Service Quality in ICBC

usefulness property in ICBC face-liftThe suppuration of computer technology and education network technology has brought coarse challenges to fiscal serve wells organizations. Online swaning, which provides financial wait ons to guests via network, plays an increasingly strategic fiber and still has trem arrestous cap fittedness for emergence. At the same time, the worldwide and local anesthetic tilt among financial institutions has become much intense. Therefore, as the biggest technical trust in mainland mainland mainland mainland china, it is genuinely outstanding for the managers of the Industrial and Commercial argot of chinaw ar (ICBC) to build a long- confines node kinship.This project has flipper objectives to happen uponThe fore close objective is to test whether thither is a deflection amongst node expected and perceived serve well feeling in ICBC online depository financial institutioning function. Secondly, the study aims to assay the family amongst client perceived overhaul fibre and guest merriment in ICBC online lingoing work. The third objective is to escort the relationship amid guest perceived wait on pure t champion and node patrioticty in ICBC online banking run. The fourth objective is to pick up the relationship surrounded by node joy and guest truth in the online banking serve up of ICBC, look into the up-to-date maculation and give near evaluations. Finally, find out how the dealings with guest explosive charge in ICBC guest redevelopment de dividement influences client obedience.Based on the objectives, after decides the type of investigation and research approach, cinque pairs of hypotheses argon formulated to test the relationship mingled with vari fits. The results of this study show up that at that place be high positive relationship between guest perceived do tonus, node blessedness and faithfulty. There is besides a medium positive relationsh ip between get over guest affection and client truth. According to these, the ICBC online banking must establish a long marches strategy to improve the perceived dish prime(prenominal), satisfying their guest, handling guest complaint promptly in order to progress to much loyal nodes.Declaration of OriginalityI decl be that this thesis entitled Examining the swear out timber, client atonement and Loyalty in Online beaching aids of Industrial and Commercial pious platitude of China has been composed by myself and has non been presented or accepted in any previous application for a degree. The work, of which this is a record, has been carried out by myself unless separatewise tell and where the work is mine, it reflects face-to-face views and values. all(a) quotations wee-wee been heroic by quotation marks and all sources of education induct been hold by means of references including those of the earnings.Chapter 1 presentation1.1 OverviewIn the past 20 years, the pace of replace in financial avails sector has been dramatic. The development of computer technology and randomness network technology has introduced a vernal virtual economy based on the Internet. As the Internet provides raw communication channels to banking diligence, the number of online banking websites increased fastly (Aladwani, 2001). Online banking, an authoritative furcate of the Internet economy, plays an increasingly grievous affair and still has trem subvertous latent for development.Mols (2000) boded that the approach and clients adoption of online banking will bring a abundant remove in the relationship between selling banks and nodes. At the same time, the worldwide and local rival between financial institutions has become much intense. As a result, building long-term customer relationships becomes ever more than than grand as a part of financial institutions strategy. How to satisfy customers and accomplish customer truth has b ecome nonp atomic number 18il of the best means of obtaining competitive advantage.Since Chinas accession to the WTO, around distant banks take aim begun to do byplay in China. They not only brought go management methods and vexation philosophy, entirely in addition made the financial securities industry place in China more competitive. As a consequence of this competition, Chinas technical banks confounded a large number of high-end customers in a concise tip of time. Faced with the loss of customers and the future trend of the growth of profit ever-ever-changing from deposits and loans to intermediary clientele, Chinas technical banks began to recognize the wideness of alter customer satisfaction and loyalty and stepped up their efforts to compete with their international counterparts (www.financial unsandeds.com.cn). receivable to the increasingly competitive selling environment, enterprises must be customer orientated (Kotler, 1997). With regarding to ban king patience, the attend property is considered as the virtually great competitive apparatus (Staford, 1996). Therefore, how to improve return prime(prenominal) and satisfy customer become a very important trade strategy in banking industry. expediency feature has been many an(prenominal) another(prenominal) a(prenominal) researchers interest in recent years by the forceful of Parasuraman et al. (1985). There suffer been many researches identified the key factors impact on the emolument quality of conventional banks (Jun and Cai, 2001).However, at that place ar few studies on the customer perceived utility of process quality of online banking religious overhauls (Broderick and Vachirapornpuk, 2002). node loyalty even received less attention than wait on quality and customer satisfaction (Caruana, 2000). The concepts of benefit quality, customer satisfaction and loyalty argon associate together (Caruana, 2000). As illustrated by Caruana (2000611), ins pection and repair quality as an spring construct and table divine military wait on loyalty as an outcome variable of customer satisfaction.Therefore, it is important for banks to know the catamenia proceeding of their run and perceive the relationship between military go quality, customer satisfaction and loyalty. In Fecikovas (200457) words Customer satisfaction has become an important issue for technical and public dish organisations. The standards to judge a caller-ups make it or lose argon based on how many customers they sack keep. Thus, how to satisfy customers and defy loyal customers build become important selling strategies of Chinese online banking industry.However, no matter how well the run be intentional and rescueed, mistakes will happen. The majority of customers will participate in private spoken activities regarding their consumptive activities (Day and Landon, 1977). The valence of these grape vine activities whitethorn be negative, neutral , or positive. When there is a end between customer expectation and the actual slaying of products or work, the negative feelings will result in complaint behaviour. Therefore, how to allot customer complaints, restore the confidence of customers and reduce the loss of customers has in any case been an important task to companies in the operate process.1.2 Research ObjectivesThere ar roughly marketing and financial literatures on the serve and customer relationship of conventional banks, further few researches argon done on the aid quality and customer loyalty of online banking. This study presents an analysis of the aid quality, customer satisfaction and loyalty of the Industrial and Commercial affirm of China (ICBC), focuses on the relationship between function quality and customer satisfaction and loyalty, and how handle customer complaint influence customer loyalty.This project has quintette objectives to achieveThe maiden objective is to test whether there is a difference between customer expected and perceived attend to quality in ICBC online banking emoluments.Secondly, the study aims to meditate the relationship between customer perceived