Understanding multilevel organizing: a focus of customer satisfaction on firm performance

Abstract

Customer satisfaction (CSAT) with a firm’s products and/or services is one of the most fundamental strategic assets a firm can nurture to achieve superior performance. Unfortunately, the effects of CSAT on firm-level performance have been examined almost exclusively by focusing on either consumer transactions and/or firm-level actions toward achieving performance. From the lens of understanding the organized ecosystem involving firms, we expand theorizing to the multilevel effects of CSAT as a strategic firm asset on performance (1) within firms over time, (2) between firms within industries, and (3) between industries. We compiled a rich sample of 1.2 million customer responses and 2,460 firm-year observations spanning 2008 to 2019 (pre-COVID-19 repeated observations for 306 firms across 38 industries). We include five performance metrics–three that reflect the firm’s ability to convert financial inputs and assets into profitability (ROA, ROE, and ROCE) and two direct measures of profitability (PM, EPS). Broadly, the results show that a firm’s performance varies (1) with differences in CSAT levels within firms over time, (2) relative to CSAT performance between firms within industries, and (3) relative to CSAT performance between industries. Also observed are combinative CSAT effects across levels for ROE and profit margin (PM).