Asia Marketing Journal

Korean Marketing Association (한국마케팅학회)
권호 표지
DOI QR코드

DOI QR Code

Does the Variance of Customer Satisfaction Matter for Firm Performance?

  • Received : 2016.11.07
  • Accepted : 2017.02.08
  • Published : 2017.01.31
Download PDF
⟨ Previous Next ⟩

Abstract

Although much attention has been paid to customer satisfaction (CS) as a leading indicator of firm performance, few studies have investigated the role of CS distribution across individual customers. With 10 years of National Customer Satisfaction Index (NCSI) data in Korea, we examine the relationship between the variance of CS and key corporate performance measures such as revenue, profit, Tobin's q, and stock return. There are three main findings. First, we confirm the findings of previous studies that the average CS for a firm is related to the firm's economic performance. Second, we find a moderating effect of CS variance such that the relationship between the level of CS and firm performance is attenuated by the variance of CS. Finally, the variance of CS is found to directly affect firm performance over and above the CS level effect. More specifically, the variance decreases sales and stock return.

Keywords

References

  1. Aksoy, Lerzan, Bruce Cooil, Christopher Groening, Timothy L. Keiningham, and Atakan Yalcin (2008), "The Long-Term Stock Market Valuation of Customer Satisfaction," Journal of Marketing, 72(4), 105-122.
  2. Anderson, Eugene W. (1998), "Customer Satisfaction and Word of Mouth," Journal of service research, 1(1), 5-17.
  3. Anderson, Eugene W., Claes Fornell, and Donald R. Lehmann (1994), "Customer Satisfaction, Market Share, and Profitability: Findings from Sweden," Journal of Marketing, 58(3), 53-66.
  4. Anderson, Eugene W., Claes Fornell, and Sanal K. Mazvancheryl (2004), "Customer Satisfaction and Shareholder Value," Journal of Marketing, 68(4), 172-185.
  5. Anderson, Eugene W., Claes Fornell, and Roland T. Rust (1997), "Customer Satisfaction, Productivity and Profitability: Differences between Goods and Services," Marketing Science, 16(2), 129-145.
  6. Anderson, Eugene W. and Sattar A. Mansi (2009), "Does Customer Satisfaction Matter to Investors? Findings from the Bond Market," Journal of Marketing Research, 46(5), 703-714.
  7. Anderson, Eugene W. and Vikas Mittal (2000), "Strengthening the Satisfaction-Profit Chain," Journal of Service Research, 3(2), 107-120.
  8. Arellano, Manuel and Stephen Bond (1991), "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, 58(2), 277-297.
  9. Arnold, Mark J., Kristy E. Reynolds, Nicole Ponder, Jason E. Leug (2005), "Customer Delight in a Retail Context: Investigating Delightful and Terrible Shopping Experiences," Journal of Business Research, 58 (8), 1132-1145.
  10. Banker, Rajiv D., Gordon Potter, and Dhinu Srinivasan (2000), "An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures," The Accounting Review, 75(1), 65-92.
  11. Chandler, Colby H. (1989), "Quality: Beyond Customer Satisfaction," Quality Progress, 2(2), 30-32.
  12. Chitturi, Ravindra, Rajagopal Raghunathan, and Viajay Mahajan (2008), "Delight by Design: The Role of Hedonic Versus Utilitarian Benefits," Journal of Marketing, 72(3), 48-63.
  13. Chu, Wujin and Preyas S. Desai (1995), "Channel Coordination Mechanisms for Customer Satisfaction," Marketing Science, 14(4), 343-359.
  14. Chui, Andy C.W., Sheridan Titman, and K. C. John Wei (2000), "Momentum, legal systems and ownership structure: An analysis of Asian stock markets," Working paper, University of Texas.
  15. Collins, Daniel W. and S. P. Kothari (1989), "An Analysis of Intertemporal and CrossSectional Determinants of Earnings Response Coefficients," Journal of Accounting and Economics, 11(2-3), 143-181.
  16. Fama, Eugene F. (1970), "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, 25(2), 383-417.
  17. Fama, Eugene F. and Kenneth French (1993), "Common Risk Factors in the Returns on Stocks and Bonds," Journal of Financial Economics, 33(1), 3-56.
  18. Fornell, Claes (1992), "A National Customer Satisfaction Barometer: The Swedish Experience," Journal of Marketing, 55(1), 1-21.
  19. Fornell, Claes (1995), "The Quality of Economic Output: Empirical Generalizations About Its Distribution And Relationship To Market Share," Marketing Science, 14(3), 203-211.
