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Satisfied Customers: An Asset Driving Financial Performance

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The Reign of the Customer

Abstract

We began the book by positioning customer satisfaction as a strategic company asset, but it can only be a strategic asset if it is connected to a company’s financial performance. Thankfully, we can unequivocally conclude that the link between customer satisfaction and a company’s financial performance is very strong. To justify this, we go a bit technical, but readable, in this chapter, and the data are overwhelming. Proven over a long period of time, customer satisfaction has been found to be a positive and significant predictor of a company’s stock market performance that consistently outperforms the S&P 500. Additionally, customer satisfaction affects myriad other financial performance variables in a strongly positive manner that are attractive to all companies.

Significant parts of this chapter are based on the authors’ article titled, “Stock Returns on Customer Satisfaction Do Beat the Market: Gauging the Effect of a Marketing Intangible.” This article was originally published in the Journal of Marketing in 2016.

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Notes

  1. 1.

    For a selection of articles that make these and related points, see: Anderson, E., C. Fornell and D. R. Lehmann (1994). “Customer Satisfaction, Market Share, and Profitability: Findings from Sweden,” Journal of Marketing, 58, 53–66; Rust, R., A. Zahorik and T. L. Keiningham (1995). “Return on Quality (ROQ): Making Service Quality Financially Accountable,” Journal of Marketing, 59(Apr.), 58–70; Heskett, J., W. E. Sasser and L. Schlesinger (1997). The Service Profit Chain: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction, and Value, Cambridge, MA: Harvard University Press; Bolton, R. (2004). “Linking Marketing to Financial Performance and Firm Value,” Journal of Marketing, 68, 73–75; Gupta, S. and V. Zeithaml (2006). “Customer Metrics and Their Impact on Financial Performance,” Marketing Science, 25(6), 718–739.

  2. 2.

    Ambler, T., F. Kokkinaki and S. Puntoni (2004). “Assessing Marketing Performance: Reasons for Metrics Selection,” Journal of Marketing Management, 20, 475–498.

  3. 3.

    Gruca, Thomas S., and L. L. Rego (2005). “Customer Satisfaction, Cash Flow, and Shareholder Value,” Journal of Marketing, 69(July), 115–130; Keiningham, Timothy L., Bruce Cooil, Tor Wallin Andreassen and Lerzan Aksoy (2007), “A Longitudinal Examination of Net Promoter and Firm Revenue Growth,” Journal of Marketing, 71(July), 39–51; Morgan, N. A. and L. L. Rego (2006). “The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance,” Marketing Science, 25(5); Anderson, E., C. Fornell and S. Mazvancheryl (2004). “Customer Satisfaction and Shareholder Value,” Journal of Marketing, 68, 172–185.

  4. 4.

    Keiningham, T. L., F. V. Morgeson III, L. Aksoy and L. Williams (2014). “Service Failure Severity, Customer Satisfaction, and Market Share: An Examination of the Airline Industry,” Journal of Service Research, 17(4), 415–431; Morgan, N. A. and L. L. Rego (2006). “The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance,” Marketing Science, 25(5); Rego, Lopo L., Neil A. Morgan and Claes Fornell (2013). “Reexamining the Market Share–Customer Satisfaction Relationship,” Journal of Marketing 77(5), 1–20.

  5. 5.

    Fornell, C., F. V. Morgeson III and T. Hult (2016). “Stock Returns on Customer Satisfaction Do Beat the Market: Gauging the Effect of a Marketing Intangible,” Journal of Marketing, 80(5), 92–107; Ngobo, Paul-Valentin, Jean-Francois Casta and Olivier Ramond (2012), “Is Customer Satisfaction a Relevant Metric for Financial Analysts?” Journal of the Academy of Marketing Science, 40(3), 480–508.

  6. 6.

