Customer Satisfaction-Based Mispricing: Issues and Misconceptions

We appreciate the opportunity to respond to the commentaries and additional analyses by Fornell et al. [Fornell, C., S. Mithas, F. V. Morgeson III. 2009a. The economic and statistical significance of stock returns on customer satisfaction. Marketing Sci. 28(5) 820–825] and Ittner et al. [Ittner, C., D. Larcker, D. Taylor. 2009. The stock market's pricing of customer satisfaction. Marketing Sci. 25(5) 826–835]. Both studies have multiple theoretical and econometric limitations that challenge the validity of their arguments and findings (e.g., neither study allows for time-varying risk factor loadings in their assessments of mispricing although the composition of firms in their analyzed portfolios changes over time, Fornell et al. mischaracterize the efficient markets hypothesis, and Ittner et al. do not use standard panel data econometric methods and models). Generalizations about customer satisfaction, like any other construct, should be assessed by appropriate econometric methods and should withstand rigorous scrutiny. We believe an open, frank dialogue can help clear up misconceptions, air central issues, and advance better understanding of methods and analyses for assessing the financial market implications of marketing metrics such as customer satisfaction.