How Corporate Social Responsibility Enhance Banking Sector Customer Loyalty in Digital Environment? An Empirical Study
Abstract
This study examines the relationship between corporate social responsibility (CSR) perceptions and customer loyalty in the banking sector while considering the mediating effects of customer satisfaction, corporate image, corporate reputation, service quality between CSR activities and customer loyalty. A self-administered survey was conducted on the banking customers in Pakistan. Based on 221 customers' data, the analysis was performed using the structural equation modeling (SEM) approach. The study results show that CSR positively influences customer loyalty in the banking sector, customer satisfaction, corporate image, and service quality affect the customer-business relationship. Notably, a new finding from the study highlights the importance of the mediating role of corporate image and service quality in enhancing the effect of CSR on customer satisfaction. The research findings provide valuable insights to banks in developing counties on developing a CSR strategy to strengthen customer loyalty.
JEL Classification: M19, L21, M10, D22
Keywords
References
Abdullah, M. I., Ashraf, S., & Sarfraz, M. (2017). The Organizational Identification Perspective of CSR on Creative Performance: The Moderating Role of Creative Self-Efficacy. Sustainability, 9(11), 2125. https://doi.org/10.3390/su9112125
Abdullah, M. I., Huang, D., Sarfraz, M., & Sadiq, M. W. (2021). Service Innovation in Human Resource Management During COVID-19: a Study to Enhance Employee Loyalty using Intrinsic Rewards. Frontiers in Psychology, 12. https://doi.org/10.3389/fpsyg.2021.627659.
Abdullah, M. I., Sarfraz, M., Arif, A., & Azam, A. (2018). An Extension of the Theory of Planned Behavior Towards Brand Equity and Premium Price. Polish Journal of Management Studies, 18(1), 20-32. https://doi.org/10.17512/pjms.2018.18.1.02.
Ajina, A. S., Japutra, A., Nguyen, B., Alwi, S. F. S., & Al-Hajla, A. H. (2019). The Importance of CSR Initiatives in Building Customer Support and Loyalty: Evidence from Saudi Arabia. Asia Pacific Journal of Marketing and Logistics, 31(3), 691-713.
Aramburu, I. A., & Pescador, I. G. (2019). The Effects of Corporate Social Responsibility on Customer Loyalty: The Mediating Effect of Reputation in Cooperative Banks versus Commercial Banks in the Basque Country. Journal of Business Ethics, 154(3), 701–719. https://doi.org/10.1007/s10551-017-3438-1.
Arrive, T. J., Feng, M., Yan, Y., & Chege, S. M. (2019). The Involvement of Telecommunication Industry in the Road to Corporate Sustainability and Corporate Social Responsibility Commitment. Corporate Social Responsibility and Environmental Management, 26(1), 152–158. https://doi.org/10.1002/csr.1667.
Bahta, D., Yun, J., Islam, M. R., & Ashfaq, M. (2020). Corporate Social Responsibility, Innovation Capability and Firm Performance: Evidence from SME. Social Responsibility Journal, 17 (6), 840-860.
Baron, R. M., & Kenny, D. A. (1986). The Moderator-Mediator Variable Distinction in Social Psychological Research. Conceptual, Strategic, and Statistical Considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182.
Bendapudi, N., & Berry, L. L. (1997). Customers’ Motivations for Maintaining Relationships with Service Providers. Journal of Retailing, 73(1), 15–37.
Bocquet, R., Le Bas, C., Mothe, C., & Poussing, N. (2019). Strategic CSR for Innovation in SMEs: Does Diversity Matter? Long Range Planning, 52(6), 101913.
Carroll, A. B. (1979). A Three-Dimensional Conceptual Model of Social Performance A Three-Dimensional Conceptual Model of Corporate Performance. The Academy of Management Review, 4(4), 497-505.https://doi.org/10.2307/257850.
Carroll, A. B., & Shabana, K. M. (2010). The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice. International Journal of Management Reviews, 12(1), 85–105.
Chin, W. W. (1998). Commentary: Issues and Opinion on Structural Equation Modeling. MIS Quarterly, 22(1), vii-xvi.
Chin, W. W. (2010). How to Write Up and Report PLS Analyses. In Esposito Vinzi, V., Chin, W., Henseler, J., & Wang, H. (Eds). Handbook of Partial Least Squares (pp. 655–690). Springer. Berlin.
Chin, W. W., Marcolin, B. L., & Newsted, P. R. (2003). A Partial Least Squares Latent Variable Modeling Approach for Measuring Interaction Effects: Results from a Monte Carlo Simulation Study and an Electronic-Mail Emotion/Adoption Study. Information Systems Research, 14(2), 189–217.
Creswell, J. W., & Creswell, J. D. (2017). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. Sage publications. New Jersey.
Cuesta-Valiño, P., Rodríguez, P. G., & Núñez-Barriopedro, E. (2019). The Impact of Corporate Social Responsibility on Customer Loyalty in Hypermarkets: A New Socially Responsible Strategy. Corporate Social Responsibility and Environmental Management, 26(4), 761–769.
