Google+ Benefits From Small but Highly Satisfied User Base

Google+ may not be the first brand to jump to mind among social networks, but its users are the happiest, according to the latest findings of the American Customer Satisfaction Index (ACSI). With a high score of 81 on ACSI’s 100-point scale, Google+ improves user satisfaction year-over-year by 7%, jumping ahead of several larger social media contenders. With its smaller, more niche-like customer base, Google+ scores far ahead of social media giant Facebook, steady at 68 following its 9% tumble a year ago. Google+ appears to be serving its dedicated user base well with new features and a site redesign launched earlier this year. Google+ may also benefit from its seamless integration with other Google products across the platform.

The biggest gain in social media, however, belongs to Twitter, up 8% to 70 and overtaking Facebook. Social media is becoming an increasingly popular and vital platform for up-to-the-minute news, and Twitter has made its mark—all the way to the White House. And while Twitter surges for user satisfaction, every single major news website stumbles this year in ACSI. For the internet news and opinion category overall, user satisfaction drops 1.3% to 75.

Compared with social media (73) and internet news (75), search engine and information websites stay just ahead with an overall score of 76, despite a 1.3% downturn. The top name in search and information websites continues its reign unchallenged as Google dominates with a score of 82 (-2%). The nearest competitors are Bing, down 3%, and Yahoo!, down 1%—both much lower at 73. The latter now operates under the subsidiary Oath following its acquisition by Verizon. Another Oath brand, AOL, is the only search and information site to improve, inching up 1% to 70. Nevertheless, AOL remains ahead of just one other site—last-place Answers.com (68).

Regardless of category, the standout displeasure among consumers is the amount of advertising on websites. With scores ranging from 66 to 69, advertising rates as the worst aspect of the customer experience this year and shows deterioration over the last four years.

Washington Post: The Most-Loved Social Network Among Americans Isn’t the One You Think »

SiliconBeat: Social Media Satisfaction: Google+ Most Beloved Social Network, Twitter Gets a Trump Bump »

Search Engine Land: Report: Customer Satisfaction With Search Drops, in Social Google+ Beats Facebook »

Media Post: Consumers Less Satisfied With Search, Ads Worst Part Of Experience, ACSI Says »

Full-Service Restaurants Falter Amid Slumping Sales

Casual dining spots are suffering from similar circumstances plaguing major retailers—slowing sales and shrinking foot traffic—as once-vibrant malls lose favor with Americans. At the same time, U.S. consumers are less satisfied with sit-down venues to the point where fast food now takes the lead in the American Customer Satisfaction Index (ACSI).

Just a year ago, full-service restaurants were rated among the top four industries tracked by the ACSI. Now the industry dives 3.7% to a score of 78 on ACSI’s 100-point scale, allowing fast food to slip past at 79—a first in ACSI history. For companies that depend on quality to justify higher prices, it is sobering news when lower-price competitors can deliver a more pleasing experience.

As menu prices rise, lower grocery costs may be encouraging more Americans to dine at home, and younger consumers seek quicker service, convenience, and healthier choices. Amid these changes, many sit-down chains are looking to redefine themselves, including off-premise options and menu upgrades.

The top restaurant continues to be Cracker Barrel, up 1% to 84—a score that makes the Americana-themed entrant a customer favorite. Second-place Texas Roadhouse beats other steakhouses with a score of 82, although Outback Steakhouse gains 4% to 80. Darden’s LongHorn Steakhouse tumbles 6% to fall below average at 77, tied with an improved Chili’s.

Another Darden chain, Olive Garden, holds stable at 81 and it continues to generate sales, aided by to-go order increases. Also hitting 81, Red Lobster rises 3% to a four-year high after investing in better ingredients to upgrade its menu.

For Applebee’s, introducing wood-fired grills has yet to pay off in improved satisfaction and the chain is unmoved at 79. Ruby Tuesday also stagnates at 78 and earlier this year put itself up for sale amid store closings. TGI Fridays falls 3% to 76, tying Denny’s (+3%).

