DRIVERS OF CUSTOMER SATISFACTION AND LOYALTY IN AI-DRIVEN E-COMMERCE: EVIDENCE FROM KARACHI, PAKISTAN

Abstract

The swift development of artificial intelligence (AI)-based e-commerce websites has radically reshaped the way consumer’s act and business relations in the Pakistani online market. Although this has changed, there remains a notable gap in the academic literature on the particular psychological, technological precursors of customer satisfaction and customer loyalty in the Pakistani environment especially in a large urban area like Karachi. This paper explores how Trust, Perceived Usefulness, Service Quality, Perceived Enjoyment, and Perceived Personalization affect Customer Satisfaction, which in turn affects Customer Loyalty, in the context of active users of AI-based e-commerce platforms in Karachi. Moreover, the research evaluates the direct impact of the Personalized Price Promotions (PPP) on Customer Loyalty and also tests the PPP to mediate Customer Satisfaction Customer Loyalty. A cross-sectional, quantitative research design was used. A structured questionnaire based on rigorously tested international scales was used to gather data on 100 respondents. The SmartPLS 4.0 was used to run the Partial Least Squares Structural Equation Modeling (PLS-SEM) to evaluate the measurement model and the structural relationships. Results reveal that Trust (β = 0.241, p = .006), Perceived Usefulness (β = 0.305, p = .009), Service Quality (β = 0.328, p = .006), and Perceived Enjoyment (β = 0.198, p = .039) each exert significant positive effects on Customer Satisfaction, which in turn significantly predicts Customer Loyalty (β = 0.378, p < .001). Individualized Price Promotions turned out to be the best direct predictor of Customer Loyalty (β = 0.495, p < .001). It has significant explanatory power as the model explains 84.6% of the variance in Customer Satisfaction and 74.0% in Customer Loyalty. Surprisingly, PPP showed no significant predictive power of Customer Satisfaction (β= -0.042, p =.734), and PPP was no significant in moderating the relationship between Satisfaction and Loyalty (β= -0.013, p =.603). The implications of these findings to e-commerce managers and platform developers in Pakistan are significant as trust-building mechanisms, functional utility, service reliability and emotional involvement were considered crucial in the development of consumer satisfaction and retention. The research contributes to the growing body of literature on AI-based e-commerce in the setting of developing countries and offers a basis to further longitudinal and cross-cultural research.