” and that the
consumer only becomes aware of the issue when there is insufficient supply and they have
to wait for the service.”

2.2.4. Service quality dimensions

Service's unique characteristics of intangibility, heterogeneity, and inseparability lead

them to possess high levels of experience and credence properties, which, in turn, make
them more difficult to evaluate than tangible goods (Bitner 1990; Zeithaml 1981).
Identification of the determinants of service quality is necessary in order to be able to
specify measure, control and improve customer perceived service quality (Johnston
1995).

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The SERVQUAL is a concise multiple-item scale with good reliability and validity that
researcher can use to better understand the service expectations and perceptions of
consumers and, as a result, improve service (Parasuraman et al., 1988). SERVQUAL was
also selected since it is important when it is used occasionally to track the service quality
trends, and when it is used in combination with other forms of service quality instrument
(Parasuraman et al., 1985).

Parasuraman et al. (1985) identify ten determinants for measuring service quality which
are tangibility, reliability, responsiveness, communication, access, competence, courtesy,
credibility, security, and understanding/knowledge of customers. Later these ten
dimensions were further purified and developed into five dimensions i.e. tangibility,
reliability, responsiveness, assurance and empathy to measure service quality,
SERVQUAL (Parasuraman et al., 1988). These five dimensions identified as follows:

Tangibility

Tangibilityrefers to physical facilities, equipment, and appearance of personnel. Jab noun

and Al-Tamimi (2003) indicated that customers choose tangibility factor of service
quality in the banking industry “Bank could build customer relationships by delivering
added tangible and intangibility elements of the core products (Zineldin, 2005).

Reliability

Reliability means ability to perform the promised service dependency and

accurately.Reliability is a significant factor of product quality in addition to good
personal service, staff attitude, knowledge and skills (Walker, 1990). It is found that
service reliability is the service “core” to most customers and managers should use every
opportunity to build a “do-it-right-first” attitude (Berry et al., 1990).

Responsiveness

Responsiveness means willingness to help customers and provide prompt service.

Customers are very sensitive to employees' working environment in service giving
organizations (Brown and Mitchell, 1993). Gollway and Ho (1996) also reported that

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proper balance between staff skills and customers' expectation resulted in superior service
quality towards customers.

Assurance

Assuranceindicates knowledge and courtesy of employees and their ability to inspire trust
and confidence. Parasuraman et al.(1988) found that assurance is an important factor of
service quality next to reliability and responsiveness towards customer satisfaction.
According to Arasli et al. (2005) assurance has the strongest impact on customer
satisfaction that leads to positive word of mouth outcome.

Empathy

Empathy refers to caring, individualized attention the firm provides its customers (ibid).
Jabnoun and Al-Tamimi (2003) found that bank customers believed empathy as an
essential factor of service quality. Nelson and Chan (2005) suggested that employees'
commitment to deliver quality services, skillfully handling of conflicts and efficient
delivery of services resulted in satisfied customers for long term benefits.

2.3. Multiple Customer Listening Tools

There are different customer listening tools; these are: relationship surveys, transaction
surveys, customer complaints, total market and life cycle surveys, in-depth interviews,
focus groups and observation.

Relationship vs. Transaction Surveys

The literature has long debated the most appropriate conceptualization of customer
satisfaction (Oliver 1997). Some researchers argue that satisfaction is a transaction
specific emotion resulting from the disconfirmation of expectations model (Oliver 1980).
On the contrary, other researchers have conceptualized and evaluated satisfaction as a
universal construct, being the outcome of various past relationships with a particular
seller (Oliver 1997). As of late, researchers have accepted both views of satisfaction and
have modeled satisfaction with interactions and the impact on global satisfaction

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(Boulding et al., 1993). Following this lead, practitioners often use two satisfaction
surveys a transaction survey and an overall relationship survey (Rust et al., 1995).

Customer Complaints

Research has indicated that appropriately managing customer objection has a dramatic
influence on customer retention and loyalty (Singh and Wilkes, 1996). Research has
focused on processes to handle complaints (Tax et al., 1998; Fornell and Westbrook,
1984; Resnick and Harmon, 1983), the customer’s experience (Smith et al., 1999; Hansen
et al., 1997), analysis of complaint data (Schibrowsky and Lapidus, 1994), and the
relationship to important business outcomes (Richins, 1983 as cited in Garver, 2006).

Total Market and Life Cycle Surveys

Total market surveys are used to gather perceptions of the entire market, not just
company’s current, regular customers. Researchers have noted the importance of
gathering perceptions of the market place because regular customers are often satisfied
with the vendor and supply relatively high performance scores (Gale 1994). Inflated
performance scores are a problem with satisfaction data (Oliver 1997), one that is
overcome with market surveys.

Research findings suggest that satisfaction often varies throughout the life cycle and that
the importance of service/product attributes change over time (Mittal and Tsiros, 1999).
Woodruff and Gardial (1996) found that customers may devalue certain products over
time, expressing declining levels of satisfaction as product usage evolves’. Furthermore,
Gardial et al. (1994) found that customer expectations and the importance placed on
certain attributes often change throughout the life cycle.

