Timor-Leste Journal of Business and Management

Vol.2, Issue 1, pp. 33-44, 2020

Available online at: https://tljbm.org/jurnal/index.php/tljbm

Examining the Relationships between Product Quality, Customer Satisfaction

and Loyalty in the Bamboo Institute, Dili, Timor-Leste
Sabino Rua1, Estanislau de Sousa Saldanha2, Alvaro Menezes Amaral3
Graduate School-Master of Business Administration (MBA) Program
Dili Institute of Technology (DIT), Timor-Leste
Email: [email protected], [email protected], [email protected]

ABSTRACT

The objectives of this research are to test and explain the influence of product quality and customer satisfaction on customer loyalty, in
addition to customer satisfaction on the relationship between product quality and customer loyalty. A total of 190 valid questionnaires were
collected from costumers of Bamboo Institute in Dili, Timor-Leste, and the relationships between 3 variables were tested using SMART-PLS
3.0. The result of the study revealed that product quality and customer satisfaction influence positively and significantly on customer loyalty,
and customer satisfaction fully mediate the relationship between product quality and customer loyalty. The result of study confirms that
product quality and customer satisfaction are strong antecedent factors for customer loyalty. Therefore, to enhance customer loyalty, it is
important to provide the product quality that meets the customer’s satisfaction level.

Keywords: Product quality, customer satisfaction, customer loyalty, Timor-Leste.

1. Introduction Consumer satisfaction is one of the most marketing

concepts because a consumer will buy and use a product
The Bamboo Institute, PI is a public institute in Timor- repeatedly if satisfied with a product or service. Therefore a
Leste that manufactures furniture. This institute creates jobs company must be good at production and sales, as well as
and contributes to State income. The annual income of this how to attract and retain its customers. Thus, a company
institute fluctuates: in 2017, its income decreased from US$ must find out the needs and desires of consumers, in order to
98,615.38 in 2016 to US$ 79,502.28 (19.38%), and in 2018, produce products and provide certain services according to
the income increased to US$ 140,568.77 or an increase of the needs and desires of consumers and to satisfy them
77% from 2017. It is predicted that this figure will continue (Whalley, 2010). Consumer satisfaction with a company's
increase in 2020 (Rua, 2020). products is very important to ensure or retain consumer
The consumer's need for furniture in the Timor-Leste loyalty. Chandrashekaran et al. (2007) notes thatsatisfaction
market has started to increase as consumers learn about the has a strong relationship to customer loyalty and the strength
quality of its bamboo products (Unidade Setor Ekonomiku- of satisfaction is a factor that determines the vulnerability of
MF). The same products from other companies are available consumers. Customers perceive satisfaction as a target
in Timor-Leste market: there are 468 companies working in obtained from the purchase and use of goods and services,
the furniture sector (SERVE, 2019). This number is thus satisfaction is the result that companies are looking for
considered large for a country as small as Timor-Leste and to achieve (Carpenter, 2008). Satisfaction has influence on
this means that competition is increasing and poses a major consumer loyalty (Cakici et al., 2019). There are some
threat to the Bamboo Institute's revenue projections. The studies showing that customer satisfaction has a positive
Bamboo Institute must strive to ensure customer satisfaction effect on customer loyalty (Brunner et al., 2008; Chiou &
to maintain customer loyalty. Shen, 2006; La, 2004).
Consumer loyalty is an important factor for a company's Customer satisfaction is also related to the quality of
income, because consumers who are associated with a products and services. Mooradian, Matzler, & Ring (2014)
product will recommend products to their partners, and will consider that a product in the market always has a balance
continue to buy products from the company. Therefore, an between changes in quality and price. Consumers want to
organization needs to retain customer loyalty (Mahoney & pay more for higher quality goods and services (better
Tang, 2017). Conversely, Bowen & Chen (2001) said that quality). There are studies which confirm that product
loyal consumers are consumers who repeatedly buy products quality has a positive effect on consumer satisfaction (Gök
from a company, with a commitment to repurchase the et at., 2019).
product or service and recommend others to buy. Therefore, The role of mediation effect of consumer satisfaction on
consumer loyalty is influenced by product quality and the relationship between product quality and customer
consumer satisfaction. loyalty is very important to ensure competition and company
performance. Although until now there has been no integral

