TITLE

Customer Satisfaction Heterogeneity and Shareholder Value

AUTHOR(S)
Grewal, Rajdeep; Chandrashekaran, Murali; Citrin, Alka V
PUB. DATE
August 2010
SOURCE
Journal of Marketing Research (JMR);Aug2010, Vol. 47 Issue 4, p612
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
It is widely recognized that business growth and shareholder value are engineered on the basis of investments aimed at acquiring and retaining customers. Along with this premise, however, the literature reveals a growing recognition that the manner in which important customer-based outcomes are constructed in the short term has vital implications for long-term firm performance. Adopting the view that customer satisfaction is a stochastic marketplace asset, the authors advance a mean-variance perspective that enables them to test two conjectures: (1) Objective service quality and advertising affect not only the level of customer satisfaction but also the heterogeneity in customer satisfaction, and (2) shareholder value is shaped by the interplay of satisfaction level and heterogeneity, through their impact on retention sales, acquisition sales, and servicing costs. The authors test these conjectures using secondary data from diverse sources that describe the dynamics in the U.S. airlines industry during a nine-year period (1997–2005). The results, derived from estimating structural models that account for the impact of several meaningful control variables, provide strong support for both conjectures. Importantly, the findings indicate that the return on satisfaction to shareholder value decreases by almost 70% in going from low to high satisfaction heterogeneity; at the same time, increasing levels of satisfaction heterogeneity serves to reduce the volatility in shareholder value.
ACCESSION #
52119020

 

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