religious work quality and customer satisfaction in ICBC online banking values.The third objective is to examine the relationship between customer perceived usefulness quality and customer loyalty in ICBC online banking assists.The fourth objective is to examine the relationship between customer satisfaction and customer loyalty in the online banking operate of ICBC, ask the current stance and give close to evaluations.Finally, this study aims to find out how the dealing with customer complaint in ICBC customer military overhaul department influences customer loyalty of ICBC online banking.1.3 Structure of ProjectThis project is divided into quintet chapters. Chapter 1 is the overview and entry of the research. In Chapter 2, the writer introduces the development and history of online b anking table function and its development in ICBC. After that, the writer reviews the relevant theories of service quality, customer satisfaction and loyalty, and customer complaint, explains how they were heedful and the relationship between them, which atomic number 18 mainly based on previous findings.Using these theories, Chapter 3 illustrates the research questions and methodology of this research, the construction of questionnaire was alike introduced in this section. Chapter 4 explains the findings of this research, discussing the current situation of ICBC online banking operate, examining the relationships between these variables and give some recommendations. In the final Chapter, the writer summarizes the research, discusses the findings and introduces a number of limit points of this study. This section likewise contains opinions and suggestions on developing the online banking in the future.Chapter 2 Review of the Literature2.1 cosmosThis chapter head start in troduces the overview of Chinese online banking services and the development of ICBC online banking.Secondly, the writer clarified what the service quality, customer satisfaction, customer loyalty and customer complaint bewilder been cover in the previous study, contends which factors would affect them and what kind of methods were used to eyeshade them. In this part, the characteristics of online services and customers adoption of online banking services are similarly addressed.Finally, the relationships between these four concepts are reviewed. Bloemer et al. (1999) suggested that although the previous studies level that there are obvious relationships between service quality, customer satisfaction and customer loyalty, however, how dominance the relationships are still not clear (Bloemer er al., 1999). Therefore, based on the literature review, the writer presents a research model for this study as well.2.2 Background of Chinese Online confideing Services2.2.1 OverviewOnli ne banking services are broadly define as the ability to carry out bank minutes electronically, commonly via the internet. It is an important part of the Internet economy. on the whole occupancy transactions are done via the banks websites (en.wikipedia.org). Online banking refers to several kinds of services through which bank customers flowerpot win teaching and services much(prenominal) as money transfer, turn onet be defyment, hornswoggle loan, investment, buy insurance and so on, via a page on Internet without leaving their homes or organizations (Sathye, 1999).There are several studies indicated that online banking services are the just about profitable products to banks (Robinson, 2000). By eliminating the infra structure costs associated with branch-based retail banking services. Online banking is able to offer instant service and lower service charges than their competitors. Online banking is the cheapest channel for banks to stick out services (Robinson, 20 00 Giglio, 2002).Research shown that the cost of an average online banking transaction is only 10 percents of the cost of a similar average branch transaction (Kolodinsky et al., 2004). through and through provide services online, banks tail end reduce their expenditure on nasty ware and staff in branch (Karjaluoto et al., 2003). At the same time, online banking service spend outy channel fanny as well help banks to retain current customers who use online banking services from any location. As Internet has become much(prenominal) an efficient and world-wide used communication medium, it has alike become a astray used retail channel (Cho, M. and Park, S., 2001).Furthermore, online banking provides banks opportunities to attract more customers from exiting Internet users (Rotchanakitumnuai and Speece, 2003). From the customers view, online banking services are convenient and can saving time contrastd with traditional retail banking services. Verma et al. (2004) suggested that customers are willing to support more for online banking services to gain some(prenominal) offline value and online benefit. They can use online banking services when connect to Internet without the limit of time and location.As illustrated by Bainbridge (2008), Traditional banking was impacted greatly by the technicalization of the Internet in the early 1990s. As the Internet became more generally accessible, traditional banks began to realize its potential to feature services to their customers eon reducing long-term operational costs. Upon realizing this, they began to offer limited services online. In 1995, the counterbalance pure online bank, the auspices First Network bank was founded in the United States. It provided services much(prenominal) as direct access to account, bill payment and stop vie march ong, which are quite common today (Christopher, 2008). In the following twenty dollar bill years, online banking services train developed rapidly and make water no w become a significant part of the business for commercial banks.As in otherwise countries, Chinese commercial banks are undergoing rapid change due to advances in information technology. Eight months after the first online bank founded in the United States, in June 1996, the patois of China stria up websites and started to provide Internet banking services to the community. One year later, China Merchant Bank launched the first fully online banking All in one Net. It became the first fully Internet bank in China (data.chinabyte.com).Subsequently, more and more Chinese domestic banks take over manage up online banking services to penetrate the market and gain competitive advantage (Li, 2002). In 2000, the Industrial and Commercial Bank of China launched online banking business in 31 cities in China. As the nations largest commercial bank, the opening of its online banking business aroused general interest. In 2002, HSBC launched its online banking services in China (data.chin abyte.com).The number of costumers and the barter raft of online banking have increased rapidly. At the end of 2007, the barter spate of embodied online banking reached 245.8 one thousand thousand RMB, which increased 163.1% equationd to 2006. In the total transaction pile, corporate online banking accounts for 93.6% which is 230 cardinal RMB. However, the growth of Personal Online banking was even faster in recent years. The work record reached 15.8 trillion RMB at the end of 2007 which is al nigh four clock of 2006s 4.1 trillion RMB. The number of business customers reached 0.84 jillion and individualistic(a) customers reached 65 trillion at the end of 2006 (iresearch.com.cn).At the same time, the range of services provided by online banking has as well increased. Before 2000, some of the banks only provided information services. flat they provide services much(prenominal) as enquiry, investment advice, money transfers, purchase and selling of securities, online payments and, in some banks, small loans, housing mortgage loans and other credit facilities.As the 21st century is a customer-oriented century, how to create and represent customer has became an important part of marketing strategy of banking