Revisiting The Satisfaction-Loyalty Relationship

Journal of Retailing 89 (3, 2013) 246262
Revisiting the SatisfactionLoyalty Relationship: Empirical Generalizations

and Directions for Future Research
V. Kumar a, , Ilaria Dalla Pozza a,b , Jaishankar Ganesh c
a
Center for Excellence in Brand & Customer Management, J. Mack Robinson School of Business, Georgia State University, Atlanta, GA 30303-3989, United States
b IPAG Business School, Paris, France
c School of Business, Rutgers University, Camden, NJ, United States
Abstract
This extensive literature review highlights the state of the art regarding the relationship between customer satisfaction and loyalty, both attitudinal
and behavioral. In particular, it brings to light several issues that should be carefully considered in analyzing the efficacy of customer satisfaction in
explaining and predicting customer loyalty. In fact, for many years companies all around the world have heavily invested in customer satisfaction
in the hope of increasing loyalty, and hence, consequently, profitability. But after having gone through a detailed analysis, it is clear that this link
it is not as strong as it is believed to be and customer satisfaction is not enough to explain loyalty. In fact, the major findings of this review are
captured in the form of a few empirical generalizations. We generalize that, while there is a positive relationship between customer satisfaction
and loyalty, the variance explained by just satisfaction is rather small. Models that encompass other relevant variables as moderators, mediators,
antecedent variables, or all three are better predictors of loyalty than just customer satisfaction. Further, the satisfactionloyalty relationship has
the potential to change over time. Similar weaker findings are uncovered and the study offers specific guidelines on who, when, and how much to
satisfy. Finally, suggestions for future research to explore this domain are offered.
2013 New York University. Published by Elsevier Inc. All rights reserved.
Keywords: Customer satisfaction; Loyalty; Word-of-Mouth; Customer lifetime value; Retention; Generalizations
Introduction
While having a satisfied customer base is a laudable goal
that is not to be questioned, its impact on loyalty and performance outcomes is not as obvious. In reality, the question
concerning the efficacy of the satisfactionloyalty link is
much more nuanced than if a simple yes, it exists, or no, it
doesnt. Researchers (Kamakura et al. 2002; Rust, Zahorik,
and Keiningham 1995) have for long suggested that companies
should not blindly follow the path of only focusing on customer
satisfaction in the hope of improving loyalty. Specifically, these
studies have pointed out the necessity of considering the cost of
We would like to thank the seminar participants at various universities in

the U.S., France, and Italy and Yashoda Bhagwat for their valuable suggestions
during the preparation of this manuscript. We thank Renu for copyediting the
manuscript.
Corresponding author. Tel.: +1 404 413 7590; fax: +1 832 201 8213.
E-mail addresses: vk@gsu.edu, dr vk@hotmail.com (V. Kumar),
ilaria.dalla pozza@devinci.fr (I.D. Pozza), Jganesh@camden.rutgers.edu
(J. Ganesh).
a customer satisfaction improvement when deciding whether or

not to make customer satisfaction investments (Kamakura et al.
2002). A meta-analysis conducted by Szymanski and Henard
(2001) finds that satisfaction explains less than 25 percent of
the variance in repeat purchase. More precisely, the association between customer satisfaction and loyalty is highly variable
depending on the industry, customer segment studied, the nature
of the dependent and independent variables, and the presence of
numerous factors that serve as mediators, moderators, or both
to the relationship.
For instance, while several studies report of a positive significant relationship between satisfaction and loyalty, Verhoef
(2003), examining the effect of satisfaction along with other
variables on defection and customer share development, found
no significant direct effect for satisfaction. Only affective commitment and loyalty program membership were found to have a
significant positive direct effect on customer retention. However,
satisfaction comes into play when moderated by relationship
age. Results also vary according to the way loyalty is measured (intentions vs. actual behavior). For instance, Seiders et al.
(2005) find that customer satisfaction has a strong positive effect
0022-4359/$ see front matter 2013 New York University. Published by Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.jretai.2013.02.001
V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262
on repurchase intentions, but found no direct effects on repurchase behavior.

Researchers have also indicated the presence of moderators
in the satisfactionloyalty relationship. For instance, Homburg
and Giering (2001) in linking customer satisfaction to loyalty recognized that the link is not universally strong for all
segments. The authors find significant moderating effects of
customer characteristics: among them, age, variety seeking, and
income seem important variables. Mittal and Kamakura (2001)
find that in the automotive industry satisfaction ratings are higher
for women than men. Others have pointed out that satisfaction
is not the main driver of loyalty. Agustin and Singh (2005)
conducted their study in the retail clothing and airline industries and found that relational trust and value are the strongest
determinants of loyalty intentions, rather than customer satisfaction. Similarly, Ngobo (1999) and Anderson and Mittal
(2000) found variability of the satisfactionloyalty link across
industries.
Deftly summarizing more than two decades of academic
research on this issue, Mittal and Frennea (2010) offer strategic insights and critical guidelines to managers that, among
other things, identify the differences across customer groups
and segments and the varying impact of customer satisfaction on behavior across industries. While Mittal and Frennea
(2010) do point out the presence of customer segment differences, they do not systematically address moderators, mediators,
and other predictors of loyalty that could potentially reduce
the relevance of customer satisfaction. Luo and Homburg
(2007) on the other hand explore the moderating impact of
market concentration on the relationships between customer
satisfaction and future advertising and promotion effectiveness as well as a firms human capital performance. While
they state that satisfaction increases customer loyalty and
influences future purchase intentions and behaviors they do
not directly examine this relationship. They do not provide
empirical generalizations regarding the relationship between
customer satisfaction and loyalty. Despite a plethora of studies examining the impact of satisfaction on a firms customer
base in multiple contexts using other moderating and mediating variables (Biong 1993 B2B; Bowen and Chen 2001
hospitality; Keh and Lee 2006 services; Vesel and Zabkar
2009 DIY programs; Sderlund 2002 prepurchase familiarity; Suh and Yi 2006 product involvement; Yi and La
2004 expectations) there still exists a void in terms of generalizable empirical findings (Garbarino and Johnson 1999)
relating the various attitudinal and behavioral measures of
loyalty and the role of customer, relational, and marketplace
characteristics in understanding the satisfactionloyalty relationship.
Helping to fill this void, Gupta and Zeithaml (2006) identify and develop empirical generalizations on three links: the
relationship between unobservable metrics (customer satisfaction) and financial performance, the relationship between
unobservable constructs and observable constructs (satisfaction and retention), and the impact of observable constructs
on financial performance (relationship between retention and
profitability). Gupta and Zeithaml (2006) develop empirical
247
generalizations by considering eleven studies expressing loyalty as observable actual behavior (retention or repurchase rather
than repurchase intentions). The focus of our study is on examining the relationship between customer satisfaction and loyalty
using both attitudinal and behavioral measures. In Gupta
and Zeithamls (2006) words, we focus both on relationships
between perceptual customer metrics (customer satisfaction and
attitudinal loyalty) and on relationships between unobservable metrics and behavioral metrics (customer satisfaction and
behavioral loyalty) in order to provide a more comprehensive
review.
The primary objective of this study is to provide a comprehensive review and draw empirical generalizations addressing
these critical issues that impact the satisfactionloyalty link. In
particular, this study examines the following questions: What
do we really know about the customer satisfactionloyalty link?
Is customer satisfaction a good predictor of loyalty? Is it really
worth investing in customer satisfaction in an effort to improve
loyalty? The generalizations are based on studies that span multiple retail and service sectors including banking and financial
services, hospitality, insurance, pharmaceuticals, telecommunications, automotive, and retail grocery. Our conclusion is that
the customer satisfactionloyalty main effect is indeed weak and
that customer satisfaction, by itself, can hardly change customer
loyalty in a significant way. In fact, the systematic presence
of moderators, mediators, and other predictors of loyalty introduce a high variability in the findings, thus reducing the role
of satisfaction. So, does it really make sense for companies to
continue to adopt the conventional paradigm? In a resource constrained environment, should companies continue to invest in
customer satisfaction in the traditional sense, in the hope that
customer loyalty and profits will follow? Should companies
continue to look at the link between satisfaction and loyalty
in isolation or should they examine the relationship in a broader
context?
The next section presents a literature review on the relationship between customer satisfaction and loyalty. The literature
review and the associated analysis of the empirical findings will
be conducted separately for attitudinal and behavioral loyalty.
First, we will look at the direct relationship between satisfaction
and loyalty (direction, shape, variance explained). Then, we will
investigate the moderators, mediators, and other predictors of
loyalty, after controlling for the effect of satisfaction. Based on
past research findings, we draw empirical generalizations that
offer consistent explanations to these complex relationships. In
the final section we examine research addressing the broader
phenomenon of customer-oriented strategy and customers differences in terms of the value they bring to the firm as measured
by the lifetime value (Gupta et al. 2006) and draw insights on
who to satisfy and how much and when to satisfy. For instance,
companies should be engaged in proactive strategies that enable
them to target their resources first toward satisfying the high
value customers while minimizing investments targeted at nonprofitable or less profitable customers, thus bringing profitability
and a stronger focus on costs to bear at the outset of the decisionmaking process. We conclude by highlighting directions for
future research.
248
Customer satisfactionloyalty relationship: literature

