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Proceedings of the 15th Annual International Conference
1389
Impact of Product Quality on Customer Satisfaction and Loyalty
1Dr. Ejika Sambo, 2Ukpata Ijuo Sunday
3Atiga M. Mary, 4Fumba John
samboejika@gmail.com, atigamary1@gmail.com
1,3Department of Business Administration
Modibbo Adama University, Yola
2,4Department of Business Administration
Federal University Wukari, Taraba State, Nigeria
ABSTRACT
The main aim of this work is to evaluate the impact of product quality on customer satisfaction
and loyalty. The study adopted a survey research design. The population of the study was 264
staff of Adama Beverages Ltd. The data collected were analysed using linear regression
analysis. The entire population was used as sample size. Questionnaire were adapted to draw the
information from the respondents. The finding of the study revealed that when it comes to
customer satisfaction, product quality is a major determinant and that reduction in level of
customer loyalty, might be due to variation in the firm’s product quality and the customers level
of satisfaction as regard the product quality. It is recommended that since product quality
happens to be one of the major determinants of customer satisfaction and customer loyalty and
as such management of firms must establish an interactive metrics that will keep track of the
level of their product quality based on the customer perceptions, as a fall or rise in product
quality can either reduce or increase the level of customer satisfaction, which in turn can make
the level of customer loyalty.
Key words: Product, Quality, Customer Satisfaction, Loyalty
INTRODUCTION
As the result of the impact of globalization and the developments associated with technological
advancement, influx of new entrants into the business environments resulting in new products
emergence, rivalry incremental challenges, market shares declinations as well as lower
repurchase intentions leading to reduction in organizations’ sales volume in line with the
challenges of keeping up with the growing customers’ desires and expectations makes today
firms to take issue of product quality, customer satisfaction and repurchase intentions which will
eventually leads to customer loyalty very essential and crucial to the overall survival of the
organization (Nuridin, 2018; Atiyahi, 2016). In fact, all organizational production components
should be coordinated towards meeting consumer’s expectation and desires and as such,
organization should leave the old pattern of production because if the customers’ desires and
expectations are not address by critical improvement on all productions component of the
organization, they may switch to that of the company rivals (Razak, 2016).
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Moreover, the extent to which products are able to attain to the needs and desires of customers is
reported to refers to as product quality (Smith and Wright, 2004; Suchánek, Richter &Králová,
2015) and that improvement in product quality automatically lead the satisfaction of customers
thereby positively influencing repurchase intentions and higher sales (Flynn, Schroeder &
Sakakibara, 1994; Lynch, 1999; Porter and Vander Linde, 1995; Nadia, 2001). Repurchase
intention is determined by products quality that are capable of meeting the needs and satisfaction
of customers (Bei and Chiao, 2001; Wagner, 2005; Atiyahi, 2016). Ehsani and Ehsani (2015)
revealed that product quality in relation to price can be used as a resource towards increasing
satisfaction of both customer and the organizational profitability. Repurchase intention and
customer satisfaction are highly affected by customer perception of product quality and customer
value as proposed by Ma and Ding (2010) that customers’ desires can be satisfy by customer
value delivery while Sugiarti, Thoyib, Hadiwidjojyo & Setiawan (2013) revealed that comparing
to what the rivals will bring to the market, better customer value will make consumers feel
highly satisfied thereby leading to customer loyalty.
The essence of establishing any enterprise is for the purpose of achieving stated goals and
objectives and one of the main objective in the mind and thinking of stakeholders while bringing
out their hard earn capital resources for the establishment of any firm is strictly for the sole aim
of making or earning profit which every managers or business operators must work hard toward
attaining such a noble goals and aspirations of stakeholders (Nuridin, 2017). It is worthy to note
here though that business enterprises in developing countries especially in Nigeria hardly survive
the first ten years as a result of globalizations, intense competitive pressures, frequent changes in
government policies, constant technological evolutions, changes in consumers’ taste only to
mention but a few.
All these put pressures on organizations causing them to easily phase out in the business
environment (Porter and Vander Linde, 1995; Nadia, 2001; Cruz, 2015), thereby making
enterprise desirous to achieve profitability so as to increase shareholders’ wealth through
diversification and expansion for continuous existence find it extremely difficult to do so.
