This chapter will provide a presentation of the background for the research in order to create logic for the project at hand. Further, a problem discussion addressing critical issues of the research subject is presented and concludes with the purpose of this research.
Modern management science’s philosophy considers customer satisfaction as a starting point standard of performance and a possible standard of excellence for any business organization (Gerson, 1993). Moreover, the satisfaction of clients gives all employees who are involved in any stage of the client service process a sense of achievement and accomplishment. In this way, client satisfaction motivates people to perform and achieve higher levels of productivity (Wild, 1980).
Merrin, Hoffmann, and Penning (2013) indicate that customer satisfaction is the most important aspect of any firm's growth. However, not all satisfied customer make repurchases or use again of the services of a company. Therefore, customer satisfaction cannot guarantee customer retention, but customer satisfaction can be an important push factor in achieving customer loyalty (Khan, 2012)
In the private bank industry, where loyalty is an important parameter, loyalty could lead to high customer satisfaction and thus increase the probability of a customer returning, making business recommendations, promoting the company via word-of-mouth references and publicity (Bowen & Shoemaker, 1998). Also, loyal customers are less expected to move to a competitor due to price changes, and these customers make more purchases compared to less loyal customers (Baldinger & Rubinson, 1996).
All in all, customer satisfaction is an important factor in delivering the service of private banking due to the fact that private banks try to improve customer satisfaction through their products and services. Therefore to have an indication about customer satisfaction, THE PRIVATE BANK started to conduct a survey based on the NPS model of Reichheld (2003). The survey is sent to every private banking clients after having a meeting with a banker. The survey filled in by private banking clients showed an NPS score of +33, which is an improvement of 20 points on the NPS score in one year (THE PRIVATE BANK, 2018).
1.1 Company Description
THE PRIVATE BANK is a private bank in XXXXXX, owned by the BANK. The private bank is a subsidiary catered to wealthier[1]
customers that may have different needs and wants in regards to banking services (THE PRIVATE BANK, 2018).
Private banking and retail banking are two different concepts based on services and product offering. Retail banking clients have a regular arrangement with BANK retail banking. The regular arrangement with BANK retail banking entails mainly self-service via the website, on the mobile application, and visits to the many bank shop (THE PRIVATE BANK, 2018)
Private banking instead, is an exclusive service for the wealthier1
individual (see appendix A for the product and services). At private banking, a client has a fixed private banker who is the first point of contact and guiding the client for one's banking affairs at THE PRIVATE BANK.
Additionally, another example of what differs private banking from retail banking is the fact that the private banker is available to meet anywhere according to the needs of a client instead of meeting at one of the many regular retail banking shops around the country with a random representative of BANK retail banking (THE PRIVATE BANK, 2018).
Therefore, when becoming a part of THE PRIVATE BANK private banking there is more personal contact between bank and client; more customization available in regards to investments, loans and more opportunities for personal gain (network events facilitated by THE PRIVATE BANK for their relations with fellow private banking clients).
To grow in a saturated market like the private banking market in The Netherlands, the major banks (3BANKS) decided to lower the minimum net worth of a client to be classified as a private banking client from €1.000.000 to €500.000 (Poll, 2017). Thus, the only requirement to migrate clients to private banking from the regular retail banking was specifically for retail clients who had a net worth over €500.000,-.
In regards to the changed bank’s policy, 10.389 complexes[2] were selected to migrate from BANK retail banking to BANK private banking where eventually 6.614 retail clients decided to stay BANK (PRIVATE BANK, 2017). However, for the purpose of this research, the focus is at the Rotterdam office of PRIVATE BANK where 275 complexes2 successfully migrated from retail banking (THE PRIVATE BANK, 2017).
1.2 Problem Definition
The private banking sector is becoming too competitive given the entry of new generation tech-savvy banks and managers have to deal with the emerging situations by shedding a lot of old ideas, developing better customer loyalty programs, changing practices and adopting a distinct approach to meet the challenges that can be encountered in the future (Miguel-Dávila, Cabeza-García, Valdunciel & Flórez, 2010). It is necessary to consider the non-price factors such as customer service. Despite the numerous benefits of group private banking such as privacy, one-on-one services, discounted services and high returns, the managers also experience challenges including regulatory restrictions, lead acquisition, talent recruitment and integration of client of client relations with financial analysis (Choudhury, 2014a). A new private bank can induce prospective customers to try the services through the provision of efficient and speedy services that satisfy end-users' needs and expectations. For the success of service firms such as banks, customer satisfaction is an important element since a bank is a customer-oriented industry.
