The Effect of Service Quality and Brand Image on Customer Loyalty with Customer Satisfaction as a Mediating Variable: A Study on Modern Retail Consumers in the City of Bandung

Abstract

This study examines the effect of service quality and brand image on customer loyalty, with customer satisfaction as a mediating variable, in the context of modern retail in the city of Bandung. Intensifying competition in modern retail calls for a deeper understanding of the mechanisms underlying customer loyalty, particularly the role of customer satisfaction as a bridge between perceptions of service quality, brand image, and long-term loyal behavior. Data were collected through a survey of 210 modern retail consumers using purposive sampling and analyzed using Structural Equation Modeling–Partial Least Squares (SEM-PLS) with SmartPLS 4.0. Results indicate that service quality (β = 0.34, p < 0.001) and brand image (β = 0.29, p < 0.001) have significant positive effects on customer satisfaction, and customer satisfaction has a significant positive effect on customer loyalty (β = 0.46, p < 0.001). Customer satisfaction partially mediates the relationship between service quality and customer loyalty, but fully mediates the relationship between brand image and customer loyalty. This study reinforces expectancy-disconfirmation theory and offers practical implications for retail managers to prioritize frontline service quality and ensure a consistent shopping experience in order to strengthen customer loyalty.