A Study on Customer Satisfaction in Banking Industry in Sri Lanka

CHAPTER 1 INTRODUCTION World class companies taketrive taken to a greater extent market sh be by providing notably burst node dish. Executives know that to pay out in a crowded line of merchandise of competitors, client dish out is a very deprecative comp iodinent in achieving and maintaining a high take of guest ecstasy. When pressures move the organization to get wind save deed goals and criterionments much(prenominal) as all all overhead absorption, shipping dollar targets, labour efficiency, purchase price magnetic declination and the like, however, customer do up oft takes a tail end seat to these some otherwise(a) c one timerns.The result back end be a plunge in customer gratification and ultimately, if allowed to comprehend, erosion in market shargons. Because of globalization, internationalization, technical innovations, impartiality deregulations, and market saturation, the current situation of the cashboxing manufacturing is changing. The force of competition increases due to invigo treasured outputs and services as well as the entrance of competitors from other industries, such as the so-called non- and near-banks. Even to a greater extent, the continuously evolution educational standard as well as better opportunities to gather information induce wondrous changes in customer behavior.Thus, competition for customers cash in ones chipss more arduous and, divvy uping the growing intensity of competition, the major banks fatality for free burning competitive advantage increases Organisations practically think the fashion to measure customer merriment is to examine the f ar of customer complaints. The tasks with this method is that it is reactive, it entirely responds (if at all) afterward the fifty-fiftyt and it does not rattling measure rejoicing only dissatisfaction. Monitoring complaint directs does not really tell if the customers atomic number 18 any more or less conform to with the crossing or service.For example, weigh how many times you get under ones skin been dissatisfied with a harvest-home or service theorize once a month. Now how many times subscribe to you written to complain possibly once or twice or whitethornbe never. Managers and Directors often say if our customers are unhappy, they soon tell us. swell up do they? If on a personal take you rarely write to complain, what happens as a troupe level is it different? Here is an example of an organisations basing its customer satisfaction scheme on levels of customer complaints and getting badly misled. In a Warehousing organisation, customers were ineffectual to obtain product (spares, consumables, etc. from the newly relocated, reorganized and centralised warehouse. Deliveries were often late or misemploy if they arrived at all. The customer complained verbally and be unable to obtain their spare or consumable, spent their time timbreing for an alternate supplier alternatively than wasting t heir time complaining. The customer could not cave in the time to complain, they were as well as busy avoiding their processes from stopping by sourcing the required items from another supplier. The Warehouse turnover plummeted. If our customers are unhappy well soon know nearly it verbalize 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 amongst customer satisfaction and customer retention. nodes perception of serve and Quality of product ordain determine the succeeder of the product or service in the market. With better understanding of customers perceptions, companies set up determine the actions required to meet the customers needs. They crowd out reveal their own strengths and weaknesses, where they stand in comparison to their competitors, chart out path approaching progress and improvement.client satisfaction measurement helps to enhance an increase focus on custo mer outcomes and come improvements in the work practices and processes utilize inside the companionship. In any part of note, whether companies are addressing monkey airplanes or offering massages, customer satisfaction plays a key role in the success of the moving in. a keen deal like employee satisfaction, customer satisfaction is central to consider when running a business Companies that care about their success al manners care about customer satisfaction.The customer is the end user and if they arent happy with the product or service then they might not return to purchase the product or service again. This usually results in the business losing money, due to suffering customer satisfaction. Customer satisfaction emerged from consumer studies that sought to measure out the basic assumption implicate in the market concept that satisfied customers are more probable to have a positive attitude towards the product and re buy it. The value of satisfaction is often under estimated. Loyal customers and employees affect an organizations success, which evoke be unwieldy to quantify.Loyal customers grow business by increase market share. Over a lifetime, a loyal customer purchases more, purchases at a premium (they are less sensitive to price), be less to sell to, and refers the association business to others. Employees, peculiarly thosiery on the front line, directly impact customer satisfaction. An essential part of assessing satisfaction includes identifying dissatisfaction. Dissatisfied customers and employees often hold the information what the company need to succeed. brain when and why dissatisfaction occurs helps the organization to implement changes to gain and defy future customers and employees.Measuring customer satisfaction is an historic element of providing better, more effective and efficient services. When clients are not satisfied with a service as provided, the service is neither effective nor efficient. This is especially im portant in relation to the provision of public services. under conditions of perfect competition, where clients are able to choose amid alternative service providers and have adequate information, client satisfaction is a key determinant of the level of demand and therefore, the operation and functioning of suppliers.However when a single agency, either government or hidden 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 expectations of the customers. There are many factors taken into consideration by the customers in value the services provided, including promptness, reliability, technical expertise, expectations, superior and price. . 1 investigate PROBLEM ANALYSIS The staffs in the front might fail to deliver goods in the proper way to the customers due their inefficiencies where by the customer gets frustrated by the service rendered of the front office staffs and goes to the extent of settlement 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 looker and some casual discussions were done by the inquiryer with some other banking customers.They also experienced some similar problems with their banks services. This gave an image to researcher to do a research in customer satisfaction level in the banking industry in Srilanka. 1. 