A Study on Customer Satisfaction in Banking Industry in Sri Lanka

CHAPTER 1 INTRODUCTION World class companies run through taken to a greater extent market sh atomic number 18 by providing notably pause node usefulness. Executives know that to stand out in a crowd field of competitors, client portion is a very critical fixings in achieving and maintaining a high level of client felicity. When pressures move the organic law to meet only performance goals and tonements such(prenominal) as overhead absorption, conveyance dollar targets, labour efficiency, purchase price variance and the like, how perpetually, guest value ofttimes takes a back seat to these other(a) c erst temporary hookuprns.The result raft be a plunge in client joy and ultimately, if al clinical depressioned to continue, wearing a counsel in market sh bes. Because of globalization, internationalization, technological innovations, law deregulations, and market saturation, the present-day(prenominal) bureau of the banking manufacture is changing. The intensity of c ompetition growths imputable to new harvests and services as advantageously as the entrance of competitors from other industries, such as the question equal non- and near-banks. Even more, the continuously growing educational standard as well as better opportunities to gather information induce enormous transposes in customer behavior.Thus, competition for customers becomes more fractious and, aiming the growing intensity of competition, the major banks need for sustained competitive advantage increases Organisations often deliberate the way to measure customer satisfaction is to examine the number of customer complaints. The problems with this mode is that it is reactive, it only replys (if at all) after the event and it does not really measure satisfaction only dissatisfaction. Monitoring complaint levels does not really give notice (of) if the customers be any more or less snug with the product or service.For example, consider how slightly(prenominal) prison te rms you fox been dis fulfill with a product or service say in one case a month. like a shot how many another(prenominal) times have you written to complain possibly once or twice or maybe never. Managers and Directors often say if our customers are uncheerful, they soon tell us. Well do they? If on a personal level you rarely write to complain, what happens as a union level is it different? Here is an example of an geological formations basing its customer satisfaction strategy on levels of customer complaints and getting badly misled. In a computer storage organisation, customers were unable to obtain product (spares, consumables, etc. from the newly relocated, reorganised and centralized warehouse. Deliveries were often late or wrong if they arrived at all. The customer complained verbally but being unable to obtain their spare or consumable, worn-out(a) their time looking for an alternate supplier rather than wasting their time complaining. The customer could not afford the time to complain, they were too busy avoiding their processes from fish fillet by sourcing the required items from another supplier. The Warehouse turnover plummeted. If our customers are un halcyon well soon know about it said management.Well, they didnt at least not until it was too late and they had lost 90% of their customers. Yes 90%. there is obviously a strong link between customer satisfaction and customer retention. clients perception of Service and Quality of product forget sterilize the success of the product or service in the market. With better intellectual of customers perceptions, companies can determine the actions required to meet the customers needs. They can identify their let strengths and weaknesses, where they stand in comparison to their competitors, chart out path forthcoming progress and feeler.Customer satisfaction standard helps to promote an increased boil down on customer outcomes and stimulate improvements in the work practices and processes used deep down the come with. In any type of barter, whether companies are snitching toy airplanes or offering massages, customer satisfaction plays a key role in the success of the backup. Much like employee satisfaction, customer satisfaction is important to consider when running a trade Companies that care about their success evermore care about customer satisfaction.The customer is the end user and if they arent happy with the product or service then they might not precipitate to purchase the product or service again. This usually results in the business losing specie, due to poor customer satisfaction. Customer satisfaction emerged from consumer studies that sought to quantify the basic assumption implicate in the marketing concept that satisfied customers are more likely to have a positive side towards the product and re buy it. The value of satisfaction is often at a lower placeestimated. allegiant customers and employees locomote an organizations succ ess, which can be difficult to quantify. trusty customers grow business by increasing market share. Over a lifetime, a loyal customer purchases more, purchases at a premium (they are less sensitive to price), cost less to sell to, and refers the company business to others. Employees, especially those on the ask line, directly impact customer satisfaction. An immanent part of assessing satisfaction includes identifying dissatisfaction. Dissatisfied customers and employees often hold the information what the company need to succeed. Understanding when and why dissatisfaction occurs helps the organization to implement changes to gain and hold open future customers and employees.Measuring customer satisfaction is an important element of providing better, more effective and efficient services. When thickenings are not satisfied with a service as provided, the service is n all effective nor efficient. This is especially important in relation to the provision of public services. Under conditions of perfect competition, where clients are able to choose between alternative service providers and have adequate information, client satisfaction is a key determinant of the level of contract and therefore, the effect and functioning of suppliers.However when a unity agency, either governing body or private sector, is the sole provider of services, the level of client satisfaction is often overlooked when assessing the effectiveness and efficiency of services. Customer satisfaction is the extent to which the desires and the requirements of the clients are met. A service is considered satisfactory if it fulfils the needs and stopations of the customers. There are many factors taken into consideration by the customers in appraising the services provided, including promptness, reliability, technical expertise, expectations, quality and price. . 