Customer relations & profitability

I was on the airplane reading US Airways’ magazine and came across an excerpt from (what is sure to be) a great book: “Your Call Is (Not That) Important To Us” by Emily Yellin (kind of a coincidental name because lots of people interviewed in her book do a lot of yellin’). The excerpt includes several scathing comments from disgruntled Comcast customers and how the company is responding. What caught my attention was the part about Claes Fornell, a professor of business at The University of Michigan and founder of The American Customer Satisfaction Index or ACSI. Professor Fornell states “with ACSI, we are able to capture a much better understanding of a company’s current condition and its future capacity to produce wealth.” Ms. Yellin notes that it is professor Fornell’s conviction that “customer satisfaction is a leading indicator of a company’s long-term market value and financial health.” It may also be worth noting that professor Fornell is a former cryptologist (or code breaker). It’s not so cryptic to me that customer satisfaction is directly linked to a company’s profitability. What is crytpic to me is that investors may not make this connection. It’s simple, really. A company has a desireable product or service and can continue to grow (appreciate in value) if its customers are happy and either purchase more from the company (repeat business) or refer others to the company. Our local supermarket, Wegmans, is a great example. I’ve shopped there for as long as I can remember. They have pretty much everything I want and need for groceries, including organic produce and environmentally friendly home and health care products, and I always enjoy shopping there. Everyone is helpful, responsive, and friendly. I understand that Wegmans treats their employees very well (they’re frequently in the listing of the top WNY companies to work for) and it shows. I’m believe Wegmans is a family owned company but if they weren’t, I’m pretty sure I’d be asking my investment advisor about their stock.