Fundamental to FFICS, and all similar satisfaction barometers, is the indispensable precept that satisfied consumers represent a real, albeit intangible, economic asset to a company. An economic asset, by definition, generates a future stream of income to the owner of that asset. Although FFICS measures the overall satisfaction of buyers in household consumer markets, it is not limited to transactions per se. Rather, it is the subjective evaluation of the goods and services acquired and consumed that are measured. All consumer decision-making, in the final analysis, is subjective. And it is the consumer’s evaluation–not econometric standards–that ultimately affects the demand curve. Measurement of that evaluation, however, is not necessarily subjective. FFICS also incorporates price, how well companies have chosen their markers, and the resulting degree of fit between the nature of demand and the nature of supply. Consumer satisfaction, in contrast to quality, further assumes actual consumption experience. In other words, consumer satisfaction has a large effect on demand, as most products and services are repeat purchases.

From an historical perspective, consumer satisfaction research has evolved from two different types of evaluation–namely, transaction-specific satisfaction and cumulative satisfaction. Interest originally focused almost entirely on a consumer’s experience with a product episode or service encounter and was denoted as transaction-specific satisfaction. Over the last decade, however, a more economic psychology-based –termed cumulative satisfaction–has matured and gained acceptance. This approach defines satisfaction as a consumer’s overall experience to date with a product or service provider. An important advantage of the cumulative satisfaction construct over a more transaction-specific view is that it is better able to predict subsequent behaviors and economic performance. This is because consumers make repurchase evaluations and decisions based on their purchase and consumption experience to date, not just a particular transaction episode. At an aggregate level, then, consumer satisfaction is equated with consumer welfare. And it is this welfare-based or cumulative view of satisfaction upon which FFICS–and all other prominent indices of satisfaction–is modeled.

Methodologically, FFICS encompasses four key properties: (1) FFICS uses an econometric model with measures of an index of satisfaction (FFICS) and related indices for latent variables, or constructs, that are general enough to be comparable across companies and industries, but specific enough–when customized–to address an individual company’s unique business needs. These measures come from manifest variables (i.e., survey questions) that are inputs to the model. The latent variables and their relationships apply to competitive product markets and public services alike. (2) FFICS is embedded in a system of cause-and-effect relationships, which serves to validate the index from a nomological standpoint. A form of construct validity, nomological validity is the degree to which a construct behaves as it should behave within a system of related constructs called a nomological net. Whenever the model predictions are supported, then the validity of the FFICS is supported. (3) Consumer satisfaction–consistent with its definition–is measured as a latent variable using multiple manifest variables (i.e., questions). At best, any one concrete measure of consumer satisfaction, such as a single survey question, is a proxy for latent satisfaction. FFICS, instead, uses several proxies that reflect overall consumption experience. To operationally define consumer satisfaction, these proxies are combined into a composite index on a 0 to 100 scale. (4) A primary objective is to estimate the effect of FFICS on consumer loyalty, a construct of universal importance in the evaluation of current and future business performance.