National Customer Satisfaction Index-UK

NCSI-UK Commentary Second Quarter 2010

Customer Satisfaction Reaches New Heights as Carmakers and Restaurants Improve

September 9, 2010

The National Customer Satisfaction Index (NCSI-UK) gains for a third straight quarter, rising 0.5% to 73.7 on NCSI’s 0-100 scale, the highest level since the NCSI introduced a national score for customer satisfaction in 2008. The increase is driven by improved customer satisfaction with carmakers and restaurants.

The NCSI applies the patented methodology of the American Customer Satisfaction Index (ACSI) to the UK market. The ACSI is an economic indicator developed at the University of Michigan and CFI Group, and it has long demonstrated a strong relationship between customer satisfaction and the health of the US economy. The NCSI reveals a similar relationship to economic growth in the UK because of the effect of customer satisfaction on overall consumer demand.

The sharp NCSI drop in the first quarter of 2009 coincided with a deepening of the recession, but as customer satisfaction has improved, so too has the economy.  The rise in NCSI over the past three quarters corresponds with three straight periods of positive growth in GDP.  For the second quarter of 2010, NCSI’s 0.5% jump matches its largest single gain, and the economy grew 1.1% for the quarter.

The 16 industries included in the NCSI represent nearly half of total UK consumer spending. All industries reported in the second quarter of 2010 perform better than the national average. Limited-service restaurants and carmakers perform slightly above average, with NCSI scores of 74 and 79, respectively. Full-service restaurants perform well above average at 83, the highest score for any industry.

Customer satisfaction with carmakers rises by 4% to an NCSI score of 79, a three-year high.  According to customers, better value for the money is behind much of the improvement. During the same period, US car satisfaction declines 2.4% to 82.  The duration of government incentives may in part explain the directional difference between the two countries.  In the US, the “Cash for Clunkers” programme boosted customer satisfaction in 2009, but had already ended by 2010.  The UK scrappage scheme extended to April of this year and probably affected customer satisfaction for 2010.

Last year, Ford, Peugeot, and Renault were the lowest scoring carmakers, but each has significantly improved customer satisfaction this year.  Renault jumps from last to first with an 11% increase to a score of 80, now matching Toyota at the top of the industry. According to customers, Renault provides better quality dealership service than its larger competitors in terms of salesperson knowledge, helpfulness, honesty and courtesy. Improved customer satisfaction with Renault has gone hand-in-hand with increased sales. Even as auto sales cooled in the summer months after the government incentives ran out, Renault sales were up over 200% for June, and so far the automaker has doubled its year-to-date sales from 2009.

Toyota has lost customer satisfaction in the wake of recent recalls, falling 4% to an NCSI score of 80. Volkswagen dips 1% to 79, and BMW is unchanged at 78. Peugeot gains 5% to 77. Ford is up by 4% to 76, but the industry overall has improved, leaving Ford below the average. With the rise of Ford, Peugeot and Renault, Vauxhall is now at the bottom of the industry, unchanged from last year at 75.

Customer satisfaction with restaurants improves this year.  The limited-service restaurant industry inches up slightly, gaining 1% to an NCSI score of 74, while full-service restaurants jump 5% to 83.  Both improvements are driven largely by better value for money, as weakened consumer demand in the midst of an uncertain economy continues to put pressure on restaurants to offer discounts.  The sharp rise for full-service restaurants may also be the result of some migration of their least satisfied customers to the lower-priced fast food and takeaway establishments, leaving fewer, but more satisfied, customers.  Smaller does better among full-service and limited-service restaurants; the aggregate of smaller restaurants and local establishments has higher customer satisfaction than any of the large chains.

Starbucks loses its lead, falling 4% to 72, and now ties with rival Costa. Despite the drop in customer satisfaction, Starbucks remains an industry leader in quality as well as customer service.  The challenge for Starbucks is value for money. High prices in the current economy have made sales more difficult, with growth slowing and a loss of market share to the fast-growing Costa.

The decline of Starbucks lets Greggs (up 1% to 75) reclaim the top spot among the larger quick-service food chains. Greggs benefits from price-competitive offerings, but both Greggs and the two coffee chains remain well ahead of the burger and pizza establishments. Yum! Brands (Pizza Hut and KFC) falls 3% to 69, followed by Burger King (67) and McDonald’s (66).

Among full service restaurants, Gondola Holdings (parent company of ASK, Zizzi, and Pizza Express) lead with an NCSI score of 75, outdistancing the other large chains.  Gondola continues to upgrade its restaurants, and according to customers, provides the best ambiance in the industry.

Just below Gondola are Nando’s and Whitbread Group (Beefeater, Brewers Fayre, Table Table and Taybarns brands) at 72. Tragus Holdings (Café Rouge, Strada and Bella Italia brands) and the Restaurant Group’s chains (including Frankie & Benny’s and Chiquito) score lowest at 71.

The National Customer Satisfaction Index (NCSI-UK) is an economic indicator of customer evaluations of the quality of products and services available to household consumers in the United Kingdom. The NCSI applies the methodology and technology of the American Customer Satisfaction Index (ACSI).  It is updated quarterly with data from different sectors of the economy. The results of this release are based on data from 4,500 respondents, collected during Q2 of 2010.