THE INFLUENCE OF CUSTOMER SATISFACTION OF LOYALITY

TOWARD APARTMEN CONSTRUCTION COMPANIES IN INDONESIA

DURING COVID-19 PANDEMIC: MEDIATED BY TRUST

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ABSTRACT
High-rise apartment construction is one of the construction sectors that have good growth potential in
Indonesia. Even in the COVID-19 pandemic, the Indonesia government provide support and commitment to
encourage the infrastructure industries to continue working. However, the customer satisfaction in the high-rise
apartment construction sector still low. Customer satisfaction and loyalty are essential factors for construction
business; hence it is important to understand the factors that influence customer satisfaction toward high-rise
apartment project contractors. Customer trust helps to keep a good relationship between buyer and seller. Prior
studies revealed that customer trust has an essential role as mediating variable in the relationship of customer
satisfaction and customer loyalty. However, there still few study that examine customer trust as mediating
variable in the construction context. Therefore, this study proposes to build research model that examine the
influence of customer satisfaction on customer loyalty, examine customer trust as mediating variable, and
evaluate the influence of guanxi, corporate image, and service quality as factor-factor that build customer
satisfaction.

Keywords: high-rise apartment construction, satisfaction, guanxi, loyalty, trust

INTRODUCTION
The construction industry is one of the important contributors to the economic in countries (Chou &
Yang, 2012; Niazi & Painting, 2017). The construction industry in Indonesia is an important industry
that contributed to 14% of Indonesia's gross domestic product in 2017 (Konstruksi, 2017). High-rise
apartment construction is one of the construction sectors that have good growth potential in Indonesia.
According to a report by Arcadis, high-end rise apartments in Indonesia shows an upward trend in
construction cost from 2014 until 2018 (Indonesia, 2019). In Jakarta, the ratio between the number of
unit apartments and the population is still 2%, a relatively small number, which indicates there is a big
room for growth in apartment construction in Indonesia (rumah.com, 2020). The world faces the
COVID-19 pandemic in early 2020. The global COVID-19 pandemic caused more than 4.3 million
cases in the middle of 2020 (Kanniah et al., 2020). The COVID-19 pandemic caused major
catastrophes in every sector. The construction industry in Indonesia is one of the sectors that feel the
negative impact of the COVID-19 pandemic. However, the Indonesia government provide support and
commitment to encourage the infrastructure industries to continue working during COVID-19
pandemic under health protocols (Baidarus, 2021). The high rise-apartment industries have a good
prospect even during COVID-19 pandemic.
The success of a project is vital for the construction business. One of the evaluation factors of the
project success in the construction business is customer satisfaction (Alshihre et al., 2020). Customer
satisfaction in the construction industry represents factor that indicate the success of a project and
evaluation of quality, and furthermore, customer satisfaction can be observed as one of the tools for
learning and developing the construction business (Kärnä et al., 2009). In order to understand
customer satisfaction in the high-rise apartment sector in Indonesia, this study conducts preliminary

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studies. The preliminary studies use the survey to collect data among 30 project managers from the
developer of a high-rise apartment in Jakarta with minimum 10 years of experience in construction
projects. The survey conducted using face-to-face questionnaires with 5 Likert scales ranging from 1
(very dissatisfied) to 5 (very satisfied). The survey was held from December 12 th, 2021 until January
30th, 2022. The result of the survey is presented in Graphic 1.1.
Graphic 1.1 High-rise Apartment Developer in Indonesia Satisfaction.
The preliminary survey result (Graphic 1.1) showed that 64% of respondents said that they were very
dissatisfied with their high-rise apartment construction project.

