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Customer Satisfaction: A Comparative Study of Public and Private Sector

Banks in Bangladesh

Research · January 2018

DOI: 10.9790/487X-2001011521

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IOSR Journal of Business and Management (IOSR-JBM)
e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 20, Issue 1. Ver. I (January. 2018), PP 15-21
www.iosrjournals.org

Customer Satisfaction: A Comparative Study of Public and

Private Sector Banks in Bangladesh
Jaydeb Ray
Lecturer, Dept. of Accounting, Dinajpur Govt. College, Bangladesh

Abstract: The purpose of this study is to compare the customer satisfaction in public and private sectors banks
operating in Dinajpur city of Bangladesh. The data were collected through a structured questionnaire utilizing
a five point Likert scale. For statistical analysis of data, mean and standard deviation were used. The number of
participants was 160 customers (80 from private banks and 80 from public banks). The results reveal significant
differences between public and private sector banks with regard to customer satisfaction. The customer
satisfaction in private bank is more as compared to public sectors banks. The service quality dimensions of
tangibles, responsiveness, reliability, assurance and empathy influence the customers overall satisfaction. The
tangibility dimension is found to be the most influential predictor of customer satisfaction, whereas empathy
dimension is the least satisfaction influencing factor with customer satisfaction. The results of this research will
be helpful to the bank managers and other stakeholders in order to assess the service quality of banks in
Bangladesh and also help to take a better strategy to satisfy their existing customers’ demands and
requirements in the competitive business environment.
Keywords: customer satisfaction, public sector banks, private sector banks, service quality
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Date of Submission: 23-12-2017 Date of acceptance: 08-01-2018
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I. Introduction
Banks play a very significant role for the development of economy of a nation. Modern banking system
is the key to growth and development of trade and commerce. In Bangladesh, nationalized commercial banks
were established in 1972 through amalgamation of twelve commercial banks that were operating in pre-
independent of Bangladesh. But, these banks could not play the adequate roles in the implementation of
governmental plans and policies. Therefore, a trend of de-nationalization of banks started from mid 80’s. In
order to provide more credits and advances to local investors and businessmen, the private sector banking had
been introduced. Now, the banking sector in Bangladesh operates in a more competitive environment than in the
past. Due to the globalization and free market economy, this industry is facing severe competition in
Bangladesh. Competition among banks is growing all the time and that is why providing good services to
customers is becoming more and more important for these banks. To survive in the market, banks have to deal
various types of customer everyday and give various types of services. The goal for every bank should be to
make its customers satisfied. Customer is called the king of market. It is clear that if the bank can make the
customer satisfied, the customer will come back again to the bank and the customers might also tell to some of
their friends and relatives about the good services they got. So, for achieving the primary objective of any bank,
creating new customers and retaining the existing one are very important. Quality in service has become an
important factor in business enterprises especially for banking sectors. So, it is necessary to measure the service
quality of banks. This paper tries to measure the customer satisfaction both in private and public sectors banks
operating in Bangladesh.

II. Objectives of The Study

The objectives of the study are as follows:
 To identify various factors of customers’ satisfaction of both private and public sectors banks in Dinajpur
city of Bangladesh.
 To know in which service quality dimension the bank is performing well and in which dimension it needs
improvement.
 To evaluate the impact of service attributes offered by the banks on the level of satisfaction of customers.

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 Customer Satisfaction: A Comparative Study of Public and Private Sector Banks in Bangladesh

