American Customer Satisfaction Index
Encyclopedia
The American Customer Satisfaction Index (ACSI) is an economic indicator that measures the satisfaction of consumers across the U.S.
economy
. It is produced by the American Customer Satisfaction Index, a private company based in Ann Arbor
, Michigan
.
The ACSI interviews about 80,000 Americans annually and asks about their satisfaction with the goods and services they have consumed. Potential respondents are screened prior to interviewing to guarantee inclusion of customers of a wide range of business-to-consumer products and services, including durable goods
, services
, non-durable goods, local government services, federal government services, and so forth. Results from data collection and analyses are released to the public throughout each calendar year. ACSI data has been used by academic researchers, corporations, government agencies, market analysts and investors, industry trade associations, and consumers.
in Milwaukee
, Wisconsin
, and CFI Group in Ann Arbor. The ACSI was based on a model originally implemented in 1989 for the Swedish economy called the Swedish Customer Satisfaction Barometer (SCSB). Both the Swedish version and the ACSI were developed by Claes Fornell, now Donald C. Cook
Professor of Business Administration at the University of Michigan, and chairman of CFI Group. In 2009, the ACSI left the University of Michigan to form a private company, although Fornell remains a professor at the university and the principal researcher behind the ACSI.
responses) from randomly selected and screened customers of companies. The random-digit dial
method of sampling
is used to identify potential respondents, guaranteeing an accurate representation of the U.S. consumer population. In addition to these methods, the ACSI also collects a portion of its data using opt-in online interviewing and sampling from a representative Internet panel.
ACSI researchers analyze this data once collected with a structural equation model
, which provides scores for the measured latent variable components (such as customer expectations, overall quality, perceived value
, etc.), and the relationships (or "impacts") between these measured components. Most importantly, each measured company or organization receives a customer satisfaction index score (an "ACSI score") which reflects a weighted average of three satisfaction proxy questions. Each index score is on a 0-100 scale, and a company can (hypothetically) receive any score ranging from 0 to 100. In practice, over the history of the ACSI scores have tended to range from the low 50's to the high 80's. While slight differences between questionnaires administered to respondents across industries and sectors do exist, the three satisfaction questions used to create the ACSI score for each company are identical. Coupled with the standardized 0-100 index scale, these methods allow maximum comparability between companies and government agencies.
Using these methods, each year ACSI produces customer satisfaction scores for more than 225 companies, 45 industries, 10 economic sectors and the U.S. national economy overall. Measurement is done on a rolling basis. During each fiscal quarter, data is collected for particular sectors and industries and used to replace data collected 12 months earlier. This data is then weighted by company market share up to industry scores, by industry revenue to create sector scores, and by sector share of GDP to create the National ACSI score. The National ACSI score represents, albeit at a level of abstraction, the satisfaction of the "average American consumer." This broad perspective allows ACSI researchers to examine the impact of improving or declining satisfaction on macroeconomic performance. Once completed, all of these results are released to the public on a monthly basis through the ACSI website and a variety of media outlets.
The 0-100 ACSI score is calculated with the following formula, using the arithmetic mean for each question from the N total responses for that company (X1, X2, X3), along with the standardized and normalized partial least squares factor loading (or weight) for each question as calculated within the ACSI structural equation model (W1, W2, W3):
((X1-1)*W1 + (X2-1)*W2 + (X3-1)*W3)/9*100
The actual weights used to calculate an ACSI score tend to vary considerably across companies and industries, and the weights are proprietary to ACSI and its clients.
industries — including both durable and non-durable goods manufacturers — have tended to perform well. The comparatively higher satisfaction performance by these sectors is understandable; industries within these sectors tend to be well established, "old economy" industries that have a longer-running focus on quality control procedures (such as TQM
and Six Sigma
), and perhaps more importantly are also industries that rely less on human intervention in the production and consumption processes. On the other hand, the "new economy" service sector industries, which rely more on customer service and human intervention in the consumption process, have tended to perform below average.
