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    ACSI: Customer Satisfaction Down a Bit, But Consumer Spending Should Improve

    MILWAUKEE - Although customer satisfaction dropped slightly in the last quarter and has been flat in the past year, household spending should rebound somewhat, according to the American Customer Satisfaction Index (ACSI), a leading indicator of consumer spending.

    MILWAUKEE - Although customer satisfaction dropped slightly in the last quarter and has been flat in the past year, household spending should rebound somewhat, according to the American Customer Satisfaction Index (ACSI), a leading indicator of consumer spending.

    "Household expenditure growth dropped to a low 1 percent during the fourth quarter of 2002, so unless we have further increases in oil prices, terrorism or a collapse of housing prices, consumer spending should edge up," said Prof. Claes Fornell, director of the University of Michigan Business School's National Quality Research Center, which compiles and analyzes the ACSI data.

    The ACSI, which measured U.S. customer satisfaction with the quality of products and services in the e-commerce, retail and finance sectors during the fourth quarter of 2002, slipped to 72.9 (on a 100-point scale) from 73.1 in the third quarter of last year. In the first half of 2002, the ACSI held steady at 73.

    Fornell says that large quarterly fluctuations in consumer spending in recent times can be traced to the lack of pricing power, manifested not only in flat or falling prices, but also in resulting price promotions. Since buyer satisfaction is not improving, the lack of pricing power may well continue, he adds.

    However, the ACSI shows several companies with rising customer satisfaction scores, due mainly to better service and quality, not lower prices, Fornell says.

    Customer satisfaction was down slightly in the retail sector (from 74.8 to 74.6), although some companies in this sector showed improvement.

    Kohl's, which was included in the ACSI for the first time, scored highest among department stores and all companies measured in the retail sector, with a score of 84. Publix once again led all supermarkets with a score of 81, while Costco topped the specialty stores with a mark of 79 (a 4-percent increase). Target discount stores (78), Sam's Club (77) and the SUPERVALU grocery chain (77) also fared well in the retail sector.

    On the other end of the spectrum, Home Depot (71) and Kmart (70) scored lowest among retail companies (excluding fast-food restaurants) and both also posted the largest drop in ACSI scores -- a 5-percent decrease.

    In the e-commerce sector, Amazon.com's customer satisfaction score jumped 5 percent to an industry-best 88, the highest ACSI score ever for a service company. Barnes&Noble.com, right behind with a mark of 87, saw even greater improvement with a 6-percent increase.

    The ACSI score for the e-commerce sector, overall, increased 6 percent -- from a score of 72.9 in the fourth quarter of 2001 to 77.6 last quarter.

    "The strong satisfaction scores in this sector continue to demonstrate the value of e-commerce to the consumer," Freed said. "E-commerce is no longer a 'nice-to-have' for companies, but a requirement to compete."

    Among fast-food restaurants, KFC (with a 10-percent jump to a score of 69), Little Caesar's (a 6-percent rise to 74) and Burger King (a 5-percent increase to 68) showed solid improvement.

    For the fourth straight year, Papa John's led the industry with an ACSI score of 76, followed closely by Domino's Pizza (75), Wendy's (74) and Little Caesar's (74). Once again, McDonald's posted the worst ACSI score (61) among fast-food companies.

    The ACSI is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the United States. It is updated each quarter with new measures for different sectors of the economy replacing data from the prior year. The overall ACSI score for a given quarter factors in scores from 185 companies in 38 industries and from government agencies over the previous four quarters.

    Company scores and other information about the ACSI can be found at www.theacsi.org.

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