III. Literature Review

Customer satisfaction is a marketing term that measures how products or services supplied by a
company meet a customer’s expectation. It is the best indicator of how likely a customer will make a relation
with a company. A customer can be defined as an individual or business that purchases the services produced
by the business organizations. The efficiency of a banking sector depends upon how best it can deliver services
to its target customers. Customer satisfaction of a bank is a measure how services supplied by a bank meet a
customer’s expectation. Every rationale customer compares the cost and benefit of any product or service.
Customer satisfaction is a relative term and therefore it is difficult to determine. The level of satisfaction varies
from person to person, product to product and service to service. Customer satisfaction aids to repurchase
product that ultimately leads to increase the brand loyalty of business organization. Kotler and Armstrong
(2012) stated that customer satisfaction is the degree to which a product’s perceived performance matches a
buyer’s expectations.
Kaura (2013) has done a research on customer loyalty in Indian commercial banks. She categorized
service convenience into decision convenience, access convenience, transaction convenience, benefit
convenience and post benefit convenience. According to her, decision convenience influences customer
satisfaction more than the other dimensions of service convenience.
Akhtar et al. (2016) suggested that service quality, customer satisfaction, loyalty programs have
positive impact on customer loyalty so bank should introduce more loyalty programs to their loyal customers to
satisfy them and also provide them best service quality to retain them.
Ali and Raza (2015) found that the multidimensional service quality scale is positively and significantly
associated with the unidimensional scale of customer satisfaction.
Paul et al. (2016) carried out comparative analysis to examine the impact of various service quality
variables on the overall satisfaction of customers and compare the private and public sector banks using a
sample from India. They argued that the components of service quality that are positively associated are not the
same in public sector banks as they are in private sector banks. Appearance is the only factor that is negatively
associated with satisfaction of customer both in private and public sector banks.
Bilika et al. (2016) advocated that service quality has a positive and significant effect on customer
satisfaction and that customer satisfaction bears a strong influence on customer loyalty.
Ragavan and Mageh (2013) measured the influence of service quality dimensions on customer overall
satisfaction. The result demonstrates that the most important service quality practice on customer satisfaction is
responsiveness as it is perceived as a dominant service quality.
However in other study, customers are equally satisfied with both in Conventional and Islamic banks
and also no difference of customer satisfaction was found from different regions (Lone et al., 2017).
In the light of the above studies, it can be concluded that there are very few studies focusing on a
comparative analysis of service quality on customer satisfaction in public and private sector banks in the context
of Bangladesh.

IV. Research Methodology

The study is based on a survey conducted in Dinajpur city with the help of primary and secondary data.
The data collection took place from July to September 2017. Data were collected using the questionnaire and
personal contact approach. Bilingual questionnaires (i.e., Bangla and English) were used for collection of data.
Secondary data were collected from the books, magazines, periodicals and websites. Simple random sampling
technique is adopted for collection of primary data. It included equal proportion from both private and public
sector banks. Data were collected from four public banks viz., Sonali Bank Ltd., Agrani Bank Ltd., Rupali Bank
Ltd., Janata Bank Ltd. and four private banks viz., Bank Asia Ltd., South Bangla Agricultural and Commerce
Bank Ltd., Bangladesh Commerce Bank Ltd, Dutch-Bangla Bank Ltd. in Dinajpur city. It was planned to select
20 customers randomly from each bank making a total of 160 customers (80 from public sectors banks and the
rest 80 from private sectors banks) as sample by making personal visit to the respective bank. The service
quality model developed by Parsuraman et al. (1988) has been used to measure the service quality of banks.
According to this model, customers can evaluate a firm’s service quality by comparing their perceptions of its
service with their own expectations. The questionnaire was a SERVQUAL one consisting of 20 statements in 5
key dimensions namely tangibles, reliability, responsiveness, assurance and empathy and each dimension has its
own attributes. The list of service attributes based on different service dimensions are ranked and rated by the
customer to identify the importance of each service attribute. The Likert scale used for the measurement of
satisfaction level is:
Strongly disagree= 1,
Disagree= 2,
Neutral= 3,
Agree= 4,

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 Customer Satisfaction: A Comparative Study of Public and Private Sector Banks in Bangladesh

Strongly agree= 5.
After the data have been collected, these were entered into Microsoft excel and were prepared for analysis. For
analysis of the data, weighted mean and standard deviation of satisfaction level had been used.

V. Analysis & Interpretation of Data

Demographic Profile of the Respondents:
In this study, the demographic profile in terms of gender, age, duration of account with the bank etc. are
categorized and their responses were analyzed as shown in the following Table 1 in order to show the diversity
of participants of both private and public sector banks.

