Determinants of Customer Loyalty and Financial Performance

Rod E. Smith · William F. Wright

230 citations0/0 files storedJournal of Management Accounting Research

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Customer Service Quality and Loyalty Accounting and Organizational Management Customer churn and segmentation

Abstract

Recent research in accounting advocates nonfinancial measures of company performance, such as customer satisfaction and loyalty, as useful indicators of aspects of firm performance. But what are the drivers of customer satisfaction and loyalty? We provide an integrated causal model of company performance in the personal computer (PC) industry that simultaneously tests links between product value attributes resulting from business process performance, customer loyalty, and financial outcomes. Our results extend prior accounting research (e.g., Banker et al. 2000; Ittner and Larcker 1998) in two directions: (1) by explaining the determinants of customer loyalty, and (2) by clarifying the relation between customer loyalty and measures of financial performance. We report that product value attributes directly and differentially impact levels of customer loyalty as well as prevailing average selling prices. Furthermore, measures of customer loyalty explain levels of relative revenue growth and profitability, and relatively high customer loyalty engenders a competitive advantage in the PC industry.

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References

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