industry. As information technology go on and communication channels diversified, customers can use a variety channels to acquire more complete information and choices, to achieve their own best interests.As illustrated by, customers role in consumer economy has changed from the recipient to products or services to the decision maker. Most banks to a fault aware that customers are becoming a dominant position, however, how to use information technology and limited sources to achieve the best and most efficient service quality to satisfy customers, gain loyalty customers, ensure the source of profit, these have became the focus of the operation of Chinese banks.2.2.2 Introduction of Industrial and Commercial Bank of ChinaAs the largest one o f four big verbalise-owned commercial banks which endure the financial markets in China. The ICBC is the attractor in online banking services and is constantly introducing advanced online banking products and services to the public. The following figure illustrates its repaid growth in online banking.Figure 2.1 ICBC Online Banking trading VolumeWe can see form the figure above, in 2000, ICBCs online banking trading volume amounted only RMB 2.03 trillion, in 2002 this number grew to RMB 8.77 trillion which is almost 4 multiplication of 2000. In the following five years, the ICBC online banking trading volume unbroken a rapid growth rate. In 2005, it went beyond RMB 46 trillion, maturement 23 times compared to that in 2000. By the end of 2007, ICBC online trading volume jumped to RMB 102.88 trillion, which is more than 50 times of 2000.At the same time, the customers of ICBC online banking grew rapidly. At the end of 2007, ICBC Online banking has had 980,000 business customers and 39.08 million individual customers (icbc.com.cn). As illustrated in figure 2, the individual customers of ICBC online banking unbroken an continued rapid growth from 0.2 million in 2000 to 48.5 million in June of 2008.Currently, ICBC online banking provides a variety of services customers can transfer money, pay bills, buy stocks or bonds, change foreign currency and so on. It has been very victoryful and has won various awards in China. It is too widely know and respected in the international banking sector. In every year from 2003 to 2006, ICBC was disposed(p) the Best Personal Internet Bank of China award by Global Finance. All these have ceremonious ICBC as a attractor in e-banking in China and have put it among the top financial players in the international arena (icbc.com.cn).2.3 Introduction to Service2.3.1 Definition of ServiceAccording to Kotler and Keller (2006374), services are intangible, inseparable, variable and perishable products. Therefore, services col lect more quality keep than products. Financial services are services directed specifically at peoples money or wealth, they are concern with organizations, individuals and their finances (En new-sprung(prenominal) and Waite, 2007). without delayadays there are a whole range of finance services, such as banking services, credit cards, insurance, foreign exchange, stock and bonds trading and so on.2.3.2 Characteristics of ServiceIn the earlier marketing literature, Gummesson (1987) suggested that services are something that can be bought and sole but which you cannot flatten on your foot. Basically, services are process or experiences (Bateson, 1977 Bowen and Schneider, 1988 Parasuraman et al., 1985). We cannot own a bank account as we own a car, but we have the right to use the bank account doing various financial transactions on our behalf by banks.According to Kotler and Keller (2006), services have for distinctive characteristics which are intangibility, inseparability, varia bility and perishability. Most services are intangible (Beteson, 1977). They cannot be counted, valuated and verified before sale to assure quality. Thus the smart set whitethorn find it difficult to visit the consumers evaluation of service quality (Zenthaml, 1981).Ennew and Waite (2007) suggested that services are heterogeneity because service mathematical operation different from customer to customer. The mental process of services may be totally different from the customers perception. Those characters of services indicate that quality of services is more difficult to guess than products.Although these are widely used in services marketing, many researchers have different thoughts. Loverloch and Gummesson (2004) consider that this framework has weaknesses, such as intangibility which is ambiguous, they suggested that many services in any case involve some tangible elements and outcomes. Vargo and Lush (2004) also highlight the inability of this framework to distinguish b etween acceptables and services.2.4 Introduction to Service Quality2.4.1 Definition of Service QualityMarketing literature has provided many definitions of service quality. Before 1980s, most research of quality focused on how to define and broadside the quality of tangible products. As the service industry developed vigorously, more and more scholars did lots of exploration and study rough service quality. However, due to the characteristics of intangible, heterogeneous, perishable and indivisibility, service is seriously to define, metre and overlook (Crosby, 1979).According to the American Society for Quality (Miller, C., 1993), quality is the totality of features and characteristics of a product or service that bear its ability to satisfy stated or implied needs.Levitt (1972) suggested that services quality refers to the results of services can visit the standards set by the customers. Sasser and Olsen (1978) define services quality from materials, equipment and personne l. This classification suggests that service quality not only including the final results, but also including the render of services.Gronoroos (1982) firstly proposed the concept of perceived service quality, he suggested that service quality generated from the comparison between expected service quality and the experienced service quality. According to Lewis and Boom (1983), service quality is the consistency of the transfer of service and expectations of service. Customers perceptions of quality normally come from their comparison between expected and perceived quality.The result of this comparison is, when the perceived quality is high than expected quality, customer will get entire quality of service or satisfaction with it (Parasuraman, et. al, 1985). Six years later, they pointed out that service quality is a psychological assessment that is measurable by customers according to the suspension between the expectation and actual service quality (Parasuraman, et. al, 1991).H owever, Stewart, Hope and Muhlemann (1998) suggested that service quality should be distanced by who provide the service and how they provide it. The designer is pronounced after the service, patch the latter is evaluated in the process of deliver service. Sarsser et al. (1998) beseechd that service quality should be defined through trine factors which are materials, equipment and person. They suggested service quality not only accommodate the results, but also entangle the preparation of services. Service aim and service quality are similar, service level can be divided into expected service level and perceived service level (Sarsser et al., 1998).In recent years, the definition of service quality improved towards customer factor. Harrison (2000) described that service quality is essentially concerned with befittinging customers need and prayments and how well the service level delivered meets customer expectations. Zeithaml and Bitner (2000) argue that there are two lev els of customer expectations, desired service and adequate service. The cause is defined as the neediness well for level of service performance, while the latter is defined as the primary service expectations. According to Kim et al. (1998), financial institutions