Miserable Economy Makes For Happier Customers

happy customerThe Dow may be way down, but the word from the University of Michigan's American Customer Satisfaction Index is that customer contentment is up--especially in retail.

After falling for nearly 18 months, the ACSI inched up about 1% in the fourth quarter of last year, to 75.7. (The highest score this quarter was an 88--earned by online retailer Newegg, and the lowest in the 60s, including Citigroup, E*Trade, and Aetna.)

The jump was highest in the retail sector, which gained 1.3%, fueled by consumers' heartfelt appreciation of falling fuel prices and lower prices. Service stations--not surprisingly--saw a 5.4% jump in satisfaction, while both department and discount stores gained 1.4%.

But it's not all about the warm glow that comes from getting a better deal. "Despite heavy discounting during the holiday season, the bulk of the improvement in ACSI was actually due to better customer service," writes Claes Fornell, a professor in UM's Stephen M. Ross School of Business.



"It is likely that sales staff tried harder to please customers because of the economic situation and fear of unemployment. It is also possible that store traffic decreased to the point that there were more personnel per customer than usual. Both effects are rarely sustainable and will be even more difficult to build on as many retailers have since eliminated more jobs."

Happier customers also appear to pay off financially, and the index finds a correlation between satisfaction and a company's stock price: "On average, retailers that gained in ACSI lost about 30% of their market value in 2008, while those with declining ACSI scores lost nearly twice as much (57%) over the same period. By comparison, the S&P 500 dropped by 38%."

And despite soaring food prices, satisfaction levels with supermarkets are relatively stable. Although food prices rose 6.6% for the year, the report finds "a small drop of 1.3% in value for money, offset by a 2.6% increase in quality." Publix, which has led the index in satisfaction in its sector every year, continues to outshine competitors with a score of 82. (But Kroger, Whole Foods, and Winn Dixie all gained 3% to 77, 75 and 73 respectively.)

Among department stores, only Nordstrom and Kohl's topped the 80 mark, while Costco and Barnes & Noble were the only specialty retailers to do so. In the online sector, in addition to Newegg, high scorers are Amazon and Netflix, while eBay fell 4% to 78, a record low for the company.

It's possible the inching up of satisfaction could signal good things about the economy, but it's murky, the report says. "For consumer spending to rebound, two conditions must be met: consumers must be favorably disposed to spend and have the means to spend," he writes. "The good news from ACSI is that the first condition has been met: customer satisfaction is looking up. But it remains to be seen to what extent the government stimulus plan will help translate stronger satisfaction into increased consumer demand."

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