Fullerton, G. (2003). When Does Commitment Lead to Loyalty? Journal of Service Research, 5(4), 333–344.
Gilmore, J. H., & Pine, B. J. (2002). Differentiating Hospitality Operations via Experiences: Why Selling Services is Not Enough. Cornell Hotel and Restaurant Administration Quarterly, 43(3), 87–96.
Goyal, P., & Chanda, U. (2017). A Bayesian Network Model on the Association between CSR, Perceived Service Quality and Customer Loyalty in Indian Banking Industry. Sustainable Production and Consumption, 10, 50–65.
Haberland, G. S., & Dacin, P. A. (1992). The Development of a Measure to Assess Viewers’ Judgments of the Creativity of an Advertisement: A Preliminary Study. ACR North American Advances, 19, 817-825.
Hafez, M. (2018). Measuring the Impact of Corporate Social Responsibility Practices on Brand Equity in the Banking Industry in Bangladesh: The Mediating Effect of Corporate Image and Brand Awareness. International Journal of Bank Marketing, 36(5), 806-822.
Hair Jr, J. F., Sarstedt, M., Hopkins, L., & Kuppelwieser, V. G. (2014). Partial Least Squares Structural Equation Modeling (PLS-SEM). European Business Review, 26(2), 106-121.
Haq, I. U., & Awan, T. M. (2020). Impact of E-banking Service Quality on E-loyalty in Pandemic Times Through Interplay of E-satisfaction. Vilakshan–XIMB Journal of Management, 17(1), 39-55.
He, H., & Harris, L. (2020). The Impact of Covid-19 Pandemic on Corporate Social Responsibility and Marketing Philosophy. Journal of Business Research, 116, 176–182.
Huang, M.-H., Cheng, Z.-H., & Chen, I.-C. (2017). The Importance of CSR in Forming Customer–Company Identification and Long-term Loyalty. Journal of Services Marketing, 31(1), 63-72.
Inoue, Y., Funk, D. C., & McDonald, H. (2017). Predicting Behavioral Loyalty Through Corporate Social Responsibility: The Mediating Role of Involvement and Commitment. Journal of Business Research, 75, 46–56.
Islam, T., Islam, R., Pitafi, A. H., Xiaobei, L., Rehmani, M., Irfan, M., & Mubarak, M. S. (2021). The Impact of Corporate Social Responsibility on Customer Loyalty: The Mediating Role of Corporate Reputation, Customer Satisfaction, and Trust. Sustainable Production and Consumption, 25, 123–135.
Ivory, S. B., & Brooks, S. B. (2018). Managing Corporate Sustainability with a Paradoxical Lens: Lessons from Strategic Agility. Journal of Business Ethics, 148(2), 347–361.
Judd, C. M., & Kenny, D. A. (1981). Process Analysis: Estimating Mediation in Treatment Evaluations. Evaluation Review, 5(5), 602–619.
Khan, Z., Ferguson, D., & Pérez, A. (2015). Customer Responses to CSR in the Pakistani Banking Industry. International Journal of Bank Marketing, 33(4),471-493.
Khawaja, K. F., Sarfraz, M., Rashid, M., & Rashid, M. (2021). How is COVID-19 Pandemic Causing Employee Withdrawal Behavior in the Hospitality Industry? An Empirical Investigation. Journal of Hospitality and Tourism Insights, ahead-of-print. https://doi.org/10.1108/JHTI-01-2021-0002.
Latif, K. F., Pérez, A., & Sahibzada, U. F. (2020). Corporate Social Responsibility (CSR) and Customer Loyalty in the Hotel Industry: A Cross-country Study. International Journal of Hospitality Management, 89, 102565.
Lee, S., Han, H., Radic, A., & Tariq, B. (2020). Corporate Social Responsibility (CSR) as a Customer Satisfaction and Retention Strategy in the Chain Restaurant Sector. Journal of Hospitality and Tourism Management, 45, 348–358.
Lewis, B. R., & Mitchell, V. W. (1990). Defining and Measuring the Quality of Customer Service. Marketing Intelligence & Planning, 8 (6), 11-17.
Li, Y., Liu, B., & Huan, T.-C. T. C. (2019). Renewal or Not? Consumer Response to a Renewed Corporate Social Responsibility Strategy: Evidence from the Coffee Shop Industry. Tourism Management, 72, 170–179.
Lo, A. (2020). Effects of Customer Experience in Engaging in Hotels’ CSR Activities on Brand Relationship Quality and Behavioural Intention. Journal of Travel & Tourism Marketing, 37(2), 185–199.
Lu, J., Ren, L., Zhang, C., Rong, D., Ahmed, R. R., & Streimikis, J. (2020). Modified Carroll’s Pyramid of Corporate Social Responsibility to Enhance Organizational Performance of SMEs Industry. Journal of Cleaner Production, 271, 122456.
Luo, X., & Bhattacharya, C. B. (2006). Corporate Social Responsibility, Customer Satisfaction, and Market Value. Journal of Marketing, 70(4), 1-18. https://doi.org/10.1509/jmkg.70.4.1.
