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Quality consists of two primary elements which are first, either a product satisfies the needs or
second, up to which level it is free from deficiencies (Juran, 1988). Quality spells superiority or
excellence (Taylor and Baker, 1994) (Zeithaml, 1988), or, as the consumer’s overall impression of the
relative inferiority or superiority of the organization and its services (Bitner and Hubbert, 1994;
Keiningham et al., 1994-1995).

Service quality is defined as the outcomes of the customer’s overall evaluation of the differences
between service expectations and the actual service performance (Othman, A. & Owen, L. 2002). To
some, service quality can also be defined as the difference between customer’s expectations for the
service encounter and the perceptions of the service received. Fogli (2006) defined term service quality
as “a global judgment or attitude relating to particular service; the customer’s overall impression of the
relative inferiority or superiority of the organization and its services”. According to the service quality
theory (Oliver, 1980), it is predicted that customers will judge that quality as ‘low’ if performance does
not meet their expectations and quality as `high` when performance exceeds expectations. Therefore,
service quality is conceptualized as a multidimensional construct consisting of five dimensions (Othman,
A. & Owen, L. 2002).

A quantitative research was arranged by Parasuraman et al in 1988 in which an instrument was
developed for measuring the perception of consumers regarding service quality and after that research it
became known as SERVQUAL. The dimensions of SERVQUAL model were:

(1) Tangibles: the physical surroundings represented by objects (for example, interior design) and
subjects (for example, the appearance of employees). (2) Reliability: the service provider’s ability to
provide accurate and dependable services. (3) Responsiveness: a firm’s willingness to assist its customers
by providing fast and efficient service performances. (4) Assurance: diverse features that provide
confidence to customers (such as the firm’s specific service knowledge, polite and trustworthy behavior
of employees). (5) Empathy: the service firm’s readiness to provide each customer with personal.
Therefore, these dimensions been used in examining service quality in Islamic banking.
Customer Satisfaction

Before proceeding further, it is best that one fully understands the definition of the phrase ‘Customer
Satisfaction`. Customer satisfaction means that a customer or the user of service is well contended with
the performance. (Johnson and Fornell, 1991). It can also be stated as the overall evaluation of a
customer either positive or negative for the services. (Woodruff, 1997). In a competitive marketplace
where businesses compete for customers, customer satisfaction is seen as a key differentiator and
increasingly has become a key element of business strategy. There is a substantial body of empirical
literature that establishes the benefits of customer satisfaction for firms. It is well established that
satisfied customers are key to long-term business success (Kristensen et al., 1992; Zeithami et al., 1996;
McColl-Kennedy and Scheider, 2000).

Prabhakaran (2003) highlights that the customer is the king. According to Drucker (1954), the
fundamental purpose of any business is to create customer satisfaction. Increasing customer satisfaction
has been found to lead organization to higher future profitability (Anderson et al., 1994), increased buyer
willingness to pay premiums, provide referrals, and use more products (Reichheld, 1996), and higher
levels of customer retention and loyalty (Fornell, 1992). Giese & Cote (2000), identified the components
of satisfaction such as: Customer satisfaction is one kind of response (emotional or cognitive), the
response emphases on a particular focus (product, consumption, experience, expectations etc.), and
response occurs at a particular time (after choice, based on accumulated experience, after consumption

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