Banking Sector of Pakistan

Evaluation of ACSI model in Banking Sector of Pakistan.


Banking sector of Pakistan - one of the few profitable sectors in Pakistan's economy is facing fierce competition that highlights the concern to measure, analyze, forecast and plan for customer satisfaction. The objective of this study is to evaluate the ACSI model in local environment by asking consumers regarding bank services. The data collected for this research consists of 244 complete responses out of 400 master level university instructors. They were customers of 21 different banks working both in public and private sectors. The reliability of the data was checked through SPSS for Windows software package and the technique that was used is Cronbach's Alpha with a value 0.542. It was identified earlier that this research requires huge and diverse type of respondents but due to time and money constraints limited number of responses has been taken because it was not sponsored research. Results revealed that Image and expectations have strong relationship with Satisfaction that successively has a strong relationship with Loyalty. Data does not show any relation of Customer expectations with Perceived value and perceived quality, Perceived quality and Customer satisfaction, Perceived value and Customer Expectations, and Customer Satisfaction and Complaints.

Key Words:

ACSI, Customer Satisfaction, Image, Customer Expectations, Loyalty, Perceived Value, Perceived Quality, and Complaints.


In an era of global recession, when the words like “financial disaster”, “bankruptcy”, “cash crunch” etc. are heard everywhere from U.S. to U.K., from China to Chile, from India to Indonesia, and Japan to Pakistan; Sky is blue everywhere. Industries like automobile manufacturing, textile, telecom, leather, chemicals, pharmaceuticals, hotel, tourist and even banks are hit by this financial crunch. But no wonder what makes foreign banks to enter into Pakistan in this hard time despite of worse law and order situation - highest return in banking sector of Pakistan across the globe. This lucrative market is saturating due to more and more players entering into this industry in recent years. Only those banks will survive that will have more and more satisfied customers.

Literature Review:

Satisfaction is vital concept when we think about humans. Role of those humans may be of different types like employees, customers or stakeholders but satisfaction may be considered as an ultimate objective and it provides the context and basis of any modern organization. It may be easily said that any organization who develop its formal mission always consider satisfaction of their stakeholders. Phenomenon of satisfaction is not only confined to organizations, now governments specially developed countries are also highly concerned with their citizens satisfaction indices. Claes Fornell, Michael D. Johnson, Eugene W. Anderson, Jaesung Cha, and Barbara Everitt Bryant in Michigan University in 1989, first time in the history of this planet Earth, built a nation level measurement system i.e. Swedish Customer Satisfaction Barometer (SCSB) (Fornell, 1992) to measure satisfaction. Later in 1994, American Customer Satisfaction Index (ACSI) came into being because of Fornell et al. hard work (Fornell, 1996; Xiaoming Yang & PengTian 2004). After seeing the success and knowing the importance of these Customer Satisfaction Indices (CSI), apart from Europe and Asia, countries like Germany, Norway, Switzerland, Korea and Malaysia have developed their own CSIs (Anderson & Fornell, 2000). The importance of these indices is that it gives a vivid picture of economic output that results in better economic strategy assessment, enhancement in quality of product or service produced that leads to improvement in standard of living (Fornell 2000). Another reason for using these indices may be that all welfare governments are more concerned with the value given to customer or end consumer by the organization producing and distributing goods and services.

As a living being; People have different set of needs and wants that needs to be satisfied. The main objective of any product or service provider is to develop and provide offerings that satisfy customer need and expectations that will result in the attainment of business core objective i.e. to maximize the sales and profit (Valarie A. Zeitheml & Maryjo Bitner, 2001). Satisfaction and dissatisfaction is the output of all the efforts put in for fulfilling the needs and wants experienced by customers and consumers. Satisfaction is considered as pleasurable level that one feel after using the particular goods or services. Again satisfaction is a subjective phenomenon and it may vary person to person. It may be considered that diverse personality traits set different standards of pleasure regarding individual purchase. In good case they evaluate the features of goods with their need fulfillment and in service case they consider the gap between service expectation and service perceptions. In both cases the output would be consumer satisfaction and need fulfillment. Richard l. Oliver, (1991) said ‘Satisfaction is the consumer's fulfillment response. It is a judgment that a product of service features or the product or service itself provides a pleasurable level of consumption related fulfillment.' Satisfaction is also viewed as the evaluation of product or service whether or not it has met the customer needs and expectations. If the customer needs and expectations are fulfilled then he/she is called satisfied customers and if product or service fails to meet the needs and expectations of customer then he/she is called dissatisfied customer. Dissatisfaction of customers in many cases leads organizations to disasters (Levesque and McDougall 1996).