A higher level of customer satisfaction together with a sustainable competitive advantage results from considering service quality as a strategic issue that requires managers' attention. Service organizations, particularly private banks, make significant efforts in finding appropriate strategies to handle the external changes to increase chances of survival and activate their services (Choudhury, 2014b). The customer's perception defines a bank and hence, effective methods should be adopted to measure clients' expectations which will help in determining the appropriate initiatives to take to meet the needs.
Some of the key elements that bank managers look at involve quality of services delivered, changing technologies in the markets and innovative technologies to adapt to offer lasting solutions to clients (Manolis & Winsor, 2000). As a result, it becomes easy to shape and form consumers’ needs and wishes in light of their civilization, social and economic conditions to establish a collaborative relationship between bank’s productivity, continuity and survival. In the current research study, the sustainable client growth led to the transfer of 275 complexes which has a significant impact on customer satisfaction. This aspect raised a management issue relating to undetermined elements that are greatly valued by clients in the private banking sector. The identification of the key components improves client-provider relationship and aid in the anticipation of possible needs and wants in future. As a result, the present study will attempt to determine which key elements are valued by clients in regards to the group private banking clients of the Rotterdam branch (275) who were transferred as a result of a change in the bank’s customer policy from retail banking to private banking two years ago.
1.3 Research Aim and Objectives
1.3.1 Main aim
The primary objective of this research study includes determining the impact of shifting to private banking on client's satisfaction.
1.3.2 Sub-objectives
1. To identify the perception of customers on service quality in private banking.
2. To establish strategies to enhance clients' perception of the private banks.
3. To evaluate the rating given by clients regarding services offered by private banks.
1.4 Research Questions
1.4.1 Main research question
The main research question is: Does migrating to private banking have significant benefits to clients?
1.4.2 Research sub-questions
1. What is the level of customer satisfaction in terms of private banking services?
2. What rating do clients give Private Banking?
3. Which elements of private banking are valued by clients?
1.5 Research Diagram
Figure 1: Fishbone analysis (Creately.com, 2017)
2. Theoretical Foundation
In this section, the existing theories regarding client satisfaction in the banking sector are discussed while taking into consideration the concept of service quality and what scholars have discussed on the effective strategies to deliver excellent services in private banking. The theoretical framework will provide the basis for design the appropriate methodology that will be used in the collection and analysis of data.
2.1 SERVQUAL Model
Parasuraman, Zeithaml and Berry (1998) developed the SERVQUAL model which helps in the identification of different gaps existing between service delivered and the expectations of customers. The SERVQUAL measurement model is as shown in the figure below (Figure 2). The model is designed to help in capturing consumer perceptions and expectations by considering five dimensions that represent service quality. The five dimensions of SERVQUAL model include reliability, tangibles, assurance, responsiveness and empathy. Tangibles involve the appearance of personnel, equipment and physical facilities (Anjalika & Priyanath, 2018). Reliability can be defined as the ability to deliver the promised service accurately and dependable. Empathy is the individual attention and care given to the clients who are being attended to by an organization's employees. On the other hand, responsiveness is the willingness of a company to provide prompt service and help the customer sufficiently (Adhikari & Das, 2016). The last dimension is assurance which involves employees' courtesy and knowledge together with an ability to inspire confidence and trust to clients regarding delivery of quality services and within the stipulated time.
