Determinants of Customer Loyalty and Financial Performance

Abstract

Recent research in accounting advocates nonfinancial measures of company performance, such as customer satisfaction and loyalty, as useful indicators of aspects of firm performance. But what are the drivers of customer satisfaction and loyalty? We provide an integrated causal model of company performance in the personal computer (PC) industry that simultaneously tests links between product value attributes resulting from business process performance, customer loyalty, and financial outcomes. Our results extend prior accounting research (e.g., Banker et al. 2000; Ittner and Larcker 1998) in two directions: (1) by explaining the determinants of customer loyalty, and (2) by clarifying the relation between customer loyalty and measures of financial performance. We report that product value attributes directly and differentially impact levels of customer loyalty as well as prevailing average selling prices. Furthermore, measures of customer loyalty explain levels of relative revenue growth and profitability, and relatively high customer loyalty engenders a competitive advantage in the PC industry.

Customer accounting and marketing performance measures in the hotel industry: Evidence from Australia

“…A number of previous studies have found mixed results in regard to a relationship between performance and customer retention, customer satisfaction, customer loyalty and sophisticated management accounting practices (Agbejule, 2005;Banker et al, 2000, Ittner andLarcker, 1998;Smith and Wright, 2004;and Qianpin, 2010). Even so, it was found in this study that large hotels, with decentralised structures, highly market orientated together with undertaking a prospector strategy, will use customer satisfaction analysis, and together there will be a positive impact on the hotels' non-financial performance.…”

“…Ittner and Larcker (1998) found significant relationships between customer satisfaction and customer retention, revenues and revenue changes within one large telecommunications firm, yet only a significant relationship between customer satisfaction and revenue for a financial services firm. Similarly, Banker, Potter and Srinivasan (2000) reported mixed results for the association between customer satisfaction and financial performance in a single hotel firm, and Smith and Wright (2004) found that in the personal computer industry, higher customer loyalty (seen as a proxy for customer satisfaction) is related to higher average product price, sales growth and return on assets.…”

Shoe Shine Entrepreneurs Social Responsibility Practices on Loyalty in Eldoret Town, Kenya

“…al., 2002). Smith and Wright (2004) used product quality, service quality, and firm viability in their structural equation model as direct determinants of customer loyalty in the personal computer industry, found service quality and firm viability to be statistically significant and product quality was negatively associated with customer loyalty. Hee-Su and Yoon (2004) in a research in the mobile industry researched if a mobile telephone subscriber would refer the carrier to others found that; call quality (service quality), customer mobile equipment type (product quality and features), and brand image were variables that had significant (positive) effect on customer loyalty.…”

Exploring Factors That Influence Consumer Loyalty to Automobile Dealerships in New York

“…Customers have more customized expectations and want to be reached as individuals (Raymond & Tanner, 1994). In addition, an exorbitant search for new business is costly (Carter, 2010).…”