Definition of the American Customer Satisfaction Index (ACSI)

What is the American Customer Satisfaction Index (ACSI)?

The American Customer Satisfaction Index (ACSI) is an economic indicator of American consumer sentiment that is based on a national survey in which American consumers are asked to rate the products and services they use.

Key takeaways

  • The American Customer Satisfaction Index (ACSI) is an economic indicator based on a survey of American consumers about the products and services they use.
  • The American Consumer Satisfaction Index (ACSI) includes four levels of indices or scores that assess customer satisfaction on a quarterly basis.
  • Stocks of companies with high ACSI scores tend to perform better than those with lower scores.
  • A key finding from ACSI indicates the importance of quality over price to customers in almost every industry.

Understanding the American Customer Satisfaction Index (ACSI)

More than 500,000 consumers are evaluated annually for the index, which rates customer satisfaction with more than 400 companies in 47 industries. The American Customer Satisfaction Index produces four levels of indices or scores: a national customer satisfaction score, 10 economic sector scores, 47 industry scores, and scores for individual companies and government agencies. The ACSI is an important indicator of the economic performance of individual companies, as well as of the macroeconomy.

ACSI uses information obtained from approximately 500,000 client interviews as inputs for a multiple equation econometric model developed at the University of Michigan. The index was first published in October 1994 and is continuously updated quarterly, with new data for one or more economic sectors replacing data collected the previous year.

ACSI data is used by companies in capital planning and budgeting, by researchers who analyze consumer behavior trends, and by policymakers who use it as an indicator of health and direction. of the economy. Investors are watching the numbers for individual companies and industries.

A company’s ACSI score is derived from a questionnaire. Each question involves a rating scale from 1 to 10 to rate a business, government agency, or other entity. Organizations are classified according to the following:

  • Overall satisfaction (1 means “very dissatisfied” and 10 means “very satisfied”)
  • Disconfirmation of expectations (1 means “does not meet expectations” and 10 means “exceeds expectations”)
  • Comparison with an ideal (1 means “not very close to ideal” and 10 means “very close to ideal”).

In its 25-plus-year history, ACSI reached its highest level of 77 out of a possible 100 during the first quarter of 2017. It repeated that high score in the third quarter of 2018. The score took a turn for the worse in the fourth quarter of 2020, falling to 73.7%. The survey authors noted that the COVID-19 pandemic may have exacerbated discontent, but also said the score had dropped in eight of the previous nine quarters and had reached its lowest level since 2005.

ACSI: Key Findings

With more than two decades of experience in collecting consumer satisfaction information, ACSI has compiled a list of key findings based on its research:

  • High customer satisfaction is correlated with better financial performance of the company.
  • Changes in customer satisfaction affect households’ willingness to make purchases. (Price-adjusted ACSI is a leading indicator of consumer spending growth.)
  • Since consumer spending accounts for approximately 70% of gross domestic product (GDP), changes in customer satisfaction correlate with GDP growth.
  • ACSI scores for manufactured goods (food, appliances) are generally higher than those for services (airlines, banks, cable TV).
  • Quality is more important than price in almost all industries as measured by ACSI. Price promotions can work in the short term to increase satisfaction, but price cuts are not sustainable in the long term. Companies that focus on improving quality tend to do better in the long run.
  • M&A activity generally has a negative effect on customer satisfaction, especially with services.

ACSI and investment

ASCI reports can have the power to move the markets. Stocks of companies with high ACSI scores tend to outperform companies with low scores, while the national ACSI score has been shown to predict trends in both consumer spending and stock market growth. ACSI also provides its proprietary customer service satisfaction data to exchange-traded fund (ETF) developers.

A portfolio of stocks selected based on customer satisfaction levels outperformed the market according to a 2006 document in the Marketing Magazine. Another 2016 study found “compelling empirical evidence” for the importance of customer satisfaction in producing stock returns. The study authors used 15 years of audited returns for companies and found that they produced 518% more returns between 2000 and 2014 compared to a 31% increase in the S&P 500.

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Mark Holland

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