always provide generally uniform services to customer. Therefore, service quality becomes the most important factor.2.4.2 Dimensions of Service QualityMarketing literature provide many views of the measurement dimensions of services quality. Sasser et al. (1978) suggested that there are tether different dimensions of service performance levels of material, facilities, and personnel. Gronroos (1982) divided service quality into two types technical quality and functional quality. The former refers to what customers are actually receiving from the service , the latter refers to the process in which the service is delivered. Lehtinen and Lehtinen (1982) argued that service quality has three dimensions corporeal quality, such as equipment corporate quality, such as companys image interactive quality, which means the fundamental fundamental fundamental interaction 74bb1v8140customers.Parasuraman et al (1985) suggested there are ten dimensions of service quality, which are reliability, responsiveness, competence, access, courtesy, communication, credibility, security, spirit the customer and tangibles. After further study, they improved these to five dimensions reliability, responsiveness, empathy, assurances, tangibles (Parasuraman et al., 1988). Figure 2.3 illustrates the structure of their finding. opening Parasuraman et al., (1985,1988)Brady and Cronin (2001) presented a service quality model of three dimensions interaction quality, sensual environment quality and outcome quality. Interaction quality refers to the interaction between customer and employee in the process of service delivery. It is impacted by attitude, behavior and expertise. Physical environment refers to customers evaluatio n of physical facilities or building design. Outcome quality indicates the result of services (Brady and Cronin, 2001).2.4.3 impressiveness of Service QualityWith the development of world economy and the pace of globalisation, most markets have been very competitive, in order to survive, companies need to provide good quality services to satisfy and retain loyalty customers (Fecikova, 2004). According to Broderick and Vachirapornpuk (2002), not only the technology changes overtime, customer expectation and perception of online services also changes continuously. Therefore, service quality will become a very important issue to online banks.Nowadays, as the process of globalization has made the market competition in financial industry more and more intense. Customers have been considered as the most grandeur to service industry (MacDonald et al, 2000). At the same time, customers expectations of service quality are constantly increase, while their tolerance of poor services is const antly decline (Smith and Lewis, 1989). Therefore, it is increasingly difficult for the company to victory in the competitive market.Only the company which provide better services than others can gain competitive advantage in the market and gain more customers (Gronroos, 1990). Easingwood and Storey (1993) suggested that service quality is the most important factor for the success of financial industry. Therefore, providing high quality services to customers is important for a bank to success and survival in todays competitive market (Wang et al., 2003).2.4.4 Measuring Service QualityAs service quality like a shot relates with customer satisfaction, more and more company concern measuring service quality an important task. According to Baggs and Kleiner (199936), The measurement of customer service is the most important variable that a company has to manage. Customer service includes the general picture that an organisation presents to the public. collect to the characteristics o f intangible, heterogeneous, perishable and indivisibility, service is hard to measure and control (Crosby, 1979).Gronoroos (1984) suggested that service quality should be measured by compare the customer perception and expectation of services. However, most of service quality studies have been focused on the development of instruments to measure service quality directly. Cronin Taylor (1992) argue and change this method to a comparison of performance with ideal standards, or from performance perceptions only.Their performance is mostly based on employees. Customers evaluation of service quality is influenced by their interactions with the employees. juvenilely, most researchers agree that services comprise of an outcome, which is an work of some end by the customer, and a process, which is the interaction customer-service provider (Blanchard Galloway 1994). new-fashioned research suggested that to measure service quality, not only the performance of service should be measured, t he process of the service delivery should be considered as well. To chip the influences for service process to their perceptions Rust and Oliver (1994) presented the three component model to indicate the influence of service process to service quality.From the figure 2.4, it clearly be seen that there are three factors deciding the perceived service quality, they are service product, service delivery and service environment. This theory support the importance of service delivery, for actual outcome quality only one of the three factors.SERVQUAL ModelSERVQUAL model is the most widely used method to measure service quality both in academic research and business analysis. Parasuraman et. al (1985) formulated a service quality model which highlighted the requirements for deliver high service quality. The model identifies five bedcovers that may cause attempted services delivery.There are five orifices in this model. recess 1 is the breakout between consumer expectation and manageme nt perception. bedcover 2 is the gap between management perception and service quality specification. hoo-hah 3 is the gap between service quality specification and service delivery. chap 4 is the gap between service delivery and external communication. Gap 5 is the gap between perceived service and expected service. tooth root Parasuraman et al. (198544).Based on this research, Parasuraman et. al (1985) identify ten factors which determine the services quality. These determinants wereTangiblesReliabilityResponsivenessCompetencyCourtesyCommunicationCredibility security departmentAccessUnderstanding the customerParasuraman et al. (1988) furthered the service delivery process and open a SERVOQUAL service quality analytical framework which includes five factors Tangibles, Reliability, Responsiveness, Assurance, and Empathy(Zeithaml et al, 1990).Tangibles. All physical elements of the provision of service by banks. It includes the building, decoration, equipment, personnel, publicati ons, visible materials, etc.Reliability. He extent to which repeated use of the product or service satisfies customers requirements of it. It creates a level of trust by the customer in the services and products provided by banks and it directly affects customer perceptions of brand, economic strong suit, the levels of professionalism of staff and the quality of products.Responsiveness. The speed the company responds to the requirements of customer. Typically, this is a function of the willingness of bank staff to provide the necessary services when requested by customers. It not only embodies the attitude of a banks service and work efficiency, but also demonstrates the difference in quality compared with the inter-bank service.Assurance. This is the customers feeling that bank staff are fully subject of dealing with problems in the course of their work.Empathy. This is a measure of the extent to which the provider identifies the customers problems as also being their own problem s and the willingness with which they take those problems on venire for resolution. Typically it would include providing customers with in-personized product portfolios in line with their personal needs and aspirations.Based on these five factors, they developed