Artikel

THE INFLUENCE OF PRODUCT QUALITY AND PRICE TOWARD
CUSTOMER SATISFACTION AND CUSTOMER LOYALTY (case: Embroidery and

Needlework in West Sumatera)
Retno Melani Putri
Management Department, Faculty of Economics, Andalas University
retnomelaniputri@gmail.com
Dr. Yulia Hendri Yeni, SE. MT. Akt.
Management Department, Faculty of Economics, Andalas University
Abstract
Abstract: This research is examined The Influencing of Product Quality and Price toward
Customer Satisfaction and Customer Loyalty on the case of Embroidery and Needlework in West
Sumatera. The research method was quantitative method performed on the customers of
embroidery and needlework. Data was collected through questionnaire. The result was drawn
from 140 customers embroidery and needlework in West Sumatera. The sample in this research
are the customers of embroidery and needlework in the area Padang, Padang Panjang,
Batusangkar, Bukittinggi, and Payakumbuh. The data was analyzed using Microsoft Excel,
SmartPLS and SPSS 16. In this research, there are 4 variables, those are independent variable
which are product quality and price, dependent variable which is customer loyalty, and
intervening variable which is customer satisfaction. The findings indicated Product Quality and
Price has significant effect on Customer Satisfaction and also Customer Satisfaction has
significant effect on Customer Loyalty.
Keywords: Product Quality, Price, Customer Satisfaction, Customer Loyalty
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND OF RESEARCH
In
era
globalization
makes
competition become increasingly sharp,
even in domestic and global markets.
Although consumers still exist but they
are more limited purchasing power. As
a result, consumers are becoming
increasingly critical in the purchase of
the products they need. In such
circumstances
encourage
every
company to be working professionally
in order to remain competitive and
survive. Every company should be able
to attract customers by offering quality
products coupled with good service is
also an economical price.
The Company will be successful if
satisfaction
for
their
customers
becoming their priority. Satisfaction for
consumers will come by itself when the
products/services sold by the company
meet or exceed what is desired by
consumers. When the company made a
mistake that damages his image then
this will lead to bad consequences for
companies because consumers will
leave the company and become
consumers
of
the
company's
competitors. Customer satisfaction is
one of the critical success factors of the
company. Besides customer satisfaction
can be a tool to compete for a firm in
the face of competitors.
In
recent
times,
customer
satisfaction has gained new attention
within the context of the paradigm shift
from transactional marketing to
relationship marketing (Grnroos 2004).
Customers who are satisfied with a
purchased product will buy the same
product again, more often (Reichheld
1996), and will also recommend it to
others (Oliver and Swan 1989.
Customer satisfaction is commonly
related to two fundamental properties
(Ostrom & Iacobucci 1995), including
the customers judgment of the quality
of the product and his evaluation of the
interaction experience he or she has
made with the product provider (Crosby
et al. 1990). Kotler sums this up when
he states: The key to customer
retention is customer satisfaction
(Kotler 2000). Even it is agreed in the
literature that price and quality has high
effect on customers satisfaction; still
there is little empirical evidence

exploring this relation. Almost nothing
is known about the human neural
mechanisms through which it affects the
decisions made by individuals.
As we know if the customer loyal
to the company and will buy the same
product again, it means the customer
satisfied with the product. Many things
can affected customer to become
satisfied, it could be product quality and
price. Price perception is the tendency
of consumers to use price in provide an
assessment of the quality of the product
(Garretson et.al.2002). In this case also
happen to the business of embroidery
and needlework. Embroidery and
needlework, the art of forming
decorative designs with hand or
machine needlework, has been around
nearly as long as clothing itself. As a
country full with diversity and enhanced
with Indonesian creativity, each of
embroidery motifs and techniques
contribute greatly to the richness of
designs. The traditional touch in every
product has made each of them a
masterpiece (Trade Research and
Development Agency, 2008)
Product quality and price might be
able to give impact to customer
satisfaction and customers loyalty; it
can be seen to the competition in the
field of embroidery and needlework in
West Sumatra. This phenomenon
encourages each company to improve
the quality of existing embroidery and
needlework in West Sumatra, as a
competitor
of
embroidery
and
needlework also from a variety of areas
and
province,
one
of
which
Tasikmalaya. West Sumatera and
Tasikmalaya could be having different
quality and different price. Sometimes,
people dont know that the quality of
product, they just bought the product
with the higher price but doesnt has
good quality, as well as otherwise. The
good quality definitely would make
customers satisfaction and then they
have an eager to be loyal and repurchase
again the product. Pricing and quality
relationship, is a relating factor that
facilitate consumers to have price as an
assistance as an information on product

quality (Rao and Monroe, 1988)
Look at the background of the issue
above, the researcher are interested in
conducting research with title THE
INFLUENCE
OF
PRODUCT
QUALITY AND PRICE TOWARD
CUSTOMER SATISFACTION AND
CUSTOMER LOYALTY
1.2 PROBLEM STATEMENT
From the case background which
already explain, the author can purpose
the problem statement as follow:
1.
How does the price have an

influence to customer satisfaction
on purchasing embroidery and
needlework?
2. How does the product quality have
an
influence
to
customer
satisfaction
on
purchasing
embroidery and needlework?
3. How does the customer satisfaction
have an influence to customer
loyalty on purchasing embroidery
and needlework?
1.3 OBJECTIVE OF RESEARCH
The purpose of study which want to
offer by the author are:
1. To find out if theres an impact of
price and product quality to
customer satisfaction.
2. To analyze how the price and
product quality could influence to
customer satisfaction.
3. To identified how customer
satisfaction give an influence to
customer loyalty on purchasing
embroidery and needlework
1.4 CONTRIBUTION
OF
THE
RESEARCH
1. For Author
As a vehicle for the author to train
and develop her skill and ability in
the field of research, as well as add
some insight and knowledge about
price and product that can influence
customer satisfaction, then get the
loyalty.
2. For The Organization
This research can be useful into
consideration and a reference for
people to satisfied them and being
3.
loyal to buy the product based on

price, product quality.
For Academics Institution
This research is expected to be
useful as an input and adds as
infrastructure for institution. It is
also expected to be useful for
further research in a different kind
of scope.
CHAPTER 2
LITERATURE REVIEW
Literature review is the process of
reading,
analyzing,
evaluating,
and
summarizing scholarly materials about a
specific topic (Uma Sekaran, 2003). The
results of a literature review may be made in
a report or they may serve as part of a
research article, thesis, or grant proposal. In
literature review, we will focus on the
subject of defining theory and making
hypothesis. Literature review also helps us
to find the result of research.
2.1 CUSTOMER LOYALTY
According Newman and Werbel
(1973) loyal customers are those a) who
re-buy a brand; b) think before buying
one brand; c) do not search any
information about brand. Loyalty can be
measured in two ways: re-buys dynamic
and recommendation (Pine et al. 1995).
Customers tendency to repurchase a
brand revealed through behavior which
can be measured and which impacts
directly on brand sales (Hammond et al
1996). Loyalty is consistent preference
and or purchase of one brand in a
specific product or service category
(Schiffman 1997). A deeply held
commitment to re-buy or re-patronize a
preferred product/service consistently in
the future, thereby causing repetitive
same-brand
or
same
brand-set
purchasing,
despite
situational
influences and marketing efforts having
the potential to cause switching
behavior (Oliver 1999).
Jacoby and Kryner in Dharmmesta
(1999), suggests that customer loyalty is
(1) behavioral response (ie purchase),
(2) the biased (nonrandom), (3) revealed
continuous, (4) by unit decision making,
(5) by taking into account one or more
brands alternative of a number of
similar brands, and (6) is a function of

process psychological (decision making,
evaluative). Another opinion from the
Oliver, Rowling and Hammond (2003)
provide a definition that customer
loyalty is a deep commitment to buy
recycled or subscribe a product or
service consistently in the future, thus
repeat to buy the same brand although
influenced by the situation and
marketing efforts which have the
potential to cause the action moves to
the other party.
Consumers who are loyal to a
product or service have the some
character (Assael: 2001), including:
1.
Loyal consumers tend to be more
confident in their choice.
2.
Consumers are more loyal opt to
reduce risk by make repeat
purchases of the same brand.
3.
Consumers who have more loyal,
tend to be loyal to that store.
4.
Minor consumer groups tend to be
more loyal.
Oliver in Chauduri and Holbrook
(2001) defines customer loyalty as a
strong commitment to re-buy of a
product or service consistently in the
future, thereby causing looping on the
same brand or buying the same brand,
although the situational conditions and
marketing efforts have the potential to
influence switching behavior. This
opinion is reinforced by previous
studies that have been conducted by
Dick and Bassu (1994) which states that
loyalty is determined by the strength of
the relationship between relative
attitude and repetition subscription. As
the basic relationship of behavior with
loyalty, there are:
1. Latent loyalty, associated with
relatively high attitude, but low
repetition subscription.
2. Signifies Loyalty, which is a
correspondence
between
the
relative
attitude
and
repetition subscription.
3. No loyalty, associated as relatively
low attitude and repetition low
subscription.
4. Spurious loyalty, is relatively low
attitude with repetition high
subscription.
James F. Engel (1995) suggested