Marketing practitioners and researchers have been addressed the importance of effectively managing
customer satisfaction and enhancing customer loyalty for a long time (Kasiri et al., 2017). Customer
loyalty is considered to be a significant determinant of business success (Nasir & Morgan, 2017).
Customer satisfaction and loyalty are essential factors for business; hence it is important to understand
the factors that might influence customer satisfaction toward high-rise apartment project contractors.
Customer trust is an important factor that helps to keep a good relationship between buyer and seller.
Prior studies revealed that customer trust has an essential role as mediating variable in the relationship
of customer satisfaction and customer loyalty (Carranza et al., 2018; Haron et al., 2020; Osman &
Sentosa, 2013). However, there is still a little study that examines the role of customer trust as
mediating variable between customer satisfaction and loyalty in the context of the construction
industry. Furthermore, this study will also examine the influence of customer trust as mediating
variable between customer satisfaction and customer loyalty. Congruent with this, the aim of this
paper is to propose a research model that accommodates the influence of customer satisfaction on
customer loyalty toward high-rise apartments, explore the relationship between customer satisfaction,
trust, and customer loyalty toward high-rise apartment construction projects, and examine factors that
build customer satisfaction toward high-rise apartment construction project.

THEORITICAL REVIEW AND HYPOTHESES DEVELOPMENT

The grand theory used in this research is Consumer Behavior Theory. The second part is an
explanation of the theory between or middle range theory. The mid-range theory used in this study is
the Stimulus Organism Response Theory or S-O-R Theory. The third part of the research is an
explanation of applied theory or application theory. There are 6 concepts used in the application theory
of this research, namely customer loyalty, customer satisfaction, service quality, guanxi, corporate
image, and customer trust.

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Stimulus-organism-response or S-O-R is a theory developed by Mehrabain and Russell (Mehrabian &
Russel, 1974). The S-O-R theory states that the shopping environment contains stimuli (S) that affect
consumers as organisms (O), and have an impact on behavior or response (R) to shopping places in the
context of this study, namely construction service companies or often called contractors in Indonesia.
The stimulus can be defined as factors that affect the internal condition of the individual, and these
stimuli consist of elements of the marketing mix (product, price, promotion, place) and other
environmental factors. Research from Famiyeh et al developed S-O-R for the banking context, and this
study adapts the S-O-R concept from Famiyeh et al into the context of apartment project construction
in Indonesia (Famiyeh et al., 2018).

3.1. Customer Loyalty

Creating and maintaining customer loyalty is the main strategy for all business owners because loyal
or loyal customers will be a profitable asset for the company (Srinivasan et al., 2002). This is not only
profitable but makes a definite captive market for the company. The initial definition of customer
loyalty states customer loyalty regarding the behavior of repurchasing or repeating orders from
company customers (Srinivasan et al., 2002). Meanwhile, according to Dick & Basu, (1994), customer
loyalty is defined as the positive attitude of customers toward a product or brand and their
commitment to repurchase or reuse it/repeat the order (Dick & Basu, 1994). According to Oliver, the
definition of customer loyalty is a commitment from customers and a positive attitude from customers
towards a brand or product despite the influence of marketing by competitors/competitors (Oliver,
1999). The definition of customer loyalty/customer loyalty, according to Keller (1993), is a positive
attitude from customers towards a brand that is presented with repeat buying behavior/repeat order.
The definition of customer satisfaction/customer satisfaction from this research is the positive attitude
of the company developer in the multi-story apartment construction business as a customer to a
construction service company/contractor, which is presented with repeated purchasing behavior or
providing new construction contracts/repeat orders and recommend it to other parties (Hoe & Mansori,
2018).

3.2. Customer Satisfaction

Customers compare their experience with product or service performance against their preconceived
expectations (Haverila & Fehr, 2016; Kotler & Keller, 2012). Customers feel satisfied when their
experience exceed their expectation and feel disappointed when their experience is below their
expectation. In project management, customer satisfaction is met when the project meets customers'
expectations (Haverila & Fehr, 2016).
In this study, customer satisfaction is the result of a subjective comparison of the development
company/developer on their expectations for the products and services of a construction company with
their experience with the products and services of a service company.
Prior research found that customer satisfaction has emerged as an essential driver of customer loyalty
(Gopi & Samat, 2020; Hoe & Mansori, 2018). Hence, this study proposes that customer satisfaction
led to customer loyalty toward high-rise apartment contractors as H1.
H1 customer satisfaction led to customer loyalty toward high-rise apartment project contractors.

