Customer satisfaction, customer retention, and market share

Abstract

A mathematical framework for assessing the value of customer satisfaction is provided. The framework enables managers to determine which customer satisfaction elements have the greatest impact, and how much money should be spent to improve particular customer satisfaction elements. The framework makes it possible to hold customer satisfaction programs accountable, in the way that other business programs are held accountable, by forcing them to demonstrate their benefits with respect to bottom-line profitability. An individual-level model of loyalty and retention is used, and market share is built up by aggregation. The application of this approach is demonstrated in a pilot study of a city's retail banking market.