The 5th International Conference on Modern Management based on Big Data (MMBD2024)

Abstract: It is generally assumed that increased satisfaction levels lead to improved financial performance. However, this assumed relationship is, by and large, still to be proven in a more general setting, especially with respect to European sectors and industries.

In this presentation I will identify empirically relationships between customer loyalty and satisfaction and profitability measured as ROA, ROE, profit margin and operating income for the European banking sector, as well as market indicators (market capitalisation and Tobin’s q). The empirical part of the research is made up of nine Scandinavian banks observed on an annual basis between 2004 and 2018, as well as banks in the UK, the Baltic States and some Eastern European countries.

It can be confirmed that customer satisfaction and loyalty have a significant positive influence on banks’ profitability and can be considered as a predictor for future profitability as the satisfaction index of the preceding year influences the next year’s financial performance. We are also able to confirm that there is a positive link between the customer satisfaction of the preceding year and market indicators of the current year. These results are important for both decision makers in banks and investors. They mean that decision makers and investors can take the bank’s level and trend in customer satisfaction to make assumptions on its future profitability and market performance.

Keywords: intangible business performance; customer satisfaction; customer loyalty; financial performance; banking

Biography: Dr. Alf Jan Eklöf is the Senior Research Fellow at Stockholm School of Economics. He is very experienced in economics and business management. Over the past thirty years, he had ever served as the Chairman of the board of SKI and EPSI Research Services Ltd, Chief statistical advisor at the Director General´s Office and the Director of Center for Economic Statistics. He has published about 90 papers in fields of economic analysis, quality management, business development as well as customer orientation (satisfaction and loyalty) and Business Excellence. Recent research interests include management and research in transitional economics (former CIS states) as well as research on Quality Management and Business Excellence issues.