Some industries that have performed well over the years in ACSI include: e-commerce
, personal care products, soft drink
s, beer
, consumer electronics
, automobiles and household appliances. Some industries that have tended to perform poorly include: cable television
providers, airline
s and telecommunications industries. Among government agencies, the Internal Revenue Service has tended to perform below average, while other agencies - such as the Social Security Administration - have performed much better.
growth as functions of changes in aggregate customer satisfaction. These researchers have argued that there is a robust relationship between aggregate ACSI data (i.e. the National ACSI score discussed above) and some important macroeconomic indicators. For instance, Fornell has argued that the National ACSI score has proven to be a strong predictor of Gross Domestic Product
(GDP) growth, and an even stronger predictor of Personal Consumption Expenditure
(PCE) growth. This latter result is especially surprising, given that many economists continue to identify PCE growth as a "random walk"
with no significant or consistent predictors.
Furthermore, Fornell and his collaborators have shown that ACSI data predicts stock market
performance, both for market indices and for individually traded companies. In a 2006 paper published in the Journal of Marketing, Fornell and his coauthors argued that a hypothetical, back-tested portfolio of stocks chosen based on their performance in ACSI outperformed the New York Stock Exchange
(the Dow), the NASDAQ
and the S&P 500
, a finding that has since been supported by other researchers.
, Indonesia
, Barbados
, Turkey
, Singapore
, Mexico
and Colombia
. Groups in several additional countries are in various stages of project implementation as well. The development of an international system of customer satisfaction measurement founded on a common methodology permits comprehensive cross-national satisfaction benchmarking, something that will grow more significant as economic globalization
advances.
) and CFI Group, Inc.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
economy
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...
. It is produced by the American Customer Satisfaction Index, a private company based in Ann Arbor
Ann Arbor, Michigan
Ann Arbor is a city in the U.S. state of Michigan and the county seat of Washtenaw County. The 2010 census places the population at 113,934, making it the sixth largest city in Michigan. The Ann Arbor Metropolitan Statistical Area had a population of 344,791 as of 2010...
, Michigan
Michigan
Michigan is a U.S. state located in the Great Lakes Region of the United States of America. The name Michigan is the French form of the Ojibwa word mishigamaa, meaning "large water" or "large lake"....
.
The ACSI interviews about 80,000 Americans annually and asks about their satisfaction with the goods and services they have consumed. Potential respondents are screened prior to interviewing to guarantee inclusion of customers of a wide range of business-to-consumer products and services, including durable goods
Good (economics and accounting)
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. It is normally used in the plural form—goods—to denote tangible commodities such as products and materials....
, services
Tertiary sector of industry
The tertiary sector of the economy is one of the three economic sectors, the others being the secondary sector and the primary sector .The service sector consists of the "soft" parts of the economy, i.e...
, non-durable goods, local government services, federal government services, and so forth. Results from data collection and analyses are released to the public throughout each calendar year. ACSI data has been used by academic researchers, corporations, government agencies, market analysts and investors, industry trade associations, and consumers.
History
The ACSI was started in 1994 by researchers at the National Quality Research Center, a research unit within the University of Michigan, in cooperation with partners at the American Society for QualityAmerican Society for Quality
American Society for Quality , formerly known as American Society for Quality Control , is a knowledge-based global community of quality control experts, with nearly 85,000 members dedicated to the promotion and advancement of quality tools, principles, and practices in their workplaces and in...
in Milwaukee
Milwaukee, Wisconsin
Milwaukee is the largest city in the U.S. state of Wisconsin, the 28th most populous city in the United States and 39th most populous region in the United States. It is the county seat of Milwaukee County and is located on the southwestern shore of Lake Michigan. According to 2010 census data, the...
, Wisconsin
Wisconsin
Wisconsin is a U.S. state located in the north-central United States and is part of the Midwest. It is bordered by Minnesota to the west, Iowa to the southwest, Illinois to the south, Lake Michigan to the east, Michigan to the northeast, and Lake Superior to the north. Wisconsin's capital is...
