The Influence of Product and Service Innovation on Customer Decisions to Choose People's Economic Banks
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Abstract
The development of the banking industry, particularly the Rural Bank (BPR) sector, has increasingly been driven by the demand for product and service innovations that can efficiently and effectively meet customers’ evolving needs. Such innovation has become an important factor influencing customers’ decisions to choose BPRs as institutions for saving and obtaining loans. This study aims to analyze the influence of product and service innovation on customers’ decisions to use BPR services. A quantitative approach with a survey method was employed. The data were collected through a structured questionnaire using a five-point Likert scale and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS. The findings indicate that product innovation has a positive and significant effect on customer trust, with a path coefficient of 0.510, a t-statistic of 6.217, and a p-value of 0.000. However, product innovation does not have a significant direct effect on customer decisions, with a path coefficient of 0.048, a t-statistic of 0.529, and a p-value of 0.597. Customer trust has a positive and significant effect on customer decisions, with a path coefficient of 0.669, a t-statistic of 6.901, and a p-value of 0.000. Furthermore, the indirect effect of product innovation on customer decisions through customer trust is positive and significant, with a path coefficient of 0.341, a t-statistic of 4.731, and a p-value of 0.000. These findings indicate that customer trust plays an important mediating role in the relationship between product innovation and customer decisions. Therefore, BPRs should strengthen product and service innovation while simultaneously building customer trust to improve their competitiveness and sustain customer relationships in an increasingly digital and competitive banking environment.
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