Why satisfaction doesn't match spending growth

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By: Wise Marketer Staff |

Posted on December 1, 2003

Even though consumer spending in the US rose sharply in the third quarter of 2003, customer satisfaction did not, according to the latest results from the American Customer Satisfaction Index (ACSI), which remained unchanged from the previous quarter.

For the third quarter in a row the index, which was updated with new customer satisfaction data on non-durable goods from Q3 2003, registered a score of 73.8 (on a 100 point scale). Compared with the same period in 2002, the ACSI's overall score is up by approximately 1%.

Q4 forecast
While early figures indicate that third-quarter consumer spending in 2003 grew by a factor of 6.6%, the stability of the ACSI score suggests a much more modest increase in fourth-quarter spending of 3.7%. According to ACSI, even this could be too high a prediction, given the fact that much of the third quarter's spending growth was due to infrequent types of purchases (such as cars, appliances, and houses) from infrequent spending sources (such as home equity and tax cuts).

"The advance third-quarter spending figure from the Bureau of Economic Analysis is much higher than the historical pattern between ACSI and spending would suggest, and far from any historical pattern of data, for that matter," said professor Claes Fornell, director of the University of Michigan Business School's National Quality Research Centre, which compiles and analyses the ACSI data. "Since consumer spending represents 70% of the economy, it stands to reason that GDP (gross domestic product) saw record third-quarter growth as well."

GDP warning
But Fornell warns that GDP growth of 7.2% for the third quarter is not likely to be sustained, and that GDP and ACSI changes did not move together as closely as in previous quarters.

"The reason is that most of the increase in consumer spending was due to spending on durable goods, and was partially enabled by refinancing, the timing of which has more to do with interest rates and price rebates than with aggregate changes in customer satisfaction," explained Fornell.

Satisfaction shifts
Even though there was no change in the aggregate level of the ACSI, only one of the eight non-durable manufacturing industries showed a decline in customer satisfaction. Satisfaction fell slightly overall for soft drinks but improved for beer and personal care products, and remained stable for food processing, tobacco, apparel, athletic shoes, and pet foods.

But despite its slight decline in customer satisfaction, the soft drinks industry still tied with personal care products for the highest ACSI score (84) among the industries measured during the quarter. Cadbury Schweppes improved its score to 89, while Pepsi and Coca-Cola both dropped to 83. The industry trend seems to be favouring healthy drinks, with declining demand for traditional soft drinks. The non-carbonated beverages were the fastest-growing segment, and bottled water is close to becoming the second most popular commercial beverage.

All of the personal care products companies showed an increase in customer satisfaction, with Clorox (86), Dial (85), Unilever (85) and Procter & Gamble (85) leading the way.

In terms of beer and pet foods, both registered an ACSI score of 82. Anheuser-Busch led the brewing companies with a score of 82, while both Colgate-Palmolive and Procter & Gamble topped the pet foods manufacturers with scores of 85.

For the sixth time in the past seven years, the food processing industry scored 81 in the ACSI. According to Jack West, past president of the American Society for Quality, a co-sponsor of the ACSI, food processing companies continue to show exceptionally high and stable satisfaction scores. For the 10th straight year, Heinz took the top spot in this industry with an ACSI score of 90. Quaker Oats (86), Hershey (85) and ConAgra (84) were next in line.

Other non-durable manufacturing industries measured in the ACSI included apparel (with an ACSI score of 80), athletic shoes (79) and tobacco (76).

The ACSI is an economic indicator of customer experiences with the quality of products and services available in the USA. It is updated quarterly with new measures for different sectors of the economy replacing data from the previous year. The overall ACSI score for a given quarter factors in scores from more than 200 companies, across 40 industries and from government agencies over the previous four quarters. The index is produced by a partnership of the University of Michigan Business School, American Society for Quality and CFI Group, and supported in part by corporate contributor Market Strategies Inc., and e-commerce corporate sponsor ForeSee Results.

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