1 RESEARCH PROBLEM ANALYSIS The staffs in the front self-assurance fail to deliver goods in the proper way to the customers du e their inefficiencies where by the customer gets frustrated by the service rendered of the front office staffs and goes to the extent of closing their accounts and look for another bank who could better service for the customers. Due to this problem customers maintain several bank accounts in many banks to consume better services. This problem was faced by the questioner and some informal discussions were done by the researcher with some other banking customers.They as well as experienced some similar problems with their banks services. This gave an idea to researcher to do a research in customer satisfaction level in the banking manufacture in Srilanka. 1. 2 IMPORTANCE OF CUSTOMER SATISFACTION ENSURING FUTURE REVENUES A renewed focus on customer service and satisfaction leads to alter customer loyalty and increased revenue. For example, reducing customer churn by 1 percent can translate into the same percentage increase in revenue. Particularly in industries characterized by l ow switching costs and products that are dif? ult to differentiate, customer service offers a way of providing diaphanous value to the customer. The company gives excellent services customer satisfaction other brands become less important and switching costs decline, the importance of customer service has increased and, in some industries, become the major differentiator. Companies that lay out themselves to better serve their customers enjoy lower customer churn, lower costs, and high(prenominal) pro? ts, since satis? ed, loyal customers purchase additional products and services. At the same time, customers expect better service.They expect their requirements to be fulfilled promptly and their issues resolved rapidly and to their satisfaction. Long periods spent on hold, multiple transfers, and interactions with inexperienced or ailing trained customer service representatives can damage the relationship. Accordingly, all(prenominal) customer interaction has the potential to e ither strengthen the relationship or stupefy the customer to a competitor. 1. 3 CUSTOMER SATISFACTION AND LOYALTY management ON THE LONG TERM Achieving high customer satisfaction levels, low churn rates, and effective cross-merchandising requires a strategy that agreements the seemingly con? cting factors that affect organisation performance. Such a strategy can increase boilersuit business performance by balancing ef? ciency-based measures with effectiveness measures that emphasize customer service and cross-selling. Whether an organisation is focused primarily on servicing customers or generating additional sales revenue, maximizing the value of customer interactions depends on a companys ability to clearly record the factors impacting performance and respect back finales that leverage or resolve hose factors. Through this level of insight, organisation can achieve and maintain high satisfaction levels and higher revenues while keeping their costs as low as possible. 1. 4 unavoidableness OF CUSTOMER SATISFACTION RESEARCH Spending on customer satisfaction research by American industry has grown tremendously in recent long time, and a number of trends suggest that the need for this type of research will continue to rise in the years ahead, particularly among firms that sell to other organizations.The following reasons induce organizations to conduct research on customer satisfaction. Companies are purchasing more, but from fewer suppliers Business and government markets are growing, but getting tougher to sell to. Organizations bought more than $8. 3 trillion deserving of goods and services in 1993, accord to Penton research serve estimates. Spending has increased every year since 1982, even during the 1990-91 recessions. Companies forced to downsize in recent years are now buying many of the goods and services they used to produce internally.Goods-producing industries source the most, although government which is privatizing a number of operat ions and many service firms expect to do more outsourcing in the years ahead. Total business and government purchases are expected to double over the next decade, reaching $17. 5 trillion by the year 2005. However, its also becoming more difficult for suppliers to get and keep customers. A Penton Research Services study set up that 40 percent of large business and government units are buying from fewer suppliers than they were five years ago, even though the amount purchased is up.And baseball club out of ten purchasing executives at Fortune 1000 companies surveyed by the Center for march on Purchasing Studies (91 percent) expect to use fewer sources of provision in the year 2000. Business and government buyers want to establish partnerships with their suppliers. Properly-conducted customer satisfaction research can help a company piss stronger relationships with both(prenominal) accredited clients and key prospects. Customer power is increasing The balance of power in busi ness transactions is shifting to the customer.According to a study conducted by Arthur Andersen in conjunction with the Distribution Research and facts of life Foundation, the buyers ability to dictate such terms and conditions as billing and price is expected to increase during the 90s, while the power of suppliers/ manufacturers and wholesaler-distributors decreases. As buyers gain power, theyll have increased leverage to set standards for product quality and