Is Customer Experience A Leading Indicator Of Stock Price?

In a recent post, I discussed an analysis of how leaders in Forrester’s Customer Experience Index have outperformed other companies in the stock market. I also highlighted my research earlier this year that showed a high degree of correlation between customer experience and loyalty.

These insights seems to indicate that customer experience is connected to business performance. But there is not yet enough data to say that customer experience performance is, in fact, a leading indicator of stock performance.

There are a lot of variables that go into stock performance. But if customer experience is a leading indicator, then financial analysts should start taking note of metrics like Forrester’s Customer Experience Index.

So I’m wondering what you think…

The bottom line: This is just a start to the conversation

About Bruce Temkin, CCXP
I'm an experience (XM) management catalyst; helping organizations improve results by engaging the hearts and minds of their employees, customers, and partners. I enjoy researching and speaking about these topics. I lead the Qualtrics XM Institute, which is the world's best job. We're igniting a global community of XM Professionals who are inspired and empowered to radically improve the human experience. To achieve this goal, my team focuses on thought leadership, training, and community building. My work is driven by a set of fundamental beliefs: 1) Everything starts and ends with human beings, so you need to understand how people think, feel, and behave; 2) XM is a discipline that needs to be woven throughout an organization's entire operating fabric; and 3) Building the XM discipline requires a combination of culture, competency, and technology.

15 Responses to Is Customer Experience A Leading Indicator Of Stock Price?

  1. I think it is relative to industry. If you are in an industry with little focus on customer experience, you should have very high stock-market performance. If you are in a highly competitive industry with a strong focus on CEM, your ROI is preserving market share, and your stock performance will be average.

  2. M Clark says:

    I believe share and stock holders are not familiar with these particular aspects of each business, it is very difficult to 1) measure customer satisfaction (CS) 2) relate this measure to economical and share “numbers”.
    Of course stock prices are not directly related to holders but in the end they are the prime customers. Taking this in mind, the only way CS would make his way as an important factor for stocks would be relating its performance to sales/accountability/board supervision.

    This, of course it is just my opinion. Believe me I truly love deep marketing strategys and not-popular subjects on business administration but the reality on most companies, now, is other.

  3. Allen Bonde says:

    Hi Bruce – I enjoy reading your blog!

    I looked at this topic a year or so ago when I was at eVergance (now KANA) and found the following piece on BusinessWeek: which is pretty interesting and may support your thesis. References a couple studies at Michigan and Vanderbilt, the latter of which showed that a portfolio of companies whose ACSI scores had risen over the past year and were above the national average outperformed the S&P 500 by 2X over a 10 year period.


  4. Majid Rizvi says:

    Customer Experience is NOT the leading indicator of a Stock’s price as there are other variables involved. Typically a bad Customer Experience leads to no sale in the B2C world thus impacting the revenue stream and it is best for the company to make the necessary changes to raise the level of CE. Management team along with the future position (R&D) of the company and the demand for the company’s future products play a more important role. A good example is the bad online experience B2B companies offer their clients (corporations) and yet continue to do great because of good quality products and great contract prices despite of terrible “online order entry” system

  5. The stock market rarely moves based on actual facts…it mainly reacts based on speculation and perception. That said, the more “customer experience indicators” become perceived as linked to successful business strategies (as the trends are revealing) I agree…the more financial analysis will start recognizing that this as a reliable way to predict future portfolio results.

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  7. M Clark says:

    Following Majid comment. I think bad online experiences which leads to no sale are often overlooked. In the last years the so called “call centres” have been considered (and integrated) as the entry-level job at companies, and not as the first and most used way a customer contacts it.
    In relation to this I recently read the Southwest Airline story
    and I think it is a good example of a new kind of CEO decision (regardless of the economic results this brought) giving credit to the most experienced workers in relation to customers. This could also relate to “Happy Employees Create Better Customer Experiences” post on this same blog.

