Quantifying the Spillover Effects of Customer Satisfaction

• Activity Number: 336
• Type: Topic Contributed
• Date/Time: Tuesday, August 6, 2013 : 10:30 AM to 12:20 PM
• Sponsor: Section on Statistics in Marketing
• Author(s): Xiaojing Dong*+ and Pradeep Chingtagunta
• Companies: Santa Clara University and The University of Chicago
• Keywords: Customer Satisfaction ; Spillover across categories ; Self-Selection ; Bayesian

Abstract

This study relates the repurchase and recommendations intentions of consumers to their satisfaction with companies providing both banking and credit card services, while allowing for the spillover effects of customer satisfaction across categories. Since the choice of using the same vs. different firms for these two services underlies our measure of spillover, a key methodological challenge is to allow for consumer self-selection along this dimension. We do so via a Multinomial Probit selection model in which respondents choose between using the same or different providers across categories. We find spillover effects exist, and they are asymmetric across categories. We also quantify the effects of improving satisfaction on the firms' customer lifetime value (CLV). We find that a one-level improvement on the satisfaction scale could lead to 1.3-8.6% increase in average CLV. To assess the generalizability of our model and findings we provide results using data from a pair of telecommunication services - television and internet.