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Claes Fornell
  Claes Fornell

ACSI: Consumer Spending May Rise Next Quarter

8/15/2006 --

Customer satisfaction with PCs and U.S. autos improves.

ANN ARBOR, Mich.—The American Customer Satisfaction Index has risen for a fifth consecutive quarter to its highest level since 2004. The ACSI stands at 74.4 (on a 100-point scale) for the second quarter—up nearly 2 percent since the first quarter of last year.

Over its 11-year history, the ACSI has demonstrated that it predicts a number of essential indicators of micro and macroeconomic performance, according to ACSI director Claes Fornell, professor at the University of Michigan's Ross School of Business.

At the macro level, customer satisfaction has been shown to be a leading indicator of both consumer spending and GDP growth. If the historical pattern holds true, the second-quarter report indicates spending growth should increase in the third quarter, contrary to what many observers of the economy expect, Fornell said.

"In the last couple of years, discretionary spending money has become harder for consumers to find due to higher interest rates, rising energy costs and growing household debt," he said. "But a rise in overall customer satisfaction could offset the forces pointing to a slowdown in consumer spending."

At the microeconomic level, research shows that firms with higher ACSI scores tend to have higher earnings and stock returns relative to competitors. Stock portfolios based on companies that show strong performance in customer satisfaction deliver excess returns in up-markets as well as in down-markets.

The ACSI measures a different set of industries each quarter. The individual companies covered in the current report include durable goods (automobiles, personal computers, appliances) and e-business (portals, search engines and news and information sites).

Automobiles: Detroit Makes Slight Gains Against Foreign Competition

Customer satisfaction with automobiles reached an all-time high this quarter, up 1.3 percent to a score of 81. American automakers have shown overall improvement and have narrowed the gap with foreign competitors, but most of Detroit's nameplates are still among the lower-scoring cars, Fornell said.

"Last year's customer satisfaction increase for American manufacturers came largely because of price rebates, but this yearís jump is associated with improvements in product and service quality," he said. "It's a better, more sustainable, long-term business strategy."

Toyota held steady as the industry leader at its all-time high of 87. Honda, Buick and Lexus all scored 86, followed by BMW at 85. Ford shared the last spot with Kia Motors and DaimlerChryslerís Jeep, all at 77. Among Asian automakers, only Mazda (79) and Kia are below the industry average. German carmaker Volkswagen scored 78, while Nissan rebounded 5.1 percent to 82.

Personal Computers: Whole Industry Improves

Overall customer satisfaction with the PC industry is up 4 percent to 77, its highest score since 1994. Perennial industry leader Apple Computer's customer satisfaction jumped 2.5 percent to a new high of 83, bringing it into the top 15 percent of all companies measured in the ACSI.

But the focus this year may be on Dell, with stock prices at a five-year low and a recently issued profit warning. This quarter, Dellís score improved 5.4 percent to 78.

"It can be difficult to combine a cost-efficiency strategy with superior customer service, but Dell's early results are headed in the right direction," Fornell said. "Short-term profits are almost always adversely affected when a company invests heavily in improved customer service. For Dell, the key will be sales growth, but not necessarily short-term profit growth."

Portals and Search Engines: Google Stays on Top, Yahoo Stumbles

Google retained the top spot in the category, a perch it has held since it was first measured in 2002. Its score dropped 1 percent to 81, but the company continues to satisfy customers, even as it broadens its business beyond its core competency of search.

Last year, Yahoo hit an all-time high, but this year it fell 5 percent to 76 in its worst performance in five years. This year's ACSI drop portends further trouble, Fornell said.

AOL (up 4.2 percent) and MSN (down 1.3 percent) both scored 74, though the two companies arrived from very different scores when the e-business industry was first measured six years ago. AOL scored a 56 in 2000, 20 percent below MSN's 71 that same year. Since then, AOL has gained a remarkable 32 percent, while MSN's improvements have been more modest (4 percent).

Online News and Information: Tightly Grouped, But Much Stronger Than Newspapers

Only two points separate the top and bottom companies in the news and information category, which scored 73 in aggregate. Little differentiation between competitors has kept it a tight race since the ACSI started measuring the category. However, online news and information sites considerably outperformed print newspapers, which scored 63 when measured in the first quarter of 2006.

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 40 industries and from government agencies over the previous four quarters.

The index is produced by the U-M's Stephen M. 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.

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