The Effect of Measurement Timing on the Information Content of Customer Satisfaction Measures

Posted: 19 Dec 2013

See all articles by Clara Xiaoling Chen

Clara Xiaoling Chen

University of Illinois at Urbana-Champaign - Department of Accountancy

Melissa Martin

University of Illinois at Chicago

Kenneth A. Merchant

University of Southern California - Leventhal School of Accounting

Date Written: December 17, 2013

Abstract

We use two sets of customer satisfaction measures obtained from a homebuilding company to examine the effect of measurement timing on the association between customer satisfaction measures and future financial performance. The research site employs two separate consulting firms that measure customer satisfaction at different times from the same homebuyer population. A national consulting firm captures customer satisfaction at a fixed time in the year following purchase (the "NF" measure), whereas an industry-focused, boutique consulting firm captures customer satisfaction at three specific points in time (30 days, 5 months, 11 months) after purchase (the "BF" measures). We analyze data for the period 2002-2004 and have the following findings: First, customers’ satisfaction varies over a homebuyer’s consumption period. Comparing across the three BF measures, we find that on average a homebuyer is most satisfied 30 days after purchase and least satisfied 11 months after purchase. Second, we compare the NF measure with the BF measures and find significant differences in their predictive abilities for future financial performance. The BF measures are significant leading indicators of future financial performance, as measured by higher revenues and profits and lower warranty costs, but the NF measure is not. Additional analyses indicate that the relatively higher predictive ability of the BF measures is due to the more precise timing of those measures, rather than differences in measurement content. Finally, we find that the point of diminishing returns to improvements in customer satisfaction varies across customer satisfaction measures obtained at different points in the consumption period. We conclude that timing has a significant impact on the information content of customer satisfaction measures, at least for goods and services that are consumed over extended periods of time.

Keywords: customer satisfaction, nonfinancial performance measures, intangible asset, performance driver, consumption systems, homebuilding industry

JEL Classification: M4

Suggested Citation

Chen, Clara Xiaoling and Martin, Melissa and Merchant, Kenneth A., The Effect of Measurement Timing on the Information Content of Customer Satisfaction Measures (December 17, 2013). Management Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2368877

Clara Xiaoling Chen

University of Illinois at Urbana-Champaign - Department of Accountancy ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Melissa Martin

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Kenneth A. Merchant (Contact Author)

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States
213-740-4842 (Phone)
213-747-2815 (Fax)

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