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Claes Fornell
  Claes Fornell

Customer Satisfaction Takes First Dip in Two Years

11/13/2007 --

Decline, largely due to higher food prices, may weaken consumer spending growth, according to the American Customer Satisfaction Index.

ANN ARBOR, Mich.—Customer satisfaction is down for the first time since early 2005, according to the third-quarter report of the Ross School's American Customer Satisfaction Index.

The ACSI slides 0.1 percent to 75.2 on its 100-point scale, but it remains 1 percent higher than it was a year ago. Still, even a slight decline does not bode well for consumer spending in the holiday season, says Claes Fornell, professor of marketing at the Ross School of Business who heads the ACSI.

"The dip in ACSI is largely attributable to higher food prices, and despite employment growth and holiday discount pricing, consumer spending is unlikely to match last year's fourth-quarter growth," he said.

Every third quarter ACSI measures consumer nondurables, one of the highest scoring sectors of the index. Consumer nondurables consistently achieve high customer satisfaction scores because competition between products is high, switching costs are minimal and prices are relatively low, Fornell said. Though most industries improve this quarter, it is not enough to offset the ACSI decline in food manufacturing, by far the largest industry in consumer nondurables.

Athletic Shoes: Nike thinks outside the (shoe) box

Nike makes the biggest gain of any company this quarter, climbing 4 percent to 75. The Beaverton, Ore., company, traditionally known for its high-profile endorsements of sports superstars from Michael Jordan to Tiger Woods, taps alternative sports like skateboarding to keep a step ahead of its rivals. Nike also partnered with one of tech's best innovators, Apple, to develop a shoe-iPod product designed for runners.

"Nike is doing a better job of keeping up with customers' changing tastes," Fornell said. "They're broadening their appeal through innovative partnerships and more trend-setting styles."

But shoemakers such as New Balance, Skechers and Puma continue to lead the athletic shoe industry with a 3 percent increase to a score of 83. Adidas, which acquired Reebok nearly two years ago, loses 1 percent to 77. As an industry, athletic shoes improve 4 percent to 79, halting a two-year slide.

Food: Heinz tops ACSI, Sara Lee not so sweet

Customer satisfaction with food companies declines 2 percent to 81, dropping for the first time since 2005. But ACSI leader Heinz moves in the opposite direction with a 3 percent gain to 90, the highest score for any company in any industry in ACSI.

"Heinz is getting back to basics and focusing on what it does best," Fornell said. "They may have found their secret sauce for satisfaction by making their core products even better."

Campbell's Soup is also up this quarter by 4 percent to a score of 83. Campbell's recently made improvements to their brands in order to appeal to customers' desires to live a healthier lifestyle, Fornell said. Campbell's has been offering more health-conscious soups, as well as soup and broth alternatives flavored with sea salt to reduce sodium content. Candy manufacturers Hershey and Mars also show strong performance with scores of 87 and 86, respectively.

Sarah Lee Corp. falls 4 percent to 82 after shedding about 40 percent of its business over the past year. Other decliners include Kraft, down 2 percent to 84, and Kellogg, down 2 percent to 83.

Apparel: Jones Apparel patches the holes; Liz Claiborne declines

Apparel companies hit an all-time high of 82, increasing 3 percent over last year. VF Corp. leads the industry with a 2 percent increase to a score of 84, while Liz Claiborne registers the industry's only drop (-3 percent to 79). Smaller companies manage a 3 percent improvement to 82. Hanesbrands is unchanged from last year, also scoring 82.

Jones Apparel, which declined 4 percent a year ago, regains most of what it lost as it improves to 81.

"After last year's drop in ACSI, Jones Apparel's stock fell 45 percent," Fornell said. "A reversal of misfortune would bode well for stockholders."

Breweries: Another merger brewing

Amidst news of yet another merger, the brewing industry improves 1 percent to 83. The difference between the highest-scoring company (Miller, 83) and the lowest (Anheuser-Busch, 82) is tiny. The merger of Molson Coors with Miller will probably not impact customer satisfaction, but the merged company will benefit from economies of scale, Fornell said. Smaller breweries that have held higher ACSI scores have seen that lead evaporate.

Personal Care & Cleaning Products: Dial comes out clean; Colgate needs a brush

Customer Satisfaction with personal care and cleaning products is up 1 percent to a record high of 85. The industry is the highest scoring in the third quarter, in part because products are inexpensive, switching costs are low and choice is abundant, Fornell said. Unilever and Procter & Gamble each gain 1 percent, with Clorox retaining the top position at 87. Dial makes the biggest jump, up 4 percent to 86, its highest score in 12 years. Colgate-Palmolive is the only decliner in the industry, losing 4 percent to 81.

About the ACSI

The American Customer Satisfaction Index is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the United States. It is updated each quarter with new measures for different sectors of the economy replacing data from the prior year. The overall ACSI score for a given quarter factors in scores from about 200 companies in 43 industries and from government agencies over the previous four quarters.

The index is produced by the University of Michigan's Ross School of Business 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.

For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847,