WALLAGA UNIVERSITY

SCHOOL OF GRADUATE STUDIES

THE IMPACT OF SERVICE QUALITY ON CUSTOMER

SATISFACTION: THE CASE OF ETHIO TELECOM
NEKEMTE DISTRICT, OROMIA, ETHIOPIA

January 2023

Nekemte, Ethiopia

Table of Contents
1
CHAPTER ONE........................................................................................................................3
1. INTRODUCTION.............................................................................................................3
1.1 Background of the Study..................................................................................................3
1.2 Statement of the Problem.................................................................................................5
1.3. Research Questions.........................................................................................................7
1.4. Objective of the Study.....................................................................................................7
1.4.1. Main Objective.........................................................................................................7
1.4.2. Specific Objectives...................................................................................................8
1.5. Significance of the Study................................................................................................8
1.6. Scope and Delimitations.................................................................................................8
1.7. Limitations of the Study..................................................................................................8
1.8. Definition of Key Terms.................................................................................................9
1.9. Organization of the Thesis..............................................................................................9
CHAPTER TWO.....................................................................................................................11
2. REVIEW OF RELATED LITERATURE.......................................................................11
2.1.Concept of Service.........................................................................................................11
2.1.2 Service Quality............................................................................................................11
Service Quality Model.........................................................................................................13
2.2.. Customer Satisfaction..................................................................................................14
2.3. Empirical Review..........................................................................................................15
2.3.1. Relationship between Service quality and customer satisfaction..............................15
2.3.4 Service quality and customer satisfaction...................................................................17
2.4. Conceptual framework..................................................................................................17
CHAPTER THREE.................................................................................................................19
RESEARCH METHODOLOGY.........................................................................................19
3.1 Research design..............................................................................................................19
3.2 Study Approach..............................................................................................................19
3.3. Target Population..........................................................................................................20
3.3.2. Sample Size Determination........................................................................................20
3.3.3. Sampling Technique..................................................................................................20
3.4 Source of Data................................................................................................................21

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 3.5 Data Collection Method.................................................................................................21
3.6 Method of Data Analysis...............................................................................................22
3.7 Reliability and Validity..................................................................................................22
4. BUDGET AND WORK BREAK DOWN..........................................................................23
4.1. Budget Breakdown........................................................................................................23
4.2. Cost Budget...................................................................................................................24
Bibliography............................................................................................................................25

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 CHAPTER ONE
1. INTRODUCTION
This chapter contains background of the study, statement of problem, research question,
objectives, scope of the study, limitation of the study, significance of the study, key definition of
terms, organization of the study.

1.1 Background of the Study

Service quality is the degree and direction of discrepancy between consumer’s perceptions and
expectations in terms of different but relatively important dimensions of service quality, which
can affect the future purchasing behavior of the customers (Parasuraman, A., Zeithaml, V.A.,
Berry, L. , 1985)It is considered as one of the top priorities of firms as it gives the company a
competitive advantage, helps to sustain growth and increases efficiency ( (Anderson, and
Fornell, , 1994).

Perceived quality is simply the overall customer’s assessment of the standard process of
receiving customer services. The key strategy for the success and survival of any business
institution is the deliverance of quality services to customers ( (Zeithaml, V. A., Parasuraman,
A., Berry,, 1990). Excellent services increases customer satisfaction and leads to repeat customer
purchase behavior ( (Cronin & Taylor,, 1992)) which ultimately increases the market share of the
companies and generates high revenues.

Customer Satisfaction is feeling of pleasure or disappointment which results from comparing a

product’s or service’s perceived performance or outcome against expectations ( (Kotler, 2012)).
It is the provisions of goods or services that fulfill customer expectation in terms of quality of
service and more specifically in relation to price paid. The goal of most effective business is to
maintain a high level of customer satisfaction by providing value added transactions through
excellent service quality that can enhance company performance and profitability in return.

Customer satisfaction is highly interrelated with service price and service quality where fair
service price and higher service quality brings enhanced customer satisfaction, repeat patronage,
and increased profits and customer loyalty ( (Anderson, and Fornell, , 1994)

In today’s dynamic and competitive environment telecommunication industry plays an

important role for the success of any businesses. It has great influence on economic, social,

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political, personal and legal affairs where it is becoming a prerequisite for successful
achievements Telecom services recognized throughout the world as an important tool for the
socio-economic development of a nation where it has a significant contribution for the country
GDP. It is the key support and essential service for rapid growth and modernization of various
sectors of the economy ( (Dubale, 2010)).

Telecommunications service was introduced in Ethiopia by Emperor Menelik II in 1894 when

the construction of the telephone line from Harar to Addis Ababa was started and it is renamed
as Ethio telecom on 29th November 2010. Ethio telecom is established with the ambition of
supporting the steady growth of the country within the Growth and Transformation Plan (GTP).
Concentrating its efforts on the development of education, health and agriculture, the Ethiopian
government has decided to focus on the improvement of telecommunication services,
considering them as a key lever in the development of Ethiopia.(www.ethiotelecom.et) Ethio
telecom with a vision of being a world class telecom service provider has go through a vendor
financing of $1.5bn dollar for Mobile, wireless and fixed network infrastructures including third
generation mobile technology and a national fiber optic backbone in 2006. In addition, in 2010
the government has outsourced the management of France Telecom (FT) for two years contract
to create world class telecom service provider and in 2014 the company go through multi-vendor
financing of 1.5bn dollar with Huawei, ZTE and Ericsson for infrastructure expansion including
the rural area (ethioteleom loan report 2017).

