Impact of Service Innovation on Customer Satisfaction: An Evidence from Pakistani Banking Industry

Abstract

The purpose of this study is to appraise the linkage between service innovation (SI), customer value creation (CVC), and customer satisfaction (CS) with a specific focus on the Pakistani banking sector. In addition, the study evaluates the moderating role of brand equity (BE) fit between SI and CS. A survey is conducted on 250 customers from commercial banks in Pakistan and scales were acquired from past literature. The study showed that CVC mediates the relationship between SI and CS. Therefore, SI must create value for their customers in order to enhance CS. Moreover, BE has a partial positive moderation effect on the relationship bewteen SI and CS. By relating to the findings, managers of firms should focus on SI that adds to or create holistic value for their customers, which ultimately increase the CS level. This study relies on two theories, which include signaling theory and expectation disconfirmation theory to explain how SI in Pakistani banking sector creates customer value which achieves CS. The other uniqueness of the study is that it will be helpful for researchers by giving baseline regarding BE effect as a moderator between SI and CS in Pakistani banking industry.

Keywords

Service innovation customer satisfaction customer value creation brand equity

Introduction

In a worldwide economy, the service sector is considered as one of the fastest growing sectors in which innovation has been getting a great deal of consideration for research (Den Hertog, Van der Aa, & De Jong, 2010). Innovation means offering a new or adapted solution to a problem that adds value for customer (Michel, Brown, & Gallan, 2008). Different scholars have looked at different aspects of service innovation (SI). Still, there is a need for massive research on SI from a customer perspective (Janssen, Castaldi, & Frenken, 2011). Wilke and Sorvillo (2005) explained that despite the fact that firms achieved their benefit by investing heavily in innovation, the majority of them fail within their introductory three years because managers are not properly sure what actually brings value for their customers (Cheng & Chen, 2009). In acknowledgment of this challenge, the need of customers to stay with their banks is dependent on new and advanced technologies that provide higher value to customers (Zafar, Zaheer, Rehman, & Rehma, 2011). The success of Pakistani bank greatly depend on highly perceived value of customer (Khan & Kamal, 2006). This perplexity of customer value creation (CVC) is pointed out by different scholars, and this study has tried to fill in this gap.

Banking industry of Pakistan has seen drastic change as far as growth and improvement are concerned over the time of 64 years. Commercial banks in Pakistan have provided many facilities which customers would expect to find anywhere in the world, including credit cards, debit cards, money transfers travelers, cheques, personal loans and vehicle loans. They also offer specialized services such as, ladies accounts, children and student’s accounts, VIP accounts, plus e-banking services such as automated teller machine (ATM), telephone banking, PC banking, mobile banking, branch networking and paying bills online, which offer 24/7 access (Khalid, Mahmood, Abbas, & Hussain, 2011). The main purpose of these services is to increase the level of customer’s satisfaction toward their service offerings which is the positive indicator for the success of SI. The research tried to fill the gap that was identified in last year research paper (Mahmoud, Hinson, & Anim, 2018) recommended a future research on the relationships between SI, CVC and CS with a specific emphasis on the banking sector. This study used two influential theories, which are signaling theory (ST) and expectation disconfirmation theory (EDT), for the investigation of innovation and CS relation.

The novelty of this study is that it will also investigate how brand equity (BE) strengthens the relationship between SI and CS in the Pakistani banking sector, which has not been explained before. As practitioners revealed that, the service sector contributes heavily in the GNP of Pakistan and financial services have a great contribution, so study will be done on banking sectors, and the result of the study will help to explain how they can strengthen of their offerings that lead to CS. A successful innovation fortifies the firm’s BE because this enhances the meaning of brand for their customer and it is used as an effective measure of firm profitability. On the other hand, the failure of innovativeness has a negative consequences for BE (Beverland et al., 2010). The reason for using BE as a moderator is that, in previous literature, authors have revealed a positive relation between SI and BE (Atashfaraz & Abadi, 2016) and also between BE and CS (Nam, Ekinci, & Whyatt, 2011), so it implies that BE can work as a strong influencer between these two variables. This will be examined in the present research work.