Figure 2: SERVQUAL measurement model
Source: Akroush (2008)
From this model, there are five different gaps which result from the difference between the services offered by the company and the customer's needs and expectations and are explained in detail as follows. GAP 1 indicates expected service whereby the perception of management regarding client expectations is measured (Gupta & Agarwal, 2013). It is known as the knowledge gap arises when there is lack of deeper insights on what the consumer expects which prevents the process of meeting the market demands. Failure to understand clients’ needs or wants is due to inadequate market research and intelligence (Parasuraman et al., 1998). Gap 2 focuses on management perception and service specifications. It is the standard gap whereby an organization develops own idea expectations of clients regarding the services to be delivered. The gap results from absence of goal settings, inadequate service scope and inappropriate task standardization. Hence appropriate measures should be put in place to handle the differences that exist between company’s performance and consumers’ perception (Adhikari & Das, 2016). Service delivery gap is the third one which results from incorrect implementation and an organization offers services that do not meet the expectations of the customers. It implies that the delivered service does not meet the stipulated standards as a result of failure to analyse demand and supply effects together with presence of inefficient human resource policy Mulat, 2017). Closing this gap requires team-work and co-operation accompanied by establishing strategies that deliver excellent service (Ragavan & Mageh, 2013). The fourth one includes the communications gap whereby a company sends out the wrong message through external marketing communications by creating wrong expectations on what the firm actually delivers (Munusamy, Chelliah & Mun, 2010). The unrealistic expectations lead to dissatisfied clients who may not be persuaded to be retained and destroys the customer relationship management progress. The fifth gap consists of the differences that exist between expected service and perceived service. Hence, there will be dissatisfied results which lead to a bigger gap in the service quality.
2.2 Net Promoter Score (NPS)
NPS is a management tool pioneered by Fred Reichheld that seeks to gauge the customer relationships’ loyalty and is correlated to revenue growth. A majority of Fortune 1000 companies have been applying NPS as a metric to measure client satisfaction and in the banking industry is used to measure the loyalty between the banks and customers (Raassens & Haans, 2017). An NPS survey may consist of more or less than 100 respondents and an approximate of +50 is considered excellent. It is an approach used in prescribing two customer survey questions including qualitative as well as quantitative that help in improving client experience as well as ensuring that the organizations remain profitable (Zaki, Kandeil, Neely, & McColl-Kennedy, 2016). The parameters around which the NPS measure is derived should be specified and three elements should be evaluated including detractors, passives and promoters. Appropriate identification of potential problems requires consideration how each element is trending for a given period (Timothy, Lerzan, Bruce, Tor & Luke, 2008). As a result, NPS can be used analyzing the root causes of a particular issue and can be applied in supporting action management for problem-solving. Satisfaction is more inclusive and is mostly influenced by situational, personal, perceptions of perceived quality and product price. Service quality reflects on the client's perception of empathy, assurance, responsiveness, reliability and tangibility. With the higher levels among bank customers, managers in private banks should consider demographic characteristics as a way to gain deeper insights regarding the customers (Denny & Weckesser, 2018). Debates on customer satisfaction focus on expectation of the service delivery, actual delivery of the customer experience and expectations that were either exceeded.
2.3 The Expectancy Disconfirmation Paradigm (EDP)
EDP is based on the idea that goods and services are purchased by consumers with pre-expectations regarding the anticipated performance of an organization. The service delivered is judged by focusing on the expectation level as the standard of performance, whereby outcomes are compared against expectations (Qazi, Tamjidyamcholo, Raj, Hardaker & Standing, 2017). A difference between outcomes and expectations result in disconfirmation and in the process, a customer can either be satisfied or dissatisfied (Elkhani & Bakri, 2012). Among the healthcare providers, client satisfaction has remained an essential focus as it is a function of disconfirmation, perceived performance and expectations. There are a variety of factors that influence customer satisfaction and they include competitive pricing, friendly and knowledgeable employees, billing clarity and service quality (Zopounidis, 2012). The private bank is a service-oriented organization where employees frequently interact with clients. Overall satisfaction results from the evaluation of different experiences by the customers which are associated with the particular services that have been provided within a given period (Anjalika & Priyanath, 2018). Greater satisfaction leads to increased loyalty, higher customer base, profits and market share due to ability to retain a large number of clients. In the development processes of an institution, client satisfaction is regarded as the decisive factor (Adhikari & Das, 2016). Nevertheless, the success of a private bank relies on its ability to deliver quality services which contribute significantly to remaining competitive in the dynamically changing banking industry. Service quality is an antecedent to satisfaction of clients despite the fact that these two constructs could be transaction-specific or cumulative (Yuksel, 2001). However, when studying the relationships between perceived quality and expectations of clients, researchers. From the concepts of customer satisfaction model clients in the banking sector their expectations with perceptions of actual services performances (Negi, 2009). Disconfirmation result from discrepancies that may be identified between performance and expectations and the consumption experience is defined by the preferences and perceptions of end-users (Zopounidis, 2012). The customer benefits are used in describing the characteristics and aspects used in evaluation of consumption experience.