Recently in 2018 the company revised its tariff in national, international calls and the internet
services to improve the customer satisfaction level (www.ethiotelecom.et; Ezega 2018;
ethioteleom internal data 2019). In the near future the Ethiopian government is planning to
privatize the sector (Dr. Abey Ahmed 2018; Ezega 2018) Despite the strong efforts and the
changes delivered through infrastructures developments, new products and services, new
processes and new tariff the customers of Ethio telecom are always feeling dissatisfied. The
company has always been complained for focusing only on increasing its subscriber base and
ignoring improvements on it service quality, weak performance, poor network quality,
incompetent employees and the continues service failures (Fortune 2018; internal report, 2019)
In various studies, there has been a clear indication that service quality influences customer
satisfaction (Cronin & Taylor, 1992; Taylor and Baker 1994; McDougall and Levesque, 2000;

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Zeithaml et al., 1996;). Other more recent studies focusing on Service quality have also shown a
positive impact on customer satisfaction (McDougall, G. H., & Levesque, T, 2010). Besides
direct Service quality to customer satisfaction relationship, scholars also recommend further
researches with moderator variables between service quality and customer satisfaction. Through
this perspective, introducing other variables into the analysis helps to uncover the hidden effect
and understand the original relationship of service quality and customer satisfaction

(Cohen, 2013)Examined that perceived value has a significant moderating effect on the
relationship between service quality and customer satisfaction That is, the interaction between
service quality and perceived value explained more of the variance in satisfaction than the direct
influence of either service quality or perceived value on customer satisfaction. ( (Ryu & Han,
2010) (Walfried, 2000), studied the effect of service quality on overall satisfaction is influenced
somewhat by the occurrence of service failure.

Specifically, as the number of service failure incidents decreases, the positive effect of service
quality on satisfaction is intensified it stands to reason that as the incidence of service failure
declines, customers are better poised to recognize and thereby appreciate the process elements of
service quality. In other words, when the technical or core element of the service what is actually
delivered is fairly stable i.e. low levels of service failure, the customer is able to devote more
attention to how the service is delivered. This is the rationale behind this research, Ethio telecom
is struggling for quality of service without considering customer value and service failure in
relation to the company service quality and customer satisfaction. In this regard, perceived value
and service failure play instrumental role in their success and it is assumed that the presence of
these moderator variables could help the company to achieve high level of customer satisfaction.
Thus, the aim of this research is to investigate the effect of the service quality in customer
satisfaction in case of Nekemte district.

1.2 Statement of the Problem

Service quality has become a notable research area because of its strong impact on customer
satisfaction, business performance, customer loyalty and gaining higher profit. Satisfying
customer’s is a difficult task, especially when it comes to services, since studies have shown that
consumers level of satisfaction is generally lower for services than physical products (Anderson,
and Fornell, , 1994).

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Ethio telecom in a mission of providing high quality, innovative and affordable telecom products
and services that can enhance the development of country and ensure high customer satisfaction
is in great customer complaint of its service quality. Ethio telecom customers are highly
discontented with its service quality, price level, network performance and other factors. In line
with the current reform in Ethiopia and the customer dissatisfaction level, Ethio telecom has
reduced its tariff in most of its service by almost half of the original tariff after assessing other
telecom companies tariff whose per capital incomes are similar to Ethiopia. The dramatic tariff
revision of ethio telecom is a big strategy where the company tariff was a great obedient of most
customers in the country since its establishment. In addition to the new tariff Ethio telecom also
introduced other strategies including new promotion strategy, new product and services, new
service delivery process (Fortune 2018; www.ethiotelecom.et, internal report)

Unfortunately, following the tariff revision the service quality of Ethio telecom become a great
concern of most enterprise customers and according to their opinion and feedbacks customers are
highly dissatisfied with the service performance of ethio telecom where its quality deteriorating
and affecting the day today activities of businesses and society (Ezega 2018; Fortune 2018; ethio
teleom internal report, 2019).The fixed monthly broadband payments while the services are
down or inaccessible, which should have been compensated by ethioteleom, is the main issue of
enterprise customers (Ezega 2018; Fortune 2018; ethioteleom internal report, 2019).

Above the entire gap on the compatibility of broadband internet speed against the payment is
major complaining of most enterprise customers. In addition, customers stated that once the
broadband services are provided by the company absence of proactive recovery on the
unavailability of broadband services because of service failures, interruptions, congestions,
faults, inaccessibility affects the day today business transactions (Fortune, 2018; internal
complain report) Today's business network is the foundation of business performance, when the
network experiences performance issues; it is ultimately the business that suffers. Network
performance can be affected by a number of operational problems, and packet loss is one of the
most common one

A number of studies have addressed the relationship between Service quality and customer
satisfaction and many of the studies have linked service quality and customer satisfaction as
having direct relationship (Lee, S. H., Shim, J. K., Kim, J. M., Choi, H. K., & Jeon, C. O., 2009).