review and generalizations
Attitudinal loyalty measured as intention
Attitudinal loyalty can be expressed as the likelihood to recommend, the likelihood to repurchase, or depending on the
context, the likelihood to visit/repurchase from the retailer
again (Agustin and Singh 2005; Anderson and Mittal 2000;
Anderson and Sullivan 1993; Bloemer and de Ruyter 1998;
Chandrashekaran et al. 2007; Cronin, Michael, and Hult 2000;
Gustafsson and Johnson 2004; Homburg and Furst 2005;
Homburg and Giering 2001; Johnson, Herrmann, and Huber
2006; LaBarbera and Mazursky 1983; Lam et al. 2004; Liang
and Wang 2004; Mittal, Kumar, and Tsiros 1999; Mittal, Ross,
and Baldasare 1998; Ngobo 1999; Seiders et al. 2005). These
likelihoods are measured as intentions based on self-reported
surveys. Literature is replete with research addressing the satisfaction and attitudinal loyalty relationship. Fig. 1 and Table 1
present a summary of the results.
The studies presented in Table 1 are organized according to
how the constructs were measured, that is, using single item or
multi-item scales. For each study, Table 1 indicates the direction of the relationship (positive, negative or not significant),
the R2 and the shape of the relationship where reported (linear, concave or convex, asymmetric nonlinear, with increasing
or decreasing returns). Based on these results, we identify the
following generalizations (Bass and Wind 1995):
G1 :
Overall, there is a positive relationship between customer satisfaction

and loyalty intentions.
It is important to note that while Szymanski and Henard

(2001) report their findings based on a meta-analysis of nine
studies on customer satisfaction and repeat purchase, they do
acknowledge that further analysis is necessary because, few
correlations are available in the literature to report on these associations and so a few studies reporting different effect sizes in
the future could alter conclusions (24). Further Szymanski and

Henard (2001) state that studying the relationship between satisfaction, loyalty, retention, and other variables using research
excluded from their meta-analysis could be insightful, interesting, and valuable. Hence, G1 is grounded on an extensive
literature base, which studies additional variables, and both confirms and extends their findings.
Interestingly, there is one study (Homburg and Furst 2005)
which stands apart from G1 by finding a nonsignificant
relationship between satisfaction and loyalty. However, this nonsignificant result is valid only for overall satisfaction but not for
transactional satisfaction (positively related to intentions). The
explanation may rely in the setting investigated. The study takes
place in a complaint management setting and it seems reasonable to think that satisfaction (as transactional satisfaction is
expressed) recorded after an interaction with customer service
is dominant in affecting loyalty. Moreover, the sample size of
the study is relatively small.
Regarding the variance explained in loyalty, it is not normally possible to isolate the unique contribution of customer
satisfaction since other variables are introduced in the study as
moderators, mediators or other predictors. The only exception
is presented by Anderson and Sullivan (1993), who indicate
an R2 of .19 with the only variable being customer satisfaction (Table 1). In general, the R2 always refers to the overall
model encompassing other variables. For instance, Agustin and
Singh (2005) report an R2 between .43 and .51 by including
trust and value in the model, while Cronin, Michael, and Hult
(2000) report an R2 of .94 by including service value and service
quality (Table 1). Similarly, Seiders et al. (2005) indicate an R2
of .42 by including involvement and convenience. While the
results addressing the shape of the relationship between satisfaction and intentions are varied, it is safe to state that the
majority of the studies report a linear relationship (Bloemer and
de Ruyter 1998; Bolton and Drew 1991; Cronin, Michael, and
Hult 2000; Garbarino and Johnson 1999; Homburg and Furst
2005; Homburg and Giering 2001; LaBarbera and Mazursky
Fig. 1. Relationship between multiple item customer satisfaction measures and loyalty intentions.
249
Table 1
Summary of satisfactionloyalty intention findings.
Customer satisfaction
Single item
Loyalty
intentions
Single item
Multiple item
Multiple items
Overall satisfaction
Linear
LaBarbera and
Mazursky (1983) (+)
Mittal, Kumar, and
Tsiros (1999) (+)
R2 : .37.50
Shankar, Smith, and
Rangaswamy (2003) (+)
R2 : .39.50
Baumann, Burton, and
Elliott (2005) (+)
R2 : .47.72
Keiningham et al.
(2007) (+)
Anderson and
Sullivan (1993) (+)
R2 : .19 (only CS)
Concave/convex
Jones and Sasser
(1995) (+)
Linear
Bloemer and de
Ruyter (1998) (+)
Linear
Olsen (2002) (+)
Gustafsson and
Johnson (2004) (+)
R2 : .38
Chandrashekaran
et al. (2007) (+)
Linear
Garbarino and
Johnson (1999) (+)
Cronin, Michael, and
Hult (2000) (+)
R2 : .94
Lam et al. (2004) (+)
Homburg and Furst
(2005) (ns)
Nonlinear, quadratic
Ngobo (1999) (+)
R2 : 0.57
ACSI/SCSB
Transactional
satisfaction
Attribute satisfaction
Decreasing returns
Oliva, Oliver, and
MacMillan (1992) (+)
R2 : .33
Increasing returns
Anderson and
Mittal (2000) (+)
Linear
Homburg and
Furst (2005) (+)
Asymmetric nonlinear
Mittal, Ross, and
Baldasare (1998) (+)
Linear
Homburg and
Giering (2001) (+)
Liang and Wang
(2004) (+)
Seiders et al. (2005)
(+)
R2 : .42
Decreasing
returns
Agustin and
Singh (2005) (+)
R2 : .43.51
(+), () and ns (non significant) refer to the direction of the association between customer satisfaction and the dependent variable.
1983; Lam et al. 2004; Liang and Wang 2004; Mittal, Kumar, and
Tsiros 1999; Olsen 2002; Seiders et al. 2005; Shankar, Smith,
and Rangaswamy 2003).
The exceptions to the linear relationship findings include
the studies conducted by Jones and Sasser (1995), Ngobo
(1999), Mittal, Ross, and Baldasare (1998), Oliva, Oliver, and
MacMillan (1992), Anderson and Mittal (2000), and Agustin
and Singh (2005). For instance, Anderson and Mittal (2000),
using the ACSI, find that the link between customer satisfaction and repurchase intention is asymmetric and nonlinear
with increasing returns. The line becomes steeper on each
end, where the line rises into the delight or extreme dissatisfaction zone. In the middle there is a flattening zone, a
zone of apathy where changes in customer satisfaction result
in minor changes in loyalty (Anderson and Mittal 2000; J.D.
Power and Associates 2007). As a consequence, when customers
are delighted (Berman 2005; Jones and Sasser 1995; Oliver,
Rust, and Varki 1997; Reichheld 1996; Rust and Oliver 2000;
Schneider and Bowen 1999), they tend to ignore competing
brands, while a decrease in satisfaction below a certain threshold

