When Does Customer Participation Matter? An Empirical Investigation of the Role of Customer Empowerment in the Customer Participation-Performance Link

Abstract

Research on customer participation (CP) has focused on its benefits for customers. However, recent research suggests that CP is beneficial to both customers and firms. The literature is also sparse on the economic (e.g., profitability) and customer (e.g., customer retention) impact of CP. This research introduces the concept of customer empowerment and develops and tests a model of customer empowerment as a parallel mediator, along with customer satisfaction, to explain the linkage between CP and bank branch performance. Furthermore, the authors draw on a broader set of moderators beyond customer characteristics to examine when CP affects empowerment and satisfaction. Using triadic matched data from a multiwave design and a three-level model in which customers are nested within employees, who are, in turn, nested within bank branches, the authors show that customer empowerment and satisfaction fully mediate the effect of CP on branch performance. The findings also show that CP results in greater customer empowerment and satisfaction when there is fit between participation and the context in which it is used. The authors discuss implications for advancing CP research and suggest actionable steps for reaping the economic and customer benefits of CP.