Few researchers believe Customer before experiencing some product/service develop some standards and this pre-experience standard influence customer satisfaction or dissatisfaction (David K.TSE & Peter C. Wilton 1988; Bearden and Teel 1983; Cardozo 1965; Day 1977; Leichty and Churchill 1979; Miller 1977; Oliver 1977,1980; Woodruff, Cadottec and Jenkius 1983), some believe it as a barometer that evaluates whether satisfaction is achieved or not (M.M.Andre & P.M.Saravia 2000), and many believe it as a reaction or feeling of the customer in response to a product or service offered by the organization (Woodruff & Gardial 1996).

Objective of the study:

The objective of this study is to evaluate the ACSI model in local environment by asking consumers regarding bank services. Through this research we may evaluate that whether local consumers consider all the factors and relationships among these factors according to model developed by Fornell et al. It may also depict that how mature local consumers are and how they react to item related to all factors of ACSI.

Importance of Customer Satisfaction in Pakistan:

Customers as believed by many organizations are the sole purpose of their existence, very important element, and King of the market (Holdway 2001). Despite of the Capital adequacy ratio for the banking sector of Pakistan that is two to three times the average for developed nations, the profit of banks is at risk. The main reason is customers of this industry is limited and have more options to choose from, so any mistake or unable in meeting the expectations of customers will lead to a financial loss; as customers will switch to other banks. More or less, banks are giving similar offerings to their customers, hence leading to low switching cost. In a time of cut throat competition, and financial turmoil; Banks in service sector are one of few industries that are showing profits and contributing towards National Income. Their good financial health is critical for the economy of Pakistan. So, in order to retain the sky-scraping profits of this sector in Pakistan; measurement of customer satisfaction is vital. This Customer satisfaction index will help this industry and its players to make an excellent forecasting and take concrete decisions in order to enhance and retain high profits (Levesque and McDougall, 1996).



Although the population for this research may be all the customers and consumers of banking services and they may be male or female availing the services of public or private sector banks. The data collected for this research consists of 244 complete responses out of 400 master level university instructors. They were customers of 21 different banks working both in public and private sectors. Instruments were distributed to all faculty members of the university which includes both male and female instructors. There were 188 male responses and 56 female responses.


Instrument that was developed by Fornell et al. is used with minor adjustment in language and items. There were total of 27 items in the instrument with seven factors. These factors include image, expectation, perceived quality, perceived value, customer satisfaction, customer loyalty and customer complaints. The instrument contained six point Likert scale with 1 is for strongly agree and 5 is for strongly disagree. Image contains 6 items, expectation has 3 items, perceived quality has 8 items, perceived value has two items, satisfaction has 3 items complaints has two and loyalty has three items.


The reliability of the data was checked through SPSS for Windows software package and the technique that was used is Cronbach's Alpha with a value 0.542. It was identified earlier that this research requires huge and diverse type of respondents but due to time and money constraints limited number of responses has been taken because it was not sponsored research. To check the validity of the instrument, all items were translated into Urdu and then again in English. 20 responses were taken on both English instruments and there were no significant difference in the responses. All 20 respondents had filled both instruments identically.

