An Empirical Investigation on the Loyalty of Islamic Banking Consumers

Transcription

1. An Empirical Investigation on the Loyalty of Islamic Banking Consumers Waqas Ali1 Waqas_ali1125 @yahoo.com Rehman Javaid2 Rahmanjavaid@hotmail.com Munira Hassan Ali Tharwani3 arinumuli89@gmail.com Shujahat Ali4 Shujahat@must.edu.pk Shazmina Saher5 Shazminasaher79@gmail.com Limkokwing University of Creative Technology, Cyberjaya, Malaysia1235 Mirpur University of Science and Technology, Mirpur, AJ&K4 ABSTRACT This paper aims to investigate the role of SERVQUAL model in the Islamic Banks of Pakistan. A comprehensive Instrument has been adapted based on the Six Dimensions of SERVQUAL Model. A valid sample of 390 customers of Islamic Banking from various cities of Pakistan has been considered for empirical analysis. The analysis includes the integration of conceptual framework on the OLS estimations. The results of the investigation suggest that among the six attributes, i.e., Reliability, Assurance, Tangibles, Empathy, Responsiveness, and Internal Marketing, only Responsiveness and Internal marketing have insignificant impact on customer loyalty with the intervening variable of customer satisfaction. Remaining dimension of service quality has positive relation with customer satisfaction and loyalty. Business and marketing managers of Islamic banks can use these findings to form their business and marketing strategies to capture an extra share of the market. This study is prone to some limitation such as only examining the perspective of Islamic banking customers in Pakistan and also employed a convenience sampling method which may have an influence on the generalization of results. Present study advances the understanding of SERVEQUAL Model with respect to Pakistani Islamic banks with an additional dimension of Internal Marketing. More pointedly, customer satisfaction is tested as a mediator to examine the strength of relationship between customer satisfaction and loyalty. This study provides an extension towards the body of knowledge and recent literature in Pakistani Islamic banking context.
2. Keywords : Service Quality, Customer Satisfaction, Customer Loyalty, Islamic Banks Introduction For many reasons, the conventional banking system remains under criticism among Muslim and secular economic scholars. For an ideal economic model, the need for an interest-free banking system with more viable and useful products is always emphasized. The Islamic banking system has gained and is gaining much popularity, but still, it does not seem to be taking more effective measures against the giant conventional banking system. In the banking industry, one of the vital instruments to compete and attract customers is awareness and satisfaction of the customers. These tools are crucial for Islamic banks not only to compete with conventional banking but also to compete within the Islamic banking sector to create more awareness and a increased customer satisfaction. Islamic Banking is found to be critical in economic growth by bringing those people to the banking system that was reluctant to use conventional banking. Now, to provide an alternate of traditional banking system, it has become more important to pay attention to service quality and standards of Islamic banks. Service quality measures like SERVPERF and SERVQUAL are considered to be a trademark to examine service performance and quality in any service industry. This study implies SERVEQUAL, one of the most adopted model for examining service quality by Parasuraman et al. (1985b), which consists of service quality dimensions named as: Reliability, Tangibility, Empathy, Responsiveness, and Assurance. The novelty of this research lays in inclusion of a sixth dimension to the already established model that is “Internal Marketing”. The core objective of underlying investigation is to establish the influence of service quality dimensions on financial satisfaction along with customer loyalty. In addition, the influence of satisfaction and contentment on the loyalty of the consumer will also be tested. This study might prove to be accommodating for Islamic banking intuitions to recognize the issues and underlying factors and dimensions necessary for understanding customers’ satisfaction. It may also be helpful in improving “Customer Service Quality” and perception in Islamic Banking. It will also help strengthen the customers’ satisfaction level and their business perception according to their ethical and religious values and become a source of Islamic Banking business growth. The study may also lead to develop, review, renew and reformulate existing and/or new products as per need and expectations of customers in the Islamic Financial System. Background of the Study It is said that “Customer perception is a tradeoff between pre-purchase expectations and post-purchase experience.” This perception becomes the bridge between customers’ next purchase intention and brand loyalty. Any gap between the two can make a big difference in the sale of a product or service. The fast
