Article 2 of 8
Economy
Postal Service Is Satisfying Its
Customers
---
University of Michigan Poll
Finds It
Was Good Year
For Package Delivery
By Nicholas
Kulish
05/15/2000
The Wall Street Journal
Page A2
(Copyright (c) 2000, Dow Jones & Company,
Inc.)
NEW YORK -- After years as a target of criticism and the
butt of jokes, the United States Postal Service and its
carriers can stand proud for a change. By one important
measure, the postal service has learned how better to satisfy
its customers.
According to the American Customer
Satisfaction Index , the USPS has seen its
score improve 18% since the survey began more than five years
ago, a greater increase than any company included in the
first-quarter results for 2000. The USPS rose 1.4% to a score
of 72, compared with the previous year. "If you look at what
they've been doing over the past couple years, they've really
moved up in the quality of their services," says Peter
Coleman, senior analyst for Bank of America Securities.
Actually, it was a good year for parcel delivery all
around. The American Customer Satisfaction
Index for the entire industry improved , led by
United Parcel Service Inc., which saw its score climb 2.5% to
81. FedEx Corp. remained steady, but at a survey-topping score
of 83. The high scores for the industry are no surprise.
"That's what the industry is built on . . . on-time, reliable
service," says Mr. Coleman.
The package-delivery industry is just one of several
industries that is the focus of the latest
customer-satisfaction survey conducted by the University of
Michigan Business School in partnership with the CFI Group and
the American Society for Quality. The overall index, which is
scheduled for release today, fell 0.41% to 72.5 from 72.8 in
the previous quarter. Although the index remains below its
opening level of 74.2 in the fourth quarter of 1994, it has
showed steady improvement in recent years. And that trend, say
researchers at the University of Michigan, suggests that
corporate America seems to be doing a slightly better job of
satisfying the very high demands of the finicky American
consumer.
"In general I think the trend line is pointing up," says
Claes Fornell, the University of Michigan professor who heads
the ACSI project. He says the small decline in the index
during the first quarter of 2000 is a reflection less of
consumer dissatisfaction with product quality than of a
growing unease about rising inflation that is boosting prices
on a wide range of consumer products and services. "We're
probably at a point where companies feel reasonably
comfortable charging higher prices," which can affect the
index. Although consumers rarely notice falling prices, they
are quick to complain when prices begin to creep up, as they
have been in recent months.
Keeping the quality of customer service high has always
been a challenge for companies, but the strong economy and
tight labor market are making it tougher than ever. "The
reality is that the economy is red-hot. It's very hard to hire
people," says Ethan Harris, a senior economist at Lehman
Brothers. As a result, some companies are forced to hire
people who have "little job experience, who have been a long
time unemployed," and may not do a particularly good job of
pleasing customers.
Professor Fornell's researchers annually survey customers
of 185 companies and 30 government agencies, updating selected
industries each quarter. For the first quarter that group
included services and transportation companies.
In addition to assessing the quality of individual
companies' services, the index is meant to predict future
economic health on the assumption that satisfied consumers
spend more money than those who are dissatisfied. The upward
trend in satisfactory buyer-seller transactions would point to
continued robust growth for the economy, while a decline
suggests that consumer spending will be curtailed.
Not everyone agrees on the survey's usefulness as a
broad-based economic indicator. Calvin Schnure, senior
economist for Chase Securities, says the survey may be trying
to do too many things. "It seems to be a hybrid between a
national survey and a firm-level market analysis," he says.
"It may not have as much value for interpreting what's going
on in the overall economy."
Prof. Fornell, not surprisingly, disagrees. He says there
is a direct relationship between how customers feel about
companies and those companies' future prospects. He notes that
"parcel delivery really stands out" as an industry that
provides reasonably good service and is prospering as a
result. Due to the growth of e-commerce, those companies, he
says, "are right in the middle of the New Economy and in a
very interesting position to capitalize on it."