As Pakistani banking sector shows a rapid change in introducing an innovation (Khan & Kamal, 2006), the study will be helpful while examining the contribution of CVC as a mediator in order to achieve better CS. The study will help Pakistani banking sector to draw better decisions in the future as they see the influence of BE as a moderator between SI and CS. This article sought out the answers of the following questions: What is the influence of SI with regard to new service concept (NSC), new service process (NSP) and new technological systems (NTS) on CS? What is the relationship between SI, CVC CS in the banking sector? Does BE strengthen the relationship of SI and CS? The rest of the study is organized into five parts, including literature review, methodology, result, discussion and conclusion.

Literature Review

Theories

In research investigation of innovation and CS, have contemporary dominant importance (Pappu & Quester, 2016). Most importantly, ST explains the innovativeness–satisfaction relationship that was used in the past literature (Henard & Dacin, 2010). A prominent scholar Spence (2002) suggested the idea of ST that rose from the concept of information economies and according to which it provides customer exchange asymmetric or imperfect information in the marketplace. Stiglitz (2000) explained that ST theory revealed customer does not have full access to all the information that help in judging the quality or value of newly introduced innovation in the marketplace. Therefore, in this case, a firm provides information to the customers by using the signals of advertising, brand name, price and warranty as signals to infer value of these communicated innovations, to determine their satisfaction or dissatisfaction levels. Generally, researchers concur that innovativeness constitutes one of the signals, which customers perceive from a firm.

Furthermore, EDT explains how customer becomes satisfied with the advent of new service offering. The idea of EDT was introduced by Leon Festinger in 1957 from the cognitive dissonance theory which means dissonance between customer’s cognition/thinking and its reality. It is a theory of matching customer expectation of a performance with what he/she experienced in the real world. EDT measures the satisfaction of customer from the difference between expectations of performance with what customer experienced from the services offerings (Patterson et al., 1996). In this model, the customer forms expectation about services before their purchase. The result of the evaluation of expectation and experiences lead to CS. Therefore, CS is the result of comparison between the perceived performance and pre-purchase expectations. Three outcomes occur, that is, simple disconfirmation, positive disconfirmation and negative disconfirmation.

In a nutshell, ST provides help through its main constituents in the communication of new SI and EDT further explains how customers become satisfied with an introduction of a new service offering.

SI and CS

SI is all about bringing improvement toward product and services, which is the demand of time. Satisfying the ever-changing customer needs is considered important for organizations, and they are seeking innovative ways to satisfy their customers’ needs that retain them and also give help to maintain a competitive advantage (Christensen et al., 2005). Thus, the pioneering of innovation is used for CS and to gain maximum potential in the marketplace that increases the company profit (Owano et al., 2014).

The higher level of CS encourages bank to adopt innovation into the services (Zameer et al., 2015). Pakistani banking sector also shows a rapid change in introducing innovations like ATM, mobile banking, branch networking, house financing, credit cards, personal financing and transfer electronic funds and paying bills online (Sumra et al., 2011). Thus, this leads to the following hypothesis:

H1: Service innovation has a positive relationship with customer satisfaction in Pakistani banking sector.

CVC and CS

Customers’ perceived value is the evaluation or judgment of what value suppliers provide them (Flint et al., 2005). It is all about the difference between benefit and cost that the customers incurred (Aktepe, Baş, & Tolon, 2009). CS comes due to perceived value after products and services are received in the transaction. When the customers encounter with service and perceive higher value, they feel pleasant about service and their buying decision that ultimately lead to CS (Raji & Zainal, 2017). In marketing literature, previous studies have showed that CVC is the important factor in achieving CS and post-buying behavior (Kuo, Wu, & Deng, 2009). Thus, this leads to the following hypothesis:

H2: Customer value creation and customer satisfaction have a positive and significant relationship in Pakistani banking sector.