3.3. Service Quality

Service quality is one of the important investment of a business because service quality is one of the
sources of competitive advantage that differentiate a business from its competitor (Alam & Noor,
2020). One of the early and most popular service quality models was developed by Parasuraman et
al(Parasuraman et al., 1988). The service quality represents the level to which an entity experience
satisfies its customer's satisfaction (Famiyeh et al., 2018). Research from Sunindijo et al developed the
SERVQUAL concept by Parasuraman et al into the context of the construction industry (Sunindijo et
al., 2014). This study adapts the concept of service quality from the research of Sunindijo et al (2014).
The service quality concept from Sunindijo et al consists of 5 dimensions, which are:
1) Tangibility is related to field conditions and personal physical conditions, and the workers.

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 2) Reliability relates to the ability, expertise, and method that can be relied upon in working on
the project in accordance with the results of the promised quality of work and accuracy of
specifications achieved.
3) Responsiveness relates to the willingness to help customers and provide prompt service.
4) Assurance relates to the level of knowledge and professional level of the staff and workers of
construction service companies/contractors.
5) Empathy relates to the personal attention and concern of companies towards their customers.
The definition of service quality from this research is the customer's assessment of the overall quality
of service from a construction service company. Marketing researcher has been giving a great deal of
attention in the relationship between service quality and customer satisfaction (Famiyeh et al., 2018).
Prior research found that service quality is an important asset that has a significant influence on
developing customer satisfaction (Gopi & Samat, 2020; Koay et al., 2022; Rita et al., 2019). Based on
prior findings. This study proposes that service quality is one of the antecedents of customer
satisfaction.
H2 service quality has a positive influence on customer satisfaction.

3.4. Guanxi
Guanxi is one of the factors that is considered important and influential in the strategic management of
Chinese companies, especially in the realm of strategic orientation (Li & Peng, 2008). Guanxi is the
root of Chinese culture that has existed since their ancestors lived in a society that helped each other
and worked together. One of the widely cited Guanxi concepts in strategic management research is
that of Yang (1994) (Yang, 1994). According to Yang, the practice of guanxi is a relationship that
involves the exchange of gifts, favors, and meals, the cultivation of personal relationships and
networks of interdependence, and the creation of obligations and debts between the two parties (Yang,
1994). Guanxi is a social exchange mechanism between buyer and seller that is built on mutual favors
and is considered a strategic asset in the Chinese business and its long history (L. W. Y. Lee et al.,
2018). According to Yen et al., guanxi in the business context can be defined as durable social
connections and networks that companies use to exchange favors in order to fulfill organizational
goals (Yen et al., 2011). The concept of guanxi in this study adapts guanxi from Yen et al (2011).
Guanxi in this study is a multi-dimensional form/contract consisting of dimensions of renqing, xinren,
and ganqing. Renqing is a set of social norms adopted by network members as a strategy to maintain
harmony in their social circle. Xinren relates to the aspect of trustworthiness, guanxi is regarded as
credit. Ganqing represents a shared feeling among network members, ganqing indicates guanxi the
closeness of network members. Quanxi in this study is defined as social connections and networks
formed and used by developer companies and construction companies to exchange assistance in order
to fulfill the goals of the organization.
The relationship is an important aspect of marketing theory and practice because it has an essential
influence on developing and maintaining a good relationship between buyer and seller (L. W. Y. Lee
et al., 2018). Prior research encompasses the importance of guanxi practice on customer satisfaction in
many industries (Chen & O’Leary, 2018; Zhai et al., 2013). Hence, this study proposes that guanxi
practice is one of the important predictors of customer satisfaction.
H3 guanxi practice has a positive influence on customer satisfaction toward high-rise apartment
project contractors.