In-depth interviews, Focus Groups and Observation

In-depth interviews and focus groups are commonly used in practice and have received a
considerable amount of attention (Greenbaum, 1998; Holstein and Gubrium, 1995 as
cited in Garver, 2006). More advanced users will employ them on the back end of
surveys to add insight into quantitative results as well (Woodruff and Gardial, 1996).
With more complex offerings, focus groups are also used to gain an in-depth evaluation

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of the offering (Krueger 1994). Observation instead relies upon actual behaviors and
actions, inferring the participants thought processes and motivations (Taylor 1994).

Total Market and Life Cycle Surveys

Total market surveys are used to gather perceptions of the entire market, not just
company’s current, regular customers. “Researchers have noted the importance of
gathering perceptions of the market place because regular customers are often satisfied
with the vendor and supply relatively high performance scores” (Gale 1994). “Inflated
performance scores are a problem with satisfaction data (Oliver 1997), one that is
overcome with market surveys.”

“Research findings suggest that satisfaction often varies throughout the life cycle and that
the importance of service/product attributes change over time” (Mittal and Tsiros 1999).
Woodruff and Gardial (1996) “found that customers may devalue certain products over
time, expressing declining levels of satisfaction as product usage evolves’. Furthermore,
Gardial et al. (1994) “found that customer expectations and the importance placed on
certain attributes often change throughout the life cycle.”

In-depth interviews, Focus Groups and Observation

In-depth interviews and focus groups are commonly used in practice and have received a
considerable amount of attention (Greenbaum 1998; Holstein and Gubrium 1995 as cited
inGarver S. M. 2006).“More advanced users will employ them on the back end of
surveys to add insight into quantitative results as well (Woodruff and Gardial 1996).”
“With more complex offerings, focus groups are also used to gain an in-depth evaluation
of the offering” (Krueger 1994).

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“Observation instead relies upon actual behaviors and actions, inferring the participants
thought processes and motivations” (Taylor 1994).

2.4. Customer Satisfaction

According to Drucker (1954) the principle purpose of a business is to create satisfied

customers. Increasing customer satisfaction has been found to lead to higher future
profitability (Anderson, 1994), lower costs related to defective goods and services
(Anderson, 1997), increased buyer willingness to pay price premiums, provide referrals,
and use more of the product (Reichheld, 1996; Anderson and Mittal, 2000), and higher
levels of customer retention and loyalty (Fornell, 1992; Anderson and Sullivan, 1993;
Bolton, 1998 as cited in Malthouse et al., 2003).

Increasing loyalty, in turn, has been found to lead to increases in future revenue (Fornell,
1992; Anderson, 1994) and reductions in the cost of future transactions (Reichheld, 1996;
Srivastava, 1998 as cited in Malthouse et al., 2003). A firm’s future profitability depends
on satisfying customers in the present–retained customers should be viewed as revenue
producing assets for the firm (Anderson and Sullivan, 1993; Reichheld, 1996; Anderson
and Mittal, 2000 as cited in Malthouse et al., 2003). Empirical studies have found
evidence that improved customer satisfaction need not entail higher costs, in fact,
improved customer satisfaction may lower costs due to a reduction in defective goods,
product re-work, etc. (Fornell, 1992; Anderson, 1997 as cited in Malthouse et al., 2003).
“Customer satisfaction and retention that are bought through price promotions, rebates,
switching barriers, and other such means are unlikely to have the same long-run impact
on profitability as when such attitudes and behaviors are won through superior products
and services” (Anderson and Mittal, 2000).

Several authors, on the other hand, have defined satisfaction in different way. Some
definitions are given as follow:

Rust and Oliver (1994) defined satisfaction as “the customer’s fulfillment response which
is an evaluation as well as an emotion-based response to a service.” Customer satisfaction
is “a collective outcome of perception, evaluation, and psychological reaction to the

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consumption expectation with a product or services” (Yi, 1990). Kotler (2000) defined
satisfaction as “a person’s feelings of pleasure or disappointment resulting from
comparing product’s perceived performance or outcome in relation to his or her
expectations.”

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.” Satisfaction is “merely the result of things not going wrong; satisfying
the needs and desires of consumers” (Besterfield, 1994). Satisfaction refers to “the
buyer’s state of being adequately rewarded in a buying situation for the sacrifice he or
she has made” (Al-alak, 2009).

Furthermore, Lin (2003) defined customer satisfaction as “the outcome of a cognitive and
affective evaluation of the comparison between expected and actually perceived
performance, which is based on how customers appraise delivery of goods or services.”
Jamal and Kamal (2002) describes customer satisfaction as “a feeling or attitude of a
customer towards a product or service after it has been used.”

2.5. Distinction between Service Quality and Customer Satisfaction

The literature on services has made a distinction between service quality and customer
satisfaction (Bitner, 1990; Bolton and Drew, 1991; Parasuraman et al., 1988 as cited in
Harr, 2008). This differentiation is important for firms to concentrate on enhancing their
capability to satisfy customers through providing high service quality.

The position of scholars characterized by Parasuraman et al., (1988), is that “service

quality involves an attitude and is an evaluation over several service encounters over
time”. It is also “thought to be an overall assessment about a service category or an
organization” (Parasuraman et al., 1988). “In support of this, respondents in Parasuraman
et al., (1988)’s study demonstrated satisfaction with specific service encounters but were
not happy with the service quality of the firm.”