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This shows that Service quality is influential to achieve customer satisfaction and company
performance in return. However, some other studies have depicted weak and insignificant link
(Nimako, 2010) consequently, the cause of these mixed results needs further research. According
to Lee (2013), service quality and customer satisfaction also contingent by other factors
perceived value, perceived price and switching cost.

(Caruana, 2000), also shows the moderating role of value on service quality and customer
satisfaction relationship Lassa (2000), Jeremiah, Ojera, Ochieng (2015), demonstrate the
moderating effect of service failure on service quality and customer satisfaction. In Ethio
telecom where service quality is the big issue of the customers it is worthwhile to include
customers perceived value and service failure to achieve higher customer satisfaction level and
succeed in the upcoming privatization.

Although a lot of researches has been conducted on the effect of service quality on customer
satisfaction, customer loyalty and company performance, as to the researcher knowledge there is
no study conducted on the effect of Service quality on customer satisfaction with a moderating
variable of perceived value and Service failure. Therefore, the present study tried to deliver
empirical evidence on the subject matter by analyzing the effect of Service quality on customer
satisfaction with moderating roles of perceived value and service failure. This study, therefore
examine the effect of service quality on customer satisfaction in the case of ethio telecom in
nekemte district.

1.3. Research Questions

This research tried to address the following three research questions:

1. Can service quality dimensions be applied to examine customer satisfaction?

2. What is the relationship between service quality dimensions on customer satisfaction in the
ethio telecom service providers in nekemte?

3. Is there any relationship between customer satisfaction and service quality dimension in ethio
telecom nekemte district?

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1.4. Objective of the Study
1.4.1. Main Objective
The main objective of the research is to examine the impact of ethio telecom service quality on
customer satisfaction in case of nekemte district

1.4.2. Specific Objectives

i. Examine the applicability of service quality dimensions on customer satisfaction

ii. To examine the relationship between service quality dimensions and customer satisfaction

iii. To determine the relationship between customer satisfaction and service quality dimensions

1.5. Significance of the Study

The aim of this study is to examine the effect of service quality on customer satisfaction in case
of nekemte district. Service quality and customer satisfaction has been recognized as one of the
important issues and generated a substantial amount of interest among managers and researchers.
Service quality has been proposed as one of effective way for organizations to increase customer
satisfaction and company performance.

The study helps ethio teleom to identify its strength and weakness towards service quality and
levels of customer satisfaction in order to improve its service quality and build its competences
for the forthcoming competition.

Furthermore, it can be an initial to see service quality the cases of Ethiopia using these and
other new dimensions, especially for manufacturing sectors. Ethio telecom customers will
benefit from improved and better service due to the recommendations of this study.

1.6. Scope and Delimitations

Scholars recommended longitudinal research design to make universal cause-effect relationship
between these variables. However, due to time and financial constraints this research depends on
the data collected only from Ethio telecom enterprise customers located in nekemte in year 2023.
Though there are many models for measuring service quality, for this study SERVPERF model
of (Cronin & Taylor 1992) is selected on the appropriately selected service quality dimensions
that are reliability, assurance, responsiveness, empathy and tangibles in relation to overall service
quality and customer satisfaction.

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1.7. Limitations of the Study
Empirical research in Service quality and customer satisfaction relationship with integrated
moderating variables is limited. This puts a challenge in proceeding with this research smoothly.

Lack of time to utilize maximum effort due to other work pressure which is the only source of
income for the research project work even for the researcher to survive and lack of availability of
prior researches in Ethiopia.

Theoretically the study is delimited in assessing the determinants of sales peoples’ performance
of Ethio- telecom under western region. The geographical coverage area delimited with in town
of nekemte.

1.8. Definition of Key Terms

Service Quality: Excellence or superior service delivery process of the consumer expectations.
Tangibles: Physical facilities, equipment, appearance of personnel and communication
materials.
Reliability: The ability to perform the promised service dependably and accurately
Responsiveness: The willingness to help customers and to provide prompt service.
Assurance: Knowledge and courtesy of employees and their ability to inspire trust and
confidence

Empathy: Caring and individualized attention that the firm (service provider) provides to its
customers.

Perceived Value: as a trade-off between the benefits and sacrifices. It is the consumer’s overall
assessment of utility of product based on perceptions of what is received and what is given.
Service Failure: Service failure is any service-related mishaps that occur during a customer’s
experience with the firm. Proactive interaction is anticipating potentially problematic issues and
acting prior to customer recognition or reaction to prevent service failures from occurring.
Customer Satisfaction: Customer Satisfaction is feeling of pleasure or disappointment which
resulted from comparing a product’s or service’s perceived performance or outcome against
expectations

SERVPERF: Performance-based service quality model developed by (Cronin & Taylor, 1992)
and used for measuring service quality.