3. paced growth of Islamic Finance around the globe is quite evident . In Pakistan, it must go a long way to compete with the conventional banking system. Awareness and satisfaction level of Islamic banking customers have been studied previously regarding the products and service. These studies reveal that there are some misconceptions over the similarity of products or more correctly to say, a lot of similarity of handling with products in both rival systems. People look unaware of the terminologies used by Islamic financial institutions, i.e. Murabaha, Ijara, Salam and Istana etc. in comparison to LC and leasing, etc. Moreover, it is noted that the mechanism of Islamic financial system is paying little attention to its customers’ expectations of offers within the Islamic Banking and Economic system. This gap also needs to be bridged through exact information of customers’ expectations with their Banking agents. The use of the SERVQUAL dimensions examining service quality has been modified by the scholars and investigators in Islamic banking and established the “Compliance Dimension” as the most inflectional service quality attribute. Under the CARTERC model, Islamic banking customers are more inclined towards the compliance dimension as indicated in the previous studies. The Islamic banking system has been designed, introduced and implemented in Pakistan for the last three decades. However, its growth is not as fast as it had been expected earlier. Among other reasons, customer’s perception of Islamic Banking Products and Service Quality also seems to be a contributing factor, which influences growth and promotion of Islamic Banking. It is required to identify significant factors or dimensions, which directly affect the perception of the customers regarding satisfaction towards Islamic banking which also, in turn, affect their trust and loyalty. This research is therefore designed to examine the impact of SERVQUAL Model on the establishment of favorable consumer perception about banking with Islamic Banks. Literature Review Reliability The meaning and definition of reliability is the aptitude of a product to present as per the customer expectation. When a product or service has these unique features, it makes the customer feel confident, contended, engaged and accomplished (Wei et al., 2016). However, the definition of reliability from a service perspective is slightly different from the Oxford dictionary. The most cited definition of reliability in services is performing the services accurately as promised (Parasuraman et al., 1988). Moreover, it can also be explained as a degree to which the end user is confident that the service will be performed as per the expectations (Lee et al., 2003). Iberahim and Tuafik et al. (2016), explained reliability more recently as delivering the same quality and standard every time as per the customer expectation.
4. The reliability attribute is very important because it contains the capability to act upon according to the prospects (Narteh, 2015). An optimistic relation between customer satisfaction and reliability has been identified by may many researcher (Alnaser et al., 2017, Ihtiyar and Ahmad, 2015, Izogo, 2017), whereas, Kashif et al. (2015) suggested on the contrary that in Malaysian Islamic banking customers, reliability has no such relationship with consumer contentment. These findings are also backed by Omar et al. (2016), who observed an unimportant affiliation amid reliability and customer satisfaction in Malaysian customers of Arabic restaurants. H1: Reliability has a positive and significant effect on customer satisfaction. Tangible Tangible attribute involves physically available facilities, personnel, equipment, and buildings. Moreover, the physical environment offered at the facility and preference and consideration given to the customers is also considered to the tangible dimension of service quality. Nonetheless, three dimensions of tangible identified by Baker (1986), are design, ambiance and social. Design explains the overall layout of the area, colors, and furnishing, ambiance represents the beauty and aroma of the surrounding, and finally, social is the personnel including employees, staff and other stakeholders. Although these dimensions have no direct relationship with products and services, yet consumers are affected by these dimensions. Lee et al. (2016), held a study on diner’s perception regarding tangible service quality that asserted that tangible factors affect the perception regarding service quality. However, visual factors like presentation had no such influence on the perception statistically. Another study by Al-Azzam (2015), argued favorably that tangible attributes including staff performance, equipment and facilities are optimistically associated with consumer satisfaction. However, tangible attributes of these two studies are not in line with those identified by (Baker, 1986). Previous literature indicates an optimistic association between tangible and service quality (Heung et al., 2000, Khan et al., 2013, Qin and Prybutok, 2009) but all these studies were conducted on restaurants and fast food industry. However, a comparative study in the banking industry of Pakistan also suggested that tangible trait of service quality is among the highest determinant of quality perception for conventional banks in Pakistan (Faizan and Yuan, 2013). H2: Tangible has a positive and significant effect on customer satisfaction. Assurance As per Parasuraman et al. (1985a), the assurance dimension may be understood as good manners and consciousness of the employees and their traits of being confident and trustworthy. Wilson et al.(2012), concluded in their study that assurance becomes a vital concern in the services sector when the clients feel
