Customer Satisfaction a Strong Predictor of Consumer Spending
ANN ARBOR -- Customer satisfaction has had a greater influence on consumer spending in recent years than income changes and consumer confidence combined, says a University of Michigan Business School researcher.
In fact, 38 percent of the variation in spending growth since 1995 is due to buyer satisfaction, according to Professor Claes Fornell, director of the U-M Business School’s National Quality Research Center (NQRC).
The NQRC compiles and analyzes data for the American Customer Satisfaction Index (ACSI), a quarterly national economic indicator of customer evaluations of the quality of U.S. products and services.
In a new study of the relationship between customer satisfaction and consumer spending, Fornell and colleague Jennifer Stephan constructed a data set that included the ACSI, Index of Consumer Sentiment, Consumer Confidence Index, real personal consumption expenditure and real personal disposable income from 1995 to 2001.
"The empirical results suggest that customer satisfaction has a stronger relationship with subsequent consumer spending than either income changes or consumer sentiment or confidence," Fornell says. "The research model, with ACSI as the sole predictor, accounts for 38 percent of the variation in consumer spending growth. The other variables add relatively little beyond what is captured by satisfaction."
Of course, Fornell notes, the time period of measurement is short and was, for the most part, characterized by rapid economic growth.
"It will be interesting to see if satisfaction has the same effects in periods of economic stagnation or slow growth," Fornell says. "Perhaps a case can be made for a greater impact from changes in income and confidence under such circumstances, but it would, nevertheless, be difficult to dismiss satisfaction as a major driver in consumer purchase behavior. Though cash flow provides the means to spend, satisfaction provides the rationale."
An important implication from the findings, Fornell says, is that consumer spending not only can be predicted, at least to some extent, but also can be affected by government and corporate actions.
"Customer satisfaction is an outcome of buyer-seller interactions as well as of subsequent consumption experiences," Fornell says. "In both cases, buyer satisfaction is affected by the availability of consumer choice alternatives, product quality, customer selection by the seller and buyer information. Since the satisfaction effect on household spending appears to be quite rapid, stimulating companies to devote more resources to customer service and satisfaction may well be an effective tool for encouraging household buying."
The study, "Consumer Spending Growth Predicted by Buyer Satisfaction," is on the Web at: http://www.theacsi.org/scores_commentaries/commentaries/spendingpaper.pdf.
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