The Effect of Service Quality and Product Diversity on Customer Loyalty: The Role of Customer Satisfaction and Word of Mouth

Abstract

Batik industry is a business activity oriented towards customer loyalty and is demanded to show an increasing diversity of products with various motives designed to prevent customers from moving to other companies. Therefore, the purpose of this study is to develop a theoretical approach in solving problems in the relationship between service quality and product diversity on satisfaction and word of mouth (WoM) and its impact on customer loyalty. Furthermore, this study also examined the mediating effects of satisfaction and WoM in the relationship between service quality and product diversity on customer loyalty. This research's object took the customers of Batik Semarangan Craftwork, Indonesia, with the phenomenon of always developing creative and innovative Batik motif designs that can be accepted by the market without leaving Semarang's uniqueness. The total sample was 98 customers. The results of the study showed that service quality and product diversity positively affected satisfaction and WoM and had a positive effect on customer loyalty. Besides, satisfaction and WoM had a mediating effect on the effect of service quality and product diversity on loyalty. Thus, it is essential for management to create and increase customer loyalty by paying attention to service quality, product diversity, satisfaction, and WoM.