Donald C. Cook Professor of Business, Ross School of Business; Director of the National Quality Research Center (NQRC), University of Michigan; founder and chairman, CFI Group; Chairman of the Board, ForeSee Results, Inc.
This paper studies the effect of aggregate information technology (IT) investments on customer satisfaction and profits at the firm level. Using data on 109 U.S. firms for the 1994Ð1996 and 1999Ð2006 periods, we find that aggregate IT investments have a positive association with customer satisfaction. However, the strength of the relationship varied across the 1994Ð1996 and 1999Ð2006 periods. Specifically, IT investments had a more positive influence on customer satisfaction for the 1994Ð1996 period than for the 1999Ð2006 period. Conversely, IT investments had a positive effect on profits in the 1999Ð2006 period, but a negative effect in the 1994Ð1996 period. These findings extend prior discourse in the information systems literature on the role of customer satisfaction as a mechanism that explains how IT-enabled benefits are Òpassed on to consumersÓ [Rai A, Patnayakuni R, Patnayakuni N (1997) Technology investment and business performance. Comm. ACM 40(7):90]. Our additional exploratory analyses showing that IT investments had a stronger effect on perceived quality than on perceived value provide an explanation for some of the observed effects of IT on customer satisfaction and profits. Together, these contributions and implications provide new insights to assess returns on IT investments by focusing on customer satisfaction, an important intangible and leading measure of firm performance, stock returns, and stock risk.
Web sites are important components of Internet strategy for organizations. This paper develops a theoretical model for understanding the effect of Web site design elements on customer loyalty to a Web site. We show the relevance of the business domain of a Web site to gain a contextual understanding of relative importance of Web site design elements. We use a hierarchical linear modeling approach to model multilevel and cross-level interactions that have not been explicitly considered in previous research. By analyzing data on more than 12,000 online customer surveys for 43 Web sites in several business domains, we find that the relative importance of different Web site features (e.g., content, functionality) in affecting customer loyalty to a Web site varies depending on the Web site's domain. For example, we find that the relationship between Web site content and customer loyalty is stronger for information-oriented Web sites than for transaction-oriented Web sites. However, the relationship between functionality and customer loyalty is stronger for transaction-oriented Web sites than for information-oriented Web sites. We also find that government Web sites enjoy greater word-of-mouth effect than commercial Web sites. Finally, transaction-oriented Web sites tend to score higher on mean customer loyalty than do information-oriented Web sites.