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Timor-Leste Journal of Business and Management
Vol.2, Issue 1, pp. 33-44, 2020
Available online at: https://tljbm.org/jurnal/index.php/tljbm

and comprehensive research on the relationship between when they hear the product brand. (7) Company reputation:
product qualities, satisfaction and consumer loyalty in the ability to create a positive and favourable image in the
Timor-Leste. The other part, this relationship is very minds of consumers when they hear the name of company;
important to ensure competition and good performance of the and (8) Customer service: ability to serve consumers after
companies. Therefore, the research aims to find out the selling products to ensure customer satisfaction.
relationship between product quality, customer satisfaction
and consumer loyalty. 2.1.2. Customer Satisfaction
Consumer satisfaction is the result of a product that
provides good benefits in accordance with the needs and
2. Theoretical Framework, Conceptual Model and
expectations or positive feelings about the use of a product
Hypothesis
or service (Farooq et al., 2018). The desire of consumers
2.1. Theoretical Frameworks and Conceptual Model today is not only the quality of the product or service, but
also the value of the goods and services themselves
2.1.1. Product Quality (Whalley, 2010:50).
Satisfaction has a relationship with consumer answers
Products are any items that are distributed to the market
when buying a product and believe that the product is in
for attention, purchase, use or consumption with the aim of
accordance with the expectations and quality they feel.
satisfying consumer wants and needs (Kotler and Amstrong,
(Angelova, 2011; Lien, Cao and Zhou, 2017). The result of
2012). Product quality is an important function and
satisfaction is a precondition for customer loyalty to a
perceptions of consumer performance related to existing
product or service of a company (McMullan and Gilmore,
product attributes or services (Albayrak, 2015:136).
2002). Therefore, customer satisfaction can be interpreted as
Basically, consumers always see and evaluate the quality of
a way to increase market share with a company's profits
products in the market before buying (Adhikari, 2018:22).
(Angelova, 2011).
Normally consumers look for high quality products. Good
Customer satisfaction is the center of ideas in marketing.
product quality, use according to function, durable and not
In accordance with this observation, the company's goal is to
easy to damage (Izquierdo & Samaniego, 2007).
serve consumers well in order to create consumer satisfaction
Traditionally, good quality product is like a standard
and maintain consumer loyalty who always use products and
product, suitable quality to use, and looks nice. Thus, product
recommend products or services to other consumers (word
quality makes consumers satisfied and loyal to a product
of mouth) (Zameer et al., 2015; Omar et al., 2016). Products
(Cakici, Akgunduz, & Yildirim, 2019). There are many
that have higher quality than consumer expectations, will
factors that influence product quality. Product quality is
make consumers satisfied, continue to use the company's
influenced by value, prestige, brand and the model of the
products or services and become evangelists for our product
product itself (Beneke and Zimmerman, 2014; Veloutsou,
brands (Mooradian et al., 2014:276). On the other hand, if
2015). Product quality is also influenced by fair perception
the product is not in accordance with consumer expectations,
and quality of service (Zietsman et al., 2019).
then consumers will not be satisfied, and it will make them
Researchers always use different indicators to measure
not buy and not recommend to other consumers (Chien and
product quality. Thus, each research result is also different.
Chi, 2019).
Product quality is measured by fair, right, and according to
Many indicators are used to measure consumer
production cost (Beneke et al., 2013). Mooradian et al.
satisfaction with the products or services of a company or
(2014) measured product quality using dimensions such as:
organization. Unfortunately, until now there has been no
(1) Performance, (2) Features, (3) Reliability, (4)
consensus among researchers on indicators that measure
Conformance, (5) Durability, (6) Serviceability, (7)
consumer satisfaction. However, differences in these
Aesthetics (Form, style, design, Other Perceptions). Forker,
indicators exist due to differences in the types, dimensions
Vickery, & Droge (1996) measure the product quality using
and environments of consumers of firms. By Annamdevula
8 dimensions, such as: (1) Conformance to specification:
& Bellamkonda (2016), many indicators are used to measure
Manufactured product capabilities that comply with existing
consumer satisfaction with the products or services of a
performance standards. (2) Reliability: ability to maximize
company or organization. To measure customer satisfaction,
time for product failure or function failure. (3) Durability:
the indicators used are as follows: (1) Satisfied with the
ability to maximize time to change product. (4) Design
quality of equipment, (2) Satisfied with service quality, (3)
quality (design innovative): ability to provide product,
Satisfied with other support of service quality, (4)
characteristic, style or with superior operational
Completely satisfied with all services from the company, (5)
characteristic compare with product from other competitors.
Satisfied with the quality of administrative services, (6)
(5) Product development: ability to develop existing
Satisfied with the quality of academic services. Farooq,
products well. (6) Brand Image: the ability to create a
Salam, Fayolle, & Jaafar (2017) To measure consumer
positive and favourable image in the minds of consumers

