The effect of excellent service, diversity of banking products and physical environment on customer loyalty through customer satisfaction

The purpose of this study was to test the effect of service quality, product variety of banking and physical environment towards customer loyalty considering the mediating role of the banking industry in Indonesia. This study was descriptive and descriptive in purpose as well as data collection. The needed data were collected through a standard questionnaire from the customers of four banks (450 people) who are conducting business in Indonesia’s largest cities and cross-checked with structural equation modeling (SEM) and Smart-PLS. The findings were that service quality, product variety and physical environment have significant and positive effects on customer satisfaction and loyalty. Also, the role of the customer satisfaction variable as a mediator was fully confirmed while the service quality was considered the optimum determinant of loyalty. The results emphasize the requirement of capital spending in order to improve the quality of service and attractive environmental design as vital factors to achieve satisfaction and ultimately long-term customer loyalty in Indonesian banking sector.

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