In last place, Red Robin plummets 9% to 73 as its first-quarter same-store sales drop. Red Robin, like many establishments with a mall presence, is not immune to changes in consumer shopping habits. As such, the company is testing delivery and catering options, as well as rethinking its mall locations. For casual dining overall, it remains to be seen if efforts like these will be enough to turn around customer satisfaction and bolster sales in the long term.

Consumer Affairs: Survey Shows Consumers Prefer Fast Food to Full-Service Restaurants »

FSR Magazine: Report: Full-Service Restaurants are Losing to Fast Food »

Competition Boosts Satisfaction for Wireless Phone Service

As contracts fade in the wireless phone service marketplace, customer satisfaction surges—proof that choice matters in the battle to win over consumers. The industry’s ACSI score climbs 2.8% to 73 this year, with carriers engaging in more competitive price wars.

Compared with other telecom categories where consumers have little choice, the wireless industry shows that when companies fight for customers, good things happen: prices are competitive, service improves, and customer satisfaction is higher. Decades ago, landline phone companies were fully immersed in price wars to win and keep customers. Today, unlimited data and no contracts are hallmarks of the new battleground, and the wireless industry is truly competitive again.

Smaller wireless carriers set the bar with a 3% gain to an ACSI score of 79, followed by prepaid provider TracFone Wireless at 77 (+3%). Likewise, Verizon Wireless and U.S. Cellular climb 4% and 3% each to 74, while Sprint hits an all-time high of 73 (+4%). T-Mobile ties with Sprint and is the only company to move in the opposite direction (-1%). AT&T Mobility is at the bottom of the category (+1% to 72). As new competition arrives from companies like Comcast via its Xfinity Mobile, consumers will have even more options as they increasingly eschew landline in favor of wireless phone service.

ACSI: Wireless Competition Boosts Customer Satisfaction While Pay TV Fades »

Pay TV and ISPs: Dead Even, Dead Last in ACSI

It doesn’t take a lot of imagination to glean that U.S. consumers find little to like about their subscription television or internet service—especially when it is provided via cable. According to customers, internet service providers constitute the bottom of the barrel when it comes to customer satisfaction, and this year pay TV is no better. Both come in dead last among 43 industries in the American Customer Satisfaction Index, and many of the same companies dominate both categories.

While other telecom industries improve in 2017—most notably wireless phone service rises nearly 3% to 73—pay TV slides 1.5% to meet ISPs at 64. And some cable providers are scraping down toward the bottom of the entire Index. Comcast’s Xfinity tumbles 6% to 58, just ahead of Mediacom (56). The best pay TV can offer comes via fiber optic or satellite, as DISH Network, AT&T’s DIRECTV and U-verse, and Verizon’s Fios score in the range of 67 to 71. For internet service, Fios and U-verse also take the top (71 and 69, respectively) with Xfinity at 60, just ahead of several providers who languish in the 50s (Frontier, Windstream, Mediacom, and CenturyLink).

For pay TV, the very real threat of competition has not turned the tide for customer satisfaction. Increasingly, customers are forgoing the poor service they are receiving and switching to streaming services. In the first quarter alone, over half a million subscribers defected from cable and satellite service—the biggest loss in history.

Overall, the ACSI report does not bring good news for broadband and as other options proliferate, cord cutting is unlikely to subside or slow down. As such, the ACSI will be adding measurement of VOD (video on demand) in 2018 to capture the on-demand services of traditional providers, along with coverage of competing stand-alone video streaming services.

ACSI Telecommunications Report 2017 »

BGR News: Cable Companies Need to Be Scared, Because Cord Cutting Is Here to Stay »

Fortune: The Cable TV Industry Is Getting Even Less Popular »

Consumerist: You Still Hate Your Cable Company as Much as Ever, but Think Your Mobile Carrier’s All Right »

CIO: Consumers Love to Hate the Companies That Deliver Pay TV and Broadband »

Smartphones: Apple iPhone SE Has Happiest Users

It has been four years since Apple updated a smaller, pocket-sized phone and consumers are over-the-top with the new iPhone SE. Among smartphone brands, the lower-priced, no-frills iPhone SE scores a sky-high 87 on a scale of 0 to 100—the best rating among an array of primarily Apple and Samsung models in a recent study from the American Customer Satisfaction Index (ACSI).

