Satisfied Customers Do, Indeed, Increase Shareholder Value

Job-cutting, cost-cutting and other profit- enhancing measures are too often used as the silver bullet to increase shareholder value. If you have been working in a field, where you have been involved with customers (customer relationship management, customer experience, customer service), you have probably experienced situations where you had to find arguments, why you should invest in a certain program to improve customer satisfaction and loyalty when everything that counts is shareholder value.

Fortunately some research has been done on the impact of customer satisfaction on shareholder value and stock prices respectively which should help to strengthen your arguments next time.

The authors of the study “Customer Satisfaction and Stock Prices” have analyzed the top 20% companies of the American Customer Satisfaction Index (ACSI) and found that their performance greatly outperformed the stock market, generating a 40% return.

From Consumerist:

From 1996-2003, the portfolio outperformed the Dow Jones Industrial Average by 93%, the S&P 500 by 201%, and NASDAQ by 335%.

Past performance doesn't indicate future results. ACSI only goes back to 1994. However, these startling findings help vindicate one of our central claims: investing in customer service and satisfaction is good for your bottom line.

You can download the full article or read more at Consumerist.