Customer satisfaction, earnings and firm value

Abstract

Purpose -The aim of this study is to examine the relationship between customer satisfaction, earnings and firm value. Design/methodology/approach -A model borrowed from the accounting literature -the Ohlson model -is used to consider the impact of customer satisfaction on Tobin's q -a capital market-based measure of firm performance widely used in marketing research. Data on firm performance is drawn from COMPUSTAT and integrated with data on customer satisfaction from the American Customer Satisfaction Index (ACSI). Findings -Results show that customer satisfaction has a positive impact on firm value. Critically, the authors find that this impact is over and above the impact that earnings has on firm value. They also find that customer satisfaction positively and significantly moderates the earnings-firm value relationship.Research limitations/implications -Findings are limited to firms covered by the American Customer Satisfaction Index and subject to the assumptions underpinning the Ohlson model. Practical implications -This study's demonstration of the complementary relationship between earnings and customer satisfaction in determining firm value should encourage managers to engage with satisfaction as a driver of business performance and value. Originality/value -Findings extend recent studies on the impact of customer satisfaction on business performance. While prior studies either ignore earnings or focus on the relationship between satisfaction and stock returns, the authors show the impact of satisfaction on firm value, in a model that includes earnings. Importantly, they also extend prior studies by showing that the interaction between customer satisfaction and earnings is central to understanding the impact of both satisfaction and earnings on firm value. In addition, they demonstrate the usefulness of an earnings-based valuation model, to explore the relationship between a marketing metric and firm value. The authors' approach may be adopted to consider the impact of other measures of marketing performance. Thus, they hope that this study helps to further bridge the gap between marketing and the financial disciplines.

Impact of customer satisfaction on financial results of car servicing companies: findings from slovenia

“…Their study showed that the satisfaction creates shareholder value by increasing future cash fl ow growth and reducing its variability. [31] complement and extend that study by showing that customer satisfaction has an impact on fi rm value, which is over and above the impact of profi t (earnings). They fi nd that fi rm value is infl uenced by profi t, customer satisfaction and the interaction between these two metrics.…”

“…Some papers used national customer satisfaction indices (e.g. the American Customer Satisfaction Index (ACSI): [24], [34] and [31]; the Swedish Customer Satisfaction Index (SCSI): [1] and [2]), while others relied on individual company customer satisfaction measurements.…”

Influences of Country-Of-Origin on Perceived Quality & Value According to Saudi Consumers of Vehicles

“…In the same context, the literature review of Wang, (2013), reports that multiple studies have found a correlation between PQ and PV. "Value" is one of the most widely and frequently used words in various disciplines of social science (O'Sullivan & McCallig, 2012). In the marketing domain, value has been considered a key concept in understanding and predicting customer behavior (Choo et al, 2012).…”

Impact of Professionalism and Accountability among Royal Malaysian Police (RMP) Staffs in Selangor, Malaysia

“…Furthermore, numerous past researches have also revealed the relationships between customer satisfactions and factors such as significant brand loyalty (e.g., Choudhury, 2013;Torres-Moraga, Vasquez-Parraga, Zamora-Gonzalez, 2008;Veloutsou, 2015), improved employees and organization's performances in terms of productivity (e.g., Lee, Lee, Kim, & Lee, 2007;Mihelis, Grigoroudis, Siskos, Politis, & Malandrakis, 2001), higher profits (e.g., Morris, 1991;O'Sullivan & McCallig, 2012;Rust, Danaher, & Varki , 2000), and so on. In addition to the impacts on the organization in general as mentioned above, customer satisfactions were also found to have significant impact on employees' job satisfaction and retention, which in turn will also increase customers' satisfaction (Graham & Smith, 2005;Helton, 2010;Hur, Moon, & Jung, 2015;Pantouvakis & Bouranta, 2013).…”