It is generally assumed that increased satisfaction levels lead to improved financial performance. However, this assumed relationship is, by and large, still to be proven in a more general setting, especially with respect to European sectors and industries. This research aims to identify empirically relationships between customer loyalty and satisfaction and profitability measured as ROA, ROE, profit margin and operating income, as well as market indicators (market capitalisation and Tobin's q). The research sample is made up of nine Scandinavian banks observed on an annual basis between 2004 and 2014. We can confirm that customer satisfaction and loyalty have a significant positive influence on banks' profitability and can be considered as a predictor for future profitability as the satisfaction index of the preceding year influences the next year's financial performance. We are also able to confirm that there is a positive link between the customer satisfaction of the preceding year and market indicators of the current year. These results are important for both decision makers in banks and investors. They mean that decision makers and investors can take the bank's level and trend in customer satisfaction to make assumptions on its future profitability and market performance.

Purpose The purpose of this paper is to examine the relationship between customer satisfaction measured as Extended Performance Satisfaction Index (EPSI) and the financial performance of the banking sector for seven European countries over the period 2004–2014. Design/methodology/approach Using panel models, this study finds a significant positive influence of EPSI on banking financial performance at the country level. Findings Findings suggest that the value of the customer satisfaction index is important in explaining the financial performance of the banking industry at the aggregative country level. The customer satisfaction index measured as EPSI has a strong positive influence on the financial performance of the banking industry for the various North European countries studied. It was shown that EPSI has a positive influence on both total assets and total equity, with a higher relative influence and stronger significance on the total assets of the banking sector than on total equity. Originality/value The study contributes to understanding the importance of measuring and maintaining customer satisfaction as a profitability driver in the banking industry, providing new cross-country evidence. It also contributes to the literature focussing on a group of countries that have not previously been studied.

No abstract

Purpose The purpose of this paper is to assess the usefulness and efficiency of customer-based measures such as customer satisfaction (CSI) and perceived loyalty for monitoring and enhancing the financial performance in corporations. Design/methodology/approach General financial data for the empirical modeling is compiled from national and international databases (Alla Bolag, IMF/IFS, Bloomberg, Eurostat, etc.) and company-specific data from the studied corporation. Customer perception data (like CSI and loyalty) are taken from the Extended Performance Satisfaction Index-initiative database (annual observations for the period 2001-2014 and quarterly for 2008-2014). A hierarchy of structural models is devised on a combined time-series and cross-section (panel and multi-level) approach. The results are based on models estimated by Arellano–Bond procedures (Arellano and Bond, 1991). Findings The core findings are two. First, there is a strong positive relationship between customer-based measures and financial performance. Second, it is effective to regularly monitor CSI as a forward- looking indicator for understanding future financial performance. Practical implications Customer-based measures are highly useful as leading indicators of companies’ future performance and should be incorporated even more into corporate decisions. Originality/value According to this survey of contemporary research, very little is academically documented for the full-circle from corporate to branch level. Thus, the prevailing study should be of potential value for companies in general.

There are many references in literature to customer satisfaction and related non-financial measures driving the financial performance of a company. Here we report results of analysis in the North-European financial sector, mainly banking. Based on proposed financial and customer perceived KPIs operational measures are devised and measured for the studied corporation on different levels from global-corporate to individual branches. In addition, possible extensions to other industries of this relationship are studied and briefly reported. The analysis is based on panel approach where cross-section and time-series observations are studied for major actors. The Arellano-Bond estimation technique is used throughout.