SI and CVC

Creating customer value means serving more value to a customer as compared to their rival and it depends on the organizations’ capabilities. For offering more value to their customer, it is essential for organizations to be different and unique from their competitors. And this uniqueness relies on bringing innovation in services (Kanten & Yaşlioğlu, 2012). SI could be the great antecedent for companies’ success and growth, but it is estimated that 30 percent of new service both in industrial and in customer market fail (Storey & Kelly, 2001). To enhance the possibility of the success of new service offering and to reduce the chances of failure rate, it is necessary to know what creates value for customer and to understand the customer entire value chain, meaning not only present needs but also changes evolving over a time (Gao, Leichter, & Wei, 2012). Customer value is positively influenced by SI. In short, SI is the antecedent of CVC (Kanten & Yaşlioğlu, 2012). Thus, this leads to the following hypothesis:

H3: SI has a positive influence on CVC in Pakistani banking sector.

SI, CVC, and CS

A success of innovation is based on organizations who think like a customer, which means firm innovation must create value for its customer (Kandampully, 2002). When customers perceived greater value from suppliers in their offering, they feel pleasant about their experience of utilization that ultimately leads to CS (Kuo et al., 2009). It was suggested that SI can alone lead to CS, but innovation that creates value for their customer could better reach CS (Mahmoud et al., 2018). SI individually has lesser importance, but if it creates value for customers then it has more advantages of offering.

Thus, it is hypothesized that the greater the fit between CVC and SI, the greater the CS in Pakistani banking sector.

H4 a: The greater the fit between CVC and NSC, the greater the CS.

H4 b: The greater the fit between CVC and NTS, NSP, the greater the CS.

SI and BE

According to Hoeffler and Keller (2002), BE is the strength of the brand, which exists in the mind of a customer from the use of the brand. Collectively, there are four dimensions of BE, which include brand loyalty, brand awareness, perceived quality of the brand and brand associations.

SI creates a noteworthy role in building up of BE. More specifically, brand value is activated by innovation because it enhances the meaning of brand for its customer. Strong brands are triggered by innovation; the higher the level of innovativeness, the superior will be the BE (Atashfaraz & Abadi, 2016). Prior research had not addressed the effect of advanced services on BE in the banking sector. Thus, this leads to the following hypothesis:

H5: Service innovation has a positive relationship with brand equity in Pakistani banking sector.

BE and CS

CS and BE are considered important aspects of marketing profitability (Garvey, Emmanuel, Boman, & Ikegwuiro, 2016). CS is the outcome of BE (Nam et al., 2011). BE encourages the satisfaction and firm value of consumption. The linkage of BE and CS is based on customer evaluations, brand awareness, perceived quality, and brand association (Rambocas, Kirpalani & Simms, 2018). It is suggested that the higher the level of BE, the higher will be CS and hence the BE is the essential antecedent of CS (Huang, Yen, Liu, & Chang, 2014). Thus, this leads to the following hypothesis:

H6: BE has a positive relationship with CS in Pakistani banking sector.

SI, BE, and CS

Adam and Akber (2016) explained if brand creates value in the minds of the customers, gradually it ends up with loyalty and synchronized buyers; their brand becomes a companion that not only satisfies them but also give feelings of completeness. Customers have value for those brands which give them differential values and which is possible through innovative features (Hanaysha & Hilman, 2015). Today, the goal of an organization’s marketing is to compel customer on maturity ladder (Jalali, Hosseinipour, & Astaneh, 2016). In short, due to extensive competition, organizations are not only developing new innovative technologies to satisfy the customers but also looking for ways that extend the equity of their brand in customers’ mind that make them loyal and keep them satisfy for a long time. Therefore, debate suggested that BE may work as a positive influencer between SI and CS. This leads to the following hypothesis:

H7: Brand equity may positively strengthen the relationship between service innovation and customer satisfaction in Pakistani banking sector. Based on the examination of different concepts, in the literature review, the conceptual framework is designed in Figure 1.

Figure 1.

Source: The authors.

Methodology

Survey Design and Sampling Description

Pakistani commercial banks were chosen for data collection, and reasons for choosing this sector are they play an active role in the economic and financial development in Pakistan, commercial banks in Pakistan have a large customer base and their customers are more satisfied because of their multiple branches at convenient locations. A structural survey questionnaire was developed and a convenience sampling technique was used for primary data collection. The research questionnaires were disseminated to the 18 branches of commercial banks and 250 responses were collected.