5. uncertainty about the services offered by a particular service provider . This uncertainty may lead to losing existing and potential customers. Hence, addressing the assurance attribute of service quality becomes vital. Assurance can be delivered by the staff in a way that the client may feel confident about the service like, waiter’s recommendations about food that it is healthy and not contaminated (Wilson et al., 2012). While, in the banking sector, assurance may relate to a piece of favorable financial advice, ease of access to reliable information and neat appearance of the staff (Kumar et al., 2009). A study highlighting the Malaysian context to understand the association amid service quality attributes with customer satisfaction while taking gender as a mediator. The results indicated that assurance has a significant influence on customer satisfaction (Omar et al., 2016). The study indicated the significant role of gender on customer contentment and service quality. Another study doing a proportional assessment of Islamic and traditional banks took place in Pakistan, the results of which, highlights that the assurance attribute is highly perceived by the Islamic banking customers and tangible attribute for conventional banking customers (Faizan and Yuan, 2013). H3: Assurance has a positive and significant effect on customer satisfaction. Responsiveness As the name indicates, responsiveness refers to a quick response and reaction of the service vendor towards the query of the clients. This attribute put emphasis on the quick and attentive behavior of the service vendor in regards to the consumer complaints and problems solving (Wilson et al., 2012). For instance, how long a customer needs to wait for his query or request to be fulfilled, and how accurately a customer’s concern is addressed. Responsiveness may also include the convenience to the clients, like easy job hours, detailed monitoring and security of transaction (Kumar et al., 2009). As per the studies of Omar et al.(2016), responsiveness has no noteworthy association with consumer contentment as per the hierarchal regression results. Moreover, a weak positive relationship was found among responsiveness and customer satisfaction. Arguing favorably, studies of Faizan and Yuan (2013), also suggest that responsiveness attribute has a lower customer perception regarding Islamic banking in Pakistan. Service providers need to enhance the responsiveness dimension of customer satisfaction for an enhanced customer experience resulting in consumer satisfaction and faithfulness (Omar et al., 2016). Kheng et al. (2010), also found responsiveness as insignificant for predicting customer loyalty. However, an extensive amount of literature favors a positive relationship between the two (Ismail and Yunan, 2016, Izogo, 2017, Kashif et al., 2015, Mittal and Agrawal, 2016, Park et al., 2018, Tung et al., 2017). H4: Responsiveness has a positive and significant effect on customer satisfaction.
6. Empathy Term empathy in services may be referred to as courtesy and devotion provided to the customers by the service provider at an individual level . More profoundly, empathy is a feeling conveyed to the customer that he is special and unique (Wilson et al., 2012). Every customer contains an urged to be prioritized and dealt like a king; hence, empathy can be gained by providing this feeling to the customer and conveying them that their needs and requirements are being understood (Wilson et al., 2012). Empathy is an integral attribute of service quality because it indicates the strength of the customer-employee relationship. It is giving customers importance by providing them a space for personalization, and understanding them (Kumar et al., 2009, Parasuraman et al., 1993). Empathy is strongly correlated with customer satisfaction (Omar et al., 2016) also; it is a strong attribute of service quality (Saraei and Amini, 2012). The favorable relation between empathy and satisfaction is also advocated by Lai and Nguyen (2017), based on their research. They examined customer satisfaction of mobile service providers in Vietnam and found empathy as a highly influential factor for customer satisfaction. However, a contradiction is found in a research held by Ilyas et al.(2016), where the result indicates that empathy had no influence on Islamic banking customers’ satisfaction in Pakistan. H5: Empathy has a positive and significant effect on customer satisfaction. Internal Marketing Term internal marketing defined by Grönroos (1981), as the firm presentation to its own personnel and staff. Moreover, it is also referred to as the procedure of retaining, motivating and attracting firms’ current employees that are more qualified (Berry, 1991). The thought of in-house marketing was primarily integrated by Berry et al.(1976), who argued that internal marketing can be regarded highly for service quality. However, the concept was not welcomed and practiced initially by the organizations because of the non-clarity of the concept (Sargeant and Asif, 1998). Variations in understanding the concept have resulted in difficulties to implement the concept. Besides the controversies, internal marketing is examined as a service quality dimension of the past several years. Paul and Sahadev (2018), suggests that internal marketing positively persuade employee contentment and quality of the service that eventually end-up in customer satisfaction. Similarly, service quality being a mediator strengthen the association among in-house marketing and consumer contentment (Alghamdi, 2016). Findings of a study conducted on the south and east European market highlights that the association of in-house marketing with customer satisfaction is boosted by the mediating role of crossfictional goal compatibility (Kadic-Maglajlic et al., 2018). Furthermore, internal marketing is becoming a more acceptable practice by the organizations.