Therefore, since the profitability of an organization largely and solely rely on the quality of
organizational products capable of leading to customer satisfaction as well as an increase in its
sales volume through customer loyalty and repeat purchases (Shaharudin, Mansor, Hassan, Omar
&Harun, 201;Sirfaz, Sabir&Naz, 2014). To this end, issues relating to quality management in
line with the production of highly qualitative products can never be seen to be overemphasized
because organizational survival largely depends on its ability to meet or even surpass the
expectations of it clients. Therefore, it is very crucial for any profit oriented firm to look for
ways towards meetings the needs and aspirations of its potentials customers because if a
company’s products are not able to satisfy the customers’ needs and specification which may be
as a result of defective materials used, improper setting of equipment, operational errors and
unskilled manpower on the part of the organization, there is likelihood that consumers will not
patronize such product thereby minimizing repeat purchase as well as customer loyalty and the
organizations’ profitability level (Tsiotsou, 2006; Kusuman & Abdillah, 2014; Asshidin, et al.,
2016).
Assessment detail of factors affecting the firm’s customer loyalty of its clients becomes crucial
due to the fact that it can at least provide information to us and the organization of all pertinent
Proceedings of the 15th Annual International Conference
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issues that are relating to the general organizational profitability which to a large extend relies on
the firm’s products and quality management. Consumers perceived these qualities as well as the
impact it has on their satisfaction and loyalty thereby increasing their purchasing intensions
(Kusuman & Abdillah, 2014; Asshidin, et al., 2016; Kelemu & Mandefro, 2017). Owning to the
various complain by consumers and many agencies in Nigeria regarding poor products qualities
which can lead to customer dissatisfaction thereby affecting repurchase intentions as well as
customer loyalty toward any firm’s products makes this research work worthy of conducting
which focuses on the impacts of product quality on customer satisfaction and customer loyalty
taking into consideration all products produced by Adama Beverage Ltd, Yola.
CONCEPTUAL ISSUES
Product quality: One of the important element in the business word is providing value to
customers which does not only include objects that are tangible but also objects that are
intangible, that is including packaging, service characteristics, brand name as well as
performance quality. Customer’s satisfaction and value is thus linked to a product’s quality
which has a significant impact towards service performance or the product (Kotler & Armstrong,
2012). However, according to Rust et al (2002), the term quality has been so overused that its
meaning is not easy to determine because of the so much attention that have been devoted by
academics and practitioners. Moreover, most authors accept the qualification of product quality
by Zeithaml’s (1988) which states that, product quality is defined based on either extrinsic cues
that is the external quality or the intrinsic cues which is the internal quality of a product.
Customer’s perception regarding extrinsic cues such as warranty, brand, country of origin or
price according to Teas and Agarwal (2000) is based on the quality externally. The dimensions
of product quality according to Winder (1996) and Chavan (2003) is the totality of product
characteristics that has the capability or capacity of satisfying the expectations of consumers.
Clients will be highly happy and consider that a product is of higher quality and is acceptable
when a product meets their expectations. These dimensions according to Garvin (1984) include
the following: Performance, Feature, Reliability, Conformance, Durability, Service Ability,
Aesthetics, and Perceived Quality.
Customer satisfaction: A pleasant feeling customers derived or a disappointment that occur
when they compare their own expectations to a product's perceived outcome (performance) was
regarded by Kotler and Keller (2012) as satisfaction. Moreover, customer satisfaction occurs
when the customer's perception of received value in a transaction is equivalent with the
perceived service quality relative to the client’s costs of acquisition and price (Jahanshahi,
Gashti, Mirdamadi, Nawaser&Khaksar, 2011). Though customers repurchase intentions and
behavior was seen to be influenced by customer satisfaction (Tu, Li &Chih, 2013) thereby
impacting positively on the profit of the organization as well as future revenue. Satisfaction of
customers is their feedback in the form of evaluation after actual purchasing and using a product
and also comparing it with their own expectations and desires (Woodruff, Cadotte and Jenkins,
1997).
