The Relationship Between Market Share and Customer Satisfaction

A recent research paper, ‘Reexamining the Market Share-Customer Satisfaction Relationship’, examined the longitudinal relationship between market share and customer satisfaction of US businesses. Contradictory to popular thought, it found that not only did market share have no impact on future customer satisfaction, but that the two variables were actually negatively correlated. The authors believe that larger companies are not able to satisfy a large customer base with their differing needs and requirements, which therefore results in dissatisfied customers. A strategy put forward to counteract this is breaking a company down into numerous, more niche brands which can target particular segments of the market. Furthermore, the paper also stresses the importance of monitoring the nearest rival’s satisfaction (or perceived satisfaction), and using this as a benchmark, rather than taking a company’s satisfaction score as a sole value.

In our experience, we have found that market share and customer satisfaction are linked in certain situations. For example, our studies have found that increasing customer satisfaction increases the profitability of a company, which in turn can only improve market share (research has found for every 1% increase in customer satisfaction, a company can expect a 12% increase in profitability). A case study, which also counteracts the findings of the research paper, is John Lewis. The department store continues to have a high customer satisfaction, while also improving its market share year by year. However, the paper does make some good points, such as the importance of assessing a company’s satisfaction relative to that of rivals. Although a company may gain high satisfaction scores, a competitor may perform similarly well, or even better, which could result in a gradual loss of market share. It is also important to remember that conducting a segmentation of your audience can help to ensure you can meet the requirements of your appropriate target groups. This will result in greater customer retention and increased satisfaction.

This is our view, but what do you think?

Article: Lopo L. Rego, Neil A. Morgan, and Claes Fornell (2013) Reexamining the Market Share–Customer Satisfaction Relationship. Journal of Marketing: September 2013, Vol. 77, No. 5, pp. 1-20.

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