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1.9. Organization of the Thesis
The study has five chapters with key contents as discussed in detail below:

CHAPTER ONE: Contains the introduction part including the background, research problem,
objectives, scope and delimitations of the study.

CAHPTER TWO: this chapter reviews relevant literatures and provide definition of most
important concepts, such as customer satisfaction, service quality, models of service quality,
critically review both theoretical and empirical literatures in Service quality-customer
satisfaction research area.

CHAPTER THREE: Describes the research design applied in this study specifically target
population, sample size, sampling technique, data collection instruments, data collection process,
the issue of reliability and validity, measurement of variables, method of data analysis.

CHAPTER FOUR: Reports on the results of the empirical data analyses. These include various
analyses of the descriptive variables; several test results to establish reliability and validity,
results of inferential analyses to show the relationship among variables. This chapter also
presents detail discussions on the results of the data analyses with supports from existing
literature where relevant.

CHAPTER FIVE: The chapter summarizes the major findings, give conclusions with
recommendations and finally insight gaps for future researches

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CHAPTER TWO
2. REVIEW OF RELATED LITERATURE
This part of the study address relevant conceptual, theoretical framework and empirical review
related to the topic of the study. It includes definition and concept of customer satisfaction,
Service and SERVQUAL which would be addressed in this study

2.1. Concept of Service

Service is any activity or value that one party can offer to another which is essentially intangible
and does not result in the ownership of anything (Kotler, 2012) Services broadly defined as acts,
deeds, performances or efforts that have different characteristics from goods. According to
(Gronroos, 2006), Service is a practice consisting of intangible activities that normally takes
place in interaction between the customer and the service provider. Services are more or less
subjectively experienced process where production and consumption activities take place
simultaneously. Services are economic activities that create value and provide benefits for
customers at specific times and places, as a result of bringing about a desired change in or on
behalf of the recipient of the service. Many Scholars agree on the following special
characteristics of services that made them different from goods Gronroos 2006. Service
intangibility: Services cannot be seen, tasted, felt, heard, or smelled as such they are more related
to performances rather than objects. Service variability: Service delivery can vary from provider
to provider and customer to customer. Service provider and customer can affect the quality of
services. Service inseparability: Services are produced and consumed at the same time and
cannot be separated. Production and consumption of services are inseparable. It is produced and
consumed at the same time in the presence of the customer and the service producer. Service
perishability: Services cannot be stored for later sale or use.

2.1.2 Service Quality

Service quality has got a great deal of contemplation from academicians and practitioners
because of its strong correlation with customer satisfaction, financial performance, productivity
(Negi, 2019). Service Quality is excellence or superior service delivery process of the consumer
expectations ( (Bitner, 1996). The common definition of service quality is the alteration between
consumers’ perceptions of the services delivered by a service firm and their expectations toward
that service (Parasuraman et al., 1988; Gronroos, 1984). This definition was mostly referred by

12
different scholars for defining service quality (Cronin and Taylor, 1992; Mestrovic, 2017; Ismail
and Yunan, 2016; Iqbal et al., 2016; Ojo, 2010; Kaushal, 2016).

Expected service and perceived service are the key factors that affect the quality of services, if
the service is received as expected then the service quality is good or satisfactory, but if the
services received exceed the expectations service quality is very good or ideal and the customers
will be very satisfied. Conversely, if the service received is lower than expected then the
perceived poor quality of services.

Service quality is based on the belief that consumers always have an expectation of such service,
and this expectation may vary from country to country, culture to culture and person to person,
which makes measuring service quality a challenging task. Quality of service will depend on
how much the service provider's ability to consistently meet the needs and desires of consumers.
There are two main aspects that describe and affect service quality the actual service customers
expected (expected service) and services perceived (perceived service). Parasuraman, et al.,
(1985), explained that the creation of customer satisfaction for a service can be identified
through a comparison between service perceptions with service expectation. Parasuraman et al.
(1985), Zeithaml et al. ,(1990), indicated that the key strategy for the success and survival of any
business organization is the provision of quality services to customers.

Expressly in the service industries, service quality has been recognized as critical for the success
of organizations because of its close link with customer satisfaction (Parasuraman, Zeithaml &
Berry, 1985). There is a general agreement by researchers that the concepts of customer
satisfaction and service quality are extremely interrelated. Although satisfaction and service
quality are close in Perceived service quality was explained as a form of attitude and a long-run
overall evaluation of a product or service, while customer satisfaction was considered as a
transaction-specific evaluation. Parasuraman et al., (1985), suggested that benefits gained from
creating and maintaining quality of service are greater than the cost to reach or as a result of poor
quality.

