Islamic banking in Palestine is considered to be still at its infancy stage. However, it has been able to capture a lot of interest and support in the region mainly because of its attractive products and the role of Islamic banking in Palestine economy CITATION Reu16 \l 1033 (Reuters, 2016). Some of the products and services that these banks offer to their customers include interest free loans, and entering into parallel contracts with their customers in business transactions whereby; the two parties share profits and losses, and it has led to creation of wealth (Kassim & Asiah Abdullah, 2010). From an economic perspective, Islamic banks have contributed to a flow of wealth between people, provision of capital to start different business projects, and it has contributed to establishing of new jobs in Palestine.
Service quality is considered to be an intangible, variable and it is regarded as an integral characteristic, which is seen as unique to the services that are offered. Due to the increase of global competition, providing quality service is considered to be a key for success. Most marketing experts believe that service quality is among the top strategies that are currently shaping the marketing and business strategy (Amin, Isa, & Fontaine, 2013). For banks to increase the number of customers that they serve on a regular basis, they should not only provide good quality products; they should also be willing to render excellent services to satisfy their customers needs.
In reference to customer satisfaction, it is a measure of how different products or services that have been supplied by a company will meet or surpass a customers expectation. It is mainly used by businesses and market owners as a metric in order to manage and improve a business in terms of the products and services that are being offered to the customers (Flavian, Torres, & Guinaliu, 2004). It is also considered to be a leading indicator in terms of assessing a consumers repurchase intentions and also loyalty. It is important to point out that the brand image of the Islamic banks is determined by the impression that the targeted customers have in relation to that brand (Bravo, Montaner, & Pina, 2009). As has been pointed out, Islamic banks have managed to build a positive image in Palestine based on the products that they offer, and that they ensure that the bank customers can manage to conduct their bank transactions while observing the religious teachings in relation to financial dealings (Bontis, Booker, & Serenko, 2007).
The objective of this study is to assess the role of service quality, customer satisfaction, and bank image of the Islamic banks in Palestine on customer loyalty and recommendation. The paper begins with a review of the literature on the different aspects that have been mentioned. Hypotheses were then developed to conduct tests and also illustrate the empirical approach and then perform data collection (Alshurideh, Al-Harawy, & Mohammad, 2017). The implications of the findings were then discussed, conclusions made with various recommendations.
2. Conceptual Framework and Hypotheses
2.1 Underpinning Theory
In this theory, customer loyalty is determined using the cognitive-affect-conation pattern model. This model assesses customer loyalty at different stages when they are interacting with a certain product. There are three stages of assessment- cognitive loyalty-affective, loyalty-conative, and loyalty-action stages. In the first phase, a customers loyalty is based on the experience that he or she has been provided in relation to the product. At this point, a customers loyalty is inconsequential mainly due to the fact that the opinion that he or she has in regards to a certain product is based on other peoples opinions rather than his or her own opinion (Bravo, Montaner, & Pina, 2009). The second phase is known as affective loyalty, and during this period, a fondness of the product or service that an organization provides will have started being developed based on experience. The next phase is conative loyalty, which will be established through the satisfaction of repeated events in relation to the products or services provided by an organization to its customers.
2.2Definition of Concept
2.2.1 Service Quality
A service is defined as an action that is meant to be beneficial to a customer. Therefore, service quality is considered to be the difference between the expected performance of a certain service, and its actual performance (Fornell, Johnson, Anderson, Cha, & Bryant, 1996). Service quality is seen as the extent in which a certain service fulfills the expectations of the customers. It normally determines the impression that a customer will have towards a certain product or service.
2.2.2 Customer Satisfaction
As has been stated before, customer satisfaction refers to an organization fulfilling its customers expectation in relation to the products and services that it offers. Therefore, if the perceived performance matches or it exceeds his or her expectation, then the customer will be satisfied, however, if it is not, then it is highly likely that they will be dissatisfied (Kassim & Asiah Abdullah, 2010). In relation to this theory, it has been determined that prior to the purchase of a product or service, consumers have certain expectations on how a product will fulfill a certain need. The expectations that the consumers have are derived from past experiences of the product or similar products, and the existing attitudes held by a customer. There are different approaches that can be used to determine customer satisfaction in relation to a certain product.