The 4-inch SE beats out phones that are larger and designed with premium in mind. In second place, big-screen models Galaxy S6 edge+ and iPhone 7 Plus tie at 86, followed by three more Galaxy phones (scoring 84 to 85). Further down, the 5.7-inch Galaxy Note 5 comes in at 82.

Overall, Apple and Samsung dominate the category, and other manufacturers occupy the low end. Motorola’s Moto G and the larger LG G4, with its 5.5-inch screen, trail behind with scores of 75 and 73, respectively. The lowest-rated model, however, belongs to Samsung—the Galaxy Core Prime (70).

CNET: People Are Actually Happier With the iPhone SE Than the iPhone 7 »

Apple Insider: Apple’s iPhone SE, iPhone 7 Plus Take Top Spots in Customer Satisfaction Index »

Airlines: In a Year of Gains, Ultra-Low-Cost Yields Low Satisfaction

Surprise: The airline industry overall is improving its customer experience, according to surveys of thousands of passengers flying over the past year conducted by the American Customer Satisfaction Index (ACSI). While recent high-profile incidents peppered April headlines—from United’s passenger debacle to Delta’s spring break computer outage—consumers evaluating their experiences between April 2016 and March 2017 see year-over-year improvement as industry satisfaction bumps up 4.2% to an ACSI score of 75 (scale of 0 to 100).

Industry leaders JetBlue (82), Southwest (80), and Alaska Airlines (78) turn in scores that compare well with top-scoring companies in other industries. Other carriers—including legacy airlines—fall anywhere from middling to below-average for customer satisfaction. But passengers that are the most dissatisfied are those who opt for low price above all else. In a year that brings nearly across-the-board escalation in passenger satisfaction, the ultra-low-cost operators Spirit and Frontier lose ground (dropping 2% and 5%, respectively).

With major airlines like Delta and American starting to compete more aggressively on price, low ticket prices are not enough of a trade-off for low service quality. Across three years of ACSI measurement, Spirit consistently ranks last for passenger satisfaction, although the airline did improve last year (up from 54 in 2015 to 62). In 2017, however, the airline does not build upon that gain. Thus far, Spirit’s efforts over the past year to better customer relations and improve on-time arrivals are not paying off as passenger satisfaction instead recedes to 61.

Consumerist: For Third Year Running, Spirit Airlines Still Scores Lowest For Customer Satisfaction »

FOXNews.com: Spirit Airlines Ranks Last in Customer Satisfaction Survey for Third Year »

HuffPost: There’s an Airline People Dislike Even More Than United »

NBC News: Guess Which Big Airline Scored Lowest in the Airline Satisfaction Survey Again? »

Passengers Prefer JetBlue; United Last Among Legacy Carriers

JetBlue proves that airlines can deliver a satisfying experience to passengers in an industry that, on average, still shows ample room for improvement. The discount carrier’s low-cost business model and cabin upgrades appear to be the right combination for its passengers, according to data from the American Customer Satisfaction Index.

In 2017, JetBlue leads the industry with an ACSI score of 82 on a scale of 0 to 100—a satisfaction level deemed excellent by ACSI standards. JetBlue has maintained an ACSI score in the low 80s in all but one year over the past five. A close second goes to low-cost operator Southwest—an airline that also occupies the industry’s upper tier with a five-year average of 79.

While both JetBlue and Southwest sail above the average in 2017, most of the major legacy carriers take the industry’s middle ground, well ahead of the ultra-low-cost fliers—Spirit (61) and Frontier (63). United, however, ranks third from the bottom with a score of 70 despite a net gain of 10 points over the past two years.

United’s forcible removal of a passenger—captured on social media—triggered a stock market drop for the airline, but is not reflected in the 2017 ACSI results as data collection had ended prior to the media storm. The impact of such a high-profile incident on future satisfaction is unknown, but passengers tend to base their satisfaction levels on their own experiences. For many United customers, that experience has been less than stellar as the airline’s satisfaction has been lagging for some time. In sharp contrast this year, both American and Delta score 76—a record-high for American and the best score in over two decades for Delta. Looking at five-year trends for legacy airlines, United is still playing catch-up among the majors.