7. H6 : Internal marketing has a positive and significant effect on customer satisfaction. Researchers have extensively examined and favorably argued the correlation of quality of the service, contentment of the consumers, and loyalty of the consumers (Alnaser et al., 2017, Ihtiyar and Ahmad, 2015, Izogo, 2017, Kashif et al., 2015, Kumar et al., 2009, Omar et al., 2016, Wilson et al., 2012) but, previous work on the straight association of service quality dimensions and faithfulness is limited, particularly from a banking perspective. For example, Kheng et al.(2010), examined both direct and indirect association of service quality attributes with satisfaction and loyalty, separately in Malaysian banking customers. The underlying study follows the same model as by Kheng et al. (2010), but with the extension of one dimension of “Internal Marketing.” As pervious section of the literature cites the association of service quality attributes with consumer contentment, the following section will go through the literature on service quality attributes and consumer faithfulness relationship. Reliability and Loyalty Customer loyalty, a common marketing term, used when a customer seems to be loyal to a service or a product. A formal definition of customer loyalty can be, the repeated purchasing trend along with positive inclination towards a brand (Day, 1976); or a psychological bond combined with the behavior to purchase repeatedly (Jarvis and Wilcox, 1977). Baloglu(2002), explained customer loyalty could not only be described by the repeated purchase because repeated purchases can only be behavior and behavior is independent towards brand loyalty and commitment. The attributes of service quality may predict the satisfaction of the customers, and a satisfied consumer is an indicator of customer loyalty. Hence, these quality attributes can directly influence consumer faithfulness. The study of Izogo (2017), on Nigerian telecom customer, asserted that customer loyalty is directly predicted by the service reliability as reliability means delivering what is promised. Alnaser et al.(2017), argued favorably in the cultural perspective of Arabian Islamic banking customers that, reliability has strong relation with customer satisfaction that influences consumer faithfulness. Nonetheless, this investigation does not examine the direct relation of service reliability and consumer loyalty. H7: Reliability has a positive and significant effect on Customer Loyalty. Tangible and Loyalty Wong and Sohal (2003), investigating the direct impact of service quality on loyalty in the Australian market, asserted tangibles as the highest predictor of consumer loyalty among rest of the service quality attributes. Nguyen (2018), also found in the fast-food sector of the United Kingdom that tangible was the
8. foremost and highly influential interpreter of consumer contentment . As per the study of Park et al. (2018), tangible is the most stable attribute of service quality. On the contrary, Kheng et al. (2010), argued that there is not important impact of tangibles attribute on consumer loyalty. The reason behind is the emergence of IT due to which there is a gradual decline in the reputation of tangible as a measure of loyalty, especially, in the banking segment where mobile and internet banking has revolutionized the banking service industry. H8: tangible has a positive and significant effect on Customer Loyalty. Assurance and Loyalty Mittal and Agrawal (2016), held their research in India to inspect the influence of price clarity on assurance, reliability, and loyalty. Findings indicate that loyalty and assurance are substantially affected by price transparency; however, a straight relation of price transparency and loyalty was missing in the results. Assurance is observed to be the second highest dominant factor of customer satisfaction that results in customer loyalty by Lai and Nguyen(2017). With technology evolution, businesses are moving towards the adoption of technology and offering e-services in the form of mobile apps and online services (Farooq & Raju, 2019).This advancement has extensively been observed in the banking industry where mobile banking and e-banking is offered to customers. E-service quality attribute within Pakistani banking sector was explored by Rahi et al. (2017), where it was found that assurance to be a contributing factor towards the adoption of internet banking and consumer devotion. Similarly, in the health sector of Malaysia, the correlation was observed between assurance customer loyalty (Ismail and Yunan, 2016). H9: Assurance has a positive and significant effect on Customer Loyalty. Responsiveness and Loyalty In today’s fast-paced life where everything is required to be done as quickly as possible, removing the time constraint has become a competitive edge technique for many service providers. Therefore, responsiveness may find to be handy in this scenario by catering customers issues timely and responsibly. Responsiveness, ensured at the employee or staff’s end, plays a vital role of moderator for guest satisfaction and loyalty (Tung et al., 2017). An extensive recent literature indicates a favorable correlation between responsiveness and customer loyalty (Ismail and Yunan, 2016, Izogo, 2017, Kashif et al., 2015, Mittal and Agrawal, 2016, Park et al., 2018, Tung et al., 2017), while this relationship is opposed by Kheng et al. (2010) with an argument based on their study findings that responsiveness has no considerable connection with client loyalty in the Malaysian banking sector.