two reasons for the importance
maintaining customer loyalty:
1. Generally easier to retain existing
customers rather than attract new
customers.
2. Losing customers can be disastrous
for the company.
Basically, the consumer will make
a purchase experiment to a brand. If
satisfied they will be inclined to make a
purchase repeated on the brand, because
they believes that it will be safe and
famous. Brand loyalty is a measure of
customer engagement towards a brand.
2.2 CUSTOMER SATISFACTION
Customer satisfaction has been
gaining increasing attention from the
researchers and practitioners as a
recognized field of scholarly study and
is a fundamental tool used by financial
institutions for enhancing customer
loyalty and ultimately organizational
performance and profitability. The
importance of customer satisfaction
cannot be dismissed because happy
customers are like free advertising.
Many of us have heard of the current
trend for businesses to become highly
customer-centric, that is to put the
customer at the centre of our business in
terms of our strategies, actions and
processes. For most of us, old truths still
hold good, such as it is easier and more
profitable to sell to existing customers
than to find new ones. In practice,
organizations are increasingly setting
themselves strategies to measure and
ensure customer retention, and charging
their staff to be more customer-focused
and service-oriented.
Customer satisfaction has been
defined in various ways, but the
conceptualization, which appears to
have achieved the widest acceptance, is
that satisfaction is a post-choice
evaluative judgment of a specific
transaction (Bastos and Gallego, 2008).
Customer satisfaction is the result of a
customers perception of the value
received in a transaction or relationship
where value equals perceived service
quality relative to price and customer
acquisition costs (Hallowell, 1996).
While the literature contains significant

differences in the definition of
satisfaction, all the definitions share
some common elements (Giese and
Cote, 2002). When examined as a
whole, three general components can be
identified:
1. Consumer satisfaction is a response
(emotional or cognitive);
2. The response pertains to a
particular focus (expectations,
product, consumption experience,
etc.);
3. The response occurs at a particular
time (after consumption, after
choice, based on accumulated
experience, etc).
Satisfaction study began with
exploratory of potential reasoning to
dissatisfaction. Consumer satisfaction
has been very well-known in marketing
where as it is as the basic focus in
achieving business objective, vision and
also mission (Anderson et,al, 1994 and
Yi,1990). This is being proved by
business articles from different varieties
which show that customer satisfaction is
an arousal to special acknowledgements
(Anton, 2004). Consumer satisfaction is
customer evaluation or felt towards a
product after usage that does the
product itself differs from some of the
features or factors through the
expectation and also the presentation of
the product itself (Yi, 1990). Customer
satisfaction is a fresh thoughts that is
used to be the representative to the
wholly after purchasing effects on the
products after a duration (Anderson et
al., 1994; Fornell, 1992; Johnson and
Fornell, 1991).
On the other hand, customer is not
basically a value or price oriented.
Hence, when customer satisfaction is at
a certain level, it does base on price
(Caruana et al, 2000; De Ruyter et al,
1997; Howard and Sheth, 1969; Kotler
and Levy, 1969; Rust and Oliver, 1994)
because price is a medium which can be
used together as a conceptual
framework where it can be very
comparable (Fornellet al., 1996;
Lancaster, 1971). As for distinguished
value, quality partnering with price
(Holbrook, 1994) because most of the
time, customer counts both price and

quality to products value. (Fornell,
1992; Fornell et al, 1996). Price,
product features, and product reliability
as the factor in effecting on customers
toward a product in satisfying
themselves (Madu et al, 1995).
Customer satisfaction perceived as high
has quite a number of benefits whereas
it in enhance customer loyalty,
improved reputation, lower down price
elasticity, lower the cost in future
transaction and also increase employees
competence (Anderson et al., 1994;
Fornell, 1992; Swanson and Kelly
2001). Customer satisfaction is resulted
from the comparison of service and also
the performance with expectation in
determination (Barsky, 1992; Hill,
1986; Oliver, 1980). It is a mindset
where customers needs, wants and also
expectations on a product or services
has met or exceeded, in which it
resulted in repeating in purchasing and
also loyalty (Anton, 2004). Customers
arousing responses to the usage of
product or services is defined as
customer satisfaction (Oliver, 1997).
In
other
words,
customer
satisfaction is a complicated human
thought that is involving cognitive and
effecting procedures together with the
further psychological and physiological
influences (Oh and Parks, 1997).
Traditionally, customer satisfaction
pursuing the disconfirmation paradigm
of
consumer
satisfaction
or
dissatisfaction by proposing that
satisfaction or dissatisfaction resulted
by the contact between consumers prepurchase expectation and post-purchase
evaluation (Berkman and Gilson, 1986;
Czepiel and Ronsenberg, 1997; Engel et
al., 1990; Handy, 1977). On the other
hand, the satisfaction view can be
measured from a point of view or
evaluation in performance, and with
addition
on
the
unnecessary
disconfirmation process (Churchull and
Surprenant, 1982; Cronin and Taylor,
1992; Olshavsky and Miller, 1972).
Hence, measuring customer satisfaction
is a vital part in the effort to enhance
products quality, company competitive
advantage (Garvin, 1998) repurchasing
and positive word-of-mouth advertising

(Fornell, 1992). Customer satisfaction
in total is equal to the emotional
perception (Wong, 2000). Customer
satisfaction resulted as an evaluation
which is being reflected after product or
services usage.
Therefore, customer satisfaction is
evaluated by positive perception
perceived which have similarity to the
meaning of customer value package that
are from price, product quality, service
quality, innovation and corporate image
(Fredericks and Salters, 1995) Price is
one of the elements in measuring
customer satisfaction where price or
value is a similar in considering it is a
important factor in influencing and
assisting in building up customer
satisfaction (Getty and Thompson,
1994). Quality is the factors of fair
specification, meanwhile satisfaction
has a wider range of elements, and one
of the elements is quality (Oliver,
1997). Besides that, requirement needed
in determining satisfaction is customer
experiences but in determining quality,
customer experiences are not needed
(Bolton and Drew, 1991a; Boulding et
al., 1993; Cronin and Taylor 1994;
Oliver 1980; Parasuraman et al., 1988).
2.3
PRODUCT QUALITY
Product is all that can be offered in
the market to get attention, demand,
usage or consumption that can satisfy
the desire or the needs of consumers
(Sumarni and J. Supranto, 1997 in
Tjiptono, 2006:95). Product quality
reflects the ability of the product to run
duties
that
include
durability,
reliability, progress, strength, ease of
packaging, and repair products and
other characteristics (Kotler and
Armstrong, 1997:279). According
Kotler and Armstrong (2010), in
market offering, a product is the key
element that brings value to the
customer. Products are more than just
tangible objects but inclusive of
service features, design, performance
quality. brand name and packaging. A
products quality has a significant
impact towards the product or service
performance, thus it is linked to a
customers and satisfaction (Kotler and

Armstrong 2010). It is also vital for
marketers product positioning tools.
Consumers today are demanding
high quality goods that save time,
energy and often calories. The rank
that consumers in united State placed
for product quality are as follows;
Reliability,
Durability,
Easy
maintenance, Ease of use, a trusted
brand name and Low price (McDaniel,
Lamb and Hair, 2011). Consumers are
seeking reliable product that suit the
purpose and able to stand the intended
functions. With the increase of
customer purchasing power supported
by multiple and flexible financing
scheme, customers find themselves
surround with many options to choose.
Changes
in
the
competitive
environment and increasing customers
expectation regarding product quality
and customers satisfaction are driving
manufacturers to place a greater
amount of emphasis on understanding
customers attitude and behavior in
order to maintain and grow market
share and profitability.
The quality is influenced by factors
that
determine
that
a product can fulfill its purpose. The
quality is the level of gratification of
an item. There are several factors that
affect the quality products, among
others:
1. Process of making products
and equipment and settings
used in the production process.
2. Aspects of Sales
If the quality of goods
produced from goods too low
will
can lead to reduced sales.
Conversely, if the quality of
goods produced from goods
too high making the selling
price more expensive so the
number sold because of limited
purchasing ability.
3. Changes in Consumer Demand
Consumers or users frequently
want any changes items worn
either quantity or quality
4. Role of Inspection.
In addition to being a quality

control or standards that have
been set also seek to minimize
the cost of production.
Meanwhile,
according
Assauri
(1993:28), there are several quality factors
or
the quality of the product include:
1. Functions of an item. The function
of an item produced should pay
attention to the function what the
item is used or intended so that the
go
2. ods produced can fulfill these
functions.
3. Outer manifestation.
One important factor that is often
used
by
consumers
in
see an item the first time to
determine the quality or the quality
is the outer manifestation of the
goods.
Factors
external
manifestation of an item is not only
be seen from the shape, but also
color, packaging, and others.
4. Cost of goods.
In general, the cost or price of a
product will be able to determine
the quality of the goods. It is seen
that the goods have expensive
goods may indicate that the quality
of the goods better.
According to Griffin (2002:42),
there are several steps to manage quality
a product:
1. Planning for quality, includes two
things: the quality of performance,
relating to privilege performance
product quality and reliability, with
regard to the consistency of quality
products from unit to unit.
2. Organizing
for
quality,
in
producing quality goods and
services that require a business
from all parts of the organization.
3. Briefing for quality, briefing
quality means managers need to
motivate
employee
achieving
quality goals.
4. Controlling for quality, by doing
monitors for products and services,
a company can detect errors and
make corrections.
Quality of a product can be

