This study examines the following research question in two complementary research settings: How does customer bargaining power affect the relation between customer satisfaction and future financial performance? Motivated by the mixed evidence on the effects of customer satisfaction on financial performance across industries, the first research setting investigates the moderating effect of customer switching costs, an important component of customer bargaining power, in a large-sample cross-sectional study. Using the American Customer Satisfaction Index and Compustat data, I predict and find that high customer switching costs, as measured by the industry-level Herfindahl-Hirschman Index, weaken the association between customer satisfaction and future financial performance. In the second research setting, I obtain a proprietary database from a leading health insurance company that measures satisfaction levels of multiple customer groups, including: (a) clients that purchase insurance plans for their employees, (b) patients who use the insurance plans, and (c) doctors who provide medical services. I find that the extent to which a customer group influences the purchasing decision increases the effect of customer satisfaction on future revenues. I also find that customer bargaining power enhances the impact of customer satisfaction on future revenues. This study contributes to our understanding of the performance consequences of nonfinancial value drivers and has implications for resource allocation, performance evaluation, and compensation practices within firms.This is because customers may not switch to another service provider in the presence of high switching costs even if they are ... I find that the relationship between customer satisfaction (as 1 For example, before the aquot;number portability ruleaquot; (which allowed cellular phone customers to ... ATaamp;T Wireless, which had the worst customer-complaint rate of any major U.S. cellular provider, was so hard hit by theanbsp;...
|Title||:||Customer Satisfaction, Customer Bargaining Power, and Financial Performance|
|Publisher||:||ProQuest - 2006|