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Claes Fornell
  Claes Fornell
 

Customer Satisfaction Down Slightly in Latest ACSI

11/17/2009 --

Consumers find comfort in sweets, smokers fume over cigarette prices.

ANN ARBOR, Mich. — After surging through the second quarter, aggregate customer satisfaction as measured by Professor Claes Fornell's American Customer Satisfaction Index has stalled.

The ACSI, down 0.1 percent for the third quarter, now stands at 76 on a 100-point scale — still 1.3 percent higher than it was a year ago. Despite the slight drop in ACSI, many companies are improving their customer relationships: gainers led decliners 45 percent to 39 percent, with 16 percent unchanged.

Due to the relatively sharp increase in customer satisfaction through the second quarter, the ACSI predictive model pointed to a consumer spending increase of 3.25 percent, much higher than most other predictions, but not quite high enough — actual third quarter consumer spending turned out to be 3.35 percent.

"For the short term, it seems unlikely that households will continue spending at that level, not only because customer satisfaction is no longer rising, but also because unemployment is getting worse and so is consumer confidence," says ACSI founder Fornell, the Donald C. Cook Professor of Business Administration at Ross. "Some of the spending increase also was due to government programs, such as Cash for Clunkers, which have since expired. Unless something unforeseen happens, it is more likely that consumer spending for the fourth quarter will be below 3 percent and perhaps as low as 2 percent, even though retail sales may well be somewhat higher than last year."

For the third quarter, the ACSI reported results for the nondurable goods sector, including apparel, athletic shoes, beer, cigarettes, food manufacturing, pet food, soft drinks, and personal care and cleaning products.

Food Companies: Comfort in Chocolate but not Frozen Dinners
Customer satisfaction with food companies was unchanged at 83. Top-performer Heinz (unchanged at 89) leads the industry for a 10th straight year, with cereal maker Quaker Oats (unchanged at 87) and chocolate makers Hershey (+2 percent to 87) and Mars (+1 percent to 87) close behind. Buyer satisfaction with Heinz ketchup (and the many other food products the company manufactures) ties luxury automakers Lexus and Cadillac for the highest score across all categories covered by ACSI.

Confectionary maker Nestl&aecute; also improved (+2 percent to 85), boosting satisfaction with manufacturers of sweets overall to an all-time high of 86.

"The same thing happened in 2001 in the midst of the previous recession and also in 2004 when concern over the Iraq War and rising fuel prices appeared to be reflected in higher satisfaction with comfort foods," Fornell says.

At the other end of the spectrum, ConAgra fell 7 percent to the bottom of the industry, matching the biggest drop ever for any company in the food category and reaching an all-time low of 78. ConAgra raised prices on its popular Banquet line of frozen dinners and cut costs in other areas that have had a negative impact on satisfaction, Fornell says.

Cigarettes: New Federal Taxes Make It Costly to Smoke
A new tax increase on cigarettes, from 39 cents a pack to $1.01, has led to a sharp downturn in customer satisfaction, falling 7.7 percent to 72, an all-time low. No company is immune from the effects of the new tax. Philip Morris dropped 9 percent and Reynolds American 8 percent, both to 72.

"In the past, a 10 percent price increase in tobacco products contributed to about a 4 percent decline in consumption," Fornell says. "The ACSI model suggests the most recent tax hike will have a similar effect."

Customer satisfaction with tobacco products, largely made up of cigarettes, has never quite matched other nondurable products in customer satisfaction. Price has been an issue for a long time, and it also seems there might be less differentiation than the advertising budgets imply, Fornell says.

Beer: A Comfort Drink?
Beer drinker satisfaction is at an all-time high, rising 1.2 percent to 84, perhaps following the same pattern as chocolate and sweets. Anheuser-Busch leads the way (+4 percent to 85), driven by increased sales of popular low-priced beers, like Natural Light and Busch, and of newer products, such as Bud Light Lime and Golden Wheat. Parent company InBev has made a number of changes in business strategy over the past year that appear to be paying off.

Results for Miller (+1 percent to 83) and Coors (-2 percent to 81) brands are mixed. Coors in particular is composed of more higher-priced brands compared with Anheuser-Busch and may be feeling the effects of consumers seeking better value for money.

Personal Care/Cleaning Products: Clorox Cleans Up; Colgate Loses Its Sparkle
There is no change in the industry score for personal care and cleaning products, which remains at a record high of 85 for a third straight year. Clorox improved 1 percent to 88, tying its all-time high score and marking the 13th straight year it has been at least tied for the top spot. A total of 88 percent of Clorox products are either the No. 1 or No. 2 sellers in their categories. Clorox is followed closely by Unilever (unchanged at 87) with Procter & Gamble and Dial next at 85 (unchanged) and 84 (-1 percent), respectively. Colgate-Palmolive dropped sharply after a big improvement in 2008, falling this year 5 percent to 83. Colgate appears to have a pattern of rolling out many new products with competitive pricing in one year, only to scale back and increase price the next, Fornell says.

Apparel: Levi Strauss from Worst to First
Apparel made the largest leap in customer satisfaction of all the nondurables industries, rising 2.5 percent to 82. Levi Strauss led the way, up 6 percent to tie Jones Apparel atop the industry lead at 83. The improvement for Levi Strauss moves the jeans maker all the way from the bottom to the top of the industry in just one year. Liz Claiborne also is making more customers happy, gaining 4 percent to 82, tying Hanesbrands (+3 percent) with VF following close behind, down 2 percent to 81.

According to Fornell, Liz Claiborne seems to be getting a much-needed boost from famed fashion designer Isaac Mizrahi, whose first line for the clothing maker appeared in the spring, and from lower-priced offerings in its trendy Kate Spade and Juicy Couture lines. As for Levi Strauss, "perhaps it also benefits from a comfort factor similar to that produced by the chocolate makers," Fornell says. "After all, Levi Strauss has been around for a long time and may well represent something familiar, trusted, and American."

For a complete list of measured companies and scores, visit www.theacsi.org.

About the ACSI
Developed at Michigan's Ross School of Business, 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 44 industries and from government agencies over the previous four quarters.



For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847, bernied@umich.edu