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Conversely, recent thoughts on customer satisfaction is summarized in the following

definition of satisfaction by Oliver (1981) as “a psychological state resulting when the
emotion surrounding disconfirmed expectations is coupled with the consumer’s prior
feelings about the consumption experience”. Furthermore, definitions by other scholars
(Howard and Sheth 1969; Hunt, 1979 as cited in Harr, 2008) support the thinking that it
relates to a specific service encounter. Moreover, Oliver (1981) distinguished customer
satisfaction from service quality in his definition of attitude as “the consumer’s relatively
enduring affective orientation for a product, store, or process while satisfaction is the
emotional reaction following a disconfirmation experience which acts on the base attitude
level and is consumption-specific” (Oliver, 1981, p. 42). Therefore, service quality is
“more stable and is situation ally oriented” (Oliver, 1981, p. 42). The two constructs are
related in that service encounters of customer satisfaction over time result in perceptions
of service quality (Oliver, 1981; Parasuraman et al., 1988 as cited in Harr, 2008).

There is also a lot of argument regarding whether customer satisfaction is the antecedent
of service quality or the outcome of service quality. Initially, scholars take the position
that satisfaction is an antecedent of service quality since to reach an overall attitude
(service quality), implies an accumulation of satisfactory encounters (Bitner, 1990;
Bolton and Drew, 1991). However, other scholars take the opposite view that service
quality is the antecedent of customer satisfaction (Cronin and Taylor, 1992; Ekinci, 2004;
Rust and Oliver, 1994; Swan and Bowers, 1998 as cited in Harr, 2008).

Empirical research by Cronin and Taylor (1992) “showed that service quality has a
significant effect on customer satisfaction.” Similarly, recent studies by (González and
Brea, 2005; Ekinci, 2004 as cited in Harr, 2008) using recursive structural models
provided empirical support that service quality results in customer satisfaction.
According to Zeithaml et al. (2006), customer satisfaction “is a broader concept than
service quality which focuses specifically on dimensions of service”.

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2.6. Previous Studies

Research on quality of service currently has received special attention from marketing
researchers. Below is a summary of results of previous studies regarding the service
quality and its influence on satisfaction, published in various scientific journals.

Table 2.1: A summary of previous studies

Authors Antecedents Result

Munusamy et Five dimensions of service The three service quality dimensions

al.(2010) quality (tangibility, (assurance, empathy, and responsiveness)
reliability, responsiveness, have positive and insignificant effect on
assurance and empathy) customer satisfaction. Tangibility has a
positive and significant impact on customer
satisfaction. However, reliability has a
negative and insignificant effect on customer
satisfaction.

Mohammad 5 dimensions of The five service quality dimensions

and Servicequality (tangibility, (tangibility, reliability, responsiveness,
Alhamadani reliability, responsiveness, assurance and empathy) have a positive and
(2011) assurance and empathy) significant effect on customer satisfaction.

Al-Hawary et 5 dimensions of (tangibility, The four service quality dimensions

al., (2011) reliability, responsiveness, (tangibility, reliability, assurance, and
assurance and empathy) responsiveness) have a positive and
significant effect on customer satisfaction.
Empathy has a negative and significant effect
on customer satisfaction.

Malik et al., 5 dimensions The two dimensions of service quality

(2011) ofSERVQUAL(tangibility, (Reliability, assurance) have a significant and
reliability, responsiveness, positive effect on customer satisfaction.
assurance and empathy) However, the rest three service quality
dimensions (tangibility and responsiveness
and empathy) have no contribution to
customer satisfaction.

Source: Own compilation

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2.7. Conceptual Framework

Service quality is a vital antecedent of customer's satisfaction (Cronin and Taylor, 1992).
In turn customer satisfaction is believed to affect post-purchase and perception and future
decisions. Following from the literature review done above, the relationship between
service quality variables and customer satisfaction can be shown as following. In this
conceptual model the five service quality dimensions have been selected form the study
conducted by Parasuraman et al. (1988).

Parasuraman et al., (1985) conducted research on different service organization

(Bank, Hotel, Electrical Corporation, Hospital, Transportation) by using ten
service quality dimensions (tangibility, reliability, responsiveness, communication,
access, competence, courtesy, credibility, security, and knowledge). Later
Parasuraman et al. (1985) conducted research and then the ten dimensions were
further purified and developed into five dimensions (tangibility, reliability,
responsiveness, assurance and empathy). The reason behind purified the ten
dimensions into five dimensions was the appropriateness of each service quality
dimensions to different service organizations for example security dimension is
appropriate for transportation, credibility dimension is appropriate for hotel (Fig.
2.1).

Figure 2.1. Conceptual framework of the effect of customer service quality on customer
satisfaction

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Source: Parasuraman et al., (1988).

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CHAPTER THREE

3. Research Design and Methodology

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 of the method
of data analysis was presented.

