THE ROLES OF THE PHYSICAL
ENVIRONMENT, PRICE PERCEPTION,
AND CUSTOMER SATISFACTION IN
DETERMINING CUSTOMER LOYALTY IN
THE RESTAURANT INDUSTRY
Heesup Han
Dong-A University
Kisang Ryu
University of New Orleans
This research aims to examine the relationships among three components of the physical
environment (i.e., décor and artifacts, spatial layout, and ambient conditions), price per
ception, customer satisfaction, and customer loyalty in the restaurant industry. A total of
279 cases from a survey were used to assess overall fit of the proposed model and test
hypotheses using structural equation modeling. The three factors of the physical environ
ment strongly influenced how customers perceived price, and this price perception, in turn,
enhanced customer satisfaction level and directly/indirectly influenced customer loyalty.
Décor and artifacts were the most significant predictors of price perception among the
three components of the physical environment. Furthermore, both price perception and
customer satisfaction played significant partial/complete mediating roles in the proposed
model. The paper provides potential ways for restaurateurs to increase customer loyalty by
improving their understanding of the roles of physical environment, price perception, and
customer satisfaction.
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