The marketing profession has tried for years to quantify customer satisfaction in a way that lends itself to clarifying a brand’s equity, or worth. Annual studies like the American Customer Satisfaction Index, Prophet’s Reputation Management Index and Forrester Research’s Customer Experience Index are just three examples.
For instance, the American Customer Satisfaction Index has shown that the stock prices of companies ranking higher in the index tend to do better than those lower down. In fact, between 1994 and 2007, companies ranking in the top 25% of the index created $420 billion in wealth for shareholders, versus $111 billion for those in the bottom 25% -in other words, companies that please their customers are shown to create about four times the wealth.
Most analysts would agree that market capitalization is greatly influenced by brand power. In a study by marketing gurus David Aaker and Robert Jacobson, 34 companies examined between 1989 and 1992 demonstrated that those with the largest increase in brand equity averaged stock returns of 30% while the ones losing the most brand equity dropped 10% on average.
If you’re not quite sold on the idea of customer satisfaction affecting stock prices, Forrester Research’s annual Customer Experience Index ranks the best and worst in customer service. Companies in the top 10 routinely outperform the S&P 500. If the findings are altered slightly to consider operating profits, the results are even more pronounced.