explained as the consumers judgment
about the superiority or the degree of
excellence of a product. Perceive
quality which may not exist because all
quality is perceive by someone be it
consumer or manager. Harris in his
practical approaches to consumers
found that, consumer want the product
they purchase to the double and
functional until the consumer want to
replace them. The requirement of
quality mandates that manufacturers and
distributors produce product that live up
to the consumers expectation of
durability. Research has identified key
lower level attribute use by consumers
to inferior quality in only a few product
categories. This lower may include
price (Olson 1997). Maynes (1976)
claims that, quality evaluations are
made within the set of goods which
would in the consumers judgment serve
the same general purpose for some
outlay maximization.
On the basis of qualitative study
consistent with Maynes contribution to
the set of product used in comparing
quality is evaluated as high or low
depending on its relative excellence or
superiority among products or service
that are viewed as substitutes by the
consumer. According to Monore (1988),
conceptually, it has been argued that
hypothesis of people using price as an
indicator of quality is studied best by an
idiosyncrasy approach that is repeated
measure over several prices as the
experiment
situation
created
is
analogous to real world situation of
examining several different choices at
different price.
2.4 PRICE
There are factors that can affecting price
sensitivity based on Nagle and Holden
(1995):
Perception
of
the
available
substitutes differs widely among
customers and across purchase
situations. Customers new to a
market are usually less aware of the
discount brands than people with
more experience. Consequently, they
usually pay relatively high prices
and buy from the most visible
suppliers. Small business manager
could establish effective marketing
efforts by positioning a brand as
good value and target customers
with
a
high reference
for
comparison. This method can
influence the buyers perception of
substitutes.
2. Unique Value Effect.
Since the customers
perception of substitutes is such an
important determinant of price
sensitivity, much of the small
business effort is directed towards
reducing the effect of substitutes on
the total economic value. The goal is
to offer something unique, a
differentiation, that consumers
will pay for despite the existence of
lower-price alternatives. Buyers are
less sensitive to a products price the
more they value any unique
attributes that differentiate the
offering from competing product.
We should note, however, that
differentiation alone does not
produce this effect. Customers must
first recognize a differentiation and
then be convinced of its value.
3.
1. Perceived Substitutes Effect.

The perceived substitutes
effect states that buyers are more
price sensitive the higher the
products price relative to the prices
of the buyers perceived substitutes.
The key word here is perceived.
4.
Difficult Comparison Effect.

This method states that
customers are less sensitive to the
price of a known or reputable
supplier when they have difficulty
comparing alternatives. Rather than
attempting to find the best value in
the market and risk getting a poor
value in the process, many buyers
simply settle for what they are
confident will be a satisfactory
purchase.
Price- Quality Effect.
Price- quality effect states that

buyers are less sensitive to a
products price to the extent that a
higher price signal better quality. A
buyer might use price as a quality
signal for a number of reasons.
Some buyers buy items to
communicate to others that they
can afford them or because the
particular product reflects as a
symbol of wealth. Numerous
studies have shown that, even when
the objective quality of a brand is
unaffected by its price, consumers
use price as a quality cue to the
degree that:
5.
They believe qualities

differ
among
brands
within the product class.
They perceived that low
quality imposes the risk of
a large loss.
They
lack
other
information enabling them
to evaluate quality before
purchase.
Fairness Effect.
Buyers are more sensitive to
a products price when it is outside
the range that they perceived as
fair or reasonable given the
purchase context. But what is fair?
Small business manager should
note that the concept of fairness has
little to do with profitability. Three
things appear to determine peoples
perception of fairness in pricing:
The
current
price
compares
to
prices
previously encountered by
the product.
Price is expected to be
different in some purchase
location or situations than
in others.
Price is expected to be fair
for a necessity product
and charging a high price
for them is perceived as
unfair.
When a product was being

promoted, only 50% of the
shoppers remembered correctly,
and could recall whether they had
purchased a special priced product.
This leads one to question the
effectiveness of promotions. One
implication is that it may be in the
shared interest of both retailers and
manufacturers to spend more on instore pop materials than on the
(price) promotion itself. The
tendency to overestimate the
reduction in price suggests that it is
the special price status itself that is
the attraction for shoppers. Thus
there may well be a minimum rate
of reduction that makes shoppers
evaluate the offer as being a good
bargain, i.e. a real reduction. It is
easily apparent that many special
price tags only really offer a very
small price reduction. In the course
of our interviews, shoppers not
infrequently reported negative
feelings with regards promotions
that were simply a bait. Thus,
while clearly exists shoppers who
are promotion sensitive, and will
buy anything that is labelled
special-priced, there is another
group, let us call them promotion
skeptics who do not look just at
the special-price status but rather at
the actual price (and other features)
of the product when making
purchase decisions (Zsofia Kenesei
and Sarah Todd, 2003)
Price is a factor that is playing
neither an important role in
affecting the distribution of newly
product nor services in the market.
Hence, setting a price for a new
product in the market is difficult
(Foxall, 1984). Price is one of the
element in marketing mix, which it
is very plays a very heavy role
because marketers uses price as
communication
medium
with
customers where the message is
being
clearly
perceived
by
customer as what it meant to the
marketers (Dickson and Sawyer,
1990;
Monroe
and
Lee,
1999;Vanhuele and Dreze, 2002).
A product price is one of the main

decision methods for both customer
and also retailers as now the market
is very competitive, price has made
its position and role in differentiate
in designing marketing and
business strategies.
Price resulted to be the main
point for customer to judge what is
offered in the market (Monroe,
2003; Monroe and Lee, 1999;
Oliver, 1997). Price is also a main
factor in transaction relationship
where it is one of the medium used
by marketers to counter the market,
either in attracting or in retaining
customer or as a element in
competing
with
competitors
(Summerour, 2000; Patton, 2002;
Beck, 2000). In making a
reasonable and affordable price for
a product in depth information from
what does a customer perceive is
needed
(Munnukka,
2005).
Consumers center of concentration
in developing the distinctive of
price and the cognitive is the
element on which the price
information to be elaborated and
kept (Xia, 200s5). Price does not
only as an element of financial
sacrifice but as well as a
determination of product quality
(Monroe, 2003).
Price maybe resulted in both
positive and negative factor in
influencing a purchase by customer
perception which it may cue to a
quality, standing or the consumers
reputation (Lichtenstein et al.,
1990; Monroe and Krishnan, 1985).
On the other hand, a lower price is
being featured as economically
sacrificing. Hence, both positive
and also negative features of a price
show customer decision making
process in this competitive market
situation (Dodds, 1995). This
proves to a study that, generally
price is used as the factor in
determining the level of product
quality (Lichtenstein et al., 1993).
Price in fixed price concept, means
that process are not to be negotiated
and customer is paying for the same
2.5
price and they would not have the

thought of the price will be set
lower then what they paid for today
(Suri et al., 2000). Price is being
portrayed as financial cost (Fox et
al., 2004), it is also as a factor in a
wider image of a store (Finn and
Louviere, 1996) and also the
customers value (Sweeny and
Soutar, 2001).
Price has also been found that
it is the main factor of one
customer in determining the choice
of the store to proceed with their
shopping (Seiders and Costley,
1994). Marketing managers are
interested in which the ability in
providing competitive price and the
prices did resolve the customers
anxiety either before or after
purchasing. This resulted in
empirical proving where price is
important and also prices effect on
post-purchase behavior as guidance
for retailers who want to adapt into
low pricing strategy (Jain and
Srivastava, 2000). Market price is
where the prices are at equal to
retailers and also consumers which
they do not have the opportunity in
paying high prices in store and to
found lower price elsewhere
(Lucas, 2001).
REVIEW OF PREVIOUS STUDY
Previous study is very important
as a foundation in order to preparation
of this study, usefulness to know the
result that has been done by previous
researchers, as well as a comparison
and overviews for support research
activities following:
a.
Asghar
Afshar
Jahanshahi,
Mohammad Ali Hajizadeh Gashti,
Seyed Abbas Mirdamadi, Khaled
Nawaser, Seyed Mohammad Sadeq
Khaksar (2011) with the title of
research: Study the Effects of
Customer Service and Product
Quality on Customer Satisfaction
and Loyalty. The purpose of this,
address the following questions that
are
becoming
increasingly
important to managers: is there a
relationship between customer
b.
service and product quality with

customer satisfaction and loyalty?
If yes, how is the relationship
between these four variables? On
the other hand, Customer service
can be considered as an innate
element of industrial products.
Customer service quality, product
quality, customer satisfaction and
loyalty can be measured at different
stages, for example, at the
beginning of the purchase, and one
or two years after purchase. The
population of the study is all of the
Tata Indica car owners in Pune.
Hypotheses of the study will be
analyzed using regression and
ANOVA. Results of the study show
that there are high positive
correlation between the constructs
of customer service and product
quality with customer satisfaction
and loyalty.
Sandra
Martisiute,
Gabriele
Vilutyte, Dainora Grundey (2010),
with the title of research: Product or
Brand?
How Interrelationship
between Customer Satisfaction and
Customer Loyalty Work. The
purpost of this study The purpose
of the article is based on the
assumption that there is a
theoretical link between brand
satisfaction and consumer loyalty.
The
article
includes
brand
satisfaction and loyalty research
links in the theoretical studies.
Based on the analysis of scientific
literature, stated that the brand is a
key factor, it generates customer
satisfaction. The paper analyzes
and summarizes Sivadas and Baker
Prewitt (2000), Vasquez - Parraga
and Alonso (2000), Zamora et al
(2004), Bravo et al (2005) and
Rowley (2005), Torres-Moraga et
al (2008) and other scientists
research results, demonstrating
satisfaction of brand impact on
consumer loyalty. According to the
summary methodological elements,
a theoretical model is created on
consumer satisfaction and loyalty
link based on brand aspects.
c.
Shaharudin Jakpar, Angelyn Goh