, and CFI Group in Ann Arbor. The ACSI was based on a model originally implemented in 1989 for the Swedish economy called the Swedish Customer Satisfaction Barometer (SCSB). Both the Swedish version and the ACSI were developed by Claes Fornell, now Donald C. Cook
Donald C. Cook
Donald C. Cook served as chairman of the U.S. Securities and Exchange Commission between 1952 and 1953 and also served as a member from 1949-1953. Cook later became chairman of American Electric Power. Donald C. Cook Nuclear Generating Station is named for him....
Professor of Business Administration at the University of Michigan, and chairman of CFI Group. In 2009, the ACSI left the University of Michigan to form a private company, although Fornell remains a professor at the university and the principal researcher behind the ACSI.
Methodology
The ACSI uses two interrelated methods to measure customer satisfaction: customer interviewing and econometric modeling. Beginning with the interviewing, professional telephone interviewers working for a market research firm contracted by the ACSI and employing Computer Assisted Telephone Interviewing (CATI) technology collect data (in the form of surveyStatistical survey
Survey methodology is the field that studies surveys, that is, the sample of individuals from a population with a view towards making statistical inferences about the population using the sample. Polls about public opinion, such as political beliefs, are reported in the news media in democracies....
responses) from randomly selected and screened customers of companies. The random-digit dial
Random digit dialing
Random digit dialing is a method for selecting people for involvement in telephone statistical surveys by generating telephone numbers at random. Random digit dialing has the advantage that it includes unlisted numbers that would be missed if the numbers were selected from a phone book...
method of sampling
Sampling (statistics)
In statistics and survey methodology, sampling is concerned with the selection of a subset of individuals from within a population to estimate characteristics of the whole population....
is used to identify potential respondents, guaranteeing an accurate representation of the U.S. consumer population. In addition to these methods, the ACSI also collects a portion of its data using opt-in online interviewing and sampling from a representative Internet panel.
ACSI researchers analyze this data once collected with a structural equation model
Structural equation modeling
Structural equation modeling is a statistical technique for testing and estimating causal relations using a combination of statistical data and qualitative causal assumptions...
, which provides scores for the measured latent variable components (such as customer expectations, overall quality, perceived value
Value (economics)
An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...
, etc.), and the relationships (or "impacts") between these measured components. Most importantly, each measured company or organization receives a customer satisfaction index score (an "ACSI score") which reflects a weighted average of three satisfaction proxy questions. Each index score is on a 0-100 scale, and a company can (hypothetically) receive any score ranging from 0 to 100. In practice, over the history of the ACSI scores have tended to range from the low 50's to the high 80's. While slight differences between questionnaires administered to respondents across industries and sectors do exist, the three satisfaction questions used to create the ACSI score for each company are identical. Coupled with the standardized 0-100 index scale, these methods allow maximum comparability between companies and government agencies.
Using these methods, each year ACSI produces customer satisfaction scores for more than 225 companies, 45 industries, 10 economic sectors and the U.S. national economy overall. Measurement is done on a rolling basis. During each fiscal quarter, data is collected for particular sectors and industries and used to replace data collected 12 months earlier. This data is then weighted by company market share up to industry scores, by industry revenue to create sector scores, and by sector share of GDP to create the National ACSI score. The National ACSI score represents, albeit at a level of abstraction, the satisfaction of the "average American consumer." This broad perspective allows ACSI researchers to examine the impact of improving or declining satisfaction on macroeconomic performance. Once completed, all of these results are released to the public on a monthly basis through the ACSI website and a variety of media outlets.
