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Customer satisfaction, loyalty andfinancial performance

A holistic approach of the Greekbanking sector

Elissavet Keisidou, Lazaros Sarigiannidis andDimitrios I. Maditinos

Department of Business Administration,Technological Educational Institute of Kavala, Kavala, Greece, and

Eleftherios I. ThalassinosDepartment of Maritime Studies, University of Piraeus, Piraeus, Greece

Abstract

Purpose – The present paper is an attempt to provide a holistic approach of the Greek banking sectorand how it operates.Design/methodology/approach – A survey was carried out in the banking sector of Greece in orderto gather information regarding customer satisfaction and loyalty, while the financial data of thebanks were attained from their annual financial statements. Structural equation modelling was used totest the hypotheses.Findings – It has been found that neither customer satisfaction nor loyalty has a significant impacton the financial performance of banks, while the remaining factors have indicated unprecedentedresults.Research limitations/implications – The main limitation of the study is the economicenvironment of Greece and the general crisis of the banking sector.Practical implications – The study provides an insight into the Greek banking sector and theinterrelationships among the investigated factors, and how customer satisfaction and loyalty could beenhanced through the remaining factors.Originality/value – A new factor, the economics factor, was created and included in the study.Moreover, the tangibles factor was tested as an individual and not as part of service quality.Additionally, the present study is among the few that have incorporated customer satisfaction, loyaltyand the financial performance of banks. To take it one step further, some more factors were included topresent a more holistic approach of how customer satisfaction and loyalty are enhanced.

Keywords Customer satisfaction, Customer loyalty, Financial performance, Service quality, Image,Value, Brand credibility, Economics, Convenience, Tangibles, Banking, Greece

Paper type Research paper

1. IntroductionThe financial sector relies on the maintenance of a long-term relationship with itscustomers, due to the nature of the products and services it provides, and the loss of aclient is viewed with concern (Sweeney and Swait, 2008). The importance of customersatisfaction in financial services has been studied extensively in the existing literature(Arbore and Busacca, 2009) and the marketing activity of many companies has focusedon achieving customer loyalty (Vesel and Zabkar, 2009). The studies that recognisethe significance of customer loss regarding the profitability of an industry areabundant (Sweeney and Swait, 2008; Chi and Gursoy, 2009; Fathollahzadeh et al., 2011;Akhter et al., 2011).

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/0265-2323.htm

International Journal of BankMarketing

Vol. 31 No. 4, 2013pp. 259-288

r Emerald Group Publishing Limited0265-2323

DOI 10.1108/IJBM-11-2012-0114

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The Greekbanking sector

It has been stated that the antecedents of customer satisfaction and loyalty areintricate, developing over time and dynamic ( Johnson et al., 2006) and the full extent ofthe interrelations among the factors that affect them have not been completelyunderstood (Taylor et al., 2006). The main objective of the present study is to determinethe factors that affect customer satisfaction, as well as the factors that influencecustomer loyalty. And then both of these constructs are tested in order to underlinetheir importance towards the profitability of banks. This study is in a position toprovide managers with a more complete view of which factors determine customer’ssatisfaction and loyalty and furthermore, the extent to which they affect the financialperformance of banks.

2. Literature review2.1. The Greek banking sectorThe banking sector in Greece consists of 18 commercial banks, 16 co-operative banksand one credit institution (the foreign credit institutions have not been included)(Bank of Greece, 2011). The six largest banks of Greece (National Bank of Greece, EFGEurobank, Alpha Bank, Pireaus Bank, Agricultural Bank of Greece and CommercialBank of Greece) hold a market share of more than 60 per cent in terms of total assets(Organisation for Economic Co-Operation and Development (OECD), 2010).

During the first stages of the international financial crisis, Greek banks faced minordifficulties due to two main reasons: their substantial capital adequacy and theirdecision not to invest in toxic securities (Hellenic Bank Association, 2010). Thegovernment implemented a liquidity support programme, which in general involvedthe provision of bonds and guarantees to the banks, aiming that the economywould absorb the liquidity generated by this programme through loans (Hellenic BankAssociation, 2011).

However, due to the vast financial debt and lack of trust in the local economy,Greek banks faced the degradation of the government bonds, which they used inorder to borrow money from other European financial institutions, causing them tosuffer great losses. Additionally, soon the global media started spreading variousspeculations stating that the Greek government was about to declare bankruptcy. Themain source of money in the Greek banking sector was and still is the depositsof the people (Hellenic Bank Association, 2011). Those rumours and fear of losing theirmoney led people to withdraw their money or transfer their deposits abroad whichsharpened the hostile environment even more.

The Greek government has guaranteed to safeguard deposits up to 100,000.00h, fivetimes higher than the “pre-crisis” amount (Hellenic Bank Association, 2011).Everything else is left to be done by the banks. Their survival depends on how theywill plan their strategy to increase their profitability. In this adverse bankingenvironment, the retention of customers appears to be more crucial than ever. It seemsas if the banking sector is compelled to emphasise on customer satisfaction and loyalty(Hossain and Leo, 2009) in order to enhance its financial performance.

2.2. Previous studiesThe literature which studies the relationships among customer satisfaction, customerloyalty and the financial performance has been divided into two groups. The first,involves the service management literature, where customer satisfaction affectscustomer loyalty which in turn influences profitability (Hallowell, 1996). Chi andGursoy (2009) have stated that a satisfied customer turns into a loyal one and a loyal

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customer, in time, will lead to higher sales and therefore higher financial returns for thecompany. Zeithaml et al. (1990), Reicheld and Sasser (1990), Anderson and Fornell(1994), Heskett et al. (1994), Storbacka et al. (1994), Rust et al. (1995) and Schneiderand Bowen (1995) are all supporters of this theory. According to Hallowell (1996) thestudy of the way the above factors interact was initiated by Nelson et al. (1992),who tested the relationship of customer satisfaction to customer profitability in thecontext of hospitals.

The service management literature argues that customer satisfaction results fromthe perceptions of customers about the value they receive when making a transactionor when being part of a relationship, compared to the value provided by thecompetition. In this context, value is defined as the perceived service quality relative toprice and customer acquisition costs (Hallowell, 1996). It is believed that customersrecognise and value remarkable services when offered to them and over time they willexhibit loyalty behaviours (Chi and Gursoy, 2009).

The second group, the marketing literature, studies the impact of customersatisfaction on customer loyalty and suggests that customer loyalty can be defined intwo different ways, as attitude and as behaviour ( Jacoby and Kyner, 1973). Accordingto the attitudinal definition, different feelings create an individual’s attachment to anorganisation, product or service. These feelings state the individual’s degree ofloyalty (Hallowell, 1996). Examples of the behavioural definition include thecontinuing purchase of services from the same supplier, which increases the level ofrelationship (Yi, 1990).

Nowadays, a considerable amount of banks direct their strategies towardscustomer satisfaction (Arbore and Busacca, 2009). Researchers such as Winstanley(1997), Ehigie (2006) and Ndubisi (2006), have proven that customer satisfaction is alink between critical customer behaviours and the tendency of an individual toconsider his/her bank as one that he/she has a relationship with. Liang et al. (2009)stated that loyalty is the most important factor in predicting customers’ repetitivepurchasing intentions.

