Service quality and customer satisfaction is an important ingredient in addressing global challenges, such as customer satisfaction and service quality. Service quality influences customer satisfaction because with an excellent service provided to the customers, their needs and expectations are met and as a result it improves customer satisfaction and helps create a good image of the company and bring positive reactions to potential customers mind. Despite this attention, little empirical research has been performed about relationship-marketing practices among SMEs, especially those in developing countries. This study is intended to investigate the effects of service quality on customer satisfaction in Kitale town. Stratified sampling was used to divide the Central Business District in terms of streets. Systematic random sampling was used to select SMEs from each street to obtain a sample size of 146 SMEs where customers was interviewed from each SME making a total of 146 customers involved in this research work. Findings reveals that service quality highly affect customer satisfaction positively (β2=0.396, P<0.05). All the beta values were significant at 0.05 level of significance. Hence it is recommended that managers should focus on developing appropriate competencies in service quality since it has a positive impact on customer satisfaction.
Keywords: Customer Satisfaction, SMEs, Service Quality