ACSI score calculation
A company's ACSI score is derived from three manifest variables (i.e. survey questions) included within the ACSI questionnaire, each rated on a 1-10 scale by the respondents interviewed for that company, government agency, or other organization:| Manifest Variable | 1 | 10 |
|---|---|---|
| Overall satisfaction (X1) | Very dissatisfied | Very satisfied |
| Expectancy disconfirmation (X2) | Falls short of your expectations | Exceeds your expectations |
| Comparison to an ideal (X3) | Not very close to the ideal | Very close to the ideal |
The 0-100 ACSI score is calculated with the following formula, using the arithmetic mean for each question from the N total responses for that company (X1, X2, X3), along with the standardized and normalized partial least squares factor loading (or weight) for each question as calculated within the ACSI structural equation model (W1, W2, W3):
((X1-1)*W1 + (X2-1)*W2 + (X3-1)*W3)/9*100
The actual weights used to calculate an ACSI score tend to vary considerably across companies and industries, and the weights are proprietary to ACSI and its clients.
Sector, industry and company-level findings
Thirteen years of ACSI data have shown that certain sectors, industries and companies perform well consistently, while others are almost always below average (with the National ACSI score reflecting the average). At the sector level, manufacturingManufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
industries — including both durable and non-durable goods manufacturers — have tended to perform well. The comparatively higher satisfaction performance by these sectors is understandable; industries within these sectors tend to be well established, "old economy" industries that have a longer-running focus on quality control procedures (such as TQM
Total Quality Management
Total quality management or TQM is an integrative philosophy of management for continuously improving the quality of products and processes....
and Six Sigma
Six Sigma
Six Sigma is a business management strategy originally developed by Motorola, USA in 1986. , it is widely used in many sectors of industry.Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability in manufacturing and...
), and perhaps more importantly are also industries that rely less on human intervention in the production and consumption processes. On the other hand, the "new economy" service sector industries, which rely more on customer service and human intervention in the consumption process, have tended to perform below average.
Some industries that have performed well over the years in ACSI include: e-commerce
Electronic commerce
Electronic commerce, commonly known as e-commerce, eCommerce or e-comm, refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. However, the term may refer to more than just buying and selling products online...
, personal care products, soft drink
Soft drink
A soft drink is a non-alcoholic beverage that typically contains water , a sweetener, and a flavoring agent...
s, beer
Beer
Beer is the world's most widely consumed andprobably oldest alcoholic beverage; it is the third most popular drink overall, after water and tea. It is produced by the brewing and fermentation of sugars, mainly derived from malted cereal grains, most commonly malted barley and malted wheat...
, consumer electronics
Consumer electronics
Consumer electronics are electronic equipment intended for everyday use, most often in entertainment, communications and office productivity. Radio broadcasting in the early 20th century brought the first major consumer product, the broadcast receiver...
, automobiles and household appliances. Some industries that have tended to perform poorly include: cable television
Cable television
Cable television is a system of providing television programs to consumers via radio frequency signals transmitted to televisions through coaxial cables or digital light pulses through fixed optical fibers located on the subscriber's property, much like the over-the-air method used in traditional...
providers, airline
Airline
An airline provides air transport services for traveling passengers and freight. Airlines lease or own their aircraft with which to supply these services and may form partnerships or alliances with other airlines for mutual benefit...
s and telecommunications industries. Among government agencies, the Internal Revenue Service has tended to perform below average, while other agencies - such as the Social Security Administration - have performed much better.
Macroeconomic and microeconomic findings
One interesting set of findings discovered by academic researchers involve predictions of macroeconomicMacroeconomics
Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...
growth as functions of changes in aggregate customer satisfaction. These researchers have argued that there is a robust relationship between aggregate ACSI data (i.e. the National ACSI score discussed above) and some important macroeconomic indicators. For instance, Fornell has argued that the National ACSI score has proven to be a strong predictor of Gross Domestic Product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
(GDP) growth, and an even stronger predictor of Personal Consumption Expenditure
Personal Consumption Expenditure
The Personal Consumption Expenditure is the component statistic for consumption in GDP collected by the BEA. It consists of the actual and imputed expenditures of households and includes data pertaining to durable and non-durable goods, and services. It is essentially a measure of goods and...
(PCE) growth. This latter result is especially surprising, given that many economists continue to identify PCE growth as a "random walk"
Random walk
A random walk, sometimes denoted RW, is a mathematical formalisation of a trajectory that consists of taking successive random steps. For example, the path traced by a molecule as it travels in a liquid or a gas, the search path of a foraging animal, the price of a fluctuating stock and the...
with no significant or consistent predictors.