Over time, researchers have identified many other factors that influence customersatisfaction and loyalty. For example, service quality has been viewed as a factorthat has a strong link to satisfaction (Taylor and Baker, 1994; Levesque andMcDougall, 1996; Johnston, 1997; Lassar et al., 2000; Oppewal and Vriens, 2000; Jamaland Naser, 2002; Ndubisi, 2006; Arbore and Busacca, 2009; Culiberg and Rojsek, 2010).Parasuraman et al. (1985) claimed that service quality consists of five dimensions:reliability, tangibles, responsiveness, assurance and empathy, which are widely knownas the SERVQUAL model.

Culiberg and Rojsek (2010) employed six factors (the five of the traditionalSERVQUAL instrument and access) to measure service quality and its effect oncustomer satisfaction but after the factor analysis they were reduced to four.Assurance and empathy were considered one factor and so did reliability andresponsiveness. All four factors were found to have a positive effect on customersatisfaction with the assurance-empathy factor being the strongest (Culiberg andRojsek, 2010).

Others stated that there are two dimensions that affect customer satisfaction: thequality of the core service which is provided by the bank and the quality of therelationship with the bank. The first dimension consists of reliability, security,functionality, accuracy and speed, while the second includes responsiveness,competences, assurance, trust, friendliness, courtesy availability, commitment,

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flexibility and communication (Levesque and McDougall, 1996; Johnston, 1997;Winstanley, 1997; Jamal and Naser, 2002).

Arasli et al. (2005) found that service quality has a positive effect on customersatisfaction in the Greek-Cypriot banking sector. Ehigie (2006) carried out a research inNigeria and found that service quality and satisfaction were strongly related tocustomer loyalty. Bloemer et al. (1998) found that service quality had both a direct andan indirect effect, through customer satisfaction, on customer loyalty.

Akhtar et al. (2011) tested the effect of service quality of Islamic banking oncustomer satisfaction in terms of assurance, compliance, empathy andrepresentativeness and concluded that their relationship is positive. Ladhari et al.(2011) compared the differences in perceptions of service quality in the banking sector,using the SERVQUAL instrument, between Tunisians and Canadians and found thattangibles had no significant effect in both countries. Empathy was found to be themost important factor that affected both satisfaction and loyalty in Canada while inTunisia reliability and responsiveness were found to be the most influential factors(Ladhari et al., 2011). Baumann et al. (2007) found that empathy, overall satisfaction andaffective attitude can help predict customer loyalty.

Furthermore, Hossain and Leo’s (2009) findings in Qatar, Sohail and Shaikh’s (2008)findings in Saudi Arabia and Jamal and Ananstasiadou’s (2009) findings in Greece,suggest that the tangibles factor is a significant predictor of customersatisfaction. On the other hand, Kheng et al. (2010) tested the SERVQUAL model oncustomer satisfaction and loyalty and found that tangibles affected neithersatisfaction, nor loyalty. Also, responsiveness was found to be insignificantregarding loyalty, while reliability was found not to contribute in the creation ofcustomer satisfaction.

Korda and Snoj (2010) examined the relations among service quality, value andsatisfaction and found that both service quality and value strongly affect satisfaction.Arun Kumar et al. (2010) examined the effect of overall service quality on loyalty in thecontext of private banking and found positive results. Lai et al. (2009) examinedthe various interrelationships among service quality, value, satisfaction, image andloyalty in the context of telecommunications. Their results showed customersatisfaction and perceived value have a direct positive effect on loyalty.

Regarding loyalty, apart from customer satisfaction and service quality that werementioned earlier, image is another factor that is thought to have a direct effecton it (Mazursky and Jacoby, 1986; Bloemer et al., 1998). In a research carried out byAkhter et al. (2011), it was found that customer loyalty is directly and positivelyaffected by customer satisfaction, product image, trustworthiness and customerrelationship. Fathollahzadeh et al. (2011) studied the effects of customer value oncustomer loyalty in terms of satisfaction, co-operation, trust, commitment, servicequality, complaint handling, image and communication in the banking sector andfound that all eight variables were significant. Ogba and Tan (2009) found thatbrand image has a positive effect on customer loyalty, commitment, perceivedquality and satisfaction, regarding the telecommunication sector. In addition Sweeneyand Swait (2008) studied the role of brand credibility as a construct that influences bothloyalty and satisfaction.

Varki and Colgate (2001) studied another factor, the cost and especially theprice-quality ratio and the price fairness. Matos et al. (2009) found that switching costshave a direct effect on loyalty and act as mediators in the satisfaction-loyaltyrelationship. Oppewal and Vriens introduced the location factor, both in terms of

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accessibility and convenience. Wu (2011a) found that locational convenience hasneither a direct effect nor an indirect effect through satisfaction, on loyalty.

Moreover, some researchers pointed out the positive impact of problem-solvingskills on customer satisfaction (Levesque and McDougall, 1996; Ndubisi, 2006). Veseland Zabkar (2009) found that personal interaction quality affects customer satisfactionand customer satisfaction influences customer loyalty. No relation was foundbetween personal interaction quality and loyalty. Thuy and Hau (2010) examined theeffect of service personal values towards customer satisfaction and loyalty and theirhypotheses were verified.

Al-Wugayan and Pleshko (2010) examined customer loyalty and satisfaction andthe effect they have on the market share of banks that offer mutual funds investmentservices. They found that only loyalty has a strong linkage to the market share of thebank. Chi and Gursoy (2009) in their study examined and verified that employeesatisfaction and customer satisfaction lead to better financial performance in thehospitality industry.

As it can be seen, in recent years many studies have focused on satisfaction andloyalty, the factors that affect them and how they result in positive financial benefits.Service quality is among the most widely studied factor in the existing literature.Those studies usually neglect the effects of others factors on both satisfaction andloyalty. Wanting to fill this gap and after examining all the aforementioned studies,in the following section a more complete research model and the hypotheses that wereformed, are stated.

3. Research model and hypothesesAfter the wide, extensive and in-depth study of the existing literature, a new modelthat has not been tested before is being proposed in this study. The most importantcharacteristic of this new holistic model is the fact that it is the first time that customersatisfaction and loyalty are being tested to such an advanced degree by employingso many factors. The factors that have been selected to be studied in this paper are:economics, convenience, tangibles, functional and relational quality, image, value,brand credibility, customer satisfaction, customer loyalty and the financialperformance of banks.

The majority of the factors (functional and relational quality, image, value, brandcredibility) were selected due to the fact that they have been widely tested in literature.However, they have never been combined in one model before, to see how theyinteract with one another and the cumulative effect they have on both satisfaction andloyalty. The factors that are not as widely tested in literature (economics, convenience,tangibles) were selected for different reasons. The “economics” factor was constructedto provide a more general variable than the ones previously used in literature, whilethe “convenience” factor was incorporated due to lack of substantial empirical results.The “tangibles” factor, although it is widely known as part of the SERVQUAL model,not enough evidence exist where it is tested as an individual factor and since in thisstudy service quality is measured by functional and relational quality, it wasconsidered wise to include it.

There are other models that have attempted to provide an understanding of howcustomer satisfaction and loyalty interact, like the one of Lee and Overby (2004) whohave divided value in two dimensions (utilitarian and experiential) and testedhow these two dimensions affect satisfaction and how satisfaction affects loyalty in anonline retailers environment. While it provides an in-depth insight of value, it is far

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more simplistic than the one proposed in the present study. Another model is theAmerican customer satisfaction index (ACSI) proposed by Fornell et al. (1996) whichincorporates antecedents (expectations, perceived quality and value) and consequences(voice and loyalty) of overall customer satisfaction. Although there are similar factorsin both the ACSI and the proposed model, the ACSI is rather limited to predictingcustomer satisfaction while the proposed one is attempting to predict customer loyaltyas well, and how both satisfaction and loyalty can predict the financial performanceof companies. The proposed model is more complete and presents a holistic approachof customer satisfaction and loyalty and their effects on the financial performancein the banking sector. A schematic illustration of the proposed research model ispresented in Figure 1.

