Customer satisfaction and profitability: Is there a lagged effect?

Chiquan Guo, Anand Kumar, Pornsit Jiraporn

Research output: Contribution to journalArticle

15 Scopus citations

Abstract

Although customer satisfaction is one of the fundamental concepts in marketing theory and practices, the direct link between customer satisfaction and a firm's bottom line is still somewhat ambiguous and vague. While most research focuses on how customer satisfaction contributes to the firm's profitability, financial resources required to implement satisfaction programs are largely ignored in the literature. This paper takes a conceptual middle ground, proposing that customer satisfaction influences profitability, and at the same time, profitability impacts satisfaction. However, based on recent evidence (Rust, Moorman and Dickson, 2002), we propose that there is a lagged effect between the two. In other words, past satisfaction has a positive effect on current profitability, and similarly, past profitability affects current satisfaction. Furthermore, event study methodology is utilized to examine stock reaction to the announcement of the firm's satisfaction performance, solidifying the relationship between satisfaction, a marketing metric, and financial performance.

Original languageEnglish (US)
Pages (from-to)129-144
Number of pages16
JournalJournal of Strategic Marketing
Volume12
Issue number3
DOIs
StatePublished - Jan 1 2004

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Marketing

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