Investigating the Strategic Influence of Customer and Employee Satisfaction on Firm Financial Performance

Investigating the Strategic Influence of Customer and Employee Satisfaction on Firm Financial Performance

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Article ID: iaor20107405
Volume: 29
Issue: 5
Start Page Number: 895
End Page Number: 908
Publication Date: Sep 2010
Journal: Marketing Science
Authors: ,
Keywords: customer relationship management
Abstract:

The ability to demonstrate the impact of marketing action on firm financial performance is crucial for evaluating, justifying, and optimizing the expenditure of a firm's marketing resources. This presents itself as a formidable task when one considers both the variety and potential influence of marketing activity. We propose a hierarchical Bayesian model of simultaneous supply and demand that allows us to formally study the financial impact of a variety of marketing activities, including those that operate on different timescales. The supply-side model provides insight into how the firm allocates resources across its various subunits. We illustrate our approach in a services context by integrating data from three independent studies conducted by a large national bank. Our model allows customer and employee satisfaction to influence firm profitability by moderating the conditional relationship between the bank's operational inputs and its proclivity to produce revenue.

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