The extent to which product performance perception matches the expectations of buyers is what
customer satisfaction is all about (Kotler and Armstrong, 2012) There are various indicators of
customer satisfaction which include: repurchase interest, loyalty, small desire and intention to
make a complain, satisfaction, the reputation of the company and the willingness to recommend
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the product (Kotler & Keller, 2012). Whereas, the judgment of a specific post-choice transaction
on a product which has been duly evaluated is referred to as customer satisfaction (Bastos &
Gallego, 2008). However, the perception of Customers regarding the value received in a
transaction or relationship is what is known as customer satisfaction- when the value received is
equivalent to the perceived service quality relative to acquisition costs by customer and any
transaction price, then we say there is satisfaction (Hallowell, 1996).
Customer loyalty: Customer loyalty is one of the purposes companies are marketing strategy
implementation. Musanto (2004) opined that the behavior of customers who buy a product
continuously and to establish customer loyalties to a particular organization is what known as
loyalty. Loyalty is the commitment customers have to a certain supplier, brand or store which
reflected based on their positive behavior throughout their repeat purchase (Mittal, 2004). The
company’s main purpose in establishing as well as creating a relationship with their clients is to
create or build loyalty behavior that is very strong.
Customer loyalty dimensions are four categories (Griffin, 2002), namely: 1) Make purchases
regularly; Customers will make purchase regularly when they engage in a transaction with the
organization thereby deriving satisfaction with what the process. Moreover, this will help them
in forming a close and a cordial relationship with the client as well as what he or she desire. 2)
Clearly demonstrate immunity to the pull of rivals; Clients are confident with the usage of the
products thereby making it very hard for them to easily switch to other competitor’s products
because they have confidence in the company and its brand. Therefore, they refuse to
acknowledge other products.3) Recommend products to others; customers will also recommend
the product to others, this will make them good spokesperson to other customers and a greater
asset to the organization besides recommending the products and brands of the company to
others. 4) Buy inter-line products and services; Here, customers may add other items from the
purchased product because they are not just purchasing one category of product after another, but
they are purchasing for their product accessories as well.
Negativity theory
It is very important to note that this particular theory which was propounded by Carlsmith and
Aronson (1963) revealed that any expectations and performance will produce what is called
‘negative energy’ thereby disrupting the individual by creating in him or her feeling of negativity
towards the product which provide foundations in the process of disconfirmation for the
development of negative theory in consumerism processes. Therefore, negative theory stipulates
that in a situation where expectations are strongly held by the consumers, that any
disconfirmation will cause negative responses from them and as such, dissatisfaction will take
place accordingly especially in a situation where performance perception is by far lesser than
expectations or also in a situation where performance perceptions is greater than expectations by
far (Ferrel, Michael & Hartlines, 2010; McLaughlin, 2010). Consequently, the aforementioned
definition indicates that the satisfaction of customer is determined by the fulfillment level
expectations attached to the product. Therefore, the level of quality of product is generally based
on the degree to which expectations as well as desires has been considered met by the consumer.
Hence, the main product quality criterion or factor is the satisfaction of customer. Therefore,
company must be able to manufacture quality product that is capable of meeting customer’s
desires and expectations.
Proceedings of the 15th Annual International Conference
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METHODOLOGY
The study focused on the impact of product quality on customer satisfaction and loyalty.
Descriptive survey research design was adopted. A structured questionnaire was used to elicit
data from the respondents. However 264 copies of closed ended questionnaire were administered
to the respondents and were found useful for the analysis. Both validity and reliability test were
carried out for the study. The instrument was subjected to content validity test while the
reliability test ensures that the instruments measure consistently as required. Alpha Cronbach
value of 0.957, 0.993 and 0.919 was obtained for product quality, customer satisfaction and
customer loyalty respectively. These values indicate an excellent reliability, and the instrument
of data collection for this study, measures consistently what it intends to measure.
Table 3.1: Alpha Cronbach Reliability Test
Variables
Cronbach's Alpha
N of Items
Product Quality
0.957
10
Customer Satisfaction
0.993
10
Customer Loyalty
0.919
10
Statistical tools used for the study is linear regression. Furthermore, test for Heteroscedasticity
(using the scatterplot of standardized residuals) was carried out and the analysis was performed
having in mind the regression diagnosis output so as to ensure the output generalization of the
analysis within contexts the study.
