Disentangling the Market Value of Customer Satisfaction: Evidence from Market Reaction to the Unanticipated Component of ACSI Announcements

Abstract

There is a rich literature that examines the impact of customer satisfaction on market value. Surprisingly, the short-run market impact of customer satisfaction has been found to be either insignificant or limited in scope. To address this shortcoming, we introduce the notion that investors form expectations about customer satisfaction and respond only to deviations from these expectations (i.e., “surprises”). We consider two “expectations” models: a naïve model that utilizes last year’s scores and a model that includes firm characteristics and marketing investments to proxy for the prior allocation of resources devoted to improving customer satisfaction. In our empirical work, we find that the market does indeed respond in the short-run to surprises in customer satisfaction, with more pronounced effects for our second expectations model. Overall, our research offers two distinct contributions. First, it refines the current conceptualization of customer satisfaction by explicitly introducing the notion of investor expectations. Second, we employ this refined conceptualization to unequivocally demonstrate the short-run impact of investments in customer satisfaction.

Keywords: customer satisfaction, value, ACSI, ACSI scores

JEL Classification: M30, M31, G39