Sze Na, Anita Johari, and Khin
Than Myint (2012), with the title of
research: Examining the Product
Quality Attributes That Influences
Customer Satisfaction Most When
the Price Was Discounted: A Case
Study in Kuching Sarawak. The
study is about customer satisfaction
towards the product quality.The
effect of low pricing product with
the product quality plays the same
result of low price products
produces low quality product and
vice-versa. Data instrument that is
used in obtaining data is by
distributing survey questionnaire.
The main purpose of this research
is to classify whether the eight
dimension of product quality after
price discounting is satisfying
towards customer. The respondent
of the research was chosen through
sampling method by using the nonprobability sampling. The results
infer that that the customers
satisfaction towards the discounted
product quality is based on the
three attributes most namely
perceived quality, performance and
reliability. The Perceived qualityon image, brand name, and
advertising is positively related to
the level of satisfaction towards the
quality of discounted product; were
all supported as the relationships
between the variables were
statistically significant. This study
does also provide useful guidelines
for future researcher to be more
rigorous and also in-depth to
empirical and theoretical processes.
In
future
study,
customer
satisfaction towards discounted
product quality of the product to be
specified to a product only
determine by one gender (female)
and also a perception towards a
certain discounted price level of a
product and its quality with
extension of product design and
customer requirements.
2.6
HYPOTHESIS
According to Sekaran (2003), a
hypothesis can be defined as a
logically conjectured relationship
between two or more variables
expressed in the form of a test table
statement.
Relationships
are
conjectured on the basis of the network
of associations established in the
theoretical framework formulated for
the research study. Hypothesis can be
defined
as
logical
conjectured
relationship between two or more
variable expressed in the form of a
testable statement. Relationship are
conjectured on the basis of the network
of associations established in the
theoretical framework formulated for
the research study (John Wiley & sons,
Inc, 2003). In this research, we defined
the hypotheses that we developed from
three variables.
2.6.1 Customer Satisfaction is
significantly
associated
with
Customer Loyalty.
The current research study attempts
to find the impact of customer
satisfaction on customer loyalty and
intentions to switch. Clarke (2001)
examined that customer satisfaction is
really no more than the price of entry
to a category. For satisfaction to be
effective, it must be able to create
loyalty amongst customers. McIlroy
and Barnett (2000) stated that an
important concept to consider when
developing a customer loyalty program
is customer satisfaction. Satisfaction is
a critical scale of how well a
customers needs and demands are met
while customer loyalty is a measure of
how likely a customer is to repeat the
purchases and engage in relationship
activities. Loyalty is vulnerable
because even if consumers are satisfied
with the services they will continue to
defect if they think they can get better
value,
convenience
or
quality
elsewhere.
Therefore,
customer
satisfaction is not an accurate indicator
of loyalty. Satisfaction is essential but
not a sufficient condition of loyalty. In
other words, we can have customer
satisfaction without loyalty, but it is
too hard or even impossible to have
loyalty without satisfaction (McIlroy

and Barnett, 2000). So, base on
statement above, we can conclude:
H1:
Customer
satisfaction
significantly influence customer
loyalty
2.6.2 Price is significantly Influence
Customer Satisfaction
Price is one of the elements in
measuring customer satisfaction where
price or value is a similar in
considering it is a important factor in
influencing and assisting in building
up customer satisfaction (Getty and
Thompson, 1994). There are two types
of low price product quality possibility
where firstly, low price is the
indication to low quality. On the other
hand, low price is indicating to good or
very good quality. Although product
price is set at low, to penetrate the
market in high speed, product quality
is actually high although the price is
set low (Hilleke and Butscher, 1997).
Price has been found very vital in
affecting distinguish quality and safety
of a product (Asher, 1992; Dodds et
all., 1991; Enis and Stafford, 1969;
Tse, 1999). A study being done on
perceiving product quality, divulged if
the one factor that is price is the only
factor indicator, price is apparently a
straight in determining a products
quality (Dodds, 1991). Quality has
many cause of differentiation where it
is being describe in segregation
approach in which a predictable
knowledge has proven that high
quality products and being set at a high
price is because of the cost used in
processing and producing the product
(Philips et al., 1983). Therefore, high
quality product is set to be a low price
product is suggestions where it will be
turned out to beneficial on the
economies of scales through higher
share (Kroll et al., 1999; Philips et al.,
1983). Price not only as an indicator to
monetary of financial sacrifice, but it is
also display on product quality
(Monroe, 2003). Pricing and quality
relationship, is a relating factor that
facilitate consumers to have price as an
assistance as an information on
product quality (Rao and Monroe,
1988). From a traditional economic

model, consumers always take up price
as the ruler in measuring the product
quality with the price of the product
(Feigenbaum, 1951). If the customer
satisfied with the product that they
have purchased and then the price and
quality was suit with their expectation,
so we can see that price has relation
with the customer satisfaction. So base
on case above, we can conclude:
H2: Price has significantly influence
customer satisfaction
2.6.3 Product Quality is Significantly
Influences Customer Satisfaction
Pilkington and Chai (2008) studied
the importance of quality of products
customer satisfaction and found out
that loyal customers mostly lie in
category of customers who have used
higher quality products. This implies
that better quality of products tends to
increase customers loyalty. Researches
by Chai and colleagues (2009) show
that quality of product is one of the
most important factors in identifying
new customer needs and as we all
know, the key to customer satisfaction
and loyalty is providing the customers
with their undiscovered needs. Other
studies done by Bastos and Gallego
(2008); Yi, (1990); Chai et al, (2009);
Bloemer, et al (1995) also show the
importance of products quality in
enhancing customer satisfaction and
loyalty. One may pursue the common
point of these studies in undiscovered
customer needs. In a setting where
companies do not depend on others to
serve customers, the customer is aware
to whom his/her perception is
dedicated, and the direct link between
perceived
quality,
customer
satisfaction and loyalty is naturally
expected.
Kotler (1993) says that consumers
will prefer products that offer quality,
performance and best characteristic.
According Swastha (1999) one of the
important factors that can make
consumers satisfied is quality product.
This opinion is in line with Hardiwan
and Mahdi (2005) stated that one of
the determining factors in creating
loyalty customer satisfaction in the

product is given (Nuraini, 2009).
Consumers who obtain satisfaction in
the products bought tend to repurchase the same product (Swastha,
1999). Then, the consumers feel that
the use of the product will definitely be
a loyal satisfied. Good product quality
will create, maintain and make
customer satisfaction loyal (Hardiwan
and Mahdi, 2005 and Nuraini, 2009).
So, base on statement above, we can
conclude:
H3: Product quality significantly
influences customer satisfaction
2.7 Conceptual Model
Conceptual model is a theoretical
construct that represents something,
with a set of variables and a set of
logical and quantitative relationships
between them. Models in this sense are
constructed to enable reasoning within
an idealized logical framework about
these processes and are an important
component of scientific theories.
Idealized here means that the model
may make explicit assumptions that are
known to be false (or incomplete) in
some detail. There are 4 variable in this
research that can show it. These are
product quality and price as independent
variable, customer satisfaction as
moderating and dependent variable is
customer loyalty.
Product quality and price can
influence customer satisfaction, the
company should be able more attractive
to get their customers satisfaction. It
could be happen by offering the good
quality and economical price of the
embroidery and needlework in West
Sumatera to their customers. Based on
that price can influence customer
satisfaction, if the price wouldnt same
with the customer expected, the
customers will feel unsatisfied, or the
customers have bought the product with
the higher price, but the price doesnt
suit with the quality that customer got.
So, the customer would not feel
satisfied with the product embroidery
and needlework that they got, even they
do not to repurchase the product again.
On this issue, the company will lose
their loyal customer; it would be a
critical thing for business. Thats why

Base of the explanation above
keep customer loyalty is an important
product quality and price could
thing for the company to make the
influence customer satisfaction and
business success. How to keep the
customer satisfaction can influence
customer being loyal to the company is
customer loyalty.
through keep the satisfaction of their
customers. And then, how to keep the
customer satisfaction is through product
quality and price.
Interaction of Product Quality and Price toward Customer Satisfaction and Customer
Loyalty
Product
Quality
Customer
Satisfaction
Customer
Loyalty
Price
CHAPTER III
RESEARCH METHODOLOGY
4.1 Research Design
This research is going to use
quantitative research method. This
research method will complete and
support the achievement of this
research. Quantitative research design
has been selected in order to find out the
appropriate answers to the research
question and to test the hypothesis
(Sekaran, 2003). This research can be
done by non-contrived study setting. All
of data and information are collected
from respondents using questionnaire
and then the result will be explained to
answer research questions.
3.2 Population and Sample
Defined by Sekaran (2003), the
population is entire group of people, events,
or things of interest that the researcher
wishes to investigate. The populations of
this study are the customers of Embroidery
and Needlework in West Sumatera. In other
statements, some elements of the population
would form the sample (Sekaran, 2003).
According to Sekaran (2006), the right
sample size to use is more than 30 and less
than 500 samples.
Researcher will contribute questionnaire
to 140 customers of embroidery and
neddlework in West Sumatera. In this study,
the researcher uses a convenience sampling
technique. It means that the researcher draw
members of the population on the basis of
convenience only
3.3 Data Collection Methods