3.1. Research Design

Both descriptive and explanatory study design using quantitative method was used to
analyze for data collected from customers. The reason behind using descriptive study
design is because the researcher is interested in describing the existing situation under
study. This study used descriptive analysis that describes the service quality dimensions
that lead to customer satisfaction. This study also used explanatory study design, to
explaining, understanding, predicting and controlling the relationship between variables.

3.2. Population and Sample

The sample size of branches has been determined by using stratified random sampling
method. Under the East Region office there are 26 branches. From these branches about
five branches and about 350 respondents were randomly sampled for this study. The five
branches are Chiro, Bedessa, Gelemso, Mechara, and Hirna Branches. After the sample
of branches has determined then stratified random sampling method was used to select
the target customers.

3.3. Data Source and Collection Method

The primary and secondary data sources were used to obtain required information that
would enable us to achieve our objectives of the study and to test the hypothesis
proposed. Primary data was collected using questionnaires. Questionnaires were
distributed to the randomly sampled customers of the banks. The variables were

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attitudinal and measured using Likert scale with five response categories (strongly
disagree, disagree,n either agree nor disagree, agree, and strongly agree). “The Likert
scale method was preferred to make questions interesting to respondents and thereby
enhance their cooperation, ultimately to ensure maximum response rate” (Robson, 2002).

3.4. Procedure of Data Collection

The research sought permission from five branches in East Region, and permission was
granted for the survey by the managers of each branch. After permission was granted, the
questionnaires were distributed to the respondents. The survey pack included a copy of
the cover letter, and the questionnaire. Collection of responded questionnaire was started
to from the date administration and continued.

The questionnaire has two parts. These are: - Service Quality Questionnaire (SQQ) and
Customer Satisfaction Questionnaire (CSQ).

Service Quality Questionnaire (SQQ)

The first part of the questionnaire measures the banks service quality by using a five –
point Likert response scale which includes strongly disagree (1), disagree (2), neither
agree nor disagree (3), agree (4) and strongly agree (5). After a review of the literature,
23 service quality attributes were developed in the questionnaire. SERVQUAL
instrument served as a foundation for development of questionnaire.

Customer Satisfaction Questionnaire (CSQ)

The second part of the questionnaire measures customer satisfaction level by using a five
-point Likert response scale which includes strongly disagree (1), disagree (2), neither
agree nor disagree (3), agree (4) and strongly agree (5). 6 customer satisfaction items
were developed in the questionnaire.

3.6. Data Analysis

Statistical Package for Social Science (SPSS) software for version 19.0 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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Descriptive analysis
The descriptive statistical results were presented by tables, and percentages to give a
condensed picture of the data. This was achieved through summary statistics, which
computed for each variable in this study.

Pearson Correlation analysis

In this study Pearson’s correlation coefficient was used to determine the relationships
between service quality dimensions (tangibility, reliability, responsiveness, assurance and
empathy) and customer satisfaction.

Multiple Regression Analysis

Multiple regression analysis was used to investigate the effect of service quality
dimensions (Tangibility, reliability, responsiveness, assurance, and empathy) on customer
satisfaction.

Regression functions
The equation of multiple regressions on this study is generally built around two sets of
variable, namely dependent variables (customer satisfaction) and independent variables
(tangibility, reliability, responsiveness, assurance, and empathy). The basic objective of
using regression equation on this study is to make the researcher more effective at
describing, understanding, predicting, and controlling the stated variables.

Independent variables: tangibility, reliability, responsiveness, assurance, empathy

Dependent variables: customer satisfaction

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CHAPTER FOUR

4. Data Analysis and Discussion of Results

4.1. Introduction

This chapter will present and discussion of the final results and the process through which
the results were obtained. In addition to this, background information of respondents will
be presented. Finally, the statistical methods of analysis were discussed, which included a
descriptive analysis, a correlation analysis, and a multiple regression analysis through
SPSS.
4.2. Data Analysis

Our analysis shows that the data we got from customers interview and from suggestion box are
most likely different from

4.2.1. Background information of Respondents

The objectives of this study is to identify the effect of customer service quality on
customer satisfaction on Awash Bank East region. Sample selected of five branches of
three hundred fifty questionnaires were distributed to the respondents and out of the 350
questionnaires 342 of them were collected with a response rate of 98%. However, only
342 responses were valid with complete answers. The demographic characteristics
include: gender, age, level of education, and occupation. This aspect of the analysis deals
with the personal data on the respondents of the questionnaires given to them. The table
below shows the details of background information of the respondents.

Table 4.1 Response rate

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Particulars Frequency Percentage (%)

Responded 342 98%

Non responded 8 2%

Total 350 100%

Source: Customers survey,

The respondent’s questioner of valid and complete 342 customers of five branches of
Awash Bank East Region. Table 4.1 presents the background information of the
respondents for this study. The survey showedthat out of the 342 questionnaires collected
and valid response rateof 98% of the total distributed questioners.

Table 4.2 Age of respondents

4.2.2 Demographic factor

Age Frequency Percentage (%)

Between 18-25 44 12.9%

Years
92 26.9%
Between 26-35
Years 115 33.6%
Between 36-4
79 23.1%
years

Between 46-55 12 3.5%

Years

Above 55 years

Gender Male 192 56%

Female 150 44%

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Total 342 100%

Source customer survey

The survey showed that there were more males as compared to females. Male
respondents represented 56%, on the other hand 44% were females. As far as age of
respondents is concerned 12.9% of the respondents are in the range of 18-25 years,
26.9% of the respondents are in the range of 26-35 years, 33.6% are in the range of 36-45
years, 23.1% are in the range of 46-55 and 3.5% are above 55 years.

