Article 4 of 8
Economy
Customer Satisfaction:
Satisfaction With Retail
and Financial Companies Slips
---
Personal-Property
Insurers,
Supermarkets Are Only Two
To Gain From Year
Ago
By Melanie Trottman
02/22/2000
The Wall Street Journal
Page A2
(Copyright (c)
2000, Dow Jones & Company, Inc.)
The continued surge in spending in today's robust economy
doesn't necessarily mean consumers are smiling more at the
cash register.
In fact, a quarterly survey of customer satisfaction,
scheduled for release today, indicates that customers of
retail and financial-services companies grew less satisfied in
the fourth quarter of 1999 compared with a year earlier. The
results also show general long-term declines in customer
satisfaction since the index's start in 1994.
Compiled by the National Quality Research Center at the
University of Michigan Business School in partnership with the
American Society for Quality, the American Customer
Satisfaction Index found that satisfaction
with retail companies in the fourth quarter fell 1.9% to 73.3
out of a possible score of 100. Satisfaction with financial
services also fell, by 0.7% to 73.9.
Only two categories out of seven showed year-over-year
increases, supermarkets and personal-property insurance
companies, both with scores above the national average of
72.8.
"This is sort of a backside of a growing economy," said
Claes Fornell, a professor at the university's research
center. "What the economy has done is increase productivity,
and there has certainly been more attention paid to the bottom
line than customer satisfaction, in general."
Mr. Fornell believes that the quality of economic output is
as important as the productivity of economic resources and
that attempting to improve one without improving the other
could eventually harm economic growth because consumers could
become disenchanted and curb their spending.
But other economists see something else at work. Brian
Wesbury, chief economist at Griffin, Kubik, Stephens & Co.
in Chicago, said declining satisfaction may actually be a
function of rising expectations. "There is no doubt that the
quality of products today is much better than years ago, but
consumer expectations are outstripping the ability of
companies to improve quality." Mr. Wesbury said that is partly
because American consumers are fussier than ever. "Consumers
are trying to force perfection in almost everything. So if I
have to wait on line, I'm unhappy with that. If I don't get a
dial tone on my cell phone, I'm unhappy about that. But cell
phones are a great product."
Still, the news isn't all bad. The broader index, based on
a survey asking customers about their expectations and their
experiences with a number of products, shows overall customer
satisfaction inched up 1% to 72.8 after factoring in the
fourth-quarter update on retail and financial-services
companies. And some companies measured in the quarter did
increase their ratings. However, the declines in most groups
outweighed the gains.
Consider gasoline stations, a group in which each company's
score declined. BP Amoco fell the most, by 8.4% to 76, while
Texaco Inc. declined 7.4% to 75, and Chevron Corp. dropped
6.2% to 76. The culprit: higher gas prices, which rose an
average 32% last year, Mr. Fornell said.
Dan Larson, a BP Amoco spokesman, said he wouldn't have
expected the ratings drop for the company, which he attributed
to higher prices. "We're in an environment of rising crude
prices, and no one likes to pay more money," he said.
Most other energy companies echoed his comment.
The score for life-insurance companies dropped as well,
falling 1.3% to 76. But personal-property insurance companies
rose 2.6% in the index to 79. Customers buying property or
casualty insurance might want to thank Berkshire Hathaway
Inc.'s Geico car-insurance unit for the improvements, said
Weston Hicks, an insurance analyst at J.P. Morgan Securities.
"Consumers' exposure is shifting from the traditional
insurance agency that doesn't answer the phone to Geico, which
is advertising its 24-hour service." That in turn has forced
many of Geico's competitors to implement 24-hour,
seven-days-aweek call centers where customers can make changes
and get information on their policies. Geico's success has
also spurred insurers to consider new ways, such as the
Internet, to reach customers.
Of course, it also helps that car insurers, locked in
frenzied competition for premium dollars, were lowering
car-insurance rates over much of the period covered by the
survey. Customers are basically saying, "We love it when you
lower prices, we hate it when you raise prices," said Mr.
Hicks.
Life insurers said the same focus on when-you-want-it
answers has helped satisfaction stay fairly high. A spokesman
for New York Life Insurance Co., whose approval rating
increased 5.4% to 78, said it has been "placing a great deal
of emphasis on training and development" of agents and
customer-service employees at its four service centers.
