Service Quality and Customer Loyalty in Deposit Taking Saccos in Kenya

Abstract

The main objective of this study was to investigate the relationship between Service Quality and customer loyalty in DT-SACCOs in Kenya. Service quality has been considered as independent variable whereas customer loyalty was considered as the dependent variable. Five dimensions of service quality have been considered in this study namely: tangibility, responsiveness, reliability, assurance and empathy based on SERVQUAL model of (Parasuraman, et al, 1991). The other objectives included, an investigation of the effect of demographics on customer loyalty in DT-SACCOs in Kenya, the perception of service quality provision in DT-SACCOs in Kenya and the customer’s expected service quality. A descriptive cross-sectional survey research design was used. A 47 item instrument was generated comprising of 44 items for the five dimensions of Service Quality on the basis of the work of (Parasuraman, et al, 1991) and 3 items for customer loyalty on the basis of the work of (Dick & Basu, 1994). The study used judgmental and convenience sampling to restrain the sample to 40 DT-SACCOs located in Nairobi County where semi-structured questionnaires were administered to 2 customers found in the service area of the selected DT-SACCOs. The quantitative data generated were analyzed with the aid of Statistical Package for Social Sciences (SPSS). The study used regression as the model of analysis. The study findings revealed that there is a significant relationship between service quality and customer loyalty. The regression model shows that taking all the factors (Tangibility, Responsiveness, Reliability, Assurance and Empathy) constant at zero, customer loyalty would be -0.980.with results, statistically significant as P>0.05 at 0.000. The service quality had a positive and significant effect on customer loyalty with a correlation coefficient of 0.898 at p-value of .001.The study further shows that a unit increase in service quality with respect to empathy will lead to a 1.017 increase in customer loyalty, tangibility will lead to 0.941increase in customer loyalty; a unit increase in assurance will lead to a 0.887 increase in customer loyalty, unit increase in responsiveness will lead to a 0.796 increase in customer loyalty and a unit increase in reliability will lead to a 0.777 increase in customer loyalty. These results imply that of the five service quality elements variables studied; empathy contribute more to the customer loyalty in the DT-SACCOs followed by tangibility, assurance, responsiveness and lastly reliability. The SACCOs should adopt and use SERVQUAL model with respect to the entire elements so as to improve on customer loyalty.