In this study, the data obtained firsthand
by the researcher on the variables of interest
for the specific purpose of study (Sekaran,
2003). In collecting data, the researcher had
conducted survey through the questionnaire.
The questionnaires were distributed directly
to the target of this research.
3.4 Conceptualization
and
Operationalization of Variables
A variable is anything that can take on
differing or varying value. The value can
differ at various times for the same object or
persons, or at same time for different object
or person (Sekaran, 2003). There are four
types of variable, such as dependent
variable, independent variable, intervening
variable and moderating variable. In this
research, researcher use dependent variable,
independent variable and intervening
variable.
Operational definition is a concept that
describe its observables characteristics in
order to be able to to measure the concept.
Operational definition concept doest not
consists of delineating the reasons,
antecedents, concequences, or correlates of
the concept. In this research the operational
definition
refer
on
the
variables
measurement and items of each variable
3.4.1
Dependent Variable
Dependent variable is the variable
of primary interest to the researcher
(Sekaran, 2003). Dependent variable is the
variable that influence by other variable. In
this research, the researcher use customer

customer loyalty of customers of embroidery
and neddlework in West Sumatera as
dependent variable.
3.4.2
Independent Variable
Independent variable is variable
that only has predicted causal for
construction or variable in this research
(Sekaran, 2003). An independent variable is
one that influences the dependent variable in
either a positive or negative way, In this
research, researcher use price and product
quality as independent variable.
3.4.3
Intervening Variable
Intervening variable is the type of
variables that affect the relationship between
the independent variables with the
dependent variables became an indirect
relationship. Intervening variable is a
variable that lies between the independent
variables with the dependent variables, so
that the independent variables do not directly
explain or influence the dependent variable
(Sekaran, 2006). The presence of
intervening variables changes the initial
relationship between independent variables
and the dependent variable. In this research,
researcher use customer satisfaction as
intervening variable.
3.4.4
Operational Definition
Operational definition is a concept
that describe its observables characteristics
in order to be able to to measure the concept.
Operational definition concept doest not
consists of delineating the reasons,
antecedents, concequences, or correlates of
the concept. In this research the operational
definition
refer
on
the
variables
measurement and items of each variable.
The research variables and the definitions
operations are described can be seen on
table.
Variable
Product
quality
Operationa Definition
Indicator
-
Price
Custom
er
Satisfact
ion
Custom
er
Loyalty
Source
The quality of product as

good as expected
Product are not made as
well as they used to be
Too many of product are
defective in some way
The quality of product
consistently
improved
over the years
John F. Gaski
and Michael J.
Etzel (1986)
Price can compete with

another
competitors
product
Most of price are fair
Company keep the price
are reasonable
The customers satisfied
with the product quality
of the product
with the price of product
wth advertisement that
their read, see, and listed
about the product
with the selling process
that have done by most of
store
Recommend the product
to the others
The customer want too
repurchase the product
John F. Gaski
and Michael J.
Etzel (1986)
3.5 Data Analysis Method

To analyze the respondents
characteristics, SPSS software is used. It is
used to analyze the respondent characteristic
by looking at the frequency and percentage
of respondent data. The characteristics will
be examined based on 9 categories. They are
gender, age, domicile, job, income per year,
John F. Gaski
and Michael J.
Etzel (1986)
R.A.J. van Es
(2012
type of product, type of handicraft, payment

method, and where is the place usually buy
the product. In addition, to analyze
respondents response, SPSS software is
also used by looking at the mean of each
item in each variable. The highest mean of
item will represent the highest response
from respondents.
This study is intended to test a
model that explained the relationship among
product quality, price of product, customer
satisfaction and customer loyalty. Smart
PLS 2.0 software for windows is used. The
researcher uses PLS to test the instrument
(Outer Model) by testing the validity and
reliability and to test the model (Inner
Model) by testing R-square and hypotheses.
Smart PLS determines relationships
among independent and dependent latent
variables as linear composites, like multiple
regression multivariate techniques. The
SEM tool is able to determine both the
indirect and direct path influences among
all of the latent variables in a nomological
network simultaneously. PLS path modeling
is a strong SEM technique which is flexible
in handling, a very user-friendly path
modeling tool, with an intuitive visual
interface.
This
software
provides
information about goodness-of-fit model and
relationship among the variables.
3.5.1 Variable Measurement
The research is conducted in
West Sumatera. In collecting data, the
researcher
used
survey
through
questionnaire. Questionnaire formulated
contains set of questions to which
respondents record their answers, usually
within rather closely defined alternatives
(Sekaran, 2003). The researcher uses rating
scales based on likerts scales where they are
designed to examine how strong the subjects
agree or disagree with the statements on a 5point scale (Sekaran, 2003).
No
Scale
Score
1.
Strongly Agree (SA)
2.
Agree (A)
3.
Neutral (N)
4.
Disagree (D)
5.
Strongly Disagree (SD)
Likerts Scale
3.5.2
Validity and Realibility Analysis

a. Validity Testing
Validity test is a tool
which is used to measure validation
of questionnaire. Validity testing is
purposed to establish the goodness
of measurement, whether we
measure the right things or not.
Homogeneity from each item of all
variables is > 0.5 that is deemed
valid and strong construct (Sekaran,
2003). To test the validity, the
researcher uses SmartPLS (Partial
Least Square) 2.0. There are two
kinds of validity will be tested in
this research; convergent validity
and
discriminant
validity.
Convergent validity will be
examined by looking at the value of
Outer Loadings, meanwhile the
discriminant validity will be
examined by looking at the value of
Cross Loading.
b. Reliability Testing
Reliability is measuring
instrument to measure a questioner
which represent indicator of
construct variable. The reliability of
a measure indicates if it is without
bias (error free) and ensures
consistent measurement across time
and across the various items in the
instrument. In other words, the
reliability of a measure is an
indication of the stability and
consistency with which the
instrument measures the concept
and helps to assess the goodness
of a measure (Sekaran, 2003). To
test the reliability, the researcher
uses SmartPLS (Partial Least
Square) 2.0. Reliability test can be
seen from the value of Cronbachs

Alpha and Composite Reliability.
3.5.3
Hypothesis Testing
The researcher purposes Analysis
Structural Equation Modeling (SEM) with
program SmartPLS 2.0 to test the research
model and test the hypothesis in this
research. In SmartPLS, coefficient path has a
function to identify the relationship and
influencing of independent variable to
dependent variable. The hypothesis testing
can be examined from t-statistics. In this
research, the hypothesis will be accepted if tstatistics is greater than 1.96 on alpha 0.05.
CHAPTER IV
RESULT AND ANALYSIS
In this chapter, the data gathered
through on line questionnaires will be
processed and analyzed. As previous
chapter, researcher has explain the purpose
of this research is to analyze the influence of
product quality and price of product toward
customer satisfaction and customer loyalty
in case of purchasing embroidery and
needlework in West Sumatera. Answering
this question researcher collect information
with distributes 140 questionnaires to
consumer who has ever purchased
Sumatera.
4.1 Respondents Characteristics
The questionnaires gathered from
this research are 140 questionnaires. These
questionnaires will be processed and
analyzed using SPSS and SmartPLS. The
questionnaires consist of two parts. The first
part is about the profile and background of
respondents. The second part is 16
questions. The respondents characteristics
gender, age, domicile, job, income, etc will
be analyzed using SPSS.
Survey Results
Number of
Questionnaires
140
Distributed
questionnaires
Returned questionnaires
140
Analyzed questionnaires
140
4.1.1 Respondents Characteristics Based

on Gender
In this part, researcher will shows
some data in a table of respondents based on
gender. Data gathered from 140 respondents
shows most of respondents is female.
Female respondents are 113 and male
respondents are 27. Hence, 80.7 %
embroidery and needlework industries in
West Sumatera have female customers and
19.3 % embroidery and needlework
industries in West Sumatera have male
customers.
Respondent Characteristics Based on
Gender
Gender Frequency Percentage
Female 113
80.7
Male
27
19.3
Total
140
100
Source: proceed from questionnaires
by using SPSS in 2014
4.1.2 Respondent Characteristics Based
on Age
Based on the result, it is found that
most of respondent is people of age around
20-59. The percentage of age 20-29 is
33.6%. The smallest percentage is 13.6 %
for age 30-39. The percentage of age 40- 49
is 25.7%. For more than 50 years old, the
percentage is 27.1%.
Respondent Characteristic Based on Age
Age
Frequency Percentage
(years)
20-29
47
33.6
30-39
19
13.6
40-49
36
25.7
50-59
38
27.1
Total
140
100.0
Source: proceed from questionnaires by

using SPSS in 2014
on Domicile
Based on result, from 140
respondents showed
that 69.3 % of
respondents are in Padang. Then percentage
domicile in Bukittingi are 28.6%,
Batusangkar 1.4%. The smallest percentage
is in Payakumbuh, that is 0.7%.
Respondents Characteristics Based on

