Simultaneity in the Relationship between Sales Performance and Components of Customer Satisfaction

Abstract

The widespread use of customer satisfaction metrics has prompted researchers to investigate the relationship between customer satisfaction and sales performance. Earlier studies, however, have ignored an important aspect of the relationship - the simultaneity between sales performance and some components of customer satisfaction. This article shows that the bias produced by ignoring simultaneity can significantly alter the conclusions drawn from the analysis. Results from a model that links sales performance with individual components of customer satisfaction, ignoring simultaneity, contradict intuition. Our results from a reformulated model provide evidence of the simultaneity between the components of customer satisfaction and sales performance. The results also document that estimating a model ignoring simultaneity produces estimates that are biased. The authors suggest the need to use simultaneous equation models for future studies that examine the role of customer satisfaction in determining sales performance. The implications of the study are also relevant for managers who use the results of such analyses in the formulation of marketing programs.