Paper by Leon Gim Lim accepted in Journal of Marketing
In a new study that has been accepted for publication in the Journal of Marketing, Leon Gim Lim from Tilburg University, Kapil R. Tuli from Singapore Management University and Rajdeep Grewal from the University of North Carolina at Chapel Hill, examine the impact of customer satisfaction on the future cost of selling of a firm and the extent to which this impact differs across firms and industries.
Abstract Customer Satisfaction and its Impact on the Future Costs of Selling:
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), i.e., 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.