The mediating effect of organizational reputation on customer loyalty and service recommendation in the banking industry

Purpose The overall purpose of this study was to develop an understanding of the mediating effect of organizational reputation on service recommendation and customer loyalty. Design/methodology/approach Four models were developed that were variations of the American Customer Satisfaction Model (ACSM). These models were then tested by using the Partial Least Squares (PLS) procedure on a data collected from a survey that yielded 8,098 respondents. Findings It was found that customer satisfaction enhances reputation in the service environment. It was also discovered that reputation partially mediates the relationship between satisfaction and loyalty, and that reputation partially mediates the relationship between satisfaction and recommendation. Research limitations/implications More research needs to be undertaken to explore the role of reputation within the ACSM. It is necessary to conduct research employing experimental design with longitudinal data captured from across industries using robust measures. Originality/value The findings suggest that the relationship between corporate reputation and profitability may reside in reputation's influence on customer loyalty, and that reputation plays an important role within the ACSM. This study is one of the first documented attempts to use PLS to test a mediation effect.