RESULTS
4.0 Descriptive Statistics
Descriptive statistics of the responses of the respondents as regards the survey items, in light of
the study variables (Product quality, customer satisfaction and customer loyalty) was used.
Table 4.1: Product Quality
Items
Mean
Std. D.
Remark
1
The product has excellent qualities
3.1992
1.54291
Agreed
2
The packaging is very reasonable and informative
3.1829
1.53433
Agreed
3
The product has a very rich taste
3.8089
1.21893
Agreed
4
The product is highly nutritional
3.5772
1.34927
Agreed
5
The product standouts from other alternatives
3.3902
1.23641
Agreed
6
I highly recommend it to my friends and colleagues
4.0081
1.21216
Agreed
7
The product quality is exceptional
3.5366
1.27643
Agreed
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8
The probability of me shifting to another brand is
close to zero
3.8821
1.14211
Agreed
9
Continuous innovation and rich add-ons actually
matched my improvement expectations
1.3008
1.45369
Disagreed
10
The constant additions to the product make have kept
me satisfied with the brand
1.0203
1.26958
Disagreed
Table 4.2 revealed the responses of the respondents as regards items on product quality section
of the questionnaire. The respondents agreed to item number 1 to item number 8. They disagreed
with item number 9 and 10.
Table 4.3: Customer Satisfaction
Items
Mean
Std. D.
Remark
1
The taste of the product is very okay and has
prompted me to repeat purchase
3.8618
1.25406
Agreed
2
I agree that the price of the product is very
affordable
3.6626
1.31086
Agreed
3
The distribution is very wide and no scarcity exists,
meeting up with my demands at all times
1.5935
1.30517
Disagreed
4
I attest to the nutritional superiority of this product
1.6179
1.32800
Disagreed
5
The product “quantity wise” is commendable
3.8902
1.21896
Agreed
6
The product meets my expectations at all dimensions
2.4748
1.25841
Disagreed
7
My demand has increased despite reduction in
Adama Beverages promotion and advertisement
3.7764
1.05502
Agreed
8
Health and Nutrition wise, the product is extremely
ok
3.5569
1.37128
Agreed
9
The product packaging is always perfect
4.2480
.94734
Agreed
10
When it comes to this product solutions, I always
ask for this brand first (only absent of this brand
triggers me to purchase from other alternatives)
3.7683
1.33675
Agreed
Table 4.3 revealed the responses of the respondents as regards items on customer satisfaction
section of the questionnaire. The respondents agreed to all items except item number 3, 4 and 6.
This implies a high level of satisfaction exist.
Proceedings of the 15th Annual International Conference
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Table 4.5: Customer Loyalty
Items
Mean
Std. D.
Remark
1
My Repeated purchase is over 10 times
3.8252
1.20794
Agreed
2
I have increased intake of this product due to its
incomparable taste and flavour
3.9593
1.20474
Agreed
3
I have recommended this product to more than 2
persons
3.3374
1.40407
Agreed
4
I believe this product deserves my loyalty
3.9431
1.15918
Agreed
5
Over the past year, my loyalty to this product has
grown stronger
3.5528
1.34743
Agreed
6
Adama Beverage values people, customer health
and nutritional needs, and relationships ahead of
short-term goals
3.9106
1.12492
Agreed
7
In total, I have been a customer of Company
Adama Beverages for over 3 years
1.8862
1.25651
Disagreed
8
My chances of repurchasing any offerings of
Adama Beverages is excellent
3.2033
1.44256
Agreed
9
My intention to repurchase is being stirred up by
this product brand serving as the industry standard
4.2683
.95681
Agreed
10
I am extremely satisfied with the products of
adama beverages and I am not looking for
alternatives
3.6870
1.32002
Agreed
Table 4.4 revealed the responses of the respondents as regards items on customer loyalty section
of the questionnaire. The respondents agreed to all items, except item number 7. This implies a
high level of customer loyalty.
Table 4.5: Summary Statistics
N
Mean
Std. Deviation
Skewness
Statistic
Statistic
Statistic
Statistic
Std. Error
Product Quality
246
3.5907
.62240
-.020
.155
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Customer Satisfaction
246
3.7650
.65203
-.576
.155
Customer Loyalty
246
3.7573
.57528
-.264
.155
Descriptive statistics in relation to all the study variables are reported in Table 4.5. The
descriptive statistics table reveals the Mean, standard deviations and skewness with their
standard error. Moreover, the low variations of the standard deviations and the mean’s values
indicates data gathered fits together properly. Nonetheless, from the column of the skewness, all
the variables are negatively skewed, this implies normality in terms of distribution of the
sampled customers’ responses.
