So it comes as little surprise to Claes Fornell that wireless providers are one of the few categories that have taken a hit in his latest American Customer Satisfaction Index. Fornell, director of the National Quality Research Center at the University of Michigan, found in his latest quarterly survey that, overall, consumers are happier than they have been in years with their purchasing experiences. Old-school phone companies, for example, have been doing a better job of keeping their customers satisfied. So have hospitals and parcel delivery companies like FedEx.
But there are some notable exceptions. Aside from the wireless companies, consumers are also becoming less happy with large airlines as discount carriers have increased their competitiveness. The offshoot? With an overall increase in customer satisfaction, Fornell says, consumer demand is likely to climb, stimulating household spending and improving the overall economy. Fornell recently spoke with NEWSWEEK’s Brian Braiker about the findings in the ACSI report. Excerpts:
NEWSWEEK: According to your report, overall consumer satisfaction is higher than it has been in quite a while.
Claes Fornell: Yeah, it’s higher than it has been in the past 10 years or so, which is surprising to many people.
Why do you think that is?
I think it’s pretty clear what’s going on. We have an environment where sales are harder to come by and, in general–not in every case, but in general–many firms are forced to try harder. That is what’s fueling this. Up until now, at least, we haven’t had marginal price increases on most things. [But] here and there we are beginning to see some inflation. And there’ve been some price increases in some industries [like the cable companies].
We hear a lot in the news about customers being upset about the cell-phone industry. What’s going on there?
The focus has been–and most of the money by far has been spent–on technology. And the consumer hasn’t really been thought about to the same extent. I think you can support that with the findings that we have. They have had pretty severe difficulty in customer service and customer satisfaction across the board.
And meanwhile, the phone companies seem to be doing a better job of keeping their customers satisfied. Is that because they’re worried about losing them to cell phones?
I think that’s right. It’ll be interesting to see with this fight [over] what the Baby Bells can do to reverse what’s going on in terms of providing access at low cost.
Your report also had some interesting findings on the airline industry.
The airline industry is one that is facing continual difficulties. If we go back to when we started measuring this [in 1994], they actually did a bit better. But then what happened was that most of the airlines pretty much organized themselves into local near-monopolies. When that happened, it was fairly predictable what was going to happen: It is the consumer who has less choice. The airlines are then less concerned about the satisfaction of the buyers. Now I think that trend continues except for one thing–and that’s the low-cost carriers having some significant success. That means the traditional airlines are faced with not only increased competition, but also right now there’s certainly higher fuel costs and a public that has more information in terms of prices. The way [the airlines] responded to rising costs was trying to get rid of as many people as possible on the labor side, [but] then it’s very difficult to have good customer service.
Some airlines are no longer including meals in the price of the ticket; they are charging for the in-flight meal.
That’s a fairly recent thing. Actually, it would be interesting to see how that plays out, because the meals have obviously been free of charge in the past. But on flights that are not superlong–say, two hours–they’ve canceled the meals. Now, is it better to have meals, but have people pay for them? Well, maybe it could be better if the meals were better. I remember flying to Washington from Detroit early in the morning and even the business class didn’t get breakfast.
You say in your report that the fact that consumers are more satisfied with their buying experiences may ultimately bolster the economy. How do you figure that?
I think it’s true on some level [for] all companies and certainly smaller companies, that in order to stay in business you have to please the customer–assuming of course you have some competition. Everybody understands this. I think it’s very easy to go from that statement to say that jobs and job security and job growth depend on the same thing. Your job security is no better than the satisfaction of your customers in the end. You aggregate that and certainly that is a component of economic growth. Statistically, what we have found is that there is a strong relationship between changes in the ACSI from quarter to quarter in the subsequent quarter’s growth in consumer spending. If consumer spending is two thirds of [the gross domestic product], it then follows that it also impacts economic growth as measured by GDP. So that is how this process works.
You measure this every quarter. What are you expecting for the next quarter?
In terms of satisfaction, that is very hard to predict. What is less difficult for me to predict is looking at the numbers I have now on satisfaction and then say something about what would happen to the economy. The answer is for now, short term for this quarter, we would expect that consumer spending will actually continue to grow at a pretty healthy rate, somewhat above the average over the past 20 years or so. Obviously the economy benefits from that.
What level of growth are you talking about?
Well, we would predict that consumer spending would increase somewhere between 3.9 to 4.2 percent, which is pretty good.
Can you speculate on whether this has anything to do with the tax cuts?
Not that we can see. Our analysis and our colleagues’ analyses at the University of Michigan trying to relate tax cuts to consumer spending have not found any significant relationship.