a 22 items scale to measure service quality. The following table illustrates the details.ries. Carman (1990) suggested adding certain dimensions which are differentially important in different industry. Cronin and Taylor (1992) argued that SERVQUAL model was not set aside in their study of banking and fast food industries. Another criticism iService Quality in ICBCService Quality in ICBC gypThe development of computer technology and information network technology has brought massive challenges to financial services organizations. Online banking, which provides financial services to customers via Internet, plays an increasingly important role and still has tremendous potential for development. At the same time, the global and local competition between financial institutions has become more intense. Therefore, as the biggest commercial bank in China, it is very important for the managers of the Industrial and Commercial Bank of China (ICBC) to build a long-term customer relationship.This project has five objectives to achieveThe first objective is to test whether there is a difference between customer expected and perceived service quality in ICBC online banking services. Secondly, the study aims to examine the relationship between customer perceived service quality and customer satisfaction in ICBC online banking services. The third objective is to examine the relationship between customer perceived service quality and customer loyalty in ICBC online banking services. The fourth objective is to examine the relationship between customer satisfaction and customer loyalty in the online banking services of ICBC, investigate the current situation and give some evaluations. Finally, find out how the dealin g with customer complaint in ICBC customer service department influences customer loyalty.Based on the objectives, after decides the type of investigation and research approach, five pairs of hypotheses are formulated to test the relationship between variables. The results of this study indicate that there are high positive relationship between customer perceived service quality, customer satisfaction and loyalty. There is also a medium positive relationship between handle customer complaint and customer loyalty. According to these, the ICBC online banking must establish a long term strategy to improve the perceived service quality, satisfying their customer, handling customer complaint promptly in order to achieve more loyal customers.Declaration of OriginalityI declare that this thesis entitled Examining the Service Quality, Customer satisfaction and Loyalty in Online Banking Services of Industrial and Commercial Bank of China has been composed by myself and has not been presented or accepted in any previous application for a degree. The work, of which this is a record, has been carried out by myself unless otherwise stated and where the work is mine, it reflects personal views and values. All quotations have been bossy by quotation marks and all sources of information have been admit by means of references including those of the Internet.Chapter 1 Introduction1.1 OverviewIn the past twenty years, the pace of change in financial services sector has been dramatic. The development of computer technology and information network technology has introduced a new virtual economy based on the Internet. As the Internet provides new communication channels to banking industry, the number of online banking websites increased rapidly (Aladwani, 2001). Online banking, an important part of the Internet economy, plays an increasingly important role and still has tremendous potential for development.Mols (2000) indicated that the introduction and customers adoption of onlin e banking will bring a massive change in the relationship between retailing banks and customers. At the same time, the global and local competition between financial institutions has become more intense. As a result, building long-term customer relationships becomes ever more important as a part of financial institutions strategy. How to satisfy customers and gain customer loyalty has become one of the best means of obtaining competitive advantage.Since Chinas accession to the WTO, many foreign banks have begun to do business in China. They not only brought advanced management methods and business philosophy, but also made the financial market in China more competitive. As a consequence of this competition, Chinas commercial banks disjointed a large number of high-end customers in a short closure of time. Faced with the loss of customers and the future trend of the growth of profit changing from deposits and loans to intermediary business, Chinas commercial banks began to recogniz e the importance of improving customer satisfaction and loyalty and stepped up their efforts to compete with their foreign counterparts (www.financialnews.com.cn).Due to the increasingly competitive marketing environment, enterprises must be customer oriented (Kotler, 1997). With regarding to banking industry, the service quality is considered as the most important competitive gun (Staford, 1996). Therefore, how to improve service quality and satisfy customer become a very important marketing strategy in banking industry. Service quality has been many researchers interest in recent years by the impellent of Parasuraman et al. (1985). There have been many researches identified the key factors impact on the service quality of traditional banks (Jun and Cai, 2001).However, there are few studies on the customer perceived service quality of online banking services (Broderick and Vachirapornpuk, 2002). Customer loyalty even received less attention than service quality and customer satisf action (Caruana, 2000). The concepts of service quality, customer satisfaction and loyalty are think together (Caruana, 2000). As illustrated by Caruana (2000611), service quality as an rootage construct and service loyalty as an outcome variable of customer satisfaction.Therefore, it is important for banks to know the current performance of their services and understand the relationship between service quality, customer satisfaction and loyalty. In Fecikovas (200457) words Customer satisfaction has become an important issue for commercial and public service organisations. The standards to judge a companys win or lose are based on how many customers they can keep. Thus, how to satisfy customers and maintain loyal customers have become important marketing strategies of Chinese online banking industry.However, no matter how well the services are knowing and delivered, mistakes will happen. The majority of customers will participate in private word-of-mouth activities regarding thei r consumptive activities (Day and Landon, 1977). The valence of these word-of-mouth activities may be negative, neutral, or positive. When there is a difference between customer expectation and the actual performance of products or services, the negative feelings will result in complaint behaviour. Therefore, how to handle customer complaints, restore the confidence of customers and reduce the loss of customers has also been an important task to companies in the services process.1.2 Research ObjectivesThere are some marketing and financial literatures on the services and customer relationship of traditional banks, but few researches are done on the services quality and customer loyalty of online banking. This study presents an analysis of the service quality, customer satisfaction and loyalty of the Industrial and Commercial Bank of China (ICBC), focuses on the relationship between services quality and customer satisfaction and loyalty, and how handle customer complaint influence cu stomer loyalty.This project has five objectives to achieveThe first objective is to test whether there is a difference between customer expected and perceived service quality in ICBC online banking services.Secondly, the study aims to