Customer satisfaction flattens out across the board

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By: Wise Marketer Staff |

Posted on August 21, 2007

Customer satisfaction with the products and services sold in the US has risen for nine consecutive quarters - the longest period since measurement began in 1994, according to the latest figures from the American Customer Satisfaction Index (ACSI).

But the rate of growth is declining and, as the improvement in customer satisfaction began to level off at the beginning of 2007, consumer spending has also declined. Even though the US economy grew by 3.4% during the second quarter, consumer spending was unusually weak, showing a drop from 3.8% in the first quarter to only 1.3%. Not only is this much lower than usual but it was also lower than predicted by overall customer satisfaction.

Growth forecast
Over the past 15 years, consumer spending growth has averaged about 3.6% per quarter. Over this same period, ACSI growth has ranged from -1.0% to 1.6%. While changes in spending tend to vary considerably and are often difficult to predict, one consistent predictor of spending growth from quarter to quarter is the change in the ACSI.

In quarters where the ACSI has declined, consumer spending growth averaged 3.4% in the following quarter (below the series average) while in quarters where the ACSI increased, spending growth averaged 3.9%. At times when the ACSI did not change, spending growth was at its long-term mean of 3.6%.

When consumer spending drops, it often rebounds in the next quarter - and that may still be the case now. But that will depend on the effect of the currently slumping US housing market. On the bright side, the unemployment rate is low, corporate profits are healthy, and there has been some income and wage growth recently, so there is a chance that corporate borrowing will be more affected than consumer borrowing.

Value for money counts
The small increase in overall customer satisfaction is largely due to what consumers see as "slightly better value for money", but improvements in quality are also playing a role. Customer loyalty is also up slightly, and complaints are down. At the same time, buyer expectations are not increasing, which is important because rising expectations would be more difficult to meet and could risk weakening customer satisfaction and lead to less repeat buying.

The car industry gained 1%, rising to an overall index score of 82, while personal computers fell 3% to 75. In terms of reliability, cars have always outperformed PCs by a large margin. In addition, the ACSI figures suggest that the importance of service customisation is increasing. This may pose a challenge for durable goods manufacturers and retailers in particular: If consumers are demanding more customised services for their cars and computers, such services are often both costly and difficult to provide.

Industry best and worst
This quarter, Apple and Dell contributed to the decline in customer satisfaction for personal computers. ACSI scores for both dropped by 5%, although Apple remains the industry leader with a score of 79, a little ahead of HP at 76.

Customer satisfaction with cars improved again, up 1.2% to a new high of 82. Greater satisfaction with US and European brands is driving the continued upswing. Asian makers peaked one year ago but have fallen back since then. The good news for the US makers is that they are moving closer to the Asian manufacturers, although they still rank last in the index. But their path is a promising one, with gains coming more through quality improvements than from price incentives.

In the internet world, Google fell by 4% from one year ago to a new score of 78. Its year-to-date stock returns have been about market average, although the company missed its most recent earnings forecast. Interestingly, despite being an innovator, one key observation from the ACSI team is that Google's home page has changed little since the 1990s, and some end users feel that it looks "stale compared to", suggesting that visual presentation may be a factor in Google's latest score.

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