Customer satisfaction and profitability: Is there a lagged effect?

Chiquan Guo, Anand Kumar, Pornsit Jiraporn

Research output: Contribution to journalArticle

15 Citations (Scopus)

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

Fingerprint

Customer satisfaction
Customer profitability
Profitability
Relationship satisfaction
Marketing practices
Event study methodology
Marketing metrics
Financial performance
Announcement
Financial resources
Firm profitability
Marketing theory

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Marketing

Cite this

@article{c2c390072be64f398001703c720fda3c,
title = "Customer satisfaction and profitability: Is there a lagged effect?",
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.",
author = "Chiquan Guo and Anand Kumar and Pornsit Jiraporn",
year = "2004",
month = "1",
day = "1",
doi = "10.1080/0965254042000262878",
language = "English (US)",
volume = "12",
pages = "129--144",
journal = "Journal of Strategic Marketing",
issn = "0965-254X",
publisher = "Routledge",
number = "3",

}

Customer satisfaction and profitability : Is there a lagged effect? / Guo, Chiquan; Kumar, Anand; Jiraporn, Pornsit.

In: Journal of Strategic Marketing, Vol. 12, No. 3, 01.01.2004, p. 129-144.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Customer satisfaction and profitability

T2 - Is there a lagged effect?

AU - Guo, Chiquan

AU - Kumar, Anand

AU - Jiraporn, Pornsit

PY - 2004/1/1

Y1 - 2004/1/1

N2 - 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.

AB - 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.

UR - http://www.scopus.com/inward/record.url?scp=84986181495&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84986181495&partnerID=8YFLogxK

U2 - 10.1080/0965254042000262878

DO - 10.1080/0965254042000262878

M3 - Article

AN - SCOPUS:84986181495

VL - 12

SP - 129

EP - 144

JO - Journal of Strategic Marketing

JF - Journal of Strategic Marketing

SN - 0965-254X

IS - 3

ER -