I don’t see the reference to a definate causation, but a suggestion that a “relationship” probably does exist between Cust. Satisfaction & Econ. Performance. I gathered from The Big Picture that the concept is valid and perhaps a connection has been proven.

Of course it doesn’t happen in every situation and underlying variables will always be present in terms of performance AND stock price. That is just a given.

Your overall message of closing the gap between listening and understanding our customers is commendable.
Regards,
Valerie

Thank you for your comment. You bring a valid point, however we do not fly planes or sail boats relying on just one instrument – making predictions of a company financial performance is far more complex and therefore requires a good number of reference points than most activities we usually deal with. In that context, the use of customer satisfaction trends to assess a company profit forecast risks, seem to me a very valuable approach. In fact I spoke to a number of financial securities analysts who use customer satisfaction data trends as one of predictive indicators.

There is quite possibly omitted variable bias in both the studies quotes – there is another lurking variable (e.g., strategy, products, effective pricing, channels, quality, market etc) that drive both stock prices and the customer satisfaction.

Even if we assume there is causation, investing based on customer satisfaction is a good investment strategy only if this information is not already reflected in the stock (in other words, high customer satisfaction gives new information that is not available through other indicators like earnings growth, accruals, cash flow etc).

Just some thoughts
-rags