Xueming Luo & Christian Homburg
Executive Summary
There is a growing consensus that marketing must be connected to finance. As top management focuses on maximizing shareholder value, researchers stress the importance of benchmarking the financial contribution of customer equity. Against this background, the authors introduce the concept of a stock value gap—the shortfall of a firm’s actual market value from its optimal market value as measured by a best-performing benchmark. Using a benchmark approach helps a firm (1) identify best practices among competing firms given the same resources and (2) learn from best practices to close the gap to best-performing competitors. A clear advantage of this approach is that it can precisely reveal the stock value gap for every company when scientifically benchmarked against optimal, best-performing competitors, as opposed to nonoptimal, average-performing rivals. The results of the stock value gap analysis and implied shortfalls in future cash flows will equip managers with actionable guidelines that take relevant optimal market competitors into account.
On the basis of a large-scale, real-world database, the authors test the effects of both customer satisfaction and customer complaint on the stock value gap of firms. The results show that customer complaint has a stronger effect than customer satisfaction on closing the value gap. Furthermore, there is some support for the moderating influences of working capital and firm specialization.
This study offers some helpful managerial implications. Companies should build a more complete “customer equity dashboard,” which may consist of “blue” indicators (for positive customer experience like satisfaction, loyalty, and customer retention) and “red” indicators (for negative customer experience like complaint, switching, and customer churn). Customer insights may reveal both good news and bad news to financial markets. Thus, managers should not value customer satisfaction and customer complaint in isolation; rather, both should be considered in a duet. Clearly, these full-spectrum parameters with both blue and red buttons help firms pulse and monitor not just their customer-based asset (value adders, such as happy customers) but also customer-based liability (value destroyers, such as complaining customers) over time.
Furthermore, to optimize firm stock performance with a reduced stock value gap, companies should use a “carrot-and-stick” approach—for example, establishing a companywide financial and strategic environment that may not simply reward good efforts that promote satisfaction but also punish misconducts that induce complaint or obstruct complaint handling. Indeed, service failure (i.e., the extraordinary stumble at JetBlue Airlines) raises a red flag, indicating that the brand equity of “customer service champs” can be diminished, if not totally destroyed. After all, this study shows that pursuing what is right for the customer (i.e., successful experience with more satisfaction and less complaint) can be in line with what is right for the firm (i.e., smaller value gap below the optimal benchmark).
Moreover, managers should acknowledge firm contingencies when valuing customer insights. The authors find some evidence for the notion that the impact of satisfaction and complaint on the stock value gap may change depending on boundary conditions of working capital and firm specialization. Firms may benefit more financially and become best performers if they can mesh well customer equity dashboard management with a supportive organizational environment.
Biography
Xueming Luo is Eunice & James L. West Distinguished Professor and Associate Professor of Marketing in the College of Business Administration at the University of Texas at Arlington. His research focuses on econometric modeling, strategic marketing, and international marketing/business. His work has appeared in academic and practitioner journals, such as Journal of Marketing, Journal of Marketing Research, Marketing Science, Journal of the Academy of Marketing Science, International Journal of Research in Marketing, Journal of International Marketing, Journal of Business Research, Journal of Advertising Research, Industrial Marketing Management, and Journal of Consumer Psychology.
Christian Homburg is Professor of Marketing and Chair of the Marketing Department at the University of Mannheim, Germany. He also serves as director of this university’s Institute for Market-Oriented Management. In addition, he is Professorial Fellow in the Department of Management and Marketing at the University of Melbourne. He holds a master’s degree in Business Administration and Mathematics; a PhD in Business Administration from the University of Karlsruhe, Germany; and a PhD honoris causa from the Copenhagen Business School, Denmark. He also holds a habilitation degree from the University of Mainz, Germany. His research interests include market-oriented management, buyer–seller relationships, and business-to-business marketing. He has published in Journal of Marketing, Journal of Marketing Research, Strategic Management Journal, Journal of the Academy of Marketing Science, and International Journal of Research in Marketing. He is also the founder of Professor Homburg & Partners, an internationally operating management consulting firm.
Journal of Marketing, Vol. 72, No. 4, July 2008
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