Stock investing strategy based on Customer Satisfaction


(Ravichand) #1

Recently i came across research by Prof. Claes Fornell. The research compared the cumulative returns on the customer satisfaction portfolio based on American Customer Satisfaction Index (ACSI) data with S&P 500 data for a 15 year period. The results were nothing short of remarkable:

a) The cumulative, model-free returns, expressed as the value of $100 invested from April 2000 through June 2014 grew to $618 (+518%) compared to 31% growth in S&P 500
b) The other key finding was how consistently the customer satisfaction portfolio beat the S&P returns on an annual basis. In 14 out the 15 years of the study, the customer satisfaction portfolio did better than the broader index except in the year 2013.

To see if the effects of customer satisfaction to generate outsized stock returns is replicable across markets, the researchers checked the data for United Kingdom which has a similar customer satisfaction Index called NCSI-UK.

I had done a blog post on this and tried to apply this for the Indian market:

The reason I posted here is :

A) Need feedback / thoughts on this strategy for the Indian market.
B) I had great difficulty getting customer satisfaction data for the Indian market. Please share any reliable sources for data across any Industry / Sector. This will help further validate the findings.

PS: Mods, If the topic is inappropriate or wrongly categorized, Kindly excuse. Still finding my feet around here. Please delete / re-categorize appropriatelly:pray:


(Nolan) #2

Dear @Ravichand08

The study does come up with good observations. However, it may/may not be practically applicable for customers in India. The tastes and preferences of consumers in Indian and western markets are very different. In developed markets, differentiated products/services are well received and customer is willing to pay high prices for superior quality. Such is not the case in India as customers look for value and bargains. Quality is looked at from the prism of prices, which in turn erodes margins substantially for producers. Only the companies driving significant volumes and marketshare are able to do well for long periods of time. Hence, I feel an independent survey here would be necessary to determine the findings in context of Indian companies. Trouble is that finding data and data sources for India is a tough job as there are very few. Good luck!