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Claes Fornell
  Claes Fornell
 

Customer Satisfaction Reverses Course

5/20/2008 --

The ACSI scores for airlines are down, but hotels, phone companies, and cable and satellite television show improvement.

Scores for all industries and companies are available at American Customer Satisfaction Index.

ANN ARBOR, Mich.---After a year of stalling and falling, the American Customer Satisfaction Index at the Ross School of Business has reversed course, registering its first gain in a year---a 0.4 percent tick upward to 75.2 on ACSI's 100-point scale.

"The improvement in ACSI may boost consumer spending and jumpstart the economy, but conditions are much different than they were the last time a reversal in ACSI signaled recovery from the economic downturn in 2000 and 2001, primarily because consumers' ability to spend is more limited today," says ACSI founder Claes Fornell, professor of marketing at the Ross School.

"Households are under pressure from falling housing prices, tight credit, and rising food and fuel costs, making it more difficult for satisfied consumers to spend more even if they want to. The smart move for companies in this economic environment is to make sure they keep the customers they have by shoring up their customer relationships."

In the first quarter 2008, ACSI measured customer satisfaction in such industries as airlines, hotels, restaurants, telephone service, cable and satellite television, utilities and health care.

Airlines: More Turbulence Ahead

Customer satisfaction with airlines dropped to its lowest point since 2001, falling for a third year in a row. Faced with the soaring cost of jet fuel, airlines are raising ticket prices, overbooking flights, and charging extra fees for checking more than one bag and for "premium" seats, Fornell says.

Continental Airlines and US Airways suffered the largest nosedives. Continental's ACSI score plummeted 10 percent to 62, while US Airways fell 12 percent to 54. The four airlines at the bottom of the industry are in various stages of merger talks. United Airlines, which scored 56 for a second consecutive year, is contemplating a merger with US Airways. Northwest (down 7 percent to 57) and Delta (up 2 percent to 60) recently announced they will merge.

"When it comes to mergers, combining two negatives doesn't make a positive," Fornell says. "Passenger satisfaction is dismal and things probably won't get any better if airlines continue to charge more for less."

American Airlines improved 3 percent to match the industry average, but it should be noted that ACSI reflects the first quarter, which was prior to the large cancellation of flights in which more than 100,000 of American's passengers were affected, he says.

Southwest continues to be a bright spot (up 4 percent to 79). Fornell says the airline has led the industry in passenger satisfaction for the past 15 years, and is one of only three airlines to improve since last year.

Hotels: You Get What You Pay For

Marriott , Hyatt and Hilton are tied at the top of the industry at 78. Budget hotels such as Choice Hotels (Comfort Inn, Quality Inn and Econo Lodge) and Best Western are at the other end of the scale, scoring 71 and 70, respectively.

"These results underscore something that is more common than not---the strong impact of quality and the relatively weak effect of price on satisfaction," Fornell says.

On the whole, the hotel industry improved its ACSI score 6 percent to an all-time high 75. Much of the gain can be attributed to high customer satisfaction with smaller budget hotel chains and luxury resorts.

Restaurants: Good Times for Fast Food; Not So Good for Sit-Downs

The fast-food restaurant industry improved 1 percent to 78, its highest score ever, while the full-service restaurants dropped 1 percent to 80.

"In an economy where discretionary spending is shrinking, the restaurants need to have a larger lead vis--vis fast food," Fornell says. "A two-point customer satisfaction difference that may well shrink further is not going to be enough."

Pizza Hut's customer satisfaction rose 6 percent to 76, which, along with Papa John's, is the highest in the industry. McDonald's had its biggest gain ever, rising 8 percent to 69. Even though McDonald's remains below Burger King (71), KFC (70) and Taco Bell (70), the world's largest fast-food company doesn't have to compete on customer satisfaction to the same extent as its smaller competitors, Fornell says.

Telecom and Cable: Telephony Dials Up; Satellite Better Than Cable

Traditional local and long distance service is up 4 percent to 73, reaching its highest score since 1999. AT&T, which recently merged with high customer-satisfaction provider BellSouth, improved 7 percent to lead the industry at 75. Cox Communications jumped 6 percent to 74, while Verizon's fixed-line telephone service slipped 3 percent to 70. Comcast improved 3 percent to 69 but remains at the bottom of the industry.

Customer satisfaction with wireless telephone service remains at an all-time high for the second straight year at 68, with Verizon Wireless topping the industry at 72. Two other industry giants are heading in opposite directions. AT&T Mobility (formerly Cingular) registered the biggest gain, improving 4 percent to 71. AT&T was the first wireless company to let customers use phones from any manufacturer, and it is also the only company to offer Apple's iPhone, Fornell says.

Sprint Nextel, still suffering from service problems and customer defections after the acquisition of Nextel, dropped 8 percent to 56.

"Business is unsustainable in a competitive marketplace when customer satisfaction scores are as low as Sprint Nextel's," Fornell says.

Rising scores for smaller cable TV providers offset the deterioration in customer satisfaction by Comcast and Charter Communications. The industry gained 3 percent to 64, led by a 5 percent jump to 69 for the collection of smaller cable TV providers.

Among the large cable companies, Comcast dropped the most, falling 4 percent to 54 and sharing the basement with Charter Communications ( down 2 percent to 54). By contrast, satellite TV continues to do better than cable. DirecTV edged up 2 percent to 68, and while DISH Network slipped 3 percent to 65, it remains well ahead of the large cable TV providers.

Utilities: Uneven Performance

Customer satisfaction with the utilities sector is up 1 percent to 74, its highest level since 2001. Ameren has the largest improvement, up 13 percent to 64, a year after being hammered by customers due to rate hikes and a long outage caused by a winter storm. Still, it has a long way to go to get out of the industry basement, Fornell says.

At the other end of the spectrum, Southern Company (81) continues to hold the top spot. Some utilities are offering environmentally friendly energy options, which may contribute to higher satisfaction. Reliant Energy, which gives customers the option to buy a wind-power plan at the same cost of traditional power, improved 12 percent to 72.

Health Care: Healthy Satisfaction Scores

Patient satisfaction with health care is high, despite rising costs. Although the ACSI score for hospitals fell 3 percent to 75, this is still respectable, Fornell says. Ambulatory care debuts this quarter with an even higher score at 81. Ambulatory care includes office visits with all types of health care professionals---physicians, dentists, optometrists, chiropractors, and physical, occupational and speech therapists.

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, bernied@umich.edu