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Vol.2, Issue 1, pp. 33-44, 2020
Available online at: https://tljbm.org/jurnal/index.php/tljbm

satisfaction in the context of an publishing company, using service quality, satisfaction with consumer loyalty to
indicators such as: (1) I am happy with the decision to buy a products and services. Satisfaction with loyalty is influenced
product, (2) I have a preference for choosing the company as by product quality. This empiric concept is being targeted in
a fair decision, (3) I make the right decision for choosing this many countries with different environments, types and
company as a product supplier, (4) I am satisfied and very industrial scales. Starting from here, this research concept
pleased with the experience gained from this company. seeks to enrich existing theories and empirics (Berry,
Parasuraman and Zeithaml, 1988; Parasuraman, Zeithaml
2.1.3. Customer Loyalty and Berry, 1994; Subrahmanyam, 2017; Sangpikul, 2018;
Sriyalatha and Appuhamilage, 2019) to link product quality,
Consumer loyalty is generated by emotional experiences satisfaction with consumer loyalty.
during the process of using a product brand when consumers To test this model, the indicators of product quality
interact with the design. Professionals also need to keep in variables were adopted from (Beneke et al., 2013),
touch when consumers have purchased goods to ensure trust satisfaction and loyalty adopted from authors, such as
and connection. If consumers are already positively Parasuraman et al. (1994), Pedro et al., (2018), Pereira et al.,
associated with a company's product brand, during and after (2016), ho Özkan et al., (2019). From here, the authors build
purchasing, this will result in advocacy for the product brand. a research model as in Figure 1.
Advocacy for product brands will be more oriented towards
word of mouth marketing on social media (Mahoney &
Tang, 2017:190).
Consumer loyalty and retention is something that
promotes customers to accept new products from the
company and opens up market opportunities for new
products (O’Cass & Heirati, 2015:62). Izquierdo &
Samaniego (2007) state that consumer loyalty will provide
income and benefits to a company. When companies provide Figure 1. Conceptual model (PQ= product quality, CS=
satisfaction to their workforce properly, they will provide customer satisfaction, CL= customer loyalty)
superior service to customers. As workers, providing better
service quality will have a positive influence on consumers.
According to Asnawi et al. (2019), consumers are loyal to a 2.2. Hypothesis
product or service when they are satisfied with the product
or service itself. Because of that, consumer loyalty is 2.2.1. Product Quality and Costumenr Loyalty
influenced by customer satisfaction. Usually, customers are looking for good and high quality
To date, researchers have had different opinions about the products (Izquierdo & Samaniego, 2007). Product quality is
dimensions and indicators for measuring consumer loyalty. related to customers' knowledge about a product brand which
However, consumer loyalty focuses on consumer behavior has a positive effect on customer loyalty (Devaraj, Matta, &
intentions. According to Zeithaml et al. (1996), loyalty has Conlon, 2001; Kuang et al., 2009). Good product quality will
five indicators related to consumer behavior intentions, such make consumers happy and proud, with this they will buy
as: (1) talking positively about the company, (2) repeatedly and recommend others to buy by word of mouth
recommending the company to others, (3) encouraging (word of mouth marketing).
others and neighbors to establish business relationships with Many empirical studies have shown that product quality
the company, (4) considering the company as the first choice, can increase consumer loyalty to a company's product or
and (5) continue to do business with the company in the service. According to (Djumarno et al., 2018; Jannah et al.,
future. Cakici et al. (2019) using consumer loyalty 2019) confirm that product quality has a positive effect to
indicators, such as: (1) intend to choose this company costumers loyalty. Cakici et al. (2019) also confirmed that
continuously, (2) consider the company as the first choice, product quality can make customers loyal to a product.
(3) feel better when going to one company, even though there
are other companies. H1: Product quality has positive effect and significant to
customers loyalty in Bamboo Institute, PI, Timor-Leste
2.1.4. Conceptual Model
2.2.2. Product Quality and Costumer Satisfaction
In this study, researcher saw that the relationship between
variables such as product quality is a determinant factor that Product quality indicates a product that is good, durable
affects consumer satisfaction and loyalty in an industry's and reliable. A quality product will make customers satisfied
competitive environment. This concept is built from theory to decide and buy the product (Kotler and Amstrong, 2012).
(Berry, Parasuraman and Zeithaml, 1988; Parasuraman, Product quality is important to ensure a company's
Zeithaml and Berry, 1994) about the relationship between competitive advantage in the market. Improving product

