US customer satisfaction levels off at ten-year high

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By: Wise Marketer Staff |

Posted on September 3, 2004

The latest American Customer Satisfaction Index (ACSI) stands at an overall score of 74.4 (out of 100) for the second quarter of 2004, remaining at its ten-year peak for the second quarter running. According to the ACSI report, overall satisfaction levels among US consumers are enough to encourage spending but may still not be sufficient to offset the effects of rising prices and interest rates.

The high overall customer satisfaction level appears to have contributed to increased consumer spending in the USA and, while satisfaction can't completely offset recent price and interest rate rises, the economy's ability to continue delivering good satisfaction levels may also help pull consumer spending above the first quarter's level.

The report also suggests that the US auto industry will have to fight to avoid losing customers to foreign car makers, and that some of the best known American PC brands are gaining ground (which could be good news not only for PC sales but also brand extensions). Industry-level satisfaction scores provide strong cues concerning which lines of business are most vulnerable to foreign competition, according to the report.

More spending?
"High levels of satisfaction with shopping and consumption usually mean that people are more willing to spend, which gives a boost to the economy," explained Professor Claes Fornell, who heads the ACSI at the University of Michigan. "But there are now considerable forces pulling in the other direction, and price-adjusted satisfaction is actually dropping. Add weak employment, debatable wage growth, and higher interest rates, and the consumer's enthusiasm for buying more weakens."

Nevertheless, according to Fornell, third quarter spending for 2004 is almost certainly going to exceed the disappointing second quarter spending level. It is normal to see a proportional change in consumer spending following a significant change in the ACSI the previous quarter. Based on the ACSI alone, spending should grow by some 3.7% in the third quarter 2004.

Car wars
This quarter's ACSI scores also bring a warning for domestic auto manufacturers; Of the six nameplates that are at or below the industry average for customer satisfaction, five are domestic. The gap in customer satisfaction between domestic and foreign producers is also growing, with Japan regaining the lead, followed by Europe. Fornell points out that this will not make it easy for the big three US manufacturers to curb further erosion of market share by their overseas competitors.

"Major recalls notwithstanding, the big three are basically holding their own with foreign auto makers when it comes to quality and reliability," said Fornell. "Where they fall short is value for money. Despite the weakening dollar, domestic auto makers have not been able to capitalise in price comparisons with international competition."

Because of lower prices, upgrades in power and capabilities, and a gradually increase in experienced computer users, customer satisfaction with personal computers has improved to a level last seen in 2000. Apple leads the index with a score of 81, having shown a 5% improvement in each of the past two years. Gateway has also improved, as its products are now perceived to offer a better value - particularly after the acquisition of eMachines - which helped pull the company up from a low of 69 a year ago to equal the industry average this year.

Corporate impact
But higher satisfaction scores have implications for companies beyond simply making customers happier. "A company that improves in customer satisfaction tends to perform better financially by generating more repeat business, which leads to greater profits and a higher stock price," explained Fornell. "Sales of Apple computers are up and its stock value has improved by more than 50% over the past year."

The ACSI is an economic indicator of customer evaluations of the quality of products and services available to household consumers in the USA. It is updated each quarter with new measures for different sectors of the economy replacing data from the previous year. The overall ACSI score for a given quarter takes into account the scores from approximately 200 companies in 40 industries, and from government agencies over the previous four quarters.

The index is produced by the University of Michigan Business School in partnership with the American Society for Quality and CFI Group, and is supported in part by ForeSee Results (corporate sponsor for the e-commerce and e-business measurements) and by corporate contributor Market Strategies Inc.

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