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Prestige seeking buyers are increasing gradually and maximization of brand loyal customers is a main target of every organization for rapid growth. Due to intangibility in nature of services, physical environment becomes a major tool, to communicate consumers about the quality of services, to setting customer expectations, to create positive service experience and to influence employee productivity because services are produced and consumed simultaneously. The research?s main purpose is to create better understanding of physical surroundings through examining the effect of physical environment?s dimension (D?cor &artifacts, spatial layout, ambience) on brand loyalty. Second purpose is the mediating test of brand prestige between dimension of physical environment (D?cor &artifacts, spatial layout, ambience) and brand loyalty. Thirdly, to check brand prestige?s impact on brand loyalty. A quantitative approach is used and data is collected from diners of fine dining restaurant from two metropolitan cities of Pakistan i.e. Lahore and Faisalabad, in order to investigate the direct and indirect impact of dimensions of physical environment on brand loyalty and brand prestige via convenience sampling. Sample size was 271 and Multiple Regression Analysis was used to test the study hypotheses. Preacher & Hayes Process Macro was used to measure the mediation. Findings of the study showed that three dimensions of physical environment i.e. d?cor & artifacts, spatial layout and ambience have positive impact on brand prestige & brand loyalty. Brand prestige has mediating role between all three dimensions of physical environment and has positive impact on brand loyalty. Theoretical and practical implications are provided which is helpful for the marketing managers to make strategies in such a way that can create positive brand loyalty.
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