Three Essays on Advertising, Customer Satisfaction, and Customer Loyalty

This dissertation focuses on the attitudinal metric of customer satisfaction and its consequence of customer loyalty. While the merits of customer satisfaction and customer loyalty are widely studied and recognized, less is known about how the firm should go about using its resources to optimize these constructs, and how the optimization of these constructs may affect firm value. The first essay examines the effect of advertising effort on customer satisfaction and its implications for firm value. The second essay delves into analyzing the conceptual components of customer loyalty by exploring the effect of a firm's resource allocation choices on its loyalty capability, which is defined in this dissertation as a firm's ability to convert its resources into customer loyalty. In these first two essays collectively, I argue that the efficient optimization of both customer satisfaction and customer loyalty will positively impact a firm's performance in the market. The final essay examines customer satisfaction within a global context, and explores the extent to which market familiarity and experience contributes to a multinational corporation's (MNC's) ability to provide valuable offerings with which consumers in the host country express satisfaction. The results of Essay I suggest that firms can over- or underadvertise with respect to optimizing customer satisfaction. This advertising ineffectiveness, particularly overadvertising, is detrimental to firm value. Moreover, this study shows that analyzing the impact of advertising on market value without accounting for effectiveness may lead to biased results. The findings from Essay II demonstrate that loyalty capabilities may vary across firms and over time due in part to the firms' advertising allocations, level of innovation, category characteristics, and portfolio strategy. The findings also suggest that loyalty capability contributes to firm performance. Finally, the results of Essay III indicate that a firm's experience in the market has a positive effect on its ability to provide value to the customer. However, the results are mixed as to whether experience helps a MNC overcome differences between the country of origin and the host country, and cope with the volatility of those differences.Doctor of Philosoph