Table 4.3 Level of Education

Table 4.2.3 1 Level of Education

Characteristics Frequency Percentage (%)

High school 36 10.5%

Certificate 68 19.9%

Diploma 96 28.1%

Degree 132 38.6%

Master & above 10 2.9%

Total 100%

Source- Customer Survey

Regard to educational level of respondents, certificate holders represented 19.9% of the

customer, Diploma holders represented 28.1% of the customers, and degree holders
represented 38.6% .Masters and above holders represented 2.9% of the customers;
finally, 10.5% of the respondents were high school graduates. It can be said from the
survey that, Most of the banks customers were Diploma and Degree holders of the bank.
The lowest respondents were master’s holder.

Table 4.4Occupation

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Table 4.2.4 Occupation

Occupation Frequency Percentage (%)

Government –employers 72 21%

Private - employees 120 35.1%

Self – employed 104 30.4%

Student 39 11.4%

Others 7 2.1%

Total 342 100%

In the type of occupation of respondents, government employees were represented 21%

of the respondents. 35.1% of respondents were engaged in private sectors, while 30.4%
of them self-employed and 11.4% of where students. The rest respondents were the
others occupation with only 2.1% of respondents.

4.2 Descriptive Statistics Analysis

Table 4.5 Mean and standard deviation for the five branches of Service quality
dimensions and Customer Satisfaction

N Mean Std. Deviation

Assurance 342 3.8492 .55097

Responsiveness 342 3.7146 056009

Reliability 342 2.9364 .58520

Tangibility 342 3.7696 .53951

Empathy 342 2.8242 .51837

Customer 342 3.6143 .62141

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Satisfaction

Valid N (listwise) 342

Table 4.5 Indicate that assurance has the highest mean value and reliability and empathy
have least mean value. Therefore, it may be concluded from table 4.5 that respondents are
most satisfied with assurance dimensions with a mean and standard deviation of 3.8492
and 0.55097 respectively. This is followed by tangibility and responsiveness. However,
Awash Bank East region customers are less satisfied with reliability and empathy at a
mean of 2.9364, 2.8242 respectively. The satisfaction has a mean score 3.6143 which
indicates that overall customers are slightly satisfied with the service quality of banks.

4.2.6. Pearson Correlation analysis

To determine the relationship between service quality dimensions (tangibility, reliability,

responsiveness, assurance, and empathy) and customer satisfaction, Pearson correlation
was computed. Table 4.6 below presents the results of Pearson correlation on the
relationship between service quality dimension and customer satisfaction.

Table 4.6. The relationship between service quality dimensions and customer

Satisfaction

Customer Satisfaction

Assurance Pearson correlation .669**

Sig.(2-tailed) .000

N 342

Responsiveness Pearson correlation .-596

Sig.(2-tailed) .000

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N 342

Reliability Pearson correlation .756**

Sig.(2-tailed) .080

N 342

Tangibility .832**

Pearson correlation .000

Sig.(2-tailed) 342

Empathy Pearson correlation .786**

Sig.(2-tailed) .000

N 342

Source, Own survey,

** Correlation is significant at the 0.01 level (2-

tailed).

The results in table 4.5 indicate that, there is positive and significant relationship between
assurance and customer satisfaction (r = 0.669, p < 0.01), responsiveness andcustomer
satisfaction (r = -0.596, P > 0.01), reliability and customer satisfaction (r = 0.756, P
<0.01), empathy and customer satisfaction (r = 0.786, < 0.01).

However, the results also indicate that, there is a negative and insignificant relationship
between responsiveness and customer satisfaction (r = -0.596, p > 0.01). The finding on

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table 4.5 above further indicates that the highest relationship is found between tangibility
and customer satisfaction (r = 0.832, p < 0.01).

Unlike responsiveness four service quality dimensions (tangibility, reliability, assurance

and empathy) has a positive relationship with customer satisfaction.

4.2.7. Multiple Regression Analysis

Multiple regression analysis was employed toexamine the effect of customer service
quality dimensions on customersatisfaction.

Multi co linearity Test: in multiple regression analysis, multico linearity refers to the
correlation among the independent variables.

According to (Kline, 1998) multico linearity is not a threat if a correlation value is less
than 80%. Before conducting the multiple regression analysis, the researcher examined
the result of multiple correlations among the independent variables and found that, the
pair wise correlation between the independent variables is less than 80%, as shown in
appendices A. The following subsections present the results of multiple regression
analysis.

Table 4.7 Regress Customer satisfaction on service quality

dimensions

Variable Un standardized Standardized

Coefficients Coefficients

B Std. Beta t Sig.

error

(Constant) -.713 .236 -3.002

.003

Assurance .362 .074 .287

4.262 .000**

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Responsiveness - .096 .113 - .078

- .851 .376

Reliability .315 .098 .312 4.352

.000**

Tangibility .347 .082 .379

5.375

000**

Empathy .416 .103 .326

3.908 000**

R square .804
** P < 0.01

Source, own survey,

Hypothesis testing is based on standardized coefficients beta and P-value to test whether
the hypotheses are rejected or not.

