Services can be described as activities, benefits or satisfaction which are offered for sale which are intangible in nature ; that is, they are not concrete objects which can be seen, felt or tasted rather we enjoy the benefits from them. When a customer buys a service from the service market he simply buys the time, knowledge and skill as someone who is the service provider. With these, we can say service marketing refers to the marketing of services against tangible products. In addition, service marketing can be defined as the marketing of processes, deeds and performance (Lovluck and Wirtz, 2006).

Service marketing possesses unique characteristics that differentiate them from marketing of goods. The most common characteristics include:

i. Intangibility 

ii. Inseparability

iii. Perishability

iv. Variability

a. Intangibility: Services are activities performed by the service provider unlike physical products; services cannot be seen, felt or smelt before they are consumed. Not all services products have similar intangibility. Some services are highly intangible while others are low.

b. Inseparability: Services are typically produced and consumed simultaneously. In the case of physical goods, they are manufactured into products, distributed through multiple reservoirs and consumed later but in the case of services, it is different because the service cannot be separated from the service provider.     

c. Perishability: Services are acts, performance or deeds whose consumption takes place simultaneously. Services cannot be stored i.e. the value of services exist at the point where it is required.

d. Variability: Services are highly variable, as they depend on the service provider.

Just like the marketing mix of a product the service marketing comprises of product, price, place and promotion. However, as a service is not tangible the marketing mix has three additional elements which are: People, Process, and physical evidence. 

In services industry like in the banking industry, we win and lose customers based on the quality of the service. Only customers can judge the quality of service rendered, one must first understanding now the customers and potential customers judge service quality. Service quality is not an accident and can be improved through total commitment. Management must take quality seriously. 

However, service organizations appreciate the need to offer quality services at all times to their customers. This expectation is not always realized due to the nature of services which vary in different ways including the production process and the outcome. In the course of service delivery, service failures could occur which could be of immense cost to the organization. As noted by Kelly and Davis (1994) one negative service encounter can undermine an extraordinary record of superior service, lowering evaluations of service quality and causing customers to search for alternative service providers. But service recovery can help to solve this problem.

Service recovery can be defined as actions taken by service providers in response to service failures. Service recovery also means trying to put back smile on a customer’s face after you have made a mistake. This way he feels that the company cares and will be an advocate for the company. When services fail, some customers would complain while the majority would not but would say damaging things about the services providers. In term of utility, those who complain are more useful to the services providers. This is because the complaints provide opportunities for service recovery. Complaints when properly addressed and recovered result in service recovery paradox in which the aggrieved but now satisfied customer will rate the company performance higher than he would have if there was no service failure. 

However, empirical studies have documented that, the essence of rendering better services to the customers in the telecommunication industry is because growth and survival is the goal of every business organization. Thus no firm in the telecommunication industry can make a healthy living without meeting the needs of its customers. In the past, such companies took their customers for granted. This resulted from the fact that their customers may not have had many alternative sources of supply, or that all suppliers were equally deficient in service, or that the market was growing so fast that the company did not worry about satisfying its customers, (Kotler, 2000).

Today, things have changed. Customers are harder to please. They are smarter, more price conscious, more demanding, less forgiving and approached by more competitors with equal or better offers, (Kotler, 2000).

It is therefore not enough to be skillful in attracting new customers. There is need to keep them as the cost of losing a customer is equal to the customer’s lifetime value – that is the present value of the profit stream that the company would have realized if the customer had not defected prematurely, (Kotler, 2000).

The concept of growth and survival pose a great challenge to all firms in the banking industry. These growth and survival demands are further deepened by the need to satisfy and retain customers, as customers are the main focus of their successful business. Business success depends on the firm’s understanding and meeting customers’ needs and demands.

A number of empirical studies have been conducted on the subject of service quality and customer satisfaction (Cronin and Taylor, 1992; Spreng and Mackoy, 1996; Jones and Suh, 2000; Coyles and Gokey, 2002; Ranaweera and Prabhu, 2003; Choi et al., 2004). Research on this subject shows that most of the studies were conducted in industrialized countries such as United States, the United Kingdom, and Japan. This implies that there is dearth of relevant literature on underdeveloped and developing countries, including Nigeria which has to be covered by research. In addition, despite the existence of these studies, very little attention has been given to the banking industry. This means that the effect of service quality on customer satisfaction in the banking industry has not received adequate research attention in Nigeria. Thus, there is a major gap in the relevant literature on Nigeria, which has to be covered by research. This research attempts to fill this gap by studying the situation of the Nigerian banking industry and providing more empirical evidence on the effects of service quality on customer satisfaction.