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The impact of negative customer engagement on market-based assets and financial performance

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  • Rahman, Mahabubur
  • Faroque, Anisur R.
  • Sakka, Georgia
  • Ahmed, Zafar U.

Abstract

Negative customer engagement (NCE) has received little research attention. The effect of NCE on market-based assets (i.e. brand equity) and firm performance remains a particularly underexplored topic despite the increasing rates of NCE with brands across a multitude of service industries. This study develops a comprehensive and parsimonious model of the causes and consequences of NCE. In this study, time-series cross-sectional data from the US airline industry and a simultaneous equation modelling technique were used to provide evidence for why some firms experience more NCE than others. The results indicate that airlines with a higher relative marketing capability (RMC) experience fewer NCE incidents in the form of customer complaints. A firm’s relative marketing capability determines the extent to which its customers engage negatively with it. Furthermore, deviating from earlier studies which explored the direct and immediate relationships between the focal variables, this study theoretically argued and empirically demonstrated that brand equity mediates the nexus between NCE and financial performance. That is, the number of NCE incidents a firm experiences affects its brand equity, which in turn impacts its financial performance, as measured by Tobin’s q and market value added (MVA).

Suggested Citation

  • Rahman, Mahabubur & Faroque, Anisur R. & Sakka, Georgia & Ahmed, Zafar U., 2022. "The impact of negative customer engagement on market-based assets and financial performance," Journal of Business Research, Elsevier, vol. 138(C), pages 422-435.
    • Handle: RePEc:eee:jbrese:v:138:y:2022:i:c:p:422-435
    DOI: 10.1016/j.jbusres.2021.08.023
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