3.5. Corporate Image

Corporate image is one of the important issues in both academia and industrial practice because the
corporate image has an important role in helping customers in the decision-making process when
purchasing (Horng et al., 2018). Corporate image is important for companies where the corporate
image is a source of competitive advantage because the corporate image is one of the intangible assets
of a company that is difficult for competitors to imitate (Alam & Noor, 2020). One definition of
corporate image is the public's perception of the overall impression that an organization and/or
company has (Alam & Noor, 2020; J. Lee & Lee, 2018). According to Gurlek et al, the definition of
corporate image is a concrete result about an organization that is expressed through various emotions,

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opinions, interactions, and impressions of company stakeholders on the organization, where the
customer/customer is one of the stakeholders (Gürlek et al., 2017). The definition of corporate image
in this study is the customer's perception of the overall impression of a construction company.
Companies with a good image will stand out among their competitors and enhance customers'
perception of the firm's product or services (Coutinho et al., 2019). Marketing research has been
interesting and given attention to the corporate image's influence on customer satisfaction (Coutinho et
al., 2019; Nasir & Morgan, 2017). Hence, this study hypothesized that a good corporate image led to
better customer satisfaction.
H4 corporate image has a positive influence on developing customer satisfaction toward high-rise
apartment project contractors.

3.6. Customer trust

Trust is an important factor for companies, especially in building relationships with customers in the
construction industry (Iyiola & Rjoub, 2020). Good trust between customers and construction
companies will create a good working environment so that it can reduce problems in construction
work and improve work quality (Iyiola & Rjoub, 2020). Trust is one of the important concepts and is
often raised in research in the field of marketing, and trust is widely studied in various industrial
contexts such as online business, banking, retail, and others. According to research from Lau and
Rowlinson (2009), trust in the field of construction is defined as a psychological condition of two
parties that depends on the wisdom of both parties, where one party believes that the other party is
honest and does not act unethically (Lau & Rowlinson, 2009).
Customer trust is an important asset to keeping a good relationship. Prior empirical research revealed
that customer trust doesn’t just have an influence on customer satisfaction and loyalty; customer trust
also has a mediating role between customer satisfaction and loyalty.
Prior study in marketing literature has been giving attention to customer trust's role as mediating
variable between customer satisfaction and customer loyalty (Carranza et al., 2018; Haron et al., 2020;
Osman & Sentosa, 2013). Furthermore, this study will also examine the influence of customer trust as
mediating variable between customer satisfaction and customer loyalty.
H5 customer trust has a positive influence as mediating variable between customer satisfaction and
customer loyalty toward high-rise apartment construction contractor.

RESULT AND DISCUSSION

Prior literature on customer satisfaction, loyalty, and trust provides a useful basis for building a simple
research model that answers the aims of this study.
The S-O-R is a theory developed by Mehrabain and Russell provides the foundation for the research
model (Mehrabian & Russel, 1974). In the context of the high-rise apartment construction industry,
this study conceptualizes stimuli as characteristics of the apartment construction environment such as
guanxi, service quality, corporate image, and others that affect the emotional response of customers. In
this study, the customer is an apartment developer/developer company. The organism in this study is
customer satisfaction with the results of products or services from construction contractors/services
companies in building apartment construction projects. The response in the S-O-R model in this study
represents the final result, namely customer loyalty and customer trust.
The conceptual model depicting the hypothesized relationship among the variables in this study is
presented in Figure 1.

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 Figure 1. Proposed Conceptual Model

CONCLUSION
Customer satisfaction leads to better customer loyalty (Gopi & Samat, 2020; Hoe & Mansori, 2018).
Customer loyalty is an important asset for every business. Therefore, building customer satisfaction is
even more crucial. The research model in this study presents the relationship between customer trust
as mediating variable between customer satisfaction and customer loyalty, and three antecedents of
customer satisfaction (corporate image, service quality, and guanxi practice). The research model also
proposes that customer trust positively mediates the relationship between customer satisfaction and
customer loyalty. The proposed research model in this study provides a framework for further
empirical research with proper methodology and operationalization that can generate more useful
understanding of the role of customer satisfaction in the customer loyalty toward high-rise apartment
construction contractor and the role of customer trust as mediating variable between satisfaction and
loyalty.

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