The Effect of Service Quality on Customer Loyalty

Abstract

Competition in the banking industry is higher than ever before which has created a need for the development of new strategies to retain the existing customers rather than attracting new customers. Making loyal customers to the banks has become essential for the long term survival of any bank where the service quality of the banks has also played an important role in customer loyalty. This study attempted to find the relationship between service quality dimensions and customer loyalty in the Commercial Banks of Sri Lanka. The data collected from 300 customers of four leading commercial banks through questionnaires. Further, five hypotheses were formulated for the study. The findings revealed that three dimensions of service quality namely tangibles, reliability and empathy have significant positive effect on customer loyalty. Further service quality dimensions alone explain 43.9% of the variance in customer loyalty.

Keywords: Service quality, Customer loyalty, SERVQUAL, Banking industry