Anthony Hilton: Why the customer is not always right

Every year, MORI polls financial journalists about their attitude to companies and plots the link between familiarity and favourability.

Generally, the more familiar people are with a business the better they like it. Now MORI has come up with a new twist. Some of the City's bright new hedge fund investors have decided there is a link between customer satisfaction and subsequent share price movements.

To test this, MORI has plotted the favourability rating of a few big names - Sainsbury's, Tesco, British Airways, Vodafone and Marks & Spencer - and found that changes in customer satisfaction were reflected in changes in share prices six months or so later. It says some hedge funds are commissioning their own research to give themselves time to deal in the shares before the rest of the market has woken up.

Others are simply more alert at reading public data. Scottish Widows, for example, sold out of Morrison when it read that Safeway's customers were deserting the new formats after the takeover. There is a logical connection. Lower customer satisfaction probably means lower sales and lower profits, and profits ultimately drive share prices.

But it takes a big, sustained shift in customer attitudes to have a severe impact. In the short term, companies can get away with it because established businesses have considerable momentum.

What worries me is that once hedge funds start polling on customer satisfaction and buying or selling shares on the outcome, it will create unjustified share price volatility. Shares will fall not because of the economic impact of dissatisfied customers, but simply because a hedge fund sold a mass of shares short. This will open up a whole new frontier of information, disinformation and spinning - particularly as plotting customer satisfaction is at best an inexact science.

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