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The Impact of Service Quality Delivery on Customer Satisfaction in the Banking Sector in Riyadh, Saudi Arabia Ghalib Sanjuq1 1 School of Economics & Administrative Science, Al Imam ibn Muhammad ibn Saud Islamic University, Riyadh, Saudi Arabia Correspondence: Dr. Ghalib Sanjuq, Assistant Professor, School of Economics & Administrative Science, Al Imam ibn Muhammad ibn Saud Islamic University, Riyadh, Saudi Arabia. Tel: 966-56-839-9255. E-mail: dr.ghalibsanjuq@hotmail.com Received: June 7, 2014 Accepted: June 28, 2014 Online Published: July 4, 2014 doi:10.5430/ijba.v5n4p77 URL: http://dx.doi.org/10.5430/ijba.v5n4p77 Abstract This study aimed to evaluate what impact service quality that underlies the SERVQUAL model has on customer satisfaction in Saudi Arabia’s banking sector. The study was quantitative in nature and involved distributing a structured, pre-tested, self-administered questionnaire that was based on a convenience method to 412 customers of various bank in the Saudi capital city of Riyadh, during the fall of 2014. The response rate was 67 percent and the study data was analyzed using SPSS and a reliability coefficient (alpha) was determined. Regression analysis found a positive relationship among assurance, empathy, and responsiveness, but that this relationship has no significant effect (P=0.50) on customer satisfaction. Reliability was found to have a negative relationship to customer satisfaction, but no significant effect on the same. Only tangibles were found to have a positive relationship and a significant impact (P?0.50) on customer satisfaction. The results show that, in the retail banking sector, the servqual model remains an effective way of measuring customer satisfaction. Because customer value is an asset to organizations, organizations must ensure that they provide the right products and services, supported by the right promotion, at the right time for their customers. Keywords: servqual, customer satisfaction, local Saudi banks 1. Introduction Banking is one of the Saudi economy’s most important sectors and represented approximately one-third of the total market capitalization of all the country’s listed companies in Saudi Arabia. Banks in Saudi Arabia have a long history, including large-scale development when oil prices soared in the 1970s. In 1966, SAMA introduced the Banking Control Law to regulate the banking sector. Before 1975, the Saudi government had been largely open to foreign-owned banks wishing to open branches, leading to 10 international banks having 23 branches in the country by late 1975 (Al-Dukheil, 1995). The environment for Saudi banks, both domestically and regionally, is becoming increasingly competitive as the number of banks operating in the country almost doubled to 20 by 2006. The success or failure of a service provider depends largely on the quality of its relationship with its customers (Panda, 2003), which helps determine customer satisfaction (Lymperopoulos et al., 2006). Almost all organizations compete based on service, to some degree. The American Management Association’s most exhaustive study involved a survey of more than 3000 respondents in several countries. Seventy-eight percent of these respondents reported that the key to competitive success was improving the quality and service they provided to customers, while 92 percent indicated that, regardless of their job description, one of their key responsibilities is to provide superior service (Greenberg, 1990). A. Customer Satisfaction It is important to understand what ‘customer satisfaction’ actually means. In business circles, the term refers to the kind of products and services a company provides in order to meet and exceed its customers’ expectations. Organizations within the same market sector must assess the quality of their services if they are to attract and retain customers. It appears as though many researchers have conceptualized customer satisfaction as the feeling of pleasure or disappointment that an individual gains from comparing a perceived performance or outcome against www.sciedu.ca/ijba International Journal of Business Administration Vol. 5, No. 4; 2014 Published by Sciedu Press 78 ISSN 1923-4007 E-ISSN 1923-4015 their expectations (Oliver, 1981; Brandy and Robertson, 2001; Lovelock, Patterson and Walker, 2001). The two usual conceptualizations of satisfaction are transaction-specific satisfaction and cumulative satisfaction (Aldlaigan and Buttle, 2002; Yi and La, 2004). The former indicates how the customer evaluates his or her experience and the way that he or she reacts to a service encounter (Boshoff and Gray, 2004). Customer who experience a product or service for the first time express this reaction. Cumulative satisfaction, on the other hand, refers to how the customer evaluates his or her consuming experience overall (Johnson et al., 1995). Based on this overall evaluation, customers set a personal standard that they use subsequently to gauge service quality (SQ). However, there is general agreement that the measurement of customer satisfaction is a post-consumption assessment about the products or services gained (Churchill and Surprenant, 1982; Yuksel and Rimmington, 1988). B. Customer Satisfaction in Retail Banking Higher SQ means higher customer satisfaction. There is general agreement that the banking sector has no recognized and standardized scales with which to measure customers’ perceptions of the quality of a bank’s service. Consequently, gaining a competitive advantage by offering high-quality service is becoming increasingly important for survival in this sector. However, the unique characteristics of services – intangibility, inseparability, heterogeneity, and perishability – make it difficult for service providers to measure SQ (Bateson, 1985). Therefore, a number of measuring models have been developed with the aim of measuring service quality perceptions (Bahia and Nantel, 2000; Aldlaigan and Buttle, 2002). C. Service Quality Providing high-quality services can enhance customer retention rates, attract new customers through word-of-mouth, increase productivity, lead to higher market share, reduce operating costs and staff turnover, and improve financial performance, profitability, and morale among employees (Julian and Ramaseshan, 1994; Lewis and booms, 1983). Although issues related to SQ have attracted increasing attention in management and academia, much of this focus has been on developed countries (Herbig and Genestre, 1996), despite the rapid growth of services in emerging countries (Malhotra et al., 1993). Service qualities may have been overlooked because of the sellers’ market conditions that prevail in these emerging economies (Samli and Frohlich, 1992). Several theoretical SQ models have been developed as award-based frameworks that promote quality awareness and encourage organizations to perform self-assessment in order to identify areas in which they can improve and to develop plans for further action. The SERVQUAL instrument, developed by Parasuraman et al. (1990), relates to the customer’s perceived measurement of service quality, where perceived service quality is defined as the degree and direction of the discrepancy between a customer’s perceptions and their expectations (Parasuraman et al., 1990). The measurement methodology involves determining the customer’s expectations of a particular service and then measuring the s