Corporate reputation and customer loyalty in the banking industry: the mediating role of customer engagement

Abstract

Purpose This research aims to investigate the role of customer engagement (CE) as a mediator in the relationship between corporate reputation (CR) and customer loyalty (CL) among customers of commercial banks in Ethiopia. Design/methodology/approach This study employed a survey research design to collect information from 385 Ethiopian commercial bank customers. Purposive sampling techniques were used in the study to choose respondents, and the AMOS structural equation model in combination with SPSS was utilized to evaluate the hypotheses. Findings The findings show that CR has a substantial effect on both CE and CL. Similarly, CE plays a positive role in fostering CL. Moreover, CE acts as a mediator in the connection between CR and CL. This suggests that CR and CE are key factors in determining CL among commercial bank customers in Ethiopia. Given the cross-sectional nature of the data, these effects are interpreted as statistical associations rather than as strictly causal relationships. Research limitations/implications This study explores the impact of CR on CL through CE as a mediator. Future research could investigate how specific CR building blocks (PAV, CCV, CSRV and RMV) affect CL in the Ethiopian banking sector. Additionally, examining CR and CE in other industries could reveal unique challenges and opportunities for enhancing customer loyalty. Longitudinal studies are recommended to better understand the causal relationships over time. Finally, exploring the effects of CR and CE on other stakeholders, like employees and investors, could provide a broader perspective on their influence on business performance and social outcomes. Practical implications Banks in Ethiopia should invest in initiatives that enhance their CR and strategically drive CE to foster CL. This may involve enhancing digital banking experiences, creating personalized service interactions, or establishing interactive customer feedback platforms that resonate with local customers. Given the mediating role that CE plays between CR and CL, banking institutions should concentrate on building and maintaining a strong CR through consistent, high-quality service and proactive customer engagement strategies. This approach can set them apart from their rivals, draw in and keep loyal customers and ultimately lead to sustained business prosperity within the Ethiopian banking sector. Social implications This study highlights how a strong CR enhances CE, leading to increased CL, which in turn fosters a more positive perception of these banks within the community, building trust and goodwill. Prioritizing initiatives that strengthen CR and actively engage customers can result in increased CL, long-term relationships and positive referrals. The mediating role of CE underscores the importance of meaningful customer interactions in driving loyalty. By focusing on initiatives that reinforce trust and facilitate active customer participation, banks can cultivate a positive public image. Engaging customers benefits banks and communities, fostering trust and promoting positive social impact. Originality/value This study distinguishes itself by exploring how CE mediates the relationship between CR and CL within the Ethiopian banking sector, grounded in signaling theory. A key contribution lies in its novel approach to conceptualizing CR as a higher-order reflective construct comprising four distinct dimensions: Product attributes (PA), corporate credibility (CC), corporate social responsibility (CSR) and relationship marketing (RM). This multidimensional treatment offers a more nuanced understanding of how specific facets of a bank’s reputation collectively influence customer engagement and, subsequently, loyalty. Furthermore, the research addresses a critical gap by providing empirical insights from the understudied Ethiopian banking context.