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Vol.2, Issue 1, pp. 33-44, 2020
Available online at: https://tljbm.org/jurnal/index.php/tljbm

quality will increase customer satisfaction, which in turn will respondents is in accordance with the requirements because
improve company performance (Hussain and Ranabhat, the minimum sample to be used in a study is 30. This is
2013). Product quality has a positive impact to customers confirmed by Hair et al. (2014) that when analysing data
satisfaction (Razak, Nirwanto and Triatmanto, 2017; Jannah, using Smart-PLS, the minimum sample must be 30. To select
2019; Suhendar & Ruswati, 2019). This is confirm with the a sample, the technique used is the simple random method,
research result of Djumarno et al. (2018) ho Hoe & Mansori so that everyone as a population can have the same
(2018) showed that product quality has the high impact to opportunity to be selected as respondents.
customers satisfaction. The instrument used to obtain data was a questionnaire
consisting of three parts: research objectives, respondent
H2: Product quality has a positive influence and significant
characteristics (age, education, profession, etc.) and the
to customers satisfaction in Bamboo Institute, PI,
questions used to measure each variable. All questions will
Timor-Leste
be measured from a scale of 1 (Strongly disagree) to a scale
of 5 (Strongly agree) as this scale is widely used in marketing
2.2.3. Costumer Satisfaction with Costumer Loyalty research. To test this model, the indicators of product quality
Consumer satisfaction is a very important factor to variables were adopted from (Beneke et al., 2013),
guarantee consumer loyalty to a product or service from a satisfaction and loyalty were adopted from (Parasuraman et
company. Therefore, satisfaction has a major influence on al., 1994; Pereira et al., 2016; Pedro et al., 2018; Özkan et
consumer loyalty to a product or service (Hoe and Mansori, al., 2019). Questionnaires were directly delivered to the
2018; Wantara and Tambrin, 2019). Research Mahmud et al. respondents based on simple random methods using database
(2013) and Djumarno et al. (2018) also confirm that provided by the institute.
customer’s satisfaction has a significant effect to customer’s The collected data was tested using Smart-PLS 3.0 as this
loyalty. So that, the hypothesis in this research is: statistical package can be used for a small sample (minimum
30), reflective/formative indicators, multi-variable test, and
H3: Customers satisfaction has a positive influence to classical assumption tests (Hair et al., 2014; Saldanha et al.,
customer loyalty in Bamboo Institute, PI, Timor-Leste 2018).
According to Hair et al. (2014) as cited by Saldanha et al.
2.2.4. Product Quality, Costumers Satisfaction with (2019), When testing using Smart-PLS, it will be carried out
Costumers Loyalty through three stages, as follows: First, you have to build the
Product quality may not affect consumer loyalty. A model first in Smart PLS 3.0. This model is built based on
quality product will make customers like the product and theoretical and empiric revisions. Second, test the
they can still buy the product. When a customer wants to buy relationship between indicators and variables or constructs
a quality product or service, the customer must be satisfied (outer model measurement). This will test the reliability and
first. When customers are satisfied with the quality of a validity of the indicators. To test the reliability using the
product, the customers will remain loyal to the product or parameter composite reliability (CR) with Cronbach alpha
service. In this way, customers will continue to search and (CA). A reliable indicator when the CR value is greater than
buy, promote and recommend to others to buy by word of 0.70, and CA is greater than 0.70 (Hair et al., 2014; Saldanha
mouth. So, customer satisfaction has an important role in et al., 2018). The validity test is divided into two parts,
mediating the relationship between product quality and namely: convergent validity (outer loading or indicator
consumer loyalty (Delcourt et al., 2013; Fuentes-Blasco et loading with average variance extracted-AVE) with
al., 2017). Therefore, in this study, the following hypotheses discriminant validity (Fornell-Larcker, Cross load, and
can be formulated: Heterotrait-Monotrait). In convergent validity, the indicator
is valid when the outer loading (OL) value is greater than 0.7,
H4: There is a significant and positive relation between and the average variance extracted (AVE) value is greater
product quality and customer loyalty with the than 0.5 (Hair et al., 2017; Saldanha et al., 2019). Validity is
mediation of customer satisfaction in Bamboo seen from discriminant validity, a valid indicator when value
Institute, PI, Timor-Leste “root” AVE of an indicator for that indicator is greater than
the value of another indicator. (Hair et al., 2014), and value
of heterotrait-monotrait (HTMT) smaller than 0.85
3. Research Method
(Henseler, Ringle and Sarstedt, 2015). Third, after testing the
The population in this study was customers who relationship between indicators and variables (outer model
purchased bamboo products at the Bamboo Institute, IP, measurement) to see the validity and reliability of each
Timor-Leste during the last three years, from January 2017 indicator, the next step is to test the significance of the
to November 2019, totalling 458 customers. Using a margin relationship between variables and variables (inner model
error of 5% and Slovin formula to calculate sample size, then measurement). It is also used to test hypotheses. In testing
the total sample for this study was 214. The number of