Measures

The SI measures were adopted from Kanten and Yaslioglu (2012), Nasution, Mavondo, Matanda, and Ndubisi (2011), Salunke, Weerawardena, and McColl-Kennedy (2013), Wang and Ahmed (2004), and Yen, Wang, Wei, Hsu, and Chiu (2012). The measurements of CS were adopted from Chen and Cheng (2012), Nimako (2012), and Zangmo (2011). The measurements of CVC were depended on GLOVAL scale that was developed by Sanchez, Callarisa, Rodriguez, and Moliner (2006) in the tourism sector. GLOVAL scale measures the overall perceived value of a purchase, where the consumer not only evaluates the consumption experience but also the purchase experience. The BE measures were adopted from Yoo and Donthu (2001), a multi-dimensional scale. A five-point Likert response scale was used for measurement ranging from strongly disagree (1) to strongly agree (5). The conceptual model and hypotheses were analyzed by using SPSS software.

Result

Demographics Statistics

According to research survey as depicted in Table 1, 76 percent were males and 24 percent were females. With regard to the age of respondents, 29 percent were aged between 18 and 25 years, 51 percent were aged between 26 and 33 years, 12 percent were aged between 34 and 41 years, and 7 percent were aged 42 years or older. While evaluating income of the respondents, 20 percent had an income range less than 25,000 PKR, 39 percent had an income range between 25,000 and 50,000 PKR, 21 percent had an income range between 50,000 and 75,000 PKR, 10 percent had an income range between 75,000 and 100,000 PKR, and 8 percent of the respondents had an income range above 100,000 PKR. With regard to the education of respondents, 5 percent had less than 12-year education, 21 percent were graduates, 51 percent were master degree, 19 percent were M.Phil., and 4 percent were Ph.D. holders and 2 percent respondents had another degree. In assessing the location of respondents, it was revealed that 76 percent were from urban areas and 23 percent were from rural areas. Moreover, 15 percent respondents were users of Islamic banking and 84 percent were users of commercial bank.

Factor Analysis and Scale Reliability

For factor extraction, an exploratory factor analysis (EFA) was conducted. At the time of modification of original unfitted model, seven items of CVC (CVCFPU1, CVCFPU2, CVCFPU3, CVCFPU4, CVCSV1, CVCSV2, and CVCFE1), two items of NSC (NSC1 and NSC2) were deleted, one item of NSP (NSP2) was deleted, three items of NTS (NTS3, NTS4, and NTS5) were deleted and two items of BE (L1 and AS3) were deleted. Thus, 15 items were deleted based on standardized factor loading that was 0.4 (Hair, Black, Babin, Anderson, & Tatham, 2010). Nine factors were identified, and 69 percent variation in data was explained by the solution factors as depicted in Table 2. The reliability score for all constructs was more than 0.70, which showed that measurement of items together have a higher acceptable internal consistency (Nunnally & Bernstein, 1994). As a result of EFA, all the items of NTS and NSP merged into a single factor. BE construct’s items were also merged, that is, brand association items with brand awareness items into a single factor and perceived quality items with brand loyalty items into a single factor.

Table 1.

Demographic Information

Name	Frequency	Percent	Cumulative Percentage
1.Gender
Male	190	76.0	76.0
Female	60	24.0	100.0
2.Age
18–25 years	73	29.2	29.2
26–33 years	128	51.2	80.4
34–41 years	31	12.4	92.8
42 years or older	18	7.2	100.0
3. Income
Less than 25,000	51	20.4	20.4
25,000–50,000	98	39.2	59.6
50,000–75,000	53	21.2	80.8
75,000–100,000	26	10.4	91.2
Above 100,000	22	8.8	100.0
4. Education
Less than 12 years or equivalent	14	5.6	5.6
Graduate or equivalent (years)	54	21.6	27.2
Master’s degree or equivalent (16 years)	128	51.2	78.4
M.Phil. or equivalent (18 years)	48	19.2	97.6
Doctoral degree /Ph.D.	1	0.4	98.0
Others	5	2.0	100.0
5. Location
Urban	192	76.8	76.8
Rural	58	23.2	99.6
6. Bank orientation
Islamic bank	39	15.6	14.8
Commercial bank	211	84.4	99.2

Source: The authors.

Table 2.