  8. Bruce,

    Please note this 2007 Christopher Hart Harvard Business Review article on Beating the Market with Customer Satisfaction. The article features a study, by Claes Fornell, of 200 companies that shows a clear correlation between higher levels of customer satisfaction and higher stock prices:

    Click to access christopherhart_hbr.pdf



  9. Bruce Temkin says:

    Great discussion everyone.

    In the long run, I believe that IN THE AGGREGATE, companies that treat their customers better than their competitors will get better business results and will therefore end up with better stock performance. I don’t think this relationship will hold up for all firms, because as Majid notes, there are a lot more factors than just customer experience. If I was acquiring a company, then I WOULD DEFINITELY include an analysis of customer experience in my evaluation.

  10. It is hard to say even if we assume efficient market theory holds and all future profits are accounted for in stock’s price. How long a period are we talking, and even over long periods as Keynes said, “markets can remain irrational longer than one can remain solvent”.
    If we consider too long a period then we will be ignoring technology, macro-economic and customer shifts that could make the current business obsolete. For example, in the cloth diaper service business I bet most customers had great service experience but how long did that business survive?
    Even if we look for customer centric metrics we need to ask what is the marginal benefit over other models say for example accounting models like accruals growth.

    I recommend not to look for any single metric however simple and popular it is. Here is an article I wrote a few days back on the biases in relying on single metric


  11. It is an excellent discussion. The only thing I’d add is that Customer Experience is not limited to Customer Support, Service and Call Centers as this discussion seem to imply.

    I agree with Rags and believe that all aspects of a product or service are crucial to how we, as customers, experience it. I often hear statements like ” the company X is a great Brand” or “company Y has great customer support”, and on the same breath a person would complain about the reliability of company Y service, or quality of company X product. That is why our methodology at is focused on measurement of a gap between Customer Expectations and Customer Experience to produce multiple metrics.

  12. James Va says:

    One of the Harvard gurus, Deshpani (sp?) did an analysis of ~400 global companies in the mid 2000’s in which he discovered that those with a formally CEO endorsed customer centricity strategy, significantly out-performed those without said strategy with regard to profitability and I beleive shareholder value as well.

    This is not a customer satisfaction issue … it is a loyalty and customer repurchase issue… a great customer experience leads to more trial and eventually loyalty.

  13. @James
    Agreed. But I would ask my previous questions to this Harvard study as well
    – what are the omitted variables?
    – Is it possible that the CEOs themselves are the omitted variable here?

    I want to point out another peer reviewed study (quoted in my post) that found loyalty is a poor predictor of profitability.

  14. M Clark says:

    I think we are getting into bigger matters than CE. If a company focuses around the customer experience, which is satisfaction (or more than) the only experience wanted; we are talking about a customer centered company which will work hard to exceed the expectations with their products/services and of course the pre and post sales and the techinical support will be a big part of it.
    People is not loyal, you may have a couple of fanatics of particular brands (like Ford, Toyota, etc.) or groups that are constantly battling (Microsoft vs Apple). But is is impossible to make every person a total brand fanatic in every product they consume and above all, that is usually impossible for most of them (the companies) due to the immense ammount of money you have to invest.
    It is true that people will return to the latest brand they bought (this is a human beahaviour, to return to the known objects, places, entertainment, people, etc) but as soon they find a hotel, cereal, pc part, airline, etc has not meet their expectations (estimated price, quality, quantity, trend…) they will switch to the “next best” being this the company which could grab their attention with their “customer centered” product.
    In the end, in my opinion, is all about how the consumer feels (experiences) the integrity of our product/service but this is only measured by sales and not opinions.

  15. Bruce Temkin says:

    Hi everyone: Thanks for participating in this very lively discussion. Companies and marketplaces are complicated; so there will always be a lot of elements that determine a company’s success. A firm could have the best product, a customer-centric culture, but go out of business because it’s business model didn’t work financially or because it had a very weak salesforce. So I don’t think that customer experience can be looked at in isolation from other factors in examining the long-term health of a company. But I do believe that it is one of the key ingredients to long-term business success.

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