But whether the index is a broad economic indicator or just
a popularity contest among the nation's best-known companies,
the results aren't all that hard to explain. Take the
telecommunications industry, which saw a 1.4% decline, to an
overall score of 72. The industry has been plagued with
complaints about poor service and confusing price structures,
especially in the wireless sector. Not surprisingly, several
companies saw sharp drops in their ACSI scores, including
major players in long-distance services like AT&T Corp.,
WorldCom Inc. and Sprint Corp., not to mention local carrier U
S West Inc.
"The industry is going through tremendous change," says
Mark Siegel, a spokesperson for AT&T. "People have more
choices than ever. Familiar technologies are converging with
unfamiliar technologies." Mr. Siegel says that regardless of
survey results, AT&T remains committed to its customers.
"We continue to focus on it to ensure that customers have a
quality experience every time they use AT&T," he says.
A representative for Sprint, Eileen Gaffen, says, "We see
this as an industry trend. We're thinking that maybe that
could be attributed to increased competition and the fact that
customer expectations are higher than ever before." Ms. Gaffen
notes that Sprint's internal data do not reflect the ACSI's
results, but instead show a decline in the number of
customerservice calls over the past year.
Denver-based U S West saw some room for improvement in its
services following their decline. Bill Myers, a spokesman for
the company, says that it "recognized at the beginning of last
year that there were some challenges we faced in service in
some of our key areas." As a result, the company is increasing
overall capital expenditures by more than $1 billion and
hiring 2,000 new network employees and customer-service
representatives. Mr. Myers suggests that service already has
begun to improve, but says, "Perceptions lag reality."
In a survey where perceptions are a driving force, it's not
surprising that the airline industry, popularly associated
with horror stories about lost luggage and lengthy delays,
wouldn't fare well. The airline industry scored a 63 for the
second year in a row, the lowest mark for any industry
included in the first-quarter results.
"While the overall industry trend over the past five years
has been discouraging, there's hope on the horizon," says
PaineWebber analyst Samuel Buttrick, noting recent drives
toward roomier seating in coach, customer-friendly Web sites
and technology in airports that improve customer flow. Still,
he concludes, "It doesn't change the fact that fares are
higher and planes are more crowded."
The only bright spot among the airlines was Northwest
Airlines, which saw a nine-point increase, keeping the overall
industry score from sinking any lower. Northwest scored a
dismal 53 in the first quarter of 1999, reflecting a difficult
year that included a highly publicized incident where
travelers were stranded during a blizzard on a runway for many
hours. Jon Austin, a spokesman for Northwest, is upbeat about
the improvement. "We've been improving against an industry
that overall is dropping. I think that reflects the efforts
being made."
"Northwest improved a lot and was still last, which is not
necessarily an accomplishment," says Mr. Buttrick. "The
industry overall gets low marks," he suggests, because "when
you own your customers in hubs, the competitive forces that
drive superior customer service simply aren't present to the
extent that they might otherwise be."
Customers were ambivalent about their lodgings, giving the
hotel industry an average score of 72 for the second year in a
row, just a fraction of a point below the overall ACSI. The
industry as a whole could be doing a lot worse. "I'd actually
say that the overall numbers are encouraging," says David
Anders, senior gaming and lodging analyst for Merrill Lynch,
"given how aggressively they've tried to push room rates."
The sharpest fall for the group came from Marriott
International Corp., which dropped 3.9% to 74, still above
average. Mike Jannini, executive vice president of brand
management for Marriott International, notes that Marriott
spends almost $7 million annually on tracking customer
satisfaction. "This year we ended with our best study ever in
North America." Mr. Jannini is nonplussed by the discrepancy,
saying, "Hopefully we'll get an insight or two."
Electricity provider Unicom Corp., Chicago, saw its ACSI
score fall 4.8% to an industry low of 59, after the company
and its customers suffered through major service-outage
problems in the city last summer. "There was a tremendous
amount of publicity, and we took a severe pounding-and
justifiably," says Unicom spokesman Don Kirchoffner. "We're
saying, we have to earn you back. We have to earn your respect
back through our performance." Toward that end, Unicom is
spending $1.2 billion on fixes and modifications.