Airlines overall continue to rank in the bottom third among 43 ACSI industries. The ACSI Travel Report 2017—which includes airlines, hotels, and internet travel services—is based on thousands of customer surveys completed over 12 months.

Business Insider: United Was Plagued With a Huge Issue Even Before Dragging a Customer off a Plane »

CBS MoneyWatch: United Ranks as America’s Bottom-Rated Legacy Airline »

Chicago Tribune: United Scores Lowest Among Legacy Airlines in Customer Satisfaction; JetBlue Tops Survey »

CNN Money: America’s Least Favorite Airline (Hint: It’s Not United) »

Why Jana’s Involvement Can Have The Future Looking Fresh For Whole Foods

Last week, Jana Partners announced that it has taken a 9% stake in Whole Foods Market, Inc. (NASDAQ:WFM). Among the changes Jana hopes to enact is:

…pursuing opportunities to improve performance by advancing its brand development and by addressing core operating deficiencies in areas including customer loyalty and analytics.

Through technological, customer focused solutions, Whole Foods can recapture market share and differentiate itself once again in the supermarket space.

When Whole Foods Market was founded in 1980, it was one of only a handful of natural food supermarkets in the United States. Over the next three decades, Whole Foods opened new geographic markets nationwide through expansion and strategic acquisitions. By the first decade of the 2000’s, Whole Foods helped ignite a national shift in consumption, as a first of its kind and best in class purveyor of natural and organic foods. By focusing not only on the customer experience in its physical stores, but also shinning a spotlight on the differentiation in the higher standard of products it sourced, WFM was able to redefine how people thought about food origination.

Whole Foods was first measured by the American Customer Satisfaction Index (ACSI) in 2007. With a below industry average score of 73, it was much closer in customer satisfaction to Wal-Mart’s (NYSE:WMT) supermarket offering (71) than to the industry leader Publix (OTC:PUSH) (83). This was perhaps due to customers still adjusting to value proposition that allowed Whole Foods to charge premium prices. However, over the next four years Whole Foods recorded an unprecedented four straight annual increases in their ACSI Score. From 1/2008 to 1/2013 Whole Foods saw its sales increase 53% while consistently maintaining 34% gross margins, far higher than the 21% average gross margins of its competitors. WFM’s strong customer satisfaction allowed it to exhibit pricing power and led to the traditional fundamental improvements that increased its stock a phenomenal +123% over that timeframe (vs S&P 500 -2.9%).

A well-established underpinning of microeconomic theory is that consumers will spend their money on the goods that bring them the most utility. With customer satisfaction as a proxy for utility, this is a concept well founded in classical economic theory and well proven in academic studies from sources ranging from Dr. Claes Fornell (considered the father of customer satisfaction) to the world renown consulting firm McKinsey and Company. WFM’s stock price has been particularly sensitive to customer satisfaction changes as shown in the graph below.

It is easy to see the very strong relationship between the changes in WFM’s ACSI score and the performance of the stock in the subsequent year. However, one cannot simply look at the stock price of WFM in a vacuum and draw the conclusion that changes in WFM’s customer satisfaction were predictive of future stock performance.

The way that customer satisfaction as a metric ultimately gets disseminated to the market at large, is through revenue and earnings surprises. As the ACSI collects customer data about their satisfaction and, by extension, their future buying behavior, those increases or decreases should make their way to the top line of the company within 1 – 3 quarters
(depending on a product’s buying cycle). We expect strong/increasing customer satisfaction companies to have revenue surprises at a greater than market rate and therefore outperform the market in the subsequent year. Here to, the relationship between WFM’s satisfaction score and stock performance is very strong as seen in the table below.

Please note that the ACSI change listed for any above year took place at the beginning of that time period, and thus the relative return of WFM to the S&P 500 is what took place in the 12 months after the satisfaction measurement. In 6 of the 7 one year periods following the release of WFM’s annual ACSI score, the stock either over or underperformed the S&P 500 in the correct direction as indicated by satisfaction changes at the periods beginning (one of the periods listed above had an ACSI score that did not change and was not counted as correct or incorrect).