Superior service quality and consistency can lead to customer satisfaction which in turn will
provide high company profit, customer loyalty, good word of mouth and better corporate
reputation. The implication of these benefits is that each company must realize the strategic

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importance of quality; continuous quality improvement is not a cost but an investment to
generate greater profits. Service quality Model Most of the researchers have recognized and
used the service quality measuring model in a variety of industries such as the service quality
model improved by (Parasuraman, A., Zeithaml, V.A., Berry, L. , 1985) . The service quality
model of Parasuraman et al. (1988) suggested a five dimensional structure of perceived service
quality tangibles, reliability, responsiveness, empathy and security as the instruments for
measuring the service quality (Parasuramanet el al., 1988; Zeithamlet el al., 1990).

Service Quality Model

SERVQUAL Model One of the most useful measurements of service quality is the dimensions
from the SERVQUAL model. In the creation of this model for the very first time, “Parasuraman
et al. (1985) identified 97 attributes which were condensed into ten dimensions; they were found
to have an impact on service quality and were regarded as the criteria that were important to
access customer’s expectations and perceptions on delivered service (Kumar et al., 2009,). The
SERVQUAL scale which is also known as the gap model by Parasuraman, et al.(1988) has been
proven to be one of the best ways to measure the quality of services provided to customers. This
service evaluation method has been proven consistent and reliable by some authors (Brown et al.,
1993). They held that, when perceived or experienced service is less than the expected service; it
implies less than satisfactory service quality; and when perceived service is more than expected
service, the obvious inference is that service quality is more than satisfactory (Jain et al., 2004,).

From the way this theory is presented, it seems the idea of SERVQUAL best fits the evaluation
of service quality form the customer perspective. This is because when it is stated “perceived”
and “expected” service, it is very clear that this goes to the person, who is going to or is
consuming the service; who definitely is the consumer/customer. The original study by
Parasuraman et al., (1988) presented ten dimensions of service quality namely: Tangibles,
Reliability,Responsiveness, Competence, Courtesy, Credibility, Security, Access,
Communication and Understanding the customer,

In first SERVQUAL model that came had 22 pairs of Likert-type items, where one part
measured perceived level of service provided by a particular organization and the other part
measured expected level of service quality by respondent. After refinement, these ten dimensions
above were later reduced to five dimensions as below: Tangibility: physical facilities, equipment,

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appearance of personnel and communication materials. Reliability: It is consistently shown that
it is the most important determinant of perceptions of service quality. It is the ability to perform
the promised service dependably and accurately. The promise may include delivery, service
provision, problem resolution and pricing. Responsiveness: Is the willingness to help customers
and provide prompt service. This dimension emphasizes attentiveness and promptness in dealing
with customer request, questions, complaints and problems.

It is all about length of time they have to wait for assistance, answers to questions or attention to
problems. To truly distinguish themselves on responsiveness companies need well-staffed
customer service department as well as responsive frontline people in all contact positions.
Assurance: knowledge and courtesy of employees and their ability to inspire trust and
Confidence. This dimension is likely to be particularly important for services that customers
perceive as high risk or uncertain about their ability to evaluate outcomes. Trust and confidence
are embodied in the contact employee and the company itself. Empathy: caring individualized
attention the firm provides to its customers.

The aggregated sum of difference between perceptions and expectations from the five
dimensions forms the global perceive quality construct. Laroche et al. (, 2004,) following this
view, customers’ expectations were met through the outcome dimension (reliability) and exceed
it by means of the process dimension (tangibility, assurance, responsiveness, and empathy).To
confirm the validity of SERVQUAL model in the evaluation of service quality,Zeithaml et al
(2006), stated that “service quality is a focused evaluation that reflects the customer’s perception
of reliability, assurance, responsiveness, empathy, and tangibles” (Zeithaml et al., 2006,). They
added that among these dimensions, “reliability” has been shown consistently to be the most
important dimension in service quality (Zeithaml et al., 2006,). Rust et al. (1994) state that
SERVQUAL is intended to describe the dimensions of quality common to all services and is
therefore unlikely to encompasses the special properties of any particular service. In call centers,
unlike face-to- face service encounters occurring in other service organizations like restaurants,
banks, service encounters are phone encounters that happen every time a customer interacts with
a company through call centers over telephone. In telephonic service encounters, tangible factors
such as attire of employees, physical evidences do.

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2.2.. Customer Satisfaction
Customer satisfaction is conceptualized transaction-specific meaning. It is based on the
customer’s experience on a particular service encounter, (Cronin & Taylor, 1992) and also
customer satisfaction is cumulative based on the overall evaluation of service experience (Jones
and Suh, 2000). These highlight the fact that customer satisfaction is based on experience with
service provider and also the outcome of service. Giese and Cote, (2000,) clearly state that there
is no generic definition of customer satisfaction and after carrying a study on various definitions
on satisfaction they came up with the following definition, “customer satisfaction is identified by
a response (cognitive or affective) that pertains to a particular focus (i.e. a purchase experience
and/or the associated product) and occurs at a certain time (i.e. post- purchase, post
consumption)” From this definition, it is clear that the consumer’s/customer satisfaction is
determined by his/her contact experience with the service provider and this is supported by
Cicerone et al., (2009,) and Sureshchander et al., (2002), who believe customers’ level of
satisfaction is determined by their cumulative experiences at all of their points of contact with a
supplier organization. Fornell, (1992),

clearly defines customer satisfaction as an overall post-purchase evaluation by the consumer and
this is similar to that of Tse and Wilton, (1988, ) who defined customer satisfaction as the
consumer’s response to the evaluation of the perceived discrepancy between prior expectations
and the actual performance of the product or service as perceived after its consumption. These
definitions consider satisfaction as a post purchase response and in the case of call center
experience is important in evaluating customer satisfaction.