Furthermore, Fornell and his collaborators have shown that ACSI data predicts stock market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
performance, both for market indices and for individually traded companies. In a 2006 paper published in the Journal of Marketing, Fornell and his coauthors argued that a hypothetical, back-tested portfolio of stocks chosen based on their performance in ACSI outperformed the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
(the Dow), the NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
and the S&P 500
S&P 500
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...
, a finding that has since been supported by other researchers.
International adoption of the ACSI model
Research groups, quality associations and universities in several countries have adopted the ACSI model to create customer satisfaction indices for their own national economies. Recent additions to the list of countries that have adopted the ACSI model include Great BritainGreat Britain
Great Britain or Britain is an island situated to the northwest of Continental Europe. It is the ninth largest island in the world, and the largest European island, as well as the largest of the British Isles...
, Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
, Barbados
Barbados
Barbados is an island country in the Lesser Antilles. It is in length and as much as in width, amounting to . It is situated in the western area of the North Atlantic and 100 kilometres east of the Windward Islands and the Caribbean Sea; therein, it is about east of the islands of Saint...
, Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
, Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
and Colombia
Colombia
Colombia, officially the Republic of Colombia , is a unitary constitutional republic comprising thirty-two departments. The country is located in northwestern South America, bordered to the east by Venezuela and Brazil; to the south by Ecuador and Peru; to the north by the Caribbean Sea; to the...
. Groups in several additional countries are in various stages of project implementation as well. The development of an international system of customer satisfaction measurement founded on a common methodology permits comprehensive cross-national satisfaction benchmarking, something that will grow more significant as economic globalization
Economic globalization
Economic globalization refers to increasing economic interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology and capital...
advances.
Private and public sector adaptation of ACSI
Only two companies have been licensed to apply the methodology of the ACSI for both the private and public sector: ForeSee (formerly called ForeSee ResultsForesee results
ForeSee is an international customer experience analytics firm based in Ann Arbor, Michigan. Using the methodology of the American Customer Satisfaction Index which was founded at the University of Michigan , ForeSee continuously measures satisfaction across customer touch points and delivers...
) and CFI Group, Inc.
ACSI literature
The following is a partial list of academic research by Fornell and his collaborators that has used ACSI data and drawn from ACSI findings.- Fornell, Claes, (2007), The Satisfied Customer: Winners and Losers in the Battle for Buyer Preference. N.Y.: Palgrave Macmillan.
- Fornell, Claes, Sunil Mithas, Forrest V. Morgeson III & M.S. Krishnan, (2006), "Customer Satisfaction and Stock Prices:High Returns, Low Risk," Journal of Marketing, Vol. 70, January, 3-14.
- Fornell, Claes, David Van Amburg, Forrest Morgeson & Barbara Bryant, (2005). The American Customer Satisfaction Index at 10 Years. Ann Arbor: The Stephen M. Ross School of Business.
- Anderson, Eugene W., Claes Fornell & Sanal K. Mazvancheryl, (2004), "Customer Satisfaction and Shareholder Value," Journal of Marketing, Vol. 68, October, 172-185.
- Fornell, Claes, (2001), "The Science of Satisfaction," Harvard Business Review, Vol. 79, 3 March, 120-121.
- Fornell, Claes, Michael D. Johnson, Eugene W. Anderson, Jaesung Cha & Barbara Everitt Bryant, (1996), "The American Customer Satisfaction Index: Nature, Purpose and Findings," Journal of Marketing, Vol. 60, October, 7-18.
- Anderson, Eugene W., Claes Fornell & Donald R. Lehmann, (1994), "Customer Satisfaction, Market Share and Profitability: Findings from Sweden," Journal of Marketing, Vol. 58, July, 53-66.
External links
- The American Customer Satisfaction Index
- National Quality Research Center (self-description, includes the ACSI)
- National Business Research Institute