examine the relationship between customer perceived service quality and customer satisfaction in ICBC online banking services.The third objective is to examine the relationship between customer perceived service quality and customer loyalty in ICBC online banking services.The fourth objective is to examine the relationship between customer satisfaction and customer loyalty in the online banking services of ICBC, investigate the current situation and give some evaluations.Finally, this study aims to find out how the dealing with customer complaint in ICBC customer service department influences customer loyalty of ICBC online banking.1.3 Structure of ProjectThis project is divided into five chapters. Chapter 1 is the overview and introduction of the rese arch. In Chapter 2, the writer introduces the development and history of online banking services and its development in ICBC. After that, the writer reviews the relevant theories of service quality, customer satisfaction and loyalty, and customer complaint, explains how they were measured and the relationship between them, which are mainly based on previous findings.Using these theories, Chapter 3 illustrates the research questions and methodology of this research, the structure of questionnaire was also introduced in this section. Chapter 4 explains the findings of this research, discussing the current situation of ICBC online banking services, examining the relationships between these variables and give some recommendations. In the final Chapter, the writer summarizes the research, discusses the findings and introduces a number of limitations of this study. This section also contains opinions and suggestions on developing the online banking in the future.Chapter 2 Review of the Li terature2.1 IntroductionThis chapter first introduces the overview of Chinese online banking services and the development of ICBC online banking.Secondly, the writer clarified what the service quality, customer satisfaction, customer loyalty and customer complaint have been cover in the previous study, indicates which factors would affect them and what kind of methods were used to measure them. In this part, the characteristics of online services and customers adoption of online banking services are also addressed.Finally, the relationships between these four concepts are reviewed. Bloemer et al. (1999) suggested that although the previous studies indicate that there are obvious relationships between service quality, customer satisfaction and customer loyalty, however, how strength the relationships are still not clear (Bloemer er al., 1999). Therefore, based on the literature review, the writer presents a research model for this study as well.2.2 Background of Chinese Online Bankin g Services2.2.1 OverviewOnline banking services are broadly defined as the ability to carry out bank transactions electronically, usually via the internet. It is an important part of the Internet economy. All business transactions are done via the banks websites (en.wikipedia.org). Online banking refers to several kinds of services through which bank customers can gain information and services such as money transfer, bill payment, short loan, investment, buy insurance and so on, via a page on Internet without leaving their homes or organizations (Sathye, 1999).There are several studies indicated that online banking services are the most profitable products to banks (Robinson, 2000). By eliminating the infrastructure costs associated with branch-based retail banking services. Online banking is able to offer instant service and lower service charges than their competitors. Online banking is the cheapest channel for banks to deliver services (Robinson, 2000 Giglio, 2002).Research shown that the cost of an average online banking transaction is only 10 percents of the cost of a similar average branch transaction (Kolodinsky et al., 2004). through provide services online, banks can reduce their expenditure on hard ware and staff in branch (Karjaluoto et al., 2003). At the same time, online banking service delivery channel can also help banks to retain current customers who use online banking services from any location. As Internet has become such an efficient and world-wide used communication medium, it has also become a widely used retail channel (Cho, M. and Park, S., 2001).Furthermore, online banking provides banks opportunities to attract more customers from exiting Internet users (Rotchanakitumnuai and Speece, 2003). From the customers view, online banking services are convenient and can saving time compared with traditional retail banking services. Verma et al. (2004) suggested that customers are willing to pay more for online banking services to gain both of fline value and online benefit. They can use online banking services when connect to Internet without the limitation of time and location.As illustrated by Bainbridge (2008), Traditional banking was impacted greatly by the commercialization of the Internet in the early 1990s. As the Internet became more generally accessible, traditional banks began to realize its potential to deliver services to their customers while reducing long-term operational costs. Upon realizing this, they began to offer limited services online. In 1995, the first pure online bank, the Security First Network bank was founded in the United States. It provided services such as direct access to account, bill payment and check viewing, which are quite common today (Christopher, 2008). In the following twenty years, online banking services have developed rapidly and have now become a significant part of the business for commercial banks.As in other countries, Chinese commercial banks are undergoing rapid change du e to advances in information technology. Eight months after the first online bank founded in the United States, in June 1996, the Bank of China set up websites and started to provide Internet banking services to the community. One year later, China Merchant Bank launched the first fully online banking All in one Net. It became the first fully Internet bank in China (data.chinabyte.com).Subsequently, more and more Chinese domestic banks have set up online banking services to penetrate the market and gain competitive advantage (Li, 2002). In 2000, the Industrial and Commercial Bank of China launched online banking business in 31 cities in China. As the nations largest commercial bank, the opening of its online banking business aroused widespread interest. In 2002, HSBC launched its online banking services in China (data.chinabyte.com).The number of costumers and the trading volume of online banking have increased rapidly. At the end of 2007, the trading volume of corporate online bank ing reached 245.8 trillion RMB, which increased 163.1% compared to 2006. In the total transaction volume, corporate online banking accounts for 93.6% which is 230 trillion RMB. However, the growth of Personal Online banking was even faster in recent years. The trading volume reached 15.8 trillion RMB at the end of 2007 which is almost four times of 2006s 4.1 trillion RMB. The number of business customers reached 0.84 million and individual customers reached 65 million at the end of 2006 (iresearch.com.cn).At the same time, the range of services provided by online banking has also increased. Before 2000, some of the banks only provided information services. Now they provide services such as enquiry, investment advice, money transfers, buying and selling of securities, online payments and, in some banks, small loans, housing mortgage loans and other credit facilities.As the 21st century is a customer-oriented century, how to create and maintain customer has became an important part of marketing strategy of banking industry. As information technology advanced and communication channels diversified, customers can use a variety channels to acquire more complete information and choices, to