Mediating Effect of Customer Satisfaction on the Relationship between Service Quality and Customer Loyalty in the Ghana Banking Industry

Abstract

Understanding customer satisfaction and customer loyalty in banking remains critical as banks strive to attain high performance standards to justify their existence. The aim of this paper, therefore, was to determine the mediating role of customer satisfaction between its antecedent, service quality and its consequent, customer loyalty. Quantitative research method was employed to generate 850 usable questionnaires through systematic random sampling. A mediation effect investigation was done, using regression analysis to establish the interrelationships between the three study constructs. Overall, the study empirically tested and established interrelationships between the three variables in Ghana’s retail banking industry with satisfaction emerging as a strong mediator variable. Results of the study also revealed a positive and significant mediating role of customer satisfaction between service quality and customer loyalty. There were positive and significant relationships between service quality and customer satisfaction and between customer satisfaction and customer loyalty. The positive relationship between service quality and customer loyalty was insignificant. It is, therefore, concluded that, there is the need for banks to improve service quality at all levels, as the benefits to be derived are enormous, impacting strongly on customer satisfaction and weakly on customer loyalty.