August 15, 2005 9:00 PM PDT

Satisfy customers, make money

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The link between customer satisfaction and financial success is a lot more than anecdotal, according to a report released Tuesday.

The University of Michigan's American Customer Satisfaction Index, or ACSI, reflects Americans' sense of approval about some of the country's most famous companies and brand names during the first quarter of 2005. And it concludes that companies that concentrate on meeting customers' needs are the ones most likely to make sales and lure new devotees.

The most stark reflection of that fact is the correlation between the near doubling of revenues by both Google and Yahoo and their dominance of the search engine and portal categories, respectively, that researchers put them in.

"It's not a surprise that Google and Yahoo not only do a great job at satisfying their customers but are also both financial successes," said Larry Freed, president and CEO of ForeSee Results, which co-sponsored the report. "So that's a great testament to customer satisfaction."

The flip side to the success of Google and Yahoo, explained Freed, is the smaller advances in revenues and satisfaction ratings received by the two Silicon Valley companies' major rivals, MSN and AOL, which, he said, "have had minimal growth, if any at all, in revenue, and trail Yahoo and Google significantly in satisfying their customers."

In the portal category, Yahoo earned the highest rating on the ACSI: an 80, up 8.1 percent from a year ago. By comparison, MSN came in at 75 and AOL at 71. Google led the search category with an 82. Ask Jeeves scored 72 in search.

But while Google and Yahoo are seen as the clear leaders in their categories, their chief rivals are nipping at their heels.

"AOL has incredibly strong content at their disposal," said Freed, referring to the AOL-Time Warner connection, "and with recent announcements of their public interface, AOL.com, they have an opportunity to compete.

That's a surprise, Freed said, because, "It's tough to come back once things look like they're stacked against you. I think AOL can do that, but they've got to take the next step...it's a big step."

At the same time, Freed said, MSN will have a harder time coming back because of a perception that it's losing control of its strength, the desktop.

"The desktop is under attack, and while most people think of Linux as the attacker," Freed said, "I would actually think of Google as much more of a competitive threat."

The study measured customer satisfaction in several other areas as well, including personal computers, automobiles, and news and information.

In the personal computer category, Apple Computer scored 81 and led Dell by seven points. Toyota led the automobiles category with an 87. Honda trailed just behind at 86.

Freed pointed out that the bulk of the online news and information companies scored within two points of each other. That general lack of differentiation in the index between outfits like ABCNews.com, MSNBC.com, CNN.com, USAToday.com and NYTimes.com is as much about their inability to create the same kinds of distinguishing personalities put forth by their print or broadcast formats as anything else.

And Freed thinks it's unlikely the companies will be able to make significant change anytime soon.

"Coupled with the high majority of Web users that get information from portals and search engines, (it) presents a challenge for them to build loyalty and that personality."

The ACSI is a national economic indicator of how satisfied customers are with the quality of products and services available to households in the United States. The evaluations, gathered in a report by the University of Michigan Business School and other organizations, carry a top score of 100.

The ACSI covers a number of industries, including automobiles and appliances. It comes out quarterly, although particular industries are updated once a year. Information is acquired, for example, via telephone interviews and Web questionnaires.

CNET News.com's Ed Frauenheim contributed to this report.

11 comments

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No shit sherlock
In other news, a new study has concluded people like to play outside on sunny days.
Posted by wazzledoozle (288 comments )
Reply Link Flag
Study that too!
I don't know Hank, you might need to do a study on that to confirm it.
Posted by (1 comment )
Link Flag
Lol, i agree, if you really needed to conduct a study to figure this out.... get a life. Oh and I hope they do make some changes soon!
Posted by enavigators (1 comment )
Link Flag
Bull****
Look at what Microsoft is doing and you'll find this study to lack. Theyre not satisfying customers and yet make big money.
Posted by (92 comments )
Reply Link Flag
Uh
Windows XP is well worth the money if you like to play PC games.

Get back to me once linux can match windows in that department (and many others)
Posted by wazzledoozle (288 comments )
Link Flag
Thougt I should also add this
<a class="jive-link-external" href="http://www.linneberg.com/rpgpics/xpoverlinux.png" target="_newWindow">http://www.linneberg.com/rpgpics/xpoverlinux.png</a>

Funny thing is linux still cant match an almost 5 year old operating system.
Posted by wazzledoozle (288 comments )
Link Flag
What?
"MS is not satisfying their customers"? How true is that? You suck for that. Microsoft is satisfying me; and i'm their evergreen customer.