    For a small selection of the studies examining the ACSI-Tobin’s q relationship, see: Luo, X. and C. B. Bhattacharya (2006). “Corporate Social Responsibility, Customer Satisfaction, and Market Value,” Journal of Marketing, 70, 1–18; Morgan, N. A. and L. L. Rego (2006). “The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance,” Marketing Science, 25(5); Lariviere, B., T. L. Keiningham, L. Aksoy, A. YalCIn, F. V. Morgeson III and S. Mithas (2016). “Modeling Heterogeneity in the Satisfaction, Loyalty Intention, and Shareholder Value Linkage: A Cross-Industry Analysis at the Customer and Firm Levels,” Journal of Marketing Research, 53(1), 91–109; Fornell, C., S. Mithas, F. V. Morgeson III and M. S. Krishnan (2006). “Customer Satisfaction and Stock Prices: High Returns, Low Risk,” Journal of Marketing 70(1), 3–14.

  7. 7.

    Studies of CEO turnover, whether forced or voluntary, have been associated with greater volatility and downside risk for company stock market performance. See: Clayton, M. J., J. C. Hartzell and J. V. Rosenberg (2003). “The Impact of CEO Turnover on Equity Volatility,” Staff Reports 166, Federal Reserve Bank of New York.

  8. 8.

    Fornell, C., S. Mithas, F. V. Morgeson III and M. S. Krishnan (2006). “Customer Satisfaction and Stock Prices: High Returns, Low Risk,” Journal of Marketing, 70(1), 3–14; Fornell, C., S. Mithas and F. V. Morgeson III (2009). “The Economic and Statistical Significance of Stock Returns on Customer Satisfaction,” Marketing Science, 28(5), 820–825; Fornell, C., F. V. Morgeson III and T. Hult (2016). “Stock Returns on Customer Satisfaction Do Beat the Market: Gauging the Effect of a Marketing Intangible,” Journal of Marketing, 80(5), 92–107.

  9. 9.

    This fund has since been established as an exchange-traded fund (ETF) that can be purchased by any investor with the ticker symbol “ACSI.” Information about the ETF can be viewed here: http://acsietf.com.

  10. 10.

    For evidence of managers’ lack of understanding of their own customers, see: Hult, G. Tomas M., Forrest V. Morgeson III, Neil A. Morgan, Sunil Mithas and Claes Fornell (2017). “Do Managers Know What Their Customers Think and Why?” Journal of the Academy of Marketing Science, 45(1), 37–54.

References and Further Reading

  • Anderson, E., Fornell, C., & Lehmann, D. R. (1994). Customer Satisfaction, Market Share, and Profitability: Findings from Sweden. Journal of Marketing, 58, 53–66.

    Article  Google Scholar 

  • Anderson, E., Fornell, C., & Mazvancheryl, S. (2004). Customer Satisfaction and Shareholder Value. Journal of Marketing, 68, 172–185.

    Article  Google Scholar 

  • Bolton, R. (2004). Linking Marketing to Financial Performance and Firm Value. Journal of Marketing, 68, 73–75.

    Article  Google Scholar 

  • Fornell, C. (1992). A National Customer Satisfaction Barometer: The Swedish Experience. Journal of Marketing, 55(Jan.), 1–21.

    Google Scholar 

  • Fornell, C., Mithas, S., & Morgeson, F. V., III. (2009a). The Statistical Significance of Portfolio Returns. International Journal of Research in Marketing, 26(2), 162–163.

    Article  Google Scholar 

  • Fornell, C., Mithas, S., & Morgeson, F. V., III. (2009b). The Economic and Statistical Significance of Stock Returns on Customer Satisfaction. Marketing Science, 28(5), 820–825.

    Article  Google Scholar 

  • Fornell, C., Mithas, S., Morgeson, F. V., III, & Krishnan, M. S. (2006). Customer Satisfaction and Stock Prices: High Returns, Low Risk. Journal of Marketing, 70(1), 3–14.

    Article  Google Scholar 

  • Fornell, C., Morgeson, F. V., III, & Hult, T. (2016). Stock Returns on Customer Satisfaction Do Beat the Market: Gauging the Effect of a Marketing Intangible. Journal of Marketing, 80(5), 92–107.

