Managing brand instability and capital market reputation: Implications for brand governance and marketing strategy

Abstract

This study investigates how customer satisfaction and its instability affect the capital market reputation and shareholder returns. A sample from the American Customer Satisfaction Index database of 76 publicly traded firms, during the period from 2001 to 2007, was used to test the hypothesised model. The model consisted of a series of hypothesized relationships, where: (1) instability of customer satisfaction is negatively related to levels of customer satisfaction; (2) customer satisfaction is positively related to capital market reputation; and (3) capital market reputation is positively related to shareholder value. Structural equations modeling, using the partial least squares (PLS) algorithm, supported the hypotheses. The results are of importance and relevance to brand management and the emerging field of brand governance as they: explore the possible negative consequences of instability of customer satisfaction, develop theory on the relationship between customer satisfaction in product markets and capital market reputation and introduce a new measure of capital market reputation.