Domicile
City
Padang
97
69.3
Bukittinggi
40
28.6
Batusangkar
1.4
Payakumbuh
0.7

Income per year
Income
PercentaFrequency
ge
<2 million
30
21.4
Total
140
100
Source: proceed from
questionnaires by using SPSS in 2014
on Job
The
result
of
respondents
characteristics based on job shows the
highest percentage is government officer
(pns) (42.9%). The second highest
percentage is 30.7% for respondents who
has job at private companies. The third
highest is 15 % for student.
Job
Job
percentages base on income per year are

who respondents purchase embroidery and
needlework products have >5 million
incomes per year.
BUMN
2.9
Lecturer
1.4
Civil Servant
(pns)
60
42.9
Student
21
15
Private Company
43
30.7
Housewife
10
7.1
Total
140
100.0

using SPSS in 2014
on Income per year
The
result
of
respondents
characteristics based on income per year. It
can be seen that 21.4% of customers
embroidery and needlework products has
less than 2 million incomes per year. The
second highest percentage shows that 18.6%
of respondents who purchase embroidery
and needlework product have 2.5 million - 3
billion incomes per year. The low
>5 million
4.3
2 million 2.5 million
15
10.7
2.5 million 3 million
26
18.6
21
15.0
24
17.1
6.4
6.4
Total
140
100.0
using SPSS in 2014
4.1.6 Respondent Characteristic Based on
Type of Handicraft
The
result
respondents
characteristics based on type of handicraft
can be seen on table. The highest percentage
shows that 69.3% of respondent who
purchase
embroidery.
The
smallest
percentage is 30.7% of respondents who
purchase needlework.
Respondent Characteristic Based on Type
of Handicraft
Type of
Handicraft
Embroidery
97
69.3
Needlework
43
30.7
Total
140
100.0

using SPSS in 2014
Type of Product
The
result
respondents
characteristics based on assets can be seen
on table below that shows the highest
percentage is mukena (33.6%). The second
highest percentage is 14.3% is kebaya
(traditional
clothes).
The
smallest
percentages are working clothes and gamis

which have percentage 2.1%.
Respondents Characteristic Type of
Product
Type of
Product
Kebaya
20
14.3
Working
clothes
Muslim
(men)
clothes
Baju Kurung
2.1
19
13.6
19
13.6
Blouse
14
10.0
Gamis
2.1
Veil
3.6
Mukena
47
33.6
10
7.1
140
100.0
Full outfit
Kebaya
Total

using SPSS in 2014
buy the products can be seen on table. The

highest percentage respondent based where
the customers buy the product which has
30.7% is Boutique. The smallest percentage
respondents on buying the embroidery and
needlework are in Silungkang and
Singgalang (0.7%).
Respondent Characteristic Based on
where the Customers buy the Product
Where the
Customers
buy the
product
Gathering
9
6.4
Boutique
Direct to
craftsman
Online
Bukittingi
Market
(Pasar Atas)
Aur Kuning
Market
(Bukittinggi)
Padang
Market
(Pasar Raya)
Silungkang
43
30.7
12
8.6
5.7
12
8.6
3.6

27
19.3
Payment Methods
From the table, the highest
1
0.7
percentages of respondents are paying the
Teman
product through cash which is 91.4%. The
22
15.7
second highest percentages are respondents
Singgalang
1
0.7
who using credit as the payment methods
Total
which is 14.3%. The smallest percentage is
140
100.0
respondents who using credit card as the
payment methods which has 1.4%.
using SPSS in 2014
Respondent Characteristic Based on
Payment Methods
Payment Metode Frequency Percentage
4.2 Description of Questionnaire Items on
Credit
10
7.1 Each Variable
In this section, researcher wants to
Credit Card
2
1.4 analyze the items of each variable in the
Cash
128
91.4 questionnaire. The purpose is to find out
which item of each variable gets the most
Total
140
100.0 positive response from respondents. It will
be analyzed by looking at the value of mean.
The higher score of mean means the more
using SPSS in 2014
positive response from respondents. Data is
gathered from on-line questionnaires
4.1.9 Respondent Characteristic based
distributed to owners embroidery and
on where the Customers buy the
needlework industries in West Sumatera.
Product
The items are measured using 5 point likert
The
result
respondent
scale.
characteristics based on where te customer
The result on table below shows

KP1 The quality of most products I buy
today as good a can be expected has the
highest value of mean. It means that this
item gets more response from respondents.
As a result, in order achieve customer
satisfaction and customer loyalty, the
industries always try to understand the
quality as customer can be expected. The
lowest response is KP2 Most product I buy
wear out too quickly. It means thats not
most industries has the good quality of the
product.
Response of Respondents on Product
Quality
No.
Items
Mean
KP1 The quality of most
products I buy today
4.15
as good a can be
expected
KP2 Most product I buy
3.4
wear out too quickly
KP3 Product are not made
as well as they used 3.828571
to be
KP4 Too many of the
products I buy are
3.814286
defective in some
way
KP5 The companies that
make products I buy
dont care enough 3.792857
about how well they
perform
KP6 The
quality
of
products I buy has
consistently
4.121429
improved over the
years
using SPSS in 2014
Response of Respondents on Price of

Product
No. Items
Mean
HP1 Most of products 3.735714
I
buy
are
overpriced
HP2 Business
could 3.742857
charge
lower
prices and still be
profitable
HP3 Most prices are
reasonable
considering the 3.678571
high cost of doing
business
HP4 Competition
between
3.842857
companies keeps
prices reasonable
HP5 Companies
are
unjustified
in
3.057143
charging the price
reasonable
HP6 Most price are
3.614286
fair
using SPSS in 2014
The result in table response of
respondent on price of product shows HP4
Most price are reasonable considering the
high cost of doing business has the highest
value of mean. It means that this item gets
more response from respondents, the
competition among companies make price
reasonable to keep the satisfaction and
loyalty by the customers. The lowest
response is HP5 Companies are unjustified
in charging the price reasonable, most of
the price of product are fair, because it suits
with the quality of the product.
Table 4.2.3
Response of Respondents on Customer
Satisfaction
No.
Items
Mean
KEP1 I am satisfied with
the product quality
of embroidery and 4.078571
needlework from
West Sumatera
the price of product
of embroidery and 3.828571
needlework from
West Sumatera
the advertisement
that I read, see, and
listen
about 3.607143
embroidery
and
needlework from
West Sumatera
the selling process
of the embroidery
3.821429
and
needlework
from
West
Sumatera
using SPSS in 2014
The result on table above shows
KEP1 I am satisfied with the product
quality of embroidery and needlework from
West Sumatera has the highest value of
mean. It means that this item gets more
response from respondents. As a result, the
customers are satisfied with the product
quality of the embroidery and needlework
from West Sumatera. The lowest response is
KEP3 I am satisfied with the advertisement
that I read, see, and listen about embroidery
and needlework from West Sumatera.
The result in table response of
respondents on customers loyalty shows
CL1 I like the product of embroidery and
needlework from West Sumatera than other
province has the highest value of mean. It
means that this item gets more response
from respondents. As a result, most of the
customers like the embroidery and
needlework product from West Sumatera
than other province. The lowest response is
I want to move to others province in order
to purchase the product of embroidery and
needlework.
Table 4.2.4
Response of Respondents on Customer
Loyalty
No. Items
Mean
CL1 I like the product of
embroidery and
needlework from
4.121429
West Sumatera than
another province
CL2 I want to recommend
the
product
of
embroidery
and 3.985714
needlework
from
West Sumatera
CL3 I want to purchase the
product of embroidery
3.014286
and needlework from
others provinces
CL4 I want to repurchase
the
product
of
embroidery
and 3.885714
needlework
from
West Sumatera
CL5 I want to buy more
product of embroidery
3.878571
and needlework from
West Sumatera
using SPSS in 2014
4.3 Test of Instrument (Outer Model)
4.3.1 Validity Test
After collecting the data, the first
thing that is done is testing the validity or
validity test. The researcher used smartPLS
2.0 in order to test the validity of each
indicators of each variable. To measure the
validity of data, the researcher considers the
evaluation based on convergent validity and
discriminant validity. Convergent validity is
examining whether the indicators of each
variable definitely measure its variables. It
means convergent validity is measured
based on correlation between score item and
indicators (component score) with construct
score.
This test is done by measuring the
value of outer loading through algorithm
process. The indicators will be valid if the
value of outer loading is above 0.7.
However, if the value of outer loading is
higher than 0.5 and less than 0.7, it is still
accepted as long as the value of AVE and
Communality is higher than 0.5 (Chin in
Gozali, 2006). The result of data processing
by using smartPLS 2.0. This table shows the

value of outer loading of product quality,
price of product, customer satisfaction and
customer loyalty.
The result of outer loading shows
that the indicator CL3, HP1, HP2, HP5, KP2
which measures the enjoyment variable has
less than 0.5 outer loading value. The value
of KP2 is 0.394958, HP1 is 0. 090791, HP2
is 0.122046, HP5 is 0.183456, and CL3 is
0.118789. Since the indicator is invalid, the
indicator KP2, HP1, HP2, HP5, CL3 are
removed because their value is less than 0.5
although the value of AVE and
communality is already higher than 0.5 as
what has been required. The value of AVE
and communality can be seen in table 4.3.2.
For the next step, the CL3, HP1,

