Impact of Digitalization and Value Co-Creation on Customer Loyalty: The Mediating Role of Emotional Engagement in Banking Services
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The study examined the impact of Digitalization of Banking Services (DBS) and Value Co- Creation (VCC) on Customer Loyalty (CL), with Emotional Engagement (EE) as a mediating factor. A sample of 232 managers and supervisors from the banking sector was selected, and the data was compiled using PLS-SEM to determine both the direct and the indirect relationship. The results illustrate that Value Co-Creation has a positive influence on Emotional Engagement and Customer Loyalty, highlighting the significance of participatory service strategies in enhancing customer attachment and loyalty. Digitalization of Banking Services on the contrary has a positive impact on both Emotional Engagement and Customer Loyalty, implying that increased automation can enhance emotional involvement and improve loyalty outcomes. The mediation analysis has shown that Emotional Engagement partially mediates the relationships between VCC and CL, and between DBS and CL, underscoring the key role of emotions in transforming service experiences into behavioral outcomes. Furthermore, correlation and path tests prove that relational and participatory strategies prove to be more effective than digitalization alone in building loyalty. The research contributes to the existing literature by extending service relationship theories and models to represent the two-fold impact of digitalization and co- creation through the emotional engagements. In practical terms, the results emphasize the need for banks to find a balance between technological effectiveness and engaging participation, so that digitalization does not interfere with, but intensifies relational interactions to increase the retention of customers over the long term.
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