Exploring the Dimensionality of Service Quality: an Application of TOPSIS in the Indian Banking Industry

The Indian banking industry is going through turbulent times. With the lowering of entry barriers and blurring product lines of banks and non-banks since the financial sector reforms, banks are functioning increasingly under competitive pressures. Hence, it is imperative that banks maintain a loyal customer base. In order to achieve this and improve their market positions, many retail banks are directing their strategies towards increasing customer satisfaction and loyalty through improved service quality. Moreover, with the advent of international banking and innovations in the marketplace, customers are having greater and greater difficulty in selecting one institution from another.Hence, to gain and sustain competitive advantages in the fast changing retail banking industry in India, it is crucial for banks to understand in-depth what customers perceive to be the key dimensions of service quality and to evaluate banks on these dimensions. This is because if service quality dimensions can be identified, service managers should be able to improve the delivery of customer perceived quality during the service process and have greater control over the overall outcome.The study suggests that customers distinguish four dimensions of service quality in the case of the retail banking industry in India, namely, customer-orientedness, competence, tangibles and convenience. A methodological innovation in this study has been in the use of TOPSIS in the field of customer-perceived service quality. TOPSIS has been used to evaluate and ranking the relative performance of the banks across the service quality dimensions. Identifying the underlying dimensions of the service quality construct and evaluating the performance of the banks across these factors is the first step in the definition and hence provision of quality service in the Indian retail banking industry.