It is important to note that customer loyalty is affected by customer satisfaction (Heskett, 1997).
A loyal customer will retain to use the service or sustain to repurchase and with least change to
search for substitution. There is empirical support for positive association between customer
satisfaction and intention to spread word of mouth (Dabholkar and Thorpe, 1994; Richins, 1983).
According to Anton (1997), perception of service quality (performance) can be classified into
three zones. Rejection, acceptance and preference by the customer Satisfaction index (CSI).
According to him, the score above 85 is under preference zone, the score between50-84 is under
tolerance zone and the score bellow 50 is under rejection zone. 19

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2.3. Empirical Review

2.3.1. Relationship between Service quality and customer satisfaction

Since customer satisfaction has been considered to be based on the customer’s experience on a
particular service encounter, ( (Cronin & Taylor, 1992)it is in line with the fact that service
quality is a determinant of customer satisfaction, because service quality comes from outcome of
the services from service providers in organizations. Regarding the relationship between
customer satisfaction and service quality, Oliver (1993) first suggested that service quality would
be antecedent to customer satisfaction regardless of whether these constructs were cumulative or
transaction-specific. Satisfaction and service quality have certain things in common, but
satisfaction generally is a broader concept, whereas service quality focuses specifically on
dimensions of service.

Although it is stated that other factors such as price and product quality can affect customer
satisfaction, perceived service quality is a component of customer satisfaction (Zeithaml et al.
2006,) According to Sureshchandar et al., (2002), customer satisfaction should be seen as a
multi- dimensional construct just as service quality meaning it can occur at multi levels in an
organization and that it should be operationalized along the same factors on which service
quality is operationalized.

In relating customer satisfaction and service quality, researchers have been more precise about
the meaning and measurements of satisfaction and service quality. Satisfaction and service
quality have certain things in common, but satisfaction generally is a broader concept, whereas
service quality focuses specifically on dimensions of service. Parasuraman et al., (1985)
suggested that when perceived service quality is high, then it will lead to increase in customer
satisfaction. He supports that fact that service quality leads to customer satisfaction and this is in
line with Saravana and Rao, (2007,) and Lee et al., (2000), who acknowledge that customer
satisfaction is based upon the level of service quality provided by the service provider.

According to Negi (2009), the idea of linking service quality and customer satisfaction has
existed for a long time. He carried a study to investigate the relevance of customer-perceived
service quality in determining customer overall satisfaction in the context of mobile services
(telecommunication) and he found out that reliability and network quality (an additional factor)
are the key factors in evaluating overall service quality but also highlighted that tangibles,
17
empathy and assurance should not be neglected when evaluating perceived service quality and
customer satisfaction.

This study was based on a specific service industry (mobile service) and it is very important to
identify and evaluate those factors which contribute significantly to determination of customer-
perceived service quality and overall satisfaction. Fen &Lian, (2005,) found that both service
quality and customer satisfaction have a positive effect on customer’s re-patronage intentions
showing that both service quality and customer satisfaction have a crucial role to play in the
success and survival of any business in the competitive market. This study proved a close link
between service quality and customer satisfaction. Su et al., (2002,) carried a study to find out
the link between service quality and customer satisfaction,

from their study, they came up with the conclusion that, there exist a great dependency between
both constructs and that an increase in one is likely to lead to an increase in another. Also, they
pointed out that service quality is more abstract than customer satisfaction because, customer
satisfaction reflects the customer’s feelings about many encounters and experiences with service
firm while service quality may be affected by perceptions of value (benefit relative to cost) or by
the experiences.

2.3.4 Service quality and customer satisfaction

Studies related to ethio telecom A number of studies related to service quality and customer
satisfaction with ethio telecom and the previous Ethiopian Telecommunications Corporation
(ETC) services were conducted by different researchers. Potluri and Mangnale (2010) conducted
an empirical study to find out the satisfaction level of ETC customers using the following
parameters: service interaction, service delivery process, customer complaint handling procedure
and its outcome and the overall customer satisfaction level.

Another study was conducted by RakshitNegi (2009) with the objective of exploring the causal
relationship between service quality dimensions and overall service quality, and identifying
service quality gaps as experienced by the subscribers of the mobile services of the ETC. The
result of t h e s t u d y i n d i c a t e d over all services quality of mobile communications was
perceived to be as below average by over half (52.7%) of the respondents, followed by less than
one third (28%) who mentioned it as average, and about one-fifth (19.3%) as above average.