Total 69 Percent 0.858 EFA Final Measurement Model

ItemsCodes	Statements	Factor Loading	VariancePercent	Alpha
1. CVC (personnel)			13 percent	0.887
CVCFP1	The personnel has knowledge of all the services offered by the entity.	0.759
CVCFP2	The personnel’s knowledge is up to date	0.754
CVCFP3	The information provided by the personnel has always been very valuable to me.	0.680
CVCFP4	The personnel has knowledge of all the services offered by the entity.	0.436
2.Customer satisfaction			10 percent	0.837
CS1	Overall satisfaction level regarding banking call service (voice)?	0.822
CS2	Overall satisfaction level regarding banking internet service?	0.811
CS3	Overall, the satisfaction level regarding additional banking services (SMS, voice mail)?	0.802
CS4	Overall satisfaction level regarding the customer service?	0.769
CS5	Overall satisfaction level regarding the total banking service offering?	0.767
3. SI (NTS, NSP)			9 percent	0.792
NTS1	My banking is based on the latest technology	0.630
NTS2	My banking service has many innovative features.	0.595
NSP1	My banking service has automated service options.	0.521
NSP3	My banking offers quick and easy call center support.	0.849
NSP4	My banking services have creative and innovative marketing	0.610
4. CVC (Establishment)			8 percent	0.832
CVCFE2	The installations are spacious, modern and clean.	0.903
CVCFE2	It is easy to find and accessible.	0.760
CVCFE4	It seems tidy and well organized.	0.608
CVCFE5	The installations favor confidentiality and privacy of dealings	0.565
5. BE (Association, Awareness)			7 percent	0.819
BEAS1	Some characteristics of my bank come to my mind quickly	0.608
BEAS2	I can quickly recall the symbol or logo of my bank	0.829
BEAR1	I can recognize my bank among other competing Banks	0.443
BEAR2	I am aware of my bank.	0.692
6. SI (NSC)			6 percent	0.805
NSC3	My banking services are noticeably different in concept and design, compared to preceding services	0.779
NSC4	My banking service is noticeably different in concept and design, compared to competing services.	0.750
NSC5	My banking service very different service experience compared to the preceding service.	0.701
7. CVC (Price)			6 percent	0.744
CVCFPr1	The payment of interest or commission is fully justified	0.770
CVCFPr2	The service is good for the expense it causes me	0.758
CVCFPr3	The total cost that it causes me is reasonable	0.659
8. BE (Perceived quality, Loyalty)			5 percent	0.848
PQ1	The likely quality of my bank services is extremely high	0.631
PQ2	It is my belief that my bank services would be highly functional	0.607
PQ3	I will not buy the services of another bank if my bank is available	0.591
L2	My bank would be my first choice	0.545
9. CVC (Emotional value)			5 percent	0.865
CVCEV1	The personnel do not hassle me	0.903
CVCEV2	The personnel give me positive feelings	0.737
CVCEV3	In general, I feel at ease	0.666
CVCEV4	I feel relaxed	0.601

Source: The authors.

Testing and Analysis

H1 was confirmed as SI in terms of NTS, NSP (β = 0.528, p < 0.000) and NSC (β = 0.251, p < 0.000) and has a positive and significant effect on CS in Pakistani banking. H2 was also confirmed as SI has a positive influence on CVC in Pakistani banking as p-value < 0.05. H3 was partially accepted because three constructs of CVC—functional value personnel, functional value establishment and functional value price (β = 0.220, p = 0.001), (β = 0.375, p = 0.000), (β = 0.201, p = 0.000)—have a significant relationship with CS except emotional value (β = 0.073, p = 0.270) in Pakistani banking (see Table 3).

Table 3.

Hypothesis Testing

Hypothesis regression path β estimate t-value p-value result
H1 NSC CS	0.251	4.655	0.000	Supported
NSP & NTS CS	0.528	9.655	0.000	Supported
H2 NSC CVCFP	0.238	3.590	0.000	Supported
NSP & NTS CVCFP	0.288	4.338	0.000	Supported
NSC CVCFE	0.160	2.479	0.014	Supported
NSP & NTS CVCFE	0.397	6.139	0.000	Supported
NSC CVCFPr	0.360	4.446	0.000	Supported
NSP & NTS CVCFPr	0.133	1.928	0.055	Supported
NSC CVCEV	0.308	4.635	0.000	Supported
NSP & NTS CVCEV	0.226	3.416	0.001	Supported
H3 CVCFV CS	0.220	3.296	0.001	Supported
CVCFE CS	0.375	6.484	0.000	Supported
CVCFPr CS	0.201	3.621	0.000	Supported
CVCEV CS	0.073	1.106	0.270	Rejected

Source: The authors.

