National Customer Satisfaction Index-UK

NCSI-UK Commentary First Quarter 2012

Airlines, Mobile Phone Service Providers and Energy Utilities

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May 30, 2012

The National Customer Satisfaction Index (NCSI-UK) is essentially flat for the first quarter of 2012, up only 0.1% to 74.6 on a 100 point scale. The marginal improvement is the result of gains for airlines, energy utilities, and mobile service providers.

The NCSI, which uses the same methodology of the American Customer Satisfaction Index (ACSI), demonstrates a strong relationship to economic growth. The 15 industries covered by NCSI represent nearly half of total UK consumer spending. In the final quarter of 2011, a 0.3% drop in NCSI corresponded to a 0.3% contraction in GDP. For the first quarter of 2012, both NCSI and household expenditure register a weak growth of 0.1%, and GDP again declined 0.3% due to a steep drop in construction output.

Of the three industries covered in the first quarter, mobile phone companies have the highest customer satisfaction, rising by 1.4% to an NCSI score of 75. Airlines and energy utilities score much lower at 69, although both show improvement. Airlines increase by 1.5% and utilities by 3.0%. Despite their gains, airlines and utilities have the lowest customer satisfaction of all industries tracked by NCSI. Nevertheless, results for individual companies are overwhelmingly positive: 83% improve, while only 11% decline and 6% register no change.

Airlines

Passenger satisfaction with airlines improves by 1.5% to an NCSI score of 69, but remains well below average for a service industry. High fuel prices have not dampened growth, and mild weather has resulted in fewer disruptions this year. Passengers have benefitted from aggressive discounting, including from major airlines which occasionally offered fares at or below those of low-cost, no-frills airlines. However, the value-driven boost in passenger satisfaction may be challenging to sustain. In April, Air Passenger Duty increased by 8%, at double the rate of inflation and nearly 70% higher than just three years ago.

Virgin Atlantic remains steady atop the industry, inching up 1% to an NCSI score of 74, but the gap between Virgin has narrowed considerably. British Airways (BA) gains 3% to 72, the highest passenger satisfaction score the airline has achieved since measurement began. BMI increases by 4% to tie with Flybe (+1%) at 70. BMI has refurbished their cabins, and while the airline has been rapidly losing passengers since 2008, the smaller customer base seems to be more satisfied with the latest improvements. BA parent IAG has now completed its acquisition of BMI, further expanding on BA’s already dominant position in the market.

Virgin continues to invest in the customer experience, revamping in-flight food services and premium cabins in particular. BA has also made improvements to its food services, ticketing, and in-flight technologies, such as providing crew members with iPads updated with passenger information to enable more customised, efficient service.

All the major airlines show some improvement, but EasyJet alone remains well below the industry average, despite gaining 2% to an NCSI score of 66. EasyJet beats most carriers on price, but service quality lags far behind the other airlines. Nevertheless, EasyJet’s low-cost/no-frills business model has gained popularity in a weakened economy—revenues are up 15% from a year ago. It seems many passengers are willing to accept less service in exchange for cheap tickets.

Mobile Phone Service Providers
Customer satisfaction with mobile phone companies rises 1.4% to an NCSI score of 75, an all-time high for the industry. With the exception of Vodafone, all major mobile phone service providers improve. According to users, service quality, value, and options have improved.

Tesco Mobile continues to lead by a wide margin, gaining 2% from a year ago to a score of 84, which is second highest among all companies measured in the NCSI, regardless of industry. Tesco, which uses the O2 network, offers by far the best value for money according to customers, due in part to its prepaid accounts and “capped” monthly contracts.

O2 increases by 3% to an NCSI score of 77. Virgin gains 1% to 76.  Orange and T-Mobile, now part of Everything Everywhere, improve by 4% and 1%, respectively, to match the industry average at 75.

Vodafone and Three fall below average. Vodafone slips 1% to an NCSI score of 72, and Three still struggles at the bottom despite a 3% gain to 69. Recent cuts to the Mobile Termination Rates (charged when non-customers use a provider’s network) may have helped Three more than competitors due to its smaller customer base, but according to customers, quality of reception and customer service remain low relative to other service providers.

Energy Utilities
Household satisfaction with electric and gas utility providers rises 3.0% to an NCSI score of 69. Although this is a very low score by NCSI standards, it is a five-year high for the industry. Several factors contribute to the gain—all six of the major suppliers cut prices in the first quarter of the year, and a mild winter has resulted in reduced energy consumption.

Among the six largest energy companies, Scottish & Southern Energy (SSE) leads, gaining 1% to an NCSI score of 73, above the industry average. The other energy companies are grouped closely together. E.ON inches up 1% to match the industry average at 69.  Customer service improvements by npower over the past year appear to have paid off and npower makes the greatest increase, gaining 8% to 68. Scottish Power registers no change at 68, and British Gas improves by 3% to 67.

EDF Energy is the only energy utility to drop, falling 4% to the bottom of the industry with an NCSI score of 65. New billing and call centre systems rolled out last summer caused serious glitches and customer service issues, leaving customer satisfaction at an all-time low for the company.

The number of households using smart meters continues to grow, although the base is still small. Smart meters are designed to help household monitor energy consumption, but so far there is no measureable difference in the customer satisfaction of households using smart meters versus non-users. On the other hand, nearly half of respondent households now pay their utility bills through a direct debit system, and those that do so are more satisfied (NCSI = 69) compared with those that do not pay by direct debit (66).