National Customer Satisfaction Index-UK

NCSI-UK Commentary Second Quarter 2009

Customer Satisfaction Dips Slightly in Q2; UK Consumers Less Satisfied with Automobiles, Full-Service Restaurants

Strong Gains for Toyota, Starbucks; Burger King Slides

September 1, 2009

The National Customer Satisfaction Index (NCSI-UK) retreats slightly in the second quarter, falling 0.1% to 72.9 on a 100 point scale. The small drop is largely due to declining customer satisfaction with the automobile industry – despite sharply falling sales over the past year, new vehicle purchases still make up a sizeable proportion of overall consumer spending.  Customer satisfaction also declines for full-service, sit-down restaurants, but the fast food industry remains flat.

Overall, customers are considerably less satisfied than they are in the United States. NCSI-UK is a sister initiative of the American Customer Satisfaction Index (ACSI), the economic indicator developed by founder Claes Fornell. In contrast to the UK, US customer satisfaction shows strong improvement for autos and full-service restaurants. ACSI now stands at 76.1 and has seen improvement in each of the last three quarters.  The positive movement in ACSI has signaled a slow strengthening of the US economy, and the NCSI should have a similar predictive role in the UK.  Even though the NCSI shows a small dip in customer satisfaction, this suggests a slowing of the contraction of the UK economy.  In fact, Gross Domestic Product fell only 0.8% in the second quarter of 2009, compared with a 2.4% drop in the first quarter.

The sixteen industries covered in NCSI represent nearly half of total UK consumer spending. Of the industries measured in the second quarter of 2009, fast food matches the national average (73), while autos (76) and full-service restaurants (79) are well above the average.  Among individual companies, decliners outnumber gainers by a small margin: 33% have better customer satisfaction than last year, 42% decline and another 25% are unchanged.

Automobiles: Toyota in the Driver Seat as Ford and BMW Slip
Customer satisfaction with automobiles declines 1.3% to a score of 76.  Toyota surges to the industry lead, improving 4% to a score of 83.  Already a leader in vehicle quality, Toyota improved the quality of its service to overtake BMW for the #1 spot.  Unlike a year ago when Toyota, BMW and Volkswagen were clustered at the top, there is now significant separation with Toyota holding a strong lead over Volkswagen.  BMW falls 3% to 78, beaten by Volkswagen for the first time.  More so than many other car brands, the high-performance and luxury automaker BMW has been hit by concerns about pricing as consumers have become increasingly value-conscious given the recent state of the economy.

Ford also shows declining customer satisfaction.  The market-share leader was tied with second-largest Vauxhall a year ago with NCSI scores of 75, but while Vauxhall holds steady, Ford slips 3% to 73, falling into a statistical tie with Peugeot (unchanged at 73) and Renault, which rounds out the bottom of the industry down 1% to 72.  Despite the drop in customer satisfaction, Ford sales have not as of yet declined as much as some, and the Fiesta and Focus remain the two best-selling models in the UK.  Because many Ford models tend to be smaller, cheaper cars, the government’s “scrappage scheme” program may be helping somewhat to prop up Ford sales.

NCSI research suggests that the better informed customers are before making an automobile purchase, the more satisfied they become.  Those who already decided on the car they wanted had higher expectations and perceived the quality of the vehicle to be higher than those who had not made a decision prior to visiting a dealership (customer satisfaction score of 77 for those who had decided vs. 74 for those who had not).

Restaurants: Starbucks Brews Up the Top Spot
NCSI-UK measures consumer satisfaction with fast food chains, sandwich and coffee shops and other takeaway establishments, as well as full-service sit-down restaurants and pubs.  On average, customers remain far more satisfied with full-service restaurants, but with full-service restaurants falling 2% to 79 and fast food holding steady at 73, the gap has narrowed a bit.  For full-service restaurants, the challenge has been to keep prices down relative to their fast food competitors in the midst of slumping sales.  The decline in consumer satisfaction for the full-service category is driven almost entirely by a lower perception of value for money, and the outcome has been a drop in loyalty to pubs and sit-down restaurants, leading to more customer defections to lower-priced fast food and other takeaway establishments.

Among the chains measured in the fast food category, Starbucks leaps ahead of Greggs-Bakers Oven (down 3% to 74) to take the lead, improving 4% to an NCSI score of 75.  The coffee shop recently closed all its stores for three hours to train baristas how to make the perfect drink every time.  The result is higher quality drink products and a lower level of customer complaints.  The improvement in customer satisfaction also puts Starbucks ahead of Costa, the UK’s fastest growing coffee shop brand, which debuts in the NCSI with a score of 72.  Costa already has more outlets in the UK than Starbucks and plans another 100 or so in the next year to outpace Starbucks by about 1000 to 700 establishments.  An aggressive focus on expansion often has the negative side-effect of dampening customer satisfaction in the short term. To the extent that Costa can maintain the quality existing outlets, customer satisfaction could improve.

Customers are less satisfied with burger, chicken and pizza chains, than with coffee and sandwich shops.  However, the “All Others” category, which includes Chinese and Indian takeaway, improves to a high score of 77. The Yum! collection of brands, particularly Pizza Hut and KFC, gains1% to 70.  Burger King falls sharply, down 4% from a year ago, joining McDonald’s (up 2%) to round out the bottom of the industry with scores of 67 and 66 respectively. McDonald’s has typically been among the lowest scoring chains even as it’s done the biggest volume of business. Indeed, McDonald’s recently announced its strongest year ever in sales, despite relatively low customer satisfaction.  This apparent paradox can be explained in large part by the strong value proposition McDonald’s offers.  In the midst of the economic downturn, customers are more often choosing value over quality, and while McDonald’s is separated from industry leader Starbucks by nine points in customer satisfaction, customers rate the two chains the same on value for money.