The Effect of Product Diversity, Price, Service Quality, and Location on Repurchase Intention Mediated by Pharmacy Customer Satisfaction

The Effect of Product Diversity, Price, Service Quality, and Location on Repurchase Intention Mediated by Pharmacy Customer Satisfaction

Abdul Hafiz, Jasman J Ma’ruf, Sorayanti Utami

Master of Management Study Program, Faculty of Economics and Business

Syiah Kuala University

DOI: https://doi.org/10.51244/IJRSI.2024.11090111

Received: 23 September 2024; Accepted: 27 September 2024; Published: 24 October 2024

ABSTRACT

This research aims to analyze the Effect of Product Diversity, Price, Service Quality, and Location on Repurchase Intention mediated by Pharmacy Customer Satisfaction in Banda Aceh City. The study involved 208 respondents who shopped at six pharmacies in the city. Data collection was conducted using a Likert scale questionnaire, and the analysis utilized Structural Equation Modeling (SEM) with SmartPLS Version 3.0. The results of the analysis show that although Product Diversity has a positive effect on repurchase intention, this effect is not significant, suggesting that pharmacy managers should prioritize other factors that significantly influence repurchase behavior. Price positively and significantly affects repurchase intention but does not significantly impact customer satisfaction, indicating that customers may value other aspects more. Service Quality shows a positive and significant effect on both repurchase intention and customer satisfaction, emphasizing the importance of providing high-quality service. Location emerges as the most significant factor influencing customer satisfaction, with an O value of 0.366, T Statistics of 4.685, and a P-value of 0.000. Additionally, Customer Satisfaction has the strongest impact on repurchase intention, with an O value of 0.419, T Statistics of 4.759, and a P-value of 0.000, highlighting that efforts to improve customer satisfaction should be a top priority. To enhance customer satisfaction and drive repurchase intention, pharmacy managers should focus on strategic location choices, high-quality service, and initiatives such as loyalty programs, responsive customer service, and relevant product offerings. By prioritizing these elements, pharmacies can better meet customer needs and foster long-term loyalty.

Keywords: Product Diversity, Price, Service Quality, Location, Repurchase Intention, Customer Satisfaction, Pharmacy, Banda Aceh City.

BACKGROUND AND PROBLEMS

Business expansion is one of the main goals for every entrepreneur, both those who are just starting and those who are experienced. Expanding the business network is an important indicator of business growth and development. However, expansion is not easy because it has to face fierce competition and the emergence of many new competitors. For a business to grow, entrepreneurs need to take strategic steps such as effective marketing and improving service quality. Retaining old customers and attracting new customers is the key to success in business.

In the world of pharmacies, this business not only sells medicines but also provides health services to the community. In Banda Aceh City, the number of pharmacies continues to increase, from 42 units in 2021 to 90 units in 2023. However, the main challenge faced by pharmacies is significant fluctuations in turnover, as seen in data from several pharmacies in Banda Aceh. For example, Kimia Farma Diponegoro Pharmacy has a turnover of IDR 11 billion by selling 1,800 products, while Berkat Jaya Farma Pharmacy, which sells 5,000 products, only earns a turnover of IDR 350 million. This difference in turnover indicates that other factors affect sales performance, such as customer loyalty and repurchase intentions. Fluctuations in turnover and uncertainty in customer loyalty are significant problems for pharmacies in Banda Aceh. Initial surveys showed that repurchase intention at pharmacies in Banda Aceh was still low, with an average score of 3.056. This shows that customers are not fully committed to returning to shop at the same pharmacy. Several factors such as customer satisfaction, location, price, service quality, and product variety have the potential to influence repurchase intentions, but it is not yet known to what extent each of these factors contributes.

This study offers novelty by focusing on a combination of factors that influence repurchase intention at independent pharmacies in Banda Aceh, which are not affiliated with hospitals. In addition, this study introduces the variable of customer satisfaction as a mediator in understanding the relationship between external factors (product, price, service, location) and repurchase intention. The results of this study are expected to provide practical insights for pharmacy owners in designing more effective marketing strategies and increasing customer loyalty amidst increasingly fierce competition.