HP2, HP5, KP2 indicator is removed from
the instrument model testing and the data
will be reprocessed. The outer loading value
of all indicators after removing CL3, HP1,
HP2, HP5, and KP2 can be seen in table
below.
AVE and Communality
AVE
Communality
Customer loyalty
0.626435
0.626435
Customer
satisfaction
Price of product
0.574211
0.574212
0.561283
0.561283
Product quality
0.513276
0.513275
Source: Proceed from questionnaires by

using smartPLS in 2014
Outer Loading
PRODUCT
QUALITY
PRICE OF
PRODUCT
CUSTOMER
SATISFACTION
CL1
CL2
CL3
CL4
CL5
KEP1
0.703017
KEP2
0.836143
KEP3
0.693074
KEP4
0.790036
HP1
0.090791
HP2
0.122046
HP3
0.676855
HP4
0.733774
HP5
0.183456
HP6
0.823524
KP1
0.670118
KP2
0.394958
KP3
0.730863
KP4
0.819076
KP5
0.755185
KP6
0.581941
Source: Proceed from questionnaires by using smartPLS in 2014
CUSTOMER
LOYALTY
0.778296
0.733919
0.118789
0.863054
0.774491
Outer Loading (Reestimate)

PRODUCT
QUALITY
PRICE OF
PRODUCT
CUSTOMER
SATISFACTION
CUSTOMER
LOYALTY
0.786811
0.736670
0.870734
0.765380
CL1
CL2
CL4
CL5
KEP1
0.706369
KEP3
0.837334
KEP4
0.688495
KEP5
0.789136
HP3
0.676741
HP4
0.738850
HP6
0.824604
KP1
0.680502
KP3
0.716431
KP4
0.813824
KP5
0.744512
KP6
0.611076
Another test that will be done to
correlation of constructs with other
test the validity is discriminant validity test.
constructs. The value of cross loading can be
To determine the discriminant validity of
seen in table below.
instrument, it can be seen from the value of
cross loading by comparing the indicator
Cross loading
Customer
Price of Product
Satisfaction
CL1
0.406453
0.482257
0.786811
CL2
0.379577
0.260404
0.736670
CL4
0.467951
0.424758
0.870734
CL5
0.372785
0.201649
0.765380
HP3
0.336480
0.279366
0.676741
HP4
0. 340973
0.303871
0.738850
HP6
0.328879
0.456699
0.824604
KEP1
0.554060
0.313377
0.706369
KEP2
0.356291
0.451955
0.837334
KEP3
0.286223
0.352983
0.688495
KEP4
0.339498
0.332232
0.789136
KP1
0.194938
0.451392
0.291660
KP3
0.115957
0.302208
0.056702
KP4
0.068922
0.305545
0.091994
KP5
0.072598
0.242699
0.182311
KP6
0.158525
0.296519
0.249987
Customer Loyalty
Product
Quality
0.232857
0.043984
0.201061
0.086816
0.062973
0.178059
0.293415
0.292421
0.377732
0.337780
0.425541
0.680502
0.716431
0.813824
0.744512
0.611076
If the square root of AVE of every

construct is higher than the correlation
among constructs and other constructs in the
model, the model will have sufficient
discriminant validity.
Table below shows the comparison
value of square root from each variable with
correlation among variables. It also shows

that each of square root of AVE of the
variable is higher than correlation among the
other variables. Therefore, it can be
concluded that all of latent variables have
good
discriminant
validity.
Latent Variable Correlation (square root of AVE)

Product quality
Price of product
Customer
satisfaction
Customer loyalty
0.716432
Customer satisfaction
0.516349
0.749188
Price of product
0.440174
0.479589
0.757767
Product quality
0.184020
0.471921
0.260326
Customer
loyalty
0.791476

4.3.2 Reliability Test
Reliability test is a test to examine
the accuracy and measurement precision of
measurement tool which is consistent over
time. In this research, the reliability is
determined by the value of cronbachs alpha
and composite reliability for each block of
indicator on reflective invalid constructs.
Rule of thumb of Cronbachs alpha and
composite reliability must be higher than 0.7
eventhough 0.6 can be accepted (Cooper and
Schindler, 2008). The value of Cronbachs
alpha and composite reliability can be seen
in table below.
Cronbachs Alpha and Composite
Reliability
Product quality
Cronbachs
Alpha
0.766305
Composite
Reliability
0.839391
Price of product
0.621828
0.792229
Customer
satisfaction
Customer loyalty
0.750505
0.842761
0.799753
0.869807

4.4 Test of Structural Model (Inner

Model)
Test of structural model is aimed to
identify the strength of relationship between
independent variable and dependent
variable. It produces the significant value of
the relationship among latent variables by
using bootstrapping function. R-Square is
used to evaluate the structural model PLS by
examining the significance between
constructs in structural model for dependent
construct, value of coefficient path or tvalues for each path.
4.4.1 R-Square
To assess the goodness of fit
model with PLS, it is started from the value
of R-Square for each latent dependent
variable. The R-Square value is used to
assess the effect of certain latent
independent
variable
toward
latent
dependent variable whether it has
substantive effect. In structural model,
endogenous latent variable which has R2 =
0.67 indicating good model, R2 = 0.33
indicating moderate model, R2 = 0.19
indicating weak model (Urbach et al.,
2010). Table 4.4.1 below shows the value of
R-square model of research.
R-Square
R Square
Product quality
Price of product
0.359221
Customer loyalty
0.266616

From table R-square, shows the
value of customer satisfactions is 0.359221.
It means customer satisfaction are able to
explain product quality and price of product
of the variance 35,92%. Then, the value of
customer loyalty is 0.266616. It means
customer loyalty are able to explain
customer satisfaction of the variance
26,66%. And rest is explained by other

variables outside of the variables used in the
model study.
Structural model testing
4.4.2 Hypotheses Test
The original sample among
constructs shows the coefficient value of
each line. The level of significance in
hypotheses testing can be seen in the value
of coefficient path or inner model. The
coefficient path score or inner model is
shown by T-statistic value. It must be above
1.96 for two-tailed hypothesis and above
1.64 for one-tailed hypothesis to test
hypotheses on alpha 5 percent (Hair et al.,
2001). The result of hypotheses testing can
be seen in figure below.
Total Effects (Mean, STDEV, T-Values)

Original
Sample (O)
Sample
Mean (M)
Standard
Error
(STERR)
0.089174
T Statistics
(|O/STERR|)
0.522785
Standard
Deviation
(STDEV)
0.089174
-> customer loyalty
0.516349
Price of product ->

0.382669
0.393600
0.087602
0.087602
4.368252
Product quality ->

0.372303
0.365411
0.072403
0.072403
5.142116
5.790328
Note:
Significant at p<0.05
Table above shows the significance
of paths among variables in the structural
model of t statistics among variables. Each
independent variable tested in this structural
model study had an impact on its dependent
variable. It is proven by the value of Tstatistics that are all greater than 1.96. Test
relationships between variables shows that
the influence of customer satisfaction to
customer loyalty (0.516349) and significant
at = 0.05 with statistical value
5.790328>1.96. Price quality has positive
effect on customer satisfaction (0.382669)
and significant at = 0.05 with statistical
value 4.368252>1.96. Then, product quality
also has effect on customer satisfaction
(0.372303) and significant at = 0.05 with
statistical value 5.142116>1.96.
Hypothesis Testing Conclusion
Hypothesis
H1
H2
H3
Hypothesis
Statement
Result
Customer
supported*
satisfaction
is
positively related to
customer loyalty
Price of product is supported*
Product quality is supported*
4.4.2.1
The
Influence
Customer
Satisfaction on Customer Loyalty
As stated in literature review, firm
performance is hypothesized to significantly
affect customer satisfaction. The result
shows influence of customer satisfaction to
customer loyalty with statistical value is
5.790328>1.96. It means that customer
satisfaction affects customer loyalty
significantly. It can be s result supports the
previous research that loyalty is vulnerable
because even if consumers are satisfied with
the services they will continue to defect if
they think they can get better value,
convenience
or
quality
elsewhere.
Satisfaction is essential but not a sufficient
condition of loyalty. In other words, we can
have customer satisfaction without loyalty,
but it is too hard or even impossible to have
loyalty without satisfaction (McIlroy and
Barnett, 2000).
Satisfaction is essentially viewed as
the result of loyalty. Consumer satisfaction
and consumer loyalty depends on a product
type, is it a new and innovative one or isnt.
Customers satisfaction is essential for
customers loyalty. Loyalty and satisfaction
have a strong relation. It shows that
customer satisfaction significantly influence
customer loyalty.
4.4.2.2 The Influence Price of Product on
According to many researchers the
customer satisfaction and trust is being
influenced by the price perception (Oliver,
1997; Peng & Wang, 2006; Chengetal.,
2008; Kimetal., 2008). Price is one of the

elements in measuring customer satisfaction
where price or value is a similar in
considering it is a important factor in
influencing and assisting in building up
customer satisfaction (Getty and Thompson,
1994). Price are correlated to customer
satisfaction. Increase in price will give an
influence on customer satisfaction It is prove
by the result of the influence of price toward
customer satisfaction with statistical value
4.368252>1.96. It means that price is
significantly related to customer satisfaction.
4.4.2.3 The Influence Product Quality on