3.1. EconomicsThe economics factor, in its present form, has not been mentioned in the existingliterature. Lee and Cunningham (2001) in their study have employed the economic costsfactor, which they distinguish in monetary and non-monetary costs. Monetarycosts include service costs (price) and non-monetary costs involve service time (theamount of time necessary for a service to be provided). Trassoras et al. (2009)considered price as part of the approach for measuring value. Levesque andMcDougall (1996) considered competitive interest rates as part of the service featuresthat affect customer satisfaction.

In this form, it is a more general construct of the economic-related items whichpreviously have been used as individual constructs by the aforementioned researchers(Levesque and McDougall, 1996; Lee and Cunningham, 2001; Trassoras et al., 2009).It deals with the cost of transactions and interest rates that are established by a bank.It involves structures like price fairness and price-quality ratio (Levesque and

ECONOMICS

CONVENIENCE

TANGIBLES

FUNCTIONALQUALITY

SERVICE QUALITY

RELATIONALQUALITY

H5c1, 2 (+)

IMAGE

VALUE

H6d (+)H6c1, 2 (+)

H5d

(+)

H4c1,

2 (+

)

H4d

1,2

(+)

BRANDCREDIBILITY

CUSTOMERSATISFACTION

H8b (+)

CUSTOMERLOYALTY

H9 (+)

H8c (+)

H7b (+

)H7a (+

)H6b (+)H

6a (+

)

H5b (+

)H5a

(+)

H4b1, 2 (+)

H4a1, 2 (+)

FINANCIALPERFORMANCE

H8a (+)

H3 (+)

H2 (+)

H1 (+)

Figure 1.Research model

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McDougall, 1996; Lee and Cunningham, 2001; Varki and Colgate, 2001; Nagar andRajan, 2005; Matzler et al., 2006; Manrai and Manrai, 2007). Levesque and McDougall(1996) stated that the economic-related factors are usually considered as part of theoverall satisfaction.

Since in this form it has never been tested before, no evidence exists in literatureregarding its effect. Overcoming this gap in literature and based on otherstudies that have employed other economic structures, this newly developed factoris thought to positively affect the satisfaction the customers receive from theirselected banks:

H1. Lower economics have a positive effect on customer satisfaction.

3.2. ConvenienceConvenience is scarcely mentioned in the existing literature, yet it has been found tohave a positive effect on customer satisfaction (Arbore and Busacca, 2009; Wu, 2011a).It involves issues such as the location of a bank, the opening hours, the distance that acustomer has to travel to reach a bank, the parking places around the bank and theATM availability (Levesque and McDougall, 1996; Oppewal and Vriens, 2000; Jones,2004; Manrai and Manrai, 2007).

In the study carried out by Wu (2011a) locational convenience, which involves thenecessary time and effort for a customer to reach one’s service provider (Seiders et al.,2000), was tested in order to examine the moderating effect it had on customersatisfaction with regard to different types of service providers. Another type ofconvenience is inertia (Wu, 2011b). Inertia is defined by the customer’s unwillingness tosearch for new products and services due to habitual attachments to the existing statusquo (Lee and Cunningham, 2001; Gounaris and Stathakopoulos, 2004; White andYanamandram, 2004; Ye, 2005). In a struggling economy, as is the Greek economy, allforces of habit tend to disappear and thus inertia is not incorporated in the conveniencefactor. In this study the operational and locational characteristics of bank convenienceare tested on the effect they have on customer satisfaction:

H2. Convenience has a positive effect on customer satisfaction.

3.3. TangiblesThis factor includes constructs like the physical layout and furniture of a bank, thephysical facilities, the equipment, the cleanliness, the personnel appearance and theatmosphere and environment inside the bank (Arbore and Busacca, 2009; Hossain andLeo, 2009). It refers to the physical appearance and atmosphere every bank has createdby utilising their resources.

Some researchers support that tangibles have no impact on customer satisfaction(Wakefield and Blodgett, 1999; Oppewal and Vriens, 2000; Jones, 2004; Kheng et al.,2010; Ladhari et al., 2011) where others support the exact opposite (Levesque andMcDougall, 1996; Jamal and Naser, 2002; Sohail and Shaikh, 2008; Hossain and Leo,2009). Jamal and Ananstasiadou (2009) found that tangibles are one of the mostimportant predictors of customer satisfaction in the Greek banking sector. Althoughthe tangibles factor is considered to be part of the SERVQUAL instrument in thepresent study it is used as a separate variable:

H3. Tangibles have a positive effect on customer satisfaction.

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3.4. Functional and relational qualityService quality is considered to be a key factor for a successful business, especiallybanks (Angur et al., 1999; Akhtar et al., 2011), and is considered to contribute inachieving strategic benefits and increasing the competitive advantage (Akhtar et al.,2011). Service quality, as a term, originated from the product quality and customersatisfaction literature (Korda and Snoj, 2010). It involves the customer’s evaluationabout the overall excellence of the product or service offered and it is based on thedifference between the customer’s pre-consumption performance expectations andthe post-consumption performance of the product or service (Parasuraman et al., 1988;Culiberg and Rojsek, 2010; Korda and Snoj, 2010).

Service quality in the banking sector is viewed to increase customer satisfaction andto contribute to profitability (Ladhari et al., 2011). Moreover, it decreases customerdefection, it increases customer loyalty and enhances corporate image (Arasli et al.,2005; Baumann et al., 2007). Additionally, exceptional service quality is consideredto enable the development and maintenance of long-term customer relations(Camarero, 2007).

In order for researchers to measure service quality in the banking sector they mostcommonly employ the SERVQUAL instrument (Parasuraman et al., 1988; Ladhari et al.,2011) which consists of five dimensions (tangibles, reliability, responsiveness,assurance and empathy) and it has been widely tested in the context of different typesof service providers which include banks, restaurants, hotels and insurance companies,and regarding different countries (Parasuraman et al., 1985; Hossain and Leo, 2009;Ladhari et al., 2011).

Many researchers have questioned the use of the SERVQUAL instrument tomeasure service quality due to the fact that it measures the gap between expectationsand performance. The same researchers suggest that service quality should only bebased on performance measures (Cronin and Taylor, 1992; Brown et al., 1993; Teas,1993; Levesque and McDougall, 1996; Ladhari et al., 2011). More specifically, Brownet al. (1993) stated that there is no distinction between perception and expectationscores and Cronin and Taylor (1992) added that service quality is measured moreprecisely by using the performance scores. Furthermore, Culiberg and Rojsek (2010)questioned the universal character of the instrument regarding its dimensions and thescale it is measured on.

Moreover, the five dimensions of the SERVQUAL instrument have raisedsubstantial doubts regarding the use of all five variables (Brown et al., 1993; Croninand Taylor, 1992; Teas, 1993; Ladhari, 2009). It has been stated that there are twoprevailing dimensions of service quality, the functional or core and the relationalone (Morgan and Piercy, 1992; Levesque and McDougall, 1996). Functional qualitymeasures items like reliability, speed, accuracy, security and functionality of a serviceprovided, while relational quality measures items like the responsiveness,assurance, friendliness, courtesy, commitment and communication (Levesque andMcDougall, 1996; Johnston, 1997; Winstanley, 1997; Jamal and Naser, 2002; Arbore andBusacca, 2009).