Take my word or leave it.
Posted by folsco (55 comments )
Link Flag
Big logical fallacy here
The automatic assumption by the authors of the study that companies making a lot of money, such as Google, are satisfying their customers is maddeningly naive. Everyone knows that the biggest moneymakers in tech--Google, Microsoft, and eBay--are monopolists that are widely hated by a significant portion of their customers and have big public relations problems which are not affecting their bottom line. THAT is a phenomenon worth studying, but perhaps by people with degrees from a real business school.

One important feature of business models of these moneymaking monopolists is that they have 2 customer bases: the ones who pay them directly for their services and the ones who receive their services through their mediation. If we look at Google, eBay, and UPS (to throw in one of my favorite bad guys) we see companies which make big profits from their primary clients while treating the secondary clients shabbily, which may not be hurting their bottom line but is hurting their image among the secondary clients. Time will tell...
Posted by Razzl (1318 comments )
Reply Link Flag
Customer Service: Apple UP / Dell DOWN (IDG News)
Study: Dell customer rating plunges, Apple leads pack
IDG News Service 8/16/05

Tom Krazit, IDG News Service, San Francisco Bureau
U.S. consumers lambasted Dell Inc. for poor customer service in
a survey conducted last quarter, sending the world's largest PC
vendor into a virtual tie with the rest of the PC market behind
the industry-leading efforts of Apple Computer Inc.

Component costs rising, but PC prices won't
Pirated version of MacOS for x86 available for install
HP preparing the next wave of wireless iPaqs

Mutual Fund Transfer Agency Technology: Migrating from
Mainframes
Are Blade Servers too Hot to Handle? Strategies for Optimal
Network-critical Physical Infrastructure
Blade Servers: The Case Is Simple

Blade servers from HP  consolidation and affordability

For the second year in a row, Apple received the best rating from
PC buyers in the American Customer Satisfaction Index (ACSI),
said David Van Amburg, general manager of the ACSI. The
University of Michigan compiles the ACSI in numerous product
categories by randomly calling U.S. residents and surveying their
buying habits, he said.

Apple received a score of 81, compared to an industry average
score of 74, in results released Tuesday. The Cupertino,
California, company's focus on product innovation and customer
service has won it a cadre of famously loyal customers unlike
any other PC vendor, Van Amburg said. Apple also received a
score of 81 in 2004.

Dell, on the other hand, earned a score of 74, down from a score
of 79 the previous year. Survey respondents complained mostly
about the quality of Dell's customer service, not its products,
Van Amburg said. The ACSI doesn't ask specific questions about
the type of problems customers are having with a company, but
customers were clearly more frustrated with the Round Rock,
Texas, company than last year, he said.

A few recurring complaints were the length of time on hold with
Dell customer-service representatives, as well as the quality of
the help customers eventually received, Van Amburg said. Dell
has started to expand its lead over Hewlett-Packard Co. (HP) in
PC shipments, and sometimes when market leaders increase
their product shipments they fail to increase service capabilities
at the same rate, he said.

Dell announced plans to open two new customer service centers
last week, but company Chief Executive Officer Kevin Rollins
denied that Dell was having customer service problems.

The ASCI tracks HP's customer satisfaction in two categories,
partly because HP's U.S. consumer PC business is divided
between two different product lines and partly to provide
historical comparisons for the performance of the products
before HP acquired Compaq in 2002. HP-branded products
received a score of 73, while Compaq-branded products were
rated the lowest of any vendor with a score of 67.

The HP-branded products have now regained the customer
satisfaction score they posted before the merger, while the
Compaq products have continued to languish well below the rest
of the industry, Van Amburg said. HP is looking into its two-
brand strategy as it searches for opportunities to cut costs under
Chief Executive Officer Mark Hurd, and some analysts believe it
might be time to cut the Compaq PCs from its lineup.

Gateway Inc. posted the largest increase in customer satisfaction
last year after its acquisition of eMachines, but slipped a bit
from 74 to 72 this year. However, that difference is within the
survey's margin of error of three points, Van Amburg said.

