Customer empowerment and firms’ performance

Abstract

Purpose The purpose of this paper is to examine the effect of customer empowerment (CE) on financial performance and the role of innovation and customer satisfaction as mediating variables in this relationship. Design/methodology/approach To empirically test the conceptual model and research hypotheses, data were collected through a survey from 216 branches of 14 commercial banks in Tunisia. Results were analyzed using exploratory factor analysis and structural equation modeling. Findings The results indicate a significant and a positive impact of CE on firms’ financial performance. Customer satisfaction, exploitative innovation and exploratory innovation mediate the relationship between CE and firms’ financial performance. Practical implications These findings provide useful insights for practitioners, particularly bank managers who can improve their financial performance, customer satisfaction and innovation by empowering their customers and integrating them in the products and/or services conception process. Conclusions emphasize practices to be encouraged within banks such as services customization which are acquired by customers themselves, the expression of opinions, customers’ needs and the interaction among bank customers. Originality/value Several studies in the literature have studied the CE and its impact on business performance. However, few research studies have focused on the variables that mediate this relationship. So far, this paper not only integrates mediating variables such as customer satisfaction and innovation to study the link CE-firm performance but also makes the distinction between exploitative and exploratory innovation which is seldom made by researchers.