Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: This study examines the nonlinear relationship between customer satisfaction and both the level and growth of customer revenue at the individual level in the banking sector. It tests the hypothesis of diminishing returns at high satisfaction levels and explores how customer characteristics and temporal dynamics influence this relationship. Using a unique dataset of 19,054 Swedish bank customers, the study combines subjective satisfaction measures with objective financial and demographic data. Regression analyses assess the effects of satisfaction on revenue level and growth, controlling for key customer characteristics. The persistence of nonlinear effects is evaluated up to four years after the satisfaction measurement. The data span from 2013 to 2017. Customer satisfaction is positively associated with both revenue level and growth, but the relationship is not strictly linear. Evidence suggests diminishing returns at the upper end of satisfaction: customers scoring 80-89 generate higher revenues than those scoring 90-100. This ceiling effect is weak (significant at the 10% level) and absent for revenue growth. Satisfaction explains less than one percent of revenue variation, indicating that other factors play a stronger role. Older women with low incomes, and no debt are more likely to exhibit ceiling effects, while wealth has no influence. Nonlinear effects fade after the first year, though gender remains a consistent moderator. The study provides novel evidence of nonlinearity in the satisfaction-bank customer revenue link at the individual level. It highlights the limited financial returns of maximizing satisfaction and underscores the need for differentiated marketing and segmentation strategies for highly satisfied customers.

Keywords: customer satisfaction; bank customer revenue; nonlinear relationship; diminishing returns; ceiling effect; effect size

JEL-codes: D10; G21; G41; G51; M21; M31

Language: English

29 pages, First version: January 13, 2025. Revised: October 28, 2025. Earlier revisions: October 28, 2025, October 28, 2025.

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