In the banking and finance industry, a transformation is underway in which customer interactions are shifting from physical bank branches to digital channels. Within this change, there is a need to understand the relationship between customer satisfaction and banks’ long-term revenues from customers. 

The purpose of this study is to examine the relationship between customer satisfaction and a bank’s revenue at the individual customer level over time. Specifically, it investigates whether higher satisfaction is associated with greater revenue growth, whether this effect is sustained over time, and whether the relationship is linear or nonlinear across satisfaction levels.  The analysis combines subjective data from a customer survey (19,060 anonymised telephone interviews with Swedish bank customers) and objective data. 

The results indicate that higher customer satisfaction is associated with greater revenue growth at the individual customer level, even after controlling for demographic and socioeconomic factors. Consistent with previous research, the explanatory power of the relationship between customer satisfaction and customer revenue is low. Customers with medium and high satisfaction levels increase their revenues more than those with low satisfaction. The relationship between customer satisfaction and bank revenue exhibits a nonlinear pattern: it is significant at higher satisfaction levels but to peaks at scores between 80 and 89 on a 100-point scale. Nonlinear effects are observed for revenue levels, not for revenue growth. Suggesting that socioeconomic constraints and low involvement may explain the diminishing returns at high satisfaction levels.

This dissertation contributes to the understanding of customer satisfaction dynamics within the banking sector by demonstrating, the sustained effects of customer satisfaction on customer revenue over a four-year period, while controlling for relevant demographic and financial variables. The study presents new empirical evidence of a nonlinear relationship between customer satisfaction and individual-level bank revenues. The findings indicate diminishing financial returns to maximizing satisfaction, which, together with other results of the study, underscores the importance of differentiated marketing strategies based on varying levels of customer satisfaction.