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Causal Loop Diagramming of the Relationships among Customer Satisfaction, Customer Retention, and Profitability

Customer satisfaction and its antecedents have been investigated extensively in the customer satisfaction and service quality literature, and the consequences of customer satisfaction have received some attention in the research literature. Customer satisfaction research literature contends that higher customer satisfaction increases customer retention and hence organisational profitability. Most of the research examines the influence of customer satisfaction in a linear, open-loop manner. This study aims to adopt a more systemic approach by recognising the interactions among these constructs and other mediating variables, for example market share or disbursement of cash flow from operations. The investigation uses causal loop diagramming to develop one possible model relating customer satisfaction to profitability and suggests some directions for further research.