9. H10 : Responsiveness has a positive and significant effect on Customer Loyalty. Empathy and Loyalty Customer loyalty can be gained and maintained by developing a friendly relationship with the customers by the employees and staff (Butcher et al., 2001). This relates to the empathy attribute that is found to be an imperative aspect of loyalty (Butcher et al., 2001, Ndubisi, 2006). This is exactly in proportion to the study of Kheng et al. (2010), who suggested a significant relationship among empathy and customer loyalty for banking consumers. Moreover, consumer devotion was examined by Wong and Sohal (2003), at two levels of retail business, company level, and interpersonal level. A substantial connection stuck between quality and consumer loyalty was observed at both the levels while tangible being a strong indicator of customer devotion at the corporation stage while empathy was at the individual stage. Lai and Nguyen (2017), found empathy to be the highest influencer on consumer’s contentment that leads toward customer loyalty. H11: Empathy has a positive and significant effect on Customer Loyalty. Internal Marketing and Loyalty Internal marketing generally relates to the job satisfaction and employee retention, whereas, the association of in-house marketing, service quality, the satisfaction of internal customers and loyalty has been examined by few (Alghamdi, 2016, Joseph, 1996, Kadic-Maglajlic et al., 2018). Another research found a constructive association between the two variables with the mediator of organizational behavior, job contentment and affective commitment in the telecommunication organizations in Pakistan (Awan et al., 2015), and positive influence of internal marketing on job satisfaction. Similarly, Alghamdi (2016) claimed that internal marketing as an attribute of service quality effects job satisfaction. While job satisfaction is stepping stone towards customer loyalty (Awan et al., 2015). H12: Internal Marketing has a positive and significant effect on Customer Loyalty. Customer Satisfaction and Loyalty If a client is truly loyal, he must be completely satisfied (Hart and Johnson, 1999). Most of the above-sited literature has identified a positive correlation between service quality, consumer satisfaction, and loyalty. Satisfaction has been used as an intermediary amid quality and loyalty. A satisfied customer forms a constructive approach towards a product and repurchase intention that leads to loyalty (Vázquez‐Casielles et al., 2009). Successfully achieving the goal of satisfied customers results in obtaining consumer trust and
10. loyalty (Amin et al., 2011), that leads to an increased spread of word-of-mouth (Jiráková, 2017), helping companies financially to gain more profits (Oliver, 1979). H13: Customer satisfaction has a positive and significant effect on Customer Loyalty. Conceptual Model Figure 1: Conceptual Model Research Methodology The data gathering technique includes the primary source consisted of a comprehensive survey via an objective oriented questionnaire from the indented population of clients of Islamic Banking in Pakistan. A sample of 450 customers was targeted to gain the responses regarding service quality, customer satisfaction, and customer loyalty. Out of 450 survey questionnaires, 390 responses were received in considerably suitable form. Hence, the response rate remains at 86.67%, which is reasonable and fair as identified by Mugenda (1999). To achieve the objective of this research, convenience sampling (Non-Probability) method was employed for data collection. The reason of using convenience sampling method was because of unknown population size.
