Wednesday, September 5, 2007

Customer Satisfaction and Financial Success

I have seen a number of blogs that downplay the impact of customer satisfaction on the financial performance of the firm. I have just published (with my co-author) a refereed article that shows that there is a statistical relationship between companies with a customer focus and the financial performance of the company. The article is "Customer Focus: One Key to Financial Success". It is published in Volume 2, Issue 2 of the Business Renaissance Quarterly (Summer 2007), pages 41-49.

In the article we analyzed 30 companies in twelve industries and used the ACSI scores from the University of Michigan as the basis for their customer focus. We then tested the companies that had high ACSI scores against those who had low ACSI scores within each industry. All companies had to be listed in the Value Line Investment Survey and we used the financial data from the March 27, 2007 issue. We used 7 different financial measures including Beta, growth in sales, growth in cash flow, profit margin, price stability, price growth consistency, and earnings predictability. Four of the financial statistics were statistically significantly higher for those companies with high ACSI scores. The three that were not statistically significant had very large variances. There was no measure in which the worst companies had financial performance better than the best companies.

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