The Effect of Digital Marketing, Product Innovation, and Service Quality on Customer Loyalty in Indonesian MSMEs: The Mediating Role of Customer Satisfaction

Abstract

The increasing digitalization and evolving customer behavior in the post-pandemic era have posed new challenges for Indonesian Micro, Small, and Medium Enterprises (MSMEs) in maintaining customer loyalty. This study aims to analyze the influence of digital marketing, product innovation, and service quality on customer loyalty, with customer satisfaction acting as a mediating variable. A quantitative research design was employed, and data were collected from 250 MSME customers through structured online questionnaires. The data were analyze using Structural Equation Modeling (SEM) with SmartPLS. The results indicate that digital marketing, product innovation, and service quality significantly influence customer satisfaction, which in turn has a strong positive effect on customer loyalty. Furthermore, customer satisfaction proven to mediate the relationship between the three independent variables and customer loyalty. The study concludes that enhancing digital engagement, fostering innovation, and improving service quality are key strategies for MSMEs to strengthen customer satisfaction and loyalty. These findings offer practical implications for MSME stakeholders in designing effective marketing and customer retention strategies in a digital business environment.