11. Instrument Scale Measurement of reliability , tangible, assurance, responsiveness, empathy and internal marketing study scale was adopted from Amin and Isa (2008), and Foreman and Money (1995), with some modifications. The underlying study utilizes five items of reliability, three items of tangible, four items of assurance, four items of responsiveness, six items of empathy and five items of internal marketing. For the analysis of consumer satisfaction, seven-item scale was taken up from Afthanorhan et al. (2019), with some modifications. Customer loyalty was analyzed through nine items scale taken up from Hoe and Mansori (2017) with required modifications. Results and Discussion CFA 1st Level The below image depicts the outcomes of Confirmatory Factor Analysis by using SmartPLS v.3.2.8. Figure 2: Confirmatory factor analysis at the first level With the integration of SmartPLS, factor loadings are presented in the above displayed figure. The acceptable threshold for factor loading is >0.7, >.6 or >0.5. Present study uses the last threshold for accepting the loading which is >0.5 also recommended by social sciences researchers. Findings from the
12. analysis explain that there are few factors having value less than the acceptable threshold . The underlying table depicts the loading values of each variable. Table 1: Factor Loadings Items Loading Values Tangible1 0.836 Tangible2 0.552 Tangible3 0.893 Reliability1 0.727 Reliability2 0.948 Reliability3 0.353 Reliability4 0.431 Reliability5 0.332 Responsiveness1 0.442 Responsiveness2 0.914 Responsiveness3 0.832 Responsiveness4 0.704 Assurance1 0.690 Assurance2 0.797 Assurance3 0.595 Assurance4 0.811 Empathy1 0.495 Empathy2 0.785 Empathy3 -0.011 Empathy4 -0.164 Empathy5 0.238 Empathy6 -0.125 Internal Marketing1 0.929 Internal Marketing2 0.409 Internal Marketing3 0.622 Internal Marketing4 0.055 Internal Marketing5 0.543 Customer Satisfaction1 0.607 Customer Satisfaction2 0.771
13. Customer Satisfaction3 0 .766 Customer Satisfaction4 0.693 Customer Satisfaction5 -0.002 Customer Satisfaction6 0.675 Customer Satisfaction7 0.716 Customer Loyalty1 0.718 Customer Loyalty2 0.724 Customer Loyalty3 0.696 Customer Loyalty4 0.631 Customer Loyalty5 0.671 Customer Loyalty6 0.622 Customer Loyalty7 0.719 Customer Loyalty8 -0.438 Customer Loyalty9 0.477 The underlying table, Table 2, presents the values of Alpha, reliability and AVE. The acceptable threshold for the value of Cronbach’s Alpha must be greater than .70; in underlying research, all the variables have values within the acceptable range. Except for empathy, internal marketing, and reliability, all the value of composite reliability is also under the acceptable threshold. However, AVE values of customer loyalty, customer satisfaction, empathy, internal marketing, and reliability values are <0.50. Table 2: Construct Reliability and Validity Construct Assurance α 0.729 CR 0.816 AVE 0.532 Customer Loyalty 0.734 0.815 0.411 Customer Satisfaction 0.750 0.817 0.429 Empathy 0.754 0.357 0.201 Internal Marketing 0.731 0.637 0.324 Reliability 0.752 0.660 0.333 Responsiveness 0.721 0.823 0.558 Tangible 0.763 0.775 0.554
14. Due to some discrepancies in the value of above stated analysis and for the improvement of results , the analysis procedure was run again, and the items were deleted with the values less than the accepted threshold which is <0.50. The outcome values of the subsequent attempt to run CFA are given below. 5.3 CFA 2nd Level The below figure shows the results of CFA post filtering the items ( deleting the items with loading <0.50). Figure 3: Confirmatory Factor Analysis at Second Level In the above figure depicts values of loading after the analysis run by the SmartPLS. Generally, the loading of each item must be >0.7, >0.6 or >0.5. In this research, we have integrated the last criteria of >0.5 which is recommended by social sciences researchers. The results found that all items with loading value are greater than recommended (0.50) value. The values are given in below table.