Model Specification and Estimation
The regression model for the study is specified and estimated below;
The regression equation is specified below:
Y = a + β1 x1 + β2x2 + e(i)
Where:
Y= Customer satisfaction (as dependent variable).
a= Constant.
β1, β2, are unknown parameters associated with changing variables which must be estimated.
The explanatory variables are:
X1 =Product quality
X2 = customer loyalty
ei = Random error term and subscription ‘i’ indexes a particular observation.
Product quality on customer satisfaction: Table 4.6 and 4.7 reports Regression analysis of
Product quality and Customer Satisfaction, alongside model summary and test of
heteroscedasticity.
Table 4.6: Model Summary (Product Quality on Customer Satisfaction)
Model
R
R Square
Adjusted R Square
Std. Error of the
Estimate
1
.827a
.651
.647
.63637
a. Predictors: Product Quality
b. Dependent Variable: Customer Satisfaction
From Table 4.6, R which is the correlation coefficient between product quality and customer
satisfaction has a positive value of 0.827. R Square which measures covariance between product
quality and customer satisfaction has a value of 0.651 indicating that 65.1% variation in
customer satisfaction is due to product quality. The Adjusted R square has a value of 0.647, this
is more reliable than our R Square value because it takes into account our sample size. The
Standard Error which measures the variability of actual customer satisfaction values from the
predicted customer satisfaction values has a value of 0.63637, this is the same as standard
deviation.
Proceedings of the 15th Annual International Conference
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Table 4.7: Regression Analysis (Product Quality on Customer Satisfaction)
Model
Unstandardized
Coefficients
Standardized
Coefficients
t
Sig.
B
Std.
Error
Beta
Product
Quality
.837
.065
.827
3.634
.000
a. Dependent Variable: Customer Satisfaction
Table 4.7 which entails result of the regression analysis between product quality and customer
satisfaction has positive T-value of 3.634, this implies a positive relationship exists product
quality and customer satisfaction. The level of significance stood at 0.000 (0.01), which is less
than the p-value of 0.005. The Beta Value stood at 0.827. From the standardized residuals in
Figure 1, the presence of homoscedasticity is easily seen on the plot, which implies the values of
the responses of the sampled respondents are relatively close. No wider variations exist, as seen
from the cloudy nature of the dots. Little outliers are experienced but not enough to result to the
disturbance of heteroscedasticity. This is a good fit for regression model, which utilizes survey
(scaled) data. Summarily, the regression result is not spurious.
Figure 4.1: Scatter Plot for Heteroscedasticity Test (Product Quality on Customer Satisfaction)
Product quality and customer satisfaction on customer loyalty: Table 8 and 9 presents the
Regression analysis of Product quality and Customer Satisfaction, alongside model summary and
test of heteroscedasticity.
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Table 4.8: Model Summary (Product Quality and Customer Satisfaction on Product quality)
Model
R
R Square
Adjusted R Square
Std. Error of the Estimate
1
.941a
.892
.887
.48590
a. Predictors: (Constant), Customer Satisfaction, Product Quality
b. Dependent Variable: Customer Loyalty
From Table 4.8, R which is the correlation coefficient between product quality and customer
satisfaction on customer loyalty has a positive value of 0.941. R Square which measures
covariance between product quality and customer satisfaction on customer loyalty has a value of
0.892 indicating that 89.2% variation in customer loyalty is due to product quality and customer
satisfaction. The Adjusted R square has a value of 0.887; this is more reliable than our R Square
value because it takes into account our sample size. The Standard Error which measures the
variability of actual customer loyalty values from the predicted customer loyalty values has a
value of 0.48590; this is the same as standard deviation.
Table 4.9: Regression Result (Product Quality and Customer Satisfaction on Product quality)
Model
Unstandardized
Coefficients
Standardized
Coefficients
t
Sig.