has a greater impact on repurchase intentions than an equivalent increase in the flattening zone (Anderson and Mittal 2000)
(Fig. 2).
On the contrary, Agustin and Singh (2005) highlight the
simultaneity in curvilinear effects of loyalty determinants such
as transactional satisfaction, trust, and relational value, the latter
expressed as an evaluation of price paid. In particular, transactional satisfaction has a positive linear effect but a negative
quadratic effect. That is, as satisfaction increases, its impact
on loyalty decreases. Decreasing returns are supported also by
Oliva, Oliver, and MacMillan (1992). Some other authors have
analyzed the variation of the shape of the relationship on the
basis of industry characteristics.
For instance, Jones and Sasser (1995) find that in highly
competitive industries the shape of the relationship is convex,
while in less competitive industries it is concave. Similarly,
Ngobo (1999) finds that the nonlinear relationship varies
according to the industry (quadratic negative relationship with
250
Fig. 2. Shape of the relationship between satisfaction and repurchase intentions

(Anderson and Mittal 2000).
decreasing returns for an insurance company, two threshold

model with decreasing returns for the camera and bank industry,
linear relationship for the retailer). Two studies, such as those
of Jones and Sasser (1995) and Ngobo (1999) are considered
enough to define an empirical generalization related to nonlinear
relationships affected by the type of industry (Bass and Wind
1995, p. 2). In addition, other authors have argued that industry
type impacts the association between customer satisfaction
and behavior (Keiningham et al. 2007; Verhoef 2003). Ittner
and Larcker (1998) find that the value relevance of customer
satisfaction measures varies across industries. This leads us to
the following generalization:
G2 :
The type of industry affects the specic shape of the nonlinear

relationship.
Moderators in the relationship between customer

satisfaction and loyalty intentions
The relationship between customer satisfaction and loyalty
intentions is strongly affected by the presence of moderators
(Baron and Kenny 1986) that can strengthen or weaken the association. This explains why satisfied customers defect, since other
variables intervene in affecting the strength of the relationship.
In fact, Reichheld (1996) notes that 6585 percent of customers
who defect, report before defection, that they were satisfied or
very satisfied. Customers can express different levels of loyalty
intentions while holding similar levels of customer satisfaction
(Reichheld 1996).
According to Seiders et al. (2005), moderators have been
divided into customer, relational, and marketplace variables.
Referring to customer-related moderators, past research has
found positive moderator effects with satisfaction strength, and
age, and negative effects with variety seeking behavior, and
income (Chandrashekaran et al. 2007; Homburg and Giering
2001). In particular, Homburg and Giering (2001) find a significant moderating effect of customer characteristics such as
age, variety seeking behavior, and income. That is, young customers tend to be less loyal, while variety seeking behavior
markedly weakens the relationship. As a consequence, in highly

competitive environments that allow for several choices, if
switching costs are not severe, we can expect a weaker relationship due to the natural inclination of the customer to try different
alternatives. Regarding income, past research has found that in
the automotive industry it negatively moderates the relationship:
that is, a greater availability of economic resources broadens the
customers range of alternative options, thus reducing loyalty.
At similar levels of customer satisfaction, customers with higher
incomes display less loyalty toward the company (Homburg and
Giering 2001).
Relational moderators are variables that can depict the relationship between the customer and the company; customers can
be variedly interested in forming a relationship with the company, thus exhibiting a major or minor propensity in investing
resources to strengthen it (Garbarino and Johnson 1999). In
some situations, relational variables can strengthen the association between satisfaction and loyalty (Agustin and Singh 2005;
Baumann, Burton, and Elliot 2005; Bloemer and de Ruyter 1998;
Oliva, Oliver, and MacMillan 1992). For instance, Oliva, Oliver,
and MacMillan (1992) find that when transaction costs are sufficiently high, a consumer may remain loyal even under moderate
dissatisfaction. This means that high levels of transaction costs
can entangle the customer in a not fully satisfactory relationship.
On a similar line, Bloemer and de Ruyter (1998) point out the
importance of elaboration, an indicator of the customer motivation to evaluate a store, while Baumann, Burton, and Elliot
(2005) identify the length of the relationship and Agustin and
Singh (2005) the value as elements that strengthen the relationship. On the contrary, Garbarino and Johnson (1999) find
that for customers reporting high levels of relationship value,
satisfaction is less important than trust and commitment in
affecting loyalty. Finally, Chandrashekaran et al. (2007) find the
length of the relationship as not being influential in determining
loyalty.
Among marketplace moderators we have switching costs,
the type of product, the level of competition, and the kind of
medium (online vs. offline) used by customers to have negative
effects (Baumann, Burton, and Elliot 2005; Jones and Sasser
1995; Olsen 2002; Shankar, Smith, and Rangaswamy 2003).
Customers perform their economic transactions in different environments and marketplaces that can affect the relationship.
Notably, the Internet has radically changed the way customers
relate to a company, ultimately affecting their satisfaction and
loyalty. For instance, Shankar, Smith, and Rangaswamy (2003)
find that overall satisfaction has a stronger positive impact on
loyalty online than offline. The Internet has actually created
less loyal customers. In fact, rather than repurchasing the same
product over time, Internet consumers are more likely to look
at every purchase as a fresh start, counting on the impressive quantity of information and choices coming from the web.
Due to the higher competition exacerbated by the Internet and
the customers empowerment, satisfaction acquires much more
importance in affecting loyalty online than offline. Addressing
a different marketplace moderator (type of product), Szymanski
and Henard (2001) find that the correlation between satisfaction
and repeat purchasing is lower on average when products rather
251
than services are the focus of the study. Olsen (2002) also finds
that the relationship varies across products, while Baumann,
Burton, and Elliott (2005) find a very small negative moderating effect of switching costs on intentions in the short term.
This leads us to:
Agustin and Singh (2005) and Cronin, Michael, and Hult (2000),
express the need to collectively include more predictors to
explain loyalty, since, from a managerial standpoint, establishing
initiatives to improve only one variable customer satisfaction,
is an incomplete strategy. This leads us to conclude that:
G3 :
G5 :
The relationship between customer satisfaction and loyalty intentions

is moderated by customer, relational, and marketplace characteristics.
Interestingly, these factors show a more mixed effect (positive and
negative) depending on the specic variable used in the analysis.
Also, the impact of customer satisfaction on loyalty intentions changes over time. A satisfied customer can state some
intentions today that may differ from her intentions tomorrow,
because of the influence of the moderators in the intervening
period. Customers might discover a new competitors product
or, more simply, their memory about the positive experience
might decay over time (Mazurski and Geva 1989; Mittal, Kumar,
and Tsiros 1999). Mazurski and Geva (1989) find that the relationship becomes weaker as time goes by and the time lag
between customer satisfaction and loyalty increases. In addition, the drivers of customer satisfaction can also change over
time. For instance, Mittal, Kumar, and Tsiros (1999) find that
when customers buy a car, their initial satisfaction is mainly
driven by the experience with the dealer service. However, during later consumption periods, when they get to experience the
product more, satisfaction with the product prevails. To conclude, customers value different attributes over time, implying
that different kinds of investment are required over the customer
lifecycle to improve the overall satisfaction or the total customer
experience. To make matters a bit murkier, in most cross sectional studies, customer satisfaction and loyalty are measured at
the same time with common method bias potentially influencing
the responses (Agustin and Singh 2005). Unfortunately, a lack of
longitudinal research investigating the impact of customer satisfaction on loyalty makes it difficult to judge conclusively the
long-term effect of the relationship. Thus, we generalize that:
G4 :
The satisfactionloyalty relationship has the potential to change over

the customer lifecycle.
Role of mediators and other predictors of loyalty intentions