3. Research Methods
3.1 Research Design
In this study, a quantitative research design will be used that will allow an empirical statistical investigation of observable phenomena through computational, mathematical and statistical techniques. This approach allows the researcher to quantify the problem and gain comprehensive understanding on the prevalence of the issue by establishing projectable results to the larger population (Munđar, Matotek & Jakuš, 2012). Quantitative design was used because it allows measuring the extent and looking for statistical outcomes that can be interpreted objectively. It will help in defining the structured cause-effect relationship between the problem and factors. The quantitative e approach will be descriptive as the subjects will be measured only once to establish the associations between the dependent and independent variable. The main advantage of this technique includes increasing the ability to generate a variety of ideas regarding a research problem in a spontaneous and free-flowing manner (Yilmaz, 2013). Therefore, the study will focus on collecting numeric, detailed and unchanging data that facilitates convergent reasoning. To explain the impact of shifting to private banking on client's satisfaction the data will be gathered by applying structured research instruments. Quantitative design is indispensable in measuring customer trends and preferences together with their expectations in the service industry. Moreover, the quantitative methods will allow the utilization of literature review results and primary data to develop findings that are reliable and credible. The nature of information collected have a significant impact on the outcomes and thus, the need to employ a technique that increases the capabilities to incorporate individuals opinions and ideas concerning satisfaction after moving to the private banking from retail banking (Denny &Weckesser, 2018).
3.2 Sampling
Under this section, it will be appropriate to apply probability sampling which will ensure that the participants selected in the sample are a true representative of the clients in the targeted population. Probability samples are selected randomly and are not technical which implies that the process of selecting the participants will neither be lengthy nor complicated. The randomness governs the selection process and thus, gives an equality probability of selecting each member of the larger population (Mandal & Bhattacharya, 2013). The results to be obtained will be free of bias and there will be high accuracy of the statistical inferences made. Random probability sampling eliminates any possible conscious and thus, the study conducted focuses on features and behaviors of the sample that aids generalization of the overall behavior of the larger group (Zopounidis, 2012). The participants will be selected based on their working experience and knowledge of elements that affect customer value and quality of services offered in the bank. The targeted population includes Rotterdam’s employees, managers and clients affected by the changes made in the organization. The participants will include 2 managers from different departments of the bank, 5 employee representatives and 8 clients. Essentially, it is important to make sure that the entire sample consists of individuals who have been with the bank since it was in the retail banking to the time it was converted to a private bank. This step ensures that the information collected is reliable and is based on facts and opinions from those affected and how it impacts the client satisfaction.
3.3 Data Collection
Research Site:
the research will be conducted at Rotterdam which will increases the chances of accessing participants who have knowledge on the elements valued by clients in private banking and whether the sustainable client growth strategy has led to increasing in customer satisfaction. Due to convenience, interviews will be scheduled to only sample population to avoid interfering with the day-to-day programs of the organization (Mandal & Bhattacharya, 2013). Furthermore, it will help in identifying weaknesses in legal frameworks that affect the problem under study need to be addressed and it will be necessary to observe how the service is delivered by employees to clients who visit the Rotterdam branch. Before commencing the process of collecting data, participants will be contacted through emails and mobile phones to ensure informed consent. This step will ensure the information provided is appropriate and answers the research questions.
Interviews: in this study, there will be use of semi-structured interviews in the primary data collection from the human subjects. Semi-structured interviews are selected because they enhance accurate screening of data, offer opportunity for capturing raw emotions and behavior and helps in keeping the interview focused and free from any distractions that will interfere with the session (Denny & Weckesser, 2018). As a result, there are high chances of collecting reliable, accurate and comprehensive data that will help solve the management issue identified in the problem definition. Semi-structured interviews allow flexibility which will assist enumerators to provide clarification of different questions which enhances understanding among the participants of the study (Lancaster, 2016). Another important aspect that led to selection of semi-structured interviews involves creation of trustworthy relationship that promotes collaboration from the subjects which has positive impact on participant who will not be afraid of providing vital information.