Hypothesis 1

Ho1: Assurance will not have a positive and significant effect on customer satisfaction.

Ha1: Assurance will have a positive and significant effect on customer satisfaction.

Table 4.7 further shows that, assurance has a positive and significant effect on customer
satisfaction with a beta value (beta = 0.287), at 99% confidence level (p < 0.01).
Therefore, the researcher may reject the null hypothesis and assurance has a positive and
significant effect on customer satisfaction.

Hypothesis 2

Ho2: Responsiveness will not have a positive and significant effect on customer

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satisfaction.

Ha2: Responsiveness will have a positive and significant effect on customer satisfaction.

As shown in table 4.7, p-value is not significant (p > 0.01), and the beta value of
responsiveness was negative (beta = -0.078). Therefore, the researcher fails to reject the
null hypothesis and responsiveness has a negative and insignificant effect on customer
satisfaction.

Hypothesis 3

Ho3: Reliability will not have a positive and significant effect on customer satisfaction.

Ha3: Reliability will have a positive and significant effect on customer satisfaction.

The results of table 4.7 showed that the standardized coefficient beta and p value of
reliability were positive and significant (beta = 0.312, p < 0.01). Thus, the researcher may
reject the null hypothesis and it is accepted that, reliability has a positive and significant
effect on customer satisfaction.

Hypothesis 4

Ho4: Tangibility will not have a positive and significant effect on customer satisfaction.

Ha 4: Tangibility will have a positive and significant effect on customer satisfaction.

The results of multiple regressions, as presented in table 4.7 above, revealed that
tangibility has a positive and significant effect on customer satisfaction with a beta value
(beta = 0.379), at 99% confidence level (p < 0.01). Therefore, the researcher may reject
the null hypothesis and it is accepted that, tangibility has a positive and significant effect
on customer satisfaction.

Hypothesis 5

Ho5: Empathy will not have a positive and significant effect on customer satisfaction.

Ha5: Empathy will have a positive and significant effect on customer satisfaction.

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Furthermore, table 4.7 also indicates that, the standardized beta and p - value of empathy
were positive (beta = 0.326), and significant at 99% confidence level (P < 0.01). As a
result, the researcher may reject the null hypothesis. So empathy has a positive and
significant effect on customer satisfaction.

In overall, the results revealed that all independent variables accounted for 80% of the
variance in customer satisfaction (R2 = 0.804). Thus, 80% of the variation in customer
satisfaction can be explained by the five service quality dimensions and other unexplored
variables may explain the variation in customer satisfaction which accounts for about
20%, shown in table 4.6.

Moreover, from the findings of this study, researcher found out that not all of the service
quality dimensions have positive effects on customer satisfaction. Out of the five service
quality dimensions four dimensions (tangibility, reliability, assurance, and empathy) have
positive and significant effects on customer satisfaction. On the other hand,
responsiveness has a negative and insignificant influence on customer satisfaction.

The findings of this study also indicated that tangibility is the most important factor to
have positive and significant effect on customer satisfaction, followed by empathy,
assurance and reliability.

4.3. Discussion of Results

This section discusses the findings of the statistical analysis in relation to the previous
research and literature.

4.3.1. Descriptive statistics (mean, and standard deviation) and correlation analysis
for the service quality dimensions and customer satisfaction.

The finding of this study indicates that Awash bank East region customers were most
satisfied with the assurance dimensions of service quality. However, customers were less
satisfied with reliability and empathy dimensions of service quality.

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The correlation result show that there is positive and significant relationship between
tangibility and customer satisfaction, reliability and customer satisfaction, assurance and
customer satisfaction, empathy and customer satisfaction. However, the results indicate
that, responsiveness has a negative and insignificant relationship with customer
satisfaction. The finding further indicates that the highest relationship is found between
tangibility and customer satisfaction.

4.3.2. Regressing customer satisfaction on the service quality

dimensions

The result of this study indicates that tangibility has a positive and significant effect on
customer satisfaction. This finding is supported by Munusamy et al., (2010), found that
tangibility has a positive and significant effect on customer satisfaction. This finding is
also supported by Al-Hawary et al., (2011) reported that tangibility has a positive and
significant effect on customer satisfaction. On the contrary, Malik et al., (2011) reported
that tangibility has no contribution to customer satisfaction.

The finding of this study also indicates that reliability has a positive and significant effect
on customer satisfaction. This finding is supported by Al-Hawary et al., (2011) reported
that reliability has a positive and significant effect on customer satisfaction. This result
also supported by Malik et al., (2011), found that reliability has a significant and positive
effect on customer satisfaction. On the other hand, Munusamy et al., (2010) reported that
reliability has a negative and insignificant effect on customer satisfaction.

However, the finding of this study indicates that responsiveness has a negative and
insignificant effect on customer satisfaction. This result is different with the study by
Mohammad and Alhamadani (2011), found that responsiveness has a positive and

Insignificant effect on customer satisfaction. This finding is also different with the study
by Al-Hawary et al., (2011) reported that responsiveness has a positive and significant
effect on customer satisfaction.

