An agent-based Model to Study Customers’ Engagement with Brands from a Service-Dominant Logic Perspective Chathura Rajapakse Department of Computational Intelligence and Systems Science Tokyo Institute of Technology 4259, Nagatsuta, Midori-ku Yokohama, Japan Email: chathura@trn.dis.titech.ac.jp Takao Terano Department of Computational Intelligence and Systems Science Tokyo Institute of Technology 4259, Nagatsuta, Midori-ku Yokohama, Japan Email: terano@dis.titech.ac.jp Abstract—We present an Agent-based Model to study cus- tomers’ engagement with brands from a Service-Dominant Logic perspective. Customer Engagement has gained attention recently in the study of customer loyalty as a process that enables to understand and measure the impact of the depths of customers emotional responses to consumption situations on their intention to retain with a particular brand. However, there is no adequate research that deeply investigate the process of engagement, espe- cially in dynamic, competitive and complex market environments. We address this research gap by creating an agent-based artificial market model. In doing so, we base our model on Service- Dominant Logic, which offers a novel lens to look at markets and their interactions and on the customer engagement process model of Bowden to implement customers engagement with a brand. This paper basically presents a logical discussion on the formulation of the model and some initial outcomes. I. I NTRODUCTION Why customers leave brands is an interesting question of all time. In competitive markets, it is possible to see very often the collapses of once giant firms despite their attempts to improve the features of their brands. Even though researchers generally agree that the customer loyalty is the driving force behind their repeat purchases, there is no consensus on what causes loyalty [1]. Traditionally, loyalty has been seen as caused by customers’ satisfaction on a brand, determined by the extent of confirmation/disconfirmation of expectations [2]. However, this popular and widely used ideology has been challenged by research that points out even the satisfied customers will defect [3]. Research on affect, such as customers’ delight [4], has attempted to overcome some of the limitations of these purely cognitive approaches by drawing a distinction between mere satisfaction, and stronger and more positive emotional responses toward consumption [1]. The concept of engagement describes an emotional attach- ment of someone with something, which has been linked to a number of positive consequences in the management literature [1]. For example, Enrique et al. [5] recognizes the importance of proper conceptualization and evaluation of website engagement of online consumers. Moreover, employee engagement is argued to be positively related to individuals’ attitudes, intentions and behaviors [6], and subsequently to business results such as job satisfaction, low absenteeism and high organizational commitment and performance [7]. This leads to the suggestion that the study of customer engagement with brands would help answering the critical question of what causes customer loyalty. For this endeavor, Bowden [1] proposes a conceptual framework of the process of customer engagement, which incorporates satisfaction into a much richer process model of engagement that causes loyalty. However, the process of engagement and its impact on customer loyalty needs to be studied in a dynamic and competitive environment with complex interactions among service providers and customers in order to attain a bet- ter understanding. This emphasizes the need of developing simulation models of artificial markets, in which customer engagement with service providers occurs dynamically based on the outcomes of individual interactions among market entities. Thus, Agent-based Modeling approach [8] proves to be a potential candidate in this endeavor. The agent-based model presented in this paper represents an artificial market based on the concepts of Service-Dominant Logic, which has recently emerged as an alternative mindset to the traditional Goods-Dominant Logic [9]. The Service- Dominant logic (S-D Logic) views markets as systems of resource integrating actors who exchange competences in the form of services. Thus, the S-D logic rejects the distinction between goods and services by viewing every offering (i.e. a tangible product or an intangible service) as a means of delivering a service [10]. Moreover, S-D logic’s recognition of value as being co-created at the time of use instead of being exchanged at the time of purchase makes it a suitable approach to study the impact of emotional responses of consumers at consumption situations on their loyalty. In other words, the co- created value at the time of use would influence the emotional attachment of consumers with service providers. Miguel, Amblard, Barceló & Madella (eds.) Advances in Computational Social Science and Social Simulation Barcelona: Autònoma University of Barcelona, 2014, DDD repository <http://ddd.uab.cat/record/125597>