This paper presents an empirical investigation to study the effect of product quality on behavioral and attitudinal loyalty. The study is accomplished among small and medium enterprises (SMEs) located in province of Kerman, Iran. The study designs a questionnaire in Likert scale and distributes it among 180 randomly selected full time employees who work in this region. Cronbach alphas for product quality, behavioral and attitudinal loyalty have been calculated as 0.944, 0.865 and 0.913, respectively. Using structural equation modeling, the study has confirmed a positive and meaningful relationship between product quality and behavioral (B = 0.807 Sig. = 0.000) and attitudinal loyalty (B = 0.926 Sig. = 0.000).