Reexamining the Market Share--Customer Satisfaction Relationship.

Market share and customer satisfaction are often used to assess marketing performance. Despite the widespread assumption of a positive relationship between these two variables, the limited extant empirical literature on the subject indicates either a negative or a nonsignificant relationship. The authors reexamine this relationship over a longer time period than has previously been possible in a representative sample of U.S. consumer markets and find a consistently significant negative market share-customer satisfaction relationship. This is because customer satisfaction is generally not predictive of firms' future market share, but market share is a strong negative predictor of firms' future customer satisfaction. In follow-up analyses, the authors find that a firm's customer satisfaction can predict its future market share when it is benchmarked against that of its nearest rival and customer switching costs are low. In examining why the market share-future customer satisfaction relationship is generally negative, they find strong support for preference heterogeneity as a key mediator in this relationship. They also show that marketing more brands moderates the negative effect of preference heterogeneity on future customer satisfaction. Thus, larger brand portfolios offer a strategy solution for the general market share-satisfaction trade-off. [ABSTRACT FROM AUTHOR]