ARBA MINCH UNIVERSITY COLLEGE OF BUSINESS AND ECONOMICS SCHOOL OF POSTGRADUATE STUDIES

Abstract

The main objective of this study is to assess "The Effect of Service Quality on Customer Loyalty in a Comparative Analysis of Private and Public Banks in Arba Minch Town." The researcher would be used SERVQUAL model developed by Parasuraman et al. (1988) and Johnston (1995) dimensions of services quality in order to evaluate the effect of service quality on customer loyalty in the study aria. The researcher would be used descriptive and explanatory form of research design and selected the banking sector by using a judgmental sampling technique and distributed the questionnaires by using a judgmental sampling method. In addition to this 399customers are used for investigation purpose. The data collected from the questionnaire were analyzed using statistical tools such as percentage, mean, standard deviation, correlation, and regression analysis by using SPSS Version 21.The findings of the study indicate from correlation analysis all service quality dimensions(tangibility, reliability, responsiveness, assurance, empathy, communication, and access) have a strong and statistically significant relationship with customer loyalty in public bank but in private bank tangibility dimension of services quality are moderate correlation with customer loyalty the other six dimension (reliability, responsiveness, assurance, empathy, communication, and access)are strongly correlated with customer loyalty. As we can see the regression analysis result of all dimensions of service quality in both bank are, in public bank all dimensions of service quality (tangibility, reliability, responsiveness, assurance, empathy, communication, and access) has significance and positive effect on customer loyalty. Furthermore, 88.8% of the variations in customer loyalty is explained by service quality dimensions in public bank. But in private bank except tangibility dimensions of service quality the other six dimensions are significantly effect on customer loyalty. Additionally in private bank 84.4%of customer loyalty are predicted by service quality dimensions. Based on the findings the researcher recommends that the public bank must be focused on all dimensions of service quality and also the privet bank must be focused on the six dimensions of service quality (reliability, responsiveness, assurance, empathy, communication, and access). Generally the private and public bank must be invest to the entire service quality dimensions in order to develop the quality of service and increase the number of loyal customers.