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A Study on the Effect of Customer Satisfaction on Firm Profitability

Kim, Yeongchan · Hwang, Heungseon

Published: January 2006 · Vol. 35 No. 4 · pp. 1203-1221
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Abstract

Market-leading firms are devoting greater effort and resources than before to achieving customer satisfaction. This is based on the fact that creating customer satisfaction is an important prerequisite for achieving a firm's financial performance. To this end, leading firms are striving to build management systems that comprehensively manage non-financial indices such as customer satisfaction, customer loyalty, overall perceived quality, and employee satisfaction. However, despite the growing corporate interest in customer satisfaction and the increasing influence of its outcomes on business activities, research on the relationship between customer satisfaction and corporate financial performance has yielded diverse results. This study was conducted with the following two objectives. First, it aims to elucidate the relationship between customer satisfaction and corporate financial performance. In particular, this study moves beyond simple correlation analysis and pursues prediction-oriented research examining what actual impact customer satisfaction has on the medium- to long-term trends of financial indicators. Second, it aims to empirically verify the conceptual structural equation necessary to achieve the goal stated in the first objective. This study utilized longitudinal data to academically investigate the relationship between customer satisfaction scores and corporate sales revenue. On this basis, firms can obtain empirical evidence that customer satisfaction management can improve medium- to long-term financial performance, and establish a theoretical foundation for pursuing more robust customer satisfaction management. As a research method, the latent growth curve modeling approach widely used in economics was employed to empirically analyze the relationship between ACSI scores and subsequent corporate sales revenue, based on data from 83 U.S. firms using their 1994 ACSI scores and corporate sales revenue data from 1994 to 1996.
Keywords: ACSI점수고객만족잠재성장곡선모형