    Article  Google Scholar 

  • Gruca, T. S., & Rego, L. L. (2005). Customer Satisfaction, Cash Flow, and Shareholder Value. Journal of Marketing, 69(July), 115–130.

    Article  Google Scholar 

  • Gupta, S., & Zeithaml, V. (2006). Customer Metrics and Their Impact on Financial Performance. Marketing Science, 25(6), 718–739.

    Article  Google Scholar 

  • Heskett, J., Sasser, W. E., & Schlesinger, L. (1997). The Service Profit Chain: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction, and Value. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Hult, G. T. M., Morgeson, F. V., III, Morgan, N. A., Mithas, S., & Fornell, C. (2017). Do Managers Know What Their Customers Think and Why? Journal of the Academy of Marketing Science, 45(1), 37–54.

    Article  Google Scholar 

  • Keiningham, T. L., Cooil, B., Andreassen, T. W., & Aksoy, L. (2007). A Longitudinal Examination of Net Promoter and Firm Revenue Growth. Journal of Marketing, 71(July), 39–51.

    Article  Google Scholar 

  • Keiningham, T. L., Morgeson, F. V., III, Aksoy, L., & Williams, L. (2014). Service Failure Severity, Customer Satisfaction, and Market Share: An Examination of the Airline Industry. Journal of Service Research, 17(4), 415–431.

    Article  Google Scholar 

  • Kumar, V., & Shah, D. (2009). Expanding the Role of Marketing: From Customer Equity to Market Capitalization. Journal of Marketing, 73, 119–136.

    Article  Google Scholar 

  • Lariviere, B., Keiningham, T. L., Aksoy, L., YalCIn, A., Morgeson Iii, F. V., & Mithas, S. (2016). Modeling Heterogeneity in the Satisfaction, Loyalty Intention, and Shareholder Value Linkage: A Cross-Industry Analysis at the Customer and Firm Levels. Journal of Marketing Research, 53(1), 91–109.

    Article  Google Scholar 

  • Luo, X., & Bhattacharya, C. B. (2006). Corporate Social Responsibility, Customer Satisfaction, and Market Value. Journal of Marketing, 70, 1–18.

    Article  Google Scholar 

  • Morgan, N. A., & Rego, L. L. (2006). The Value of Different Customer Satisfaction and Loyalty Metrics in Predicting Business Performance. Marketing Science, 25(5), 426–439.

    Article  Google Scholar 

  • Ngobo, P.-V., Casta, J.-F., & Ramond, O. (2012). Is Customer Satisfaction a Relevant Metric for Financial Analysts? Journal of the Academy of Marketing Science, 40(3), 480–508.

    Article  Google Scholar 

  • Rego, L. L., Morgan, N. A., & Fornell, C. (2013). Reexamining the Market Share-Customer Satisfaction Relationship. Journal of Marketing, 77(5), 1–20.

    Article  Google Scholar 

  • Rust, R., Zahorik, A., & Keiningham, T. L. (1995). Return on Quality (ROQ): Making Service Quality Financially Accountable. Journal of Marketing, 59(Apr.), 58–70.

    Article  Google Scholar 

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Author information

Authors and Affiliations

  1. American Customer Satisfaction Index, Ann Arbor, MI, USA

    Claes Fornell, Forrest V. Morgeson III, G. Tomas M. Hult & David VanAmburg

  2. Michigan State University, East Lansing, MI, USA

    Forrest V. Morgeson III & G. Tomas M. Hult

Authors
  1. Claes Fornell
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  2. Forrest V. Morgeson III
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  3. G. Tomas M. Hult
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  4. David VanAmburg
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Correspondence to Claes Fornell .

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Fornell, C., Morgeson, F.V., Hult, G.T.M., VanAmburg, D. (2020). Satisfied Customers: An Asset Driving Financial Performance. In: The Reign of the Customer. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-13562-1_8

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