Customer Metrics and Their Impact on Financial Performance
Sunil Gupta
and
Valarie Zeithaml1
August 19, 2004
Revised November 30, 2005
1 Sunil Gupta is Meyer Feldberg Professor of Business at Columbia University, New York, NY 10027
(email: sg37@columbia.edu) and Valarie Zeithaml is Roy and Alice H. Richards Bicentennial Professor of
Marketing and Associate Dean of the MBA program at Kenan-Flagler School of Business, University of
North Carolina at Chapel Hill, NC 27599 (email: valariez@unc.edu). The authors are grateful for the
comments by Eugene Anderson, Asim Ansari, Robert Blattberg, Shirish Dant, Melinda Denton, Donald R.
Lehmann, Leigh McAlister, J.B. Steenkamp, Earl Taylor, Susan Toner and participants of the MSI
Research Generation Conference in Atlanta. They thank Ricardo Montoya for his research assistance.
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Customer Metrics and Their Impact on Financial Performance
Abstract
The need to understand the relationships among marketing metrics and
profitability has never been more critical. Firms experience ever-increasing
pressure to justify their marketing expenditures. The objective of this paper is to
integrate existing knowledge about the impact of customer metrics on firms’
financial performance. We investigate both unobserved or perceptual customer
metrics (e.g., customer satisfaction) and observed or behavioral metrics (e.g.,
customer retention and lifetime value). We begin with an overview of
unobservable and observable metrics, showing how they have been measured and
modeled in research. We next offer nine empirical generalizations about the
linkages between perceptual and behavioral metrics and their impact on financial
performance. We conclude the paper with future research challenges.
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Customer Metrics and Their Impact on Financial Performance
1. Introduction
Customers are the lifeblood of any organization. Without customers, a firm has no
revenues, no profits and therefore no market value. This simple fact is not...