LITERATURE REVIEW

Product Diversity

Research by Arsyanti and Astuti (2016) shows that product diversity affects customer satisfaction, with indicators of product completeness, brand, size variation, and quality. The greatest influence on customer satisfaction is found in the quality of customer service, which includes performance, additional features, usability, and perceived quality.

Shalehah (2019) found that product characteristics such as brand, quality, design, and promotion have a significant effect on repurchase intention. Albari and Kartikasari (2020) revealed that service quality has the greatest influence on customer satisfaction, while product quality contributes to customer loyalty. Vashti and Antonio (2021) also found that high-quality products increase customer interest in repurchasing.

H1. The effect of product diversity on customer satisfaction

H2. The effect of product diversity on repurchase intention

Price

Suhaily (2017) showed that price perception has no effect on customer satisfaction but does on repurchase intention. Ifan Fauzy et al. (2023) found that price has a positive effect on customer satisfaction. Rama’s (2020) research highlights the role of price perception in purchasing decisions, where customers evaluate the price-quality ratio and price trust. Matzler et al. (2006) explain that price satisfaction is often not generalizable because it involves many psychological aspects.

Another study by Lee (2018) shows that price perception affects customer satisfaction and loyalty, which leads to repurchase intention. Novia Clarita (2023) also emphasized that price and location play a role in repurchase decisions at CFC Grande Karawaci.

H3. The effect of price on customer satisfaction

H4. The effect of price on repurchase intention

Service Quality

According to Arsyanti and Astuti (2016), service quality has the greatest influence on customer satisfaction, with indicators such as physical evidence, reliability, responsiveness, assurance, and empathy. Albari and Kartikasari (2020) found that service quality has the greatest influence on customer satisfaction, which is also proven by research by Ifan Fauzy et al. (2023). Adnan et al. (2019) found that product quality, brand image, price, and advertising have a significant effect on purchasing decisions and customer loyalty. Suroso (2018) stated that to increase repurchase intention, product and service quality must be prioritized.

Alwan and Turki (2022) emphasized that good service and product quality increase customer repurchase intention. Amoako et al. (2023) showed that service recovery and service quality at KFC fast food restaurants have a significant effect on repurchase intention. Slack (2020) found that empathy and responsiveness in service have a significant effect on customer repurchase intentions, but reliability, assurance, and tangible evidence do not have a significant effect.

H5. The effect of service quality on customer satisfaction

H6. The effect of service quality on repurchase intentions

Location

Research conducted by Ifan Fauzy et al. (2023) found that location did not have a significant effect on customer satisfaction at Balung Cafe Station. This shows that location factors, although important in some business contexts, are not always the main determinants of customer satisfaction in all situations. Customers at Balung Cafe Station may be more focused on other aspects, such as product or service quality so location factors are less relevant in influencing their level of satisfaction. These results also show that customer preferences can be highly dependent on the type of business and how services or products are delivered to consumers.

In contrast, research by Novia Clarita (2023) revealed that customers at CFC Grande Karawaci prioritize price and location in their repurchase decisions. In this context, location plays a greater role in influencing consumer decisions to repurchase, indicating that accessibility and convenience of location can be very important factors in the fast food business. A strategic location makes it easier for consumers to reach the business, while competitive prices strengthen purchasing decisions. These results emphasize the importance of considering location as an important variable in designing marketing strategies, especially in the retail and restaurant sectors.

H7. The influence of location on customer satisfaction

H8. The influence of location on repurchase intention

Customer Satisfaction

Suhaily (2017) found that price perception had no effect on customer satisfaction, but had a positive effect on repurchase intention. Research by Nurul Azizah and Christian Wiradendi Wolor (2023) stated that the quality of information and trust had a significant effect on customer satisfaction and repurchase intention. Research by Nurrizky et al. (2023) at the Taichan “Goreng” restaurant showed that experience-based marketing increased consumer satisfaction and repurchase intention. This proves that customer satisfaction has a positive effect on repurchase intention.

H9. The influence of customer satisfaction on repurchase intention

Figure 2.1 Research Framework

RESEARCH METHOD

Research Instrument

In this study, all measurement items were taken from previous studies to ensure the validity of the data obtained. However, some statements have been slightly modified to better suit the context of the current analysis. To measure Repurchase Intention, 4 indicators developed by Megantara in 2016 were used. Meanwhile, Customer Satisfaction was measured using 4 indicators from Ginting et al.’s research published in 2023.

