Customer Satisfaction Does Relate to Revenue

The University of Michigan Business School's National Quality Research Center (www.bus.umich.edu/research/nqrc), the American Society for Quality (www.asq.org), and the CFI Group (www.cfigroup.com) ganged up to create the American Customer Satisfaction Index (ACSI). The ACSI was designed to be a national economic indicator of customer satisfaction with the quality of goods and services available to household consumers in the United States.

It has the distinction of being the only cross-industry national indicator that links customer satisfaction to financial returns. According to the National Quality Research Center:

ACSI's predictive power comes from use of an econometric model that ties customers' evaluations of quality and value to satisfaction; and then explains the effects of satisfaction on customer complaints and customer loyalty. The model also estimates the percent of customers who will use each company again on the next purchase occasion.

Faculty research at the University of Michigan Business School shows that Market Value Added (MVA), stock price, and return on investment are highly related to ACSI. For example, in the most recent year for which ACSI and MVA data are available, firms with the top 50% of ACSI scores generated an average $24 billion in shareholder wealth while firms with the bottom 50% of scores created only $14 billion. Since 1994, changes in ACSI have correlated with changes in the Dow Jones Industrial average. The ACSI model is a set of causal equations that link customer expectations, perceived quality, and perceived value to customer satisfaction (ACSI). ACSI is linked, in turn, to its consequences in terms of customer complaints and customer loyalty (measured by price tolerance and customer retention). For most companies, repeat customers are major contributors to profit. Thus, customer retention (estimated as repurchase probability) is a major indicator of financial performance. By translating that estimate into dollar amounts, the ACSI is able to calculate the net present value of a company's customer base as an asset over time.

The ACSI can be used with a good deal of accuracy in predictions of both individual companies' financial performance and national economic performance. So there's a benchmark out there, keeping track of how customer delight is or is not turning into increased revenues.

For our current purposes, it's enough to know that there are ways to measure online customer service to see if it's helping or hindering our efforts to increase profits.