Several researchers have found that both functional and relational quality have astrong connection to customer satisfaction (Taylor and Baker, 1994; Levesque andMcDougall, 1996; Johnston, 1997; Lassar et al., 2000; Oppewal and Vriens, 2000;Jamal and Naser, 2002; Arasli et al., 2005; Ndubisi, 2006; Arbore and Busacca, 2009;Culiberg and Rojsek, 2010; Ladhari et al., 2011) and loyalty (Bloemer et al., 1998;Ladhari et al., 2011). Moreover, it has been stated that service quality has a positive

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direct effect on customer value and that it is the factor best predicting it (Petrick, 2004;Lai et al., 2009; Korda and Snoj, 2010). Additionally Lai et al. (2009) validated in theirstudy that service quality contributes to corporate image.

Considering all the above, it was decided not to employ the traditional SERVQUALmodel, instead functional and relational quality will be employed:

H4a1. Functional quality has a positive effect on customer satisfaction.

H4a2. Relational quality has a positive effect on customer satisfaction.

H4b1. Functional quality has a positive effect on customer loyalty.

H4b2. Relational quality has a positive effect on customer loyalty.

H4c1. Functional quality has a positive effect on value.

H4c2. Relational quality has a positive effect on value.

H4d1. Functional quality has a positive effect on image.

H4d2. Relational quality has a positive effect on image.

3.5. ImageAlthough image is considered a valuable asset for companies, a widely accepteddefinition does not exist (Pina et al., 2006). Hatch and Schultz (1997) suggested toopposing viewpoints of image, one related to the organisational literature and the otherto the marketing literature.

The organisational literature suggests that the image of a company is definedbe the way its members would like external stakeholders to perceive it. In otherwords, image is the internal notions of the company’s public impression. Themarketing literature suggests that the image of a company is defined by theperceptions of all the external stakeholders, especially customers, and it representstheir beliefs and attitudes towards it (Pina et al., 2006). Image has been usedextensively to describe how customers perceive a company, regarding the productsand services it offers and its reputation, and it is considered to be able to generatevalue (Fathollahzadeh et al., 2011). A favourable image is regarded as an importantfactor in maintaining the company’s market position (Korgaonkar et al., 1985).It reflects a customer’s overall impression about the company (Bloemer et al., 1998)and is thought to influence the customers’ perceived service quality (Korda andSnoj, 2010).

The exact relationship between image and loyalty is a matter of debate. Accordingto Sirgy and Samli (1989) and Akhter et al. (2011), there is a positive relationshipbetween image and loyalty. Fathollahzadeh et al. (2011) stated that the higher thecustomers perceived image of the company, the higher level of loyalty they will exhibit.Ogba and Tan (2009) verified the positive relationship of image on satisfaction, loyaltyand service quality and Lai et al. (2009) verified that image has a positive direct effecton value and satisfaction:

H5a. Image has a positive effect on customer satisfaction.

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H5b. Image has a positive effect on customer loyalty.

H5c1. Image has a positive effect on functional quality.

H5c2. Image has a positive effect on relational quality.

H5d. Image has a positive effect on value.

3.6. ValuePorter (1996) stated that the creation of superior customer value is considered to be oneof the most essential factors that can lead to the success of a company. Moreover, it hasbeen said that perceived value is a significant part of high costumer involvementindustries, as is the banking sector (Angur et al., 1999). Trassoras et al. (2009) statedthat perceived value is a factor that influences loyalty.

A widely accepted definition states that value reflects the customers’ perceptions ofthe delivered products or services and not what a company desires to provide(Fathollahzadeh et al., 2011). Woodruff (1997) mentioned that customer value is linkedto the relationship of what the customer pays to acquire and use a product or service,and his/her notion of what he has received. In other words, value derives from thebenefits-sacrifices relationship; the higher the relationship is, the higher the level ofperceived value (Korda and Snoj, 2010).

Value is considered to increase the company’s competitive advantage and has, aswell, a significant effect on customer satisfaction and loyalty (McDougall andLevesque, 2000; Lai et al., 2009; Trassoras et al., 2009). Additionally, Fathollahzadehet al. (2011) found that value is strongly connected to image and influences servicequality:

H6a. Value has a positive effect on customer satisfaction.

H6b. Value has a positive effect on customer loyalty.

H6c1. Value has a positive effect on functional quality.

H6c2. Value has a positive effect on relational quality.

H6d. Value has a positive effect on image.

3.7. Brand credibilityBrand credibility is defined as the level to which the product or service positioninformation is considered to be believable. It entails the consistent delivery of what hasbeen promised to the customers and it represents the cumulative effect of all marketingattempts of the past (Erdem et al., 2002).

The brand of any company and especially banks can play an important role inthe marketing actions because the brand functions as a signal. An importantcharacteristic of this signal is its credibility (Erdem and Swait, 1998). The notionof credibility is distinguished in two main dimensions: trustworthiness andexpertise. Trustworthiness suggests the brand delivers what has promisedwhile expertise suggests its capability to deliver it (Erdem et al., 2002).

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Every customer feels related not only to the personnel of the institution, but to thebrand name of the bank as well (Licata and Chakraborty, 2009). Managing the brandname of a bank effectively can lead in the retention of more and more customers(Trassoras et al., 2009). Brand credibility involves the customers’ beliefs about thecommitment to be provided the quality of service that has been declared by the bank.Brand credibility is considered to have a positive influence on both customersatisfaction and loyalty (Sweeney and Swait, 2008):

H7a. High brand credibility positively affects customer satisfaction.

H7b. High brand credibility positively affects customer loyalty.

3.8. Customer satisfactionIt has been stated that customer satisfaction is the most influential factor on customerloyalty (Kanning and Bergmann, 2009; Hoq and Amin, 2010). Oliver (1980) definedcustomer satisfaction as the difference between an individual’s expectations beforethe consumption of a product or service and the actual experience that results theconsumption. The term satisfaction describes the sense of fulfillment (Vesel andZabkar, 2009), that a customer feels after having interacted with a company (Wu,2011a). Additionally, it can be defined as the evaluation that occurs after theconsumption of a product or service and at what degree it has met or exceeded thecustomers’ expectations (Yu and Dean, 2001; Akhtar et al., 2011).

Regarding the banking sector, Ladhari et al. (2011) defined customer satisfactionas the total evaluation of the overall level of services provided. It is thought thatsatisfaction is likely to increase customer loyalty (Vesel and Zabkar, 2009; Akhter et al.,2011) and according to the service-profit chain and other studies, it is suggestedthat satisfied customers result in better financial performance (Bernhardt et al., 2000;Chi and Gursoy, 2009; Fathollahzadeh et al., 2011). Kandampully and Hu (2007) testedthe effect of customer satisfaction on image, regarding hotels and verified that thereis a positive relationship between them. Wanting to be innovative, this relationship isstudied in the context of banks:

H8a. Customer satisfaction has a positive effect on image.

H8b. Customer satisfaction has a positive effect on customer loyalty.

H8c. Customer satisfaction has a positive effect on financial performance.

