Effect of customer satisfaction on profitability

Customer satisfaction does have a positive effect on an organisation’s profitability. According to Hoyer and MacInnis (2001), satisfied customers form the foundation of any successful business as customer satisfaction leads to repeat purchase, brand loyalty, and positive word of mouth. Coldwell (2001): “Growth Strategies International (GSI) performed a statistical analysis of Customer Satisfaction data encompassing the findings of over 20,000 customer surveys conducted in 40 countries by InfoQuest. The conclusion of the study was:

Zairi (2000): “There are numerous studies that have looked at the impact of customer satisfaction on repeat purchase, loyalty and retention. They all convey a similar message in that:

Aaker (1995) said that the strategic dimension for an organization includes becoming more competitive through customer satisfaction/brand loyalty, product/service quality, brand/firm associations, relative cost, new product activity, and manager/employee capability and performance (Figure 6).

Performance measures reflecting long-term profitability

Figure 6 Performance measures reflecting long-term profitability. Consequences of customer satisfaction and Dissatisfaction

The consequences of not satisfying customers can be severe. According to Hoyer and MacInnis (2001), dissatisfied consumers can decide to:

Customer satisfaction is important because, according to La Barbera and Mazursky (1983), “satisfaction influences repurchase intentions whereas dissatisfaction has been seen as a primary reason for customer defection or discontinuation of purchase”.