Abstract:
Service quality in relation to customer loyalty is one of the interesting research topic areas in
business strategy and marketing disciplines in the last few decades. The main objective of
this study is to find out the effect of service quality on customer loyalty mediated by customer
satisfaction at Commercial Bank of Ethiopia. The study employs quantitative research design
and method. A survey was conducted to collect data from customers using quantitative
methods through questionnaire. The target populations for this study were account holding
customers within seven branches under Arbaminch town at Commercial Bank of Ethiopia
(CBE), from which a sample size of 398 respondents were selected by using judgmental
sampling technique proportionally based on customer size of branches. Data analysis was
performed by using both descriptive and inferential analysis. Except responsiveness all the
dimensions of service quality have a significant and positive effect on customer satisfaction.
Except reliability and responsiveness all have significant and positive effect on customer
loyalty. When it comes to mediation, customer satisfaction partially mediates reliability and
empathy to customer loyalty relationship. The findings indicate that overall respondents
evaluate the bank positively, but still there are rooms for improvements. The researcher
recommended that Commercial Bank of Ethiopia managers better to emphasize to reliability
(i.e. being dependable in their service delivery and offer uninterrupted services) assurance
and empathy of the service quality dimensions in maintaining and keeping the customers
satisfied & become loyal to the bank. And also the researcher recommended to keep office
equipment’s clean and attractive since assurance is one of quality service dimension that
affect service quality
