Slumping Customer Satisfaction Takes a Toll on the Economy
Customer satisfaction in the United States is at its lowest point in nine years, according to the latest American Customer Satisfaction Index (ACSI). Declining satisfaction scores are nothing new for the ACSI, but researchers suggest they are taking a toll on the U.S. economy, the national gross domestic product averages, and the job market.
The aggregate ACSI score, covering the 43 industries that ACSI tracks, dipped 0.5 percent for the second quarter of 2015 to reach 74.3 on a 100-point scale. This is the sixth consecutive quarterly decline.
The drop, according to ACSI, negatively affects customer demand, which then limits economic growth. "The link is a complex one," explains Forrest Morgeson III, director of research at the ACSI, which is based in Ann Arbor, Mich. "But the bottom line is that customer satisfaction drives future economic performance."
"While a sustained decline in overall customer satisfaction is never good news, it may be particularly perilous now," said Claes Fornell, chairman and founder of the ACSI, in a statement. "About two-thirds of the economy is made up of consumer spending, and even though spending growth has edged up, it's still significantly below the long-term average and below what is needed for solid economic growth."
Corporate investment and government are the other two economic factors that affect overall growth, but the national economy can't rely on them alone to make up for the shortfalls that have occurred since 2008, Morgeson says.
Only once in the past 20 years—from 1995 to 1997—has the ACSI plunged in a similar way. Like today, that period of sustained ACSI decline occurred several years after a recession and after both consumer spending and the job market had rebounded. The major difference between now and 20 years ago is that consumer spending growth in the late 1990s ricocheted to above-average levels, whereas consumer spending today has not even returned to its long-term average.
According to the ACSI model, consumer spending will only grow by 2.6 percent to 2.8 percent for the next quarter, which is still too low for robust economic growth. Morgeson notes that spending should be at 3 percent or more to sustain economic growth.
It will be difficult for the economy to pick up speed unless both customer satisfaction and the amount of discretionary income grow, he maintains, and neither are expected to happen soon enough.
In fact, the reverse is expected, which could weigh on this year's holiday shopping season. The National Retail Federation (NRF) in mid-October predicted holiday sales this year would only grow about 3.7 percent, down from 4.1 percent in 2014. The NRF research pointed to slower job growth, price deflation, and shifting consumer spending patterns as reasons for the shortfall.
Another economic factor that is directly linked to customer satisfaction is the overall U.S. job market, which is slowly starting to rebound. "As better jobs become available, people are leaving [customer service] jobs" for ones that pay better, Morgeson says.
Contact center jobs, he adds, "tend to be transitional jobs for a lot of people. Contact center work, and other customer-facing jobs, are often placeholder jobs that people take until they can find something else."
And, as more seasoned employees leave consumer-facing positions for slightly improved pay, to the extent that they are being replaced, it is often by less experienced and newly trained personnel. Customer satisfaction suffers as a result, Morgeson maintains.
The ACSI research also found a link between today's declining customer satisfaction and the resources that companies are dedicating to rudimentary analysis of consumer feedback. "After the Great Recession of 2008, companies slashed their market research budgets," Morgeson says.
Now, as companies are starting to ramp up their spending again in that area, many are opting to do the work on their own rather than turning it over to professional market researchers. "Now, with a lot of companies doing things on their own, we're not seeing the same quality to the analysis, and that, too, adds up to a decline in overall customer satisfaction," Morgeson says.