Customer Satisfaction & Firm Performance

Introduction

This marketing academic paper aims to comprehensively understand the relationship between customer satisfaction and firm performance.

The academic paper synthesizes the results of 251 studies published between 1991 and 2017.

Customer satisfaction can be defined as the post-consumption consumer judgment of whether a good or service provided a pleasurable level of overall usage-related fulfillment.

Firm performance refers to the measure of how well a company is doing. It is typically assessed in terms of financial measures such as stock prices, profit, market share, and revenue.

The authors emphasize that satisfaction has a positive and statistically significant relationship with firm performance on average. However, the relationship is more complex than a simple bivariate one, and it is influenced by various moderating and mediating factors.

Paper Details

• Paper name: Customer satisfaction and firm performance: insights from over a quarter century of empirical research
• Authors: Ashley S. Otto, David M. Szymanski, and Rajan Varadarajan
• Publishing year: 2019
• Journal: Journal of the Academy of Marketing Science

Literature Review

The authors emphasize that the relationship between customer satisfaction and firm performance is more complex than a simple bivariate one and is influenced by various moderating and mediating factors. Some of the factors influencing this relationship, as discussed in the research paper, include:

1. Firm Factors: Firm size, such as the number of employees, sales, and assets, can impact customer satisfaction and firm performance. Larger firms may have advantages in achieving market leadership, attracting superior talent, and developing and introducing more innovations, which can positively impact customer satisfaction and firm performance.
2. Industry Factors: Market growth can influence customer satisfaction levels, as growing markets are often characterized by less strategic emphasis on price, leading to heightened opportunities for more total sales. This can result in increased customer satisfaction levels with purchased goods.
3. Marketing Strategy Factors: Advertising expenditures, research and development (R&D) expenditures, and served market scope are marketing strategy factors that can impact customer satisfaction and firm performance. For example, higher advertising and R&D expenditures can lead to improved customer satisfaction and firm performance.
4. Performance Measures: The choice of performance measures, such as market share, revenue, profit, and stock price, can also influence the satisfaction-performance relationship. For instance, the average satisfaction-performance relationship is stronger when performance is operationalized as stock price.

These factors illustrate the multifaceted nature of the relationship between customer satisfaction and firm performance, highlighting the need to consider various contextual and operational factors when examining this relationship

Conclusion

The study finds that customer satisfaction has a positive and statistically significant relationship with firm performance on average (r = .101).

However, more meaningful insights emerge when considering the moderating and mediating relationships. For instance, satisfaction is more appropriately depicted as a mediating effect of selected marketing strategy variables on firm performance outcomes.

Additionally, when satisfaction is viewed in the right setting using the right satisfaction and performance measures, a most favorable contingencies (MFC) perspective, the estimated correlation is reasonably strong (r = .349).

How to Enhance Your Marketing Role Today

1. Emphasize customer satisfaction: Recognize the importance of customer satisfaction in your marketing strategy and focus on delivering a pleasurable level of overall usage-related fulfillment.
2. Leverage marketing strategy factors: Use advertising, R&D, and served market scope to improve customer satisfaction and firm performance.
3. Consider firm and industry factors: Take into account firm size, industry concentration, and market growth to better understand the relationship between customer satisfaction and firm performance.
4. Measure satisfaction and performance: Utilize appropriate measures of customer satisfaction, such as the American Customer Satisfaction Index (ACSI), and performance metrics, like stock price, market share, and profit.