Saturday, June 5, 2010

On-going Validation that Satisfaction Matters

Thee was a short blog by Kevin Thomson on Webtrends on June 2, 2010. The author pointed out that investing $100 in the S&P 10 years ago would be worth $81 today whereas that same investment in stocks from companies that scored well in the ACSI index would be worth $372.13 today.

This tracks very well against an article published in the Summer 2007 edition of The Business Renaissance Quarterly by Bleuel and Stanley titled "Customer Focus: One Key to Financial Success" that demonstrated similar results. The authors reviewed 12 industries that were represented in the ASCI index. The authors compared the best and the worst (in terms of their ASCI index) in each of the industries and found statistically significant differences (at the 5% level) for the following financial measures:
1. Cash Flow (16.4 versus 3.4)
2. Price Growth (59.7 versus 34.6)
3. Earnings Predictability (76 versus 51.8)
4. Beta as a measure of risk (0.95 versus 1.23)

In addition there was a statistically significant difference between the average ACSI scores for the best companies versus the worst companies.

The bottom line from both of these examples is that companies that have a strategy that includes a strong customer service component tend to have better financial performance than those that do not.

No comments:


web visitor stats
OptiPlex 755 Desktops