3.9. Customer loyaltyLoyalty can be measured with both attitudinal and behavioural items ( Jacoby andKyner, 1973; Dick and Basu, 1994; Fathollahzadeh et al., 2011; Akhter et al., 2011).Attitudinal measurements, due to the fact that they reflect the psychological andemotional attachment to loyalty, are used in order to understand the cognitive elementsthat underlie purchasing motives and future actions (Bowen and Chen, 2001;Fathollahzadeh et al., 2011). They are viewed to add some degree of value to theproduct or service (Wu, 2011a). Behavioural measurements, on the other hand, focus onthe customer’s purchasing history (Vesel and Zabkar, 2009; Fathollahzadeh et al., 2011)and have been measured by the repetitive purchasing behaviour that a customershows towards a product or service (Wu, 2011a).

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Another distinction of customer loyalty is between active loyalty and passive loyalty.Active loyalty refers to the word-to-mouth advertising and the customer’s intentionto use a product or service, while passive loyalty involves the customer’s decisionto remain with the company even when he/she is not fully satisfied with the productsor services delivered (Fathollahzadeh et al., 2011; Akhtar et al., 2011). It is said thattrue loyalty is demonstrated when individuals choose to remain customers of acompany even when they are not offered the best quality of products and services(Ahluwalia et al., 2000). The type of loyalty that is characterised by commitment iscalled premium quality (Gounaris and Stathakopoulos, 2004). Furthermore, Tucker(1964) stated that brand loyalty is a biased outcome of a combination of characteristics,which do not contribute equally to the choice a user makes.

Loyalty regarding the banking sector is defined as the customer’s repeatedpatronage of a certain bank over a long period of time (Ladhari et al., 2011). Loyalcustomers are characterised by repetitive purchasing of products and services,recommending the company to others, defending it against bad comments by stronglysupporting their choices (Akhter et al., 2011).

Hallowell (1996) suggested that loyalty increases the financial performanceof an organisation. It has been reported that a 5 per cent increase in customerretention can lead from 25 to 85 per cent increase in profits (Ladhari et al., 2011; Akhteret al., 2011):

H9. Customer loyalty has a positive effect on the financial performance of banks.

3.10. Financial performance of banksFinancial performance as a factor, is not commonly measured in literature, however,the researchers that have included it in their studies have measured it in a variety ofways. Anderson et al. (1994, 1997) chose to measure the financial performance in termsof return on investment. In the research carried out by Chi and Gursoy (2009) in thehospitality industry, financial performance was measured by asking the managersof every hotel to rate their hotel’s financial performance in comparison to theirthree major competitors in terms of profitability, return on investment and net profit.Hallowell (1996), on the other hand selected two indicators to measure financialperformance: return on assets and non-interest expense as a percentage oftotal revenue.

In the present study a new, more realistic approach was adopted. When anyonerefers to the financial performance of a company he/she refers to its profitability. Thus,the three most widely known profitability ratios were used to measure the truefinancial performance of banks. These are: return on assets or investment, net profitmargin and return on equity.

4. Research methodology4.1. SampleThe sample of the research is random and consists of 304 bank customers throughoutGreece who have at least one bank product and have transactions with their banks,which implies that they maintain a close relationship with their financial institution.

Hair et al. (2010) suggested that the observation to independent value ratio shouldnot be less than five (5:1), although the recommended ratio is ten responses for eachindependent variable (10:1). In the present study 42 items where employed thus makingthe minimum sample size 210 and the ideal 420 responses. Due to time limitations, the

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sample size that was collected was 304 responses which surpass the minimum 5:1 ratiostated by Hair et al. (2010). Other studies in the banking sector that have significantresults with a sample that does not abide by the 10:1 ratio include the one of Zafar et al.(2012) and Chen et al. (2012).

Every respondent was asked to choose one bank from those they might havetransactions with as their main bank, and complete a questionnaire which would referto their perceptions of their selected bank.

4.2. Data collection methodThe collection of the necessary data was made with the use of a questionnaire. Theconstruction of the questionnaire was made after thorough and in-depth researchof the existing literature.

The questionnaire consists of three parts: the first part states the purpose of theresearch, the second part is about the participants’ personal characteristics (age,education, income, etc.) and consists of eight questions and the third part contains the42 questions used to measure the previously mentioned factors. It has been distributedwith personal interviews, telephone interviews, e-mails and through social networkingsites. Moreover, a web site was constructed to further promote the questionnaire online.

Since the research was carried out in Greece, all the questions were translated inGreek and were checked by professional translators and academics, in order to avoidany misinterpretations. Then a pilot testing was carried out to further ensure theminimisation of misinterpretations.

All questions were measured in a one to five-Likert scale and a total of 304 usablequestionnaires were returned. These data were processed with both statisticalprogrammes SPSS and AMOS in order to test the hypotheses mentioned earlier.

4.3. Measurement developmentAs mentioned earlier, in order to select the items that were used in the construction ofthe questionnaire, the existing literature was studied extensively. Table I provides asynopsis of the items used to measure the aforementioned factors.

5. Empirical analysis – results5.1. Respondent’s profileA detailed view of the respondents’ profile is provided in Table II.

5.2. Description of statistical dataThe results indicate that the participants of this study consider themselves customersof 12 banks. Furthermore, the percentages of the respondents’ preferred banks do notcorrespond to the market share of each bank in terms of total assets as stated by theOECD (2010), yet it can be viewed as the true market share in terms of customerpreference.

Most of the participants of the research (91.1 per cent) have visited their banko12 times in the last trimester and 62.5 per cent have visited their bank less thanfive times, which clearly validates the sharp economic situation of the bankingsector in Greece. A more detailed view of the aforementioned discussion is providedin Table III.

5.3. Content validityThe purpose of content validity is to eliminate or correct questions that have notfulfilled their research objective (Bock and Kim, 2002). Kim et al. (2008) in order to

271


Factors References Items

Economics Adapted from Levesque and McDougall (1996), Lee andCunningham (2001) and Trassoras et al. (2009)

3

Convenience Culiberg and Rojsek (2010) 3Tangibles Ladhari et al. (2011) 4Functional quality Levesque and McDougall (1996) 5Relational quality 5Image Adapted from Lai et al. (2009) and Bravo et al. (2009) 5Value Adapted from Lai et al. (2009) and Trassoras et al. (2009) 3Brand credibility Sweeney and Swait (2008) 6Customer satisfaction Levesque and McDougall (1996), Sweeney and Swait

(2008), Licata and Chakraborty (2009), Thuy and Hau(2010)

4

Customer loyalty Zeithaml et al. (1996), Jamal and Ananstasiadou (2009),Liang et al. (2009), Trassoras et al. (2009) and Thuy andHau (2010)

4

Financial performance ROA/ROI, NPM, ROE 3

Table I.Factors’ measurementdevelopment

Measure Data Frequency %

Gender Male 128 42.1Female 176 57.9

Marital status Single 156 51.7Married 124 41.1Divorced 17 5.6Widowed 5 1.7

Education level Primary school 9 3.0Junior high school 13 4.3Senior high school 115 38.0University degree 104 34.3Masters degree 51 16.8PhD degree 11 3.6

Age Under 18 1 0.318-24 51 16.825-34 112 36.835-44 76 25.045-54 38 12.555-64 21 6.965-74 5 1.6Over 75 0 0.0

Income Less than 5,000h 44 14.75,001h-10,000h 59 19.710,001h-15,000h 42 14.015,001h-20,000h 48 16.020,001h-25,000h 37 12.325,001h-30,000h 35 11.730,001h-40,000h 26 8.7More than 40,001h 9 3.0

Table II.Respondents’ profile

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ensure the validity of the instrument, proposed a thorough review of the existingliterature, followed by a pilot testing among experts on the subject and then aconfirmatory pilot testing involving another group of respondents.

