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Higher bank customer satisfaction increases a bank’s revenue from the customer and the effect persists over several years: A study at the level of individual customer relationships

Author

Listed:
  • Eriksson, Kent

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

  • Segerlind, Carin

    (Department of Real Estate and Construction Management, Royal Institute of Technology)

Abstract

This paper aims to investigate whether the effect of customer satisfaction on changes in bank customer revenue exhibits a time lag, and if this time lag effect differs among customer groups with varying levels of customer satisfaction. The empirical analysis is based on a dataset comprising combined survey and bank record data of 19,060 weighted customers from a bank in Sweden over a four-year period. The data is analyzed using ordinary least squares (OLS). The authors find that at the individual level, customer satisfaction leads to changes in customer revenue, and this effect persists over several years. The results are demonstrated when breaking down the results for customers with different levels of satisfaction. Additionally, the results reveal a non-linear effect, which yields differences in both short- and long-term impacts on changes in customer revenue between higher levels of customer satisfaction and those with lower satisfaction levels. The conclusion drawn is that to gain a comprehensive understanding of the impact of customer satisfaction on revenue change, it is necessary for the analysis to consider customers' varying satisfaction levels. This paper underscores the economic importance of identifying customers with lower levels of satisfaction and the significance of implementing efforts to increase their satisfaction levels.

Suggested Citation

  • Eriksson, Kent & Segerlind, Carin, 2024. "Higher bank customer satisfaction increases a bank’s revenue from the customer and the effect persists over several years: A study at the level of individual customer relationships," Working Paper Series 24/5, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance, revised 18 Jun 2024.
    • Handle: RePEc:hhs:kthrec:2024_005
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    References listed on IDEAS

    as
    1. Ittner, CD & Larcker, DF, 1998. "Are nonfinancial measures leading indicators of financial performance? An analysis of customer satisfaction," Journal of Accounting Research, Wiley Blackwell, vol. 36, pages 1-35.
    2. Sunil Gupta & Valarie Zeithaml, 2006. "Customer Metrics and Their Impact on Financial Performance," Marketing Science, INFORMS, vol. 25(6), pages 718-739, 11-12.
    3. Maarten Terpstra & Ton Kuijlen & Klaas Sijtsma, 2014. "How to develop a customer satisfaction scale with optimal construct validity," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(5), pages 2719-2737, September.
    4. Kees Van Montfort & ENNO MASUREL & INGRID VAN RIJN, 2000. "Service Satisfaction: An Empirical Analysis of Consumer Satisfaction in Financial Services," The Service Industries Journal, Taylor & Francis Journals, vol. 20(3), pages 80-94, July.
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    More about this item

    Keywords

    Bank; Customer satisfaction; Customer revenue; Individual level; Longitudinal;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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