Customer satisfaction: early indicator of economic improvement?

Author Tim Baker Published 3 August 2009

On 19 May this year the University of Michigan revealed that the American Customer Satisfaction Index (ACSI) was on the rise, having registered its second straight quarterly improvement to March 2009. Could this be an early indicator that the US economy is on the rebound?

When the ACSI posted its first improvement in the last quarter of 2008, it was a lonely positive indicator among the mostly negative reports in the middle of the Global Financial Crisis. The ACSI's second quarterly improvement was joined by several other indicators, including rising stock market and real estate values, consumer confidence and corporate earnings. It is probably still too early to predict whether this recession has bottomed out, but as ACSI founder Claes Fornell writes, 'since ACSI is usually a precursor to increasing consumer demand, it could very well be signaling a revival for a very depressed US economy.'

So, how is customer satisfaction indexed and how has it changed over the period 2006–2009?
The University of Michigan's ACSI provides a performance metric of how industries and businesses are performing today and how they might influence consumer purchasing behaviour and brand loyalty tomorrow. It is a cause and effect model that links the key drivers of satisfaction (such as customer expectations, perceived quality and perceived value) to satisfaction (the ACSI score). Satisfaction, in turn, is a predictor of crucial business outcomes such as customer complaints and customer loyalty.

The index works by using a 0-100 scale to score national industries and businesses, producing indexes for 10 economic sectors, 43 industries (including e-commerce and e-business), more than 200 companies as well as federal and local government agencies. Industries and businesses that score 80 points or above on the index are considered high performing; anything below is considered to be performing poorly.

Listed below are two tables. Table 1 tracks the high performers over the period 2006–2009; Table 2 tracks the poor performers.

Table 1: High Performing Industries

Leading Industries 80% +	2006	2007	2008	2009	Leading Businesses	Score
Internet Retail	83	83	82		Amazon.com	88
Property & Casualty Insurance	78	80	81
Internet Portals and Search Engines	77	75	80		Google	86
Express Delivery	83	81	82	82	Fedex	84
Full Service Restaurants	NM	81	80	84
Automobiles and Light Vehicles	81	82	82		Toyota & BMW	87
Apparel	80	82	80
Major Appliances	81	82	80
Breweries	82	83	83
Food Manufacturing	83	81	83		Heinz	90
Soft Drinks	84	84	83		Dr Pepper	87

Source: www.theasci.org (accessed 23 July 2009)

Table 1 reveals that high performing industries and leading businesses alike maintained their performance at the standard they had achieved before the Global Financial Crisis hit. The margin that leading businesses have over their competitors, however, is minimal.

But in Table 2 below, representing the poor performing industries, we can see a decline in customer satisfaction in 2007, which has only just been recovered. What is significant is that the leading businesses in each industry have a much greater edge in customer satisfaction over their competitors.

Table 2: Poor Performing Industries

Industries achieving less than 80%	2006	2007	2008	2009	Leading Businesses	Score
Personal Computers	77	75	74		Apple Inc	85
Airlines	65	63	62	64	Southwest	81
Health Insurance	72	71	73		All Others	75
Specialty Retail Stores	75	75	76		Barnes & Noble Costco	83
Supermarkets	75	76	76		Publix	83
Computer Software	74	71	74	75	All Others	76
Athletic Shoes	76	76	79	79	All Others	83

Source: www.theasci.org (accessed 23 July 2009)

Customer satisfaction is an important indicator of economic performance – for individual organisations and also for the macro economy. Since the University of Michigan began compiling the quarterly national ACSI in 1996 it has proven to be predictive of both consumer spending and stock market growth, among others. Is the same measure applicable to industries in your country?

For more information on the University of Michigan's American Customer Satisfaction Index, visit www.theacsi.org