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Long-term impact of increasing customer satisfaction on bank revenue

Author

Listed:
  • Segerlind, Carin

    (Swedbank)

  • Eriksson, Kent

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

  • Hermansson, Cecilia

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

Abstract

This paper examines the relationship between customer satisfaction and changes in individual-level bank revenue, using data from 19,060 Swedish bank customers combining subjective surveys and objective bank records. It also investigates whether the effect of satisfaction on revenue change involves a time lag, and whether this lag differs across customer satisfaction levels. The study finds that higher satisfaction is associated with greater revenue changes over time, with more pronounced effects for customers in the medium-high and highest satisfaction group, while the difference between the lowest customer satisfaction group and the medium-low group is not statistically significant. The research does not support the hypothesis of diminishing returns when moving from the medium-high to the highest satisfaction, although weak indications suggest further investigation. These findings highlight the long-term impact of customer satisfaction on bank revenue and emphasize the importance of targeting customers with lower to medium-low satisfaction to improve overall earnings.

Suggested Citation

  • Segerlind, Carin & Eriksson, Kent & Hermansson, Cecilia, 2024. "Long-term impact of increasing customer satisfaction on bank revenue," Working Paper Series 24/9, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    • Handle: RePEc:hhs:kthrec:2024_009
    as

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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. Santomero, Anthony M, 1984. "Modeling the Banking Firm: A Survey," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 576-602, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    bank customer satisfaction; bank revenue; individual level; time lags bank customer satisfaction; bank revenue; individual level; time lags;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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