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Claes Fornell
  Claes Fornell
 

Customer Satisfaction and Consumer Spending Stay Steady

11/14/2006 --

Kellogg, Pepsi, Reebok, Sara Lee climb; Heinz and Nike drop.

ANN ARBOR, Mich.—Customer satisfaction is flat, according to the third-quarter report of the Ross School's American Customer Satisfaction Index.

The ACSI aggregate score remains near its all-time high at 74.4 for a second consecutive quarter. Manufacturing/nondurable goods improved 0.6 percent from the third quarter 2005 to 82.3 on the ACSI 100-point scale—its best score ever and the highest of any sector in the ACSI.

Customer satisfaction as measured by the ACSI consistently has predicted future consumer spending, and the third-quarter results portend little change in spending growth, says Claes Fornell, professor of marketing at the Ross School of Business and head of the ACSI.

The ACSI forecasted a spending increase of 3 percent for the third quarter, in line with the Commerce Department's preliminary estimate for actual spending growth, which was 3.1 percent. But other factors continue to put pressure on consumers' ability to spend, Fornell says.

"Higher levels of buyer satisfaction suggest higher spending, but consumers' inclination to spend is always tempered by the availability of cash and credit," he said. "Even though the housing bubble is deflating, oil prices are going down and the stock market has been performing well. I donít expect spending to look too much different for the remainder of the year."

The ACSI measures consumer nondurables every third quarter, and as a sector it consistently achieves high customer satisfaction. Consumer nondurables require very little service either before or after purchase. There are usually multiple alternatives to any given product, switching costs are low and prices have remained pretty stable.

"When it comes to consumer nondurables, thereís a flavor for everyone," Fornell said. "Satisfaction tends to be very high because nobody sticks with a product they don't like and there's very little cost associated with switching to another brand. Changing your toothpaste is a lot easier than changing what car you drive."

The third-quarter report shows improvements in food processing (+1.2 percent, 83), pet food (+1.2 percent, 83), soft drinks (+1.2 percent, 84) and personal care and cleaning products (+1.2 percent, 84), which offset declines in cigarettes (-1.3 percent, 78) and apparel (-1.2 percent, 80). Breweries, including Anheuser-Busch, Miller and Molson Coors, remain unchanged at 82.

Food: Heinz Takes a Dip, But Still Leads Industry
Heinz, the "king of ketchup," still tops the food manufacturing industry, but its score dropped 4.4 percent to 87. The industry—which covers a range of products, including meats, cheeses, fruits, vegetables, dried and canned foods, and candy—has become a tight race at the top. Kellogg and Sara Lee both jumped 5 percent to 85, but each company took a different road to improvement. Sara Lee shed less successful product lines and is focusing more on its core business. Kellogg, on the other hand, added a new line of healthier alternatives accompanied by a health-awareness marketing campaign.

Soft Drinks: Pepsi Has Pop, Coke Goes Flat
Americans love their soft drinks, though some more than others. A product exists for virtually every palette, helping the product category score 84, one of the highest-scoring industries in the ACSI. Pepsi jumped 5 percent to 86, sharing the top spot with Cadbury Schweppes (+4 percent), the maker of 7Up, Dr. Pepper, A&W Root Beer and dozens of other well-known brands. The No. 1 one soft-drink maker, Coca-Cola, dropped 2 percent to a five-year low of 82. The gap between cola giants has never been greater.

Athletic Shoes: Reebok Running Away from Nike
The athletic shoes industry fell 1 percent to 76, dragged down mostly by the performance of Nike. Reebok and Nike were tied in last year's measurement, but they have moved in opposite directions by equal amounts this year. Reebok climbed 4 percent to 78, while Nike slipped to 72. The six-point advantage Reebok enjoys over its nearest competitor is unusually large in any industry, surpassed only by Google in search engines, eBay in Internet auctions and Wachovia in banks.

Reebok's acquisition by Adidas may have contributed to Reebok's increase in satisfaction. The combined brands led to a near doubling of U.S. sales, rivaling Nike in market share. Price increases eroded satisfaction across the industry last year, but this year Reebok has a large advantage in value for the money as perceived by its customers.

As in many other industries, the "all others" category (such as New Balance, Sketchers, and Puma) do well on customer satisfaction by focusing on specific buyer segments and differentiating their brand and product from the larger competitors.

Apparel: VF Wears the Pants; Sara Lee, Liz Claiborne Move Up
The apparel industry dropped 1 percent to 80, but VF remained unchanged at the top with a score of 82. Sara Lee improved 3.8 percent to 82, joining VF at the top of the industry rankings for the first time since 1999. Liz Claiborne also jumped 3.8 percent and stands at 81, benefiting from its move to shed less-satisfying product lines and add new ones acquired from other companies. Jones Apparel recently put its whole company on the auction block, but found no takers. Jones suffered the biggest drop in satisfaction, down 3.7 percent to 79. Levi Strauss scored 79 for a second year, joining Jones Apparel at the bottom of the industry.

For a complete list of scores from the third quarter or to sign up for the ACSI Quarterly Newsletter, please visit www.theacsi.org. The ACSI Web site, relaunched in November, includes historical ACSI data and archived commentary and analysis.

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 ACSI 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
Phone: (734) 936-1015 or 647-1847
E-mail: bernied@umich.edu