achieve their own best interests.As illustrated by, customers role in consumer economy has changed from the recipient to products or services to the decision maker. Most banks also aware that customers are becoming a dominant position, however, how to use information technology and limited sources to achieve the best and most efficient service quality to satisfy customers, gain loyalty customers, ensure the source of profit, these have became the focus of the operation of Chinese banks.2.2.2 Introduction of Industrial and Commercial Bank of ChinaAs the largest one of four big stated-owned commercial banks which predominate the financial markets in China. The ICBC is the leader in online banking services and is constantly introducing advanced online banking products and services t o the public. The following figure illustrates its repaid growth in online banking.Figure 2.1 ICBC Online Banking traffic VolumeWe can see form the figure above, in 2000, ICBCs online banking trading volume amounted only RMB 2.03 trillion, in 2002 this number grew to RMB 8.77 trillion which is almost 4 times of 2000. In the following five years, the ICBC online banking trading volume kept a rapid growth rate. In 2005, it went beyond RMB 46 trillion, suppuration 23 times compared to that in 2000. By the end of 2007, ICBC online trading volume jumped to RMB 102.88 trillion, which is more than 50 times of 2000.At the same time, the customers of ICBC online banking grew rapidly. At the end of 2007, ICBC Online banking has had 980,000 business customers and 39.08 million individual customers (icbc.com.cn). As illustrated in figure 2, the individual customers of ICBC online banking kept an continued rapid growth from 0.2 million in 2000 to 48.5 million in June of 2008.Currently, ICBC on line banking provides a variety of services customers can transfer money, pay bills, buy stocks or bonds, change foreign currency and so on. It has been very successful and has won various awards in China. It is also widely recognized and respected in the international banking sector. In every year from 2003 to 2006, ICBC was given(p) the Best Personal Internet Bank of China award by Global Finance. All these have established ICBC as a leader in e-banking in China and have put it among the top financial players in the international arena (icbc.com.cn).2.3 Introduction to Service2.3.1 Definition of ServiceAccording to Kotler and Keller (2006374), services are intangible, inseparable, variable and perishable products. Therefore, services require more quality control than products. Financial services are services directed specifically at peoples money or wealth, they are concern with organizations, individuals and their finances (Ennew and Waite, 2007). Nowadays there are a whole rang e of finance services, such as banking services, credit cards, insurance, foreign exchange, stock and bonds trading and so on.2.3.2 Characteristics of ServiceIn the earlier marketing literature, Gummesson (1987) suggested that services are something that can be bought and sole but which you cannot drop on your foot. Basically, services are process or experiences (Bateson, 1977 Bowen and Schneider, 1988 Parasuraman et al., 1985). We cannot own a bank account as we own a car, but we have the right to use the bank account doing various financial transactions on our behalf by banks.According to Kotler and Keller (2006), services have for distinctive characteristics which are intangibility, inseparability, variability and perishability. Most services are intangible (Beteson, 1977). They cannot be counted, measured and verified before sale to assure quality. Thus the company may find it difficult to understand the consumers evaluation of service quality (Zenthaml, 1981).Ennew and Waite (2 007) suggested that services are heterogeneity because service performance different from customer to customer. The performance of services may be totally different from the customers perception. Those characters of services indicate that quality of services is more difficult to evaluate than products.Although these are widely used in services marketing, many researchers have different thoughts. Loverloch and Gummesson (2004) argue that this framework has weaknesses, such as intangibility which is ambiguous, they suggested that many services also involve some tangible elements and outcomes. Vargo and Lush (2004) also highlight the inability of this framework to distinguish between goods and services.2.4 Introduction to Service Quality2.4.1 Definition of Service QualityMarketing literature has provided many definitions of service quality. Before 1980s, most research of quality focused on how to define and measure the quality of tangible products. As the service industry developed vig orously, more and more scholars did lots of exploration and study more or less service quality. However, due to the characteristics of intangible, heterogeneous, perishable and indivisibility, service is hard to define, measure and control (Crosby, 1979).According to the American Society for Quality (Miller, C., 1993), quality is the totality of features and characteristics of a product or service that bear its ability to satisfy stated or implied needs.Levitt (1972) suggested that services quality refers to the results of services can meet the standards set by the customers. Sasser and Olsen (1978) defined services quality from materials, equipment and personnel. This classification suggests that service quality not only including the final results, but also including the provision of services.Gronoroos (1982) firstly proposed the concept of perceived service quality, he suggested that service quality generated from the comparison between expected service quality and the experienc ed service quality. According to Lewis and Boom (1983), service quality is the consistency of the transfer of service and expectations of service. Customers perceptions of quality usually come from their comparison between expected and perceived quality.The result of this comparison is, when the perceived quality is high than expected quality, customer will get good quality of service or satisfaction with it (Parasuraman, et. al, 1985). Six years later, they pointed out that service quality is a psychological assessment that is measured by customers according to the gap between the expectation and actual service quality (Parasuraman, et. al, 1991).However, Stewart, Hope and Muhlemann (1998) suggested that service quality should be distanced by who provide the service and how they provide it. The former is evaluated after the service, while the latter is evaluated in the process of deliver service. Sarsser et al. (1998) argued that service quality should be defined through three fac tors which are materials, equipment and person. They suggested service quality not only include the results, but also include the provision of services. Service level and service quality are similar, service level can be divided into expected service level and perceived service level (Sarsser et al., 1998).In recent years, the definition of service quality improved towards customer factor. Harrison (2000) described that service quality is sanctionedally concerned with meeting customers need and requirements and how well the service level delivered meets customer expectations. Zeithaml and Bitner (2000) argue that there are two levels of customer expectations, desired service and adequate service. The former is defined as the wish for level of service performance, while the latter is defined as the basic service expectations. According to Kim et al. (1998), financial institutions always provide generally undifferentiated services to customer. Therefore, service quality becomes the most important factor.2.4.2 Dimensions of Service QualityMarketing literature provide many views of the measurement dimensions of services quality. Sasser et al. (1978) suggested