Table 1: Demographical data of the respondents

Type Public Sectors Banks Private Sectors Banks
N % N %
Gender:
Male 60 75 65 81
Female 20 25 15 19
Age:
Less than 25 Years 10 12 1 2
25 - 35 Years 30 38 33 41
36 - 46 Years 25 31 29 36
47 - 57 Years 12 15 13 16
Above 57 Years 3 4 4 5
Educational Qualification:
Primary 5 6 10 13
Secondary 18 22 21 26
Higher Secondary 19 24 21 26
Graduate 28 35 17 21
Postgraduate 10 13 11 14
Occupation:
Business 25 31 43 54
Govt. Job 27 34 9 11
Private Job 17 21 19 24
Housewife 7 9 6 7
Others 4 5 3 4
Monthly Family Income:
Less than Tk. 10000 13 16 8 10
Tk. 10000 - 15000 12 15 11 14
Tk. 15001 - 20000 22 28 21 26
Tk. 20001 - 25000 21 26 12 15
Above Tk. 25000 12 15 28 35
Duration of Account:
Less than 1 Year 13 16 14 17
1 - 5 Years 34 42 47 59
6 - 10 Years 18 23 13 16
11 - 15 Years 10 13 4 5
Above 15 Years 5 6 2 3
Source: Primary Data, 2017

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 Customer Satisfaction: A Comparative Study of Public and Private Sector Banks in Bangladesh

The results in Table 1 show that male participants are the majority respondents as represented by 75%
in public sector banks and 81% in private sectors banks. In both sectors, male customers are dominated. In
regard to age type in both sector banks the greater part of respondents’ age is in the range of 25 - 35 years. If we
see the occupation then majority respondents have govt. job in public banks, whereas in the private banks, the
businessmen are the major respondents. The larger part of customers’ educational qualifications in public banks
is graduates and in private banks is higher secondary. Concerning the monthly family income, the respondents
of public banks have less income than private banks. Lastly, in regard to duration of account with the bank, the
larger number of respondents has been a customer for a period of 1 - 5 years in both sectors of banks.

Dimension-wise Service Quality Analysis:

In this study, service quality for private and public sector banks was measured through the
questionnaire in which respondents were required to indicate the extent to which they agree or disagree with
each attribute of service dimensions namely tangibility, reliability, assurance, responsiveness and empathy. The
statistical analysis and explanations of these service attributes are depicted in the Tables below:

Table 2: Perceptions of customers in relation to banks tangibility

Service Attributes Public Sectors Banks Private Sectors Banks
Mean Scores S.D. Mean Scores S.D.
1. Bank has modern-looking equipments &
technology. 3.74 0.78 4.39 0.65
2. Employees of the bank are neat & tidy in
appearance. 3.74 0.73 4.45 0.57
3. The interior and exterior of bank is visually
appealing and spacious. 3.27 1.11 4.21 0.69
4. The bank is located in suitable place. 3.65 1.13 4.04 0.70
Weighted Mean & S.D 3.60 0.94 4.27 0.65
Source: Computed Data

The data in Table 2 fetch to light the distinction in the perceptions of the banks—public sectors banks
and private sectors banks with their relevant customers on tangibles dimension. More mean and less standard
deviation indicates more important factors for customer satisfaction. In case of all the attributes of tangibility the
mean ranks of private banks are higher than the public sector banks. Public banks have a weighted mean value
of 3.60 and standard deviation of 0.94. On the other hand, private banks have a weighted mean value of 4.27 and
standard deviation of 0.65. This clearly reveals that private sector banks provide better tangible services and
indicates that in case of private banks the physical facilities are more attractive and the employees are also more
impressive in their appearances than the public banks. The lowest satisfaction mean score for public banks is for
the visibility of interior and exterior side of banks and for private banks, the lowest mean is for the location of
bank attribute. It is also apparent that among all the attributes of tangibility dimension, the neat and tidy
appearance of employee has shown the highest satisfaction mean score in both private and public sector banks.

