“Companies with highly satisfied customers generate superior returns because customer satisfaction is critical for repeat business, and that type of business is usually very profitable. That is, loyal customers tend to be highly profitable as long as their loyalty comes from their satisfaction and not because prices are low.”
-- Claes Fornell, founder CFI Group and ACSI and University of Michigan professor
Last month, the CFI Group, an Ann Arbor, MI think tank focused on customer satisfaction and feedback analytics, released research findings showing that the level of a publicly traded company’s customer satisfaction directly correlates to the firm’s stock price. During the study, the CFI Group managed and tracked a portfolio of stocks based on their performance in the American Customer Satisfaction Index (ACSI) and the National Customer Satisfaction Index UK (NCSI-UK). The portfolio results were then compared to the benchmark S&P 500 in the case of U.S. companies and the FTSE 100 for firms in the United Kingdom. Overall, their research found that the top companies on the ACSI and NCSI-UK, which represented the ones with the highest customer satisfaction scores, significantly outperformed their competitors and the overall stock market. Key specific findings to support the conclusions from the report are highlighted below:
The ACSI portfolio of U.S. companies returned 390% vs. the S&P 500 return of -7% (from April 2000 to April 2012)
The NSCI portfolio of UK companies returned 59% vs. the FTSE 100 return of -6% (from April 2007 to June 2011)
Exceptional stock performance was not the only benefit experienced by these companies with higher levels of customer satisfaction. CFI Group also found that these firms experienced higher positive cash flow levels, lower stock volatility, and more positive surprises on the earnings reporting front. Previously on the Customer Effective Blog, we have repeatedly dissected how earning and maintaining high customer satisfaction and customer loyalty levels can lead to increased revenues, lower cost of sales, and higher profits. More than likely, the leading companies in the ACSI and NCSI have implemented a leading-edge enterprise CRM system, such as Microsoft Dynamics CRM, to better serve their clients and outperform the stock market to the delight of many shareholders, Board Members, and stakeholders.
To read more about how Microsoft Dynamics CRM can help your organization improve customer satisfaction levels, achieve strategic growth initiatives, ignite business performance, and boost your company stock price, please visit www.customereffective.com. Having completed hundreds of CRM on-premise and online projects over the past decade, we can help lower your TCO, shorten your implementation timeline, and increase your ROI.