In addition, Product Diversity was measured using 3 indicators developed by Keller in 2021. For the Price variable, 4 indicators from the same research by Keller were used. Service Quality (X3) is measured by 4 indicators taken from Zeithaml’s research in 2018. Finally, the Location variable is measured using 6 indicators developed by Tjiptono in 2017. Thus, this research instrument is carefully designed to ensure that each variable is measured appropriately and relevant to the research objectives. A questionnaire with a 5-point Likert scale was used to collect data. In addition, this study used in-depth interviews with several informants. This was done to obtain in-depth information related to the research variables and to support the results of the quantitative analysis.

Population and Research Sample

The population in this study were consumers who shopped for medicines at 6 (six) pharmacies in the city of Banda Aceh. Meanwhile, the theory used to determine the number of samples to be selected refers to the theory of Hair, et al (2013), where the minimum sample is 5-10 x the number of indicators, while the number of samples in this study was 8 x 26 = 208 respondents. This number of samples has met the minimum assumptions for sampling. The distribution of questionnaires to respondents will be carried out in 2 ways, namely by distributing questionnaires via Google Forms and by submitting questionnaires in hardcopy to respondents.

Data analysis

The data analysis techniques in this study are descriptive and verification. Descriptive analysis is carried out to assess the demographic profile of respondents and the internal consistency of the construction. The verification analysis uses SEM (Structural Equation Modeling) to verify the relationship path between variables in this study. In addition, the SEM analysis software is SmartPLS Version 3.0

RESEARCH RESULTS AND DISCUSSION

Respondent Characteristics

Based on the results of the study, it can be explained that as many as 107 people consist of new customers and as many as 78 people are old customers, thus the respondents in this study are dominated by new customers.

Based on the gender of the respondents, it can be explained that as many as 133 customers are male and as many as 52 respondents are female. Thus, the respondents are dominated by male customers.

In terms of the age of the respondents, it can be explained that as many as 25 people are aged between 25 – 29 years, as many as 24 respondents are aged 30 – 34 years, as many as 25 respondents are aged 35 – 40 years and as many as 111 respondents are over 40 years. Thus, respondents with an age level of over 40 years are more dominant compared to respondents aged 25 – 29 years, so respondents in this study have maturity in thinking and experience in assessing service and customer satisfaction in choosing the best pharmacy in Banda Aceh.

Then the next characteristic of the respondents is regarding the level of education of the respondents, it can be explained that as many as 12 people have a high school education, as many as 43 respondents have a Diploma

III education, as many as 108 people have a Bachelor’s degree while respondents with a Postgraduate education are 22 people from the total respondents studied.

Regarding the respondents’ occupations, it can be explained that 39 respondents work as ASN, 1 as a member of the TNI/Polri, 48 respondents who work in BUMN companies, 28 respondents, 31 respondents who work as private employees and 38 respondents who work as entrepreneurs from the total respondents work in various sectors. Thus, it can be explained that respondents who work in BUMN companies are more dominant compared to those who work in other sectors. Based on table 4.1 above, it can be concluded that the respondents in this study are dominated by long-standing customers with male gender with an average age of 40 years and above which is a mature and experienced age level and dominated by BUMN employees.

Research Instrument Testing

• Validity

The test results show that all variables used in this study are declared valid. This can be seen from the significance value (P value) which is less than 0.05 in the statistical test (2-tailed). Therefore, all indicators in the research variables, namely Product Diversity, Price, Service Quality, Location, Customer Satisfaction, and purchase intention can be considered valid and feasible to be used in the next research stage. In addition, testing using Average Variance Extracted (AVE) also shows that all variables tested have an AVE coefficient greater than 0.60. This indicates that these variables have a fairly high level of variance and can explain variations in the data well. These results also support the results of previous validity tests, which showed a match between the variables studied and the constructs to be measured. Thus, the results of validity and reliability tests indicate that all variables in this study are reliable and valid for use in further research, providing a strong basis for analysis and conclusions that can be drawn from the data collected.