To conduct the interviews appropriately, two enumerators with vast experience in research in the banking sector will be hired. This action will help in the reduction of susceptibility to biases as well as ensuring that the data collection process is carried out faster. The approximated period for collecting the data is 2 months whereby, every interview session is expected to take approximately 25 to 30 minutes as way for making sure that sufficient answers are provided to the study questions. During this time, interviewers will have a greater opportunity to record opinions and facts while at the same time, compare them with results from the literature review to aid in developing appropriate recommendations for the Rotterdam branch. Explanation of the research risks, potential benefits and measures for protecting from anonymity and confidentiality will take at least 8 minutes and the frequency of data collection will be 4 times in each week for the period of 2 months. Therefore, interviewers should live within the study area to save time as well as transportation costs. Another important thing to take into account before administering the semi-structured interviews involves the relationship between quantity of data and participants knowledge and willingness together with the number of research questions. The assumption made under this method involves anticipation that the required information will be collected under the normal session.
Additionally, survey-questionnaire will be used in this study to assist in monitoring the delivery of services to clients and behavior of the targeted population including, managers, clients and employees in the private bank. Surveys are used in quantitative research to gain deeper insights regarding people’s behavior, actions and roles resulting from the shift to private banking. Survey questions will increase opportunities to examine the current situation appropriately and aid in attaining the meaning that surrounds the problem and understand the context (Qu & Dumay, 2011). The questionnaires will be based on SERVQUAL’s questions as explained in Appendix E.
In the data collection and analysis, written documents will be required because discourse analysis will be applied to exploring the social construction between client satisfaction and service delivery in private banking. This will help to unravel loopholes that should be addressed to overcome challenges being experienced in the new branch and increase value creation to the customers. Audio recorders will also be used in documenting information on whether the new strategy is benefiting clients and will be used to complement other sources of data such as interviews, literature reviews and observation studies (Qu & Dumay, 2011). To document the required contextual data, field notes will be useful as it enhances data sharing as well as increases chances of meta-synthesis of information. To enhance comprehension of information during the sorting and coding process, all the data will be arranged in a descriptive form. Additionally, data collection will be based on cases studies associated with transfer from retail to private banking. These extra data sources are useful in providing the ground for the research and anticipated results in the elements by clients in private banks. Case studies are versatile and thus instrumental in the analysis of both simple and complex subjects relating to the research problem (Raina, 2015). Group discussions will be used in the analysis of case studies. The use of a variety of approaches in the collection of data aids in capturing more variables that represent the study population. The benefits of using case-studies include flexibility, reliability and offering greater opportunity for collecting detailed information.
3.4 Data Analysis
The SPSS data analysis method will be used in this section as it commonly used when analyzing social science data. SPSS software is an appropriate tool that will ensure thorough data management by allowing the user to have full control in organizing the collected data. It aids in the provision of faster and accurate analysis of data since the variables and cases related to the problem can be located easily (Roulston, 2013). Data will be screened and cleansed within SPSS which has a broad range of charts, graphs and methods for presenting and documenting information for future use. The better organization of output will ensure that the results of the study are stored in separate files to avoid the challenge of overwriting any other crucial information.
3.5 Research Credibility
In this research, the internal validity method will be used to test the trustworthiness of the by evaluating how well the threats to internal validity have been controlled, and the effective use of the instruments and measurements in the study. Through the use of statistical test measures, the data can be analyzed comprehensively by taking into consideration various threats including treatment replications, subject and experimenter effects, and diffusion of treatment, statistical regression, subject attrition, instrumentation, pretesting, maturation, selection and history (Munđar, Matotek & Jakuš, 2012). Cronbach’s alpha will be used in testing internal consistency to determine the degree to which the components on a scale measure one aspect together with stability and equivalence. This step will help in determining whether the results are credible to be applied in the private banking in Rotterdam and implement the necessary recommendations.
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Poll, M. V. (20
