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  • Writer's pictureIvaylo Yorgov

CX Science: customer satisfaction, dissatisfaction, and Wall Street


  • Customer (dis)satisfaction impacts investors' short selling behaviour, thus enhancing or reducing abnormal stock returns (returns beyond what is expected).

  • Dissatisfaction has more than double the impact compared to satisfaction, highlighting the primacy of not having unhappy customers. This puts the soundness of the advice to 'delight' customers into question.

Now what:

  • Don't under-invest in customer satisfaction, for it can directly impact many business KPIs, incl. company valuation.

  • Fight to avoid unhappy customers first, and only then try to delight them. Why not even consider incentivizing employees and executive on lack of dissatisfaction?


By now, many studies have established the positive impact of customer satisfaction on various financial metrics, such as "Tobin’s q, cash flows, revenue, market share, and profitability" *. Most of them investigate this through customer related metrics, such as word-of-mouth, repurchase, and others.

In an article recently published in the Journal of Marketing Research, Ashwin Malshne, Anatoli Colicev, and Vikas Mittal investigated another angle - how customer satisfaction impacts investors' short selling behaviour and, consequently, abnormal stock returns. In what I can only imagine being a tremendous effort, they collected quarterly data for 273 companies for a ten-year period spanning 2007-2017.

Three of their insights require particular attention from business leaders.

  1. On one hand, customer (dis)satisfaction impacts abnormal stock returns through short interest (a measurement of short seller activity). That is, reports of higher dissatisfaction of customers with a company spur short-selling activity, which in turn decreases abnormal returns. Vice versa, positive customer satisfaction decreases short-selling activity which enhances value.

  2. Second, and very important, dissatisfaction impacts abnormal stock returns more than twice as strongly as satisfaction. In essence, investors do react to positive signals on CSAT, but even more so on negative ones. This is important as it puts into question the concept of 'delighting' customers. Should companies do it? It probably doesn't hurt, but only after they've taken steps to have as little unhappy customers as possible, as they weigh heavier on financial results.

  3. Last but not least, these effects are stronger in industries with lower competitive intensity (lack of many competitors) and for companies with lower capital intensity (lower level of investment in fixed assets).

I hope this gives yet another ammo in the arsenal of those of us who believe that making customers happy is the way to build a sustainable and growing business. Now, we know satisfaction impacts many business and financial KPIs: from revenue and profitability, to abnormal stock returns.

My best wishes for a great day ahead!

CX Inspirations - card 20
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