• Reliability

Reliability testing using the Cronbach Alpha (CA) approach is a method commonly used to measure the reliability of a measurement instrument. In the graph presented, it can be seen that the CA values ​​of the Product Diversity, Price, Service Quality, Location, Customer Satisfaction, and Repurchase Intention variables exceed the required threshold value of 0.60. Therefore, it can be concluded that the six variables meet the CA reliability requirements applied in this test. It is important to note that a CA value above 0.60 indicates a fairly good level of reliability, but it should be remembered that the higher the CA value, the higher the reliability of the measurement instrument. Thus, the results of this test provide confidence that these variables can be relied on in data collection and further analysis related to the research topic being carried out.

• Measurement Model

Convergent validity aims to recognize the validity of each bond between the marker and the construct or its latent variable. In this research, a loading factor limit of 0.50 will be used.

From the results of the study, there is 1 indicator that does not meet the requirements because it has a loading factor number <0.50 so it must be eliminated. After the elimination process. It can be seen that none of the other indicators have a coefficient value below 0.5 or rounded up to 0.5. So in terms of loading factors, all existing indicators are said to have a loading factor that is more than the required requirements, so they are said to be valid to be included in the structural test.

However, before continuing with the structural test, the feasibility of the model will first be seen to see how well the model fits the existing data. Testing is carried out with Goodness of Fit.

• Model Fit

The model can be tested using various methods, in SEM analysis there is no single statistical test tool to measure or test the hypothesis about the model. The following are some fit indices and cut-off values ​​to test whether a model can be accepted or rejected (Ferdinand, 2006). The explanation of each fit test and cut-off value can be explained in the following table:

Table 4.1 Model Fit: Saturated dan Estimated Model

	Saturated Model	Estimated Model
SRMR	0.077	0.077
d_ULS	1.907	1.907
d_G	0.674	0.674
Chi-Square	795.623	795.623
NFI	0.773	0.773

This table shows the results of the model fit analysis for two models: The saturated Model and the Estimated Model, using several model fit indices. Here is a brief analysis: The SRMR value for both models is 0.077, indicating a fairly good fit because it is below 0.08. The d_ULS value is 1.907 and d_G is 0.674, both indicating a consistent fit between the estimated model and the observed data. The Chi-Square value is 795.623, indicating some differences between the estimated model and the observed data, but this must be seen in the context of the sample size and complexity of the model. The NFI value is 0.773, indicating a sufficient but not optimal fit. Overall, both models have a similar level of fit to the observed data, but several indices indicate that the models can still be improved to achieve a more optimal fit. This model fit evaluation is important to assess the quality of the statistical model used in this study. 4.3 Verification Hypothesis Testing

Direct Hypothesis Testing

After all assumptions can be met, the hypothesis testing will be carried out as proposed in the previous chapter. Testing of the 9 direct hypotheses of this study is carried out based on the Critical Ratio (CR) value of a causal relationship from the results of SEM processing as in table 4.11 below.

Figure 4.2. Structural Model for Hypothesis Proof

Table 4.2. Regression Weight Structural Equational Model

	Original Sample (O)	Sample Mean (M)	Standard Deviation (STDEV)	T Statistics (|O/STDEV|)	P Values
Customer Satisfaction -> Repurchase Intention	0.419	0.432	0.088	4.759	0
Location -> Customer Satisfaction	0.366	0.364	0.078	4.685	0
Location -> Repurchase Intention	0.137	0.141	0.067	2.048	0.041
Price -> Customer Satisfaction	-0.086	-0.082	0.113	0.763	0.446
Price -> Repurchase Intention	0.185	0.187	0.079	2.333	0.02
Product -> Customer Satisfaction	0.218	0.217	0.098	2.227	0.026
Product -> Repurchase Intention	0.1	0.091	0.081	1.242	0.215
Service Quality -> Customer Satisfaction	0.239	0.245	0.08	2.965	0.003
Service Quality -> Repurchase Intention	0.154	0.142	0.072	2.139	0.033

Hypothesis 1:

Product Diversity -> Repurchase Intention

Product Diversity has a positive but insignificant effect on repurchase intention, indicated by a lower an O value of 0.1,  T Statistics (1.242) and P-Value of 0.215.

Hypothesis 2:

Price -> Repurchase Intention

Price has a positive effect on repurchase intention with an O value of 0.185 and T Statistics of 2.333, with a P-value of 0.02, indicating that price can affect repurchase intention but not as strongly as other factors.

