THE EFFECT OF PRODUCT QUALITY TO THE CUSTOMER SATISFACTION AND CUSTOMER LOYALTY ON THE LOCAL FOOD (Case Study in PT ASESE)

The development of the food and beverage industry is increasing from year to year, resulting the competition become higher. In order to win the competition, a company must have a competitive advantage to fulfill the costumer needs. The customer usually will choose the product that provide a good quality and make them satisfy. The customer satisfaction will lead to customer loyalty. PT ASESE is one of the local companies in Padang, West Sumatra that produces the local food of Minang. PT ASESE produces more than 20 kinds of product, such as rendang, jerky, and chips but the popular one is beef rendang. This study aims to analyze the effect of product quality to customer satisfaction and customer loyalty on local food and then, develop suggestions to improve the customer satisfaction and customer loyalty on the local food. In this research, the indicators of product quality are developed based on eight dimensions of quality adopted from Garvin (1987). While the indicators of customer satisfaction and customer loyalty are identified from the literatures. The identified indicators are then validated to industry experts. The questionnaire is to determine the customer perception on the effect of product quality to customer satisfaction and customer loyalty on the local food. The survey conducted to 152 respondents which are the customers of PT ASESE. The PLS-SEM method is used in data processing using SmartPLS 3 software consist of designing the inner model, designing outer model, constructing the path diagram, model evaluation, and hypotheses testing. The results show that there is a significant effect in each hypothesis. The product quality has a significant effect to customer satisfaction with a value of 29.285, the customer satisfaction to customer loyalty (4.873), the product quality to customer loyalty (3.432) and the product quality to customer loyalty through customer satisfaction (4.673). Suggestion are then developed to improve the customer satisfaction and customer loyalty consist of improving the product quality of beef rendang by improving the raw material selection, improving the raw material storage, developing the training program to improve the knowledge and skill of chefs, and improving the finished product storage. Improving the customer satisfaction on beef rendang by conducting survey to identify the customer needs and desires, and improving the quality of product and service. Improving the customer loyalty on beef rendang by developing the reward program to the loyal customers, developing the reward program to the customers who promote the products and providing the best quality of product with a competitive price compared to the other companies. This study is only focused on the beef rendang. Further research can be conducted to other local food The study can also be conducted in some small and medium enterprises that produce the local food. Keywords: customer loyalty, customer satisfaction, product quality, PLS, rendang