John DiJulius | Customer Experience Blog


CUSTOMER SATISFACTION AND STOCK PRICES

In an article titled Customer Satisfaction and Stock Prices: High Returns, Low Risk, author Claes

John DiJulius

John DiJulius

Fornell shows the result of extensive research and studies that proves change in customer satisfaction, not only greatly impacts each individual organization, but has a significant impact on the future health of the economy. Fornell, is the director of the American Customer Satisfaction Index. ACSI is a leading indicator of consumer behavior, measuring the satisfaction of consumers across the U.S. Economy.

They are consistent with previous studies that firms who have higher customer satisfaction are more likely to enjoy both a higher level and more stable net cash flow. Their study proved investing in the leading ACSI companies consistently outperformed the market by considerable margins.

The Smoking Gun

Several studies were used, comparing the top ACSI organizations to the market, regarding stock performance for over a six years, from 1997 to 2003; a period where the stock market had both ups and downs. The results were astonishing. You may have known the importance and benefits of providing consistent superior customer service, but I doubt, you realized how significant it really is. The top customer satisfaction companies (based on their ASCI scores) outperformed the:

  • Dow Jones (DJIA) by 93%
  • S&P 500 by 201%
  • NASDAQ by 335%

The top customer satisfaction companies beat the Dow Jones by 93%, S&P 500 by 201%, and NASDAQ by 335%. The results conclusively show that customer satisfaction pays off in up-markets and down-markets. When the stock market dropped in value, the stock prices of firms with highly satisfied customers seemed to have benefited from some degree of insulation.

No one can argue that these results are extraordinary. There are very few actions or strategies a business can take, if any at all, that can produce this kind of financial results. This is proof that there is a significant return on investment, in improving an organizations level of customer service. In the accounting world, the economic value of satisfied customers seems to be systematically undervalued even though these customers generate substantial net cash flows with low risk. Firms that do better than their competition in terms of satisfying customers (as measured by ACSI) generate superior returns at lower systematic risk.

Organizations that consistently deliver superior customer service generally enjoy repeat business, high levels of customer retention, strong customer loyalty, lower price elasticity, higher prices, more cross-selling opportunities, greater marketing efficiency, and a host of other things that usually lead to earnings growth. In addition, several research studies find that higher customer satisfaction has a positive impact on employee loyalty, cost competitiveness, profitable performance, and long-term growth.

Sure you’ve heard this before, but now people are finally believing it and wishing they had bought into it a long time ago. When times are good, too many organizations focus on selling and marketing versus delivering an experience. The best thing about economic uncertainty brought about in 2009, is that the value of a great experience has never before received so much recognition by customers, clients, patients call them what you may. Our proof comes over these past two years when The DiJulius Group has grown considerably. We’ve been forced to offer additional services, products, add additional speakers and consultants to our organization just to handle the increase in demand for help by organizations seeking to join the customer service revolution.

Over the years, I have been extremely fortunate in two areas:
1) I have had the honor of presenting at large conferences with some of the most successful speakers and consultants whom I have looked up to and mirrored in my business model.
2) I’ve worked with some of the most amazing organizations who, long before hiring me, were world-class customer service organizations, and since have adopted my ideas and systems and made them even better.

I am extremely proud to tell you that we’re bringing the 2010 Secret Service Summit back to Cleveland, Ohio this November 4&5. If you thought last year’s was an incredible learning experience, you’ll love this year’s. Leading experts and executives from organizations of different sizes, and across industries, will share best practices and systems on how to build and operate world-class customer experience organizations.

Here is what makes this two-day conference unlike any other:

  • For over two days, four of the most respected authorities, best-selling authors, most sought after consultants to fortune companies all over the world will be together on the same stage sharing their wealth of knowledge and experience and telling how and why they’ve achieved what they have.
  • Presenting will be six executives who run world-class customer service organizations and are NOT professional speakers or consultants. So why would you want to listen to them? Because there’s value in knowing what it takes to build and run the day-to-day operations of World-Class customer service companies such as The Ritz Carlton Hotel, The Melting Pot, PricewaterhouseCoopers, Carter Mario Law Firm, and more. No one knows better what it is like to be at the pointy end of a spear, dealing with budgets, staff buy-in, economic highs and lows, and countless other demands. Yet all of them and their organizations are best in class in their sector and have ignored traditional wisdom in their own industry. They’ve made a superior customer experience their single most competitive advantage.
  • We’ll have experts from virtually every major industry including manufacturing, hospitality, professional services, and healthcare.
  • There will be a panel discussion made up of the executives and employees from these leading world-class customer service organizations, allowing every attendee an opportunity to ask tough questions on the “how to do, what to do, and what not to do” issues.

If you take your service seriously, you need to be part of this event. The content shared will be a necessity to any organization that wants to raise the bar and compete on service. The networking opportunities, in addition to this line-up, create immeasurable value. We’re quite proud of the partnerships and business dealings that have taken place between our attendees (as well as 1 marriage!). Missing this event could cost you millions in clients, sales, and staff! Don’t wait to be part of the revolution. It’s happening now!

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1 Comment

Before starting my own company, I worked for a franchise that was 1 of 250, nationwide. For the 11 years I was there, we consistently had a stellar rating in CSI (Customer Satisfaction Index) — even being highlighted, nationally. This organization generates much higher profits than its competitors and the salespeople are rewarded for high CSI. Another great article, John! All the best, Steve.

Comment by Steve Dorfman




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