Hypothesis 3:

Service Quality -> Repurchase Intention

Service quality also has a positive and significant effect on repurchase intention with an O value of 0.154, T Statistics of 2.139, and a P Value of 0.033, indicating that service quality can increase repurchase intention.

Hypothesis 4:

Location -> Repurchase Intention

The location has a positive influence on repurchase intention with an O value of 0.137 and T Statistics of 2.048, but its significance is lower compared to customer satisfaction, indicated by a P-value of 0.041.

Hypothesis 5:

Product Diversity -> Customer Satisfaction

Product Diversity has a positive effect on customer satisfaction with an O value of 0.218,  T Statistics of 2.227, and a P-value of 0.026, indicating that the product plays a role in customer satisfaction.

Hypothesis 6:

Price -> Customer Satisfaction

Price does not have a significant influence on customer satisfaction, indicated by a negative O value (-0.086) low T Statistics (0.763), and high P Value (0.446).

Hypothesis 7:

Service Quality -> Customer Satisfaction

Service quality has a significant positive effect on customer satisfaction with an O value of 0.239 a fairly high T Statistics (2.965) and a very low P Value (0.003), indicating the importance of service quality in creating customer satisfaction.

Hypothesis 8:

Location -> Customer Satisfaction

Location also has a positive and significant effect on customer satisfaction with an O value of 0.366 and a T Statistics of 4.685, with a P Value of 0, indicating that location is an important factor in customer satisfaction.

Hypothesis 9:

Customer Satisfaction -> Repurchase Intention

Customer satisfaction has a significant positive effect on repurchase intention with an Original Sample (O) value of 0.419 and a high T Statistics (4.759), indicating that this hypothesis is very significant with a P-value of 0.

MANAGERIAL IMPLICATIONS

Based on the results of hypothesis testing in the study of pharmacy customer behavior, there are several important managerial implications to note. First, although product variety has a positive effect on repurchase intention, this effect is not significant. This suggests that although product variety is important, pharmacy managers may need to focus more on other factors that are more significant in influencing customer repurchase intention.

Furthermore, price is shown to have a positive and significant effect on repurchase intention. This means that competitive and attractive pricing strategies can be key to increasing customer loyalty. Pharmacy managers should consider offering discounts, promotions, or loyalty programs that can make product prices more attractive to customers.

Service quality also shows a positive and significant effect on repurchase intention and customer satisfaction. This emphasizes the importance of training pharmacy staff to provide high-quality service. Friendly, fast, and efficient service can improve customer experience, which in turn will increase their satisfaction and loyalty. Pharmacy location also has a positive and significant effect on repurchase intention and customer satisfaction. A strategic location that is easily accessible to customers can increase their convenience in shopping. Pharmacy managers should consider factors such as accessibility, parking, and the surrounding environment in choosing a pharmacy location. Customer satisfaction has a very significant effect on repurchase intention. This suggests that efforts to improve customer satisfaction should be a top priority. Managers can undertake various initiatives such as loyalty programs, responsive customer service, and relevant product offerings to improve customer satisfaction.

Lastly, although the price does not have a significant effect on customer satisfaction, it suggests that customers may value other aspects such as service quality and location more. Therefore, pharmacy managers can focus more on improving service quality and strategic location selection to improve customer satisfaction.

By understanding and implementing these managerial implications, pharmacies can improve customer satisfaction and loyalty, which will ultimately have a positive impact on repurchase intentions and overall business success. This model fit evaluation is important to assess the quality of the statistical model used in this study, and the results indicate that although there is room for improvement, the estimated model is relatively optimal in modeling the available observational data.

CONCLUSION

In conclusion, this study shows that several factors have a significant influence on repurchase intention and customer satisfaction in pharmacies. Service quality and location are proven to be the most influential factors, both on repurchase intention and customer satisfaction. Price also has a positive influence on repurchase intention, although not as strong as service quality and location. In contrast, product diversity and price do not show a significant influence on customer satisfaction, indicating that customers value other aspects such as service quality and location more. Therefore, pharmacy managers should focus on improving service quality and strategic location selection to increase customer satisfaction and loyalty. Thus, pharmacies can achieve better business success through increasing customer satisfaction and repurchase intention.

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