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Vol.2, Issue 1, pp. 33-44, 2020
Available online at: https://tljbm.org/jurnal/index.php/tljbm

the hypothesis, the parameter used is the T value with the P Showed the CA and CR values are greater than 0.70, so all
value. The relationship between one items or indicators in this research model are reliable to test

Figure 2. Indicator Loading for Convergent Validity

variable and another variable is significant if the T value is the relationship between variables (inner model
greater than 1.96, and the P value is smaller than 0.05. (Hair measurement).
The validity test uses two types, namely convergent
et al., 2017; Saldanha et al., 2019)
validity ho discriminant validity. Convergent validity test
uses 2 parameters, namely outer loading (OL) and average
4. Result variance extracted (AVE). The OL value of a variable item
is greater than 0.7 and the AVE value is greater than 0.5, so
4.1. Validity and Reliability seen from the convergent validity, this item is valid (Hair et
al., 2014; Saldanha et al., 2018, 2019). Figure 2 shows that
Reliability was tested using Cronbach's alpha (CA) the OL value of all items in this study is greater than o.60,
parameter with composite reliability (CR). The and this value has no effect on content validity. Table I also
item/indicator variable is reliable if the CA value is greater shows that the AVE value of all items in this study is greater
than 0.7 and the CR value is greater than 0.7 (Hair et al., than 0.50. So, all items of each variable are valid as seen from
2014; Hair et al., 2017; Saldanha et al., 2019). The Table I, the convergent validity to test the relationship between
variables (inner model measurement).

Table I. Reliability (Cronbach’s alpha and composite

reliability) and convergent validity (AVE)
Item CA CR AVE
CL 0.780 0.847 0.528
CS 0.741 0.836 0.565
PQ1 0.941 0.962 0.895
PQ2 0.901 0.938 0.834
PQ3 0.800 0.870 0.625
PQ4 0.821 0.875 0.586

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Vol.2, Issue 1, pp. 33-44, 2020
Available online at: https://tljbm.org/jurnal/index.php/tljbm