All items were adopted or formed after studying extensively the existing literaturewhich fulfils the first criterion. Then a pilot testing among experts and professionalsof the subject was conducted so as to verify that the scales measure what they wereintended to measure (Chu and Murramann, 2006). Last but not least, another pilottesting was conducted which did not include any of the participants of the previouspilot testing. This process has allowed the questions of the instrument to be clearlystated and easily comprehended, and avoid any misinterpretations of their meaningamong the respondents.

5.4. Unidimentionality analysisThis type of analysis provides evidence that a construct that is not visible can beformed by combining different items (Flynn et al., 1990). The two most commonmethods of assessing the level of unidimentionality of a factor are: the exploratoryfactor analysis (EFA) and the confirmatory factor analysis.

The main objective of the EFA is to summarise the information of a largegroup of variables into a smaller one by allocating them into distinct factorswithout significant loss of their containing information (Hair et al., 1995). Theextraction of the factors was performed with the method of principal componentanalysis and the orthogonal varimax. Moreover, the measure sampling adequacy ofKaiser-Mayer-Olkin was used, which measures the degree to which some items belongto the same factor.

The analysis showed that from the 45 items that were used 11 factors are produced.The results of this analysis (Table IV) justify the use of the EFA since all the criteria arewell exceeded.

Measure Data Frequency %

Respondents’ bank National Bank of Greece 97 31.9Eurobank 46 15.1Alpha Bank 30 9.9Pireaus Bank 46 15.1Agricultural Bank of Greece 31 10.2Commercial Bank 14 4.6Marfin Egnatia Bank 9 3.0Hellenic Post Bank 7 2.3Bank of Cyprus 13 4.3Millennium Bank 2 0.7Attica Bank 3 1.0Geniki Bank 6 2.0

Customer of the bank Under 5 years 106 36.86-10 years 106 36.811-20 years 59 20.5Over 21 years 17 5.9

Bank visits in the last trimester Less than 5 times 190 62.55-12 times 87 28.613-20 times 15 4.9More than 21 times 12 3.9

Table III.Bank usage data

273


Confirmatory factor analysis is not necessary according to Sharma (1996), because thestructure model is based on existing literature that has previously been tested andtherefore, it is implied.

Conceptual factors Items Loadings KMO TVE

Bartlett’stest

significanceCronbach’s

a

Functional quality (FQ) B.1.1. 0.763 0.804 62.121 0.000 0.844B.1.2. 0.886B.1.3. 0.778B.1.4. 0.814B.1.5. 0.793

Relational quality (RQ) B.2.1. 0.930 0.808 68.469 0.000 0.883B.2.2. 0.775B.2.3. 0.774B.2.4. 0.808B.2.5. 0.796

Image (IMG) B.3.1. 0.839 0.815 68.153 0.000 0.881B.3.2. 0.838B.3.3. 0.796B.3.4. 0.769B.3.5. 0.857

Value (VAL) B.4.1. 0.730 0.736 81.291 0.000 0.883B.4.2. 0.698B.4.3. 0.794

Brand credibility (BC) B.5.1. 0.845 0.881 67.342 0.000 0.901B.5.2 0.843B.5.3. 0.888B.5.4. 0.889B.5.5. 0.925B.5.6. 0.935

Tangibles (TANG) B.6.1. 0.785 0.780 68.676 0.000 0.848B.6.2. 0.770B.6.3. 0.778B.6.4. 0.789

Convenience (CONV) B.7.1. 0.599 0.629 61.088 0.000 0.675B.7.2. 0.603B.7.3. 0.751

Economics (ECON) B.8.1. 0.705 0.714 72.285 0.000 0.808B.8.2 0.705B.8.3. 0.733

Satisfaction (SAT) B.9.1. 0.804 0.835 76.821 0.000 0.896B.9.2. 0.810B.9.3. 0.841B.9.4. 0.920

Loyalty (LLT) B.10.1. 0.895 0.818 78.108 0.000 0.906B.10.2. 0.781B.10.3. 0.761B.10.4. 0.878

Financial performance (FPER) C1 0.873 0.785 98.648 0.000 0.773C2 0.738C3 0.757

Table IV.Exploratory factoranalysis and reliabilityanalysis results

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5.5. Reliability analysisThis type of analysis refers to the internal consistency of the factors (Chu andMurramann, 2006). In order to analyse the reliability of the 11 factors and measure theinternal consistency of each factor Cronbach’s a coefficient was used (Fornell andLarcker, 1981). As it can be observed from the results of the present study (Table IV),the values of Cronbach’s a exceed the minimum 0.6 score (Nunnally, 1978).

5.6. Convergent validityThe degree to which multiple methods of measuring a factor provide the same resultsis called convergent validity (Churchill, 1979; Spector, 1992). Wixom and Watson (2001)stated that the acceptable value of convergent validity is 0.5 for all loadings of theitems and Kim et al. (2008) added that all items should load to only one factor with aneigenvalue 41.

In this study, all items have loaded to their predestined factor with an eigenvalue41. As it can be viewed by the results illustrated in Table IV, all items bear loadingsfrom 0.599 and above which completes the criteria mentioned about convergentvalidity.

5.7. Discriminant validityBurns and Bush (1995) claimed that discriminant validity revolves around the idea thatdissimilar constructs should be different. For that reason a table was constructed(Table V) containing the correlations coefficients of the factors and in the diagonal ofthis table Cronbach’s a values are introduced. Churchill (1979) stated that Chronbach’sa values of the factors should be higher than the correlation values. This wouldindicate that the correlations among the factors are lower than within them (Widener,2004).

From the results of the present study, it can be said that the above criterion is met,and thus discriminant validity has been accomplished.

5.8. Structural equation modellingThe examination of the conceptual framework was conducted with the use of the“structural equation modelling technique”. The certain multivariate technique wasused because of its ability to simultaneously examine a number of depended linearrelations, where one or more constructs (variables) are both dependent andindependent (Hair et al., 1995).

The five common fit measures: (w2/df ), (GFI), (CFI), (RMR) and root mean squareerror of approximation were used to appraise the overall model fit. The overall fitvalues of the model are summarised in Table VI and all their scores fulfil the acceptablelevels.

Moreover, the causal relationships among the variables were examined by using thestructural equation modelling approach. The structural model, along with pathcoefficients is illustrated in Figure 2. It was found that the statistical significance of H2(convenience-satisfaction), H4a1 (functional quality-satisfaction), H4b1 (functionalquality-loyalty), H4b2 (relational quality-loyalty), H4d1 (functional quality-loyalty),H4d2 (relational quality-loyalty), H6b (value-loyalty), H7b (value-loyalty) (brandcredibility-loyalty), H8c (satisfaction-financial performance) and H9 (loyalty-financialperformance) justifies their rejection.

From the modification indices analysis additional relationships have emerged andare presented in Figure 2 in red lines. These are the negative effect of economics on

275


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Table V.Correlations

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IJBM31,4

image, the positive effect of economics on both brand credibility and loyalty, thepositive effect of convenience on loyalty and last, the positive effect of tangibles onbrand credibility. Furthermore, the validity of the hypothesised paths was examinedby examining the statistical significance of each structural parameter estimate.A summary of the structural parameter estimates is presented in Table VII, as well asthe new relationships that have arisen.