In the table, the only notable deviation from expectation is the 2015-2016 period where an increase in satisfaction was met by a huge underperformance vs the market. It is however important to note, that while WFM underperformed on an annual basis, there was a mid-year shift where it changed from over-to-underperforming. At the time, each company was only being measured annually by the ACSI and thus was susceptible to timing issues. As we can see, ACSI dropped enormously during the next period and therefore, had WFM been remeasured mid-year, the change in satisfaction might have been apparent sooner. Moving forward ACSI is changing its data collection process so that each company will be measured on a monthly basis, diminishing the probability of mistiming these huge movements.

So, the question remains, what changed about people’s satisfaction with Whole Foods and how can a Jana led intervention get them back to the top? It is likely that originally, customers were satisfied by the broad array of organic options and the availability of sophisticated prepared foods which Whole Foods was the first of its kind to bring to most geographic markets. This gave WFM a relative monopoly in the space, lending them the power to charge premium prices without angering their customer base, regardless of any continued innovation and focus on the customer experience. However, as is the case with most successful innovations, competition such as Trader Joe’s, Fairway, Wegman’s and Kroger (NYSE:KR) began to copy the Whole Foods model. Giving their stores a similar look and feel and offering an ever growing variety of natural and organic products. Whole Foods can no longer differentiate itself on a superior quality of their product offering and therefore needs to refocus on technologically led, customer focused improvements to the shopping experience in the physical store itself and the way that customers interact with the brand.

Jana Partners, with their strong reputation as an activist firm and their historical success in dealing with food service companies such as ConAgra Brands, Inc. (Ticker: CAG) looks to be on track to have Whole Foods looking fresh once again.

Originally posted at Seeking Alpha.

Josh Blechman is the Director of Operations and Capital Markets at ACSI Funds.

Department Store Dilemma: Less Foot Traffic, Better Customer Service

At a time when online shopping sales keep growing and malls keep emptying, customers who still make the trip to brick-and-mortar venues may be in for a surprise: better customer service. According to surveys conducted during the busy holiday season by the American Customer Satisfaction Index, key aspects of the department and discount store customer experience are much better in 2016 compared with the prior year. Not only did shoppers report higher satisfaction overall, they also encountered cleaner stores, more courteous staff, and a much speedier checkout process.

Less foot traffic brings shorter lines and customers gain when staff have more time to offer personal service and keep merchandise in order. But less foot traffic is hardly sustainable as a massive wave of store closings sweeps across the industry and some of the oldest names in the business—Macy’s, Sears and Kmart, and JCPenney—shutter property after property.

Traditional department and discount stores have made strides with omnichannel offerings and website satisfaction shows an uptick to 79. On the other hand, sales and promotions are not as common (down 3% to 78) and perceptions about locations and hours are starting to erode as more stores close (-2% to 82). While customer satisfaction may be getting a short-term boost from better service, in the long run, consumers may get frustrated if favored locations close and they need to go farther to reach stores.

Going head-to-head with online shopping, brick-and-mortar languishes behind. With an overall ACSI score of 78 (up 5.4%), department and discount stores trail internet retail by 5 points. Coming in at 83 (+3.8%), online retail now ties for third place in customer satisfaction among 43 ACSI industries. Simply put, shopping online is so easy and convenient that it continues to place pressure on traditional retailers not only in terms of sales, but in just getting people into stores.

At the customer experience level, the advantages of online shopping remain clearly delineated, as in past surveys. While checkout speed at stores has improved greatly, it still pales in comparison with the convenience of online purchasing (88). Moreover, department and discount stores are not keeping up with merchandise selection—including brand names—or inventory availability. Perhaps most telling, however, is that despite store staff becoming more helpful and courteous, the industry does not have an edge over the customer support offered online via live chat, help pages, and call centers (both score 79).

ACSI Retail Report 2016 »

Consumerist: Maybe Emptier Stores Mean Higher Customer Satisfaction? »

Columbus Business First: With Fewer People at the Mall, Retailers See Customer Satisfaction Ratings Rise »

NBC NEWS: Despite Declining Sales, Do Shoppers Still Prefer Brick-and-Mortar Stores? »