MacKinnon, D. P., Fairchild, A. J., & Fritz, M. S. (2007). Mediation Analysis. Annual Reviews of Psychology, 58, 593–614. https://doi.org/10.1146/annurev.psych.58.110405. 085542.
Manuel, T., & Herron, T. L. (2020). An Ethical Perspective of Business CSR and the COVID-19 Pandemic. Society and Business Review, 15(3), 235-253.
Martínez, P., & Del Bosque, I. R. (2013). CSR and Customer Loyalty: The Roles of Trust, Customer Identification with the Company and Satisfaction. International Journal of Hospitality Management, 35, 89–99.
Mizik, N., & Jacobson, R. (2008). The Financial Value Impact of Perceptual Brand Attributes. Journal of Marketing Research, 45(1), 15–32.
Morgan, R. M., & Hunt, S. D. (1994). The Commitment-trust Theory of Relationship Marketing. Journal of Marketing, 58(3), 20–38.
Newman, C., Rand, J., Tarp, F., & Trifkovic, N. (2020). Corporate Social Responsibility in a Competitive Business Environment. The Journal of Development Studies, 56(8), 1455–1472. https://doi.org/10.1080/00220388.2019.1694144.
Nguyen, N., & Leblanc, G. (2001). Corporate Image and Corporate Reputation in Customers’ Retention Decisions in Services. Journal of Retailing and Consumer Services, 8(4), 227–236. https://doi.org/10.1016/S0969-6989(00)00029-1.
Özkan, P., Süer, S., Keser, I. K., & Kocakoç, I. D. (2019). The Effect of Service Quality and Customer Satisfaction on Customer Loyalty: The Mediation of Perceived Value of Services, Corporate Image, and Corporate Reputation. International Journal of Bank Marketing, 38 (2), 384-405.
Park, E., & Kim, K. J. (2019). What Drives “Customer Loyalty”? The Role of Corporate Social Responsibility. Sustainable Development, 27(3), 304–311.
Pérez, A., & del Bosque, I. R. (2013). The Effect of Corporate Associations on Consumer Behaviour. European Journal of Marketing, 47(1), 218-238.
Pérez, A., & del Bosque, I. R. (2017). Personal Traits and Customer Responses to CSR Perceptions in the Banking Sector. International Journal of Bank Marketing, 35(1), 128-146. https://doi.org/10.1108/IJBM-02-2016-0023.
Poolthong, Y., & Mandhachitara, R. (2009). Customer Expectations of CSR, Perceived Service Quality and Brand Effect in Thai Retail Banking. International Journal of Bank Marketing, 27(6), 408-427. https://doi.org/10.1108/02652320910988302.
Rai, S., & Bansal, S. (2015). Factors Explaining Corporate Social Responsibility Expenditure in India. Review of Market Integration, 7(1), 37–61.
Raza, A., Saeed, A., Iqbal, M. K., Saeed, U., Sadiq, I., & Faraz, N. A. (2020). Linking Corporate Social Responsibility to Customer Loyalty through Co-creation and Customer Company Identification: Exploring Sequential Mediation Mechanism. Sustainability, 12(6), 2525.
Sarfraz, M., Qun, W., Abdullah, M. I., & Alvi, A. T. (2018). Employees’ Perception of Corporate Social Responsibility Impact on Employee Outcomes: Mediating Role of Organizational Justice for Small and Medium Enterprises (SMEs). Sustainability, 10(7), 2429. https://doi.org/10.3390/su10072429.
Shah, S. G. M., Sarfraz, M., & Ivascu, L. (2020). Assessing the Interrelationship Corporate Environmental Responsibility, Innovative Strategies, Cognitive and Hierarchical CEO: A Stakeholder Theory Perspective. Corporate Social Responsibility and Environmental Management, 28(1), 457-473. https://doi.org/10.1002/csr.2061
Shankar, A., & Jebarajakirthy, C. (2019). The Influence of E-banking Service Quality on Customer Loyalty: a Moderated Mediation Approach. International Journal of Bank Marketing., 37 (5), 1119-1142.
Vivek, S. D., Beatty, S. E., & Morgan, R. M. (2012). Customer Engagement: Exploring Customer Relationships Beyond Purchase. Journal of Marketing Theory and Practice, 20(2), 122–146. https://doi.org/10.2753/MTP1069-6679200201.
Vo, D. H., Van, L. T.-H., Dinh, L. T.-H., & Ho, C. M. (2020). Financial Inclusion, Corporate Social Responsibility and Customer Loyalty in the Banking Sector in Vietnam. Journal of International Studies, 13(4), 9–23.
Williams, S. L., & Moffitt, M. A. (1997). Corporate Image as an Impression Formation Process: Prioritizing Personal, Organizational, and Environmental Audience Factors. Journal of Public Relations Research, 9(4), 237–258.
Zeithaml, V. A., Berry, L. L., & Parasuraman, A. (1996). The Behavioral Consequences of Service Quality. Journal of Marketing, 60(2), 31–46.
DOI: 10.15408/etk.v21i2.24548
Refbacks
- There are currently no refbacks.
Copyright (c) 2022 Muddassar Sarfraz, Muhammad Ibrahim Abdullah, Samina Arif
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
