Customer satisfaction and future financial performance

This research investigates the relationship between customer satisfaction and future financial performance. More specifically, it is studied whether customer satisfaction positively affects future financial performance, whether consistently high customer satisfaction will lead to more stability in future financial performance and whether these relations are moderated by an asymmetry effect (i.e. losses loom larger than gains) and competitive influences (i.e. the more competitive a sector, the weaker the relations). For four identified periods from 1994-2012 these relations are investigated, by using customer satisfaction data of the American Customer Satisfaction Index. As proxies for financial performance, net income and earnings per share are used. The results show that concerning the entire sample period, customer satisfaction seems to positively influence future financial performance and that the asymmetry effect exists when earnings per share is used as proxy for financial performance. The period specific results show that supportive evidence for the reputation theory is found in economic booming periods, while the asymmetry effect and competitive factors seem to influence the satisfaction-performance relationship in more severe economic periods. In addition, firm sector analysis reveals that the relation between customer satisfaction and future financial performance is strongest for the consumer discretionary and consumer staples sectors.