Lobbying leads to less-satisfied customers, but marketing can help, study finds

Researchers found that making use of certain “marketing levers” can reduce the customer satisfaction loss that comes with lobbying.
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Francis Scialabba

· 5 min read

Companies and special-interest groups spend billions each year on lobbying, trying to achieve policy outcomes beneficial to them by courting lawmakers and policymakers. But a team of academic researchers has found that this American pastime, although a financial boon to companies that engage in it, can negatively affect customer satisfaction.

Their study, recently published by the American Marketing Association in the Journal of Marketing, also offers marketing-based solutions to mitigate these effects.

Gautham Vadakkepatt, an author on the study and associate professor of marketing at George Mason University’s School of Business, explained that there have been numerous academic studies about how lobbying positively impacts a company’s finances, but few, if any, have looked at its impact on customers.

“So we know that lobbying has a positive impact on financial performance. Does this have any consequence on consumer outcomes?” Vadakkepatt told Marketing Brew.

To find out, the research team looked at lobbying data from dozens of publicly traded companies from 2000 to 2014, plus data from the American Customer Satisfaction Index, which surveys Americans about the quality of the products and services they use.

For instance, it annually surveys travelers on their experiences with top airlines, asking them to rate factors like the boarding process, loyalty programs, and seat comfort.

The researchers found an inverse trend between customer satisfaction and how much companies spent on lobbying. The question then becomes how to explain the trend: Why would lobbying be linked with lower customer satisfaction? Vadakkepatt told us the answer is attention. In other words, more resources spent lobbying usually means fewer are spent making sure buyers are happy.

“We conjecture that because companies’ attention is being spread across multiple domains, the focus on customers can go down, and therefore hurt customer satisfaction,” he said.

To try to prove this, the team had to somehow measure companies’ attention on customer issues. Using quarterly earnings-call transcripts throughout the same time period, they ran a textual analysis to see how often customer-focused issues were mentioned (including words like “customers,” “buyers,” “marketplace,” and “communities”'). The result: More lobbying spending was associated with a decrease in attention on customers.

“The level of positive impact that you get from lobbying’s effect on financial performance gets diluted if you consider its customer outcomes,” Vadakkepatt explained.

Could the customer-satisfaction loss be happening because customers are actually aware of the lobbying? Unclear. Vadakkepatt said that is the subject of future research he and his team are working on. In this case, though, the team found that the negative effect lobbying has on customer satisfaction occurred independently of any lobbying’s public visibility.

To lobby or not to lobby

Vadakkepatt doesn’t think companies are going to stop lobbying just because their customer satisfaction takes a hit.

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“Companies will lobby, I think, as long as the regulations are in place to allow you to lobby,” he said.

But the study shows that companies that do lobby can ensure they’re not losing their focus on customers by using a number of “marketing levers.”

“That goes with regard to advertising. Your advertising is a signal of how important customers are,” Vadakkepatt said. The idea is that spending more on advertising means a company is paying more attention to its customers. The paper argues that attention on customers is positively linked with customer satisfaction.

Spending more on R&D and having a CEO with a marketing background also help, the researchers found. “If you have a marketing CEO, then they are more likely to focus on the customer aspect of things,” Vadakkepatt said.

OpenSecrets shows that the top three issues companies lobbied on in 2020 (and for several years prior) were federal budget and appropriations, health issues, and taxes. However, the study found that customer-satisfaction loss is mitigated if the lobbying itself is about issues that ultimately benefit customers.

“Firms do lobby for patent-related issues. Firms do lobby for advertising issues. And we label them as activities that are focused on the consumer. Because taxes are not necessarily focused on the consumer,” Vadakkepatt said.

As an example, the study points out that Apple spent $6.65 million on lobbying in 2020, according to OpenSecrets. Although much of that lobbying went to issues like taxes and banking, the company devoted some attention to issues that are closer to the customer, like copyright and trademark policies.

“Like Spotify, Pandora, and others, Apple lobbies for issues that allow the firm to provide customers greater access to different musical genres, artists, and albums. Although controversial among individual musicians and publishers, customers are the ultimate beneficiaries of this lobbying, via greater access and lower fees,” the authors wrote.

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