15. Table 3 : Factors Loadings Items Tangible1 Tangible2 Tangible3 Reliability1 Reliability2 Reliability4 Reliability5 Responsiveness2 Responsiveness3 Responsiveness4 Assurance1 Assurance2 Assurance3 Assurance4 Empathy1 Empathy2 Empathy3 Empathy4 Int. Marketing1 Int. Marketing3 Int. Marketing4 Int. Marketing5 Customer Satisfaction1 Customer Satisfaction2 Customer Satisfaction3 Customer Satisfaction4 Customer Satisfaction6 Customer Satisfaction7 Customer Loyalty1 Customer Loyalty2 Customer Loyalty3 Customer Loyalty4 Customer Loyalty5 Customer Loyalty6 Customer Loyalty7 Customer Loyalty9 Loading Values 0.820 0.542 0.897 0.712 0.952 0.704 0.897 0.919 0.854 0.731 0.693 0.812 0.591 0.797 0.615 0.833 0.704 0.897 0.940 0.612 0.857 0.797 0.597 0.778 0.767 0.704 0.578 0.714 0.711 0.733 0.693 0.690 0.679 0.642 0.743 0.704
16. The underlying Table 4 depicts the value of CA , CR and AVE. Acceptable threshold value for Cronbach’s Alpha is >0.70, in our dimensions value is >0.70 which is within the acceptable range (Hair et al., 2006). The value of Composite Reliability and AVE are also within the prescribed range. Table 4: Construct Reliability and Validity Construct Assurance α 0.729 CR 0.816 AVE 0.532 Customer Loyalty 0.754 0.823 0.509 Customer Satisfaction 0.792 0.851 0.521 Empathy 0.776 0.752 0.512 Internal Marketing 0.795 0.756 0.534 Reliability 0.777 0.731 0.523 Responsiveness 0.721 0.823 0.558 Tangible 0.763 0.775 0.554 Model Testing The below Table 5 shows the results of our model, the results indicate that tangible, reliability, assurance and empathy have an increasing impact on customers loyalty by the mediation of customer satisfaction. Results also illustrates that a greater contribution of assurance towards customer satisfaction and internal marketing has least contribution towards customer satisfaction. Results show tangible (β= 0.259, p< 0.05), reliability (β = 0.129, p< 0.05), assurance (coefficient = 0.317, p< 0.05) and empathy (β = 0.278, p< 0.05) has significant and positive impact on customer satisfaction. Contrarily, responsiveness (β = 0.154, p> 0.05) and internal marketing (β = 0.013, p> 0.05) has an insignificant effect on financial satisfaction. Tangible (β = 0.117, p< 0.05), reliability (β = 0.121, p< 0.05), assurance (β = 0.019, p< 0.05) and empathy (β = 0.073, p< 0.05) has positive and significant effect on customer satisfaction. Diversely, responsiveness (β = 0.211, p> 0.05) and internal marketing (β = 0.313, p> 0.05) has an insignificant impact on customer loyalty.
17. Table 5 : Path Coefficient Constructs Tangible Reliability Responsiveness Assurance Empathy Internal Marketing Customer Satisfaction Customer Satisfaction 0.259** 0.129* 0.154* 0.317** 0.278** 0.013 -- Customer Loyalty 0.117* 0.121* 0.211* 0.019 0.073 0.313* 0.632** * p-value is significant at <0.05 ** p-value is significant at <0.01 The below Table 6 shows that consumer contentment is a significant variable between tangible, reliability, assurance, empathy and customer loyalty in our study. Diversely, customer satisfaction has insignificant between responsiveness and internal marketing. Table 6: Specific Indirect Effect Relationships Beta Value P Values Tangible -> Customer Satisfaction -> Customer Loyalty 0.143 0.000 Reliability -> Customer Satisfaction -> Customer Loyalty 0.127 0.000 Responsiveness -> Customer Satisfaction -> Customer Loyalty 0.061 0.067 Assurance -> Customer Satisfaction -> Customer Loyalty 0.165 0.003 Empathy -> Customer Satisfaction -> Customer Loyalty 0.182 0.011 Internal Marketing -> Customer Satisfaction -> Customer Loyalty 0.002 0.236 Discussion In present day’s stiff business atmosphere, service quality plays a key role in gaining an edge over competitors in any services business (Farooq et al., 2009) with no exception to Islamic banking industry. Since its inception, Islamic banks are competing based on stiff margins with its rival giant of conventional banking industry (Srairi, 2010). The underlying study is aimed at examining the influence of service quality dimensions on consumer happiness and customer loyalty of Islamic banking customers. The dimensions of service quality include tangible, reliability, responsiveness, assurance, empathy and internal marketing. Current investigation establishes that the tangible attribute of service quality has a constructive correlation with consumer contentment which is in line with the previous researches (Lee et al., 2016, Alnaser et al.,
