AbstractPrevious studies have found relationships between variables that predict happiness and engagement. While this suggests that engagement is a basis for generating customer happiness, the literature does not provide sufficient confirmatory evidence. Thus, the effects of different engagement intensities remain unclear. Focusing on conditions related to the Starbucks brand, this study analyzed how (1) passive and active engagement impacted customer happiness and (2) happiness impacted word of mouth (WOM) and purchase intention. Data were collected through an online survey among 802 Peruvian customers, all of whom were recruited via non‐probabilistic sampling. Because two exogenous variables were considered formative (i.e., customer engagement and customer happiness), a partial least‐squares structural equation model (PLS‐SEM) was used for the analysis. In sum, engagement (both passive and active) significantly and positively impacted customer happiness, which then positively impacted WOM and purchase intention. Given that engagement is associated with variables that are broadly related to happiness, this study makes new contributions by (i) clarifying how customer engagement can generate customer happiness, (ii) identifying differences between active and passive engagement, and (iii) adding evidence for use in the debate on the purpose of marketing and traditional practices such as engagement. As discussed in the paper, these findings have theoretical and practical implications for brand managers.