Meanings of Underlying Success Factors

Image (Factor 1)

Image means the brand name and the kind of associations customers get from the product/brand/company (Andreassen & Lindestad, 1998 a; Andreassen & Lindestad, 1998 b). It is important element of the customer satisfaction model (Martensen et al., 2000). Preceding research shows, Image positively affects customer satisfaction & loyalty but does not directly affect value (Kristensen et al.,1999; Martensen et al., 2000). This factor contains six items; Reliability of the bank, is the bank well established, positive contribution to society, concerned about customers, is the bank innovative and forward-looking and satisfaction regarding the profit offered by the bank.

Expectations (Factor 2)

Expectations pass on to expectation of customers about the level of quality he wish to receive as a result of prior experience of firms' product or service. There are three items in this factor namely expectations regarding overall quality, expectations that the bank would meet customers' personal needs, and expectations regarding the reliability of the bank.

Perceived Quality (Factor 3)

Perceived quality refers to perceived product quality and perceived service quality (Fornell et al., 1996). It is the evaluation of recent consumption experience of associated product or service. Overall quality, technical quality of banks operations, personal attention of bank given to customers, quality of service provided, number of services offered, reliability of service, quality of information provided, and availability of services in remote areas are the items included in this factor.

Perceived Value (Factor 4)

Perceived value is considered as the ratio of perceived quality relative to price (Anderson & Sullivan, 1993; Fornell 1992). Two items in this factor are desired quality against the price and fair price for the services offered.

Satisfaction (Factor 5)

This factor includes overall level of satisfaction, level of customer expectations met, and a gap present between a bank and an ideal bank.

Complaints (Factor 6)

Complaint means customer complaints regarding Product or service feature, quality, customer service etc. The intensity of complaints and the way of managing these complaints are very important in determining the satisfaction. There are two items in this factor that are the process of complaint handling and expectations regarding complaint handling.

Loyalty (Factor 7)

Loyalty refers to the judgment and feeling about a product, service, brand or company that become one of the major factors of repeat purchase. The customer repurchases the specific brand to which he is loyal instead of preferring any other brand to it. Willingness to try new products and services offered by the bank, intention of remaining as a client of the bank, and recommendations of the bank to colleagues and friends comes under this factor.


According to the structural model given by Fornell et al. ( 1), it got seven factors and the structure explains that image of the product and services create satisfaction, loyalty and set a standard for expectations of customer. There are some questions those are important to consider like which type of social image of the organization and product and service affect the customer positively. Customer behavior may be varying from person to person and he/she may give weight to different sources of information. Image also directly linked with loyalty that may be considered that with or without satisfaction customer may be convinced to repurchase the product or service due to positive image in the society. It may be true for huge number of customers but may not be generalize for all customers. Another relation of image is that it creates customer satisfaction that is not only related to functional attributes of the product or service but also with brand association. These types of needs fall under the category of self fulfillment and personal image and satisfaction related to this need may be addressed without experiencing product or services. There is an obvious link between image and expectation of the customers towards the product and services being offered. Good image of product and services may increase the expectations of customers towards the performance of product and services and good brand may increase the expectations of customers.

According to model presented by Fornell et al., Image influences Customer expectations, satisfaction, and loyalty but this research data reveals that image of banks in Pakistan impacts Customer Expectations and Satisfaction and have no relationship with loyalty. Similar findings were seen in Denmark where relationship of image were same with Customer expectations, Satisfaction, and Loyalty (Anne Martensen 2000, and Kai Kristensen 2000)

In relation to model, customer expectation is attached with perceived quality of product and services. Expectations of customers are before usage experience and perceived quality is state of mind after experiencing product and services. Expectations are also related with perceived value means after experience customer may compare the features of product and service with own expectations and the price paid for it. It is also mentioned that customer who has high expectations tends to feel more satisfaction. As per Fornell et al. customer satisfaction model, customer expectations have positive influence on perceived value and quality. Martensen et al. (2000) and Johnson et al. (2001) showed that customer expectations have negligible impact on customer satisfaction. The research data reveals that expectations of bank's customers are directly related to the satisfaction but shows no relation with Perceived Quality and Perceived value.

Perceived quality is generally related to the functional attributes of product and services and may provide input information for customers to compare it with the price paid for it. It also helps the customers to analyze that whether they are satisfied with its functional aspects within specified price. According to ACSI model Perceived Quality has a direct and positive effect on overall customer satisfaction.