Metropolitan Life Insurance Co., which is switching from a
policyholder-owned mutual company to a publicy traded company
in a few weeks, dropped 3.9% to a rating of 73 after having
been on a steady upswing since 1996.
Kevin Foley, a spokesman for the company, noted that the
study was done in the fourth quarter of 1999, at a time when
the company "bombarded our customers with a lot of mailings"
about a class-action settlement and about the company's
pending switch. He expects the satisfaction level to resume
its previous upward trend.
Department and discount stores also moved south in the
ratings, falling 1.4% to 72. Kmart Corp. had the sharpest
drop, 5.6%, and turned in the group's lowest score of 67. The
company was on the brink of bankruptcy in the mid-'90s before
getting a new chief executive, who needed to "basically fix a
broken machine," said Brown Brothers Harriman retail analyst
Daniel Binder. "He did a lot of things right, but it's still
got some further room for improvement," Mr. Binder said.
Kmart declined to comment.
Wal-Mart Stores Inc. and Sears, Roebuck & Co. also
showed statistically significant declines, defined as a drop
of at least three points. Peggy Palter, a Sears spokeswoman,
said the retailer's own internal data showed that customer
service was improving. Most other retailers that saw a decline
said they hadn't seen the survey and thus couldn't comment.
Others said they were disappointed with the rating and were
trying hard to improve customer satisfaction.
When ranked with supermarkets, WalMart's Supercenters,
combination discount and grocery stores, showed a 4%
improvement in the index. The company is simply "doing a
better job on food," said Merrill Lynch senior retailing
analyst Daniel Barry. Mr. Binder said the drop at the discount
stores could have resulted from Wal-Mart changing over some of
the operations to supercenters.
The high scorer in the group was Costco Wholesale Corp., at
79. The company had no year-earlier comparison. Analysts
hailed the wholesaling giant's merchandising strategy of
selectively providing a wide range of high-quality products at
compelling prices. "Costco is certainly the best of breed in
its sector," Mr. Binder said.
The same is said to be true of Publix Super Markets Inc.,
which helped drive the supermarket group's score up 1.4% to
74. The grocery-store chain's 3.8% rise wasn't the biggest in
the group, but its score of 82 was the best, both among
supermarkets and the entire quarterly index.
As is typical, the smaller size of Publix's operation makes
it more adept at handling the day-to-day requirements of doing
business.
By contrast, the score for Winn-Dixie Stores Inc. dropped
4.1% to 71, which made it and Food Lion Inc. the lowest in the
group. "Winn-Dixie is clearly in disarray," said Banc of
America retailing analyst Gary Giblen, adding that numerous
management changes and shifts in merchandising strategy have
hurt the quality of day-to-day store conditions.
A Winn-Dixie spokesman said the company is "disappointed"
with the rating. But the spokesman noted that Winn-Dixie named
a new president and chief executive officer, Alan R. Rowland,
in November, and "one of his primary objectives is for our
stores to offer fresh quality merchandise in pleasant
supermarkets and to meet our customers' expectations."
Supermarkets fared better than some other retailers because
they aren't as susceptible to the tight labor market, Mr.
Fornell said. They generally pay more than fast-food chains or
general retail markets, analysts said.
Fast-food restaurants, though, have been squeezed by the
tight labor market. "The turnover in this industry is just
phenomenal," Mr. Fornell said. Even so, the group has remained
virtually stable over the years although its scores are below
average. McDonald's Corp., the low scorer at 61, didn't budge
from a year earlier while Wendy's International Inc., Pizza
Hut, and Domino's Pizza Inc. all fell.
"McDonald's is trying to be more responsive to customers,"
said Donaldson Lufkin Jenrette analyst Janice Meyer, who said
the company is trying to slow unit growth and offer
made-to-order burgers instead of those pulled from under a
heat lamp.
Pizza Hut employees may have had less time to spend on
customer service as sales rose in 1999 on the strength of the
new New York-style pizza product, Ms. Meyer said. On the flip
side, Burger King, which rose 3.1% in the index to 66, may
have had more time to focus on consumer satisfaction because
of its lower sales, Ms. Meyer said. To tackle the problem,
many fast-food companies have raised wages and raised training
time to attract workers, she said.
Burger King's increase surprised Bear Stearns analyst
Joseph Buckley. "They had disappointing sales and spent most
of 1999 trying to get off of the 99-cent Whopper pricing," Mr.
