Rupali Kaul

Rupali Kaul
PhD Student, Marketing
PhD Program Office Graduate School of Business Stanford University 655 Knight Way Stanford, CA 94305

Rupali Kaul

Job Market Paper

Academic researchers, as well as industry practitioners, recognize that the voice of the customer is a powerful tool that businesses can leverage to enhance their performance. Thus companies routinely solicit and obtain feedback from a subset of their customers. Whether the feedback then has any effect on the non-solicited customers depends both on whether the company makes organization- level changes, as opposed to responding just to the solicited customers, and whether these changes, if any resonate with those customers. This research seeks to assess the impact of customer feedback on firm learning about dimensions to improve and as a result, understand the spillovers it can cause to non-solicited customers. I conduct a randomized controlled field experiment in Rwanda to study the impact of customer feedback on a sample of small-scale entrepreneurs. I hypothesize that customer feedback could operate through two broad mechanisms - (1) the act of seeking feedback itself could have a direct effect on the customers who were reached out to, or (2) the feedback could cause firms to learn from it and respond by improving the products and experiences they offer, which in-turn could cause spillovers across customers. My study attempts to tease these effects apart. The results from the experiment show that customer recall of the business increases by about 10% and purchase increases by 77% for customers who were not engaged in the feedback process. I present evidence to suggest that these spillover effects of feedback are driven by changes made by the firms in response to the customer feedback that they were provided. Finally, I also show that customer feedback led to an overall positive and significant impact on the performance of the treatment firms with a 62% improvement in sales and 54% improvement in profits relative to the control firms while showing suggestive evidence of diminishing marginal returns to feedback. These findings can guide firms in leveraging the information available with their customer base to improve the products/experiences they offer and drive greater profits.