The discriminant validity test used two 2 parameters, namely satisfaction (CS) has a positive and significant effect on
Fornell-Larcker Criterion (FL) and heterotrait-monotrait consumer loyalty (CL). So, H3 is supported.The SMART-
(HTMT). Judging from FL, an item is valid if the AVE root PLS 3.0 test results show that the T value (3.384) is greater
value (AVE root square) of an item for that item is greater than the minimum standard value of 1.96,
than the AVE root value of another item. Table II shows the
FL value of all items meeting the criteria Hair et al. (2014), Table III. Table IIIHeterotrait-Monotrait (HTMT) for
So, all items of the variables in this study are valid to test the Discriminant Validity
relationship between variables and variables (inner model
measurement). Item CL CS PQ1 PQ2 PQ3
CS 0,523
Table II. Fornell-Larcker Criteria for Discriminant PQ1 0,261 0,530
Validity PQ2 0,123 0,480 0,701
Item CL CS PQ1 PQ2 PQ3 PQ4 PQ3 0,331 0,572 0,392 0,483
CL 0.726 PQ4 0,579 0,466 0,421 0,282 0,558
CS 0.421 0.751
PQ1 0.224 0.472 0.946 4.2. Hypothesis Test
PQ2 0.051 0.403 0.645 0.913 In this study, the first hypothesis test is to see the effect
PQ3 0.282 0.460 0.340 0.409 0.791 of the product quality variable (PQ) on consumer loyalty
PQ4 0.491 0.398 0.396 0.269 0.469 0.765 (CL). The SMART-PLS 3.0 test results show that the T value
(2.185) is greater than the minimum standard value of 1.96,
and the P value (0.029) is less than 0.05 as the standard value
Looking at HTMT, an item value is valid, when the (Hair et al., 2014) (Table IV). This shows that product
HTMT value is not more than 0.85 (Henseler et al., 2015). quality (PQ) has a positive and significant effect on
So, seen from Table III, all the values of each item of the consumer loyalty (CL). So, H1 is supported.
variable are less than 0.90, except for the values of SQ3 and In this study, the second hypothesis test is to see the effect
SQ4. But the value of these two items is still used to measure of the product quality variable (PQ) on consumer satisfaction
the relationship between variables because it has no effect on (CS). The SMART-PLS 3.0 test results show that the T value
content validity (OL, FL, AVE, and HTMT), content (14.479) is greater than the minimum standard value of 1.96,
reliability (CA and CR) (Hair et al., 2014). So, all the items and the P value (0.000) is less than 0.05 as the standard value
are valid to use and test the relationship between variables (Hair et al., 2014) (Table IV). This shows that product
(inner model measurement). quality (PQ) has a positive and significant effect on
In this study, the third hypothesis test is to see the effect of consumer satisfaction (CS). So, H2 is supported.
the consumer satisfaction (CS) on consumer loyalty (CL).
and the P value (0.001) is less than 0.05 as the standard value
(Hair et al., 2014) (Table IV). This shows that consumer

Table IV. Path Coefficient for Hypothesis Test

Original Sample
Standard Deviation
Sample Mean T Statistics (|O/STDEV|) P Value Note
(STDEV)
(O) (M)
PQ -> CL 0.208 0.224 0.095 2.185 0.029 Significant
PQ -> CS 0.624 0.642 0.043 14.479 0.000 Significant
CS -> CL 0.291 0.282 0.086 3.384 0.001 Significant
PQ->CS->CL 0.182 0.180 0.053 3.408 0.001 Significant

