Examining Employee Satisfaction, Customer Service and Customer Satisfaction in a Retail Banking Organization

I read a PhD dissertation from Eric Simpson (2006) about Examining Employee Satisfaction, Customer Service and Customer Satisfaction in a Retail Banking Organization. The dissertation analyzes the relationships that exist between these three variables: employee satisfaction, customer service quality, and customer satisfaction in a mid-sized retail bank. This is topical for our research on Aktia Banking.

In the increasingly competitive world of retail banking, organizations are focusing their attention on customer service as a means of increasing customer loyalty and retention. With this goal of increasing customer retention, the link between the attitudes of the service provider (employee satisfaction), the customer interaction behaviors that those attitudes lead to (customer service quality), and the attitudes that those behaviors generate in the customer (customer satisfaction) has become an increasingly important area of investigation.

                      The competitive world of retail banking, organizations must establish a presence that sets them apart from the crowd. Low cost, convenience, broad product lines, and customer service have all been used to segment the banking industry. For small and medium sized banks, customer service has increasingly been the method of choice for making their mark. This strategy has been driven primarily by an inability to compete in other key areas with the larger players in the banking industry, but also by the economics of customer retention. (Simpson, E., 2006, p. 1)

The transition to a service economy has had important repercussions for organizations and the way they operate (Bowen & Schneider, 1988). In today’s competitive environment, service effectiveness is increasingly seen as a critical organizational objective (Cascio, 1995; Reicheld & Sasser, 1990). To understand the impact of the customer service focus, it is important to examine how the delivery of service differs from more traditional delivery of goods. The delivery of customer service is complex, dynamic, and dependent upon customer expectations and perceptions (Cascio, 1995; Iacobucci, Ostrom, & Grayson, 1995). Unlike manufacturing and distribution of products, the delivery of customer service generally is not a highly routine or structured task (Simpson, E., 2006, p. 12-13).

                      A particularly important approach to customer service is one that focuses on moving beyond the delivery of high quality service to the formation of long-term relationships with customers. The benefit of forming such relationships comes from the presumably higher levels of customer commitment and retention. The commitment and retention should lead, in turn, to higher profits for the organization (Schneider, White, & Paul, 1997). Based on this line of reasoning, the manner in which customer service representatives treat customers will have a significant impact on the development of these long-term relationships. Customer service effectiveness is an important means for organizations to gain a competitive edge in today’s service economy (Parasuraman, Zeithaml, & Berry, 1988; Bowen & Schneider, 1988). Customers who are satisfied are more likely to return for future business and sometimes recommend the service organization to others through word-of-mouth (Rucci, Kirn, & Quinn, 1998). Previous research has shown that customer retention leads to greater profitability year after year in many industries (e.g., automotive, banking) (Reicheld & Sasser, 1990). Further, the effort needed to retain current customers has been shown to be significantly less costly than that needed to find new customers (Reicheld & Sasser, 1990). (Simpson, E., 2006, p. 14)

                      Service quality is the customer’s perception of how well their expectations were met during the service encounter (Zeithaml et al., 1990). Researchers typically measure service quality using customer evaluations of five attributes: reliability, empathy, assurance, tangibles, and responsiveness. Service quality has typically been measured by surveying customers both before and after a service experience and differentiating their expectations and perceptions (Zeithaml et al., 1990). Based on the service delivery gap model, perceptions greater than or equal to expectations suggest satisfactory (Simpson, E., 2006, p. 19).

References:

Simpson, Eric Phillip (2006) Examining Employee Satisfaction, Customer Service and Customer Satisfaction in a Retail Banking Organization, Dissertation Prepared for the Degree of Doctor of Philosophy.