After customer satisfaction there are two outcomes of satisfaction satisfied customer become loyal to the organization and repurchase the product and services. If they are dissatisfied then they complaint about it and if the complaint is properly handled then eventually it would be converted in customer loyalty. As per ACSI original model Customer satisfaction is inversely related to Complaints; increase in customer satisfaction will lead to decrease the incidence of complaints (American Society of Quality, 1998; Fornell et al. 1996).

According to data, it is clear that image of products and services in the mind of customers do not significantly associated with customer loyalty. Banking industry customers think that image of bank does not create loyalty and does not push customer to reuse the service even after having a best image of required services. Whereas image is not associated with loyalty but other two links are significantly associated with satisfaction and customer expectations. It means image of the bank helps the bank to satisfy their customers and raise their customer expectations regarding bank services. Customer expectations are not associated with perceived quality and perceived value but it is associated with customer satisfaction.

Data does not confirm any relation of Perceived quality and Perceived value with other subsequent variables that was presented by Fornell et al. If consumer satisfaction is considered then respondents identified that customer satisfaction results in consumer loyalty and they haven't considered any complaints in case of dissatisfaction. May be due to cultural values and social pressures, people who complaints are not considered good citizens and generally people avoid complaints. They think that organizational managers would consider their issues by just observing and delays in processing of services. According to data, even customers do not know their own satisfaction/dissatisfaction for initiation of any complaint procedure.

The model that was confirmed by the data has different significant links that is shown in 2. The new model shows that image of the organization helps customers to develop their expectations regarding product or services, consumers initiate complaint procedures if they feel strong image of organizations and poor services. They also complaint if their expectations are not met properly. According to data, Image is also considered as source of intrinsic satisfaction. Customer expectations create loyalty among customers they may think that if they have high expectations towards any services then they would reuse the services in long run. Data also shows that high expectations regarding services results in high customer satisfaction. This satisfaction is may be due to established image of that bank in banking industry.

Perceived qualities after experiencing services by consumers help to evaluate the decision of repurchase and make them loyal towards product and services (Bitner, 1990; Boulding et al., 1993; Varki and Colgate, 2001). After experiencing the quality of the services consumer complaints about the needs which are unfulfilled or they complaints about the poor features of service pack offered to them. According to data, customers are not taking any input from their expectations and perceived quality regarding perceived value of bank services. It may be said that the sources for perceived value is the competitive analysis of banks rather than fulfillment of customer need. It may also be considered that customers do not want to face difficulty regarding cost of switching towards available alternatives, the effort required to look for available substitute, the forecasted risk linked with the new purchase and the extent they have obtained satisfaction in the past. May be due to these mentioned factors customers keep loyal to the organization and reduce their searching efforts but it may not be correct for all types of products and services. The relationship between perceived vale and loyalty reports the inverse relationship unlike the model presented by Fornell et al. Customer satisfaction generates loyalty among customers and more satisfied customers have high tendency to reuse the services (Chiou, Dorge, and Hanvanich 2002; Cronin, Brady, and Hult, 2000; Cronin and Taylor, 1992; McDougall and Levesque, 2000).


As results revealed from 244 complete responses of Banking Customers demonstrate that Image and expectations have strong relationship with Satisfaction that successively has a strong relationship with Loyalty. Data does not show any relation of Customer expectations with Perceived value and perceived quality, Perceived quality and Customer satisfaction, Perceived value and Customer Expectations, and Customer Satisfaction and Complaints. A comprehensive research should be launched in the future to verify the applicability and reliability of this ACSI model in Pakistan's Banking Sector context.


Clease Fornal(1992) a national satisfaction barometer: the Swedish experience. Journal of Marketing, vol. 56, June, 435-451

Clease formal, Michal d. Johnson, Eugene w. Anderson, jae sung cha & barbar Everitt Bryant(1996), the American customer satisfaction index: nature, purpose and findings. Journal of marketing, vol.60, oct.124/134

Xiaomingyang & pen tian (2004) national customer satisfaction measurement: past and future.

