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A Basic Assumption of Customer Satisfaction: Reconsidered

One of the basic assumptions that have been considered sacrosanct is high levels of customer satisfaction lead to increased market share. Some recent research suggests that there this assumption may not be universally true. The research was published in September, 2013 Journal of Marketing titled “Reexamining the Market Share-Customer Satisfaction Relationship.” The authors are Lopo L. Rego, Neil A. Morgan and Claes Fornell. The authors have found “a consistently significant negative market share–customer satisfaction relationship.”

Some points of interest made by the authors are: (i) Customer satisfaction is generally not predictive of a firm’s future market share, but (ii) Market share is a strong negative predictor of a firm’s future customer satisfaction.

The research suggests that as companies grow larger their customer satisfaction lessens. Success generally leads from an aggressive “take care of the customer policy” to a bureaucratic, procedurally structured organization that establishes a policy to have the “highest level of customer satisfaction in the industry benchmark.” While these might appear to be the same, one is “customer focused” and the other is “system focused.”

From this perspective there is a paradox that appears; namely, high customer satisfaction may influence growth in market share but as companies grow and systematize their customer interface, satisfaction may decline and ultimately have little or no effect or impact on market share.

The bottom line is that size, bureaucracy, policies and procedures can take the energy out of a customer relationship. As a company grows, it must be aware that the customer relationship can be diminished when the individual customer is not as important as the metric of customer satisfaction.

This article was originally published by The Customer Institute

Published: February 18, 2014
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Bill Bleuel

Dr. Bill Bleuel is an award-winning Professor of Decision Sciences at Pepperdine University’s Graziadio School of Business and Management. Dr. Bleuel’s expertise lies in the quantitative aspects of business. He specializes in the measurement and analysis of operations, customer satisfaction, customer loyalty and customer retention. He has held senior positions in engineering, marketing and service management at Xerox, Taylor Instrument Company and Barber Colman Company. Dr. Bleuel has also experience as general manager in two start-up companies that he co-founded.