Past research has shown that customer satisfaction does not
always have a direct effect on loyalty, but often works through
mediators. In particular, Agustin and Singh (2005), Garbarino
and Johnson (1999) and Liang and Wang (2004) identified trust,
commitment, and relational value, to be potential mediators.
Most of these studies also introduce other relevant predictors of
loyalty intentions, some of which have shown stronger explanatory power than satisfaction in determining loyalty. In particular,
past studies (Agustin and Singh 2005; Baumann, Burton, and
Elliot 2005; Cronin, Michael, and Hult 2000; Lam et al. 2004;
Mittal, Kumar, and Tsiros 1999) have examined the role of
trust, relational value, switching costs, length of the relationship, affective attitude, service quality, service value, and prior
intentions in predicting loyalty intentions. In fact, these studies address a critical need in the satisfactionloyalty literature
for more holistic models explain the outcome variable better.
Holistic models that encompass other relevant variables as a

moderator, mediator, as antecedent variables, or all three are better
predictors of loyalty than models with just customer satisfaction.
Attitudinal loyalty measured as Word-of-Mouth (WOM)

WOM has received a lot of attention as an alternative measure
of loyalty. For instance, Aaker (1991) noted that the real value
of those customers most loyal to an entity stems more from their
impact on other customers in the marketplace than from their
individual purchase behavior.
Notably, Reichheld (2003) states that the only number a company needs to grow is the net promoter score (NPS), the net
number of customers willing to recommend the company. Even
though this statement has been largely disproved by recent academic literature, the remarkable impact the NPS has created on
the business environment is proof of the importance imputed to
WOM as an alternative measure of loyalty.
WOM can be positive or negative. Positive WOM may
include making recommendations about a product or service,
and informing others of the quality of an offer. Customers
who spread favorable WOM about a company can become the
companys best salespeople. On the contrary, negative WOM
includes expressing disappointment about a negative experience or product or a complaint. Customers spreading negative
WOM can poison the companys reputation and can actively
seek for other more valuable alternatives (Wangenheim 2005).
Today, communities of angry customers can easily express
their complaints about a bad experience by simply posting
on the web (examples are consumerreview.com, dpreview.com,
failingenterprise.com). While before companies were pretty
much immune to negative WOM coming from angry consumers,
today, the Internet has given the customers an unprecedented
power in attacking companies reputation.
Memorable is the extreme behavior of a customer, Jeremy
Dorosin, who, in 1995 bought an expensive Starbucks espresso
machine for $299 (www.starbucked.com). The machine turned
out to be defective almost immediately. The replacement
machine was also found to be defective. Dorosin complained to
Starbucks regional offices, but never got a satisfactory answer.
As a consequence, he started to purchase ads on Wall Street
Journal to complain about the company. This got the attention
of the national media with appearances on popular television
shows talking about his bad experience. While this might be an
extreme behavior, it is an example that reiterates the power of
WOM, one that companies cannot afford to ignore (J.D. Power
and Associates 2007).
Customer satisfaction is considered an antecedent of WOM.
Research has shown that positive WOM from satisfied customers
lowers the cost of attracting new customers and enhances the
firms overall reputation, while that from dissatisfied customers
has the opposite effect (Anderson, Fornell, and Mazvancheryl
252
2004; Fornell 1992). The studies on the relationship between

customer satisfaction and WOM are mostly cross-sectional, with
WOM being a self-reported measure of past behavior. Brown
et al. (2005) is an exception where they measure WOM three
months after reporting customer satisfaction; but it is still a selfreported measure of past behavior.
Table 2 summarizes the results of the relationship between
satisfaction and WOM (after controlling for other possible
variables), identifying the direction, shape, and the variance
explained. While most studies have examined the effect of positive WOM (Brown et al. 2005; Verhoef, Franses, and Hoekstra
2002; Wangenheim and Bayon 2003), a few consider simultaneously both positive and negative WOM effects, and investigate
whether dissatisfied angry customers have a higher propensity
to report negative experiences to others as compared to satisfied customers propensity to report positive recommendations
(Anderson 1998; Bowman and Narayandas 2001). Wangenheim
(2005) provides an interesting twist, where satisfaction with the
current provider is related to negative WOM about the previous
provider.
For the most part, the shape of the relationship curve is linear (Brown et al. 2005; Lam et al. 2004; Verhoef, Franses,
and Hoekstra 2002), with Anderson (1998) and Bowman and
Narayandas (2001) reporting the existence of a U-shaped relationship. Specifically, Anderson (1998) showed that extremely
satisfied and dissatisfied customers are more vociferous than
merely satisfied customers and that, extremely dissatisfied customers engage in greater WOM than highly satisfied customers.
In the middle lies a big portion of passive and complacent
customers, merely satisfied customers, who normally do not
speak about their experiences, good or bad, but are susceptible
to competitive actions. Fig. 3 presents the results of the analysis, indicating direction, shape, and number of studies in each
category.
Moderators, mediators, and other predictors of WOM
The relationship between customer satisfaction and WOM
is characterized by the presence of moderators and mediators.
While customer satisfaction has a positive effect on customer
referral, other variables seem to predict WOM better. Among
other variables, past research (Brown et al. 2005; Lam et al.
2004; Verhoef, Franses, and Hoekstra 2002; Wangenheim 2005)
has found commitment, trust, payment equity, product involvement, and market mavenism to be better predictors of WOM.
For instance, Verhoef, Franses, and Hoekstra (2002) found that
affective commitment is a better predictor of WOM than satisfaction. Similarly, in a meta-analysis, de Matos and Rossi (2008)
found that commitment is the most relevant antecedent of WOM.
Also, among moderators, Brown et al. (2005) found that customer commitment weakens the relationship, while Anderson
(1998) showed the existence of differences between countries
of origin.
The influence of commitment on the satisfactionWOM relationship is intriguing. It is interesting to note that a variable
that serves to express the strength of customers relationship
with the firm, actually contribute to weakening the effect of
satisfaction on WOM (Brown et al. 2005). Commitment comes

across as a critical variable since it both mediates and moderates
the relationship, while satisfaction assumes a more central role
in explaining the referral activity in low commitment situations
(Brown et al. 2005). Similarly, Bowman and Narayandas (2001)
show that the more satisfied customers are with the final outcome of a complaint, the less likely they are to engage in WOM
activity. This leads us to generalize that:
G6 :
While customer satisfaction is positively related to Word-of-Mouth,

models with related variables such as commitment, trust, and product
involvement serve as better predictors of WOM.
Customer satisfaction and behavioral loyalty