6 Conclusions6.1 DiscussionThe economics factor is an invention and innovation of this paper. It has beenconstructed in order to provide a more general understanding of all the economic-related constructs and has never been examined before in this form. In this study it hasbeen found to have a positive effect on customer satisfaction, as it was hypothesised.Moreover, new paths have arisen regarding the economics variable; it has beenfound that it has a positive effect on both customer loyalty and brand credibilityand a negative effect on image. Levesque and McDougall (1996) have consideredthe economics factor as part of satisfaction, which now has been proven wrong.

Overall fit of the model

Chi-square/degree of freedom (w2/df ) 1.942Goodness-of-fit index (GFI) 0.972Comparative fit index (CFI) 0.989Root mean square residual (RMR) 0.033Root mean square error of approximation (RMSEA) 0.056

Table VI.Model fit

ECONOMICS

CONVENIENCE

TANGIBLES

FUNCTIONALQUALITY

SERVICE QUALITY

RELATIONALQUALITY

IMAGE

VALUE

BRANDCREDIBILITY

H6d(+) 0.874H6c1, 2 (+)

1.112, 0.846

1.20

0H

5d (

+)

0.440, 0.725H5c1, 2 (+)

H4d1,

2 (+

)0.96

9, 0

.665

H4c

1,2

(+)

0.40

9 (+

)

0.44

4 (+

)–0

.796

(–)

(+) 0.169

(+) 0.070

H1 (+)

0.738

H2 (+)

H3 (+) 0.298

H4a1 (+)

3.26

8 H8a

(+)

0.546H4b1 (+)

H4a2(

+)

H4b2 (+)

0.184H5a (+

) 1.2

04

H5b (+)

H6a

(+) 1

.395

H6b (+

)H

7a (+

) 2.9

22

H7b (+

)

CUSTOMERSATISFACTION

H8b (+)0.464

CUSTOMERLOYALTY

H9 (+

)

FINANCIALPERFORMANCE

H8c (+)

Accepted hypothesisRejected hypothesisNew paths

Figure 2.Hypotheses testing results

277


This is probably due to the global crisis and its consequences on the Greek economyand the banking sector. Nowadays, people care more than before about the price-fairness and the price-quality ratio, when before the crisis they would be willing to paya premium for the products and services they received. Having consistently low pricescompared to the provided quality could lead to more loyal customers over time. Theeffect of economics on brand credibility could be explained by the notion that byproviding lower prices than competition people perceive the bank as being truthful,

Pathcoefficient Remark

Research model hypothesesH1 Lower economics have a positive effect on customer

satisfaction0.738 Accepted

H2 Convenience has a positive effect on customer satisfaction RejectedH3 Tangibles have a positive effect on customer satisfaction 0.298 AcceptedH4a1 Functional quality has a positive effect on customer

satisfactionRejected

H4a2 Relational quality has a positive effect on customersatisfaction

0.546 Accepted

H4b1 Functional quality has a positive effect on customer loyalty RejectedH4b2 Relational quality has a positive effect on customer loyalty RejectedH4c1 Functional quality has a positive effect on value 0.969 AcceptedH4c2 Relational quality has a positive effect on value 0.665 AcceptedH4d1 Functional quality has a positive effect on image RejectedH4d2 Relational quality has a positive effect on image RejectedH5a Image has a positive effect on customer satisfaction 1.204 AcceptedH5b Image has a positive effect on customer loyalty 0.184 AcceptedH5c1 Image has a positive effect on functional quality 0.440 AcceptedH5c2 Image has a positive effect on relational quality 0.725 AcceptedH5d Image has a positive effect on value 1.200 AcceptedH6a Value has a positive effect on customer satisfaction 1.395 AcceptedH6b Value has a positive effect on customer loyalty RejectedH6c1 Value has a positive effect on functional quality 1.112 AcceptedH6c2 Value has a positive effect on relational quality 0.846 AcceptedH6d Value has a positive effect on image 0.874 AcceptedH7a High brand credibility positively affects customer

satisfaction2.922 Accepted

H7b High brand credibility positively affects customer loyalty RejectedH8a Customer satisfaction has a positive effect on image 3.268 AcceptedH8b Customer satisfaction has a positive effect on customer

loyalty0.464 Accepted

H8c Customer satisfaction has a positive effect on financialperformance

Rejected

H9 Customer loyalty has a positive effect on the financialperformance of banks

Rejected

New pathsEconomics-Image �0.796 AcceptedEconomics-Brand credibility 0.444 AcceptedEconomics-Loyalty 0.169 AcceptedConvenience-Loyalty 0.070 AcceptedTangibles-Brand credibility 0.409 Accepted

Table VII.Hypotheses testing results

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IJBM31,4

reliable and consistent to its promises. Finally, the negative effect of economics onimage could be explained by the fact that it is not an advised marketing strategyfor a bank to be viewed as “inexpensive” regardless of the relatively lower prices that itmay offer. This is due to the notion that usually lower costs and prices representproducts and services of lower quality. Such a strategy could harm the prestigeand good name of the bank with regard to the products and services it provides. Bankmanagers should take into consideration the above when deciding the pricing policy oftheir institution. They should also focus on the fact that over-pricing or under-pricing aproduct or service could have serious repercussions on the bank and they ought toselect their strategy carefully.

Regarding the convenience factor it has been found to have no impact on customersatisfaction which contradicts the findings of Arbore and Busacca (2009) and Wu(2011a). The opening hours of all the banks operating in Greece are the same, while thelocation of every bank is not very far from the others; most banks are located veryclose to or even opposite one another. All the above are an obvious indication thatcompetition has driven all banks to be, in terms of facilities, the same. The bankingsector in Greece has become indifferent to customers in the context of conveniencebecause bank managers strive to keep up with their competition. This is possiblywhy the convenience factor was ineffective on satisfaction. However, the new path thathas arisen from the study indicates that convenience has a positive effect on loyaltywhich is probably the result of repetitive behaviour and being accustomed to visitingthe bank at its certain location. Bank managers should not rely on convenience inorder to achieve loyalty, they should keep reminding their customers of all thecharacteristics the bank has to offer them.

The tangibles factor has been proven to positively affect customer satisfactionwhich is in line with the studies carried out by several researchers (Levesque andMcDougall, 1996; Jamal and Naser, 2002; Sohail and Shaikh, 2008; Jamal andAnanstasiadou, 2009; Hossain and Leo, 2009). Wakefield and Blodgett (1999) havefound that tangibles have an impact on the affective responses of customers, whichinclude the sense of pleasure and relaxation and the feeling of excitement. This isprobably why this factor was found to positively affect customer satisfaction; a niceenvironment can help the customer feel more relaxed, less defensive and more satisfiedwith one’s bank selection. Moreover, tangibles have been found to have a positiveeffect on brand credibility, which suggests that people associate the overall physicalappearance of the bank to the level of reliability the bank offers. The better thefacilities, equipment and stationery are the more credible the bank appears to be.Managers should allocate part of their annual budget on renewing their tangibles tokeep their customers satisfied and enhance their brand credibility. However, sincethis constitutes a cost for the bank, managers should not materialise drastic changes,they need to find ways of renewing the appearance of their institution by incorporatingintuitive ideas and smart solutions.