Overall customer satisfaction with the PC industry remains well
below the scores received by other consumer-product industries
such as household appliances and automobiles. Despite all the
work the PC industry has done to try to make their products
easier to use, customers are still frustrated by PC technology,
Van Amburg said.

The index measures the buyer's satisfaction with the last PC they
purchased, which allows the ACSI to obtain the freshest
experience, Van Amburg said. It surveyed 250 customers per
company.

Tom Krazit is U.S. correspondent for the IDG News Service.
Posted by Llib Setag (951 comments )
Link Flag
Customer Service: Apple UP / Dell DOWN (IDG News)
Reply to STORY / Not to Reader Response....

Story: Satisfy customers, make money
Study: Dell customer rating plunges, Apple leads pack
IDG News Service 8/16/05

Tom Krazit, IDG News Service, San Francisco Bureau
U.S. consumers lambasted Dell Inc. for poor customer service in
a survey conducted last quarter, sending the world's largest PC
vendor into a virtual tie with the rest of the PC market behind
the industry-leading efforts of Apple Computer Inc.

Component costs rising, but PC prices won't
Pirated version of MacOS for x86 available for install
HP preparing the next wave of wireless iPaqs

Mutual Fund Transfer Agency Technology: Migrating from
Mainframes
Are Blade Servers too Hot to Handle? Strategies for Optimal
Network-critical Physical Infrastructure
Blade Servers: The Case Is Simple

Blade servers from HP  consolidation and affordability

For the second year in a row, Apple received the best rating from
PC buyers in the American Customer Satisfaction Index (ACSI),
said David Van Amburg, general manager of the ACSI. The
University of Michigan compiles the ACSI in numerous product
categories by randomly calling U.S. residents and surveying their
buying habits, he said.

Apple received a score of 81, compared to an industry average
score of 74, in results released Tuesday. The Cupertino,
California, company's focus on product innovation and customer
service has won it a cadre of famously loyal customers unlike
any other PC vendor, Van Amburg said. Apple also received a
score of 81 in 2004.

Dell, on the other hand, earned a score of 74, down from a score
of 79 the previous year. Survey respondents complained mostly
about the quality of Dell's customer service, not its products,
Van Amburg said. The ACSI doesn't ask specific questions about
the type of problems customers are having with a company, but
customers were clearly more frustrated with the Round Rock,
Texas, company than last year, he said.

A few recurring complaints were the length of time on hold with
Dell customer-service representatives, as well as the quality of
the help customers eventually received, Van Amburg said. Dell
has started to expand its lead over Hewlett-Packard Co. (HP) in
PC shipments, and sometimes when market leaders increase
their product shipments they fail to increase service capabilities
at the same rate, he said.

Dell announced plans to open two new customer service centers
last week, but company Chief Executive Officer Kevin Rollins
denied that Dell was having customer service problems.

The ASCI tracks HP's customer satisfaction in two categories,
partly because HP's U.S. consumer PC business is divided
between two different product lines and partly to provide
historical comparisons for the performance of the products
before HP acquired Compaq in 2002. HP-branded products
received a score of 73, while Compaq-branded products were
rated the lowest of any vendor with a score of 67.

The HP-branded products have now regained the customer
satisfaction score they posted before the merger, while the
Compaq products have continued to languish well below the rest
of the industry, Van Amburg said. HP is looking into its two-
brand strategy as it searches for opportunities to cut costs under
Chief Executive Officer Mark Hurd, and some analysts believe it
might be time to cut the Compaq PCs from its lineup.

Gateway Inc. posted the largest increase in customer satisfaction
last year after its acquisition of eMachines, but slipped a bit
from 74 to 72 this year. However, that difference is within the
survey's margin of error of three points, Van Amburg said.

Overall customer satisfaction with the PC industry remains well
below the scores received by other consumer-product industries
such as household appliances and automobiles. Despite all the
work the PC industry has done to try to make their products
easier to use, customers are still frustrated by PC technology,
Van Amburg said.

The index measures the buyer's satisfaction with the last PC they
purchased, which allows the ACSI to obtain the freshest
experience, Van Amburg said. It surveyed 250 customers per
company.

Tom Krazit is U.S. correspondent for the IDG News Service
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