Customer Satisfaction Heterogeneity and Shareholder Value

Abstract

It is widely recognized that business growth and shareholder value are engineered on the basis of investments aimed at acquiring and retaining customers. Along with this premise, however, the literature reveals a growing recognition that the manner in which important customer-based outcomes are constructed in the short term has vital implications for long-term firm performance. Adopting the view that customer satisfaction is a stochastic marketplace asset, the authors advance a mean-variance perspective that enables them to test two conjectures: (1) Objective service quality and advertising affect not only the level of customer satisfaction but also the heterogeneity in customer satisfaction, and (2) shareholder value is shaped by the interplay of satisfaction level and heterogeneity, through their impact on retention sales, acquisition sales, and servicing costs. The authors test these conjectures using secondary data from diverse sources that describe the dynamics in the U.S. airlines industry during a nine-year period (1997–2005). The results, derived from estimating structural models that account for the impact of several meaningful control variables, provide strong support for both conjectures. Importantly, the findings indicate that the return on satisfaction to shareholder value decreases by almost 70% in going from low to high satisfaction heterogeneity; at the same time, increasing levels of satisfaction heterogeneity serves to reduce the volatility in shareholder value.

Does size matter? Corporate social responsibility and firm performance in the restaurant industry

“…The understanding that stakeholders' satisfaction builds financial value leads firms to recognize the criticality of maintaining good relationships with the majority of stakeholders (e.g., Grewal et al, 2010). Consequently, it is common for firms to announce their CSR activities to publicly promote their stakeholder support (Mackey et al, 2007), considering CSR activities tend to have the effects of maintaining and improving stakeholder relationship (Pride and Ferell, 1995).…”

Customer reactions to downsizing: when and how is satisfaction affected?

“…This is a standard econometric method when dealing with data structured like ours. It has also frequently been used in studies dealing with downsizing (e.g., Love and Kraatz 2009;Love and Nohria 2005) as well as ACSI data (e.g., Anderson and Mansi 2009;Grewal et al 2010).…”

The Reporting and Sustainable Business Marketing

“…Companies become aware of the need for another type of reporting approach and present ethical practices and corporate governance to potential investors, which leads to a better positioning on capital markets [18]. Thus, understanding the importance of presenting all these types of information, leading companies have resorted to the practice of their integration into a comprehensive report which presents both financial and non-financial information [19].…”