Table 3: Perceptions of customers in relation to banks reliability

Service Attributes Public Sectors Banks Private Sectors Banks
Mean Scores S.D. Mean Scores S.D.
1. Whenever I request for banking service, bank
provides it at the promised time. 3.54 0.84 4.08 0.67
2. Always bank maintains error-free records service. 3.63 0.75 4.13 0.62
3. Whenever I experience problem, bank staffs handle it
sincerely. 3.24 0.85 4.04 0.72
4. Whenever I request for service viz., cash deposit, cash
withdrawal, bank statement, etc., bank staffs provide it
as promised. 3.51 1.03 3.96 0.61
Weighted Mean & S.D 3.48 0.87 4.05 0.66
Source: Computed Data

Results in Table 3 indicate the major variations in the observation of public sectors banks with their
respective customers when this is compared with private sector banks. Private sector banks have an average
mean score of 4.05 with standard deviation of 0.66 and public sector banks have an average mean score of 3.48
with standard deviation of 0.87. This implies that customers are more satisfied with private sector banks than in
DOI: 10.9790/487X-2001011521 www.iosrjournals.org 18 | Page
 Customer Satisfaction: A Comparative Study of Public and Private Sector Banks in Bangladesh

public sector banks. The factor wise analysis of reliability dimension explains that customers feel the private
banks have better ability to perform the promised services dependably and accurately. On the other hand, in
public sector banks the highest attribute for reliability dimension is maintaining error free record service by the
bank. The lowest satisfaction mean score for public sector banks is marked for the attribute i.e. whenever
customer experiences problem, the bank staffs handle it clearly. Private sector banks are better in case of
showing interest in solving customer’s problems and performing right service at the first time.

Table 4: Perceptions of customers in relation to banks assurance

Service Attributes Public Sectors Banks Private Sectors Banks
Mean Scores S.D. Mean Scores S.D.
1. I always feel safe in my transactions & dealing with
bank. 3.90 0.69 4.29 0.64
2. Always employees of bank have the knowledge to
answer my questions. 3.34 0.93 4.00 0.68
3. Every time employees in bank are constantly
courteous & polite with me. 3.18 1.08 4.28 0.66
4. The bank has experienced management team. 3.31 0.95 4.00 0.78
Weighted Mean & S.D 3.43 0.91 4.14 0.69
Source: Computed Data

The factor wise analysis of assurance dimension illustrates that private sectors bank is greater than the
perceptions of their customers than public sector banks (Table 4). Both in private and public sectors banks,
felling safe in transactions has the greatest mean score than the other attributes. Courteous and polite behavior of
employee in public banks shows the lowest mean score among all the attributes. The satisfaction scores for all
attributes of assurance dimension in private sector banks are satisfactory. On the other hand, in public sector
banks, the average mean score for all attributes are not up to the standard. That is why customers are more
satisfied in all attributes for assurance dimension in private sector banks than in public sector banks.

Table 5: Perceptions of customers in relation to banks responsiveness

Service Attributes Public Sectors Banks Private Sectors Banks
Mean Scores S.D. Mean Scores S.D.
1. Whenever I need service, bank staffs give me quick
service. 3.65 0.77 4.25 0.50
2. Always bank staffs are enthusiastic to solve customer
problems. 3.45 0.88 4.14 0.73
3. Whenever I ask for service, bank staffs serve me
readily in a good manner. 3.38 0.95 4.04 0.74
4. Customers requests are handled promptly. 3.35 1.00 4.03 0.76
Weighted Mean & S.D 3.46 0.90 4.12 0.68
Source: Computed Data

The Table 5 exhibits the different attributes mean score for responsiveness dimension for both private
and public sector banks. Analysis clearly shows that private sector banks exceed the level of satisfaction of their
customers when compared to public sectors banks in respect of responsiveness dimension. The weighted mean
ranks of all the items under the responsiveness dimension are higher in case of private sector banks (4.12) in
comparison to the public sector banks (3.46). Among the attributes of responsive dimension, the customers’
requests are handled promptly has the lowest satisfaction level in both sector banks. The highest satisfaction
mean score in both private and public sector banks has shown .On the other hand, giving quick services to
customers by the bank staff has shown the highest satisfaction mean score in both sector banks.