Buckley said.
Tricon Global Restaurants Inc., owner of Pizza Hut and KFC,
is changing its mix of restaurants, which could be causing
service disruptions at stores, Mr. Buckley said. A Tricon
spokeswoman said Pizza Hut had ". . . made a significant
improvement in delivery speed" since the fourth quarter.
Banks had the worst showing of all financial-services
sectors, dropping 2.9% to 68 from 70.
The decline is rooted in the strain of consolidation and
push toward electronic banking, an option that older
customers, in particular, have been hesitant to embrace, said
Brown Brothers Harriman analyst Katrina Blecher. Mergers have
resulted in customer inconveniences brought on by branch
closings and technical glitches. Rising ATM fees have also
left customers grumbling.
Bank One Corp. spokesman Thomas Kelly said the bank's
two-point decline to 66 may have been caused by merger-related
stresses tied to the 1998 combination of Banc One Corp. and
First Chicago NBD Corp. The companies, which formed
Chicago-based Bank One Corp., are addressing the issues.
The only bank that didn't fall was First Union Corp., which
was unchanged.
---
Deborah Lohse and J.C. Conklin contributed to this article.
--- 4Q '99 % Change
Group/Company Score 4Q '98
Financial Services 73.9 -0.7
Banks 68 -2.9
All Others 70 -4.1
First Union 68 0.0
Bank One 66 -2.9
Wells Fargo 65 -3.0
BankAmerica 61 -1.6
Gasoline Stations 76 -3.8
Exxon Mobil 77 -3.8
All Others 76 -1.3
BP Amoco 76 -8.4
Chevron 76 -6.2
Shell Oil 75 -3.8
Texaco 75 -7.4
Life Insurance 76 -1.3
Northw. Mutual Life Ins. 79 0.0
All Others 78 0.0
New York Life Insurance 78 +5.4
Metropolitan Life Ins. 73 -3.9
Prudential Insurance 69 -2.8
Personal-Prop. Ins. 79 +2.6
All Others 80 +2.6
State Farm Insurance 78 0.0
Farmers Group 75 +4.2
Allstate Insurance Group 73 0.0
Restaurant/Fast Food 69 0.0
Papa John's 76 0.0
All Others 74 0.0
Wendy's International 71 -2.7
Pizza Hut 68 -4.2
Domino's Pizza 67 -4.3
Burger King 66 +3.1
KFC 64 0.0
Taco Bell 64 0.0
McDonald's 61 0.0
Retail 73.3 -1.9
Dept., Discount Stores 72 -1.4
Costco 79 --
Nordstrom 76 -3.8
J.C. Penney 75 0.0
Dayton-Hudson Disc. 74 0.0
May Co. 74 +2.8
All Others 73 +2.8
Dayton-Hudson Dept. 72 -2.7
Wal-Mart Stores 72 -4.0
Sears Roebuck 71 -4.1
AAFES 70 +2.9
Dillard's 68 -4.2
Federated Dept. Stores 68 +1.5
Kmart 67 -5.6
Supermarkets 74 +1.4
Publix Super Markets 82 +3.8
Wal-Mart Stores 78 +4.0
Supervalu 75 -2.6
Kroger 74 +1.4
Albertson's 73 +4.3
Safeway 72 +1.4
All Others 71 -1.4
Food Lion 71 -2.7
Winn-Dixie Stores 71 -4.1
Source: The American Customer Satisfaction Index is produced through
a partnership of the University of Michigan Business School and the
American Society for Quality
To create the American Customer Satisfaction Index , the National
Quality Research Center conducts telephone surveys with 12,500 current
customers of the companies being surveyed that quarter. Each year, that
amounts to about 50,000 customers of products from 175 companies and 30
government agencies. Sales of the measured companies constitute 30% to
40% of the U.S. gross domestic product. Companies are scored on a
scale of 0 to 100. Industry indexes are constructed with company
indexes, weighted by the sales of each company. The national index is
made up of the industry indexes, weighted by their contribution to
GDP. Different sectors are updated each quarter, so the entire index
is updated by sections once each year. Customers are quizzed about
their expectations and their perceptions of value and quality in the
services they have purchased; for manufactured goods, quality is
broken down into measures of the product and the service accompanying
the product. These are translated through computer models into overall
customer-satisfaction scores, which are used to predict customer
complaints and customer loyalty. | 
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