In this paper service quality was examined in terms of functional and relationalquality and not as a single factor. The results indicated that these two dimensionsof service quality do not behave in the same way. This is to be expected, due to the factthat they measure two different aspects of service quality, functional quality measureshow efficiently the bank operates while relational quality measures the level ofintimacy the customer receives from the bank and its employees. It has been foundthat functional quality has no effect on customer satisfaction while relational qualitywas found to have a positive impact. This occurred due to the customers’ notion that all

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banks provide the same level of functional quality, while the personal relationvaries according to the staff the bank has selected to employ. Moreover it has beenfound that neither functional nor relational quality have an effect on customerloyalty. It appears that just service quality is not enough for customers to be loyal totheir bank and they are driven by other factors towards loyalty, especially in this sharpeconomic environment. Furthermore, both functional and relational quality wereproven to have a strong relationship to value. This is consistent with the findingsof Lai et al. (2009). The better the service the better value the bank appears to have.Additionally, the two dimensions of service quality have no impact on the imageof a bank which indicates that the overall performance of a financial institution doesnot help create and maintain its image. Since relational quality affects customersatisfaction managers should educate their employees on new techniques of customerinteraction and handling which can lead to customer retention. Also, these findingssuggest that service quality should not be neglected because it is crucial to themaintenance of company value.

Image is one of the constructs that has been found to significantly affect all thefactors it has been tested on. It positively affects customer satisfaction, it drivespeople to be loyal to their banks and enhances the notion customers have about thebank’s service quality and value. All these are an outcome of how the banks have dealtwith their public image throughout the years, the services and products offered, theirpeople skills and customer complaints policy. The image of a bank is built slowly andwith a lot of effort; managers should always try to maintain or enhance it. This is whyit is considered one of the most important factors in the success of any company,not only banks.

Value has been found to positively affect customer satisfaction. This implies that acustomer thinks the benefits he/she is offered by one’s bank, are far greater than thesacrifices he/she makes. Yet this is not enough to lead to loyalty, since no positiveconnection has been found between value and loyalty. Moreover, value positivelyaffects both service quality and image, making it one of the factors a bank managershould focus on. The process of creating value is also slow and continuous; it is thebanks reward for the products and services it consistently has offered over the years.

Brand credibility has been proven to have a significant effect on customersatisfaction. This is possibly due to the fact that people relate to a brand name and thisleads them to feel satisfied with their banks. As stated by Adcock et al. (1995), Kotlerand Armstrong (1996) and Kotler (2003) the brand is one of the most significant driversto the selection of a product, service, company or in this case, bank, and reflects theoverall notion an individual has about them. Customer loyalty has not been found to beaffected by brand credibility which suggests that the reliability and trustworthiness ofa bank is not enough in this harsh environment to create loyal customers.

Customer satisfaction was found to have a strong effect on the image of the bankand on customer loyalty. If a bank repeatedly satisfies a customer this customer willcontinue to realise his/her transactions in this particular bank (Yi, 1990). Additionally,in this study it has been verified that customer satisfaction has a positive effect onimage regarding the banking sector, as was suggested by Kandampully and Hu (2007)in the hotel industry. This can be explained by the fact that increased satisfaction isreflected on the image the customers have about their bank. Managers should alwayshave as a priority the satisfaction of their customers since it is the strongest predictorof customer loyalty. This can be accomplished by listening to their requirements andthen by creating products and services that fulfil them.

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Regarding the financial performance of banks it has been found that neither customersatisfaction nor customer loyalty have an effect on the profitability of the bank contraryto the findings of many studies (Hallowell, 1996; Bernhardt et al., 2000; Chi and Gursoy,2009; Fathollahzadeh et al., 2011) supporting the exact opposite. This can be explainedby the current financial condition of the banking sector in Greece, which has been facinglosses for the past two years. These past two years the banking sector and the overalleconomy in Greece have been under a lot of distress, as it has been described earlier.

6.2 LimitationsAlthough this study is more holistic than the ones that have been carried out so farregarding customer satisfaction and loyalty, it had its limitations.

One of the main limitations is that the banks’ financial data used were taken fromthe annual report of each bank. By using objective measures that would minimise tosome extent the effects of the crisis. Furthermore, the respondents were made to chooseone bank which constitutes an additional limitation. Some of the respondents may havetransactions in more than one bank. Last but not least, this study measures the notionsof the respondents at the present time when the economic environment is not ideal dueto the financial crisis Greece and especially, the banking sector faces, which makes thefindings of the study inadequate for generalisation.

6.3 Further researchIn the future, it is considered essential to extend this research to multiple bank users inorder to have a clearer view of the notions of the respondents who have financialproducts in more than one institution. Another, recommendation would be to test themodel when the economy of Greece becomes more stable. This would provide moreaccurate outcomes of the stated hypotheses.

This study introduced an innovative extended model which involved the impact ofcustomer satisfaction and loyalty on the profitability of banks. Moreover, it hasprovided a more holistic understanding of how all the aforementioned factorsinterrelate and how the affect both satisfaction and loyalty.

This model is an innovative tool which managers can use in order to design theirmarketing strategy and accomplish the best results for their bank. It indicates thetendencies of the target population, the elements or factors of the marketing mixcustomers consider most important, it provides a more holistic view of the targetmarket and the factors that can cause satisfaction and loyalty, and also, it guidesmanagers to the implementation of a strategy that will enable them to fulfil their goals.In order for it to be established as an adequate instrument in predicting satisfaction,loyalty and financial performance it needs to be tested in different economicenvironments, countries and industries.

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About the authors

Elissavet Keisidou is a business executive in Hatzistefanou Educational Group, member of QLS,Xanthi, Greece. She holds a BA in Business Administration from the Technological Educational

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Institute of Kavala, Greece and an MSc in Finance and Financial Information Systems fromGreenwich University, UK. Her research interests include consumer behaviour, e-commerce,human resource management and organisational behaviour. Elissavet Keisidou is thecorresponding author and can be contacted at: [email protected]

Lazaros Sarigiannidis is a tutor in Project Management in the Kavala Institute of Technology,School of Business and Economics, Greece. He holds a BA in Economics from the University ofMacedonia, Thessaloniki, Greece, an MSc in Finance and Financial Information Systems fromthe University of Greenwich, London, UK, and a Doctor of Philosophy (PhD) in Project RiskManagement from Democritus University of Thrace, Xanthi, Greece. His research interestsinclude project management, risk management, business outsourcing, applied economics ande-business.

Dimitrios I. Maditinos is Associate Professor of Business Administration and InformationTechnology at the Department of Business Administration, School of Business and Economics,Kavala Institute of Technology, Kavala, Greece. He holds degrees in Business Administrationwith specialisation in Information Technology from Lund University, Sweden, and a PhD inFinance and Financial Modelling from the Business School, Greenwich University, London, UK.Before becoming a full academic, he was working in a senior position for Greek ProductivityCentre, responsible for professional training in information technology and management. Hisresearch interests are in financial modelling, performance measurement systems, capitalmarkets, financial information systems and electronic commerce, with more than 35 journalpublications, 60 conference papers and around 120 references.

Eleftherios I. Thalassinos, PhD (UIC), MBA (De-Paul, Chicago), is a Professor of QuantitativeMethods and International Economics and Finance at the Department of Maritime Studies of theUniversity of Piraeus, Greece. He has been elected Chairman of the Department for three terms(1998-2000, 2002-2004 and 2004-2006) and Director of Graduate Studies for four terms (2003-2005, 2005-2008, 2009-2011 and 2011-today). Since 1998 he has been the General Editor andFounder of the European Research Studies Journal indexed in EconLit, JEL, REPEC, EBSCO,SSRN, SCOPUS and other databases. He has held a Chain Monnet Chair since 1997. His primaryresearch interests are in international economics, quantitative financial analysis, banking andinternational finance. He has extensive research published in journals and in internationalconferences.

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