Customer satisfaction and profitability: A reappraisal of the nature of the relationship

Delivering customer satisfaction is at the heart of modern marketing theory. There is growing research evidence of the beneficial effects of customer satisfaction in terms of both behavioural outcomes such as loyalty, and performance outcomes such as profit. At the same time, a number of commentators are questioning the value of merely satisfying customers and focusing attention instead on the idea of customer delight. Implicit in these debates is the idea that the assumption of a simple linear relationship between satisfaction and relevant outcomes may no longer be appropriate. Using data from the American Customer Satisfaction Index (ACSI) and firm-level performance, this paper re-examines the nature of the relationship between satisfaction and performance with the specific objective of examining the extent to which such relationships may be non-linear. The results contradict the presumption of non-linearity and suggest that, at least over the observed range of satisfaction scores, the assumption of a linear relationship is acceptable.