Often, companies are more interested in observing customer
behavior, rather than intentions, since it can be directly linked to
revenues and profitability (Bemmaor 1995; Chandon, Morwitz,
and Reinartz 2005; Jamieson and Bass 1989). Table 3 presents
a summary of the research in this area that have used several
different measures of behavioral loyalty including retention (or
the complementary metric defection/churn), lifetime duration,
usage, share of wallet and cross buying. Retention, lifetime duration and usage reflect the length and the depth of the relationship,
while cross buying and share of wallet provides an indication of
its breadth (Bolton, Lemon, and Verhoef 2004).
Behavioral loyalty measured in terms of relationship length
and depth customer retention, lifetime duration, and usage
In examining retention, defection, and usage behaviors, it is
important to note that the behavioral variables are recorded some
time after the customer satisfaction survey (Bolton 1998; Bolton
and Lemon 1999; Capraro, Broniarczyk, and Srivastava 2003;
Gustafsson, Johnson, and Ross 2005; Ittner and Larcker 1998;
Mittal and Kamakura 2001; Seiders et al. 2005). For instance,
Mittal and Kamakura (2001), in an automotive setting, record the
new brand acquired by the customer after a customer satisfaction survey, while Bolton, Kannan, and Bramlett (2000) record
the number of customer transactions and monitor whether the
customer has canceled the service during the year following
the survey. Different measures of customer behavior are used
in contractual versus noncontractual settings. In particular, for
contractual settings (such as financial, telecommunication, and
health insurance), measures of retention or defection/churn are
used since it is relatively straightforward to observe termination of the customer-provider relationship. On the contrary, in
noncontractual settings (such as retail and automotive), where
defection cannot be easily detected (Reinartz and Kumar 2000,
2002), metrics such as repurchase behavior, number of repurchase visits, and dollar spent are used.
Table 4 and Fig. 4 present a classification of the studies
based on how customer satisfaction and the dependent variable
are measured. These exhibits also report the direction of the
relationship and, when possible, the shape of the relationship.
While these studies mostly predict a positive relationship between satisfaction and measures of behavioral loyalty,
regarding the shape of the relationship, the results are not
253
Table 2
Summary of satisfactionWOM findings.
Single item
Multiple items
Overall
Posit. WOM
WOM
Transactional
Wangenheim and
Bayon (2003) (+)
Transactional
Linear
Lam et al. (2004)
(+)
Attribute
satisfaction
ACSI/SCSB
Linear
Brown et al.
(2005)
R2 : .29 (+)
Verhoef, Franses,
and Hoekstra (2002)
R2 : .37 (+)
Wangenheim and
Bayon (2003) (+)
Wangenheim
(2005) (+)
R2 : .26.59
Negat. WOM
Posit. and
Negat. WOM
Overall
U shaped
Bowman and
Narayandas (2001)
U shaped
Anderson (1998)
R2 : .03.1 (only CS)
conclusive. While some studies report a nonlinear and asymmetric association (Ittner and Larcker 1998; Mittal and Kamakura
2001), others (Bolton and Lemon 1999; Gustafsson, Johnson,
and Ross 2005; Perkins-Munn, Lerzan Aksoy, and Keiningham
2005), find a linear relationship. More interestingly, the kind
of setting (contractual vs. noncontractual) does not consistently
predict a positive or negative relationship.
Role of moderators in the relationship between satisfaction
and behavioral loyalty
Here again, the satisfactionbehavioral loyalty relationship
is affected by the presence of moderators (customer, relational,
marketplace, or all three). In particular, among customer moderators, past research has found positive effects for age, income,
and gender, and negative effects for level of education, and number of children, with marital status, and competitor knowledge
being not significant (Capraro, Broniarczyk, and Srivastava
2003; Mittal and Kamakura 2001; Seiders et al. 2005). More
specifically, Mittal and Kamakura (2001) find that the relationship between satisfaction and repurchase behavior for cars to be
stronger for women than for men, and stronger for older than for
younger consumers. Moreover, subjects with more education
tend to have lower levels of retention than those with a high
school education. Also, consumers with one or more child in the
household have lower tolerance than those without any children.
Interestingly, there have been very few studies examining
the moderating role of marketplace variables in the relationship
between satisfaction and behavioral loyalty. Of these, most
have found little or no moderating effect of these variables.
Fig. 3. Direction and shape of the satisfactionWOM relationship.
254
Table 3
Satisfaction retention, lifetime, and usage relationship shapes and direction.
Study
Dependent variable and

direction of the
relationship
Shape of the
relationship or
technique used
Industry
Percent of the variance

explained
Bolton (1998)
Duration of the
providercustomer
relationship (+)
Actual usage level (+)
Proportional
hazard regression
Cellular telephone industry

(contractual setting)
8 percent (only CS)
Linear
12 percent with other

predictors
Retention (+) (renewal

of the membership) and
number of transaction in
the following year (+)
Defection ()
Logistic
regression and
tobit model
Continuous service providers

Financial services (credit
card) (contractual setting)
Gustafsson, Johnson, and

Ross (2005)
Churn ()
Linear
8 percent (only CS)

predictors
predictors
Ittner and Larcker (1998)
Retention rate in the

following year (+)
Linear
Choice of health insurance

plan at a large University
Financial services (credit card
membership) (contractual
setting)
Telecommunication industry
with one year contract
Mittal and Kamakura

(2001)
Perkins-Munn, Lerzan
Aksoy, and
Keiningham (2005)
Repurchase behavior of
a new car (+)
Actual repurchase (+)
Nonlinear
Automotive (noncontractual)
Linear
Number of repurchase
visits and repurchase
spending in the
following 52 weeks (ns)
Retention (ns)
Linear
Truck industry;
pharmaceutical
(noncontractual)
Retail chain of upscale
womens apparel
(noncontractual)
Bolton and Lemon (1999)

Bolton, Kannan, and
Bramlett (2000)
Capraro, Broniarczyk,
and Srivastava (2003)
Verhoef (2003)
Hierarchical
logistic regression
Probit model
Insurance products
(contractual)
Adjusted R2 from 1.3

percent to 4.9 percent
with relationship age
11.25 percent with other
predictors
predictors
From 10 percent to 13
percent with other
predictors
predictors
Table 4
Summary of satisfaction retention, lifetime, and usage relationship findings.
Retention/occurrence of the repurchase

Behavioral
loyalty
Single item
Multiple items
Attribute satisfaction
Relative satisfaction
Nonlinear increasing
returns
Mittal and
Kamakura (2001) (+)
Diminishing returns
Ittner and Larcker
(1998) (+)
Linear
Perkins-Munn,
Lerzan Aksoy, and
Keiningham (2005)
(+)
Capraro,
Broniarczyk, and
Srivastava (2003) ()
Verhoef (2003) (ns)
Bolton, Kannan, and

Bramlett (2000) (+)
Churn
Linear
Gustafsson,
Johnson, and Ross
(2005) ()
Duration of the relationship

Minutes of
usage
Usage
Number of
repurchase
visits
Amount of
spending
Bolton (1998) (+)

Linear
Bolton and Lemon
(1999) (+)
Linear
(ns)
Linear
(ns)
Number of
transactions
Bolton, Kannan, and

Bramlett (2000) (+)
255
Fig. 4. Direction and shape of the satisfactionretention, lifetime, and usage relationship.
For instance, research (Mittal and Kamakura 2001; Seiders

et al. 2005) has found very little effect of other marketplace
variables such as the area of customers residence and competitive intensity in moderating this relationship. However,
Seiders et al. (2005) did report a positive moderating effect
of convenience in the relationship between satisfaction for a
retailer and behavioral loyalty. More studies are needed to
verify the moderating role of the marketplace variables.
Among relational moderators, studies (Bolton 1998; Bolton,
Kannan, and Bramlett 2000; Gustafsson, Johnson, and Ross
2005; Seiders et al. 2005; Verhoef 2003) have found that churn,
relationship age, membership in a loyalty program, and level
of involvement to have positive effects. It is worth noting that
in the two studies in which satisfaction has no direct effect on
behavior, satisfaction turns out to be significant by interacting
with other variables, for instance, with relationship age (Verhoef
2003), involvement, and household income (Seiders et al. 2005).
This leads us to the generalization that:
G7 :
While customer satisfaction is mostly positively related to behavioral

loyalty measures, by itself, it does not always result in higher
likelihoods of retention, longer lifetime duration, and higher levels of
usage. Customer, relational, and marketplace variables play a
signicant moderating role.
Role of other predictors in explaining behavioral loyalty

Past research studies have shown that other predictors of loyalty are significant and can have a stronger explanatory power
than satisfaction (Capraro, Broniarczyk, and Srivastava 2003;
Ittner and Larcker 1998). Among significant predictors, we have
relationship age (Ittner and Larcker 1998), prior churn or prior
customer tendency to switch provider (Gustafsson, Johnson, and
Ross 2005), likelihood to repurchase (Perkins-Munn, Lerzan
Aksoy, and Keiningham 2005), commitment, loyalty product
membership, type of product (Verhoef 2003), level of involvement (Seiders et al. 2005), knowledge about competitive offers,
and switching risk (Capraro, Broniarczyk, and Srivastava 2003).
An interesting finding is presented in Capraro, Broniarczyk, and

