Product Quality and Service Quality as Determinants of Customer Loyalty: The Mediating Role of Customer Satisfaction in MSMEs in Tambaksari District, Surabaya

Abstract

This study aims to examine the influence of product quality and service quality on customer loyalty, with customer satisfaction as an intervening variable among Micro, Small, and Medium Enterprises (MSMEs) in Tambaksari District, Surabaya. This study employed a quantitative approach using a survey method through questionnaires distributed to MSME customers. The data were analyzed using Structural Equation Modeling–Partial Least Squares (SEM-PLS). The measurement model was evaluated through outer loading, Average Variance Extracted (AVE), discriminant validity, and reliability tests, while the structural model was assessed using R-square, f-square, Q-square, model fit, path coefficients, and specific indirect effects. The results indicate that product quality has a positive and significant effect on customer satisfaction and customer loyalty. Service quality also has a positive and significant effect on customer satisfaction and customer loyalty. Furthermore, customer satisfaction has a positive and significant effect on customer loyalty. The mediation analysis shows that customer satisfaction significantly mediates the effects of both product quality and service quality on customer loyalty. These findings highlight the importance of maintaining product and service quality while strengthening customer satisfaction as a strategic mechanism for building sustainable customer loyalty among MSMEs.