Examining the relationship between corporate social responsibility, customer satisfaction and customer loyalty in Ethiopian banking sector

Abstract

Purpose

This study aims to look into how customer satisfaction (CS) plays a mediating role in the relationship between corporate social responsibility (CSR) and customer loyalty (CL) among Ethiopian commercial bank clients.

Design/methodology/approach

This study used a survey research design to collect information from 790 Ethiopian commercial bank customers. Purposive sampling techniques were used in the study to choose respondents, and the AMOS structural equation model in conjunction with SPSS was used to evaluate the hypotheses.

Findings

The findings show that CSR has a significant effect on both CS and CL. Likewise, CS plays a positive role in fostering CL. Moreover, CS acts as a mediator in the connection between CSR and CL. This suggests that CSR and CS are key factors in determining CL among commercial bank customers in Ethiopia.

Research limitations/implications

This study examined the overall impact of CSR on loyalty. Future research can explore the impact of specific CSR initiatives, such as environmental sustainability, charitable giving, community involvement and ethics. Another implication could involve studying moderating factors like customer demographics and industry context. This study is a cross-sectional study; therefore, future studies should focus on longitudinal studies that could reveal the long-term effects of CSR on CL. Additionally, examining the effects of CSR on stakeholders beyond customers, like employees and suppliers, could provide a broader understanding of its impact on business performance and social outcomes.

Practical implications

By investing in CSR activities that resonate with customer values, banks can improve CS and ultimately CL. This highlights importance of aligning CSR strategies with customer preferences and expectations to create strong emotional connection with customers. Moreover, leveraging CSR efforts as unique selling point can differentiate banks from competitors and attract socially conscious consumers. By concentrating on delivering high-quality services and personalised experiences while communicating transparently about their CSR initiatives, banks build trust and loyalty among customers. Continuous monitoring and evaluation of CSR programmes are essential to ensure their effectiveness and alignment with customer needs, leading to CS and CL.

Social implications

By demonstrating that CSR activities positively impact CS and CL, commercial banks can contribute to the overall well-being of society. Engaging in socially responsible practices not only enhances the reputation of banks but also fosters a sense of trust and goodwill among customers. This leads to a more positive perception of banks as ethical and socially conscious institutions, ultimately benefiting the community at large. Furthermore, by emphasising the mediating role of CS in the relationship between CSR and CL, banks can better understand how to cultivate long-term relationships with their customers based on mutual trust and value.

Originality/value

Prior research has mainly focused on instantaneous customer responses like buying intentions and brand perception. By contrast, this study delves into the enduring impact of CSR on customer actions, specifically CL. Furthermore, it breaks new ground by exploring CSR as a higher-order construct to elucidate how CS serves as a mediator between CSR initiatives and CL.