Srivastava (2003), where it is shown that customer knowledge
of competitive alternatives account for about twice as much
variance in explaining customer defection as satisfaction and
perceived switching risk. In fact, it appears that consumers are
more likely to stay with a brand, even one that has disappointed
them in the past, if they have no information of alternatives. On
the contrary, an in-depth knowledge of alternate offers provides
customers an incentive to switch. Likewise, Bolton, Kannan,
and Bramlett (2000) argue that members of loyalty programs
weigh re-patronage intentions more heavily than nonmembers,
thus indicating a direct relationship between reward program
membership and behavioral loyalty. Further, they argue that
members of loyalty programs reveal stronger ties to the service
organization than nonmembers.
Of the variables shown by past studies as predictors of behavioral loyalty, purchase and ego involvement can be considered
as important antecedents to brand loyalty. Purchase involvement
can best be understood as the cost, effort or investment in a purchase (Mittal and Lee 1989). It is the outcome of an individuals
interaction with a product and the purchase situation (Beatty,
Kahle, and Homer 1988). Ego involvement has been defined
as the importance of the product to the individual and to the
individuals self concept, values and ego (Beatty, Kahle, and
Homer 1988). Ego involvement is similar to enduring involvement defined as an ongoing concern for a particular product
class and relatively independent of purchase situations (Bloch
and Richins 1983; Richins and Bloch 1986).
Beatty, Kahle, and Homer (1988) conceptualized and empirically tested an involvementcommitment model, showing that
ego involvement leads to purchase involvement, which in turn
leads to brand commitment. Other research has empirically
supported the purchase involvementbrand commitment relationship (Mittal and Lee 1989). Dick and Basu (1994) advance
the proposition that higher ego involvement is likely to lead
to customer loyalty. Other researchers have similarly suggested
that ego or enduring involvement leads to higher brand loyalty
256
Table 5
Summary of satisfaction share of wallet findings.
Single item
Objective
Share of wallet
Self-reported
Multiple items
Change in overall
satisfaction
ACSI/SCSB
Attribute
satisfaction
Cubic
Keiningham et al.
(2003) (+)
R2 : .07 (only CS)
Decreasing returns
Bowman and
Narayandas (2001) (+)
Linear
Keiningham et al.
(2007) (+)
Nonlinear
Cooil et al. (2007) (+)
Linear
Mgi (2003) (+)
R2 : .21.29
Linear
Perkins-Munn
et al. (2005) (+)
R2 : .07
Linear
Perkins-Munn et al.
(2005) (+)
R2 : .14
Verhoef (2003)
(ns)
Partially self-reported
attitudes or intentions (Zaichkowsky 1985), and in a services

context that involvement tends to lead to stronger loyalty to
the service provider (Ganesh, Arnold, and Reynolds 2000;
Longfellow and Celuch 1992). Keiningham et al. (2007) question that any single attitudinal measure alone, such as customer
satisfaction, could best determine future customer behavior. In
their study of three different industries, the authors argue for the
use of a multiple indicator instead of a single predictor model to
predict customer retention.
Table 4, that summarizes the studies relating customer
satisfaction and behavioral loyalty, clearly indicates that the percentage of variance explained in behavioral loyalty increases
when adding variables such as switching risk and knowledge
(Capraro, Broniarczyk, and Srivastava 2003), previous churn
and commitment (Gustafsson, Johnson, and Ross 2005), affective commitment, participation in a loyalty program (Verhoef
2003), involvement, relationship age, relationship program participation (Seiders et al. 2005), prior usage and price (Bolton and
Lemon 1999), likelihood to purchase and brand image (PerkinsMunn, Lerzan Aksoy, and Keiningham 2005), age, gender and
education (Mittal and Kamakura 2001). When customer satisfaction is considered the sole predictor of behavioral loyalty, the
variance explained is lower (Bolton 1998; Capraro, Broniarczyk,
and Srivastava 2003). Hence:
G8 :
Models that encompass along with satisfaction other relevant predictor

variables such as past customer tendency to switch provider,
relationship age, commitment, loyalty program membership, level of
involvement, switching risk are better predictors of behavioral loyalty
than models with just customer satisfaction.
Other measures of behavioral loyalty: share of wallet and

cross buying
Recently, academic and practitioners have started to focus
their attention on share of wallet as a better metric to detect
customer behavior. In fact, research has shown that customers
increasingly hold polygamous loyalty to brands (Bennett and
Rundle-Thiele 2005; Cooil et al. 2007; Rust, Lemon, and

Zeithaml 2004b; Uncles, Dowling, and Hammond 2003; Uncles,
Ehrenberg, and Hammond 1995). Customers divide their spending among different brands in a category and are continuously
influenced by competition in their choices (Yim and Kannan
1999). For instance, some customers may just change their
spending pattern with a company rather than completely stop
doing business with it, by shifting some of their share of wallet
to another brand. Therefore, companies are expending substantial effort in understanding the spending patterns of customers
rather than their defection. Once again, satisfaction is considered as a strong antecedent of share of wallet. Table 5 and
Fig. 5 present a classification of the studies addressing this
relationship.
Table 5 classifies past studies based on the way customer
satisfaction and share of wallet are measured. While customer
satisfaction is measured using traditional methods, share of
wallet can be a self-reported measure, a partially self-reported
measure, or a measure recorded in the companys database
(objective). When share of wallet is a self-reported measure and
is recorded in cross-sectional studies, it may be correlated to satisfaction as a result of common method bias. The self-reported
measures of share of wallet is similar to the use of repurchase
intentions questions commonly contained in a customer satisfaction questionnaire (Keiningham, Perkins-Munn, and Evans
2003).
In the only study that allows isolating the single contribution of customer satisfaction (Keiningham, Perkins-Munn, and
Evans 2003) the variance explained is only 7 percent. In general, the explained variance is rather small and it ranges from 7
percent to 29 percent, when other variables are introduced. The
shape of the relationship varies from linear (Mgi 2003; PerkinsMunn, Lerzan Aksoy, and Keiningham 2005) to nonlinear (Cooil
et al. 2007), nonlinear with decreasing returns (Bowman and
Narayandas 2001), and cubic in Keiningham, Perkins-Munn,
and Evans (2003). This latter study states that the greatest positive impact occurs at the upper extreme levels of satisfaction.
257
Fig. 5. Direction and shape of the satisfactionshare of the wallet relationship.
Moreover, the functional form of the relation varies by customer

segments.
Moderators play a major role in the relationship and other
variables can be significant predictors than satisfaction. Here, we
encounter customer and relational moderators more frequently
than marketplace variables. For instance, Cooil et al. (2007) find
that income, and length of the relationship negatively moderate the relationship between change in satisfaction and change
in share of wallet. That is, customer with high income and a
lengthy relationship are less likely to reduce their level of spending with the company. Furthermore, Mgi (2003), in his study
of the grocery setting, found that the interest of the customer in
comparing different shopping alternatives on price (price sensitivity) has a negative moderating effect on the relationship. Also
the interest of a customer in establishing a personal relationship
with service personnel has a negative moderating effect on the
relation. In other words, shoppers who value a personal relation
with store personnel are less likely to decrease their share of
shopping as a consequence of a decrease in satisfaction. Also,
Bowman and Narayandas (2001) find support for the positive
moderating effect of prior loyalty, and volume of purchase.
Among significant predictors, research reveals that in a grocery setting, customers who own a card of competing chains
and are prone to compare price, and tend to reduce their share
of wallet (Mgi 2003). Further, Verhoef (2003) reports that
commitment, direct mailing, and the participation in a loyalty
program, positively affect share of wallet. In addition, Bowman
and Narayandas (2001) find that the level of loyalty directly
affect share of wallet, while Perkins-Munn, Lerzan Aksoy, and
Keiningham (2005) indicate repurchase intentions as a significant predictor. The findings presented above lead us to generalize
that:
G9 :
Here again, while customer satisfaction is positively related to share of