specifications, delivery time, and service. much than half of the executives surveyed by the Gallup Organization (53 percent) report that demands from their companys customers are rising or changing a great deal.Research allows a supplier to really hear the voice of the customer and tailor its product/service tittup to changing buyer needs. Suppliers need to satisfy multiple buying influences Companies selling to industry, have to please a number of different individuals within customer organizations, each with their own n eeds and agendas. According to a Penton Research Services survey, the number of people involved in a buying decision ranges from about three, for services and items used in day-to- day operations, to almost five, for such high-ticket purchases as construction work and machinery.A Forsyth Group analytic thinking of buying decisions at one large firm, Harnischfeger, showed that the number of individuals involved in the purchase of a single type of product could exceed 50. In addition, its not going to get any easier for suppliers. A Center for Advanced Purchasing Studies survey found that 87 percent of the purchasing executives at Fortune 1000 companies expect teams of people from different departments and functions to be do buying decisions in the year 2000.A well-designed customer satisfaction measurement program that targets key buying influences can help keep current customers sold and identify ways to win over non-customers. Quality is bland job one Customers want a good price , but recall to sacrifice quality or service to get it. A Penton Research Services survey of business and government decision-makers found that quality is the single most important factor in choosing a supplier. Price authentic the second largest number of mentions, followed by reputation, delivery time, and technical assistance.In fact, golf-club out of 10 business buyers believe that paying a higher price for quality is more cost-effective in the long run, and according to a study conducted by Kane, Parsons & Associates, most executives (86 percent) prefer to do business with suppliers that have made a formal commitment to quality improvement and customer satisfaction. The buyer, not the seller, determines what attributes of a product or service launch quality, and research can provide an objective measure of what customers think, correctly or incorrectly, about a company and its competition.The rate of change is fast and getting faster American industry is in a continual evi dence of flux. There are more than 8,200 new business incorporations, failures, acquisitions, address changes, and refer changes on the average business day. The buying influences that suppliers need to keep satisfied are also constantly changing. A Penton Research Services depth psychology of changes among managers, engineers, and purchasing agents found that more than 20 percent leave their company, change job titles, or transfer to another location over the grad of a year.This performer that more than half of the buying influences will probably change in some way within three years. roughly of the executives surveyed by the Gallup Organization believe that the current rate of change at their company is rapid or extremely rapid, and 61 percent of them think that the pace of change will accelerate in the future. Companies selling to industry have to continually monitor the marketplace to be able to respond quickly to changes in buying procedures, factors influencing the purcha se, and the people making the buying decision.Customer satisfaction research will be needed more than ever by firms that want to survive and thrive in the challenging years ahead. 1. 5 CORE BANKING FUNCTIONS Banking has always been a changing industry. Lord Denning, once observed Like many other beings, a banker is easier to recognise than to rig. (D G Hanson, Page 1). D G Hanson in his popular bind on Service Banking writes, We are tempted to say that banking is what one cares to make it. whatever way one defines a bank, a banker or the business of anking, it appears that, condescension a large spectrum of financial services that banks have embarked on to offer, received fundamental scotch functions of Banking remain yet to be fully substituted. To understand this proposition it may be necessary to look at Banking from both a traditional functional view, i. e. a functional analysis and from a logical business and economic view, i. e. an economic analysis. A Functional comp end A functional analysis of banking business will look at the apparent activities that a bank performs. The activities are numerous and more keep adding to the list.The Banking Act No 30 of 1988 defines the business of banking as banking business means the business of receiving funds from the public through the acceptance of money, deposits payable upon demand by cheque, draft, order or otherwise, and the use of such funds either in whole or in part for advances, investments or any other operation either authorized by law or by customary banking practices This definition mainly deals with the aspect of banking where the function perpetually looks at the maintenance of demand deposits commonly known as current accounts.Current Accounts are maintained only by Licensed commercialised Banks. Does this mean that only Commercial Banks carry on the business of Banking? plausibly not so. There are other institutions and instruments that perform most of the economic functions of Banking. It is important, therefore, for us to analyse the economic functions more than the activities of Banking. The concentration of this article will therefore be on Economic Functions.Nevertheless, it is useful to look at the activities that banks do carryout with a view to analysing the Economic Functions. The Banking Amendment Act No 33 of 1995 by its section 31 that introduces section 76A to the Act, to provide for Specialised Banking, restricts the carrying on of the business of accepting deposits of money and investing and lending such money to be only by a company which has an equity not bad(p) in an amount not less than Rs 50 Million and under the authority of a licence issued by the Monetary Board.