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 Customer Satisfaction: A Comparative Study of Public and Private Sector Banks in Bangladesh

Table 6: Perceptions of customers in relation to banks empathy

Service Attributes Public Sectors Banks Private Sectors Banks
Mean Scores S.D. Mean Scores S.D.
1. All employees in bank pass transactions in a caring
manner. 3.63 0.83 3.88 0.57
2. All employees of bank understand my specific needs
with a specific attention. 3.31 1.05 3.73 0.55
3. Bank has convenience operating hours to all their
customers. 3.46 0.91 3.56 0.74
4. Bank has convenient branches and operates in
extended hours to all its customers without spending
much time on long queues. 3. 25 1.09 3.50 0.85
Weighted Mean & S.D 3. 41 0.97 3.67 0.68
Source: Computed Data

In case of the service dimension for empathy there is little significant difference in any of the attributes
between the private and public sectors banks (Table 6). The weighted mean score is almost the same in public
and private sectors banks. The factor i.e. passing transactions in a caring manner has the highest satisfaction
scores in both sector banks. On the other hand, the lowest mean for public banks is the case for spending
customers’ much time on long queues and this is also the same in private sector banks.

VI. Conclusion & Recommendation

In modern competitive business environment meeting up of customer satisfaction is important.
Customer satisfaction varies according to the nature of the services provided by banks. According to the study,
the highest customer satisfaction is shown in the tangibility dimension for both private and public sector banks.
The tangibility attributes such as, modern looking equipment, the neat and tidy appearance of employees, the
suitable location of banks influence highly the customer satisfaction. The almost same satisfaction level is
shown in the responsive dimension such as- whenever service needed bank staff gives quick services, solving
customers’ problems etc. On the other hand, moderate satisfactions are in the reliability areas such as
maintaining error free record, giving services at promised time etc. This is followed by assurance areas such as
feeling safe in transactions, banking knowledge of employee etc. Customer level of satisfaction for the empathy
dimension does not differ significantly in both private and public sectors banks which mean that operating hour
of banks and employee desire to understand the customers do not differ much in both sector banks. After all,
from the above study, it can be concluded that when the attribute-wise analysis is made, the private sector banks
have contributed much to their customers than by public sector banks in all the service attributes and in all
perspectives. Hence, the customers are more satisfied with private banks than in public sector banks.
In order to satisfy the customers, both public and private sector banks need to find out the weak areas to
assist the managers to take plan and decisions for meeting up the customers’ requirement. As the average
satisfaction level for all dimensions of public sector banks is lower than private sector banks, the public sector
banks should emphasize more on improving the services in terms of tangibility, reliability, responsiveness,
assurance and empathy. Courteous and polite behaviors of employee are essential to satisfy the customers in
public sector banks. They should have appealing and spacious comfortability conditions, audio visual screen,
public notice board etc. Moreover, both public and private sectors banks should give more attention to increase
the satisfaction level with empathy dimension as it has shown the lowest weighted mean satisfaction level. This
can be possible by passing transactions in a caring manner, having convenience operating hours and also
convenient branches and outlets to all their customers. On the whole, both sector banks need to focus on
customers’ oriented services in order to achieve success of business.

VII. Limitations of The Study

Some limitations have been observed during this research. The study is geographically restricted to
Dinajpur city only and does not represent the whole state, which makes it difficult to generalize the findings.
Moreover, limited number of banks was covered under the study and the actual respondent numbers were
meager because of limited time period. Finally, the result is based on primary and secondary data that has its
own limitations.

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 Customer Satisfaction: A Comparative Study of Public and Private Sector Banks in Bangladesh

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Jaydeb Ray "Customer Satisfaction: A Comparative Study of Public and Private Sector Banks
in Bangladesh." IOSR Journal of Business and Management (IOSR-JBM) 20.1 (2018): 15-21.

DOI: 10.9790/487X-2001011521 www.iosrjournals.org 21 | Page

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