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Service Quality in Retail Banking

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SERVICE QUALITY IN RETAIL BANKING

A major problem banks face is that their products are homogeneous. Improved methods of delivery and quality are likely to be adopted quickly by competitors. For instance, Midlands' First Direct has now been imitated by, e.g. Barclays, Royal Bank of Scotland.

This makes it increasingly difficult and costly to continue with a significant level of competitive superiority. Also, customers nowadays are financially sophisticated (therefore more critical of the service they receive), and are increasingly expectant of a high standard of service at the point of sale. Emphasis on 'customer' service rather than 'bank' services (Holland, 1985) can lead to differentiation. Banks need to concentrate on service quality, since in financial services, this and customer care can be a major means of differentiation (Lewis, 1988).

According to Howcroft (1992), the provision of high service quality is nowadays considered a top priority by all UK retail banks as a means of responding to both customer needs and increased competition, and establishing a competitive advantage.

Service Quality In Retail Banks

It is difficult to measure and define quality when applied to financial services. These are intangible, so customers cannot assess them before buying, and it is impossible to separate the process of consumption from production.

Howcroft (1991) defines a high quality service as one which is consistently able to anticipate and satisfy customer expectations and needs. Customers' perceptions of service quality are based on the comparison between their expectations and the actual service they receive. Moores (1989) points out that this is really a measure of customer satisfaction, but as Lawton (1989) states, quality only exists so long as customers are satisfied.

Because banks do not have any physical products, they have co-ordinated their product range, documentation, displays, etc. in an attempt to create a coherent impression of quality. Concern for quality has also been linked with enhancing corporate image (Howcroft & Lavis, 1986).

Banks have made many efforts to project their corporate identities through advertising, logos, etc. Bank advertising tends to present them as caring, sharing and understanding, but if customers experience otherwise, they will be dissatisfied. Banks need to show a truer picture of themselves and avoid promising what they cannot deliver.

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Dissatisfied customers will result in, e.g. transfers of accounts (which can be due to unhelpful staff, refusal of loans, slow service - Lewis, 1991), complaints and adverse word-of-mouth communications.

According to Moores, we tell at least four times as many people about a bad experience than we do about a good one. Howcroft (1991) and Lewis (1991) suggest that bank advertising tends to be unsuccessful in attracting customers.

When choosing which branch to hold an account with, customers (in Lewis's sample) were mainly influenced by personal needs and past experiences of financial services.