Impact of product innovation and digital marketing strategy on competitive advantage: Brand image as a mediating factor

The craft industry’s increasing competition necessitates sustainable strategies to bolster the competitive advantage of micro, small, and medium enterprises (MSMEs). Previous studies highlight that product innovation and digital marketing significantly influence brand image and competitive advantage (Al-Abdallah Ferreira & Coelho, 2020). This study examines the mediating role of brand image in the relationship between product innovation, digital marketing, and competitive advantage among Endek craft MSMEs in Badung Regency. A purposive sampling method selected 112 business owners from MSMEs who had been active for over three years. Data collection was conducted through structured questionnaires, and analysis utilized path analysis with the partial least squares structural equation modeling (PLS-SEM) approach. The findings demonstrate that product innovation and digital marketing positively and significantly affect brand image and competitive advantage. Moreover, brand image enhances competitive advantage and acts as a vital mediator in these relationships. The results emphasize the necessity of improving the brand image of Endek products to sustain market positioning. This study offers practical insights for MSME owners and policymakers on fostering innovation and optimizing digital marketing strategies to ensure competitive success.