The first one is the transaction-specific evaluation which focuses on a customers feelings in response to a certain product or service that they wish or have purchased. A customer may become satisfied or dissatisfied with a product based on its cost and what he or she assumed it will fulfill. The other approach focuses on customer satisfaction or dissatisfaction as cumulative satisfaction. In this paper, it establishes how customer satisfaction level affect their loyalty in relation to Islamic banks in Palestine.
Previous studies on customer satisfaction of the Islamic banking industry have established that there are different factors that determine customer satisfaction and therefore their loyalty levels. Othman and Owen (2002) established that a majority of Kuwait Islamic banking customers are satisfied due to their overall and personal contact with the banking staff (Radman, Othman, & Owen, 2005). In another study that assessed customer satisfaction levels in Malaysian banks, various factors such as fast and efficient services, confidentiality, and transaction speeds are the things that determine customer satisfaction levels. It is important for Islamic banks in Palestine to establish the various factors that affect their consumers, if they want to increase their consumer base.
2.2.3 Bank Image
The Islamic bank images from the customers perspective is the association that they have when they hear the name or while they are conducting their transactions with these institutions. Image has both a functional and emotional component. Functional component focuses on tangible dimensions that are easy to identify and measure. On the other hand, emotional component is the psychological aspects that are determined by an individuals experience and attitude towards a certain organization. The image that customers will have in relation to the Islamic banks is a result of their experiences, beliefs, feelings and knowledge that they have about these institutions.
2.3 Relationship between Different Variables
Various studies have provided empirical evidence that illustrate customer satisfaction is positively linked to the image, which ultimately determines customer loyalty and recommendation. Bontis et. al (2007) state that a companys reputation can be significantly improved if the organization focuses on satisfying its customers (Bontis, Booker, & Serenko, 2007). Andreassen and Lindestad (1998) pointed out that higher customer satisfaction will ultimately contribute to a higher reputation, which will have a positive influence on a companys overall image (Wallin Andreassen & Lindestad, 1998). Amin et. al (2011) also demonstrated that customer satisfaction has a positive influence or impact on the overall customer loyalty (Amin, Isa, & Fontaine, 2011).
The impact of perceived service quality and how it affects customer loyalty is seen to be one of the most researched topics in marketing theory. Shannak et. al. (2012) pointed out that by improving service quality, an organization will be able to achieve a competitive advantage, and this will ultimately lead to customer loyalty (Shannak et al., 2012). Gilbert and Veloutsou (2006) stated that most companies are now focusing on improving their service quality in order to attract more customers. Service quality is also regarded to be an antecedent of customer satisfaction, which determines customer loyalty. The following hypotheses were proposed in this study:
Service quality has a positive influence on customer loyalty
Customer satisfaction has a positive influence on bank image
Customer satisfaction has a positive influence on customer loyalty
Bank Image has a positive influence on customer loyalty
The purpose of this study is to have a better understanding of how different variables such as service quality, customer satisfaction, and bank images of Islamic banks in Palestine affect customer loyalty and recommendation. In this study, it applied the quota sampling technique, and in order to develop these quotas, the researcher listed relevant control characteristics, and then determined the distribution of these characteristics in the target population. The data was collected using structured questionnaires. The period of data collection was from July to early September (4th of September 2017).
All the respondents of this study were Islamic bank customers (the respondents needed to have a bank account with an Islamic bank in order to be considered for this study). The researcher targeted bank customers from the following regions in West Bank, Palestine- Qalqilyah, Nablus, and Ramallah cities. The selection of bank branches in different regions was intended to ensure that there was generalizability of the findings of this study, and a representation of Islamic bank customers in the country.
Questionnaires were distributed to every fifth customer that visited a branch where the researcher was at a certain period. It is also important to point out that the researcher visited these banks at different times of day, various days of the week or month for sampling purposes. All the respondents who answered the questionnaires were assured of confidentiality. A seven-point Likert scale was used in order to determine customer perceptions in relation to service quality, customer satisfaction, and bank image, and their impact on customer loyalty. A score of (1) was strongly disagree, while that of (7) was strongly agree, with (3) representing a neutral score.
Service quality was measured using the SERVQUAL instrument as was proposed by Parasuraman et al. (1998). Customer satisfaction indicators were measured by using the adapting scales that was developed by Fornell et al. (1996). Bank image was measured using the indicators that were proposed by Flavian et al (2004).
4. Data Analysis and Results
A total of 500 questionnaires were distributed, and 360 were returned- a 72 percent response rate. 125 of the respondents were male, and the remaining 235 were female.
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