  20. Fornell, Claes, Michael D. Johnson, Eugene W. Anderson, Jaesung Cha, and Barbara Everitt Bryant (1996), "The American Customer Satisfaction Index: Nature, Purpose, and Findings," Journal of Marketing, 60(4), 7-18.
  21. Fornell, Claes, Sunil Mithas, Forrest V. Morgeson III, and M.S. Krishnan (2006), "Customer Satisfaction and Stock Prices: High Returns, Low Risk," Journal of Marketing, 70(1), 3-14.
  22. Gerlsbeck, Rob (2006), "Bad Reputation Can't Be Beat," Marketing Magazine, 111(April), 6.
  23. Goldenberg, Jacob, Barak Libai, Sarit Moldovan, and Eitan Muller (2007), "The NPV of Bad News," International Journal of Research in Marketing, 24(3), 186-200.
  24. Grewal, Rajdeep, Murali Chandrashekaran, and Alka V. Citrin (2010), "Customer Satisfaction Heterogeneity and Shareholder Value," Journal of Marketing Research, 47(4), 612-626.
  25. Griffin, Abbie and John R. Hauser (1993), "The Voice of the Customer," Marketing Science, 12(1), 1-27.
  26. Gruca, Thomas S. and Lopo L. Rego (2005), "Customer Satisfaction, Cash Flow, and Shareholder Value," Journal of Marketing, 69(3), 115-130.
  27. Hallowell, Roger (1996), "The Relationships of Customer Satisfaction, Customer Loyalty, and Profitability: An Empirical Study," International Journal of Service Industry Management, 7(4), 27-42.
  28. Hameed, Allaudeen and Yuanto Kusnadi (2002), "Momentum Strategies: Evidence from Pacific Basin Stock Markets," Journal of Financial Research, 25(3), 383-397.
  29. Harmon, L.C. and K. M. McKenna-Harmon (1994), "The Hidden Costs of Resident Satisfaction," Journal of Property Management, 59(3), 52-55.
  30. Homburg, Christian, Nicole Koschate, and Wayne D. Hoyer (2005), "Do Satisfied Customer Really Pay More? A Study of the Relationship between Customer Satisfaction and Willingness to Pay," Journal of Marketing, 69(2), 86-96.
  31. Ittner, Christopher D. and David F. Larcker (1998), "Are Nonfinancial Measures Leading Indicators of Financial Performance? An Analysis of Customer Satisfaction," Journal of Accounting Research, 36(1), 1-35.
  32. Ittner, Christopher D., David F. Larcker, and Daniel Taylor (2009), "The Stock Market's Pricing of Customer Satisfaction," Marketing Science, 28(5), 826-835.
  33. Jacobson, Robert and Natalie Mizik (2009), "The Financial Markets and Customer Satisfaction: Reexamining Possible Financial Market Mispricing of Customer Satisfaction," Marketing Science, 28(5), 810-819.
  34. Jones, Charles M. and Owen A. Lamont (2002), "Short-Sale Constraints and Stock Returns," Journal of Financial Economics, 66(2), 207-239.
  35. Jones, Thomas O. and W. Earl Sasser, Jr. (1995), "Why Satisfied Customers Defect," Harvard Business Review, 73(6), 88-99.
  36. Joshi, Amit and Dominique M. Hanssens (2010), "The Direct and Indirect Effects of Advertising Spending on Firm Value," Journal of Marketing, 74(1), 20-33.
  37. Kahneman, Daniel and Amos Tversky (1979), "Prospect Theory: An Analysis of Decisions Under Risk," Econometrica, 47(2), 263-291.
  38. Keiningham, Timothy L., Tiffany Perkins-Munn, and Heather Evans (2003), "The Impact of Customer Satisfaction on Share-of-Wallet in a Business-to-Business Environment," Journal of Service Research, 6(1), 37-50.
  39. Kim, Youngchan (2006), "A Longitudinal Study of the Effect of the Korean Customer Satisfaction Index on Company Profit," The Academy of Customer Satisfaction Management, 8(1), 63-72.
  40. Kim, Youngchan and Heungsun Hwang (2006), "Latent Growth Curve Modeling for the Relationship among Revenue, Loyalty, and Customer Satisfaction," Korean Management Review, 35(2), 1203-1221.
  41. Lariviere, Bart, Timothy L. Keiningham, Lerzan Aksoy, Atakan Yalcin, Forrest V. Morgeson III, and Sunil 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.
  42. Lev, Baruch (1983), "Some Economic Determinants of Time-Series Properties of Earnings," Journal of Accounting and Economics, 5(1), 31-48.
  43. Miller, John A. (1977), "Exploring Satisfaction, Modifying Models, Eliciting Expectations, Posing Problems, and Making Meaningful Measurements," in Conceptualization and Measurement of Consumer Satisfaction and Dissatisfaction, H. Keith Hunt, ed. Cambridge, MA: Marketing Science Institute (May), 72-91.
