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November 15, 2011

Press Release November 2011

Idling Customer Satisfaction Can’t Fuel a Fragile Economy

Heinz Beats Everybody on Customer Satisfaction; Sharp Drops for Mars Petcare,
Sara Lee and Campbell Soup

ANN ARBOR, Mich. (November 15, 2011)—The overall American Customer Satisfaction Index (ACSI) is stuck in neutral for the third quarter of 2011, unchanged at 75.7 on a 0 to 100-point scale. According to a report released today by ACSI, customer satisfaction in the aggregate is going nowhere—mirroring the economy and contributing to its frailty.

“When there is little or no industry growth, the only way for many companies to expand is to take market share from competition,” notes Claes Fornell, founder of the ACSI and author of The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference. “In an anemic labor market with tight household budgets, this leads to more price competition, deflationary pressure, and a further weakening of aggregate demand. The best defense a company can have against competitive efforts to take market share is to have satisfied customers.”
Food: Can’t Catch Heinz

Condiment purveyor Heinz knows how to please customers. This year, customer satisfaction with the company’s food products rises 1% to 89—good enough to lead the industry for a 12th straight year and rate number one among the ACSI’s 225+ measured companies. Food manufacturing as a whole is stalled at 81, following last year’s decline in the face of rising food costs.

Results are mixed for the individual companies, with even numbers of gainers and losers, alongside 3 unchanged scores. Candymaker Mars (+2%) places second at 87, but its score is well ahead of chocolate rivals Hershey (-2%) and Nestlé (unchanged) at 84. Like Hershey, PepsiCo’s Quaker brand slips 2% to 84, while four companies are tied at 83 (ConAgra, Dole, General Mills and Kraft). Satisfaction with this latter group is mostly static (changes of 0% to 1%) with the exception of Kraft (+3%).

Sara Lee and Campbell Soup—both down 4% to 82 and 79, respectively—suffer the largest falloff in customer satisfaction. The loss pushes Campbell Soup to the bottom of the industry and into a tie with Tyson (+3%) and the aggregate of smaller food producers (-1%). For Sara Lee, cost is the likely culprit, as consumers encounter prices that average 10% higher on the company’s big-name brands such as Ball Park and Jimmy Dean. Likewise, Campbell has raised its prices in response to cost increases at a time when competing soup labels have held steady.
Pet Food: Satisfaction Slumps for Mars Petcare

The customer satisfaction of consumers buying food to feed their pets slips for a second year, down 1.2% to 82. The decline at the industry level is driven by steep drops for Mars Petcare and the aggregate of smaller pet food labels. In 2010, both Mars and the smaller brands led the category at 85. After a 4% drop to 82, small brands tie the industry average, but Mars tumbles a steep 6% to last place with a score of 80. Here again, price plays a key role in depressed satisfaction.

With a 2% gain, premium brand Hill’s Pet Nutrition (Colgate-Palmolive) takes over the industry lead at 84 and holds the advantage over Procter & Gamble’s premium offering, Iams (+1% to 81). Del Monte (-1%) and Nestlé Purina PetCare (unchanged) round out the industry with middling scores of 82.
Athletic Shoes: Consumers Find the Right Fit Regardless of Brand

Customer satisfaction with athletic shoes moves up incrementally to 81 (+1.3%), but consumers see little difference among the brands—big or small. The largest players in the category—Adidas and Nike—are deadlocked with scores of 80 after a 2% drop for Adidas this year. While customers perceive Nike as the winner when it comes to a high-quality product, the superior value delivered by Adidas makes the satisfaction matchup a draw for 2011. The aggregate of smaller athletic shoe brands such as New Balance and Skechers inches ahead with a 1% gain to 81, but the difference is negligible.
Apparel: Consumers Look for Lower Prices

After two years of steady improvement, customer satisfaction with apparel products such as jeans, hosiery and underwear is unraveling—down 3.6% to 80. The substantial decline at the industry level comes from dampened satisfaction (-5% to 79) with smaller companies—the group that makes up the majority of the industry’s market share. Adding to the problem is a lack of improvement among four of five major manufacturers.

“On one level, increasing costs—particularly cotton—have led to higher prices, which are at the root of the industry’s problem with falling or stagnating customer satisfaction,” explains Fornell. “Cotton prices, however, have plunged recently by more than 50%, while apparel prices have failed to follow suit. In order for customer satisfaction to return to previous levels, some adjustment in the industry’s overall pricing structure is likely needed.”

V.F. Corporation maintains the industry lead despite a 2% drop to an ACSI score of 83. Hanesbrands earns a close second place at 82 after posting the category’s only gain (+1%). Levi Strauss fails to make progress at 81 (unchanged), while Jones Group retreats 3% to the bottom of the industry at 79. Jones now ties Liz Claiborne (unchanged)—a company that suffered a sharp drop last year. Over the past three years, satisfaction with Jones has tracked steadily downward. Over that same time period, Jones’s stock has plunged nearly 50%.

This press release is also available in PDF format.

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