wallet, models that include other relevant moderator and predictor
variables explain share of wallet behavior better than models that rely
only on customer satisfaction.
Conventional wisdom states that customer satisfaction

impacts cross buying. In other words, higher the satisfaction
with a firms product, greater is the probability that the customer

will buy other products/services from the firm. However interestingly, the empirical studies that exist on the effect of satisfaction
on cross buying, report contrasting findings. Verhoef, Franses,
and Hoekstra (2001, 2002) find no significant direct effect
of satisfaction on cross-buying. However, Verhoef, Franses,
and Hoekstra (2001) find satisfaction to have an effect on
cross-buying when moderated by relationship length. Similarly,
Verhoef, Franses, and Hoekstra (2002) find that a change in satisfaction level between two points in time positively affects the
change in number of services purchased; but, satisfaction itself
has no significant direct effect. The variance explained in the
two studies is 15 percent and 8 percent, respectively.
Loveman (1998), in a retail banking setting, finds that average
customer satisfaction with the branch is significantly positively
correlated with average cross-sell, which expresses the average
number of services purchased per household. In a bank setting,
Hallowel (1996) reports that overall division satisfaction is positively related to the division-reported cross sell rates, which
record the percentage of customer households with multiple
accounts (account cross sell) or multiple services (service cross
sell). In these particular situations, the level of aggregation used
(in Lovemans study the branch level and in Hallowels study
the division level) may have influenced the results. In fact, in
their comparison of two models for the salesadvertising relationship at the individual and aggregate level, Bass and Leone
(1986) find that a model of the same form estimated at a higher
level of aggregation is characterized by an increased coefficient
for the independent variable (advertising, in this situation). Thus,
we conclude that:
G10 :
The relationship between customer satisfaction and cross buying is

inconclusive, with the level of aggregation used to analyze the data
potentially impacting the strength of the relationship.
So what do we know for sure about the customer

satisfactionloyalty relationship?
This extensive literature review has highlighted the state of
the art regarding the relationship between customer satisfaction
258
and loyalty, both attitudinal and behavioral. In particular, it

has brought to light several issues that should be carefully
considered in analyzing the efficacy of customer satisfaction in
explaining and predicting customer loyalty. In fact, for many
years companies all around the world have heavily invested
in customer satisfaction in the hope of increasing loyalty, and
hence, consequently, profitability. Academics have conducted
several studies on the satisfactionloyalty relationship sometimes with contrasting findings. After having gone through
the above analysis, the major findings of this review and the
accompanying empirical generalizations include:
1. Overall, there is a positive relationship between customer
satisfaction and loyalty.
2. However, the variance explained by just satisfaction is rather
small around 8 percent.
3. Holistic models that encompass other relevant variables as
moderators, mediators, antecedent variables, or all three are
better predictors of loyalty than models with just customer
satisfaction.
4. Inclusion of these variables increases the variance explained,
on an average, to 34 percent (54 percent for attitudinal loyalty
and 15 percent for behavioral loyalty, respectively).
5. The satisfactionloyalty relationship has the potential to
change over the customer lifecycle.
6. While customer satisfaction has a positive relationship with
WOM, other related variables such as commitment, trust, and
product involvement serve as better predictors of WOM.
7. Customer satisfaction, by itself, does not always result in
retention, lifetime duration and usage. Customer, relational
and marketplace variables often play a significant moderating
role.
8. The relationship between customer satisfaction and cross
buying is characterized by contrasting findings. The level of
aggregation used to analyze the data may impact the strength
of the relationship.
The preceding review and analysis indicate that customer
satisfaction is often times a necessary but not a sufcient condition to predict loyalty. Our empirical generalizations are also
supported by the findings on the customer satisfactionloyalty
link discussed in service-profit-chain research (Bowman and
Narayandas 2004; Heskett et al. 1994; Heskett, Sasser, and
Schlesinger 1997; Kamakura et al. 2002; Loveman 1998; Rucci,
Kirn, and Quinn 1998). The service profit chain (SPC) framework states that exceptional customer service results in greater
customer satisfaction and retention, which in turn results in
higher profitability.
Heskett et al. (1994) theoretically support the notion that the
relationship between customer satisfaction and loyalty is non linear with increasing returns. Heskett et al. (1997) find that the link
between customer satisfaction and loyalty, although positive, is
the weakest of all in the service profit chain, and that the relationship between them is not constant. The SPC proposed by Heskett
et al. (1994) became rather popular as it is demonstrated by the
numerous case studies reported by academics and practitioners
(Loveman 1998; Rhian and Cross 2000; Rucci, Kirn, and Quinn
1998).
In an interesting application of the SPC to business markets,
Bowman and Narayandas (2004) find that the experience of the
account manager and the client satisfaction with a competitor
enhance the relation between customer satisfaction and the Share
of Customer Wallet (SCW). Customer size decreases the responsiveness of SCW to satisfaction. SCW is influenced by overall
customer satisfaction and the relation shows increasing returns,
thus supporting the notion of customer delight. Kamakura et al.
(2002) using structural equation models, simultaneously test
for all the links of the chain, investigating also for mediating
effects. Customer satisfaction itself is not an unconditional guarantee of profitability and some firms may remain unprofitable
despite high levels of satisfaction due to a high investment in
customer satisfaction. Moderators are not investigated but the
authors advocate their inclusion in the model. Specifically, the
authors find a positive relationship between customer perceptions of personnel and equipment with consumers behavioral
intentions (intentions to recommend).
If customer satisfaction is not enough what needs to be
done?
A more holistic view of the relationship: Customer satisfaction is not enough to fully explain loyalty; other variables
need to be included in the relationship model to depict a more
complete picture. In particular, it is clear from the review that
variables such as customer perceived value, switching costs, and
relational variables such as trust, commitment, relationship age,
loyalty program membership, and level of customer involvement, seems to be the most desirable candidates for inclusion
in the model. While it is clear that these additional variables are
critical in customer satisfaction studies, their specific role in the
overall model indeed varies depending on the circumstances and
context. Past research has shown these variables to alternatively
be predictors of loyalty, antecedents to satisfaction, and act as
moderators, mediators, or both in the satisfactionloyalty relationship. The decision to include one or more of these variables
in a holistic model is very much context specific.
Who to satisfy? One of the main paradigms of customer
relationship management stresses the fact that customers are
indeed heterogeneous. However, companies still invest in customer satisfaction in the same way for the entire customer base.
In particular, customers are different in terms of the future value,
or profitability, they can bring to a company. A truly customer
oriented approach optimizes customer selection (Kumar and
Petersen 2005), that is, allocation of resources to the most profitable customers for the company. When allocating financial
resources, the most resources should be assigned to the most
profitable (or potentially profitable) customers.
The future value of a customer can be efficiently measured through the customer lifetime value (CLV) metric, whose
superiority over other metrics (such as past profitability or
RFM models) in defining future customer profitability has
already been well demonstrated in the literature (Kumar 2008).
CLV is generally defined as the present value of all future
profits coming from a customer during his/her life or relationship with a firm. It is similar to the discounted cash flow
applied in finance (Gupta and Zeithaml 2006). CLV is generally applied at the individual customer or segment level
and it is a forward-looking metric since makes a projection
over the future by incorporating sophistication in modeling
(Gupta et al. 2006; Gupta and Zeithaml 2006). Given this, it
makes sense to allocate resources rst to customers with a
high CLV. These customers are also the most attractive for
competitors. Clearly, the most profitable customers should be
satisfied first in order to strengthen their relationship and to
keep them away from the temptations of competitive offerings.
How much and when to satisfy? The use of the CLV can
also provide several important insights on the maximum level
of investment that should be allocated to each customer. In fact,
this is set by the future customer profitability as measured by
CLV. In other words, a company should not invest in a customer
an amount of resources greater than his/her expected level of
future profitability. However, in order to decide when to invest,
a company should also look at the current level of customer satisfaction for each customer and at the shape of the relationship
between customer satisfaction and loyalty. For instance, in presence of decreasing returns in the relationship, a company should
pay attention before deciding to invest in highly satisfied customers to further secure their loyalty and hope for higher returns.
The definition of the shape of the relationship plays a major role
in the cost/benefit relationship.
Directions for future research
Our approach depicts a customer satisfaction strategy
that starts with future customer profitability considerations
(CLV), with the end goal of undertaking different investments,
efforts/expenditures incurred to exceed expectations or cause
delight, for customers segments according to their profitability.
However, the satisfactionloyalty relationship is not generally
investigated for different levels of customer profitability both
before and after a customer satisfaction investment (i.e., efforts
to improve customer service) (Homburg, Koschate, and Hoyer
2005). In a recent study, Kumar et al. (2009) elaborate on the
weakness of the satisfactionloyalty link, as it is currently implemented by companies, to present an alternate path that reverse
the logic, the profitabilityloyaltysatisfaction chain. The new
paradigm starts the customer relationship management strategy
with customer profitability and the idea that customers with different profitability should be rewarded and satisfied differently.
A systematic analysis of the relationship between satisfaction
and loyalty for the different levels of profitability is much needed
in the literature.
The need to better investigate the link between satisfaction
and profitability as expressed by CLV is also supported by
the consideration that recent research has clearly demonstrated
that loyalty is not appropriately measured (Reinartz and Kumar
2002) and that CLV is the best measure for predicting profitability of the company (Gupta, Lehmann, and Stuart 2004; Rust et al.
2004a). According to the above premises, a direct investigation
259
of the satisfactionCLV link that discards loyalty could be a

