U-M study: Customer satisfaction a
strong predictor
of consumer spending
By Bernie DeGroat / News and Information Services
Customer satisfaction has had a greater influence on consumer spending
in recent years than income changes and consumer confidence combined,
says a Business School researcher.
In fact, 38 percent of the variation in spending growth since 1995
is due to buyer satisfaction, according to Prof. Claes Fornell,
director of the Business School's National Quality Research Center
(NQRC).
The NQRC compiles and analyzes data for the American Customer Satisfaction
Index (ACSI), a quarterly national economic indicator of customer
evaluations of the quality of U.S. products and services.
In a new study of the relationship between customer satisfaction
and consumer spending, Fornell and colleague Jennifer Stephan constructed
a data set that included the ACSI, Index of Consumer Sentiment,
Consumer Confidence Index, real personal consumption expenditure
and real personal disposable income from 1995 to 2001.
"The empirical results suggest that customer satisfaction has a
stronger relationship with subsequent consumer spending than either
income changes or consumer sentiment or confidence," Fornell says.
"The research model, with ACSI as the sole predictor, accounts for
38 percent of the variation in consumer spending growth. The other
variables add relatively little beyond what is captured by satisfaction."
Fornell notes that the time period of measurement was short and
was, for the most part, characterized by rapid economic growth.
"It will be interesting to see if satisfaction has the same effects
in periods of economic stagnation or slow growth," Fornell says.
"Perhaps a case can be made for a greater impact from changes in
income and confidence under such circumstances, but it would, nevertheless,
be difficult to dismiss satisfaction as a major driver in consumer
purchase behavior. Though cash flow provides the means to spend,
satisfaction provides the rationale."
An important implication from the findings, Fornell says, is that
consumer spending not only can be predicted, at least to some extent,
but also can be affected by government and corporate actions.
"Customer satisfaction is an outcome of buyer-seller interactions
as well as of subsequent consumption experiences," Fornell says.
"In both cases, buyer satisfaction is affected by the availability
of consumer choice alternatives, product quality, customer selection
by the seller and buyer information. Since the satisfaction effect
on household spending appears to be quite rapid, stimulating companies
to devote more resources to customer service and satisfaction may
well be an effective tool for encouraging household buying."
