Does customer satisfaction increase firm performance? An application of American Customer Satisfaction Index (ACSI)

Abstract

As a prominent factor in firms' profitability and value, customer satisfaction has been given much attention in the measurement of a firm's financial performance. In the hospitality and tourism industry, however, the effect of customer satisfaction on financial performance has been relatively neglected because of the unique characteristics of the industry and presumably increasing cost for uncertain outcomes. Based upon this realization, this study empirically examines the relationship between the customer satisfaction index (CSI) and the companies' financial performance in the hospitality and tourism industry (i.e., hotels, restaurants, and airlines). Findings reveal that the impact of customer satisfaction is reflected in the profit margin (PM), return on assets (ROA), return on equity (ROE), proxies of a firm's profitability, and in the market value added (MVA), a proxy of firm value. The results indicate that customer satisfaction positively affect a firm's profitability and value in the hospitality and tourism industry. Implications and suggestions for future research are discussed.