Eugene w. Anderson & Cleas Fornell (2000) foundation of the American customer satisfaction index: total quality management, vol. 11, no. 7, 869-882

Valarie a. zeithaml & mery jo bither (2001) services marketing integrating customer focus across the firm, 3rd edition, pp.35 McGraw- Hill

Hold way, A.(2001) Delightly customers: understanding needs starts with employees, candedien Electronics, mry 16 (3), 7-9.

Robert a westbrook & Richard L. oliver (1991) the diamentionality of consumption emotion patterns and cosumer satisfaction, the journal of consumer research, vol. 1, no.1 (june), pp. 84-91

Day, Ralph L. (1984), modeling choice among alternative responses to dissatisfaction, in advance in consumer research, vol. 11, ed. Thomas C. Kinner, Provo, UT.

David K. TSE 7 Peter C. Wilton (1988), models of consumer satisfaction formation: an extension. Journal of marketing research. Vol. xxv (mry) 204-212.

Bearden, William D. and Jese E. Teel (1983) “Selected determinants of consumer satisfaction and complaint reports,” journal of marketing research, 20 (Nov), 21-8.

Cardozo, Richard N. (1965), “An experimental study of consumer effort, expectations and satisfaction,” journal of marketing research, 2 (Aug.), 244-9.

Day, Ralph L. (1977), “Towards a process model of consumer satisfaction,” in conceptualization and measurement of consumer satisfaction and dissatisfaction. H. Keith Hunt, ed. Cambridge, MA: Marketing Science institute, 153-83.

Liechty, M. and Gilbert A. Churchill, Jr, “conceptual insights into consumer satisfaction with services,” in Educators' conference proceedings, series 94, Neil Beckwithet al. , eds. Chicago: American marketing association, 509-15

Miller, John A. (1977), “studying satisfaction, modifying models, eliciting expectations, posing problems and Making meaningful measurements,” in conceptualization and measurement of consumer satisfaction and dissatisfaction and complaining behavior Ralph L.

Zeithml, berry, and parasuraman “customer expectation of service,” p.7

D.bowaen, “leadwrship aspects & rewards system of customer satisfaction,” speech given at CTM customer satisfaction conference, Los Angeles, march 17, 1989.

E.R. Cadotte, R.B. woodruff, and R. L Jenkins, “expectations & norms in models of consumer satisfaction,” Journal of marketing research 14 (Aug. 1987), pp. 353-64

Parasuraman, Berry, and Zeithml, “understanding customer satisfaction” p.40

R.F. Abelson, “script processing in attitude formation and ecision makink,” in cognition & social behaviour, ed. J.S. Payne (hillsdale, NJ: Erlbaum, 1976).

R.A. Smith and M.J. Housten, “scrip[t based evaluation of satisfaction with sevices,” in emerging perspective on services marketing, ed L. Berry, G.L. Shostack, and G. Upah (Chicago: American marketing association, 1982), pp.59-62

L.L. Berry, “the time buying customer,” journal of retailing55, no. 4 (winter 1979), pp. 58-69.

R.B. Woodruff, E.R. Cadotte, and R.L. Jenkins, “expectations and norms in models of consumer satisfaction,” journal of marketing research 24 (Aug. 1987) pp. /305-14

J.A. Miller, “studying satisfaction, modifying models eliciting expectations, posing problems, and making meaningful measurements,” in conceptualization and measurement of consumer satisfaction and dissatisfaction, ed. H.K. Hunt (Bloominton, IN: Indian university school of business, 1977), pp. 72-91

Parasuraman, L.L. Berry, and V.A. Zeithaml, “understanding consumer expectations of service,” Sloan management review 32, no.3 (spring 1991), p.42

M. A. J. Menezes and J. Serbin, Xerox Corporation: the consumer satisfaction program

E.W. Anderson and V. mittal, “strnthening the satisfaction-profit chain,” journal of service research3 (Nov2000) pp.107-20

M. K. Brady an J.J. Cronin. Jr., “some new thoughtsa on conceptualization perceived” service quality: a hierarchical approach, “journal of marketing” (July 2001), pp. 34-49

R.T. Rust and R. L. oliver, “in service quality insights and managerial implications from the frontier,” in serevice quality: new directions in theory and practice, ed. R.T. Rust and R.L Oliver (thousand oaks, CA: sage, 1994), pp 1-19.