18
Satisfaction level of mobile users by their experience in ethio telecom point of sales was also part
of the study. The findings indicate that at national level, overall advice and customers care at
ethio telecom on average is rated at 7.2 on a ten point scale. But there is no any study specifically
related to service quality and customer satisfaction of ethio telecom

2.4. Conceptual framework

The general idea from the past literature is that there is a relationship between customers
Satisfaction and service quality; also that service quality could be evaluated with the use of five
service quality dimensions using different service quality model like SERVQUA and
SERVPERF which are the most useable even though they have their own criticism and their
applicability is vary depend on service type.

The empirical studies shows that service quality dimensions have relations with service quality
and customer satisfaction. In addition different articles and journals shows that service quality
dimensions have their own impact on customer satisfaction but their level of impact is different
in between service quality dimensions and among service types. SERVPERF model is derived
from Parasurman’s SERVQUAL model which is mainly focus on perceived service quality. The
SERVQUAL approach integrates the two constructs (service quality and satisfaction) and
suggests that perceived service quality is an antecedent to satisfaction as already stated in
theoretical part After critical review of both theories and empirical studies on service quality and
customer satisfaction related to different service sectors, the following conceptual frame work is
drawn.

The conceptual framework is drawn by combining service quality dimensions of SERPERF

scale derived from the original SERVQUAL model with (Anton, 1997) revised service quality
model of call center service. As discussed above, the SERVQUAL model is suitable for
measuring service quality and customer satisfaction in different service sectors including
retailing services using the service quality dimensions.

19
20
 CHAPTER THREE
RESEARCH METHODOLOGY
This chapter will explain the research methodologies used and it covers, research design,
population and sampling techniques, types of data and tools/Instruments of data collection, data
collection procedure, method of data analysis. Additionally, the research validity and reliabilities
as well as the Ethical considerations are included.

3.1 Research design

There is a tendency to divide research into qualitative and quantitative, when approach to
research has been considered as the criteria of classification. Qualitative research involves
studies that do not attempt to quantify the results through statistical summary or analysis.
Quantitative research is the systematic and scientific investigation of quantitative properties,
phenomena and their relationship. The objective of quantitative research is to develop and
employ mathematical models, theories and hypotheses pertaining to natural phenomena. Thus,
in general quantitative research design is used in the study.
Throughout the research report, the researcher used to explanatory research design, to allow the
determinants of service quality. To determine the relationship between the independent variables
and customer satisfaction (dependent variable), the explanatory studies are used, because it
establishes causal relationship between variables.

3.2 Study Approach

When choosing between study approaches, the study came across several approaches (Birks2,
2007) argue that study can be quantitative, qualitative or a combination of both. In the quantitative
study approach data collect in a standardized structured way and statistical methods are used in the data
analysis.
The study approach of this study will be both Quantitative and qualitative study approach by
survey and conducting interview of Nekemte town customers. The survey method using questionnaire
will use for this study primarily because it reduces cost and time and they are capable of generating
quantitative data. Standardized surveys are an effective tool to collect broad range of data for instance;
attitudes, opinions, behavior, beliefs and values of respondents (Ghauri, P. and Gronhaug, K., 2010)
Again, both quantitative and qualitative methods of social study design were used to conduct the
study. Therefore the study will use mixed study.

21
 3.3. Target Population
(Mugenda, O. M., & Mugenda, A. G, 2003) Define target population as that population the studies,
and whose findings are used to generalize to the entire population. Conducting the study on the whole
population is very difficult and impossible so it will be needed identify the target population for
conducting the study correctly and accurately. The target population of this study is customers in the
Nekemte town.

3.3.2. Sample Size Determination

Determining sample size is very important issue because sample size that is too large may waste
time, resource and money. While samples that is too small may lead to inaccurate results. While
deciding the size of sample, the study must determine the desired precision as also an acceptable
confidence level for the estimate. According to a sample size when estimating a percentage or
proportion the precision and the confidence level shall have to be specified and the sample size Kothari
(Kothari C. , 2004)The following formula gives the size of the sample in case of infinite population
when the study were estimate the proportion in the universe.
2
z ∗p∗q
n=
e2
Where n the total number of sample required
Z=the critical table value of the confidence level (Z=1.96)
p=the population variability (p=0.5)
q=the probability of the population not to be occurred (q=1-p=0.5)
e =the maximum allowed error i.e. (e =0.05)
Therefore, the study has taken the maximum allowed error as 5% at a confidence interval level
of 95% and the moderate population variability interval is 0.5(p=0.5)
2
1.96 ∗.5∗.5
n= 2 =384.16 ≈384
0.05

3.3.3. Sampling Technique

Sampling techniques is a technique used to select sample element so as to represent the whole
population. There are two common sampling techniques, probability and non-probability sampling.
Probability sampling is where the population has an equal opportunity of being selected but in non-
probability sampling methods, the probability of being selected is unknown (Bhattacherjee, 2012).
22
 Convenience sampling is a type of non-probability sampling where member of target population
that meet certain practical criteria, such as easy accessibility, geographical proximity, availability at a
given time, or the willingness to participate are included for the purpose of the study (Dornyei, 2007).
The main assumption of associated with convenience sampling is that the member of the target
population are homogeneous. That is, there will no difference in the study result obtained from a
random sample, nearly sample, a co-operative sample, or a sample gathered in some accessible part of
the population (Etikan, 2016).
The study is forced to use a non-probability sampling method of convenience sampling
technique because of it is difficult to get complete list of target population of Customers in Nekemte
town & the other reason is that the target populations of the study are geographically scattered. In
addition, to appropriately distribute the questionnaires to those willing and easily accessible;
convenience sampling technique gives a better result within a small budget and time constraints.