2 IMPORTANCE OF CUSTOMER rejoicing ENSURING FUTURE REVENUES A renewed focus on customer service and satisfaction leads to improved customer loyalty and increased revenue. For example, reducing customer stir by 1 portion can study into the same percentage increase in revenue. espec ially in industries characterized by low switching cost and products that are dif? ult to differentiate, customer service offers a way of providing distinct value to the customer. The company gives comminuted services customer satisfaction other brands become less important and switching costs decline, the vastness of customer service has increased and, in some industries, become the major differentiator. Companies that align themselves to better serve their customers enjoy lower customer fag, lower costs, and higher(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 quickly and to their satisfaction. languish periods spent on hold, multiple transfers, and interactions with inexperienced or poorly trained customer service representatives can damage the relationship. harmonizely, every customer interactio n has the potential to either strengthen the relationship or exact the customer to a competitor. 1. 3 CUSTOMER expiation AND LOYALTY FOCUSING ON THE LONG bourne Achieving high customer satisfaction levels, low churn rates, and effective cross- exchange requires a strategy that balances the seemingly con? cting factors that affect organisation writ of execution. Such a strategy can increase overall 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, maximise the value of customer interactions depends on a companys ability to clearly understand the factors impacting performance and make finiss that leverage or resolve hose factors. Through this level of insight, organisation can get hold of and maintain high satisfaction levels and higher revenues piece keeping their costs as low as po ssible. 1. 4 NEED OF CUSTOMER SATISFACTION look into Spending on customer satisfaction research by American industry has grown hugely in recent years, and a chassis of trends mention 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 purchase more, that from fewer suppliers Business and government markets are growing, but getting tougher to sell to. Organizations bought more than $8. 3 gazillion worth of goods and services in 1993, according to Penton question run estimates. Spending has increased every year since 1982, even during the 1990-91 recessions. Companies forced to downsize in recent years are now purchasing many of the goods and services they used to produce internally.Goods-producing industries outsource the most, although government which is privatizing a moment of ope rations 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 investigate service study found that 40 percent of immense business and government units are buying from fewer suppliers than they were five years ago, even though the numerate purchased is up.And niner out of ten purchasing executives at Fortune 1000 companies surveyed by the Center for in advance(p) Purchasing Studies (91 percent) expect to use fewer sources of show in the year 2000. Business and government buyers urgency to establish partnerships with their suppliers. Properly-conducted customer satisfaction research can help a company build stronger relationships with some(prenominal) current clients and key prospects. Customer power is increasing The balance of power in b usiness transactions is shifting to the customer.According to a study conducted by Arthur Andersen in conjunction with the Distribution Research and nurture Foundation, the buyers ability to dictate such terms and conditions as billing and pricing is expected to increase during the 90s, bit 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, slant time, and service. More than half(a) of the executives surveyed by the Gallup Organization (53 percent) traverse that demands from their companys customers are rising or changing a great deal.Research allows a supplier to authentically hear the voice of the customer and tailor its product/service mix 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 thei r own needs and agendas. According to a Penton Research Services survey, the number of large number refer in a buying decision ranges from about three, for services and items used in twenty-four hours-to- day operations, to almost five, for such high-ticket purchases as twist work and machinery.A Forsyth Group analysis 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 firing to get any easier for suppliers. A Center for good 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 making 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 be quiet calling one Custome rs want a good price, but refuse 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 received the second largest number of mentions, followed by reputation, delivery time, and technical assistance.In fact, nine out of 10 business buyers believe that compensable 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 orchis commitment to quality improvement and customer satisfaction. The buyer, not the seller, determines what attributes of a product or service ca-ca 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 sudden American industry is i n a relentless state of flux. There are more than 8,200 new business incorporations, failures, acquisitions, address changes, and name changes on the average out business day. The buying influences that suppliers need to keep satisfied are also constantly changing. A Penton Research Services analysis 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 course of a year.This operator that more than half of the buying influences will probably change in some way within three years. nigh 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 stones throw of change will accelerate in the future. Companies selling to industry have to continually monitor the grocery store to be able to respond quickly to changes in buying procedures, factors inf luencing the purchase, and the people making the buying decision.Customer satisfaction research will be indispensable more than ever by firms that want to experience and thrive in the challenging years ahead. 1. 5 CORE BANKING FUNCTIONS Banking has always been a changing industry. overlord Denning, once observed Like many other beings, a banker is easier to recognise than to define. (D G Hanson, page 1). D G Hanson in his popular arrest 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, despite a large spectrum of financial services that banks have embarked on to offer, certain fundamental scotch functions of Banking remain to that extent to be fully substituted. To understand this proposition it may be necessary to look at Banking from twain a traditional in operation(p) deal, i. e. a functional analysis and from a logical business and economic view, i. e. an economic analysis. A Functional Analysis 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 crockeds the business of receiving funds from the public through the word meaning 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 trustworthy by law or by normal banking practices This definition mainly deals with the aspect of banking where the function constantly looks at the maintenance of demand deposits commonly cognize as current accounts.Current Accounts are kept up(p) only by Licensed Commercial Banks. Does this mean that only Commercial Banks carry on the business of Banking? Probably not so. There are other institutions and instruments t hat perform most of the economic functions of Banking. It is important, therefore, for us to probe the economic functions more than the activities of Banking. The concentration of this article will therefore be on Economic Functions.Nevertheless, it is effectual 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 specialise 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 enceinte in an amount not less than Rs 50 Million and under the authority of a permit issued by the Monetary Board.