promising avenue for future research. The presence of mediators
suggests that researchers need to clearly examine how customer
satisfaction affects financial performance. For instance, a recent
paper (Luo, Homburg, and Wieseke 2010) shows that customer
satisfaction led to improved analyst recommendations and those
in turn led to better financial performance. Such insights do not
necessarily imply a reduced role for satisfaction, but rather the
role of satisfaction needs to be better understood.
Further, we have seen that customer satisfaction itself may
not be enough to explain loyalty. However, relationships among
other relevant variables may change over time. There is an urgent
need for longitudinal studies in customer satisfaction that can
capture these changing relationships over time. For instance,
Garbarino and Johnson (1999) demonstrate that whereas satisfaction mediates the relationship between trust and loyalty for
transactional exchanges, the mechanism is different for relational exchanges. In the latter case, trust mediates the effect of
satisfaction on loyalty intentions and therefore the effect of satisfaction in affecting loyalty becomes less central. In other words,
antecedents of loyalty for customers with a relational orientation are different from the antecedents of transaction-oriented
customers.
However, this study is cross sectional, so we cannot understand the dynamics and the interrelations among variables over
time. In fact, did satisfaction contribute to the formation of trust
and commitment over time? What role does satisfaction play
not only on loyalty but also on trust and commitment over time,
during the evolution of the relationship? It may be possible
that, as relationships evolve and go through different phases, the
dynamics among variables change as well as the role of customer
satisfaction on all the other variables. According to the results of
the literature review, we may expect that early in the relationship
customer satisfaction is more relevant, while, when the relationship gets firm, greater importance is attributed to commitment
and trust. In this particular situation, the use of models with longitudinal data that can capture variation both cross-sectional and
over time can be extremely useful. Researchers need to develop
theory to understand when and under what conditions the link
will be systematically stronger or weaker.
The importance of time in customer satisfaction studies has
been highlighted also by other authors, since measures made at
different points in time may drive to different conclusions. For
instance, Mazurski and Geva (1989) find that satisfaction and
loyalty intentions are highly correlated when measured in the
same survey at the same time. However, for the same persons,
customer satisfaction is not correlated with intentions measured
after two weeks. In this particular situation, time plays an important role since the effect of customer satisfaction seems to decay
over time. Hence, longitudinal studies are required to answer
such critical questions.
A third important issue is related to the way customer satisfaction is measured. While an attribute based measure of customer
satisfaction can be useful for managers to identify areas of
future intervention and improvement, it does not lends itself
toward the delivery of a holistic experience for the customer
that involves sense, feel, think, act and relate. According to the
260
principles of experiential marketing (Schmitt 1999), marketers

should touch upon higher levels of the customer experience and
start thinking of an operationalization of customer satisfaction
that encompasses not only physical product characteristics or
concrete aspects of the service, but also intangible elements of
the customer experience that can satisfy higher order needs such
as self-esteem, socialization, or both. Future research should also
investigate these aspects and delineate more precise measures of
satisfaction that encompass intangible aspects of an experience
leading to satisfaction.
In an interesting study of online markets, Shankar, Smith,
and Rangaswamy (2003) found that overall satisfaction had a
stronger positive impact on loyalty online than offline and that
loyalty is higher online than offline. As the relevance of the
Internet in developing and strengthening customer relationships
increases, and customers are more and more used to making their
transactions online, a better understanding of these dynamics in
the online setting would be advocated. Are the dynamics of customer satisfaction and loyalty the same online and offline? More
research in this direction is certainly needed to shed light on a
growing phenomenon that is marking the Marketing discipline
in the 21st century.
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Journal of Retailing 89 (3, 2013) 246262

Revisiting the SatisfactionLoyalty Relationship: Empirical Generalizations

We would like to thank the seminar participants at various universities in

a customer satisfaction improvement when deciding whether or

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

on repurchase intentions, but found no direct effects on repurchase behavior.

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

Customer satisfactionloyalty relationship: literature

Overall, there is a positive relationship between customer satisfaction

It is important to note that while Szymanski and Henard

the future could alter conclusions (24). Further Szymanski and

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

brands, while a decrease in satisfaction below a certain threshold

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

Fig. 2. Shape of the relationship between satisfaction and repurchase intentions

decreasing returns for an insurance company, two threshold

The type of industry affects the specic shape of the nonlinear

Moderators in the relationship between customer

markedly weakens the relationship. As a consequence, in highly

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

The relationship between customer satisfaction and loyalty intentions

The satisfactionloyalty relationship has the potential to change over

Role of mediators and other predictors of loyalty intentions

Holistic models that encompass other relevant variables as a

Attitudinal loyalty measured as Word-of-Mouth (WOM)

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

2004; Fornell 1992). The studies on the relationship between

satisfaction on WOM (Brown et al. 2005). Commitment comes

While customer satisfaction is positively related to Word-of-Mouth,

Customer satisfaction and behavioral loyalty

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

Fig. 3. Direction and shape of the satisfactionWOM relationship.

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

Dependent variable and

Percent of the variance

Cellular telephone industry

8 percent (only CS)

12 percent with other

Retention (+) (renewal

Continuous service providers

Gustafsson, Johnson, and

8 percent (only CS)

Ittner and Larcker (1998)

Retention rate in the

Choice of health insurance

Mittal and Kamakura

Bolton and Lemon (1999)

Adjusted R2 from 1.3

Retention/occurrence of the repurchase

Bolton, Kannan, and

Duration of the relationship

Bolton (1998) (+)

Bolton, Kannan, and

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

For instance, research (Mittal and Kamakura 2001; Seiders

While customer satisfaction is mostly positively related to behavioral

Role of other predictors in explaining behavioral loyalty

An interesting finding is presented in Capraro, Broniarczyk, and

V. Kumar et al. / Journal of Retailing 89 (3, 2013) 246262

attitudes or intentions (Zaichkowsky 1985), and in a services

Models that encompass along with satisfaction other relevant predictor

Other measures of behavioral loyalty: share of wallet and

Rundle-Thiele 2005; Cooil et al. 2007; Rust, Lemon, and