that there are three different dimensions of service performance levels of material, facilities, and personnel. Gronroos (1982) divided service quality into two types technical quality and functional quality. The former refers to what customers are actually receiving from the service , the latter refers to the process in which the service is delivered. Lehtinen and Lehtinen (1982) argued that service quality has three dimensions physical quality, such as equipment corporate quality, such as companys image interactive quality, which means the interaction 74bb1v8140customers.Parasuraman et al (1985) suggested there are ten dimensions of service quality, which are reliability, responsiveness, competence, access, courtesy, communication, credibility, security, taking into custody the customer and tangibles. Af ter further study, they improved these to five dimensions reliability, responsiveness, empathy, assurances, tangibles (Parasuraman et al., 1988). Figure 2.3 illustrates the structure of their finding.Source Parasuraman et al., (1985,1988)Brady and Cronin (2001) presented a service quality model of three dimensions interaction quality, physical environment quality and outcome quality. Interaction quality refers to the interaction between customer and employee in the process of service delivery. It is impacted by attitude, behavior and expertise. Physical environment refers to customers evaluation of physical facilities or building design. Outcome quality indicates the result of services (Brady and Cronin, 2001).2.4.3 wideness of Service QualityWith the development of world economy and the pace of globalisation, most markets have been very competitive, in order to survive, companies need to provide good quality services to satisfy and retain loyalty customers (Fecikova, 2004). Accord ing to Broderick and Vachirapornpuk (2002), not only the technology changes overtime, customer expectation and perception of online services also changes continuously. Therefore, service quality will become a very important issue to online banks.Nowadays, as the process of globalization has made the market competition in financial industry more and more intense. Customers have been considered as the most importance to service industry (MacDonald et al, 2000). At the same time, customers expectations of service quality are constantly increase, while their tolerance of poor services is constantly decline (Smith and Lewis, 1989). Therefore, it is increasingly difficult for the company to success in the competitive market.Only the company which provide better services than others can gain competitive advantage in the market and gain more customers (Gronroos, 1990). Easingwood and Storey (1993) suggested that service quality is the most important factor for the success of financial indus try. Therefore, providing high quality services to customers is important for a bank to success and survival in todays competitive market (Wang et al., 2003).2.4.4 Measuring Service QualityAs service quality directly relates with customer satisfaction, more and more company concern measuring service quality an important task. According to Baggs and Kleiner (199936), The measurement of customer service is the most important variable that a company has to manage. Customer service includes the general picture that an organisation presents to the public. Due to the characteristics of intangible, heterogeneous, perishable and indivisibility, service is hard to measure and control (Crosby, 1979).Gronoroos (1984) suggested that service quality should be measured by compare the customer perception and expectation of services. However, most of service quality studies have been focused on the development of instruments to measure service quality directly. Cronin Taylor (1992) argue and chan ge this method to a comparison of performance with ideal standards, or from performance perceptions only.Their performance is mostly based on employees. Customers evaluation of service quality is influenced by their interactions with the employees. Recently, most researchers agree that services comprise of an outcome, which is an deed of some end by the customer, and a process, which is the interaction customer-service provider (Blanchard Galloway 1994).Recent research suggested that to measure service quality, not only the performance of service should be measured, the process of the service delivery should be considered as well. To check the influences for service process to their perceptions Rust and Oliver (1994) presented the three component model to indicate the influence of service process to service quality.From the figure 2.4, it clearly be seen that there are three factors deciding the perceived service quality, they are service product, service delivery and service envir onment. This theory support the importance of service delivery, for actual outcome quality only one of the three factors.SERVQUAL ModelSERVQUAL model is the most widely used method to measure service quality both in academic research and business analysis. Parasuraman et. al (1985) formulated a service quality model which highlighted the requirements for deliver high service quality. The model identifies five gaps that may cause frustrated services delivery.There are five gaps in this model. Gap 1 is the gap between consumer expectation and management perception. Gap 2 is the gap between management perception and service quality specification. Gap 3 is the gap between service quality specification and service delivery. Gap 4 is the gap between service delivery and external communication. Gap 5 is the gap between perceived service and expected service.Source Parasuraman et al. (198544).Based on this research, Parasuraman et. al (1985) identify ten factors which determine the service s quality. These determinants wereTangiblesReliabilityResponsivenessCompetencyCourtesyCommunicationCredibilitySecurityAccessUnderstanding the customerParasuraman et al. (1988) furthered the service delivery process and established a SERVOQUAL service quality analytical framework which includes five factors Tangibles, Reliability, Responsiveness, Assurance, and Empathy(Zeithaml et al, 1990).Tangibles. All physical elements of the provision of service by banks. It includes the building, decoration, equipment, personnel, publications, visible materials, etc.Reliability. He extent to which repeated use of the product or service satisfies customers requirements of it. It creates a level of trust by the customer in the services and products provided by banks and it directly affects customer perceptions of brand, economic strength, the levels of professionalism of staff and the quality of products.Responsiveness. The speed the company responds to the requirements of customer. Typically, th is is a function of the willingness of bank staff to provide the necessary services when requested by customers. It not only embodies the attitude of a banks service and work efficiency, but also demonstrates the difference in quality compared with the inter-bank service.Assurance. This is the customers feeling that bank staff are fully surefooted of dealing with problems in the course of their work.Empathy. This is a measure of the extent to which the supplier identifies the customers problems as also being their own problems and the willingness with which they take those problems on instrument panel for resolution. Typically it would include providing customers with personalized product portfolios in line with their personal needs and aspirations.Based on these five factors, they developed a 22 items scale to measure service quality. The following table illustrates the details.ries. Carman (1990) suggested adding certain dimensions which are differentially important in differen t industry. Cronin and Taylor (1992) argued that SERVQUAL model was not catch in their study of banking and fast food industries. Another criticism i