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In this study, the forth hypothesis test is to see the mediation Because consumers want a balance of value between product
effect of consumer satisfaction (CS) on the relationship quality and costs. The factor that makes a significant
between product quality (PQ) and consumer loyalty (CL). contribution to customer loyalty is conformance to
The result of indirect effect test with SMART-PLS 3.0 (PQ- specification (PQ1) dimension compared to the other 2
-CS-- CL) showed that T value (3.408) is greater than dimensions namely design innovative and product image.
the minimum standard value of 1.96, and P value (0.001) is This means that the majority of Bamboo Institute consumers
less than 0.05 as the standard value (Hair et al., 2014) (Table want the quality of the product to be in accordance with the
IV). This shows that customer satisfaction has the mediation standards, specifications and functions they need. This study
effect on relationship between product quality and customer confirms some empirical research which shows that product
loyalty. So, H4 is supported. quality has a positive and significant effect on consumer
satisfaction (Jannah, 2019; Razak et al., 2017; Suhendar &
Ruswati, 2019) because a good quality product will make
5. Discussions
consumers feel satisfied and decide to buy the product
The first objective of this study was to examine the effect (Kotler and Amstrong, 2012). However, the results of this
of product quality (PQ) on consumer loyalty (CL). The study are different from the results of other empirical studies
results of the study show that product quality has a positive which show that product quality has no effect on consumer
and significant effect on consumer loyalty. This means that satisfaction (Rimawan et al, 2017) because consumers have
when companies improve product quality will increase many considerations to choose a good product to consume it.
consumer loyalty. The factor that makes a significant The third objective of this study is to examine the effect
contribution to customer loyalty is conformance to of customer satisfaction on customer loyalty. The Smart-PLS
specification (PQ1) dimension compared to the other 2 test results show that customer satisfaction has a positive and
dimensions. Because when the Bamboo Institute ensures the significant effect on customer loyalty at the Bamboo
product quality according to quality standards, Institute, because to increase loyalty, satisfaction is the most
specifications, and the function desired by consumers, it can important factor to consider. If consumers are satisfied, it
automatically increase customer loyalty as suggested by will increase their loyalty to stay with the company, because
Cakici et al. (2019) that good product quality makes to make customers loyal, the company must provide
consumers loyal to these products. This study confirms some satisfaction first (Rimawan et al, 2017). However, the results
empirical research which shows that product quality has a of this study are different from previous studies which show
positive and significant effect on consumer loyalty that customer satisfaction does not have a significant effect
(Djumarno et al., 2018; Jannah et al., 2019), because product on customer loyalty because customer satisfaction does not
quality requires continuous innovation to create better have a strong relationship with customer loyalty
quality with high value to maintain customers and ensure (Khairawati, 2020). It means that if a company does not pay
company competition in terms of high competitive attention to customer satisfaction, it will have a negative
dynamics. Likewise, according to resource based view impact on consumer loyalty.
theory, a good organization, high competition, and good The fourth objective of this study is to see the mediating
performance is an organization that has resources with good effect of consumer satisfaction on the relationship between
capabilities and strategies. (Porter, 1980; Barney, 1991; product quality and consumer loyalty. The Smart-PLS 3.0
Saldanha et al., 2018). However, the results of this study test results show that customer satisfaction has a positive and
indicate inconsistencies with other empirical studies which significant effect on the relationship between product quality
show that product quality does not have a positive and and customer loyalty. For this, consumer satisfaction
significant effect on consumer loyalty because consumer strengthens the relationship between product quality and
loyalty to a company's product does not always work with consumer loyalty at the Bamboo Institute. With the reason
product quality because consumers have many that the perspective of consumers about being satisfied with
considerations to choose a good product to use and consume product quality, product prices, service quality and overall
it (Jannah et al., 2019). satisfaction with institution supports the relationship
The second objective of this study was to examine the between product quality and consumer loyalty Bamboo
effect of product quality (PQ) on consumer satisfaction (CS). Institute. The results of this study confirm previous research
The Smart-PLS 3.0 test results show that product quality has that customer satisfaction has a significant effect on the
a positive and significant effect on consumer satisfaction. relationship between product quality and consumer loyalty,
This means that when companies improve product quality because product quality will give satisfaction to consumers
will increase consumer satisfaction on product or service.