  44. Mittal, Vikas, Eugene W. Anderson, Akin Sayrak, Pandu Tadikamalla (2005), "Dual Emphasis and the Long-Term Financial Impact of Customer Satisfaction," Marketing Science, 24(4), 544-555.
  45. Ohlson, James A. (1995), "Earnings, Book Values, and Dividends in Equity Valuation," Contemporary Accounting Research, 11(2), 661-687.
  46. Oliver, Richard L. (1980), "A Cognitive Model of the Antecedents and Consequences of Satisfaction Decisions," Journal of Marketing Research, 17(4), 460-469.
  47. Oliver, Richard L., Roland T. Rust, and Sajeev Varki (1997), "Customer Delight: Foundations, Findings, and Managerial Insight," Journal of Retailing, 73(3), 311-336.
  48. O'Sullivan, Don, Mark C. Hutchinson, and Vincent O'Connell (2009), "Empirical Evidence of the Stock Market's (Mis)Pricing of Customer Satisfaction," International Journal of Research Marketing, 26(2), 154-161.
  49. O'Sullivan, Don and John McCallig (2009), "Does Customer Satisfaction Influence the Relationship between Earnings and Firm Value?" Marketing Letters, 20(4), 337-351.
  50. Pastor, Lubos and Pietro Veronesi (2003), "Stock Valuation and Learning About Profitability," Journal of Finance, 58(5), 1749-1789.
  51. Park, Sang-June and Hyeon-Cheol Kim (2003), "Customer Satisfaction Index and Business Performance," Journal of Korean Marketing Association, 18(3), 19-50.
  52. Pauwels, Koen, Jorge Silva-Risso, Shuba Srinivasan, and Dominique M. Hanssens (2004), "New Products, Sales Promotions, and Firm Value: The Case of the Automobile Industry," Journal of Marketing, 68(4), 142-156.
  53. Raithel, Sascha, Marko Sarstedt, Sebastian Scharf, and Manfred Schwaiger (2012), "On The Value Relevance of Customer Satisfaction, Multiple Drivers and Multiple Markets," Journal of the Academy of Marketing Science, 40(4), 509-525.
  54. Rego, Lopo L., Neil A. Morgan, and Claes Fornell (2013), "Reexamining the Market Share-Customer Satisfaction Relationship," Journal of Marketing, 77(5), 1-20.
  55. Richins, Marsha L. (1987), "A Multivariate Analysis of Responses to Dissatisfaction," Journal of the Academy of Marketing Science, 15(3), 24-31.
  56. Rouwenhorst, K. Geert (1999), "Local Return Factors and Turnover in Emerging Stock Markets," Journal of Finance, 54(4), 1439-1464.
  57. Rust, Roland T. and Anthony J. Zahorik (1993), "Customer Satisfaction, Customer Retention, and Market Share," Journal of Retailing, 69(2), 193-215.
  58. Rouwenhorst, K. Geert, and Timothy L. Keiningham (1995), "Return on Quality(ROQ): Making Service Quality Financially Accountable," Journal of Marketing, 59(2), 58-70.
  59. Schneider, Benjamin and David E. Bowen (1999), "Understanding Customer Delight and Outrage," Sloan Management Review, 41(1), 35-45.
  60. Srinivasan, Shuba and Dominique M. Hanssens (2009), "Marketing and Firm Value: Metrics, Methods, Findings, and Future Directions," Journal of Marketing Research, 46(3), 293-312.
  61. Srivastava, Rajendra K., Tasadduq A. Shervani, and Liam Fahey (1998), "Market-Based Assets and Shareholder Value: A Framework for Analysis," Journal of Marketing, 62(1), 2-18.
  62. Sun, Monic (2012), "How Does the Variance of Product Ratings Matter?," Management Science, 58(4), 696-707.
  63. Tobin, James (1969), "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, 1(1), 15-29.
  64. Tornow, Walter W. and Jack W. Wiley (1991), "Service Quality and Management Practices: A Look at Employee Attitudes, Customer Satisfaction, and Bottom-Line Consequences," Human Resource Planning, 14(2), 105-115.
  65. Tuli, Kapil R. and Sundar G. Bharadwaj (2009), "Customer Satisfaction and Stock Returns Risk," Journal of Marketing, 73(6), 184-197.
  66. Yeung, Matthew C.H. and Christine T. Ennew (2000), "From Customer Satisfaction to Profitability," Journal of Strategic Marketing, 8(4), 313-326.
  67. Yeung, Matthew C.H., Lee Chew Ging, and Christine T. Ennew (2002), "Customer Satisfaction and Profitability: A Reappraisal of the Nature of Relationship," Journal of Targeting, Measurement and Analysis for Marketing, 11(1), 24-33.
  68. Yi, Youjae and Cheonglim Lee (2006), "The Effects of Customer Satisfaction on Firm's Profitability and Value," Journal of Korean Marketing Association, 21(2), 85-113.
  69. Yi, Youjae, Kyoung Cheon Cha, and Cheonglim Lee (2008), "The Dynamic Effects of Customer Satisfaction on Firm's Profitability and Value," Korean Journal of Marketing, 10(1), 1-23.