Alemyahu Balcha, Sintayehu Gurmessa, Gebeyehu Girma
The major objectives of the present study were to determine whether customers are satisfied and loyal to the services provided by the private banks and to identify the mediation role of customer satisfaction between service quality and customer loyalty, in private banks operating in Hawassa, Ethiopia. A self-administrated questionnaire was used to collect primary data from conveniently selected 238 (return rate = 81.93%) customers of nine private banks in Hawassa city. The questionnaire included 18 items for the five dimensions (tangibility, reliability, responsiveness assurance and empathy) of SERVPERF model, and five items for each of customer satisfaction, and loyalty. All five dimensions of service quality were significantly correlated with service quality, customer satisfaction, and loyalty. Regression analysis showed that reliability, responsiveness, and assurance had significant effect on both customer satisfaction and loyalty. Customer satisfaction had partial mediation between service quality and customer loyalty. This study suggested that giving more emphasis to reliability, responsiveness, and assurance dimensions of the service quality would increase customers’ satisfaction and keep them loyal to the private banks. In addition to customer satisfaction, other factors that influence the relationship between service quality and customer loyalty should be studied in the future