Digital Marketing Capability and SME Performance: The Mediating Role of Customer Engagement and the Moderating Effect of Market Turbulence

Abstract

Purpose: This study delves into the vital role of digital marketing capability in driving the performance of small and medium-sized enterprises (SMEs), highlighting how customer engagement serves as a key mediator and market turbulence acts as a critical moderator. By weaving together internal organizational processes with the realities of external market dynamics, the research addresses inconsistencies found in prior studies and offers a more integrated perspective.

Design/Methodology/Approach: Employing a quantitative explanatory approach, data were collected through surveys from 150 SMEs actively engaged in digital marketing. The proposed conceptual model was tested using Partial Least Squares Structural Equation Modeling (PLS-SEM), a robust analytical method suited for examining complex mediation and moderation effects.

Findings: Results reveal that digital marketing capability significantly enhances SME performance (? = 0.32, p < 0.01) and fosters deeper customer engagement (? = 0.58, p < 0.001). In turn, customer engagement plays a meaningful role in boosting SME performance (? = 0.41, p < 0.001) and partially mediates the relationship between digital marketing capability and performance (? = 0.24, p < 0.01). Furthermore, market turbulence intensifies the positive impact of digital marketing capability on SME performance (? = 0.18, p < 0.05), highlighting the importance of aligning internal capabilities with external environmental conditions.

Originality/Value: By integrating the Resource-Based View and Dynamic Capability Theory into a unified framework, this study transcends traditional approaches by simultaneously addressing mediation and moderation mechanisms. It offers fresh insights into the “black box” of digital marketing research, illuminating how and under what circumstances digital marketing capabilities translate into enhanced SME performance.