An Empirical Evaluation of the Service Profit Chain Model In Banking Industry of Iran

Abstract

The cause and effect relationship between customer satisfaction, service quality and business performance is a topic of interest for both academic and management experts. A number of previous scientific efforts have studied these relations, focusing on the significant effect of financial and business performance measures with the purpose of evaluating the efficiency of a bank organization. This study presents a revised version of the service profit chain model in order to empirically examine these key variables. The proposed model consists of the relations among employee satisfaction and loyalty, service quality, customer satisfaction and loyalty, and firm profitability. The study utilizes quantitative methods to test the hypotheses in the Bank Melli of Iran (BMI) as a real case study. A structured questionnaire was developed and administered on the stakeholders to capture measures from the responses of the employee related section of the model. The response to the questionnaires was collated with the help of SPSS package and Structural Equation Modelling and factor analysis was adopted to arrive at meaningful conclusions. The positive effects of employee satisfaction on employee loyalty have been confirmed in this study and they stand in line with the service profit chain model. This paper also confirms that improvements made on the service quality factors, namely information and internal communication would bring about a further increase in the satisfaction levels of employees which would in turn lead to higher employee loyalty, and also increase their tenure with the organization.