B
Std. Error
Beta
Product Quality
.853
.051
.757
1.026
.006
Customer
Satisfaction
.863
.049
.925
9.476
.000
a. Dependent Variable: Customer Loyalty
Table 4.9 which entails result of the regression analysis between product quality and customer
loyalty has a positive T-value of 1.026, this implies a positive relationship exists between
product quality and customer loyalty. The level of significance stood at 0.006, which is less than
the p-value of 0.005. The Beta Value stood at 0.757. Customer satisfaction has a positive T-value
of 9.476, which implies a positive relationship exist between customer satisfaction and customer
loyalty. The level of significance stood at 0.000 (001), which is less than the p-value of 0.005.
The Beta Value stood at 0.925. From the standardized residuals in figure 2, the presence of
homoscedasticity is easily seen on the plot, which implies the values of the responses of the
sampled respondents are relatively close. No wider variations exist, as seen from the cloudy
nature of the dots. Little outliers are experienced but not enough to result to the disturbance of
heteroscedasticity. This is a good fit for regression model, which utilizes survey (scaled) data.
Summarily, the regression result is not spurious.
Proceedings of the 15th Annual International Conference
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Figure 4.2: Scatter Plot for Heteroscedasticity Test (Product Quality and Customer Satisfaction
on Customer Loyalty)
FINDINGS
The findings of the study revealed that customer satisfaction and product quality are major
determinant. Any variation in level of customer satisfaction, product quality seems to account for
65.1% of such variation. This implies that as product quality increases, customer satisfaction
increases as well, and any reduction in customer satisfaction can be attributed to reduction in
product quality 65.1% of the times. The regression predicted that any significant improvement or
increment in product quality can trigger an increase in customer satisfaction level by 82.7%. This
supports the Kotler and Keller (2012) theory, that customers satisfaction is a function of the
extent to which customers perceived that the product quality matches or exceeds their
expectations.
Customer loyalty, product quality and customer satisfaction accounts for 89.2% variation. This
implies that reduction in level of customer loyalty, might be due to variation in the firm’s
product quality and the customers level of satisfaction as regard the product quality. The
regression model predicts that product quality has positive relationship with customer loyalty,
and as the product quality increases so does the customer loyalty. The predicted percentage stood
at 89.2% (implying variation in product quality can either increase or decrease level of loyalty by
89.2%). In light of customer satisfaction, it is predicted that an increase in customer satisfaction
will likely result to increase in customers loyalty by 92.5%. This is in line with the position of
Kotler and Keller, (2012), “A customer can only re-purchase a goods and services if and only if
such good and services were able to meet their expectation meaning that there are similarities
between the performance of the goods and services with the hope of the customers which will
spur them to re-purchase the products again”.
From the linear regression model, customer loyalty is a function of customer satisfaction, and
customer satisfaction is a function of the firm product quality. In light of Adama beverages, this
linearity exists (that is to say, their product quality, increase or decrease the level of customer
satisfaction, and the level of customer satisfaction determines the level of their loyalty towards
the offerings of Adama beverages.
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CONCLUSION
This study employed Survey research design to evaluate the impact of product quality on
customer satisfaction and customer loyalty. The findings of the study reveal that customer
loyalty is a function of customer satisfaction, and customer satisfaction is a function of the firm
product quality. In light of Adama beverages, this linearity exists (that is to say, their product
quality, increase or decrease the level of customer satisfaction, and the level of customer
satisfaction determines the level of their loyalty.
RECOMMENDATIONS
From the Findings of this study, product quality happens to be one of the major determinants of
customer loyalty and satisfaction, and as such management of firms must;
i. Establish an interactive metrics that will keep track of the level of their product quality based
on the customer perceptions, as a fall or rise in product quality can either reduce or increase the
level of customer satisfaction, which in turn can make the level of customer loyalty.
ii. Consider their product quality, their customer satisfaction and customer loyalty, holistically
and as a system due to the linear relationship that exist between them, (as good product quality,
results to high level of satisfaction among customers and consequently, this increases their
loyalty towards the firm product).
iii. Establish a new culture of quality within the unit of quality management of the company
thereby making available qualitative product that will be able to meet the expectations and
needs of customers which will lead to customers being satisfied with the product and to also
increase their level of loyalty to the organization which will result in repeat purchase and good
recommendation to other potential customers.
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