Plunge in customer satisfaction may spell trouble for economy

Updated 10:00 AM March 07, 2005

Plunge in customer satisfaction may spell trouble for economy

By Bernie DeGroat
News Service

After two years of steady increases, customer satisfaction in the United States has taken a dramatic downturn, the latest American Customer Satisfaction Index (ACSI) shows.

The ACSI for the fourth quarter of 2004 stands at 73.6 out of 100—down from 74.3, the largest decline since 1997. The drop is due mostly to waning satisfaction with retail customer service, high gas prices and a glut of user-traffic on e-commerce Web sites, according to the study.

Claes Fornell, ACSI director and professor at the Stephen M. Ross School of Business, says that declining customer satisfaction may have a significant impact on the future health of the economy.

"Customer dissatisfaction with the quality of goods and services offered in the marketplace is more than a nuisance," he says. "The U.S. economy is heavily dependent on increases in consumer spending."

The ACSI is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the United States. ACSI scores factor data from more than 200 companies in 41 industries and from government agencies.

Fornell says even a slight change in ACSI in one quarter historically has signaled a shift in consumer spending the following quarter.

Customer satisfaction with retail gasoline outlets is at an all-time low of 70—down 7 percent from a year ago. Because gasoline is such a large industry, this is a significant factor in the overall decline in the ACSI, according to Jack West, past president of the American Society for Quality, a co-sponsor of the ACSI.

Retailers also saw a drop in customer service. Sales were sluggish at the beginning of the holiday shopping season, but picked up as a result of heavy discounting by retailers, Fornell says. But when discount stores cut costs, the result was crowding, longer lines and slower service—all leading to a 3 percent drop in customer service from a year ago.

The customer satisfaction score for banks stands at 75, matching its highest level achieved a year ago. Satisfaction with smaller banks has improved slightly, but results among larger banks were mixed.

"Mergers and acquisitions often lead to deteriorating customer satisfaction as companies reduce costs," Fornell says.

Rising costs could explain a drop in satisfaction for the insurance industry, Fornell says. The industry is down 4 percent to 67, an all-time low. Among the big insurers, both Aetna and Blue Cross/Blue Shield have declined by 5 percent and 3 percent, respectively, while smaller carriers were hit hard with a 7 percent decrease.

The ACSI score for e-commerce is down 3 percent to 78.6 and satisfaction with each of the measured categories—online retail, auction, travel and brokerage sites—has declined. Increased traffic to these sites has made it more difficult to service customers well, says Larry Freed, an online satisfaction expert and CEO of ForeSee Results.

Among individual companies, Amazon.com, one of the highest scoring of all companies in the ACSI during the past few years, fell 5 percent to 84 and no longer is the leader among online retailers. The reason for Amazon.com's decline may well be expansion from its core business of selling books, music and videos, Freed says.

"Amazon has moved well beyond books and music and has morphed into an online shopping mall," Freed says. "But bigger isn't always better from a customer's viewpoint."

Another ACSI stalwart, eBay, also is struggling with customer satisfaction, falling 5 percent to 80, Freed says.

"eBay is beginning to lose some of its uniqueness and appeal as it is becoming a marketplace of its own," he says.

Plunge in customer satisfaction may spell trouble for economy

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