Abstract:
This study examines the effect of service quality on customer loyalty, with customer satisfaction as a
mediating role, at Hibret Bank’s Gondar city branches. Employing the SERVQUAL model, the
research evaluates five service quality dimensions—tangibility, reliability, responsiveness, assurance,
and empathy—and their influence on customer satisfaction and loyalty. A quantitative, explanatory
approach was used, collecting data from 320 customers across six branches via convenience sampling
and Likert-scale questionnaires. Data analysis, conducted using SPSS version 25, included descriptive
statistics, Pearson correlation, and multiple linear regression with Hayes’ Process Macro (Model 4).
Results indicate that service quality significantly predicts customer satisfaction (R² = 0.73), with
assurance and responsiveness being the most impactful dimensions. Both service quality and
satisfaction significantly predict customer loyalty (R² = 0.43), with satisfaction having a slightly
stronger effect. Mediation analysis confirms that customer satisfaction partially mediates the
relationship between service quality and loyalty, with significant direct and indirect effects across all
dimensions. Responsiveness exhibited the highest total effect on loyalty (0.91), followed by assurance
(0.78), tangibility (0.76), reliability (0.70), and empathy (0.67). The study underscores the pivotal role
of satisfaction in fostering loyalty and recommends that Hibret Bank prioritize enhancing
responsiveness, assurance, and empathy while addressing variability in loyalty and empathy
perceptions to improve customer retention. These findings contribute to the literature on service
quality in banking and offer practical insights for Hibret Bank to strengthen service delivery and
promote long-term customer loyalty.