"There's new management at Unicom, and they've made it a
priority to fix those issues," says Paul Patterson, equity
analyst for the power industry at Credit Suisse First Boston.
On an industry level, customer service hasn't always come
first. Local monopolies had little incentive to work on
customer satisfaction. "Traditionally, it's something you
don't really focus on, but as we're moving toward a
deregulated environment, utilities have taken pains to make
sure that their customers like them more," says Mr. Patterson.
Companies fear that if they have a bad reputation, customers
might all jump to the first competitor who sets up shop.
Regardless of perceptions and the feelings of customers,
Mr. Kirchoffner says that Unicom understands the top priority
for satisfying customers: giving them what they pay for. "Job
one," Mr. Kirchoffner says, "is keeping the lights on."
--- To create the American Customer Satisfaction Index , the University of
Michigan Business School's National Quality Research Center conducts
telephone surveys with 15,000 current customers of the companies being
surveyed that quarter. Each year, that amounts to about 60,000
customers of 185 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 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 surveyed about their expectations and experiences of
value and quality with the products and 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 loyalty, reservation prices and
ultimately market value. --- American Customer Satisfaction Index
Services and Transportation
The University of Michigan Business School's National Quality
Research Center annually surveys customers of 185 companies and 30
government agencies, but each quarter it updates selected industries.
Here are the index scores, out of a possible 100, for the first
quarter of 2000:
2000 % Change
Group/Manufacturer Score from 1999
Airlines (scheduled) 63 0.0%
Southwest Airlines 70 -2.8
Delta Airlines 66 -2.9
All Others 63 -6.0
AMR 63 -1.6
Continental Airlines 62 -3.1
Northwest Airlines 62 +17.0
UAL 62 0.0
USAir Group 62 +1.6
Broadcasting-TV 64 +3.2
Hospitals 69 -1.4
Hotels 72 +0.0
Hilton Hotels (incl. Promus)
77 +4.1
Hyatt 74 +1.4
Marriott International 74 -3.9
All Others 72 +1.4
Holiday Inn 71 +4.4
Ramada Inns 69 +3.0
Starwood Hotels 68 -1.4
Motion Pictures 68 -4.2
Parcel Deliv. (expr. mail)
81 +2.5
Federal Express 83 0.0
UPS 81 +2.5
U.S. Postal (pkg & expr.)
75 0.0
U.S. Postal Service 72 +1.4
Publishing-Newspaper 68 -1.4
Telecommunication 72 -1.4
LONG DISTANCE
All Others 77 +2.7
AT&T 75 -5.1
GTE 73 -1.4
MCI WorldCom 70 -4.1
Sprint 70 -5.4
LOCAL
BellSouth 75 -1.3
Bell Atlantic 71 -2.7
All Others 70 -1.4
SBC (includes Ameritech)
70 -1.4
GTE 69 +9.5
US WEST 64 -4.5
Utilities-Electric Service
75 +1.4
The Southern Company 80 +2.6
American Electric Power
79 +2.6
Central and South West 79 +3.9
Duke Energy 79 -1.3
Edison International 78 +6.8
GPU 78 +4.0
Public Service Ent. Grp.
78 +6.8
All Others 76 +2.7
CMS Energy 76 0.0
FPL Group 76 +2.7
Texas Utilities 76 +2.7
Dominion Resources 75 +1.4
DTE Energy 75 +1.4
Reliant Energry 75 +2.7
Entergy 74 +7.2
PG&E Corporation 73 +2.8
Northeast Utilities 72 +5.9
PECO Energy 72 +1.4
Con Edison of N.Y. 71 -2.7
Niagara Mohawk Power 69 +1.5
Unicom 59 -4.8
The American Customer Satisfaction Index is produced through a
partnership of the University of Michigan Business School, the
American Society for Quality and the CFI Group. |
.gif){kind=small}