18. 2017 ). Customers of Islamic banks perceive that the physical facilities (personnel, ambiance, equipment and building) offered by Islamic banks contributes toward satisfied customer base resulting in customer loyalty. With respect to the reliability attribute, results of this research are similar to the findings of Alnaser et al. (2017), that suggests a constructive influence of reliability on satisfaction. As per the consideration of Islamic banking consumers, it was found that Islamic banks in Pakistan provide their services as they promise to deliver. Responsiveness is set up to have an insignificant effect on the contentment of the customers and their faithfulness. These findings are subsequent to the results presented by the Ye et al. (2017). Moreover, the results illustrates that if Islamic banks do not provide quick response to their customer, it might have a negative impact on the customers’ satisfaction and loyalty. The results with respect to assurance suggests a significant influence on satisfaction and loyalty similar to Roslan et al. (2015), for customer satisfaction and Alnaser et al. (2017), for customer loyalty. Subsequent to the results of Ye et al. (2017), underlying research also proposes similar findings where empathy is having an intimate correlation with the quality and loyalty of the customer. However, an insignificant impact of internal marketing on consumer happiness and faithfulness is observed in this research which is in contradiction of the results of the study of Paul and Sahadev (2018), who argued a favorable relationship between the two variables. Present research also established that there is a mediating role of satisfaction among loyalty and service quality similar to the results of Akbar and Parvez (2009). Implications and limitations Banking industry of Pakistan has welcomed Islamic banking and now a sum of 22 Islamic banks are providing services throughout Pakistan with 5 fully-functional Islamic banks with 17 traditional banks providing Islamic services with 2,869 branches throughout Pakistan by the end of March, 2019 (SBP, 2019). This steady but continues growth of Islamic Banking industry in Pakistani market suggests that there is still an untapped potential market share of Islamic banking customers that is needed to be captured by Pakistani Islamic banks. To achieve this potential, service quality is the key; specifically, in a stiff aggressive environment where the traditional banks are serving from centuries. The results of this research are meaningful for the business executives of Islamic banks who form policies to market their products to the existing and potential customers. To be more specific, reliability, tangibility, assurance and empathy are found to be critical from consumer perspective in Pakistani banking sector. Polishing and enhancing these areas may result in a substantial expansion of Islamic finance in Pakistan.
19. The underlying investigation is exposed to some limitations that may be considered for future researches . This current provides a perspective of Islamic banking customers while it is evident that most of the banking customers in Pakistan hold conventional and Islamic bank account simultaneously. Therefore, a comparison between the two banking services providers with respect to SERVQUAL model may provide a better insight. In addition, the present study used convenience sampling method for data collection, due to which, the results of this study may not be comprehensive to construct a general perspective. Conclusion For better performance and valuable long-term loyal customers, businesses are supposed to not only fulfill the expectations of the consumers but to exceed them. Keeping in view this ideology, present research was aimed to examine the factors of service quality that influence customer satisfaction and loyalty. In addition, the satisfaction has been tested as an intervening construct between the attributes of service quality and loyalty of the customers. After statistical analysis and validating responses as per set thresholds, the study found that from a prospect of Pakistani banking consumers, the factor of service quality have a noteworthy association with satisfaction. Meanwhile, internal marketing and responsiveness are not found to have a significant influence on satisfaction and loyalty, whereas, assurance is the most contributed factor of service quality in Pakistan. Based on these findings, study concludes that Islamic banks put more focus on the above stated attributes and a minimal attention to internal marketing and responsiveness to enhance banks performance effectively and efficiently. In addition, this study also found that the consumers of Islamic banks in Pakistan are contented, happy and loyal. References AFTHANORHAN, A., AWANG, Z., RASHID, N., FOZIAH, H. & GHAZALI, P. 2019. Assessing the effects of service quality on customer satisfaction. Management Science Letters, 9, 13-24. AKBAR, M. M. & PARVEZ, N. 2009. Impact of service quality, trust, and customer satisfaction on customers loyalty. ABAC journal, 29. AL-AZZAM, A. F. M. 2015. The Impact of Service Quality Dimensions on Customer Satisfaction: A Field Study of Arab Bank in Irbid City, Jordan. The International Institute for Science, Technology and Education (IISTE). ALGHAMDI, A. A. 2016. The impact of the service quality as a mediating variable on the relationship between internal marketing policies and internal customer satisfaction: an empirical study at Taif University. Journal of Marketing Management, 4, 104-124.
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