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Customer satisfaction and its impact on the future costs of selling

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journal contribution
posted on 30.03.2021, 12:45 by Leon Gim Lim, Kapil Rajendra Kumar TULI, Rajdeep Grewal

Although scholars have established that customer satisfaction affects different dimensions of firm financial performance, a managerially important but overlooked aspect is its effect on a firm’s future cost of selling (COS), that is, expenditures associated with persuading customers and providing convenience to them. Accordingly, this study presents the first empirical and theoretical examination of the impact of customer satisfaction on future COS. The authors propose that while higher customer satisfaction can lower future COS, the degree to which a firm realizes this benefit depends on its strategy and operating environment. Analyzing almost two decades of data from 128 firms, the authors find that customer satisfaction has a statistically and economically significant negative effect on future COS. While the negative effect of customer satisfaction on future COS is weaker for firms with higher capital intensity and financial leverage, this effect is stronger for more diversified firms and for firms operating in industries with higher growth and labor intensity. The authors also find that these effects may vary across two components of COS, cost of persuasion and convenience.

History

Publication Date

15/05/2020

Journal

Journal of Marketing

Volume

84

Issue

4

Pages

23-44

ISSN

0022-2429

School

Lee Kong Chian School of Business

IRIS ID

137490587