Artificial Intelligence-Based Marketing and Business Performance: The Mediating Role of Customer Experience

Abstract

The rapid adoption of artificial intelligence (AI) has transformed marketing through personalised recommendations, chatbots, predictive analytics, automated advertising, and customer-data analysis. However, further evidence is needed to explain how these applications influence customer experience and translate into improved business performance. This study examines the effects of AI-based marketing on customer experience and business performance, including the mediating role of customer experience. A quantitative explanatory design was employed using survey data collected from 200 Indonesian customers who had interacted with AI-enabled marketing services. The proposed relationships were analysed using partial least squares structural equation modelling (PLS-SEM) with SmartPLS. The measurement model demonstrated satisfactory convergent validity, discriminant validity, and internal consistency. The structural model explained 46.4% of the variance in customer experience and 43.5% of the variance in business performance. AI-based marketing had a positive and significant effect on customer experience (β = 0.681, t = 11.210, p < 0.001). Customer experience also positively influenced business performance (β = 0.460, t = 5.678, p < 0.001), while AI-based marketing had a significant direct effect on business performance (β = 0.253, t = 3.470, p = 0.001). Furthermore, customer experience significantly mediated the relationship between AI-based marketing and business performance (indirect effect: β = 0.314, t = 4.915, p < 0.001). These findings demonstrate that AI-based marketing improves business performance both directly and indirectly by creating more personalised, responsive, convenient, and efficient customer interactions. The study highlights customer experience as an important mechanism connecting AI-enabled marketing practices with organisational outcomes. Managers should therefore evaluate AI investments not only by their automation capabilities but also by their capacity to create customer value, strengthen relationships, improve marketing effectiveness, and sustain business competitiveness.