How To Beat The Stock Market: Buy Companies With High Customer Satisfaction Scores

Using a back-tested paper portfolio and an actual case, the authors of a study published in the Journal of Marketing found that companies at the top 20% of the the American Customer Satisfaction Index (ACSI) greatly outperformed the the stock market, generating a 40% return.

From 1996-2003, the portfolio outperformed the Dow Jones Industrial Average by 93%, the S&P 500 by 201%, and NASDAQ by 335%.

Past performance doesn’t indicate future results. ACSI only goes back to 1994. However, these startling findings help vindicate one of our central claims: investing in customer service and satisfaction is good for your bottom line.

“Cost-cutting” and “profit-enhancing” measures like outsourcing all your tech support to India, creating a byzantine apparatus for warranty repairs, and using rebate systems designed to trip up your customers will only hurt you in the long run. — BEN POPKEN

Customer Satisfaction and Stock Prices: High Returns, Low Risk (PDF)

RELATED:
Most And Least Improved Companies In Customer Satisfaction Since 1994
Customer Satisfaction Winners And Losers
Customer Satisfaction Up Thanks To Lower Prices, Not Increased Quality


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