As depicted in Table 4, a mediated regression analysis was run to test the mediating role of CVC between SI and CS. Partial support was available for H4a, and finding revealed in indirect effects, all constructs of CVC mediate the relationship between NSC and CS except emotional value (CVC) whose effect was 0.0045 which showed zero lies within the interval range between BootLLCI = −0.0299 and the BootULCI = 0.0358. H4b was also partially accepted, and finding revealed all constructs of CVC mediate the relationship between NTS, NSP and CS except emotional value (CVC) whose effect was 0.0176 which showed zero lies within the interval range between BootLLCI = −0.0326 and the BootULCI = 0.0788.

H5 was confirmed, as SI has a positive relationship with BE: SI in terms of NTS, NSP (β = 0.299, p < 0.000) and NSC (β = 0.360, p < 0.000) has a positive influence on perceived quality and brand loyalty (BE), SI in terms of NTS, NSP (β = 0.400, p < 0.000) and NSC (β = 0.220, p < 0.001) has a positive influence on brand awareness and brand association (BE). H6 was accepted, as BE in terms of brand awareness, association (β = 0.257, p < 0.000) and perceived quality and loyalty (β = 0.434, p < 0.000) has a positive relationship with CS (see Table 5).

Table 4.

Mediated Regression Analysis

Hypothesis		Effect	BootSE	LLCI	LLCI	t	P
H4a step 4	Total effect	0.2595	0.0265	0.2073	0.3118	9.7879	0.0000
	Direct effect	0.1266	0.0240	0.0794	0.17385	0.2794	0.0000
	Indirect effect
	TOTAL	0.1329	0.0218	0.0938	0.1790
	CVCFP	0.0383	0.0170	0.0092	0.0775
	CVCFE	0.0612	0.0188	0.0318	0.1082
	CVCEV	0.0045	0.0165	−0.0299	0.0358
	CVCPr	0.0290	0.0117	0.0086	0.0556
H4b step 4	Total effect	0.7774	0.0563	0.6666	8882	13.8203	0.0000
	Direct effect	0.4821	0.0537	0.3763	0.5879	8.9794	0.0000
	Indirect effect
	TOTAL	0.2953	0.0474	0.2102	0.3975
	CVCFP	0.0813	0.0391	0.0155	0.1722
	CVCFE	0.1341	0.0474	0.0565	0.2488
	CVCEV	0.0176	0.0283	−0.0326	0.0788
	CVCPr	0.0624	0.0226	0.0260	0.1157

Source: The authors.

Table 5.

Hypothesis Testing

Hypothesis Regression Path β Estimate t-value p-value Results
H5 NSC BE (perceived quality & loyalty)	0.360	5.899	0.000	Supported
NSP&NTS BE (perceived quality & loyalty)	0.299	4.892	0.000	Supported
NSC BE (awareness & association)	0.220	3.573	0.001	Supported
NSP&NTS BE (awareness & association)	0.400	6.390	0.000	Supported
H6 BE (awareness & association) CS	0.257	4.140	0.000	Supported
BE (perceived quality & loyalty) CS	0.4343	6.990	0.000	Supported

Source: The authors.

H7 was partially accepted. There was an increase in R square value from 0.481 to 0.545 and from 0.545 to 0.552 that shows a slight positive moderation effect of BE on relation of SI and CS. A hierarchical moderated regression analysis was run to test the hypothesis that is shown in Table 6. Brand awareness and brand association do not positively moderate the relationship of SI and CS, as in the interaction term beta value of BE (awareness, association) with SI (NTS, NSP) was 0.666, p > 0.10, and beta value of BE (awareness, association) with SI (NSC) was −0.095, p > 0 that shows insignificant values. Perceived quality and loyalty partially moderate the relationship of SI and CS, as in the interaction term beta value of BE (perceived quality and loyalty) with SI (NTS, NSP) was 0.621, p < 0.10, and beta value of BE (perceived quality and loyalty) with SI (NSC) was −0.102, p > 0.10. This showed that perceived quality and loyalty to some extent positively effect as a moderator as depicted in Figure 2.