Bastos and Gallego (2008); Yi,
(1990); Chai et al, (2009); Bloemer, et al
(1995) show the importance of products
quality in enhancing customer satisfaction
and loyalty. A products quality has a
significant impact towards the product or
service performance, thus it is linked to a
customers and satisfaction (Kotler and
Armstrong 2010). Pilkington and Chai
(2008) studied the importance of quality of
products and services on customer
satisfaction and found out that loyal
customers mostly lie in category of
customers who have used higher quality
products. This implies that better quality of
products tends to increase customers
loyalty. Based on the result of the influence
of product quality toward customer
satisfaction
with
statistical
value
5.142116>1.96. It means that product
quality significantly influence customer
satisfaction.
CHAPTER V
CONCLUSION, IMPLICATION,
LIMITATION, AND
RECOMMENDATION
This chapter provides conclusions
drawn from findings and discussion
presented in the previous chapter, followed
by assessment of the potential limitations
present in this study and possible future
directions for the research. This research is
obtained to identification product quality
and price of product toward customer
satisfaction and customer loyalty. Then to
find whether there is a significant

differences between each other. Based on
review of literature and review of previous
studies, this research has developed two
hypotheses. The analysis of result as follow:
5.1
Conclusion of the Research
This research is a quantitative
research to get statistical data to show about
the identification of product quality and
price of roduct toward customer satisfaction
and customer loyalty. This research use four
variables, those are product quality, price of
product, customer satisfaction, and customer
loyalty. The data has been conducted to
customers of embroidery and needlework in
West Sumatera. The data used are primary
data and secondary data. Primary data is
gathered by questionnaires distribution to
customers of embroidery and needlework in
West Sumatera. Then, secondary data is
gathered by doing literature review. Data
have been processed by smartPLS software
tool as previous data processing. Frequency
distribution also performed in order to know
the certain data that already distribute and
also to justify the average from each
variable. The conclusions that could be
taken from the research are:
1. The research finding the influence
of customer satisfaction toward
customer loyalty on purchasing
embroidery and needlework in
West Sumatera. The result shows
the
influence
of
customer
satisfaction to customer loyalty
with
statistical
value
is
5.790328>1.96. It means there is
significant
influence
between
customer satisfaction to customer
loyalty on purchasing embroidery
and needlework in West Sumatera.
It can be concluded that customer
loyalty can being influenced by
customer satisfaction. So, the
companies can get customer loyalty
of their customers if the customers
satisfied with the product of
West Sumatera
2. This research finding the influence
of price of product toward customer
satisfaction
on
purchasing
the influence of price of product to
3.
5.2
customer
satisfaction
with
Based on result it shows that price
of product has significant influence
to customer satisfaction. The price
have set are reasonable and can be
accepted by the customers. It means
price of product can influence the
satisfaction of the customer on
purchasing the embroidery and
needlework in West Sumatera.
This research finding the influence
of product quality toward customer
satisfaction
on
purchasing
the influence of product quality to
customer
satisfaction
with
Based on result it shows that price
of product has significant influence
to customer satisfaction. The
products have quality that suit with
the customer expected or more
better
than
expected.
The
companies who selling the product
care with the quality of their
product. So, it means product
quality
can
influence
the
satisfaction of the customer on
purchasing the embroidery and
needlework in West Sumatera.
Implications of the Research

The research provides several
implications for identification product
quality, price of product toward customer
satisfaction and customer loyalty. The
results also showed that the product quality
and price of product will influence customer
to satisfaction and loyal to the product of
Sumatera. The companies expected to keep
the quality of embroidery and needlework
and offer the price that suit with the quality
of the product in order to make the customer
become satisfied and loyal. Then, they will
continuously purchasing the product.
On this study, there are three
hypotheses that researcher testing. The result
shows that the three hypotheses accepted.
For customer satisfaction toward customer
loyalty, the result shows that there is
significant influence between customer
satisfaction and customer loyalty. It means if

the customers satisfied with the product of
embroidery and needlework, they would be
loyal, then buy the product again, and
recommend the product to others.
For price of product, the findings of
this study showed that there is significant
influence between prices of product to
customer satisfaction. It means that the price
affect the satisfied of the customers on
purchasing the product. If the price is not as
customers expected, the customer would be
unsatisfied and would not to purchase the
product again, it makes sure the company
lose the loyalty of their customers. The
customers would be satisfaction if the
company can keep the price are reasonable,
the price can compete with other competitor,
offer the fair price to the customer, and not
charge the higher price in order to get more
profit.
Then, the findings of these study,
there is significant influence between
product quality and customer satisfaction on
purchasing the product embroidery and
needlework in West Sumatera. It means
quality can measure how customers satisfied
with the product or not. If the product
quality and price are suit with the quality
that company offered, for sure the customers
will feel satisfied with the product and then
they might will be a loyal to company, if the
customer feel satisfied, the customers will
have an eager to repurchase the product
again. So to keep customer satisfaction the
company should keep the quality of their
product and the quality should consistently
improve over the year.
5.3
Limitation of the Research
Researcher found some limitations
when conducted this research. Some of the
limitations and the recommendations are as
follow:
1. Size of the sample.
In this research, researcher only uses
140 respondents as sample. It could be
more than that since the respondents
are the customers who purchase
Sumatera. Hopefully, the next research
could have more than 140 respondents.
2. Variables.
The variables examined in this
research are product quality, price of
product, customer satisfaction and
customers loyalty. Hopefully, the next

research will add more variables to be
developed.
3. Research location.
The location of research is West
Sumatera. Hopefully, the next research
can be done not only in West Sumatera
but also Indonesia.
5.4
Recommendations
of
the
Research
not only focus on customers of embroidery

and needlework in West Sumatera, but also
the customers of embroidery and
needlework from another province, so result
can be compared and data can be more
accurate. And also for next future research,
hopefully use other variables that can also
influence on customer satisfaction and
customer loyalty
Based on the research result, the

customer will satisfied and being loyal to the
product of embroidery and needlework from
West Sumatera, if the company always keep
their quality and give the fair price to the
customers. The quality of the product should
suit with the customers expected or more
better than customers expected. The
company should set the price are reasonable
which can be accepted by the customer
itself. So, it makes the customer feel
satisfied on purchasing the product of
embroidery and needlework from West
Sumatera. Satisfaction will build the
customer loyalty; the customer will purchase
the product again and recommend the
product to others. So, it is better for the
embroidery and needlework industries to
keep the quality and price in order to keep
the customers satisfaction and customers'
loyalty.
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Based, on the result, the researcher

want to recommend to company to keep
their product quality through evaluate the
quality or maintaining the quality, and
improve the quality over the year. Thus,
company should keep their price in order to
keep their customer satisfaction and being a
loyal customer. The company can keep the
price of their product through offering the
reasonable price which can compete among
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THE INFLUENCE OF PRODUCT QUALITY AND PRICE TOWARD

CUSTOMER SATISFACTION AND CUSTOMER LOYALTY (case: Embroidery and

there is little empirical evidence

assistance as an information on product

How does the price have an

loyal to buy the product based on

similar brands, and (6) is a function of

James F. Engel (1995) suggested

While the literature contains significant

time, customer counts both price and

and positive word-of-mouth advertising

customers and satisfaction (Kotler and

In addition to being a quality

Quality of a product can be

1. Perceived Substitutes Effect.

Difficult Comparison Effect.

Price- quality effect states that

They believe qualities

When a product was being

A product price is one of the main

price and they would not have the

service and product quality with

Shaharudin Jakpar, Angelyn Goh

loyalty without satisfaction (McIlroy

1988). From a traditional economic

loyalty customer satisfaction in the

critical thing for business. Thats why

3.3 Data Collection Methods

this research, the researcher use customer

The quality of product as

Price can compete with

3.5 Data Analysis Method

type of product, type of handicraft, payment

Strongly Agree (SA)

Strongly Disagree (SD)

Validity and Realibility Analysis

seen from the value of Cronbachs

4.1.1 Respondents Characteristics Based

Source: proceed from questionnaires by

Respondents Characteristics Based on

Respondents Characteristics Based on

percentages base on income per year are

Source: proceed from questionnaires by

2 million 2.5 million

2.5 million 3 million

3 million 3.5 million

3.5 million 4 million

4 million 4.5 million

4.5 million 5 million

Source: proceed from questionnaires by

percentages are working clothes and gamis

Source: proceed from questionnaires by

buy the products can be seen on table. The

4.1.8 Respondent Characteristic Based on

The result on table below shows

Response of Respondents on Price of

by using smartPLS 2.0. This table shows the

For the next step, the CL3, HP1,

Source: Proceed from questionnaires by

Outer Loading (Reestimate)

If the square root of AVE of every

correlation among variables. It also shows

Latent Variable Correlation (square root of AVE)

Source: Proceed from questionnaires by using smartPLS in 2014