An empirical study of client satisfaction with service recovery within a South African banking institution

Davies, Gareth M. (2004) An empirical study of client satisfaction with service recovery within a South African banking institution. Masters thesis, Rhodes University.

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Abstract

In many industries, service is the critical determinant of success or failure. Service failure is almost inevitable, and this has the potential for the organisation to lose its customer. However, if implemented successfully, Service Recovery can rectify the breakdown in service, and turn angry, frustrated customers into loyal ones. Service Recovery is vital for profitability, especially for companies operating in the services market, like First National Bank (FNB). Unfortunately, few service firms know how satisfied customers are with their Service Recovery efforts, and FNB is no exception. This study attempted to rectify the situation, to ensure that the bank does not fail its customers a second time. The major focus of the study is to assess client satisfaction with Service Recovery (SR) from FNB. By using the RECOVSAT instrument (developed by Boshoff in 1999), the study aims to establish how effective FNB was in terms of the six dimensions of SR, namely communication, empowerment, feedback, atonement, explanation, and tangibles. The relationship between each of the dimensions and customer satisfaction, as well as between customer satisfaction and loyalty, was measured, and a hypothesis for each relationship rejected or accepted. The empirical results show that, from 702 complainants, a RECOVSAT score of 68% was computed, which could be regarded as only satisfactory. The dimensions of communication, explanation, atonement, and empowerment, had the strongest positive correlation with customer satisfaction, while feedback and tangibles, although positively correlated, were not statistically significant, and thus not as important as the first four dimensions. FNB performed best on tangibles (81%), then communication (75%), explanation (70%), atonement (68%), empowerment (62%), and lastly feedback (51%). The study reinforced the view that customer satisfaction is positively related to loyalty. Other findings were that, administration and errors were the most frequent complaints, followed by pricing, fees, and interest, while time delays/waiting were the third most numerous. Over 54% of complainants had been with the bank for over 10 years, which could be a problem if the customers had left the bank, as the profitability of a customer generally increases with time. Age and gender did not appear to be factors that influenced behaviour of complainants. In terms of the managerial implications, it is recommended that FNB implement a Customer-Complaint-Handling (CCH) system that is both national and inter-group. The bank should also focus on empowering employees, improving communication skills, explaining to customers why the problem occurred, apologising, and offering some atonement. By adopting the recommendations, FNB should improve their service recovery, and as a consequence, their customer satisfaction and loyalty, and profitability should also increase.

Item Type:Thesis (Masters)
Uncontrolled Keywords:First National Bank, Banks, South Africa, Banking, Financial services industry, Customer services
Subjects:H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Divisions:Research Institutes and Units > Rhodes Business School
ID Code:2680
Deposited By: Mrs Carol Perold
Deposited On:23 Apr 2012 13:28
Last Modified:23 Apr 2012 13:28
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