L.L. Berry, A. Parasuraman, and V.A. Zeithmal, “ten lessons for improving service quality,” marketing science institute report n. 93-104, may 1993.

J.M. Farely, C.F. Daniels, and D.H. Pearl, “service quality in multinational environment, “proceedings of the ASQC quality congress transactions, san Francisco, CA,1990

R.L Oviler, Satisfaction, a behavioral perspective on the consumer (New York: McGraw-Hill, 1997)

C.Fornell, M.D. Johnson, E. W. Anderson, J. Cha, and B.E. Bryant, “the American customer satisfaction index: nature, purpose & findings,” journal of marketing 60(Oct 1996), pp.7-18

E.W. Enderson, C. Fornell, and D.R. Lehmann, “customer satisfaction, market share,, and profitability: findings from Sweden,” journal of marketing 58 (July 1994), pp 53-66

Fornell et al., “The American customer satisfaction index.”

For a listing of companies and their scores go to ACSI website at

Bitner, M.J. (1990) evaluating service encounters: the effects of physical surroundings and employee responses. Journal of marketing , 54 (April) 69-82.

Boulding, W. Kalra, A., Staelin, R., & Zeithmal, V.A. (1993) a dynamic model of service quality: from expectations to behaviouiral intentions. Journal of marketing research, 30 (Feb.), 7-27

Chious, J. S., Droge, C., & hanvanich, S. (2002). Does customer knoeledge affect how loyalty is formed? Journal of service research, 5(2), 113-124.

Cronin Jr, J.J., Brady, M. K. & Hult, G. T. M. (2000) is assessing the effects of quality, value, and customer satisfaction on consumer behavioural intentions in service environments. Journal of retailing, 76(2), 193-218.

Cronin Jr, J.J., and Taylor, S.A. (1992). Measuring service quality: a reexamination and extention. Journal of marketing, 56 (July), 55-68.

Varki, S.A., & Colgate, M. (2001) the role of price perception in an integrated model of behavioral intentions. Journal of service research, 3 (3), 232-240.

Anne martensen, Lars Gronholdt, Ka; Kristenson (2000), the drivers of customer satisfaction and loyalty: cross industry findings from Denmark. Total quality management, vol.11, 23-32.

Kai kristensen, anew Martensen, Lars Gronholdt (2000), customer satisfaction measurement at post Denmark: results of applications of European customers satisfaction index methodology. . Total quality management, vol.11, Sep. 34-46.

Andreassen, T.W. and Lindestad, B. (1998), the effect of corporate image in the formation of customer loyalty, journal of service marketing, 82-92.

Andreassen, T.W. and Lindestad, B. (1998), customer loyalty & complex services, the impact of corporate image on the quality, customer satisfaction and loyalty for customer, with varryin Degrees of services, intl. journal of service industry management 9, 7-23.

Kristensen, K. martenses, A. and Gronhold, L. (1999), measuring the impact of buying behavior on customer satisfaction, total quality management, 10, 602-614

American society quality (1998), American customer satisfaction index (ACSI) methodology

Anderson, E.W. and Sullivan, M. (1993), the antecedents and consequences of customer satisfaction of firms, marketing science 12, 125-143.

Martensen, A. Gronholdt, L. and Kristensen, K. (2000), the drivers of customer satisfaction & loyalty, crss industry findings from Denmark, total quality management 11, 8544-8553.

Johnson M. D. , Gustafsson, A., Andereassen, T. W. Lervik, L. and Cha, J. (2001), thew evaluation & future of national customer index model, journal of economic Psychology 22, 217-245.

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!