Table 6.

Summary of Moderation Test

Moderating Impact of Brand Equity (Regression, 1, 2, 3)

R2	0.481	0.545	0.552
Adj. R2	0.476	0.537	0.537
F	114.296	73.227	37.105
Independent variable SI technology and process SI New Concept	0.528 * * 0.251 * *	0.415 * * 0.138 * *	0.318 * 0.338 *
Moderating variable BE awareness and association BE perceived quality and loyalty		0.0870.261 * * *	−0.212 * 0.697 *
Interaction Term a. BE (awareness and association) SI (technology and process) b. BE (awareness and association) SI (new concept) c. BE (perceived quality and loyalty) SI (technology and process) d. BE (perceived quality and loyalty) SI (new concept)			0.666 −0.095 0.621 * * −0.102

Source: The authors.

Notes: **p < 0.05; ***p < 0.01; *p < 0.10.

Figure 2.

Source: The authors.

Discussion

The first finding of the study interpreted that SI positively and significantly effect CS in Pakistani banking sector. This finding is consistent with previous studies.

Mahmoud et al. (2018) who postulated that SIs in marketplace are often used by the customer which proved the positive correlation between SI and CS. Further, it was found a significant positive effect of SI on CVC in Pakistani banking. Result interpreted that creating more value to customers relies on innovation in service (Kanten & Yaşlioğlu, 2012). From the result, it is interpreted that there is a partial positive effect of CVC on CS in Pakistani banking. These findings linked with previous studies within marketing literature (Raji & Zainal, 2017) that shows when customers perceived bank of high value, they feel more positive regarding their experience, buying decision and satisfaction about the offering.

To measure the mediation effect of CVC (H4a and H4b), findings indicated a partial and significant effect on the relationship between SI and CS in banking. This result shows that SI can alone reach CS, but SI that creates value for the customer could better lead to CS (Mahmoud et al., 2018).

It was found in the study that SI has a very significant positive causal effect on BE in Pakistani banking industry This finding is similar with previous studies, which concluded that higher the level of innovativeness, the superior will be BE (Atashfaraz & Abadi, 2016).

The result indicated that there was a positive and significant effect of BE on CS in Pakistani banking industry. When customers have a positive brand awareness, brand association, perceived quality and loyalty with their bank, they feel more satisfied with the service offering (Huang et al., 2014).

The study observed moderating role of four dimensions of BE. It was found that perceived quality and loyalty strengthened the relationship of SI and CS in banking, whereas brand awareness and brand association did not positively moderate the relationship of SI and CS. Prior research by Hanaysha and Hilman (2015) supported these findings and concluded that customers have value for those brands, which give them differential values, which is possible through innovative features. Fan, Yul Lee and Kim (2013) explained, if service innovation increases the perceived quality and encourages the loyalty of customers; then the organization can keep them satisfied for a long time.

Conclusion

This study used two influential theories, which are signaling theory and expectation disconfirmation theory, for the investigation of innovation and CS relation. It focuses on how SI in terms of NSC, NTS and NSP can increase the CS in commercial banks of Pakistan. The study established that SI in creating customer value has a strong and positive influence on CS.

In banking industry, innovation could alone reach CS, but innovation that create value and influence the customer perception would increase the level of CS. Therefore, this study will provide help to other sectors in how they can make a plan for the enhancement of CS by keeping in mind the importance of CVC. A study examined the moderation effect of BE on the relationship of SI and CS. The managers should focus on innovative strategies that contribute to BE which keep the customer satisfied for a long time.

Limitation and Further Research Directions

This study has few impediments, which should be solved in future research. Firstly, its focus was only on commercial banking sector, so it is difficult to generalize for other sectors. For future research, the researcher should focus on different types of service sectors such as hospital, insurance and many others. Secondly, qualitative methods could be used for better understanding of CS.

Footnotes

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The authors received no financial support for the research, authorship and/or publication of this article.

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