3.4 Source of Data

There are two type of data sources; primary and secondary. Primary data is information that
needs to be gathered from the original source. On the other hand, secondary data is the one used from
already availed or from data that has been collected for another purpose. Both primary and secondary
data was used in this study. The Primary data were used to collect from sample respondents using
survey questionnaire & interview On the other hand, secondary data has also employed from relevant
articles, journals, academic books & marketing reports.

3.5 Data Collection Method

The Primary data was collected from sample respondents using questionnaire. On the other hand,
secondary data was collected from relevant literatures and data. A questionnaire was justified for use in
this study due to the convenience in data collection, efficiency in costs during data collection and ease
of administration, collection and coding. The questionnaire for this study was used close ended five
point likert scale questions. On the other hand, semi-structured interview was Questionnaire and
interview data collection methods selected for the study because of the following reasons; firstly, it is
effective in terms of studies time, effort and cost than most other methods. Secondly, it is found to be
more appropriate to gather the Feelings and responses of respondents. Thirdly, it is through
questionnaires that standardized responses are gathered (Bhattacherjee, 2012).

23
 3.6 Method of Data Analysis
The collected data was analyzed using Statistical Package for Social Sciences (SPSS) version 25.
The data first coded in alphabetical and numerical order and then inputted in into the statistical
program. Then, the data was screened and treated for errors and missing values. The selection of
techniques to analyze the results of this study has done based on the research objectives. Reliability
analysis, correlation and regression analysis was computed for the study is to determine the relationship
and effects of the independent variables and dependent variable. . These techniques were
complemented with a descriptive statistics involving the computation of frequencies, percentages,
means and standard deviations often presented graphically.

3.7 Reliability and Validity

Reliability measures the degree to which the study can be replicated and arrive at the same
results (Sunders, 2015) as suggested by (Zikmund, W., Babin, B., Carr, J., and Griffin, M. , 2010) that
scales with coefficient alpha between 0.6 and 0.7 indicate fair reliability for further analysis. Thus, for
this study, a Cronbach‘s Alpha (α) scores of 0.60 or higher is considered adequate to determine
reliability. Questionnaires constructed by the researcher from previous studies and literatures has been
pretested on thirty respondents by using Cronbach’s alpha coefficient through SPSS v.25 was found to
be 0.795. This indicates that acceptability of the questionnaires for further actual data collection. After
all required data collected from respondents, Cronbach’s alpha coefficients for each variable had been
determined and presented below.
Reliability of data is tested using the Cronbach’s alpha. Coefficient alpha (α) is the measurement
of squared correlation between observed scores and true scores. In other words, reliability is measured
in terms of the ratio of true score variance to observed score variance. It can test the internal
consistency of each factor. The reliability and internal consistency of the data are measured by the
Cronbach Alpha coefficient. Nunnaly (1978) has stated that 0.5 is a sufficient value, while 0.7 is a more
reasonable Cronbach’s alpha. According to (Masri, 2009) Reliabilities less than 0.60 are considered as
poor; those in the range of 0.60 to 0.80 are considered good and acceptable

24
4. BUDGET AND WORK BREAK DOWN
4.1. Budget Breakdown
The accomplishment of the study will be performed in the time frame of the following schedule.
S. No Activity Months of the Years (2021/2022)
Period Delivery
Start End
1 Approval of proposal 7 days
and questionnaire test
2 Data collection 30 days Field survey
findings
3 Analysis 30 days Analysis

4 Report writing 30 days

Report

5 Submission of first 1 day

draft paper
6 research submission - -

7 Final research defense

Based on department schedule

25
4.2. Cost Budget
The initial estimated budget to execute the research is tabulated below;
No Items Unit Quantity Unit Total price
price
Birr Cent

1 Secretary expense Piece 300 4 1200 00

2 A4 paper Ream 6 150 900 00

3 Pen Piece 5 15 75 00

4 Telephone expense Card 8 100 800 00

7 Printing questionnaires Piece 1095 1 1095 00
8 Software training Hr. 30 150 4500 00
9 Printing research report Piece 750 1 750 00
10 Binding Ream 5 15 75 00

11 Internet expense 20GB 4 1600 00

12 Flash disc(32GB) Piece 1 350 350 00

13 CD-Re writable Piece 4 45 180 00

14 Scientific calculator Piece 1 200 200 00

15 Notes book Piece 4 45 180 00

16 Bag Piece 1 400 400 00

17 Data collection cost Price - - 2000 00

18 Transportation and related costs - - - 1600 00

Sub-total 14,555 00

Contingency (10%) 1455 50

Grand Total - - - 17000

26
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