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which ultimately has a positive impact on increasing kinds of goods such as tables, chairs and so on. As a local
consumer loyalty (Jannah (2019). product from local materials, the government needs to
empower the Bamboo Institute to improve quality with a
variety of products, in order to create a market for local
6. Conclusions and Implications products, and reduce imported goods. The government needs
Product quality, customer satisfaction and consumer to create a market for Bamboo Institute products by replacing
loyalty are important factors for marketing research and government furniture with local products. This could
applications in the trade sector. This is because all the strengthen the local economy in terms of the high intensity
existing variables also determine the company's of competition in Timor-Leste.
competitiveness and sustainability. Therefore, many
empirical studies have been conducted to examine the
relationship between these variables in order to increase 7. Limitation and Future Research
market share, profitability and company sustainability. This study uses customer satisfaction as a mediating
Unfortunately, the results of these studies show variable for the relationship between product quality and
inconsistencies. Some of them indicate that there is a positive consumer loyalty. But this research does not look at aspects
and significant relationship between these variables, but such as differentiation of product, price, service, market
some do not show significance. The results of this study also
orientation, entrepreneurial orientation and innovation
confirm the inconsistencies. The results of this study can be
orientation towards consumer satisfaction. Thus, future
concluded to answer the objectives of this study.
Product quality has a positive and significant effect on studies need to use these variables to observe their
consumer loyalty because high quality products will attract contribution to satisfaction with customer loyalty. This study
consumers to buy repeatedly and will recommend others to also only looks at the effect of product quality on consumer
buy. This means that when improving product quality will behaviour (satisfaction with customer loyalty), but does not
help increase consumer loyalty. From this, it shows that link to organisation’s competitive advantages and financial
consumers are satisfied with the quality of the product and performance. Conversely, competitiven advantages and
the price of the product. Consumer satisfaction has a positive financial performance are the ultimate targets of business
and significant effect on consumer loyalty. This means that organizations. Therefore, future studies should not only link
when consumers are happy with a product or service, it will product quality with consumer behaviour, but also use
stimulate consumers to buy repeatedly and recommend competitiveness with the organization's financial
others to buy the product or service that they buy. Consumer performance.
satisfaction also has a positive and significant effect on the
This research was only conducted at the Bamboo
relationship between product quality and consumer loyalty.
This shows that a good product will increase customer Institute, PI Timor-Leste and used periodic data. Therefore,
satisfaction which ultimately helps to retain consumer it is necessary to carry out continuous research to observe
loyalty. further to see the dynamics of changes in consumer
The implications of this study are (1) seeing the results of behaviour (satisfaction and loyalty) which are influenced by
the study indicate that product quality has a positive and product quality. This study also only uses a questionnaire
significant effect on customer satisfaction. Therefore, it is data collection instrument, where the overall answer only
recommended that the managers of the Bamboo Institute of depends on the respondent, and the respondent can give
Timor-Leste continue to improve product quality according biased answers. Therefore, further research should also use
to the needs and desires of consumers in order to maintain interviews, observations and focus groups to confirm the
consumer satisfaction and retain loyalty in the intensity of answers from consumers.
market competition. From that, it can help the Bamboo
Institute to expand market share, increase profitability and
ensure trade sustainability. (2) Products from the Bamboo
Institute use local materials such as bamboo to produce all

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Appendix: Research Instruments

I. Product Quality (PQ)

No Questionnaire Likert Scale

1 2 3 4 5
1.1 Conformance to specifications
1.1.1 The products I bought at this institute are in accordance with the quality
standards I want.
1.1.2 The products I bought at this institute match the specifications I wanted.
1.1.3 I bought products from this institute because they function according to my
wishes.
1.2 Durability
1.2.1 Bamboo products from this institute are durable.
1.2.2 The bamboo products from this institute have a good finishing and durable.
1.2.3 Bamboo products from this institute take a long time to replace.
1.3 Design innovation and Improvement
1.3.1 The bamboo product design of this institute is more attractive compared to other
products.
1.3.2 The bamboo product model of this institute is more attractive compared to other
products.
1.3.3 The verification of bamboo products from this institute has undergone many
changes.
1.3.4 Bamboo products from this institute have experienced changes in quality.
1.4 Brand image
1.4.1 Bamboo products from this institute are characterized by beautiful and attractive
colours.
1.4.2 Bamboo products from this institution are very easy to recognize.
1.4.3 The bamboo products of this institute are very easy to say.
1.4.4 The model of the bamboo product from this institute is in accordance with my
wishes.
1.4.5 Bamboo products from this institute are well known or famous.
1.4.6 Bamboo products from this institute are a favourite product in the community.

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II. Customer Satisfaction (CS)

Likert Scale
No Questionnaire
1 2 3 4 5
2.1 I am satisfied with the quality of the bamboo products from this institute.
2.2 I am satisfied with the service quality of this institute.
2.3 I am satisfied with the price of bamboo products from this institute.
2.4 Overall I am satisfied with this institute.

III. Customer Loyalty (CL)

Likert Scale
No Questionnaire
1 2 3 4 5
3.1 I have the intention to keep choosing bamboo products from this institute.
3.2 I consider this institute to be my first choice.
3.3 I feel better, when I go to this institute to buy bamboo products.
3.4 I will recommend bamboo products to my friends.
3.5 I will talk positively about bamboo products of this institute to others.

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