The Effect of Product Quality, Store Atmosphere, and Price Perception on Customer Satisfaction with Service Quality as an Intervening Variable Among Gen Z at Lara Coffee

Abstract

This study aims to analyze the effect of product quality, store atmosphere, and price perception on Generation Z customer satisfaction, with service quality as an intervening variable, at Lara Coffee, a coffee shop in Medan City that experienced an 18.79% decline in visitors in 2025. A quantitative approach was applied through a survey of 91 Generation Z respondents selected using accidental sampling. Data were analyzed using Structural Equation Modeling with a Partial Least Squares approach (SEM-PLS) using SmartPLS 4.0. The results show that product quality, store atmosphere, and price perception each have a positive and significant effect on both service quality and customer satisfaction directly. Service quality also has a positive and significant effect on customer satisfaction and is able to mediate the effect of product quality, store atmosphere, and price perception on customer satisfaction. Service quality is the strongest determinant of customer satisfaction (β = 0.656). The research model explains 66.8% of the variance in customer satisfaction and 70.4% of the variance in service quality. These findings imply that improving service quality should become a strategic priority for coffee shops in maintaining Generation Z customer satisfaction and loyalty.