An Empirical Investigation of the Causal Determinants of Customer Satisfaction: A Study of Indian Banks

Banking industry has sufficiently undergone rapid changes in India, and with the entry of foreign players and strong private players, the face of industry has got completely redefined. In the wake of these changes, the banking industry has capitalized on the satisfaction of its customers to stay afloat in the turbulent business environment. There are several antecedents of customer satisfaction found in various studies conducted in different areas on different industries and sectors. This study attempts to empirically establish the causal factors in determining the satisfaction of bank customers. The study factor analyzes the responses of 1,200 customers from public and private sector banks in Varanasi, India to determine the factors contributing to customer satisfaction, and subsequently, employs multiple regression to determine the major contributors to customer satisfaction. The study shows that product attributes, employee characteristics, customer convenience, bank tangibles, cost of transaction and customer communication are the main factors contributing to customer satisfaction in Indian banks. It further establishes that employee characteristic is the most important contributor, followed by product attributes, customer communication, bank tangibles and cost of transaction. However, customer convenience is found to be insignificant in determining customer satisfaction in the banks.IntroductionPsychology defines satisfaction as state of mind that normally is derived out of a comparison between the expected and the perceived. Past experiences and knowledge play an important part in the formation of satisfaction. Althoug h customer satisfaction theory has made stupendous development, the best way to measure and conceptualize customer satisfaction is still contentious and researches have been going on in this regard. satisfaction, a multidimensional construct can be measured by appraising the factors which are antecedents of customer satisfaction. Factors contributing to satisfaction of customers in service industries are separate and distinct from that of goods industries more so because of tangibility, inseparability and increased human interaction in case of services. The study aims at establishing the antecedents of customer satisfaction in banking industry.Entry of private and foreign players in Indian banking industry has changed the entire face of the industry. Competition has intensified and the banks are using customer satisfaction as their weapon against the cut-throat competition. In the wake of this dynamic environment, it becomes all the more important to determine factors defining and determining the satisfaction of the customers.Literature ReviewNumerous studies suggested that customer satisfaction is dependent on congruence of expectations and performance of the product or service. As Churchill and Surprenant (1982) put it, Customer satisfaction is an output, resulting from the customer's pre-purchase comparison of expected performance with perceived actual performance and incurred cost.Liu (2000) opined that customer satisfaction is a function of service performance relative to the customer expectation. Further, Hernon and Whitwan (2001) defined customer satisfaction as a measure of how the customer perceives service delivery. According to Bruhn (2 003), customer satisfactio n is ''an e xperience-based assessment made by the customer of how far his own expectations about the individual characteristics or the overall functionality of the services obtained from the provider have been fulfilled. Fecikova (2004) stated that customer satisfaction is the feeling that is generated in the process of comparing expectation with what is actually obtained, purchase decision itself and/or fulfillment of needs and wants. Hennig-Thurau (2004) opined that customer satisfaction level is positively influenced when their expectations with regard to service employee's behavior is exceeded by the performance. …