Digital Marketing and Customer Satisfaction in SMEs: Exploring the Mediating Role of Customer Engagement

SMEs face challenges in leveraging digital marketing to improve customer satisfaction and business performance, particularly in emerging economies like Pakistan. The swift progress of digital marketing has significantly reshaped how small and medium enterprises (SMEs) engage with their customers, offering cost-effective and scalable tools that enhance customer satisfaction and loyalty. On the basis of Grounded in Social Cognitive Theory, the study seeks to evaluate the direct impact of digital marketing on customer satisfaction, examine the influence of customer engagement on this relationship, and provide actionable insights for SMEs seeking a competitive advantage through digital platforms. Using purposive sampling, data were collected from 300 digitally active customers of Bake Parlor Foods, a well-known SME in Sindh, Pakistan. Analysis conducted via R Studio includes reliability tests (Cronbach’s alpha), multiple linear regression, and the study found that digital marketing exerts a direct positive influence on customer satisfaction, and this impact is significantly enhanced when mediated by customer engagement. This partial mediation suggests that customer interaction via personalized content, feedback mechanisms, and social media participation substantially improves the effectiveness of digital marketing efforts. The study concludes that SME should not only implement digital marketing strategies but also actively foster customer engagement to optimize satisfaction outcomes. Practical recommendations include developing interactive content, using behavior-driven personalization, and deploying responsive digital touchpoints to sustain customer interest and loyalty. These findings provide actionable guidance for SMEs operating in competitive emerging markets, where engagement-centric digital strategies can translate into lasting brand value.