Moreover, the result of this study also indicates that assurance has a positive and
significant effect on customer satisfaction. This finding is supported by Malik et al.,

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(2011),reported that assurance has a positive and significant effect on customer

satisfaction. This result is also supported by Al-Hawary et al., (2011) found that
assurance a positive and significant effect on customer satisfaction.

The finding of this study further indicates that empathy has a positive and significant
effect on customer satisfaction. This finding is supported by Mohammad and Alhamadani
(2011), reported that empathy has a positive and significant effect on customer
satisfaction. On the contrary Munusamy et al., (2010) found that empathy has a negative
effect on customer satisfaction.

In overall, the results revealed that all independent variables accounted for 80% of the
variance in customer satisfaction (R2 = 0.804). Thus, 80% of the variation in customer
satisfaction can beexplained by the five service quality dimensions and other unexplored
variables may explain the variation in customer satisfaction which accounts for about
20%.

Moreover, from the findings of this study, researcher found out that not all of the service
quality dimensions have positive effects on customer satisfaction. Out of the five service
quality dimensions four dimensions (tangibility, reliability, assurance, and empathy) have
positive and significant effects on customer satisfaction. On the other hand,
responsiveness has a negative and insignificant effect on customer satisfaction. The
results of this study further indicate that tangibility is the most important factor to have a
positive and significant effect on customer satisfaction.

4.4 Work Plan

The research will take about 5 Months. The major phase of the research, their time tables,
and the completion phases are as follows.

Table 1. Action plan for the activities undertaken during the study period

S.No. Activities 1st Q 2nd Q 3rd Q 4th Q

1 Topic and reference material selection

2 Proposal writing and submission

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3 Questionnaire preparation and re-testing

4 Data collection, cleaning and encoding

5 Data analysis and interpretation

6 Write up and submission of final paper

*Q=quarter

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CHAPTER FIVE

5. Summary, Conclusion and Recommendations

5.1. Summary

The study was intended to investigate the effect of customer service quality on customer
satisfaction in Awash bank based on the questionnaire consisting of 342 randomly
selected five branches underEast region.

The results of background information of respondents indicated that majority of the total
respondents (56%) are male, (33.6%) aged in the range of 36-45 years, (38.9%) are
degree holders, and (35.1%) of the respondents are private employees. The results of the
descriptive statistical analysis also indicated that, Awash Bank East region customers
were most satisfied with the assurance dimensions of service quality followed by
tangibility, responsiveness. However, customers were less satisfied with reliability and
empathy dimensions of service quality.

The correlation result show that there is a positive and significant relationship between
tangibility and customer satisfaction, reliability and customer satisfaction, assurance and
customer satisfaction, empathy and customer satisfaction. However, the results indicate
that, there is negative and insignificant relationship between responsiveness and customer
satisfaction. The finding also indicates that the highest relationship was found between
tangibility and customer satisfaction, while the lowest relationship was found between
responsiveness and customer satisfaction.

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Furthermore, the multiple regression results showed that except responsiveness the four
service quality dimensions (tangibility, reliability, assurance and empathy) have positive
and significant effect on customer satisfaction.

The R square value of 0.804, demonstrates that 80% of variation incustomer satisfaction
can be accounted by the service quality dimensions. The findings of this study also
indicated that tangibility is the most important factor to have positive effect on customer
satisfaction, followed by empathy, assurance and reliability.

5.2. Conclusion

The study was conducted to examine the effect of customer service quality on customer
satisfaction in Awash Bank East region.

The finding of the study also indicates that, customers were most satisfied with the
assurance dimensions of service quality. However, customers were less satisfied with
reliability and empathy dimensions of service quality. The correlation result shows that,
unlike responsiveness the four service quality dimensions (tangibility, assurance,
empathy and reliability) are positively and significantly related with customer
satisfaction.

In terms of the stated research hypotheses the following specific empirical findings
emerged from the investigation: The four service quality dimensions including
tangibility, reliability, assurance and empathy have positive and significant effect on
customer satisfaction. The findings of this study also indicated thattangibility is the most
important factor to have a positive and significant effect on customer satisfaction. In
addition to this, except responsiveness the four service quality dimensions significantly
explain the variations in customer satisfaction.

5.3. Recommendations

Based on the findings and conclusions of the study, the researcher forwards the following
recommendations to the management of the bank and suggestion for other researchers.

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Empathy dimension was considered as one of the most important factors influencing
customer satisfaction. However, the customers of Awash bank east Addis Ababa region
were found less satisfied in terms of the empathy dimensions. One way of addressing this
could be by treating customer with great respect, giving individual attention to customers,
serving customers based on their specific needs and treating customers in a friendly
manner. This is to say, the bank management should focus on this factor to maximize
customer satisfaction. Awash bank is leading all over the private bank to all parameters,
so the management should be given attention this direction of customer satisfaction.

Furthermore, reliability dimension was considered as one of the most important factors
influencing customer satisfaction. However, the customers of Awash bank were found
less satisfied in this regard. One way of handling this problem is by delivering its services
quality strategies at promised times, and handling customer’s complaints effectively.

5.4 Direction for Future Researcher

This study was conducted to examine the effect of customer service quality on customer
satisfaction in Awash Bank. The sample was drawn from only five branches under east
Addis Ababa region, thus this study may be limited in its generalizability of the findings
to others regions. So, future research should have to draw sample of respondents on more
number of branches for the sake generalizing the results of the study.

This study included only five factors, there could be some other relevant factors that may
be perceived as important by customers, but those were excluded from this study. Future
researches, therefore, may consider more factors, like corporate image, location, price,
staff attitude and other variables which can influence customer satisfaction.

Moreover, including moderator factors and looking forward to direct or indirect

relationship towards customer loyalty can also be made in the research models of the new
research by the other scholars in future.

62 | P a g e
Prepared By Ashenafi

5.5 Budget

Table 2. Budget for stationery, per Diem and other expenses

S.no Budget items Unit Quantity Unit cost Total cost

. birr birr

1 Stationery

Pen Pcs 4 10.00 40.00

Note book pcs 2 100.00 200.00

Duplicating paper Packet 1 300.00 300.00

Printing pcs 400 3.00 1200.00

Binding pcs 3 50.00 150.00

2 Data enumerators Mad-day 50 150.00 7500.00

3 Transport fee Number 5 200.00 1000.00

4 Mobile card Number 5 100.00 500.00

5 Refreshment Number 10 50.00 500.00

Total 11,390.00

63 | P a g e
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 Appendix A

Correlation matrix for the service quality dimensions

Tangible Reliability Responsiveness Assurance Empathy

Tangible 1

Reliability .764**

Responsiveness .647** .726** 1

Assurance .632** .753** .627** 1

Empathy .769** .634** .546** .674** 1

** Correlation is significant at the 0.01 level (2-tailed).

Note that: A pair wise correlation below 80% indicates the absence of series
problem of multi co linearity in the regression equation as indicated in the above
correlation matrix.

Appendix B

QUESTIONNAIRE
69 | P a g e
INTRODUCTION: I am currently doing thesis on “The Effect of Customer Service Quality on
Customer Satisfaction in Awash Bank East Addis Ababa Region.

The purpose of the questionnaire is to gather adequate information in Awash bank customer
service and customer satisfaction. In order to make the study more fruitful, your response to the
given question would be necessarily. All of your response to the given question would be used
for the research and will be kept confidential work.

To the end, I would like to forward my deepest gratitude for your unreserved co operation in
filling the questioner.

Part I: Background information of respondents

Directions: Please circle from the alternatives that are most applicable answer to you in
respect of each of the following items.

Sex: 1. Male 2. Female

Age 1. 18- 25 2. 26-35 3. 36-45 4. 46-55 5. Over 55

years old

Educational level 1. High school 2. Certificate 3. Diploma 4. Degree 5. Masters and above

Occupation 1. Government employee 2. Private-employee 3. Self-employee 4. Student 5.

Others please specify…………..

Part II: SERVICE QUALITY QUESTIONNAIRE (SQQ)

Instructions: Please tick the number that you feel most appropriate, using the scale from 1 to 5
(Where 1 = strongly disagree, 2 = disagree, 3 = neither agree nor disagree, 4 = agree and 5 =
strongly agree).

70 | P a g e
 neither
Strongly

Strongly
disagree
agree nor
Disagree

Disagree

agree
Agree
1 2 3 4 5

Tangibility

1.The Bank has modern-looking equipment.

2.The bank has neat and disciplined employees.

3.Room is clean and provides adequate of space.

4.Employees’ uniforms are attractive.

5. Printed materials (forms, brochures, bank cards, etc)

look attractive.

Reliability

6.The bank provides its services at promised times.

7.Employees are consistently courteous.

8.The employees handled customer’s complaints

effectively.

9.Employees provide accurate information to customers.

71 | P a g e
10.Employees show dependability in handling service
problem.

Responsiveness

11.Employees are happy and willing to serve the

customer.

12.The bank provides diversified service to the

customers.

13.The bank gives prompt service.

14.The bank gives quick response to customer

requests.

Assurance

15.The employee has the required skill in providing

services.

16.Bank employees are trustworthy.

17.The employees have sufficient knowledge of service

information

18.The employees make customers feel safe in their

transactions.

19.Employee instills confidence in customers.

Empathy

72 | P a g e
20.Employees always treat customers in a friendly
manner.

21.Employees understand customers' specific needs.

22.Employees treat customer with great respect.

23.Employees give individual attention to customers.

III. CUSTOMER SATISFACTION QUESTIONNAIRE (CSQ)

strongly

Strongly
disagree

disagree

disagree
agree nor
neither

Agree

agree
Customer satisfaction

24.I am satisfied with the bank’s complete range of

services.

25.I am satisfied with the performance of the employees

of this bank.

26.I am satisfied of being a client of this bank.

27.I am satisfied with the bank employees’ professional

competence

28. I am satisfied with the quick service of this bank.

29. I am satisfied with the respectful behavior of

employees.

MBA !" #$% &’(

73 | P a g e
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74 | P a g e
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76 | P a g e
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77 | P a g e